Written Testimony
Offered to the
United States Senate Committee on
Environment and public works
July 11, 2002
Submitted by
Mr. Darryl Young, Director
California State Department of Conservation
Mr. Chairman and members, thank you for inviting me
to testify on the State of California’s Beverage Container Recycling and Litter
Reduction Program (Program). I
appreciate the opportunity to provide an overview of the California Recycling
Program and the various features of our program that differentiate it from
recycling programs administered by other states in the Union.
The Division of Recycling within the California
Department of Conservation (Department) administers the Program. The Program was created by the passage of
the California Beverage Container Recycling and Litter Reduction Act (Act) in
1986. Its purpose is to make beverage
container recycling integral to the California economy. The Department’s primary goal is to achieve
and maintain a recycling rate of 80% for each beverage container type included
in the Program, thereby reducing the beverage container component of litter in
California. Units within the
Department’s Division of Recycling are responsible for participant
certification and registration, regulatory compliance, grant funding
distribution, as well as technical and educational assistance to other
industries and groups involved in beverage container recycling.
The California Program is unique among the states
that have a beverage container recycling system. In other bottle deposit states, the cans and bottles are returned
to the store from which the containers were purchased. Californians enjoy a more convenient form of
container recovery with nearly 3,000 recycling opportunities statewide. The recycling system in California provides
a convenient and efficient way to recycle beverage containers, and also is used
as a source of non-tax dollar funding of various recycling and litter reduction
programs throughout the state.
The Program involves participants from private
industry such as buy-back recycling centers (offering payment to consumers for
recycling), drop-off recyclers (such as curbside programs), beverage
manufacturers, beverage distributors, and retail dealers. Public and semi-private entities like local
conservation corps and non-profit organizations also help achieve the Program’s
goal of providing Californians convenient opportunities to recycle their
beverage containers.
The
California Redemption Value (CRV) and the way the State administers those CRV
funds is the engine of California’s beverage container recycling program. Consumers pay this CRV when they purchase a
beverage container of any type or brand.
That CRV deposit is refunded to the consumer when they recycle the container. Similarly, CRV is provided to the curbside
program or other drop-off program that may recycle the container. The CRV is two-and-a-half cents per
container under 24 ounces in volume and 5 cents for containers 24 ounces in
volume or larger. Unredeemed funds –
that is, when consumers or curbsides don’t recycle and collect the deposit on a
container – help support various components of the Program which help promote
higher recycling rates. The Program’s
goal is 80 percent recycling rate for all aluminum, glass, plastic, and bimetal
beverage containers sold in California.
California’s
Program continues to grow and change.
When the Program began, only soft drinks, beers, wine and distilled
spirit coolers and some limited carbonated fruit drinks were included in the
redemption system. In 1999, Governor
Gray Davis signed into law the largest recycling program expansion of any state
in the nation, increasing by three (3) billion the number of containers Californians
can recycle under the Program. The
expansion added non-carbonated fruit drinks, coffee and tea drinks,
non-carbonated water, and sport drinks. In addition, CRV was applied to
beverages sold in all of the seven plastic resin types. As of January of 2001, Governor Gray Davis
and the Legislature added still other beverages, specifically vegetable juices
in beverage containers of 16 oz. or less.
The
changes effective in January of 2000, combined with normal growth in beverage
sales volumes, increased the total beverage container sales from 1999 to 2000
by 25 percent. Total sales for all
material types exceeded 16.5 billion in 2000.
The addition of vegetable juices, combined with normal growth in sales,
resulted in an additional 6 percent increase over 2000 with total sales from
beverage containers reaching 17.5 billion beverage containers.
While
recycling rates in California under the Program have been as high as 82
percent, recent rates have been lower.
The addition of new beverage containers to the system provides the most
obvious reason for the recent rate decline.
This immediate addition on January 1, 2000 of containers sold under the
Program has not yet been matched by an increase in the number of containers
recycled by consumers. Significantly,
though, the total volume of material recycled has increased every year since
2000.
Three fundamental tenets of the California Program
set it apart from other states’ programs.
California has a centralized deposit fund, administered by the state for
the benefit of consumers, private industries, and semi-private/public entities
participating in the Program.
California makes a concerted effort to create and promote convenient
recycling opportunities. The Program
seeks to use existing private recycling industries -- and promotes new
recycling modes -- to offer consumers convenient places to recycle. California law also creates a Manufacturer
or Producer Responsibility for the recycling of certain material types. Here the goal is to help internalize the
cost of recycling and ensure that cost is covered when a material type’s
inherent scrap value isn’t enough to drive the recycling of a material type.
California’s Program centers around the Beverage
Container Recycling Fund. Distributors
of beverages pay an amount equal to the CRV for each container they sell to a
California retailer or dealer. The
State pays that CRV deposit back to recyclers, via processors, for each
container they collect from a consumer.
In the case of the recycler, the State compensates the recycler for a
prior payment of CRV to a consumer. The
Department has the duty of collection and payment of these CRV funds, as well
as auditing the records of the distributors and recyclers who pay CRV monies
to, and receiving CRV monies from, the State.
This method of collecting the CRV from consumers
and paying them back for recycling is virtually transparent to the
consumer. Consumers pay the CRV at the
check-stand when they purchase beverages, seeing only that CRV was included but
seeing none of the collection mechanism.
When they recycle or “redeem” their containers, an equal amount of CRV
is returned to them. Again, how the
recycler gets funds is transparent and the consumer is not required to sort
containers by manufacturer or by store-of-purchase. In some cases, consumers are even offered an additional amount of
“scrap value” from the recycler. While
this isn’t required by law, many recyclers opt to pay some of the scrap value
to induce consumers to frequent their recycling center. Most commonly, recyclers pay some scrap
value for aluminum cans, largely due to the traditional and relatively high
scrap value for aluminum.
This method of collecting CRV and distributing it
when containers are recycled carries an additional benefit beyond being
transparent and easily facilitating consumer participation in recycling. The state-run deposit is also more efficient
and less labor-intensive than a traditional bottle bill. California’s Program mixes the deposits on
all containers. This frees retailers
from handling the deposits on containers they sell. It also allows retailers to operate like retailers and doesn’t
force them into the role of “recycler,” as well. This system also benefits private industry recyclers. Recyclers do not have to track individual
manufacturer’s containers through the recycling system. Recyclers are principally interested in one
factor – weight – and not which manufacturer actually made the container or the
product that was in the container.
Under the California Program, recyclers collect containers from
consumers based on individual counts, but more often collect by weight. Reporting and claims are done based on
weight.
Lastly, California’s deposit system allows an accurate
accounting of recycling rates. Actual
volumes of containers sold in California are reported with the payment of CRV
by distributors. Verifiable volumes and
numbers of containers recycled are reported as claims for payment from the
Recycling Fund. These values are
audited regularly by the State to ensure accuracy of payment to and from the
Program fund. Knowing actual numbers
helps provide reliable recycling rate figures.
This compares quite favorably to other deposit states where the reported
numbers of sold and returned containers may be based on anecdote and are not
verifiable.
Unlike traditional bottle bill states, California
does not mandate redemption of containers inside actual retail
establishments. However, consumers must
be able to reclaim the deposits they made on containers. If those deposits aren’t readily
reclaimable, Program founders believed the deposit might actually be construed
as a tax, which it is not. The Program
relies on participation by a number of types of private industry recyclers to
provide these convenient recycling options.
The State does not operate recycling centers, but provides funds and
incentives for businesses to operate recycling centers.
A recycling infrastructure already existed on some
level before the program was established.
Most recyclers were located in scrap yards, often found in heavy
commercial- and industrial-zoned areas.
Some recyclers operated recycling kiosks near retailers, though they
mostly accepted only aluminum containers.
With the advent of the Program, though, a retailer must ensure that a
recycler is operating within a ½ mile “convenience zone” of that retailer, if
the retailer grosses a significant and specified volume of annual sales. Failure to have such a recycler located
within ½ mile has consequences.
Retailers in that “convenience zone” can be required to take-back and
pay deposits on containers inside their stores if a convenience zone is not
served by a recycler.
The Program helps develop these “convenience zone
recyclers” by offering subsidies to cover the unique costs of providing a
convenient recycling opportunity near retailers. The Program also offers subsidies to curbside recycling centers
to promote use of curbside recycling.
Over its life, the Program has proven quite adaptable in assisting
varied types of recycling operations create more consumer recycling
convenience.
Significant to the consumer convenience model, a
recycler seeking to offer consumers redemption value for their recycled
containers must redeem all material types.
Absent this mandate, some recyclers might choose to only accept aluminum-recycled
containers. This is because aluminum
has a scrap value that exceeds the cost a recycler incurs to “recycle” it. That is, a recycler will get more in scrap
value from a processor of aluminum containers than it will cost the recycler to
collect, sort, and deliver those aluminum cans to the processor. The same is not true for glass and plastic,
materials whose cost of recycling almost always exceeds the scrap value paid to
a recycler.
This requirement that certified recycling centers
accept all material types ensures that convenience of recycling isn’t simply a
matter of location. A consumer visiting a single recycler can redeem all of
their material types at one time. While
this mandate to accept all material types might appear to force recyclers to
engage in revenue-losing business practices, California’s Program takes those
potential losses into account and provides a Processing Payment to ensure
recyclers do not lose money by participating in the Program.
As noted above, some material types in the
California Program do not “pay their way” through the recycling stream. That is, the inherent value of the material
of the beverage container (the “scrap value”) is insufficient to pay for the
costs associated with collecting, handling, storing, and transporting (the
“cost of recycling”) that beverage container material. When this occurs for a container material
type, California’s Program imposes a Processing Fee on the beverage
manufacturers who choose to package in that material type.
The Department determines the need for a Processing
Fee by conducting surveys of recyclers’ actual costs of recycling and the scrap
values received by recyclers. The
difference between the scrap value and the cost of recycling is calculated on a
per container basis and this amount, per container, becomes the Processing
Payment due to a recycler. Processing
Payments are made to recyclers at the same time reimbursement for CRV paid to
consumers is made.
Processing Fees are collected from manufacturers to
pay Processing Payments to recyclers.
The Department calculates the amount of Processing Fee due from the
beverage manufacturer using statutory guidelines for survey methodology and for
some cost values. In 1992, the State
reduced the Processing Fees collected to reflect the fact that only a fraction
of the containers sold by manufacturers are actually recycled. The intent of the change was to eliminate
surplus Processing Fee collections, though opponents of that provision now
argue that it served to induce lower recycling rates (lower recycling rates
equated to a lower Processing Fees).
Since 1996, the Program has further reduced the amount of Processing Fee
paid by beverage manufacturers with subsidies of monies from unredeemed CRV
deposits.
California Recycling Program Challenges
With a program as large and complex as
California’s, some potential for fraud is bound to exist. Re‑redemption can be a problem. Containers each have ONE deposit paid to the
Recycling Fund when the container is sold to a consumer. However, an unscrupulous person can seek to
re-redeem a post‑consumer container, collecting a deposit on the same
container or containers multiple times.
Importation of out-of-state containers is another potential avenue of
fraud. No deposit is paid into the California
system on a container sold in Arizona or another neighboring state. Once shipped to California, though, the
containers can be difficult to distinguish from legitimate California bottles
and cans.
The Department, working with local, state, and
federal law enforcement, has intercepted several schemes to defraud the Recycling
Program. Truckloads of imported
materials have been intercepted at the border and in-state. Department investigators have found
warehouses of imported containers. The
Department has had notable successes combating fraud, but must continue to
pursue cases on a regular basis. The
Department does this to ensure the integrity of the Recycling Program and the
Recycling Fund and to help maintain a fair, competitive environment for
legitimate recyclers who might otherwise be forced to compete with recyclers
enjoying unfair and illegal advantage by committing fraud.
Level
of Manufacturer Responsibility
When initially conceived, the California Program
offered no subsidy to manufacturers for the Processing Fee. Since 1996, the unredeemed CRV in the
Recycling Fund has been used to reduce the amount manufacturers would otherwise
pay in Processing Fees. More recent
discussions of the Processing Fee now revolve around the amount of subsidy that
will be offered to further reduce the proportion of the Processing Payment to
recyclers that manufactures pay as a Processing Fee. The Department has noted that using nothing but unredeemed CRV
deposits and relying on no contribution from manufacturers could cause the
Program to bankrupt itself and be unable to pay consumers back their
deposits. Avoiding that problem
requires acceptance of a lower recycling rate goal than is currently expected
(80%).
Originally, Processing Fee/Payment calculations of
scrap value and cost of recycling were conducted annually. Changes in the Recycling Program in recent
years have attempted to fix either cost of recycling, scrap value, or both in
statute. However, these values change
as cost factors and markets change.
Recyclers have, in some cases, been forced to lose money when Processing
Payments don’t match real need to remain viable in the Program by redeeming all
container types. To ensure the
Processing Fee/Payment system remains viable, surveys of scrap value and cost
must be conducted regularly to reflect market changes, not negotiated
compromises.
Additionally, what is counted in evaluating the
cost of recycling or scrap values can negatively impact survey results. For instance, counting PVC plastic
contamination as a reduction in the scrap value of loads of PET plastic could
result in a surveyed lower scrap value for PET, resulting in a higher PET
Processing Fee when the problem actually originated from the PVC. The current Program has difficulties in
accounting for this kind of contamination.
California recently added millions of new beverage
containers to its Recycling Program.
The addition of these containers to the CRV system did not result in an
immediate increase in recycling rates, however. Educating consumers that these containers are now part of the
Recycling Program remains a significant challenge to the Department. One difficulty in educating consumers about
the California Program remains differentiating between the container’s material
type and what was packaged in the container.
California’s Program defines whether a container is “in” the Program or
not by what was packaged in that container.
The glass in a jar holding mayonnaise or some other product is
essentially identical to the glass containing sparking water, yet the water
bottle is included in the Program and the other jar is not. This difference creates consumer confusion
and, notwithstanding the addition of millions of new beverage containers, remains
one of the California Program’s biggest hurdles.
CONCLUSION
California's Beverage Container Recycling and Litter Reduction
Program is unique among the states. We
have experienced considerable growth over the years, and our program continues
to evolve and change to meet new circumstances. Moreover, our system is one in which all participants -- beverage
manufacturers, retailers, recyclers and consumers alike -- make valuable
contributions to the program's overall success.
Thank you for the opportunity to give you a brief
overview of California's program. I
look forward to answering any questions you may have.
California Beverage
Container Recycling: How Are We Different?
|
Traditional bottle bills |
California |
Deposit vs. Refund
Value |
Retailers refund a specific deposit (usually 5¢) for each container. |
|
Recycling Centers
and Convenience Zones |
Consumers return containers to retail stores. Containers are sorted by brand. |
. |
State Fund
Administration |
Program monies usually remain in private hands; manufacturers and retailers administer program. |
|
Use of Unclaimed
Funds |
Beverage companies keep unclaimed deposits (except MI and MA). |
|
Producer
Responsibility: Processing Fees |
Producers’ financial obligations are limited to administering the program and reimbursing retailers for their costs. |
|
Producer
Responsibility: Minimum Recycled Content |
Mainly address the supply side of recycling (collection of containers). |
|
Expanded Beverage
Types |
Typically cover beer and soft drinks (except Maine). |
|
Curbside Programs
Share Redemption Funds |
Curbside collection programs usually do not share redemption payments due to high cost of sorting by brand. |
|