1. Recyclable Resources: Minerals, Paper, Glass & More
Man is creative. But he has not been able to use his powers to increase & multiply the endowments, as yet. He has only destroyed.

2. Once used energy resources dissipate into heat energy – cannot be recycled
Other resources: retain their physical & chemical properties during use – can be recycled/reused
How much recycling is efficient?
Will market mechanism decide it?
How is efficient allocation different over time between recyclable & non-recyclable resources?
What impact does product durability has on allocation of virgin & recyclable materials?

3. Let’s find how efficient market’s work for depletable & recyclable resources & then use this as benchmark. Assume: finite resources.
Efficient allocation of recyclable resources: initially reliance on virgin resources as they are cheaper – later ↑ingly difficult to extract – then to lower grade – then import
Technological progress - ∴ lower grade ore ≠ ↑cost - difficult to extract ∴ price rises
Same time: cost of disposing product - migration to urban areas

4. Slowly, land scarce - burial of waste ↑ expensive –concerns over evn effects on water supplies & eco effects on value of surrounding land - buried waste acceptable
↑ Cost of virgin material & ↑ in waste disposal  recycling attractive – its also an alternative to both
Virgin ore - products costly - ∴ demand for recycled goods – “composition of demand effect” – additional incentive to return used product
Purity of recycled goods plays key role

5. Recycling Will ↑ as virgin ore & disposable costs ↑
Costs many: mainly transport + processing - significant – labour cost – collecting, sorting & processing scrap is labour intensive –
Scrap as input – has evn consequences – compliance with rules adds to cost
Design products to facilitate recycling - ‘stamp’
Recycling is adding more to resource – depend on it longer than on non-recyclable -

6. If recycling rate is 100%, resource flow is infinite
If 100 units of resource are in a product with one year of useful life. After one year 90% of resource is recovered & reused – next year 90% of that i.e. 81 units can be recovered & reused
If stock is A & recovery rate is α total amount used would be = A+Aα + Aα2 + Aα3 ….. This is = A/ (1- α)
For non-recyclable resources α = 0
Efficient economy strikes balance between consumption of depletable & recycled material

7. The Strategic Material problem
US: oil imports that of strategic importance – a few suppliers – true social cost > market price
Policy: tariff on imports & use proceeds for stockpile
Vulnerability of nation (importing) depends on (1) severity of shortfall (2) its ability to cope with shortfall (by substituting or suffering) Larger disruptions (> 35%) can have serious impact
Tilton: 1985: examined substitution effects of rapid rise of tin prices during 1970s

8. Waste disposal & pollution damage
Treatment of waste by producers & consumers – biases in market balance between recycling & use of virgin ores – disposal cost is a key in determining efficient amount of recycling
Failure to bear full cost of disposal shows bias towards virgin material & away from recycling
Method of financing disposal of potentially recyclable waste affects the level of recycling

9. Disposal cost & efficiency:
cost of recycling > price of recycled material sold. Loss?
Must understand relationship of marginal disposal cost to efficient level of recycling.
Example: cost of recycling $20 p t , sold for $10 per ton – inefficient?
Town is avoiding cost of disposal = $20 p t . ∴ benefits = $20 for avoiding disposal+$10 resale = $30 p t & cost $20 ∴ efficient recycling venture

10. Recyclable Waste Old scrap & New scrap
Old scrap: recovered from consumers -transport cost very imp - market works efficiently - doesn’t count marginal social cost of disposing ∴ market away from recycling old scrap & towards the use of virgin materials
New scrap: generated during production – requires no transport cost - under control of producer - design a product for scrap - minimum processing - guarantee of homogeneity - works efficiently

11. No direct relation between size of trash & fee
MC to homeowners of throwing one more unit of trash is negligible, but to society it is not.
$/unit
MCR
$/unit
MCs
MCp
Qp Qs 0%
100%
% recycled disposal
100% 0%

12. Disposal Cost & Scrap Market
How will market respond if all are to bear the true marginal disposal cost?
Effect on supply of materials to be recycled – consumers paid for discarded products – material to recycling centres – ∴ supply ↑ - economies of scale - ↓ AC of processing + more recycled materials
C ↑ due to price fall & Use of virgin ore ↓
∴ Correct inclusion of disposal cost would tend to ↑ amount of recycling & extend life of depletable- recyclable resources

13. Subsidies on Raw Materials
Are troubling source of inefficiencies – they take bias away from recycled inputs - raw materials are artificially cheap & can inefficiently undermine the market for recycled inputs
Public land’s prices are low as compared to market – people don’t receive true value for mining services provided by public lands – subsidy is lowering the cost of extracting the raw materials

14. Corrective Public Policies
Such inappropriate pricing creates improper incentives  misallocation ?
Volume pricing
Refund system
Deposit refund
Disposal & recycling charges at the time of sale
Tax for using virgin material

15. Pollution Damage
If environmental costs are added to virgin material – Price rise – leftward shift of supply curve - ∴ use more of recycled material
Disposal cost: external environmental costs – odours, pests, contamination of water…
Govt. regulates landfills for public safety – locating the facility is difficult
Impose host fees
Sometimes package is bigger than the product

16. Tax Treatment of Minerals
Some minerals get subsidy
Severance tax
Durability of the product
Three ways of obsolescence:
Functional
Fashion
Durability
Market mechanism automatically creates pressures for recycling & reuse in right direction – ↑ disposal cost & ↑ scarcity  ↑ demand for recycling