Statement of Boisson, July 11, 2002

TESTIMONY TO THE SENATE COMMITTEE ON

ENVIRONMENT AND PUBLIC WORKS

Submitted by Edward Boisson

July 8, 2002

I am honored to present this testimony to the Senate Committee on Environment and Public Works, and I thank Senator Jeffords for calling this important hearing. More than ever, we need a solution to the beverage container waste problem that includes a fair, efficient and effective system of producer responsibility, and after 30 years of deadlock among the stakeholders, leadership such as that provided by Senator Jeffords is badly needed.<

I am Edward Boisson, a consultant with 14 years experience evaluating, developing and implementing materials recycling policies and programs with the government, industrial and non-profit sectors. Last year, on behalf of Businesses and Environmentalists Allied for Recycling, a project of Global Green USA, I facilitated a dialog among beverage container recycling stakeholders including representatives of Coca-Cola North America, Waste Management, Inc., Tomra North America (a major recycling company), Beaulieu of America (a major carpet producer using recycled plastic as raw material), state and local government, environmental organizations and many others. Even though the participants held strongly opposing views, they were able to agree on many of the facts about the benefits, costs and comparative effectiveness of existing US beverage container recycling programs as well as trends affecting recycling rates. My testimony is largely based on the final report from this project, entitled Understanding Beverage Container Recycling: A Value Chain Assessment Prepared for the Multi-Stakeholder Recovery Project, prepared by a team of well-known, experienced consultants and jointly released by the project participants. [1]

I was asked to provide information to assist in evaluating the concept of producer responsibility as specifically applied to the beverage industry, and I will try in my comments to honor the mutual trust and respect developed during the MSRP project. I have three main points to offer. First, there is in fact a serious beverage container waste problem, and there are well-documented, compelling economic and environmental reasons for solving it. Had the 114 billion beverage containers disposed in 1999 been recycled, for example, it would have saved the energy equivalent to 27.4 million barrels of oil and decreased greenhouse gas emissions by 4.8 million metric tons carbon equivalent, while fueling a plastics recycling industry in need of new raw material resources.[2] But unfortunately, recycling rates for all container types are heading down, not up. My second point is that many stakeholders agree about both why rates are declining and the ingredients of a long-term solution, such as the need for financial incentives, a stable funding source and new collection services targeting beverage containers wherever they are consumed. My third and final point is that experience with existing programs shows that new initiatives should be able to significantly increase recovery at relatively low unit costs, while addressing many of the concerns raised by industry and others. Optimized deposit systems such as the program called for in S. 2220, for example, can achieve very high recycling rates and, if maximum innovation is allowed, have the potential to operate very efficiently. The MSRP report shows, for example, that the net operating costs for traditional deposit systems can be reduced from 2.21 cents per container recovered to as little as 0.55 cents through innovative design. Concerns to be addressed include the need for market development and the need to design funding mechanisms and implementation strategies that treat all companies fairly. Non-deposit based systems that include a long-term, stable funding mechanism may have the potential to increase recovery rates, though not nearly as high as deposit systems. And, although strengthening municipal programs is beneficial, it is not likely to yield significant results because of their limited scope. I expand on these points below.

THE BEVERAGE CONTAINER WASTE PROBLEM AND THE ECONOMIC AND ENVIRONMENTAL REASONS FOR SOLVING IT

Beverage containers may be the single most ubiquitous and visible form of waste in our society. In 1999, for example, over 192 billion pre-packaged beverages were sold and over 114 billion beverage containers were disposed.[3] Recycling these disposed containers would have saved the energy equivalent of 27.4 million barrels of oil, reduced greenhouse gas emissions by 4.8 million metric tons carbon equivalent, saved over 41 million cubic yards of landfill space and removed approximately 1 billion containers from roadside litter.[4] (Exhibit One lists estimated environmental benefits associated with beverage container recycling in 1999.) Recycling beverage containers has significant economic benefits too. Recovered containers are needed to fuel investment and job growth in the currently stagnant plastics recycling industry that is seeking new long-term, stable sources of quality raw material. Recycling collection activities employ a sizable number of people and each collection job supports upstream employment in processing and manufacturing.

But, as shown in Exhibit Two, recycling rates for all types of beverage containers are now steadily declining. Recycling rates for PET plastic have dropped to 22% from a high in 1994 of 38%, and rates for glass are down to 31% after peaking in 1995. Most disturbing, the rate for aluminum cans, long a staple of recycling programs, peaked at 65% recycling in 1992 and in 2000 dropped a whopping 6.5% to 49.2, dropping below 50% for the first time in many years. The overall recycling rate for beverage containers in 1999, based on the number of units, was 41%. In short, as a highly visible, recyclable waste stream, beverage container recycling is an integral part of a sound materials management policy that should be applied to all products, and if we don’t act urgently, the huge advances achieved over the past several years may erode away.

WHY RATES ARE FALLING AND THE ELEMENTS OF A LONG-TERM SOLUTION

There is a surprising amount of agreement about the causes of declining beverage container recycling rates and even over the broadly defined elements needed in any long-term solution. For example, MSRP participants agreed that the reasons for declining recycling rates include:[5]

· Beverage sales growth is dominated by plastic (with a relatively low recycling rate) at the expense of glass and aluminum (with relatively high recycling rates);

· Increasing sales of single-serve beverages that are increasingly consumed away-from-home (and away-from-recycling services);

· Increasing diversity of beverage types like water and so-called “new age” beverages (many of which may not be covered under existing recycling programs);

· The stalling of growth in new municipal programs and reduced funding available;

· The reduced relative value of deposit amounts in deposit states.

Additionally, at least 20 municipalities have recently either dropped glass from their curbside programs or greatly curtailed it.[6] This is apparently a growing trend triggered by a switch to single-stream recovery systems. While they increase overall efficiency, single stream collection systems do not handle glass well because they yield low quality, low value, mixed-color broken cullet that contaminates recovered paper.

MSRP participants agreed in a joint letter releasing their final report that the following conclusions should guide future efforts to increase recovery:

· Financial incentives should be established to ensure the long-term sustainability of high recovery rates and strong markets;

· New systems should both strengthen existing programs (such as municipal curbside) and support a range of new recovery mechanisms (especially targeting away-from-home consumption); and

· New initiatives should be able to significantly increase beverage container recovery at relatively low unit costs.

Most fundamentally, because there is a net cost to beverage container recycling (since only recovered aluminum cans typically have sufficient market value to cover collection and processing costs), there is a need for a long-term, stable funding source. MSRP participants also agreed on a set of principles that guided the project, including the need for members of the supply chain to share responsibility, the need for solutions that are economically sustainable, continually improving and adaptable to changing technologies and markets.

MSRP participants also expressed some concerns that must be addressed in new systems, for example, over the need to ensure that adequate markets will exist for recovered materials, and over the need to ensure funding mechanisms and implementation approaches are fair to all companies and as efficient as possible.

EXPERIENCE WITH EXISTING PROGRAMS SUGGESTS RECOVERY CAN BE SIGNIFICANTLY INCREASED AT RELATIVELY LOW UNIT OPERATING COSTS

The MSRP Report compared the costs and effectiveness of existing US beverage container recovery programs as they operated in 1999, and the results are shown in Exhibits Three and Four. The following conclusions can be drawn from these data.

Through innovation, deposit systems can achieve unit operating costs at or below most existing beverage container recovery programs.

An important MSRP finding is that the operating cost of traditional deposit systems can be greatly reduced, for example, by using a centralized fund to eliminate the need for brand sorting, by eliminating the need for beverage distributors to handle recovered bottles, by relying to some degree on existing infrastructure (including independent buy-back centers and municipal programs), by using highly efficient technologies like reverse vending machines and by strategically identifying the retail locations where bottles can be returned. For example, the California deposit system that includes these mechanisms had a net operating cost in 1999 of 0.55 cents per container compared to 2.21 cents per container for traditional deposit programs that require brand sorting and rely heavily on in-store recovery.[7] (This compares with typical curbside net operating costs of 1.72 cents per container recovered.) There are legitimate concerns over the California system, and many of these could be addressed through careful design of a new, national system such as the one called for in S. 2220. For example, critics have charged that the unredeemed deposit funds amount to a major system cost, though unrelated to operating recycling facilities. (Unredeemed deposit revenue results from consumers’ decisions not to redeem containers to receive their deposit back.) Unlike in California, industry could use these funds to directly offset its costs of operating the system in S. 2220, and depending on the recovery rate and system efficiency, these funds could potentially cover the vast majority of costs. Another concern is over the complexity and fairness of the funding mechanisms used in California. Presumably, the beverage industry could design a system that is fair to all market players and is far simpler than the California processing fee system that is regularly adjusted through legislation and litigation.

Deposit-based systems have the highest potential to significantly increase beverage container recycling.

Among the existing US programs, only deposit systems have all the elements of a long-term solution listed above, and the recovery rates of existing programs reflect this. Combined, the ten deposit states result in an overall recovery rate of 71.6% compared to 27.9% in non-deposit states.[8] These figures are “overall recovery rates” for all types of beverage containers, a new measure developed in the MSRP that systematically accounts for differences in the types of containers accepted and other important program differences. Most US traditional deposit systems accept only carbonated soft drinks and beer and, in the study year 1999, achieved redemption rates for these container types of 72% - 95%. In the MSRP study year of 1999, California’s unique system achieved a somewhat lower redemption rate of 69%, and in the following year, after it was expanded to cover the vast majority of all beverage container types, redemption rates initially fell to 52% (resulting in very large surpluses of unredeemed deposits). The program called for in S. 2220, however, is likely to achieve far greater redemption rates than California, given its ten-cent deposit amount compared to California’s typical deposit of 2.5 cents.[9] The only other US deposit system with a ten cent deposit, in Michigan, has consistently achieved recovery rates for the container types targeted in the range of 95% or higher.[10] One issue that needs to be addressed in any new program to significantly increase recovery is market development, and in implementing the program the beverage industry would need to take steps to ensure that supplies increase incrementally and that actions to step up demand are taken concurrently.

Non-Deposit systems can potentially increase recovery rates, though far less than deposit-based systems. To succeed, an essential component is a long-term, stable funding source.

The potential for new, non-deposit-based systems to increase the national recovery rate was explored in the MSRP, though not fully developed. As long as they include a long-term, stable funding source dedicated to beverage container recycling, they have the potential to address many of the needed elements of a long-term solution by supporting and encouraging collectors to innovate and implement new programs, thereby increasing recovery rates. However, because the incentive to consumers is not likely to be as strong or as comprehensive as a deposit system, these programs are not likely to achieve nearly as high of a recovery rate.[11] Options for funding mechanisms include assessing a fee at some point in the beverage value chain (e.g., on the sale of raw materials to container manufacturers or on the sale of beverages at the retail level).

Focusing exclusively on strengthening municipal recycling programs, though beneficial, is not likely to yield significant results.

To date, the modest support provided by industry organizations for recovery programs has largely been focused on strengthening municipal programs. Municipal programs account for the vast majority of the average 27.9% recovery rate in non-deposit states, and typical net costs are 1.72 cents per container recovered. There is certainly room to decrease costs and increase recovery through efficiency measures, and such efforts are laudable. However, because curbside programs are only capable of targeting a relatively small percentage of containers and opportunities for initiating new programs may be few, these efforts are not likely to achieve significant results in terms of increasing the national recovery rate. For example, even if education and program restructuring increased participation and capture rates in existing curbside programs by 20% (a very aggressive goal) it would result in an overall national recovery increase of only 5.6%.[12] Furthermore, as mentioned above, the trend toward single stream collection is causing some municipal programs to reduce, not increase, glass beverage container collections.

CONCLUSIONS – WIN/WIN SOLUTIONS THROUGH INNOVATION

To solve the beverage container waste problem we need a win/win solution that includes a system of producer responsibility that is fair, efficient and effective. Recycling companies can win by securing new sources of raw material and new market growth opportunities. Municipalities can win by reducing their costs while increasing the overall amount of recycled materials. Federal, state and local government agencies and their citizens can win by realizing the environmental, economic and social promise of recycling beverage containers. And the beverage industry itself can win by potentially reducing their costs associated with existing systems and by resolving, once and for all, this issue that has clearly represented a thorn in its side for many years. The pre-requisite for a win-win solution is earnest innovation by companies throughout the beverage value chain, an openness to openly consider all options and a willingness to provide tangible support for recycling while working cooperatively with other stakeholders. The program called for in S. 2220 addresses all the elements needed in a long-term solution to the beverage container waste problem and provides maximum flexibility in its implementation, encouraging precisely the type of innovation and cooperation that is needed. For these reasons, it deserves careful consideration by all stakeholders in beverage container recycling.

I want to once again thank Senator Jeffords for sponsoring this important hearing and inviting me to participate. I look forward to answering your questions as best I can.

SELECT ENVIRONMENTAL BENEFITS DUE TO US BEVERAGE CONTAINER RECYCLING IN 1999

	Glass	Aluminum	Plastic		Total
			PET	HDPE
Baseline Recycling Statistics
Recycled in 1999 (thousands of tons)	2,000	840	333	220	3,393
Reduced Greenhouse Gas Emissions
Avoided GHG Emissions (MTCE per ton)[i]	.16	4.09	.72	.44
Avoided GHG Emissions (Thousands of MTCE)[ii]	320	3,436	240	97	4,093
Energy Savings
Avoided Energy per Ton (Million Btu)	1.37	158.19	26.25	15.17
Avoided Energy (Billion Btu)	2,740	132,880	8,741	3,337	147,698
Equivalent (Thousands of Barrels of Oil)[iii]	472	29,910	1,507	575	32,464
Avoided Litter
Containers Per Ton	4,581	66,225	26,702	26,702
Avoided Litter (Millions of Containers)[iv]	91.6	556.3	88.9	58.7	795.5
Avoided Landfill Space
Volume (Cubic Yard Per ton)[v]	3.0	8.4	9.8	15.6
Avoided LF Space (Millions Cubic Yards)	6.0	7.0	3.3	3.4	19.7

Source: Understanding Beverage Container Recycling: A Value Chain Assessment Prepared for the Multi-Stakeholder Recovery Project.

Prepared by R.W. Beck, et al for Businesses and Environmentalists Allied for Recycling. January 2002. Table ES-2, Page ES-8. The estimates were developed by the Tellus Institute and Sound Resource Management Group as detailed in footnotes 1-5.

COMPARISON OF BEVERAGE CONTAINER RECYCLING PROGRAM EFFECTIVENESS AND COST

Recovery Program and Targeted States	Population in Covered States (millions)	Effectiveness Measures Uniformly Accounting for Differences in Containers Accepted and Other Variables.		Alternative Cost Comparisons (cents/ unit recovered)						Funding Responsibility
		Overall Recovery Rate[vii]	Normalized Per- Capita Containers Recovered[viii]	Gross Cost[ix]		Net Cost (Including Material Sales Revenue) [x]		Net Cost less funds from Unredeemed Deposits[xi]
Deposit States[xii]
Traditional Deposit System (Manual)	47.7	43.1%	295		4.07		2.67		1.26		Consumers (unredeemed deposits), beverage distributors (handling fees) & retailers
Traditional Deposit System (RVM)		18.5%	126		2.53		1.13		(0.28)
Weighted Average, 9 Traditional Deposit States		61.6%	422		3.61		2.21		0.80
CA Redemption System	33.9	54.5%	373		1.62		0.55		(0.42)		Consumers (unredeemed deposits) & producers (processing fee)
Curbside [xiii]	81.6	9.5%	65		2.48		1.72		1.72		Local governments, tax payers, rate payers
Residential Drop-Off	81.6	1.6%	11		1.10		0.30		0.30
Other (e.g., non-residential and buy-backs)	81.6	1.8%	13		Unknown		Unknown		Unknown		Varies
Subtotal, 10 Deposit States	81.6	71.6%	490		2.69		1.53		0.53
Non-Deposit States
Curbside	199.9	18.5%	127		2.48		1.72		1.72		Local governments, tax payers, rate payers
Residential Drop-Off	199.9	4.5%	31		1.10		0.30		0.30
Other (e.g., non-residential and buy-backs)	199.9	4.8%	33		Unknown		Unknown		Unknown		Varies
Subtotal, Non-Deposit States	199.9	27.9%	191		1.91		1.25		1.25
Total U.S.	281.4	40.6%	277		2.32		1.39		0.88

Source: Understanding Beverage Container Recycling: A Value Chain Assessment Prepared for the Multi-Stakeholder Recovery Project. Prepared by R.W. Beck, et al for Businesses and Environmentalists Allied for Recycling. January 2002. Table ES-1, Page ES-7. See notes 7-11.

[1] The report is referred to hereafter as the “MSRP Final Report.” The authors are R.W. Beck, Inc., Franklin Associates, Ltd., the Tellus Institute, Sound Resource Management Group and Boisson & Associates. The report is available online at www.globalgreen.org/bear.

[2] Based on data in the MSRP Final Report, Table 4-1, page 4-5.

[4] Based on MSRP Final Report, Table 4-1, page 4-5.

[5] Trends affecting declining recycling rates are discussed in Section 2.2 of the MSRP Final Report.

[6] Resource Recycling Electronic Newsletter, April 3, 2002.

[7] Program cost estimates are from the MSRP Final Report, Table 3-1, page 3-2.

[8] Program effectiveness estimates are from the MSRP Final Report, Table 2-7, page 2-19.

[9] Though not covered in the MSRP report, five Canadian provinces have implemented modified deposit systems covering virtually all beverage container types (except milk), achieving overall redemption rates of 74% to 86%. Deposit amounts are typically 10 cents (Canadian) with the exception of Saskatchewan with tiered deposits ranging as high as 40 cents (Canadian) and achieving an 86% overall recovery rate. Source: “An Analysis of the Costs and Benefits of Beverage Container Recovery in Canada.” Prepared by CM Consulting, January 2002.

[10] Redemption rates in US deposit systems have fallen in recent years. According to the Container Recycling Institute, this is due to the declining value of the typical 5-cent deposit, which has lost 67% of its value since the first state deposit system was adopted in Oregon in 1971. Industry sources also point to the rise of curbside recycling services in the past decade that has drawn some containers away from deposit systems.

[11] Although not evaluated in the MSRP, examples of non-deposit-based systems include the industry consortia established in European nations as required by a European Union directive. Another example is the newly developing system in Ontario, Canada in which industry will share half the net cost of municipal recycling.

[12] Based on data from the MSRP Report, Table 2-7, page 2-19.

[i] Avoided GHG emissions are from the EPA’s GHG Emissions From Management of Selected Materials in MSW (GHG Report). The avoided emissions per ton recycled instead of landfilled are taken from Table 8-6, adjusted to “as marketed” from “as collected,” using loss data in Table 4-3 for aluminum and plastic and a Tellus estimate for glass of 44 % losses.

[ii] Avoided Energy is based on the difference in energy consumption between recycled and virgin feedstock. It is based on the “Franklin Data” in Tables 2-3 to 2-6 of the GHG Report, adjusted for losses using Table 4-3 and a Tellus estimate for glass as above. Franklin data were used because it provided data on all four materials.

[iii] Computed using 5.8 million Btu’s per barrel, as shown on page 581 of the 1999 US Statistical Abstract.

[iv] Avoided Litter is based on an assumption that 1 % of containers which are not recycled are littered. The “1 % litter rate” is used for illustrative purposes.

[v] Avoided landfill space is based on loose material densities, compaction factors and a 13 % addition for cover. This calculation was taken from the Tellus analysis used in Recycling For The Future - Consider the Benefits, White House Task Force on Recycling, November 1998.

[vi] Source: Aluminum Association, American Plastics Council, Glass Packaging Institute. Rates shown are for all product types within each container type – not just beverages. Aluminum Association recycling rate data were adjusted by subtracting imports from the numerator.

[vii] The overall recovery rate is a measure for comparing the effectiveness of recycling programs that consistently accounts for their differences. For all programs except “other” the overall recovery rate is calculated by multiplying: a) the percentage of all beverage container types that are accepted in the program; b) The percent of all containers remaining after redemptions in deposit states; c) A factor to account for the generator sectors targeted (i.e., at home or away from home); d) The access rate; e) The participation and capture rate; and f) a factor to account for yield loss in intermediate processing. The “other” category was calculated by allocating the remaining known recovery to deposit and non-deposit states, adjusting for the lower availability of containers in deposit states due to redemptions.

[viii] Normalized per capita recovery figures are based on average annual consumption data for the nation and do not reflect regional differences in beverage consumption patterns. Therefore they may not be consistent with state-reported recovery figures.

[ix] Gross costs include all operations costs associated with operating collection and intermediate processing activities, as well as administrative costs. Cost figures listed for deposit states and non deposit states as a whole are a weighted average based on population and do not reflect the cost of programs in the “other” category since no data were available. A crucial “reality check” on the cost figures was provided by the consulting team and MSRP participants, who scrutinized these figures and agreed they are reasonable. Gross cost figures for traditional deposit system (manual) are based on a confidential Franklin Associates study adjusted for consistency. Reverse vending machine gross cost estimates are from Tomra North America, as adjusted by Franklin Associates Ltd. for container mix. California redemption system gross costs are based on cost survey data from the California Department of Conservation, Division of Recycling. They include recycler and processor costs, administrative costs and handling fee payments. DOC data were adjusted to conform with the scrap values and material densities used in this report, and to subtract out curbside recovery impacts. Gross costs for curbside programs are an average of three sources: American Plastics Council, National Solid Waste Management Association and a confidential waste hauling industry source. Drop-off gross costs are from an R.W. Beck study for Ocala, FL.

[x] Material sales prices used are 24-month averages based on survey data from R.W. Beck. Differences in the unit revenues of each program are related to differences in the mix of containers handled. The same per ton values are used for each program.

[xi] Unredeemed deposit for traditional deposit systems is derived based on assumed average redemption rate of 78% and a “typical” 5-cent deposit amount.

[xii] Ten states have adopted deposit systems. “Traditional deposit systems” operate in Connecticut, Delaware, Iowa, Maine, Massachusetts, Michigan, New York, Oregon and Vermont. California’s redemption system is a hybrid deposit system with distinct differences from traditional deposit systems. These terms are defined in detail in Section 2.3 and Appendix C.

[xiii] The study analysis did not generate separate cost estimates for curbside and drop-off programs in deposit and non-deposit states. The analysis used data from non-deposit states.

Submitted by Edward Boisson

THE BEVERAGE CONTAINER WASTE PROBLEM AND THE ECONOMIC AND ENVIRONMENTAL REASONS FOR SOLVING IT

WHY RATES ARE FALLING AND THE ELEMENTS OF A LONG-TERM SOLUTION

There is a surprising amount of agreement about the causes of declining beverage container recycling rates and even over the broadly defined elements needed in any long-term solution. For example, MSRP participants agreed that the reasons for declining recycling rates include:[5]

CONCLUSIONS – WIN/WIN SOLUTIONS THROUGH INNOVATION

Baseline Recycling Statistics