The Waste Diversion Tango: California's AB 939

By Lynn Scarlett
Los Angeles, CA
November 1998


In one passage from Lewis Caroll’s Alice in Wonderland, Alice stands at a fork in the road and asks the Cheshire Cat, "Tell me, please, which way ought I to go from here." The Cat replies, "That depends a good deal on where you want to get to." The Cat’s reply seems relevant as Californians ponder the approaching year 2000 deadline for achieving a 50 percent diversion of municipal waste from disposal facilities. Pundits, policy makers, and public officials are asking, "Can we get to 50 percent?" But the more central challenge is whether we are even asking the right question.

Fifty Percent: Can We Get There?

Before turning to that challenge, let me briefly respond to the less salient, but frequently asked question of whether we can achieve a 50 percent waste diversion rate. Technically, the answer is "yes." Indeed, some California cities already report having achieved a 50 percent diversion of their waste away from landfills. But the more important questions are: 1) at what cost? and 2) for what benefit? The cost question has a twist. As economists like to say, costs are not just about expenditure of dollars; what really matters is opportunity cost. What are the waste management investments, ideas, and innovations not undertaken as resources are diverted into prescribed waste management programs?

Answering the cost question is not a simple exercise for three reasons.

Costs. First, costs vary from one location to another—there is no one-size-fits-all verdict. Costs depend on location, program design, materials mix, market access, demographics, and even climate and geography. Nonetheless, in general, costs to achieve a 25 percent diversion of waste from landfills has been relatively modest on a per household basis, often hovering around $1.00 to $2.00 per household per month. Of course, in a city like Los Angeles, with 750,000 households, those costs can quickly translate into a large additional expenditure out of city coffers.

Second, diversion costs are also linked to diversion variables. Participation rates, set out rates, and capture rates all influence costs—both per household and in the aggregate. So does the mix of materials diverted. So does the presence and type of yard waste program. The work of Reason Public Policy Institute indicates that customer incentives in the form of variable rate (pay-as-you-throw) household waste fees can increase capture rates and improve program efficiency. And, of course, the amount of disposal fees avoided makes a difference in the net costs or savings associated with waste diversion—the higher the disposal fees, the greater the potential for net savings from waste diversion programs.

Finally, costs vary in operational efficiency. Some waste haulers, faced with bottom line concerns, have introduced innovations in equipment and operations that have substantially—as much as 30 percent since the early 1990s—reduced waste diversion program costs to date. Of course, the press to expand programs to include less valuable, more contaminated waste could reverse these cost-reduction trends.

Benefits. Nor is assessing benefits of mandated waste diversion a simple calculation. Several caveats are worth noting.

First, what makes sense from an environmental standpoint varies by material and circumstance. Recycling is a form of "dematerialization"—it can reduce the net amount of materials needed to produce a set of products over time. But, while recycling can result in net material savings, its utility as a dematerializer varies by material and is linked to several key product attributes. Specifically, because recycling requires capturing materials from a waste stream and reprocessing those materials, its contribution as a net "dematerializer" typically will depend on three factors: 1) the ease with which the material can be isolated from the waste stream; 2) whether large quantities of material are available in relatively uniform quality; and 3) how much "embedded value" remains within the discarded material.

These constraints invite two observations: there may be diminishing environmental returns to plucking more and more materials from the waste stream; and the real net benefit comparison is not between a virgin material and its recycled counterpart. Rather, the appropriate net benefit assessment must compare environmental impacts from virgin material use, its equivalent recycled counterpart, and any other substitute materials that could replace both the virgin and recycled product in question. Why is this broader comparison relevant? Historically, materials use has evolved toward ever more source-reduced materials—often high-tech laminates, composites, light-weighted metals and fibers, or plastics that provide relevant product attributes like strength, durability, or food preservation with very little initial material. This evolution over time has substantially reduced the amount of material consumed relative to what would have been consumed with traditional materials, whether they are recycled or not.

A second consideration is relevant when considering benefits: all markets are good markets. Any conversion of waste into feedstock for some new use displaces consumption of virgin material. Making textiles out of recycled plastics means virgin cotton, silk, or virgin resins will not be needed for those same textiles. Making boxboard out of recycled newspaper avoids use of virgin pulp. Making steel girders out of recycled auto hulks means more new, virgin steel need not be produced from freshly mined materials. Even consuming used plastics or mixed waste as fuel means other "virgin" energy sources will be conserved. Reuse, remanufacturing, closed and open loop recycling, organics conversion, methane gas capture—all represent ways of providing product and energy inputs that avoid mining extracting, and harvesting virgin materials.

What’s the bottom line regarding benefits? The ultimate goal, from a conservation standpoint, is to use less stuff per unit of output. Waste diversion, including recycling, offers one potential path to this environmental goal. Often, it is a superior pathway. But what makes sense for one product or material, or what makes sense at a particular level of effort, may not make sense for other materials, in other circumstances, or at higher levels of recapture and recycled content.

Redefining the Problem: Limits of the Mandated Diversion Mental Map

California. like many other states over the past decade, initiated mandatory waste-diversion requirements for local governments. In a two-phase process, the state required 25 percent diversion of municipal solid waste from disposal facilities by 1995 and 50 percent diversion by 2000.

While the mandate jump-started local recycling programs, the state’s waste-diversion law, AB939, suffers from one central problem. Specifically, it turns attention toward numbers and a calculation exercise. "Showing the numbers" becomes more important than tailoring programs to achieve fundamental conservation, efficiency, and safety goals. And this numbers exercise diverts resources away from waste management toward non-productive endeavors. "Showing the numbers" is, to borrow economics lingo, a transactions cost. But showing the numbers is not the same as achieving real resource conservation, public safety, and efficient waste-handling.

Specifically, AB 939 has introduced four problems.

Problems. First, mandating diversion necessitates defining what "counts" as diversion, but such definitions inevitably artificially narrow diversion activities to prescribed diversion options. Focus turns to doing what "counts," not what might be possible. Hence, California has witnessed debates about use of yard waste as alternative daily cover at landfill sites: does it count or not? Debates surface over non-combustion organic materials conversion. And we witness battles over chemical and molecular recycling? Is pyrolysis acceptable or not? Emotions, not technical or environmental considerations, tend to shape answers to these questions.

Second, waste diversion turns attention primarily toward "supplyside" emphasis on collecting waste materials rather than on a unified approach that focuses on connecting materials to markets. This emphasis skews both local and state attention toward diversion rates. Fewer resources and less attention turns toward market development.

Third, though waste diversion, in theory, comprises waste reduction and waste prevention efforts, the "show the numbers" focus turns attention toward more readily measurable efforts such as recycling and composting. Source reduction efforts—in the context of AB939—suffer from a "what’s not there is hard to measure" problem. Yeoman efforts by some AB 939 consultants to develop ways to calculate "what’s not there" have surfaced, but these efforts face profound information-generation challenges. Moreover, much of the source reduction measured results from natural competitive market dynamics in which businesses persistently look for ways to use fewer resources to accomplish a given task. These efforts are enormously important from an environmental standpoint, but they are not really attributable to AB 939.

Fourth, AB 939 turns focus away from market dynamics of waste and materials handling. AB 939 overrides rather than reinforces the ability of waste managers, public and private, to assess what mix of options makes sense at a particular location. Achieving a 50 percent diversion becomes a sort of holy grail that supplants the sort of decision making flexibility that would better enable waste managers to innovate and tailor programs to circumstances.

Achievements. Since passage of AB 939, waste diversion in California has increased substantially. No doubt AB 939 ignited these waste diversion efforts. However, the fundamental analytical issue is not whether "something" happened in response to passage of AB 939. Instead, the key consideration is whether similar achievements might have occurred with fewer of the perverse effects of AB 939. Here, fortunately, we have a national laboratory to examine. At the same time that California launched its diversion mandate, other states also sought to amplify recycling, composting, and waste diversion. Many did so without mandates. The result: many of these states, and individual communities not facing mandates, have achieved waste diversion levels comparable to those achieved in California. But they have done so without the transactions costs that attach, inevitably, to mandated programs that require "showing the numbers" and negotiating over what counts and what doesn’t.

Bottom Line. So, what’s the bottom line? Paul Relis, former member of California’s Integrated Waste Management Board, recently concluded: "Policy discussions…still are frozen on arguments about the feasibility of the 50 percent goal."

A Different Mental Map

Three central goals shape all waste management efforts: 1) safety, regardless of which waste-handing methods are used; 2) efficiency in both investment decisions and operations; and 3) resource conservation. These goals suggest four key elements of progress.

First is the importance of competition in both provision of infrastructure and service delivery. Nourishing competition requires streamlining permit processes to facilitate merchant-facility investment—private-sector, independent, competitive investments in innovative technologies and waste-handling and disposal facilities. Nourishing competition also requires facilitating programmatic innovation by establishing performance standards rather than technology prescriptions. And, finally, maintaining competition requires legal and institutional settings conducive to competitive private contracting.

Second is the importance of dynamism. Economic and environmental progress depend upon innovation. In the context of solid waste, dynamism requires policies that nurture treatment and handling innovations. Certification of new technologies should serve as the default position. A more-expansive certification approach could stimulate technologies to turn organics into solid fuel, gas, steam, or electricity, or into nitrogen replacements, chemicals, or even compost.

Dynamism also requires a focus on widening materials end-use options. For example, more attention to developing product quality standards for recycled content materials and compost materials can expand market opportunities. Organizations like the U.S. Composting Council represent one such effort, but many products, especially used in construction and infrastructure, lack performance standards for recycled content materials. In other instances, dynamism requires removing barriers to "green design." California’s tax code requires payment of sales taxes on reusable, leased shipping pallets but not on one-way containers. This differential treatment serves as an artificial (political) barrier to expansion of returnable pallet markets.

A third pathway to progress requires a focus on pricing feedback. Application of user fees at the household level helps give the customer "feedback" about the costs of waste management; such fees put trash on people’s radar screen when they make purchasing and disposal decisions. For waste managers, use of full-cost accounting is a key component in cost management. Full-cost accounting also allows public officials better to evaluate their in-house service provision with contracted alternatives.

And, finally, dynamism means nurturing industrial ecology—the deliberate incorporation of environmental values into process and product-design decisions. Industry is already "silently" and spontaneously moving in this direction. Private firms have made enormous investments in waste reduction, materials use reduction, and recycling. Some firms have reconfigured their entire mission, moving from being primarily a "product" provider to becoming a "service" or "knowledge" provider. Interface Flooring Systems now leases carpet tiles to commercial building owners, replacing individual, worn-out carpet segments rather than the whole carpet. The building owner saves money, and fewer resources are consumed.

But public action can stimulate industry ecology in various "soft" ways. Differential taxes between reusable and one-way pallets could be eliminated. Fee rebates could be offered to firms that have in place various environmental performance programs. Indiana’s Five-Star Dry Cleaning award program offers one to five stars, depending on environmental performance, to dry cleaners. Texas, through its Clean Texas Awards program, rewards pollution prevention and product stewardship.

Back to the Beginning

We have come full circle, back to the opening question: is 50 percent diversion possible? The simple answer is "yes", but under the current program model, achieving that goal is likely to increase waste management costs in many cities, though these costs will be relatively modest on a per household basis.

But moving away from the numbers game to systems analysis and competition could transform discards handling and broaden the prospects of turning waste into diverse, marketable products and better ensure that materials are handled safely and efficiently.

As Yoda said in Star Wars, "Hard to see is the future, which is always moving."

On that note, borrowing from Forrest Gump, "That’s all I have to say about that."



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