The Economics of Reducing Waste

Buying smarter and taxing the full cost of products on corporations would go a long way toward reducing waste.

Outsmart Waste

“Outsmart Waste,” by Tom Szaky, challenges us to look at waste in a different way and transform it from useless trash to a useful resource.

Cover courtesy Berrett-Koehler Publishers

Content Tools

Outsmart Waste (Berrett-Koehler Publishers, 2014), by Tom Szaky, explores why the garbage crisis exists and explains how we can solve it by eliminating the very idea of garbage. To outsmart waste, Szaky says, we first have to understand it, then change how we create it and finally rethink what we do with it. The following excerpt from Chapter 9, “The Economics of Outsmarting Waste,” shows us that we might make reducing waste more appealing to companies and governments by speaking the language of economics.

The main reason why waste is sent to landfills and incinerators and why few of our outputs are recycled (like they technically can be) is all tied up in the economics of waste. It is simply more expensive to collect and recycle most things than the results are worth, and it’s cheap—because we allow it to be cheap—to send waste to a landfill or an incinerator.

Because our world is so economically motivated, perhaps we can make outsmarting waste more attractive by speaking the language of economics. There are hidden economic benefits of investing in the process of outsmarting waste on several different levels. Like the whole of outsmarting waste, these benefits can begin with you at home.

The Benefits of Outsmarting Waste on an Individual Level

Although outsmarting waste may require an investment of your time, every aspect should save you money. If you don’t buy unnecessary items, you can save money for something more important. Packaged processed food tends to be more expensive then unpackaged fresh foods. Durable products, even though they may cost more initially, will last longer than disposables and should save you money over the long term. Buying used instead of new will also leave a few extra bucks in your pocket.

Outside of buying differently, you can save money if you compost your organics, recycle your inorganics, and upcycle your non-recyclables. This will take more work than putting everything in a garbage can, but you will see a number of economic gains. Your waste management bill, if you are billed by weight, will decrease or completely disappear. You won’t have to buy potting soil, as you’ll be making fantastic compost. In states with container deposit laws, you will actually get money back for bringing your empty beverage bottles and cans to a recycling center. And because you will be able to make upcycled goods from your waste, you’ll save money by buying less stuff overall. If you don’t want to upcycle at home, look for services that help you recycle your non-recyclables.

You will also have the noneconomic benefit of knowing that you are not only contributing to solving a major environmental problem but actively working to fight it.

The Benefits of Outsmarting Waste on a Corporate Level

The economic benefits of outsmarting waste at a broader, institutional level include everything you gain from outsmarting waste at an individual level and then some.

When it comes to offices themselves, you can utilize upcycled and recycled waste in your design and furnishings. Used doors make for great desks, vinyl records make for great wall dividers, and shredded wine corks and flip-flops make for a fantastic walking surface. This is a concrete way to show your employees that the company they work for cares about environmental issues. As a side benefit, you’ll have a more funky office environment with a lower overall cost than with traditional interior design options.

If your company manufactures products, you could find recycling and upcycling companies to take your pre-consumer waste materials for use as inputs in their processes. You could even go a step further and use upcycled or recycled materials in the products your company produces. If you manufacture clocks, why not look at making a line out of old CDs and DVDs? If you manufacture chairs, why not try building some from old skis? Consider looking at integrating recycled content into your products. The possibilities are as endless as your imagination, and leveraging raw materials that often have a negative cost can only help a company’s bottom line.

But what if you don’t need to redesign your office space or don’t want to make your products using waste? Creating collection programs through which consumers can collect your non-recyclable product waste and send it back to you is another way to outsmart waste at an institutional level while building positive relationships with your customers and clients. Many companies, from Estee Lauder to Nike, run voluntary extended product responsibility (EPR) programs in the United States and around the world. Offering free shipping can make these programs financially appealing to consumers and also decreases the likelihood of your products ultimately ending up in a landfill.

If you aren’t in a position to run an EPR program yourself, you could join the hundreds of companies that work with TerraCycle to collect and repurpose waste, saving it from the waste stream and eliminating the need to extract many new resources from the earth each year.

Extended Product Responsibility Laws

Is there a role for government in outsmarting waste? Instead of voluntary EPR programs (such as TerraCycle has innovated), should there be an expansion of mandatory EPR laws? Should other laws or policies require producers to take more responsibility for the waste that their products generate and for the environmental impact associated with that waste? The concept of extended product responsibility was first formally introduced by Thomas Lindhqvist two decades ago. In a 1990 report to the Swedish Ministry of Environment, Lindhqvist said: “[EPR] is an environmental protection strategy to reach an environmental objective of a decreased total environmental impact of a product, by making the manufacturer of the product responsible for the entire life cycle of the product and especially for the take-back, recycling and final disposal.”

The system first emerged in Germany, under the Green Dot, or Grüner Punk. Duales System Deutschland GmbH originally introduced the system in 1991 following changes to the Waste Act mandating that companies pay an EPR fee to Grüner Punk. Similar Green Dot systems were subsequently adopted in 23 other European countries and are now used by more than 130,000 companies—representing about 0.5 trillion packages per year.

The basic idea of Green Dot systems is that manufacturers pay into a fund for each package they produce. The fund then administers the money to waste management companies that actually collect and process the waste ultimately resulting from these products. When consumers see the Green Dot logo on a product, they know that the product’s manufacturer has contributed to the cost of recovery of that product. Many people have come to think that the logo means the product will be recycled, but unfortunately that is generally not the case.

Often the money paid by manufacturers goes into a fund that is administered by a group like the Duales System in Germany, Eco-Emballages in France, Chepko in Turkey, and TMIR in Israel. These groups are then charged with spending that money to recycle as much as possible, and they almost always focus entirely on increasing the recycling rate of traditional recyclable materials such as glass and paper. Although the increase in overall recycling that typically occurs is a big win for these laws, non-recyclables are still usually incinerated because recycling non-recyclables is much more expensive than recycling readily recyclable materials.

While EPR laws are able to extract billions of dollars from companies as a tax on their packaging waste, they still don’t do much in terms of recycling traditionally “non-recyclable” materials. In fact, these laws sometimes have a negative impact on the ability to bring recycling solutions to hard-to-recycle materials because they seem to encourage fallacies like classifying incineration as “recycling into energy” as a way to cheaply comply with the law. In other words, in most EPR programs around the world incineration of waste is classified as legitimate “recycling.” This is perhaps one of the most problematic challenges to outsmarting waste because “waste to energy” is a linear solution, not a circular one.

Someone once asked me what I would do if I were given the keys to the national EPR system in a country. Instead of a flat tax on all packaging, I would tax all packages and products on the true cost of their collection and repurposing. For example, a diaper package, as it is a simple plastic and lightweight, would cost only a few cents to collect and recycle. A dirty diaper, however, may cost more than the actual cost of the diaper. With that said, something that put value into the system, such as an aluminum can, would get you a credit. And something like a gold watch would get you even more. If this is how EPR were set up, the true costs of dealing with the waste that our packages and products eventually become would be billed to the manufacturers. And, just perhaps, it would create the necessary fiscal incentives to push manufacturers to make products that are easier to circularly process or, ideally, add value back into the system.

Taxing the Full Cost of a Product

If EPR laws can successfully tax companies for the waste their products produce, it should be possible to fully tax companies for all of the externalities of their existence—from the materials they extract from the earth to the fumes they pour into the atmosphere. Taxing the full cost of a product would essentially force sustainability onto all corporations, whether or not they consider themselves “green.” There is already a model for this program in the way that we tax cigarettes. Given the known dangers associated with smoking, anywhere from $0.17 per pack in Missouri to $4.35 per pack in New York is collected to help offset the costs incurred by hospitals treating people who develop lung cancer.

If we started taxing the whole cost of a product the way we tax cigarettes, the positive environmental impact would be almost immediate. Because the cost of raw materials would be much higher, companies would have to start making products in a way that would allow them to cycle more of the material they convert into their product. For example, we would pay the true (fully loaded) cost of oil instead of the subsidized cost of just extracting it from the environment and refining it. As the cost of raw materials rose, so would the desire to cycle used material. If this happened, companies would have to start looking at waste very differently.

Increasing the cost of landfilling or incineration with taxes or by charging higher fees to access these disposal methods would have a similar effect. The higher the cost of disposal goes, the more people would look at material recovery as a way to gain the needed inputs for their products. Garbage as a concept would almost cease to exist in industry because it would cost more to dispose of waste in a landfill than it would to reuse, upcycle, or recycle it.

Reducing waste can be forced onto companies and the public by increasing the cost of linear disposal (landfilling and incineration) or of extracting virgin raw materials (extended product responsibility). Both can be accomplished by taxes and regulation—or, inevitably, by time. As landfills fill up, the cost of opening more of them will increase, and as oil becomes scarcer, the cost of extracting it in harder-to-reach places (and in smaller quantities) will drive up its cost, as well.

In several industries today, I am seeing manufacturers looking ahead and investing to obtain access to the materials stream generated by their waste; they realize that the economics are evolving to the point where producing new materials will at some point be more expensive than collecting and recycling used materials. It is also an interesting way to gain control over the raw materials on which your product depends.

Environmental laws and taxes speed up the inevitable cost increase and allow us to conserve our valuable space and fossil fuels. At the same time, these laws and taxes force us to discover newer, cleaner, and more-efficient ways of producing and consuming. Given the finite amount of space and resources on our planet, these cost increases will happen, over time, whether we like it or not. The question is whether we will choose to slow the process of resource depletion with regulation or continue to use up what few resources we have at a blinding pace, driven by growth-focused economics. This is where the vote you cast at the ballot box really comes into play in the effort to outsmart waste.

Perhaps Nicolas Mallos, a marine debris specialist, said it best when he quipped: “Trash is really too valuable to toss, so we need to find alternative ways to repurpose it.” If the language of economics is the one our world really understands, perhaps it is time we start to speak it—with our ballots and our wallets—until the concept of garbage is a thing of the past.

More from Outsmart Waste:

Balancing Consumer Culture and Our Environment
Useful Waste: The Beginning and Ending of Garbage


Reprinted with permission from Outsmart Waste: The Modern Idea of Garbage and How to Think Our Way Out of It, by Tom Szaky, and published by Berrett-Koehler Publishers, 2014.