This publication (SW-733) is the second report (January 1978) to the President
and Congress submitted by the Resource Conservation Committee. Included in this
published version are two additional staff papers not submitted with the original report.
RESOURCE CONSERVATION COMMITTEE

1979

-------
 This publication (SW-733) is the second report (January 1978) to the President
 and Congress submitted by the Resource Conservation Committee. Included in this
 published version are two additional staff papers not submitted with the original report.
RESOURCE CONSERVATION COMMITTEE

1979

-------
     THE RESOURCE  CONSERVATION AND RECOVERY ACT
                           OF  1976


                      Section 8002(j)
                             of
                    Public Law 94-580

  "(j) RESOURCE CONSERVATION COMMITTEE.— (1) The Administrator
shall serve as Chairman of a Committee composed of himself, the
Secretary of Commerce, the Secretary of Labor, the Chairman of the
Council on Environmental Quality, the Secretary of Treasury, the
Secretary of the Interior, and a representative of the Office of Man-
agement and Budget, which shall conduct a full and complete investi-
gation  and  study  of  all  aspects  of the  economic, social, and
environmental consequences of resource conservation with respect to-—
      "(A) the appropriateness of recommended incentives and dis-
     incentives to foster resource conservation;
      "(B) the effect of existing public policies (including subsidies
     and economic incentives and disincentives, percentage depletion
     allowances, capital gains treatment and  other tax incentives and
     disincentives) upon resource conservation, and the likely effect
     of the modification or elimination of such incentives ana disin-
     centives upon resource conservation;
      "(C)  the appropriateness and  feasibility of restricting  the
     manufacture or use of categories of consumer  products as  a
     resource conservation strategy;
      "(D) the appropriateness and feasibility of employing as  a
     resource conservation strategy the imposition of solid waste man-
     agement charges on consumer products,  which charges would
     reflect the costs of solid waste management services, litter pickup,
     the value of recoverable components  of such product, final dis-
     posal, and any social value associated with the nonrecycling or
     uncontrolled disposal of such product; and
      "(E)  the need for further research, development, and demon-
     stration in the area of resource conservation.
  "(2) The study required in paragraph  (2)(D) may include pilot
scale projects, and  shall consider and evaluate alternative strategios
with respect to—
      "(A)  the product categories on  which such  charges would be
     imposed;
      "(B)  the appropriate state in the production of such consumer
     product at which to levy such charge;
      "(C)  appropriate criteria for establishing  such charges  for
     each consumer product category;
      "(D)  methods for the adjustment  of such  charges to reflect
     actions such as recycling which would reduce the overall quanti-
     ties of solid waste requiring disposal;  and
      "(E)  procedures for amending, modifying, or revising such
     charges to  reflect changing conditions.
  "(3) The  design for the study required in paragraph (2) (D) of
this subsection shall include timetables for the completion of the study.
A preliminary report putting forth the study design shall be  sent to
the  President  and the Congress within six months following enact-
ment of this section and followup  reports shall be sent six months
thereafter. Each recommendation resulting from  the study shall
include  at least two alternatives to the  proposed recommendation.
  "(4) The results of such investigation and study, including  recom-
mendations, shall be reported to the President and the Congress not
later than two years after enactment of this  subsection.
  "(5) There  are  authorized  to  be  appropriated  not to  exceed
$2,000,000 to carry out this subsection.

-------
THE FEDERAL INTERAGENCY COMMITTEE ESTABLISHED UNDER PUBLIC LAW 94-580

401 M Street. S.W., Washington, D.C. 20460
CHAIRMAN
Douglas M. Costle
Administrator. Environmental Protection Agency
MEMBERS
Juanlta M. Kreps
Secretary of Commerce
Cecil D. Andms
Secretary of the Interior
F.Ray Marshall
Secretary of Labor
w. Michael Biumenthai
Secretary of the Treasury
                                                       JAN 23 1978
                , ,   _    . _             _
                tne President  and  the Congress:
                  I hereby transmit for your consideration  the second report
             of the Resource  Conservation Committee, which  was established
             under Section 8002(j)  of Public Law 94-580.  This is the second
             in a series of four  reports.  The first report,  submitted in June
             1977, presented  the  Committee's Implementation Plan.  This report
andCB°a£etna3emer"  describes the Committee's activities over  the  last six months and
NON-STATUTORY MEMBERspresents the Committee's first substantive findings and
co"a c°rne"       r ecommenda t ions.
of Economic Advisors
AivinL.Aim           1he fin(3ings and  recommendations in this  report relate primarily
Department or Energy                J                                              .
             to the issue of  Federal beverage container deposit legislation.
             Although studies  are currently underway on numerous resource con-
             servation policy issues, the beverage container  deposit issue is the
             first to be thoroughly reviewed by the Committee.  It was chosen
             first because legislation on the issue is  pending in Congress and  the
             Committee felt a  responsibility to provide timely information and
             recommendations.

                  We are currently  in the midst of review of  the solid waste
             product charge concept, as requested specifically in the Resource
             Conservation and  Recovery Act and by the President's Environmental
             Message.  The Committee has deferred its final decision on beverage
             container deposit legislation until it understands the relationship
             between that issue and the solid waste product charge issue.  In
             addition, the Committee's work plan now includes those policy issues
             described in Part IV of the Implementation Plan.

                  The Committee is  intent on soliciting wide  public participation
             in its work.  The Committee has sponsored  several public meetings
             and the staff has met  with numerous public and private interest
             groups thus far.  We will, of course, especially appreciate your
             comments and suggestions.
                  Respectfully submitted for
                                                                     ion Committee,
                                                 Chairman
             Enclosure

-------
        THE RESOURCE CONSERVATION COMMITTEE
            DOUGLAS M. COSTLE, Chairman
  Administrator, Environmental Protection Agency
JUANITA M. KREPS, Secretary of Commerce


CECIL D. ANDRUS, Secretary of the Interior


F. RAY MARSHALL, Secretary of Labor


W. MICHAEL BLUMENTHAL, Secretary of the Treasury


CHARLES WARREN, Chairman, Council on Environmental Quality


ELIOT CUTLER, Office of Management and Budget


NINA CORNELL, Council of Economic Advisors


ALVTN ALM, Department of Energy

-------
                              CONTENTS


Section                                                          Page

Transmittal  Letter  	    i

   I.   Committee  Findings  	    1

       A.   Findings  on  Federal Beverage  Container  Deposit
           Legislation  	    1

       B.   Recommendations  on  Specific Legislative Design  Issues    2

       C.   Additional Committee Member's  Statement 	    4

  II.   The  Resource  Conservation Committee  and  Its Work  	    7

III.   Principles and Approach for  Policy-Making  	   10

  IV.   Public Participation Program 	   14

   V.   Staff  Background Papers on Beverage  Container  Deposits  ..   16

       1.   Rationale for Beverage Container Deposit Legislation    17

       2.   Costs  and Benefits  of National Beverage Container
           Deposit Legislation 	   27

       3.   Issues Regarding National  Beverage Container  Deposit
           Proposals 	   44

       4.   Transitional Impact of National  Beverage Container
           Deposit Legislation 	   53

       5.   Beverage  Container  Return  Rates  	   74

       6.   Localized Employment Impacts,  Glass  Industry  	   88

     *7.   Sensitivity  of Benefit Impacts of Beverage Container
           Deposits  to  Variations in  Container  Return Rate
           Assumptions  	   94

    *20.   Summary of Projected Labor Impacts of a Nationwide
           Beverage  Container  System  	  109

Appendix

Public Comments  and Input  on  Beverage Container Deposit
Legislation  	   A-2
   *This paper was not part of the 1978 RCC Report as submitted to
the President and Congress.

-------
                       CONTENTS (Cont'd)


Section                                                         Page


Volume I   -  Official Transcript of October 19, 1977,
Public Meeting 	  A-5

Volume II  -  Written Testimony Submitted by Speakers to
Accompany the Oral Transcript 	  A-6

Volume III -  Public Statements	  A-8

Volume IV  -  Supplemental Documentation and Reports Submitted
for the Record	  A-ll

-------
                       I.  COMMITTEE FINDINGS
A.  At its December 14, 1977, meeting the Resource Conservation
    Committee endorsed the following statement:

         "Critical issues involving the entire solid waste
         problem require urgent priority attention.

         The Committee finds that:

         1.  The imposition of mandatory deposits is an
             effective means for reducing litter associated
             with beverage containers.

         2.  Up to two percent of the solid waste stream
             could be eliminated by the imposition of
             mandatory deposits.

         3.  Product charges, which are currently under
             consideration by the Committee staff, might
             substantially reduce problems associated
             with the solid waste stream and encourage
             recycling, albeit with a lesser impact than
             mandatory deposits on litter resulting from
             beverage containers.

         4.  Upon completion of additional studies, the
             Committee will make a recommendation, at the
             earliest possible date, on the desirability
             of Federal mandatory deposit legislation.
             When the current studies on product charges
             are completed, the Committee will make a
             recommendation with respect to a legislative
             proposal on product charges.

         5.  Although the Committee is not recommending
             Federal mandatory deposit legislation at this
             time, its conclusions by the Committee are con-
             tained in the following section."

-------
B.  In keeping with the Committee's desire to design specific
    policies as a necessary part of the policy evaluation process,,
    the Coinmitte has reviewed,  discussed,  and debated a series of
    eleven issues related to the design of a detailed legislative
    proposal relating to the beverage container deposit issue.
    The Committee felt that it was important to make recommendations
    on these design issues so that the issue would be clearly
    understood prior to a decision regarding whether to support
    beverage container deposit legislation.   The following are
    the Committee recommendations on each of these policy design
    issues, which were also endorsed at the December 14, 1977
    Committee meeting:  (A more detailed discussion of each of these
    issues is presented in Staff Background Paper No. 3 in Section
    V of this report.)

    Issue No. 1:  Which beverages should be covered?

         - Beer and carbonated soft drinks in sealed
           containers, with a discretionary option for
           the EPA Administrator to include others by
           regulation (subject to guidelines).

    Issue No. 2:  Which containers should be covered?

         - All sealed containers for the designated beverages,
           regardless of material used, with a discretionary
           option for the EPA Administator to include or
           exclude others by regulation (subject to guidelines).

    Issue No. 3:  What should be the size of deposit?

         - Five cent minimum, indexed to the Consumer Price
           Index, in full cent increments.

    Issue No. 4:  Should deposits be uniform or multiple?

         - Uniform minimum deposit.

    Issue No. 5:  At what stage of the distribution system
    should the deposit begin?

         - Distributor-wholesaler.

    Issue No. 6:  Should deposit system be phased in?

         - The effective date of any legislation should be
           two years from the date of passage.

    Issue No. 7:  Should economic losses be compensated?

         - No recommendation at present, pending the outcome
           of studies by the Department of Labor and an
           interagency group under the direction of the
           Council of Environmental Quality,

-------
Issue No. 8s  Should nonrefunded deposits be taxed away or
regulated (other than as normal contribution to income)?

     - No (No special tax provisions are necessary.   The
       present tax code is sufficient).

Issue No. 9:  Should pull tabs be banned?

     - No

Issue No. 10s  Should cartons or carriers be regulated?

     - No

Issue No. 11s  Should State and local deposits be preempted
by Federal law?

     - No position

-------
C.  In addition to the Resource Conservation Committee Findings,
    several individual members requested that their additional
    statements be included.   The following are those statements:

    1.  Department of Commerce

             The objective of beverage container deposit legisla-
        tion and basic structure of the Committee's recommendations
        on design issues is to use economic market forces to solve
        an environmental problem.  This is accomplished by imposing
        a higher cost on the consumer who does not return the
        beverage container.  This is an effective way of addressing
        the beverage litter problem from the consumer's perspective.
        However, this is not the only aspect of the litter and waste
        reduction equation.  A greater, and probably more signifi-
        cant long term beneficial consideration to this environmental
        problem, can accrue from the supply component of the economic
        equation.  In this latter respect it is possible to draft
        legislation which would encourage the development and
        application of technology which would reduce the environmental
        problems associated with the materials used in the beverage
        container field.

             The Committee's legislative design approach, presented
        under subsection B above, limits the economic incentive to
        reduce litter to the consumer by imposing a five cent
        minimum deposit on beverage containers.  This minimum deposit
        approach overlooks an excellent opportunity to provide an
        economic incentive from the business or industry perspective.
        Namely, to provide the Administrator with the additional
        option to reduce the minimum deposit in one cent increments
        between five cents and zero upon finding that a new technology
        is significantly less environmentally degrading.  The Committee's
        present recommendation permits the Administrator to reduce the
        deposit to zero under design issue No. 2, but overlooks the
        economic incentive that could be created by providing the
        Administrator with the additional flexibility of incremental
        reductions between five cents and zero.  We believe a greater
        long term economic incentive opportunity for litter and waste
        reduction exists by encouraging the development of new tech-
        nologies that coincide with our environmental goals by means
        of providing appropriate economic incentives.  In this context
        it is well known that the development of new technologies is
        a slow process with incremental cost savings oftentimes less
        than a fraction of a cent per pound of material.  Thus, if
        we desire to enable the Administrator to encourage new
        technological developments in a positive manner toward our
        enviornmental objectives the option of permitting incremental
        cost reductions between five cents and zero provides such a
        mechanism.

-------
         Conversely,  the failure  to  provide  this cost
    reduction flexibility,  may well  be counterproductive.
    The creation of a gap between zero and five cents creates
    a tremendous barrier to the advent of new technology.
    The effect of this gap is to  freeze technology  as opposed
    to providing a realistic incentive for change  toward
    more enviornmentally acceptable  approaches.

         Accordingly, legislation, if recommended,  should  also
    include economic incentives to encourage the development
    of technology to mitigate the litter and waste  problem.
    What specific technologies will  be encouraged  is difficult
    to ascertain.  However, it is possible to envision  that such
    economic incentives would foster new technology across a
    broad range of fields not limited to container  material.  For
    example, new container  designs may result that  are  more
    readily adaptable for recycling  or new uses.  New systems
    and processes for accommodating  on-site  or off-site collection,
    disposal, new uses or any other  technology which promotes
    the reduction of litter and waste.

         In conclusion a more farsighted approach  for legislation
    that is designed to reduce litter and waste is  to provide
    a positive economic incentive to foster  the development of
    new and innovative technology.  To provide the  Administrator
    with the additional flexibility  to incrementally reduce the
    deposit between five cents and zero would provide such an
    approach.

2.  Council on Environmental Quality

         The Council on Environmental Quality, although concurr-
    ing with the Resource Conservation Committee-1 s  decision
    to postpone making its recommendations,  believes that  there
    is sufficient evidence to support the immediate adoption of
    national beverage container deposit legislation.  Our
    analyses indicate that, although there may be disagreement
    about the magnitude of the likely benefits, there is
    overwhelming evidence that mandatory beverage container
    deposit legislation would result in significant reduction
    in litter, net cost savings to consumers and municipal
    and State governments,  net energy savings, and  net  employment
    increases.  It is also a policy  that would achieve  these
    benefits with a minimum of government regulation.

         The only serious question that has  been raised about the
    policy is the cost of the consumer inconvenience it will
    create.  Most people understand  clearly  the implementations
    of beverage container deposit legislation in terms  of  how it
    would affect them as consumers.   With this knowledge,  they
    have consistently indicated in public opinion polls strong
    support for such a policy. Thus, for the one question that
    cannot be quantitatively estimated,  the  people  affected

-------
    have  stongly  expressed  their:  belief  that  the
    benefits exceed the  costs.

         Rarely does government have  the opportunity to
    adopt a policy having all of  the  above  characteristics.
    The policy has been  thoroughly  analyzed over  a  period  of
    years by a number  of different  groups.  These analyses
    consistently  indicate that it will provide  at least some
    amount of net benefits  across a wide range  of measures.
    It does not require  large government expenditures or
    regulation.  And finally, it  is a policy  that is strongly
    supported by  a well  informed  public.

         We believe that these factors argue  strongly for
    adopting beverage  container deposit  legislation now, and
    that  the conclusions of the past  studies  will not be
    changed by additional studies that the  Committee will
    sponsor.  However, being convinced that this  is so,
    and recognizing the  value of  having  all members of the
    Committee supporting the proposal, we concur  with the
    Committee's decision to undertake some  additional studies
    so that those who still have  some doubt may also be
    convinced.

3.  Department of Labor

         I support the Committee  findings in  this report,  but
    I feel they require  clarification.

         I strongly support the need  for a  consistent,
    effective policy on  solid waste management  aimed at
    resource conservation.

         I recognize that a system  of beverage  container deposits
    can contribute to this  goal by  reducing the litter  of
    discarded beverage containers.  Whether Federal legislation
    in this area  should  be  proposed depends upon  an assessment of
    its benefits  and costs,  including those accruing to society
    as a  whole as well as those affecting individual sectors  of
    the economy.

         In particular,  a crucial element in  making any cost/
    benefit assessment is the extent  to  which deposit containers
    will  be returned by  consumers.  The  Committee estimates that
    up to two percent  of the solid  waste stream could be elimi-
    nated by beverage  deposits is based  on  a  return rate of over
    ninety percent.  While  this figure may  represent our best
    judgement at  the present time,  it is based  largely on
    the experience in  two States  with deposit legislation, Oregon
    and Vermont.   Since  these States  may not  be representative
    of the country as  a  whole, I  am looking forward to the
    experience in other  States.

-------
        II.  THE RESOURCE CONSERVATION COMMITTEE
                      AND ITS WORK
     The Resource Conservation and Recovery Act, enacted
October 21, 1976, established the interagency Resource
Conservation Committee to conduct studies and prepare
reports and recommendations for the President and the
Congress on resource conservation issues over a two-year
period  (Section  8002 (j) of P.L. 94-580).  The Administrator
of the Environmental Protection Agency chairs the Committee,
which includes the Secretaries of Commerce, Labor, Treasury,
and Interior; the Chairman of the Council on Environmental
Quality; and a representative from the Office of Management
and Budget.  In  addition, the Committee also invited the
Council of Economic Advisors and the Department of Energy
to participate because of the obvious relevance to economic
and energy issues.

     The Committee has been asked to conduct "a full and
complete investigation and study of all aspects of the
economic, social, and environmental consequences of resource
conservation."   Resource conservation is defined in the Act
as "reduction of the amounts of solid waste that are generated,
reduction of overall resource consumption, and utilization of
recovered resources."

     As provided by the Act, the Committee is to examine a
wide range of policy issues including:  "A.  The appro-
priateness of recommended incentives and disincentives to
foster resource  conservation; B.  The effect of existing
public policies  (including subsidies and economic incentives
and disincentives, percentage depletion allowances, capital
gains treatment  and other tax incentives and disincentives)
upon resource conservation, and the likely effect of the
modification or  elimination of such incentives and dis-
incentives upon  resource conservation; C.  The appropriate-
ness and feasibility of restricting the manufacture or use
of categories of consumer products as a resource conservation
strategy; D.  The appropriateness and feasibility of employing
as a resource conservation strategy the imposition of solid
waste management charges on consumer products, which charges
would reflect the costs of solid waste management services,
litter pickup,  the value of recoverable components of such
products, final disposal and any social value associated
with the nonrecycling or uncontrolled disposal of such
products; and E.   The need for further research, development,
and demonstration in the area of resource conservation."

-------
     As previously reported in the Implementation Plan,
the objectives of the Committee are to:   (1) develop and
evaluate selected policies affecting the efficiency with
which our society uses materials;  (2) involve all major
interests in the formulation of these policies;  (3) present
these findings and opinions to Congress in a series of
policy reports which will express the preferred options
and recommendations of the Committee.  These policy reports
will be submitted to Congress at approximately six-month
intervals.

     This report is the second of four mandated by the Act.
It presents the Committee's findings and recommendations to
date on the first policy issue the Committee chose to
evaluate—the question of whether to recommend Federal
beverage container deposit legislation.

     The Committee is currently conducting a thorough review
of the solid waste product charge issue, as requested by
both the enabling legislation and the President's Environmental
message.  Staff and contractor studies on this issue have been
underway for many months, and the Committee will be focusing
intensively on the issue during the next few months.  Three
public meetings across the country have already been held
to gather public input on the issue.

     In addition, the Committee will be reviewing a full
range of alternative potential and existing policy issues
in the coming months.  These studies will include, but not
necessarily be limited to the following policy issues:

     --  subsidies for resource recovery

         litter taxes

         severance taxes

         percentage depletion allowances for extractive
         resources

     —  capital gains tax treatment of timber income

         freight regulations

         deposit and bounty proposals

-------
     The previous section presented the Committee findings
to date on national beverage container deposit legislation.
The following section is a brief reiteration of the principles
and general approach that the Committee has endorsed as
guidance in developing and selecting conservation policies.
Section IV describes the Committee's public participation
program over the last six months.  Section V incorporates
six background papers prepared by the Committee staff to aid
in the Committee's study and decision making process.  A
lengthy appendix, in four volumes, provides a compilation of
the public comments and input received to date on national
beverage container deposit legislation proposals.

-------
                          10
    III.   PRINCIPLES AND APPROACH FOR POLICY STUDIES


     There are a number of basic principles, criteria, or
general social values that might serve as guidlines in
formulation public policies for resource conservation.  The
Committee feels it is appropriate to reassert, as a general
statement of philosophy, those principles and values that
it considers most important both in assessing resource
conservation and recovery policies and in recommending
alternatives that will be in the greatest public interest.
Without attemption to rank these criteria in order of relative
importance and recognizing that these criteria will frequently
be in conflict, the Committee proposes to follow the principles
listed below throughout its work.

1.  Free-market principles.  To the maximum feasible
    extent,conservation policies should not interfere
    with the free choice of producers, consumers, and
    local governments to make decisions in a decentralized
    fashion.  This criterion is consistent with the
    broader democratic philosophy of freedom of choice
    and also represents our basic faith in the private
    market system as the primary mechanism for allocating
    society's resources.  Adherence to this principle
    does not imply a blind faith in the status quo,
    however.  Certain shortcomings in market structure
     (e.g., monopoly) and the absence of effective private
    market mechanisms to provide for certain public goods
     (e.g., environmental protection) allow a valid corrective
    role for government consistent with, and indeed essential
    to, the efficient and equitable functioning of the com-
    petitive private enterprise system.

2.  The "polluter-pays" principle.  In simplest terms,
    the polluter-pays principle means that whoever is
    responsible for pollution  (environmental damages)
    should be charged the costs of preventing, controlling,
    or correcting these damages.  Although there are
    exceptions to any rule, this principle states that
    pollution costs should be neither subsidized by tax-
    payers in general nor borne directly by those exposed
    to the pollution.

         For pollution related to industries or products,
    it should be emphasized that the concept of "polluter"
    refers not only to the industry in question but also
    to the consumers of that industry's products as well.
    In effect, the "polluter-pays" principle means that

-------
                      11
those producing and consuming pollution-associated
products pay.  It is unlikely that pollution control
costs assessed the producer will be totally or even
largely absorbed out of "excess profits."  Under some
market conditions, such costs will to a substantial
extent be passed along to consumers of these products.
In the long-run the extent of the pass-through will
depend upon the availability of less-wasteful products
and less-polluting technologies and the actual value
placed on that product by the consumer.

Social and economic equity.  Implementation of any
significant new policy will, if effective, engender
changes.  Often such changes will be more beneficial
to some groups than to others.  The short-term con-
sequences of a specific conservation policy might
be that specific industries, labor groups, and
geographical regions of the nation would experience
"windfall" gains and/or losses.  For example, some
consumer groups may find their living costs rising
much more rapidly than others.  In the longer-term,
major shifts in economic opportunities may occur.

     Such questions relate to the distribution of
costs and benefits  (as opposed to their total
magnitudes).  Often equity issues are the major
features which determine whether a specific proposal
will be accepted or rejected.  For example, any
scheme that is seriously regressive — that is, imposes
a disproportionate burden on the ;^oor—is unlikely to
receive serious consideration.  The purpose of emphasi
zing this criterion is not to argue against change.
Change is necessary and essential if progress in con-
serving resources and in improving the efficiency with
which materials are used is to occur.  Father, the
issue is that in developing, evaluating, and recom-
mending conservation policies, it is essential that
the Committee consider how the interests of various
groups will be affected.  If serious equity problems
appear with a specific proposal, efforts can be made
to minimize or reduce these problems by redesigning
the policy.  For example, the introduction of the
policy could be stretched out over a period of time
to reduce any transitional dislocation problems.
Alternatively, certain groups could be exempted from
the requirements.  In still other cases, society
might directly compensate groups negatively affected
by the policy or might impose special taxes on groups
enjoying unearned windfall profits.

-------
                          12
    Economic  efficiency.   In broadest terms,  economic
    efficiency may be  defined as the situation in which
    society gets  the most of those goods,  services,  and
    environmental benefits it desires within the constraints
    of existing resources and technology.   Developing
    efficient policies requires that one compare total
    social benefits with  total social costs to ensure that
    society does  not  sacrifice more goods  and services than
    are justified by  the  benefits of the policy.

    Administrative feasibility and cost.  Policies
    should be simple  enough to be understood by parties
    involved  in implementation and compliance.  A con-
    servation policy  should not require information or
    data that cannot  be acquired at reasonable cost.
    From a practical  viewpoint, the total  cost of
    administration and enforcement for both public
    administrative agencies and private parties should
    be small  compared  to  the benefits derived.  The
    Committee will explicitly assess these administrative
    costs for any policy  proposal considered.
      Approach To Policy Development And Evaluation

     The principles outlines above are insufficient in
themselves to provide unambiguous policy direction.  Often,
analysis highlights the fact that one principle or impact
must be traded off against another.   Policy development,
evaluation, and selection is a complicated and delicate
process involving a blend of philosophical principles,
economic theory,  and quantitative assessments of the effects
of proposed measures.  The Committee recognizes that quanti-
tative estimates  often tend to dominate and obscure other
selection criteria and therefore will endeavor to ensure
that principles and theory receive due consideration.
Ultimately, political values and processes will play the
deciding role.

     Recognizing  the difficulties involved in policy
development, the  Committee proposes  the following approach:

1.  Design Sepcific Policies.   Policy reports frequently
    lack effectiveness because they  discuss policy alter-
    natives at a  level that is too abstract.  At a
    relatively early stage in the evaluation of each
    policy area,  specific and detailed proposals need
    to be designed before any substantive quantitative
    analysis or public review process can begin.  Indeed,
    grappling with detailed design issues is, in itself,
    a major aspect of policy development.  Much of the

-------
                          13


    effort of the Committee will go into designing
    specific proposals.

2.  Utilize Quantitative Analysis Methods.  Although the
    Committee has few illusions about the degree of
    quantitative accuracy possible with existing methods
    and data, it still intends to evaluate alternative
    policy proposals using cost-benefit or other quanti-
    tative procedures wherever practical.  To achieve
    this, the Committee may devote resources to developing
    and improving the existing.data base as well as to
    improving current estimating procedures.  The extent
    is to ensure that the decisions of the Resource
    Conservation Committee are made in as logical and
    accurate a fashion as practicable.  Attempts will be
    made to estimate the effects of policies on the cost
    of materials, on the quantities of waste generated
    and disposed of, on materials and energy requirements,
    and on environmental variables.  Measures of other
    areas of benefit or cost impacts such as employment,
    regional economics, international trade, administrative
    cost, and enforceability,  will need to be refined or
    developed during the course of the Committee's work.
    The Committee recognizes that the state of the art
    of assessing the economic value of environmental and
    conservation benefits is not well developed.  As a
    result, certain benefits of conservation may have to
    be stated in physical rather than economic or market-
    value terms.

3.  Emphasize Gradual Transition and Implementation Features.
    To mitigate the limitations and uncertainties noted
    above, the design of a policy should provide for adequate
    monitoring, feedback, and subsequent corrective adjust-
    ments.  Where dislocations are a problem, policies
    should also be designed to be phased in over time so
    that changes will occur less abruptly, allowing
    affected groups better opportunity for adjustment.

4.  Encourage Public Participation and Review.  Participation
    and debate by public and private interest groups will
    be provided for and encouraged throughout the study
    period.  Their reactions,  comments, and suggestions
    will be used in revising the policies and will be
    reported along with the Committee's findings, con-
    clusions, and recommendations.

-------
                          14
            IV.  PUBLIC PARTICIPATION PROGRAM


    As expressed in the previous section, the Resource
Conservation Committee is committed to encouraging a high
degree of public participation and review in its policy
evaluation process.  This is in keeping with the provisions
for public participation which are so intensive to the
intent of RCRA and its implementation.  The following
section discusses the Committee's efforts to date to involve
the public in the discussions of resource conservation issues.

    Public meetings are being sponsored by the Committee as
one of the mechanisms for gathering public comments.  The
•first such meeting since the last report was held October  19,
1977, in Washington, D.C., and was devoted to national
beverage container deposit policy.  The meeting was widely
announced, and a set of questions for which the Committee
sought public opinion was mailed to over 10,000 people.
Approximately 250 people attended the all-day meeting, held
at the Commerce Department Auditorium.  The program included
40 speakers who represented a wide cross-section of congres-
sional, industry, environmental, and private citizen
interests.  Delegates from each of the agencies represented
on the Committee attended these public meetings.  Public
input was sought in written as well as oral form.  The
Committee received approximately 500 letters from concerned
groups and citizens.  The record resulting from this meeting
and the written comments received are included in the
Appendix to this report.

    A second set of public meetings, held in November, was
devoted to the solid waste product charge concept, which is
the next major policy on the Committee's agenda.  These
meetings were held November 17, in Washington, D.C.;
November 18, in Cincinnati; and November 21, in Portland,
Oregon.  These meetings were also broadly publicized and
resulted in a wide range of input from a cross-section of
speakers.  Approximately 35 speakers participated in this
set of meetings and nearly 100 letters have been received
to date concerning this issue.  Since the solid waste product
charge proposals will be covered in the next Committee report,
the transcripts and written comments from these three public
meetings will be incorporated at that time.

    Open Committee Meetings.  The Committee has decided
that its formal deliberation and decision-making meetings
will be open to the public.  Verbatim transcripts of these
meetings have also been prepared and are available for
public scrutiny.

-------
                         15

    Other Meetings.  Committee representatives and the
Committee staff have also had numerous meetings and brief-
ings with various individual groups such as the Glass
Packaging Institute, Environmental Action, the U.S. Brewers
Association, National Wildlife Federation, Can Manufacturers
Institute, National Solid Waste Management Association,
American Paper Institute, National Governor's Association,
the Society of Plastics Industries, Coca Cola Company, U.S.
Chamber of Commerce, American Public Works Association,
National Association of Recycling Industries, National
League of Women Voters, etc.  The Committee staff has made
a conscious effort to be available for these informal con-
sultations to ensure substantive participation by those
groups and individuals interested in the Committee's
activities.

-------
                         16


               V.   STAFF BACKGROUND PAPERS
     This section is a compilation of the six background
papers that were developed by the Committee staff to aid
in the Committee's study and decision-making process.  The
first three were originated by the staff to help focus the
Committee's attention and provide a common basis for
discussion.  The second three were developed in response
to specific concerns raised by the Committee during the
review and deliberation process.  The following is a brief
description of each of these papers:

1.  Rationale for Beverage Container Deposit Legislation —
    Presents the problem definition and the justification
    arguments for Federal action and briefly reviews
    several basic alternative approaches.

2.  Costs and Benefits of a National Beverage Container
    Deposit System — Discusses several key assumptions
    used in the analysis and presents estimates for
    benefits and costs expected to result from such a
    measure in 1985.

3.  Issues Regarding National Beverage Container Deposit
    Proposals -- Presents a detailed listing and discussion
    of policy design and evaluation issues.

4.  Transitional Adverse Economic Impacts of Mandatory
    Deposit Legislation -- Describes the transition
    process that would likely take place in the beverage
    packaging, distribution, and handling industry after
    passage of national deposit legislation and presents
    a worst case analysis of adverse labor and capital
    stock impacts.

5.  Beverage Container Return Rates — Presents historical
    trends and current experience with deposit systems and
    attempts to predict the return rates likely under a
    national deposit system.

6.  Localized Employment Impacts, Glass Industry —
    Investigates the potential for severe local labor
    impacts due to glass container plant closings.

-------
                                   Staff Background Paper No.  1
                           17       November 5,  1977
             RATIONALE FOR NATIONAL BEVERAGE
              CONTAINER DEPOSIT LEGISLATION
                    I.  Introduction
     In the last two decades, the distribution system for
beer and soft drinks shifted from one in which most con-
tainers were returned and refilled to one in which most
containers are thrown away after a single use.  Among other
effects, this shift created a substantial increase in litter,
solid waste, and resource use as detailed in the following
sections of this paper.  The analysis performed to date
indicates that the adverse impacts of this shift can be
reduced or eliminated by instituting a Federal mandatory
deposit system for beverage containers.  Such legislation
would provide refunds to consumers to encourage the return
of containers for reuse or recycling.

     Section II discusses the various reasons why mandatory
deposit legislation has been actively considered by all
levels of government and why it is appropriate to consider
it at the national level.  The discussion is largely quali-
tative; an accompanying background paper on the costs and
benefits of deposit legislation provides additional quanti-
tative data. Section III discusses the consistency of
mandatory deposits with the policy selection criteria endorsed
by the Resource Conservation Committee in its First Report
to the President and the Congress, implementation Plan for
the  Resource Conservation Committee.  Section IV briefly
reviews several alternative approaches to deposit legislation.
          II.  The Rationale for Federal Action

     In the early fifties, soft drinks and beer were pre-
dominantly packaged in refillable bottles.  The glass
container then in use was relatively expensive to manufacture
and the practice of the industry was to recover and refill
bottles.  To encourage consumers to return empty containers,
the beverage industry voluntarily established and maintained
a deposit/refund system.

     This situation had several advantages.  Beverage
consumption created little solid waste since most containers
were returned and reused many times before discard.  Littering
was minimal since not only would the litterer lose his
deposit (at 2 cents a container, it was a substantial fraction
of the original beverage cost)  but also the availability of
the refund created an immediate incentive for others to
collect any containers that were littered.

-------
                           18
     The refillable system required little energy and
material, since the resource requirements of each refillable
container were averaged over many trips.  Also, the wide-
spread use of deposits meant that most beverage containers
could be returned to almost any store, thus minimizing the
inconvenience to the consumer of returning them.  The reliance
on refillables and the deposit/refund system essentially
placed a user charge on those consumers who did not return
the empty containers.

     In the sixties, as labor costs increased and new
technology made available a wider array of more convenient
and less expensive beverage containers, the situation
changed rapidly.  The market share of beer and soft drinks
in refillable/returnable containrs plummeted from over 90
percent of all fillings in 1950 to 17 percent for beer and
34 percent for soft drinks in 1975.I/  The beverage industry
had little economic reason for encouraging the return of
empty cans or one-way bottles and the deposit/refund system
was severely truncated.  The shift from a deposit/refund
system to a throwaway system increased public costs for
container litter control and disposal, and for increased
resource use, which provides a rationale for government
intervention.
Reduce Public Costs for Litter Control

     With the decline of the deposit system, the act of
littering--a major externality associated with beverage
consumption—no longer incurred a direct economic penalty;
moreover, no economic incentive existed to collect littered
containers.  The costs of litter including both cleanup
costs and the detrimental effects on neighborhoods, parks,
roads, ect., were shifted from the litterer to society at
large.  This violates the principle that those responsible
for pollution should bear its costs.

     Beverage containers create a substantial litter problem.
Beverage containers are estimated to average 20-30 percent
of all litter by item count and 40 to 60 percent on a volume
basis.2/  In addition, their size and visibility make them
particularly noticeable.  Moreover, the relative permanence
of cans and bottles in the environment makes them among  the
most aesthetically damaging forms of litter.  These aesthetic
damages are not readily estimated, but the increasing value
placed on wilderness, parks, forests, and other recreational
areas suggests they are appreciable.  Littered bottles and
cans are also potential safety hazards.  Actual expenditures
for litter control, which reduce litter only to a limited
extent, are currently estimated to be as high as $1 billion.3/

-------
                           19


National beverage container deposit legislation could address
this issue by restoring both the refund, which would encourage
individuals to collect and return discarded containers, and
the lost deposit penalty for littering, which would discourage
individuals from discarding empty beverage containers in the
first place.

Reduce Public Costs of Solid Waste Management

     The shift to non-returnables also exacerbated another
problem associated with all municipal wastes—the fact
that those generating solid wastes are not billed for waste
collection and disposal in proportion to the public costs
incurred by the amount of waste they generate.  In almost
all municipalities, solid waste management costs are passed
on to the public either as fixed monthly assessments or
through the property tax mechanism.  Consequently, those
individuals purchasing throwaways and thereby increasing
the total solid waste bill pay no more than those reducing
overall waste by purchasing beverages in refillable containers.
The deadline of the deposit system shifted large quantities
of empty beverage containers from the industry-maintained
separate collection and cleaning system to the municipal
waste management system.  Responsibility was shifted from
those discarding the empty containers to the general public.
Again, this violates the basic principle of environmental
equity that those responsible for pollution should bear the
associated costs.

     Beverage containers now comprise about 7.8 million
tons, or 6 percent, of municipal solid waste per year.
Current estimates of the national costs of collection and
disposal average around $30 per ton.4/  Thus the implicit
subsidy to collect and dispose of beverage container wastes
in 1975 was about 235 million dollars.  National deposit
legislation would address the solid waste issue by diverting
most beverage containers from municipal waste into reuse or
recycling programs.

Ensure Efficient Resource Use

     The shift to one-way containers significantly increased
the material and energy resources required to package and
distribute beverage containers.  From an economic perspective,
however, an increase in resource use constitutes a social
problem only if the increase occurs because resource prices
do not fully reflect the cost of resource use.  As noted,
the failure to internalize the costs of littering and solid

-------
                          20


waste does implicitly subsidize the throwaway container.
Moreover, because many of the costs of air and water
pollution associated with materials processing are not
charged to those using the materials, the use of material
and energy resources is less expensive than it would be if
all social costs were internalized.  Other tax and regulatory
policies also bias downward the prices of energy and other
natural resources.  For these reasons, some Federal action
to correct these market failures and thereby conserve
resources may be warranted.

     The Resource Conservation Committee staff estimates
that the packaging and distribution of soft drinks and beer
consumes over 33 percent of all glass, 14 percet of all
aluminum, 2 percent of all steel, and significant amounts
of paper and plastics.  The current system also requires
considerable energy—about 383 trillion BTU's annually.5/
Deposit legislation would reduce material and energy use
by encouraging the return of beverage containers for reuse
or recycling.

Conflicting State and Local Laws

     The shift to the throwaway container with its attendant
problems has led to many legislative efforts at the city,
county, and State levels to pass deposit legislation.
Although only four States have passed such legislation, more
States are expected to do so.  To the extent that such laws
conflict with one another  (and all current State laws do
differ considerably), unnecessary inefficiencies in beverage
distribution may result.  A uniform national law would avoid
this problem.

Consumer Choice

     The industry's shift away from the deposit/refund system
coincided with a trend toward large national facilities and a
reduction and consolidation of regional operations, particularly
in the brewing industry.  This consolidation enabled the
industry to take advantage of the economies of scale associated
with the packaging of beverages in throwaway containers and
lowered the cost premium associated with the use of such
containers.

     This consolidation had both positive and negative
effects on consumer choice.  Although the trend probably
increased the availability in local stores of brands pro-
duced in other regions, it also probably hastened the demise
of many local brands.  Consumers still wishing to purchase
beverages in refillable containers found it more and more

-------
                          21
difficult to do so because retail outlets became increasingly
unwilling to handle such containers.  These changes have
militated against the continued use of refillable containers.

     Mandatory deposit legislation should increase the
availability of refillable containers.  However, it is
possible that such legislation could reduce the range of
brands offered for sale in some locations.

The "Throwaway" Society

     To many Americans the throwaway beverage container
is the paramount symbol of waste.  They view the use of
substantial amounts of energy and natural resources to
package a relatively nonessential product as inherently
wrong in a world of increasing scarcities and international
dependency.  Moreover, they consider the use of throwaway
containers undesirable given the existence of a workable
conservation-oriented alternative.

Summary of Rationale Favoring Legislation

     Taken together these issues constitute what has come
to be known as the "beverage container problem."  Mandatory
beverage container deposit legislation would address these
issues by restoring some or all of the features of the
earlier returnable system thereby reducing the public costs
associated with the non-returnable system.  The primary
benefits associated wth the legislation include the
reduction of litter, solid waste, and resource and energy
requirements.  Such legislation should also make the purchase
and return of refillable containers less difficult for those
consumers who prefer to use such containers and would signal
a movement in public policy toward a less wasteful, more
conservation-minded society.

     Groups opposing mandatory deposit legislation generally
do not take issue with the rationale that the public costs
associated with the current beverage container system should
be internalized.  Rather, they argue that the costs of man-
datory deposit legislation exceed the benefits and that
beverage containers should not be singled out for Federal
action just because they may be a symbol of waste.  An
examination of the benefits and costs of the proposed
legislation is included in Staff Background Paper No. 2.

    III.  Consistency With Policy Selection Criteria

     Mandatory deposit legislation is generally consistent
withthe policy selection criteria endorsed by the Resource
Conservation Committee in its First Report to the President
and the Congress.

-------
                          22


Reliance on Market Mechanisms

     Mandatory deposits modify the economic consequences
of not returning containers and raise the price of the
primary consumer benefit associated with convenience
packaging, i.e., disposal convenience.  However, the
deposit requirement works within the current market structure
by otherwise allowing full freedom of choice to producers and
consumers in making their production, packaging, and purchasing
decisions.

Adherence to "Polluter Pays" Principle

     Under a deposit scheme, the beverage container's con-
tribution to two major environmental pollution problems
particially created by beverage containers--solid waste
and litter—become the responsibility of those selling and
consuming beverages.  This is consistent with the "polluter
pays" principle.  The solid waste burden would be shifted to
beverage distributors and consumers under the deposit system.
Ensuring  that the litterer alone bears the costs of his
activity  is less feasible, since littering is a surreptitious
activity.  However, under a mandatory deposit system the
litterer would  forfeit his deposit and as a result would be
directly penalized.

Efficient and Effective Policy Mechanism

     As indicated in the accompanying paper on the costs
and benefits of deposit legislation, a nationwide beverage
container deposit system appears to create no long-term
economic  inefficiency with respect to resource allocation.
The major costs of this policy would be the losses in
consumer convenience, the increased costs of handling
returned containers, and the transition costs (increased
capital investment and job losses) involved in a shift in
container mix.  This shift would be brought about by changes
in consumer demand patterns as a result of a mandatory deposit.

     The major benefits are reductions in litter, solid
waste, and resource consumption.  On the average, direct
costs to the consumer of packaged beverages should not be
increased and will most likely be reduced due to increased
use of refillable containers.

Administrative Feasibility

     The feasibility of administering deposit legislation
within the private sector has been demonstrated not only
historically but also in the States that now have such

-------
                           23
laws in force.  Public sector administrative costs should
be negligible since no direct Federal regulatory or fiscal
actions are required.  The only public costs should be for
the monitoring of the impacts of the legislation.

Equitable Distribution of Costs

     The deposit mechanism should not impair the long-term
vitality of the soft drink and beer industries, as witnessed
by the economic health of these groups within States where
deposit legislation is in effect.  However, some adverse
economic impacts would occur during the transition to a
more extensive returnable/refillable system.  The adverse
impacts are analyzed in Staff Background Paper No. 4.  As
indicated above, beverage prices to consumers should, on
balance, be decreased somewhat.

                IV.  Alternative Policies

     The deposit approach addresses the litter, solid
waste, and resource conservation issues by requiring that
those concerned with the packaging, distribution, and con-
sumption of beverages take responsibility for these problems
or pay a penalty.  The individual who discards his containers
as waste or litter loses his deposit and automatically
creates an incentive for others to correct these problems.

     Although no other single policy addresses all of these
issues in exactly the same way as deposit legislation,
policies have been suggested which would address one or more
of these concerns.  Certain of these alternatives could be
viewed as complementary policies as well as direct substitutes
for beverage container deposit legislation.  The major
alternative proposals are discussed below.

Increased Education/Enforcement

     This policy would address only the litter issue by an
expanded program of public education against littering,
combined with more effective enforcement of anti-litter
laws.*  This approach has been the major policy on litter
over the last several decades.  Such a policy does not
create any economic incentives to reduce or control litter,
but may reduce the propensity to litter.  Such an approach
is a natural complement to the deposit approach, but probably
would not,  based on current evidence, reduce beverage container
litter as effectively as a deposit/refund scheme.
   This approach has been developed and promoted by Keep
   America Beautiful, Inc., in particular.

-------
                          24
Direct Recycling Subsidies

     This policy option would rely on various measures
(e.g., subsidies and Federal grants, possibly financed by
a product charge)  to increase the recovery and recycling
of postconsumer wastes.**  Although such measures could
reduce solid waste disposal requirements, they would have
little impact on litter.  Also, unless a Federal subsidy
is extremely large, and widely distributed, benefits would
lead to nationwide container recycling or reuse in a
relatively short time period.  In any event, most recycling
schemes can be made compatible with a mandatory deposit
system.  Subsidies to users of recycled materials, for
example, would be directly complementary to the recycling
objective of deposits on metal and plastics containers.

Litter Taxes

     Under this concept, items appearing in litter would
be charged their respective collection and disposal costs.***
The revenues would be used for litter reduction and collection
programs.  As proposed to date, litter taxes would provide
little incentive to change product design or merchandising
behavior.  They also fail to provide the consumer with an
incentive to reduce litter.

     However, a litter tax can be applied to all littered
items, including categories such as cigarette butts, candy
wrappers, and convenience food packaging for which a man-
datory deposit scheme would be impractical.  Thus, all
components of litter can be made to pay their share of litter
collection and disposal costs.  One problem with such an
approach would be in determining the amount of tax to be
charged each litter component.  Determination of the appro-
priate distribution of tax revenues for litter control would
also be difficult.  Litter reduction impact would depend
upon the ability of the various State and local governments
to establish and maintain an effective program to use the
revenues generated by the tax.  Again, a litter tax and
mandatory deposits can be compatible.
**
    Various industry groups involved in secondary materials
    recovery and reuse have been the major advocates of sub-
    sidy proposals.
*** An example of this approach is the Washington State
    Litter Control Act.

-------
                          25


Ban on Non-Refillables

     A ban eliminating all non-refillable containers would
presumably reduce wastes, but it would seriously disrupt
the beer, soft drink, and container industries.  Moreover,
it would prohibit consumer selection of certain types of
containers which might be particularly appropriate or
desirable for some situations.

Solid Waste Disposal Charges

     This alternative would require that the government levy
a charge equal to solid waste management costs on products
destined for disposal as municipal waste.*  As proposed to
date, the charges would be based on the virgin material
content of such products in order to create a recycling
incentive.  Funds collected would be distributed to local
governments.  This proposal would internalize the public
cost of solid waste management and should increase recycling
and conserve resources; however, this measure would not
address the litter problem.

     Additionally, the disposal charge would not have the
same symbolic impact on the public as a mandatory deposit
requirement because the charge would have little visibility
to the consuming public.  Beverage container deposits could
supplement disposal charges by addressing the beverage
container litter issue; beverage containers could be exempted
from the disposal charge to the extent that deposits would
remove beverage containers from municipal waste.
   This policy has been suggested by several ligislators,
   most recently by Senator Gary Hart  (Senate 1281).

-------
                                26

                          REFERENCES



V Beverage Industry Annual Manual,  1976-77,  p.  130.

2/ U.S. Environmental Protection Agency,  Office  of Solid Waste Manage-
   ment Programs.  Resource recovery and  waste reduction; fourth
   report to Congress.  Environmental Protection Publication SW 600.
   Washington, U.S. Government Printing Office,  1977,  p. 69.

3/ Powers, Roger W., President, Keep America  Beautiful,  Inc.  Testimony
   before the California Senate Committee on  Natural Resources.
   January 17, 1974.

_4/ U.S. Environmental Protection Agency,  Op.  cit.,  Chapter 2.

5/ Research Triangle Institute. Energy and economic impacts of mandatory
   deposits; final report.  Federal  Energy Administration, Sept.  1976.
   752 p. (Distributed by National Technical  Information Service,
   Springfield, Va., as PB-258 638.)

-------
                                   Staff Background Paper No. 2
                         27        November 7, 1977
                 COSTS AND BENEFITS OF A
       NATIONAL BEVERAGE CONTAINER DEPOSIT SYSTEM
     Over the last several years, a number of studies have
attempted to predict the costs and benefits of either State
or Federal beverage container deposit legislation.  Each of
these studies used a different set of assumptions and con-
centrated on different aspects of deposit legislation.  All
of the studies have been widely reviewed and criticized for
different reasons.

     The purpose of this paper is to predict the nature and
maximum range of the costs and benefits of national beverage
container deposit legislation using data from the latest
of these studies and a set of assumptions that seems most
appropriate given current knowledge of the beverage and
packaging industries.  The analysis focuses on national
rather than regional impacts of proposed Federal legislation.

     National beverage container deposit legislation would
cause a refundable deposit to be placed on beer and soft
drink containers.  The results of this legislation would be
a shift in the beverage packaging mix to a greater reliance
on refillable bottles, increased recycling of aluminum and
steel, reduced beverage container litter and solid waste,
reduced pollution, reduced energy and materials use, additional
container handling requirements, and a loss of consumer
convenience.

                     I.  Methodology

     In this paper we present the results of a long-run
equilibrium analysis of two scenarios which we believe
bracket the likely impacts of mandatory deposit legislation.
The approach used to estimate benefits and costs was as
follows:  First, baseline beverage sales and packaging
mix were projected to 1985.  Then, based on the experience
of States which have enacted mandatory deposit legislation,
the RCC staff estimated the possible range of impacts that
national legislation could have on the packaging mix.  The
staff then developed a series of assumptions including likely
return rates, recycling rates, and the dates for when legisla-
tion would pass and go into effect.  Current beverage shelf
prices were adjusted to reflect changes in the marketplace
caused by the deposit system.  The Research Triangle Institute
(RTI)  beverage industry model was then used to estimate the
impact of these assumptions on capital requirements, total
employment, energy and material use, reductions in solid
waste, litter, and pollution, and the change in consumer

-------
                         28
outlays for beverages.  Finally, the impact of the legis-
lation on consumer convenience was examined.
          II.  Assumptions Used In The Analysis

     The estimates of costs and benefits of mandatory
beverage container deposit legislation depend heavily on
the assumptions used in the analysis.  In fact, disagree-
ments over which assumptions should be used have been a
major source of controversy in the debate about the proposed
legislation.  For this reason, all the assumptions used in
previous studies and the criticisms of them have been reviewed,
and the RCC staff has developed the following new set of
assumptions outlined below for this analysis„

Legal Requirements;  A law requiring a minimum 5-cent
deposit on all malt beverage and carbonated soft drink
containers was assumed to pass in 1978 and go into effect
in 1980.  It was assumed that the deposit refund responsi-
bility would be placed on the distributor/wholesale„  The
proposed legislation under discussion is consistent with
these assumptions.

Baseline Assumptions

     The long-term trends previously described by RTI for
malt beverage and soft drink sales were assumed to continue,
The trend to increasing use of metal cans was also projected
to 1985.  The 1985 projection by the General Accounting
Office of packaging market shares was used as 3 guide and
adjusted to include a 10% share for large non-refillable
plastic bottles.  This 10% share of the total beverage
container market was consistent with industry projections
of a 15% soft drink market share for plastic bottles by
1985.I/

     Since the baseline projection was not intended to be
an exact forecase, aggregate packaging shares were rounded
to the nearest 5%.  The baseline packaging mix is shown in
Table I.  Refillable bottle use for malt beverage packaging
almost disappears in the baseline due to the structure of
the brewing industry, but the refillable bottle was pro-
jected to maintain a substantial share of the soft drink
packaging market.
I/ Conversation with industry representatives on 9/29/77.

-------
                                  29
                               Table I
                        Baseline Packaging Mix
                      (Percent of Beverage Volume)

                     	  1977	   	1985	
                     Malt       Soft            Malt       Soft
                     Beverage   Drink   Total   Beverage   Drink  Total

Refillable Bottle      14        38       27       4         32     20

Non-refillable         23        26       25      21         10     15
Glass Bottle

Non-refillable          0         0        00         18     10
Plastic Bottle

Metal cans             66        36       48      75         40     55

Sources RCC staff update of projections developed by the Research Triangle
        Institute in 1975
     In recent years the aluminum can has been steadily increasing
 its share of the can market.  RTI's projection of continuing
 market penetration for the aluminum can was assumed for the baseline
 projection. 2/

      The assumed baseline return rates for refillable bottles and
 the recycling rates for glass and metal non-refillable containers
 are shown in Table II.  The 1975 return rates—91% for soft drink
 bottles and 92% for malt beverage bottles— were used for the baseline
 projection, 90% appears to be a floor rate for economic use of the
 refillable bottle, and the beverage industry in the past has raised
 the required deposit on refillables when necessary to maintain the 90%
 return rate.  The secondary material recycling rates used in the base-
 line are RTI projections based on a Franklin Institute Study.

                           Table II
       1985 Baseline Return Rate and Recycling Assumptions
       Soft drink bottle return rate	  91%

       Malt beverage bottle return rate 	  92%

       Steel recycling rate	  10%

       Aluminum recycling rate  —	  40%

       Glass recycling rate	   5%


 2/Research Triangle Institute',' Energy and Economic Impacts of~Mandatory
 ~ Deposits, Sept. 1976, NTIS PB-258-638, pp. B-19 and B-23.

-------
                                 30
 Packaging Market Shares Following Federal Deposit Law

      The most important set of assumptions made to analyze the impact
 of mandatory deposit legislation is the packaging mix after the
 industry has adjusted to the deposit requirement.  Previous studies
 have assumed a wide range of possible market shares, all of which the
 RCC staff found to be unrealistic.  Accordingly, the staff developed
 two new scenarios which were felt to bracket the possible impacts of
 a Federal deposit law.  The packaging mixes used in the iirpact analysis
 are shown in Table III.  The rationale for the mixes used in these
 scenarios is presented in Staff Background Paper No. 4.  The costs and
 benefits of national legislation were assessed for 1985 because the
 transition analysis in Staff Background Paper No. 4 showed that the
 transition would be completed by 1985 in the scenario containing the
 most extreme shift from the baseline.


                              TABLE III
        1985 Packaging Mix Scenarios Used For Impact Analysis
                     (Percent of Beverage Volume)

                            Mix  I                        Mix II
                     Malt       Soft            Malt       Soft
                     Beverage   Drink   Total   Beverage   Drink   Total

 Refillable Bottles      28       50       40       51       67       60

 Non-refillable          16        5       10        9        2        5
 Glass Bottles

 Non-refillable           0       18       10        0       18       10
 Plastic Bottles

 Metal Cans              56       27       40       40       13       25

 Source:  RCC staff analysis

    The RTI inodel develops impact projections of packaging mix separately
 for the malt beverage and soft drink industries.  The baseline projection
 resulted in beverage market shares of 54% for soft drinks and 46% for
malt beverages in 1985.   These two percentages were used to construct
 the aggregate packaging mixes for the two scenarios.

      An effort was made in specifying the packaging mixes for soft
 drinks and malt beverages to maintain the baseline relationship between
 metal cans and non-refillable and management standpoint.  The split
 between malt beverage and soft drink industry sector.  The brewing
 industry is more centalized and has a more complex distribution process
 than the soft drink industry; this reduces the cost advantage of refillable
 bottles in the brewing industry and results in a smaller refillable bottle
 market share.

-------
                                 31
      The positions of  steel cans and aluminum cans relative to each
 other were assumed to  remain  as in  the baseline.  The deposit system
 favors the aluminum  can because of  its higher recycle value, but  the
 baseline already contains  a trend to aluminum cans, and  the reduction
 in can production due  to the  legislation would  slow new  investment
 in can production.

 Shelf Price  Impact Assumptions

      One of  the most important aspects of  a national beverage container
 deposit analysis is  estimating the  impact  deposits will  have on the
 shelf prices of beer and soft drinks.  RTI estimated 1985  shelf prices
 for beverages  in each  container type by beginning with actual 1975
 beverage shelf prices  and  then adjusting them for cost changes pro-
 jected to occur at the various stages of production and  distribution.
 The RTI beverage industry  model uses projections of increased handling
 costs for non-refillable containers at the retail and distribution
 levels, forfeited deposits, and recycling  revenues gained  by distributors
 or manufacturers to  determine industry cost changes.3/   Because the
 market is assumed to be competitive, it is assumed that  forfeited
 deposits will  not result in permanent increase  in profits  but will be
 reduced through price  competition.  Shelf  price changes  are the net
 effect of changes in capital  and labor costs.

      In response to  industry  criticisms that  existing shelf prices of
 malt beverages in refillable  containers did not adequately represent
 the costs of providing these  beverages on  a much more extensive scale
  (refillables are currently available for use  primarily for on-premise
 consumption  of the beverage and near breweries  where they  can be  provided
 at low cost),  3 cents  per  container was added to the 1975  shelf prices
 of malt beverages for  the  impact analysis.  This makes the refillable
 bottle marginally less expensive than the  aluminum can in  the impact
 scenarios.

 Other Assumptions Used in  the Impact Analysis

      In the  RTI study  sponsored by  Federal Energy Administration, 90%
 return rates were used for cans and bottles,  and 100% recycling rates
 were used for  returned cans.  The return and  recycling rates for  cans
 were criticized as unrealistic, so  the RCC staff developed new assumptions
 more in line, with previous experience and  the value of the different
 materials.   These rates are shown in Table IV.  An analysis of return
 rates is contained in  Staff Background Paper  No. 5.
3/ See Bingham, Taylor H. et al, Energy and Economic Impacts of Mandatory
   Deposits, Research Triangle Institute, 1976, pages 45 and 46, for a more
   detailed discussion of the data and assumptions used in determining
   shelf prices.

-------
                                32


                             Table IV

   1985 Return Rates and Recycling Rates Used in Impact Analysis
                                             Baseline   Mix I   Mix II
Refillable Bottle Return Rate

Metal and Glass Container Return Rate

Average Container Return Rate

Steel Can Recycling Rate

Aluminum Can Recycling Rate

Glass Container Recycling Rate
91%
10%

40%

 5%
90%

80%

85%

40%

80%

20%
92%

86%

90%

80%

95%

50%
     RTI's study for FEA contained coefficients of retail employment
which were based on a study of refillable container management in super-
markets.  These coefficients were reduced to take into account the likely
use of employee slack time in small package and convenience stores.

     The quantities of total beer and soft drink consumption are
projected within the model as functions of beverage prices and other
factors.  Accordingly, the present analysis made no further assumptions
about beverage sales after institution of mandatory container deposits.
In the absence of any evidence to the contrary, it was assumed that no
reduction in sales would occur due to the loss of convenience associated
with mandatory deposits.

     The reductions in materials and energy use and litter and solid
waste as a result of the mandatory deposit legislation are a direct
result of the assumed changes in packaging mix and return rates.  The
RCC staff relied on the RTI analysis of energy and materials use for
the direct reductions associated with the law.

     Beverage container disposal costs would be reduced as the quantity
of solid waste is reduced.  Collection costs probably would not be
reduced proportionately in the short run, but removal of a portion of
the waste stream would reduce the need to expand collection services
and would result in savings in the long run.  The solid waste savings
calculations were based on current national collection and disposal
costs, which were increased to $35 per ton to take into account the
more stringent disposal standards in 1985.

-------
                                33
               III.  Analysis of Costs and Benefits
     Given these assumptions, the KTI/FEA computer program was used
to project the low response (Mix I) and high response  (Mix II) outcomes
for 1985 used as the basis for the Resource Conservation Committee
staff analysis of benefits and costs.  The computer model directly
projects a large number of comparisons between baseline estimates and
scenario results, including numbers of containers, detailed sectoral
employment, energy requirements, total consumer expenditures, quantities
of containers recycled, and many others.  The RCC staff also made a
number of additional calculations to translate some of these values
into other results not directly produced by the model.  These primarily
included impacts on solid waste, litter, raw material requirements,
and selected environmental impacts.

     These cost and benefit estimates are summarized in Table V and
discussed in the remainder of the paper.

-------
                                34
                              Table V

        Summary of National Costs and Benefits of Mandatory
          Federal Beverage Container Deposit Legislation
                  (Estimates for 1985 Scenarios)*
1.   Net Direct Cost Savings to Consumer
    ($ Million)

    Net Savings per Filling (cents)

2.   Consumer Inconvenience Cost

3.   Post Consumer Solid Waste

    A.  Solid Waste Collection & Disposal
        Savings ($ Million)

    B.  Litter

        (1) Collection Cost Savings ($ Million)

        (2) Safety Consideration ($ Million)

            Net Collection & Safety Benefits

        (3) Litter Reduction
4.  Other Industrial Sector Environmental
    Impact Benefits

    A.  Industrial Solid Waste Reduction
        (million cubic feet)

    B.  Atomospheric Emission Reduction
        (million pounds)

    C.  Waterborne Waste Reduction  (million pounds)

5.  Natural Resource Conservation Benefits

    A.  Reduction in Bauxite Consumption  (million
        tons)

    B.  Reduction in Iron Core Consumption  (million
        tons)

    C.  Energy Reduction (trillion Btu)
Mix I**   Mix II***


 656      1,757

 0.6      1.5

 (Discussed in the text)
 207


 200
  10

 210
   221



   200

    10

   210
Total litter volume
reduced 40%; total
items by 20%
 270


 750

 140
 1.0


 1.3

  70
   450


 1,200

   210
1.5


 2.4

   130
*   Assumes passage of legislation in 1978 which is effective  in  1980.
**  40% refillable glass, 10% non-refillable glass, 10% non-refillable
    40% cans.
*** 60% refillable glass, 5% non-refillable glass, 10% non-refillable
    plastic, and 25% cans.

-------
                                35
Change in Consumer Costs

     As shown in Table 3, container Mix I would bring about consumer
savings in the range of $656 million, or 0.6 cent per 12-ounce serving.
Container Mix II, with higher use of refillable bottles, would bring
about consumer savings of $1,757 million or about 1.5 cents per
serving.  These values were calculated by first multiplying shelf
prices of individual container types for beer and soft drinks by the
beverage consumption for that container type, then summing the total
expenditures for the baseline, for Mix I and for Mix II.  Then the
increased amount of forfeited deposits was added to the consumer cost
of Mix I and Mix II.  The net changes in consumer savings are a result
of the combined effect of shelf price, mix, and forfeited deposit
changes.  The 1985 shelf prices for beverages by container are shown
in Table VT.

Costs of Lost Consumer Choice and Convenience

     There is general agreement that the principal advantage or benefit
to the consumer of the present one-way container system is the con-
venience of not having to return containers to points of purchase
or redemption.  A separate but related issue is that of the free choice
of the consumer to select the type of container  (in terms of physical
specifications) that best suits his personal wants or preferences.
Thus, it is often argued that consumers could suffer two types of
consumer welfare losses under a universal deposit system:

      (1)  The loss of choice among container types or brands
          if some brands or container types disappear from
          some market areas, and

      (2)  The inconvenience of returning containers in order
          to avoid forfeiting the deposit.

     It seems clear that as long as metal cans remain on the market
as a readily available alternative for those consumers with an inherent
preference for metal over glass, there will be no consumer welfare loss
on this account.  The RCC staff believes that metal cans will retain
25% of the market at aminimum after the passage of national deposit
legislation  (as would not be the case under a more extreme "ban-the-can"
law).  This is not to say that there would be no switching by some local
outlets or by some manufacturers from cans to bottles, but consumers
would in general not lose their current container selection, and would,
in fact, have a large-plastic-bottle packaging option as well.

     It is possible that the increased administrative responsibilities
for one-way containers would lead some brewers to limit their sales
of malt beverages in areas where they have a very small market share,

-------
23.8
25.8
25.8
25.8
23.8
25.6
25.6
25.0
-
-0.7
-0.7
-3.1
23.8
26.0
26.0
25.4
—
+0.8
+0.8
-1.5
                                 36
  and this could affect brand choice.   It is also possible that the
  legislation would favor the growth of regional breweries, because
  they would be able to take advantage of lower transportation and
  handling costs for refillable bottles relative to centralized
  breweries.
                                Table VI

         1985 Shelf-rrice Estimates (Cents per 12 oz.  Filling)

                          Baseline     Mix I     % Change     Mix II     % Change

Malt Beverage

   Refillable Bottle

   Non-ref illable Bottle

   Steel  Can

   Aluminum Can

 Soft Drink

   Refillable Bottle

   Non-refillable  Bottle

   Steel  Can

   Aluminum Can

 Source:   RTI beverage industry model  results  based on RCC  staff  assumptions
          used for the impact analysis.


 Consumer Inconvenience

     Aside from possible transition costs,  the loss of consumer conven-
 ience emerges as  the single major cost factor from an economic evaluation
 standpoint.   It is the principal long-run cost against  which long-run
 environmental and other benefits must be weighed. This  paper does not
 attempt  to make a quantified estimate of total inconvenience costs.
 However, the following points  may help to provide a perspective:

     (1)  Sales data from the two states with universal deposits do
         not  show  decreases in  beverage sales.  This suggests that
         consumers themselves in these States  do not perceive significant
         inconvenience from the system.
19.3
22.8
25.1
25.1
19.3
22.6
24.9
24.3
—
-0.9
-0.8
-3.2
19.3
22.9
25.3
24.6
—
+0.4
+0.8
-2.0

-------
                                  37


     (2) At  least  two groups of consumers would benefit from increased
        convenience under universal deposits.  The first  is the
        25  percent of consumers  (measured by total sales) who
        presently purchase refillables.  The second  is the sub-
        stantial  number who currently deliver cans and no-deposit bottles
        to  recycling centers.  Their convenience would be increased
        by  having a much greater number of return points.  A
        third group — those who would purchase refillables now if
        they were more widely available — would also presumably
        benefit from any combination of greater availability
        and increase in redemption points.

     (3) The loss  in convenience occurs to those consumers who
        presently do not buy beverages in refillable containers
        and would not buy them in the absence of mandatory
        deposits even if they were available everywhere.   Beer
        is no longer widely available in refillable containers,
        but soft drink price data indicate that many consumers willingly
        pay more for the convenience of one-way containers
        when they have a choice.

     (4) The additional inconvenience imposed on anyone by national
        mandatory deposit legislation could not be valued at more than
        5 cents per container because that is the amount that would
        be forfeited by a consumer who did not return the container,
        and for the vast majority who would return containers for the
        deposit,  the inconvenience cost per container would be
        less than the 5-cent refund value.   The aggregate value of the
        loss in consumer convenience could theoretically exceed the direct
        consumer savings because the "savings" represent monies consumers
        could have been retaining without the legislation if they had
        wished to return beverage containers.

Capital and Labor Impacts

    The shift to a greater reliance on refillable bottles would increase
the capital and labor requirements of the packaged portion of the beverage
industry and would decrease the energy and natural resource requirements.
As explained in Staff Background Paper No.  4 on the adverse economic
impacts of the legislation, capital requirements for metal can and bottles
would fall, while the requirements for bottle-filling equipment would
rise   Capital requirements would be manageable and premature obsolenscence
of equipment as a result of the legislation would be quite limited due
to the extended nature of the transition period.

     Although a system based move extensively on refillable bottles
would be more labor-intensive than the current system, the labor require-
ments would call  for a different skill mix.  The labor requirements  that
would support the malt beverage and soft drink packaging  systems projected
for  1985 are shown in Table VII.  The impact of the mandatory deposit

-------
                                           Table VII

                             1985 Employment Requirements (Man-Years)*
                             Baseline

Glass Container Producers     23,500
Metal Can Producers
Steel Producers
Aluminum Producers
Beverage Distribution
Retail Sector
Mix I
Mix II
Net Mix I
Net Mix II
23,500
50,700
9,800
9,800
160,600
27,900
18,600
36,500
6,900
7,100
180,000
87,100
13,100
22,700
4,000
4,700
198,900
92,200
-4,900
-14,200
-2,900
-2,700
+19,500
+59,200
-10,400
-28,000
-5,800
-5,100
+38,300
+64,300
                                                            U)
                                                            oo
*  Includes  only employment in each industry related to  beverage  container production
   and excludes plastic-bottle-related employment  which  should be relatively unaffected
   by mandatory deposit legislation.
** 40% refillable bottles, 10%  non-refillable glass bottles,  10% plastic
   bottles, and 40% metal cans

***  60%  refillable bottles,  5% non-refillable glass bottles,  10%  plastic
     bottles, and 25% metal cans

Source: RTI beverage industry model results  based on RCC staff assumptions
       used for impact analysis and adjusted to account for  sectors  (e.g. non-
       refillable bottles) not in the model.

-------
                                39
legislation would be to  increase the demands  for unskilled labor  in
the beverage distribution and retail sectors  and to decrease the  demand
for skilled labor in the container production-related industries.  The
adverse impacts are examined in Staff Background Paper No. 4, but
in the aggregate, total  employment and wages  would increase.

Benefits Associated with Reductions in Litter and Solid Waste

     One of the principal aims of beverage container deposit legislation
is to reduce litter.  The deposit serves as a monetary disincentive to
litter or discard the container.  It also serves as an incentive  for
others to pick up littered containers to redeem them for the refund
value.

     The costs of litter are not well established.  Based on existing
data, the best estimate  of current expenditures to control litter is
$1 billion.4/  In spite  of this expenditure,  there is no evidence
that littering habits are improving or that less litter is accumulating.
Consequently, the aesthetic damage caused by  litter cannot be measured
by the $1 billion expenditure.  This amount only represents the cost of
collecting what is collected and the cost of  anti-litter education.
Collecting litter more frequently or more completely would increase
litter control costs.  Additionally, costs continue to be incurred due
to injuries related to litter.  The best estimate of the cost of  such
injuries, not including  the value of work lost as a result, is $18
million.5/
4/ Powers, Roger W., President, Keep America Beautiful, Inc.,
~  Testimony before the California Senate Committee on Natural
   Resources.  January 17, 1974.

5/ Syrek, Daniel B., California Litter, A Comprehensive Analysis
~  and Plan for Abatement.  Institute for Applied Research, May 1975.

-------
                               40
     Beverage container deposit legislation can be expected to reduce
the number of beverage containers in litter by 80%, and the total
number of items littered by 20%.6/  This is a reduction of nearly
40% of total litter volume.  Total litter-related injuries could
decline by 55%.7/  The cost savings associated with this decline in
litter (assuming collection costs linearly related to item number)
would be about $210 million per year.  However, the aesthetic value
of the decline may be much greater.

     Another benefit associated with mandatory beverage container
deposit legislation is the reduction of solid waste management costs
due to the increased recycling and use of refillable bottles.  _The
savings associated with the two scenarios evaluated are shown in
Table VIII.

Industrial Environmental Impacts

     The production of beverage containers, like all manufacturing
processes, produces a certain amount of industrial pollution.  This
pollution can be measured  in terms of industrial solid waste—process
losses, ash from fuel combustion, mining wastes, atmospheric emissions
and waterborne wastes.  Additionally, mining causes ecological damage
that cannot be measured in terms of wastes or emissions.  Any change
in packaging mix brought about by a beverage container deposit system
will bring about a resultant change in industrial pollutants.  Table IX
shows that beverage container deposits, regardless of the resultant con-
tainer mix, would bring about substantial reductions in industrial
pollution.

Natural Resource Conservation Benefits

     Table X shows estimate of savings resulting from deposit  legisla-
tion in the consumption of bauxite, iron ore, and energy.  The primary
raw material used in the manufacture of aluminum cans is bauxite.  The
potential reduction in bauxite consumption from baseline projections
is 1.5 million tons.  About 90% of the bauxite used in the U.S.  is
imported.

     The primary raw material used in the manufacture of steel cans
is iron ore, though bauxite is used to make lids for bi-metal  cans.
The reduction in iron ore  consumption from baseline projections  would
be up to 2.4 million tons.  One-third of the iron ore consumed in the
U.S. is now improted and domestic deposits being exploited are becoming
lower in grade.
 6/ RCC  Staff estimate.
 7/ Syrek, Daniel B., Op. cit., pp. 59-73.

-------
                                     41


                                Table VIII

                       Annual Solid Waste in 1985

                                	Mix I	  	Mix II	
                                        Reduction                   Reduction
                     Baseline   Total from Baseline   %    Total  from Baseline 	%_
Beverage Container     6.3       4.8       1.5       24%    3.1       3.2        51%
Waste (million tons)


Total Solid Waste     165**     163.5      1.5        1%   161.9      3.2         2%
(million tons)


Cost Savings from                         53                        112
Reduced Collection
and Disposal*
($ Million per year)
* At $35 per ton collection and disposal cost.

** EPA, Fourth Report to Congress, Resource Recovery and Waste Reduction,
   1977, p.20.

Source:  Research Triangle Institute computations based on assumptions
         provided by the RCC staff.

-------
                                  42
                                Table  IX

                           Industrial Pollution
               Caused  by Beverage Container Production  in  1985
 Industrial Solid Wastes
 (million cubic feet)
 Baseline

 524
                                           Mix I
                                                Reduction
                                                  from
                                       Total    Baseline
250
52%
                                       Mix  II
                              Reduction
                                 from
                     Total    Baseline
71
86%
Atmospheric Emissions     1717
 (million pounds)
              968
         44%
             521
           70%
Waterborne Wastes
(million pounds)
308
173
44%
                                    94
                                 69%
Source: RCC staff estimates
NOTE:  The numbers in this table represent industrial  effluents from the
       extraction, fabrication,  and recycling  sectors  of beverage container
       production.

-------
                                       43
              The energy figures in Table X represent "total systems" energy
         use, from extraction through delivery and final disposal.  The pro-
         jected reduction in consumption would be equal to approximately 0.1%
         of 1985 U.S. energy consumption.  It should be noted, however, that
         possible increases in consumer expenditures for other consumer goods
         and services would cause increases in material and energy consumption
         which could significantly affect the projected savings.
                                       Table X

                            1985 Materials and Energy Savings
                         Under Beverage Container Deposit System

                                     Mix I                         Mix II
                Baseline    Quantity    Percent of            QuantityPercent of
              Consumption*  Saved       Baseline              Saved        Baseline


Bauxite         2.0         1.0          50%                  1.5          75%
 (million tons)
Iron Ore        2.9         1.3          45%                  2.4           83%
 (million tons)
Energy**        334         72           21%                  134            40%
 (trillion Btu/
* The baseline return rate includes both voluntary recycling and recovery of aluminum
  cans from municipal solid waste.  The Mix I and Mix II rates do not include recovery
  from municipal solid waste.

** Used in beverage packaging

Note:  Possible reductions in total consumer spending for beverages would be
       reflected in increased expenditures for other consumer goods and services.
       Such expenditures would cause increases in material and energy consumption
       which could significantly offset these projected savings.

Source:  Research Triangle Institute data and Hunt, et. al., Resource and Environmental
         Profile Analysis of Nine Beverage Container Alternative, 1974.

-------
                              44
                                             Staff Background Paper No.
                                             November 5, 1977
           ISSUES REGARDING NATIONAL BEVERAGE CONTAINER
                         DEPOSIT PROPOSALS
     This paper presents an outline of issues relating to beverage
container deposit legislation for consideration by the Senior Policy
Advisory Group of the Resource Conservation Committee.

     The purpose of this list is to get all major issues out on the
table, in writing, for review by Committee members' agencies.  A
complete list of issues should be developed now while there is still
time for the Staff or other Policy Group members to address them.
Hopefully, by so doing we can begin to answer some of the following
questions:

1.  What are the essential areas of agreement or disageeement within
    the Committee?

2.  Where disagreement is found:

    H  Can the issue be resolved by practical research or
       analysis?

    H  Can any other resolution be proposed?  For instance, could
       the legislation be designed to include a mechanism for
       possible future adjustment if unexpected problems become
       evident?

     This paper is divided into three major sections:

I.  Design Issues:  These include questions that should be
    addressed by an Administration proposal if a decision were
    made to proceed with national beverage container deposit
    legislation.  This includes a list of specific options under
    each of the following major design questions:

    1.  Which beverages  (soda, beer, wine, milk, etc.) and
        containers should be included?

    2.  What should be the size of the deposit and should it
        be the same for all sizes of containers?

    3.  At what stage of the beverage industry production/
        distribution chain should the deposit originate?

    4.  Implementation issues:  should beverage container
        deposit legislation be phased in?  Should dislocated
        groups be compensated?  How?  Should the government
        do anything with unrefunded deposits?

-------
                                 45
 II.  Impact Evaluation:  What effects and impacts should be estimated
      and understood in order to evaluate the desirability of such a
      policy?

III.  Alternative Policies:  This section is a list of other policy
      proposals that address one or more of the same problems.  They
      are not necessarily mutually exclusive or non-compatible
      alternatives.
                           I.  Design Issues

  1.  Which beverages and container materials should be included?

       Most State deposit legislation .and Federal bills have been
  directed only at beer and carbonated soft drink containers.  This is
  primarily due to the heavy historical reliance of these products on
  returnable containers and their high incidence in litter.  Most
  other types of beverages could, in principle, also be included in
  deposit legislation.  Milk was once distributed in returnable glass
  containers, but this practice is rare today.  Some European countries
  require deposits on containers for wine and mineral water.  Wine and
  liquor bottles are visible in urban litter.  Extending the coverage to
  other beverages may be justifiable on grounds of equity among beverage
  types, reduced litter, and/or resource conservation benefits.

       A second closely related question is whether all types of con-
  tainer materials should be included.  Today glass and carbonated soft
  drink industries.  However, plastics have a significant potential, and
  paperboard is now widely used for milk and non-carbonated soft drinks.
  If the list of beverages is expanded, failure to include all materials
  could have potentially significant market-share repercussions.

       The major options include:

       a.  Beverages

           1.  Beer and carbonated soft drinks only  (Oregon and
               Vermont laws; Hatfield bill)

           2.  Mineral water, fruit juices, non-carbonated soft
               drinks  (some European countries)

           3.  Milk  (historical U.S.)

           4.  Wine  (some European countries) and spirits

-------
                              46
    b.  Container materials

        1.  Glass and metal only

        2.  All materials

        3.  Specific exceptions

 2.  What should be the deposit size structure?

     Two different types of deposit structures have been proposed for
 beverage containers.  One type would require a simple uniform deposit
 on all containers of a specific size or range of sizes (e.g., 5C for
 16 oz. and under; and 10C for over 16 oz.).  A more complex structure
 might allow a lower deposit (e.g., 2C as in Oregon) on containers
 that are refillable by more than one manufacturer.

     The rationale for this type of two-tiered structure is that it
 creates an incentive to use standardized,  refillable bottles.
 Standardized bottles would reduce transportation costs because a
 bottler could use other standard bottles that are located closer to
 his filling operation.  Standardized bottles would also be more con-
 venient for retailers because they would not have to sort returns by
 brand.  In addition, consumers would experience less inconvenience
 since they could return standard bottles to stores other than those
 that stock their particular brand of beverage.

     A second issue involves the acutal size of the deposit.  Almost
 all U.S. proposals start with 5C or a 5C minimum.  The size of deposit
 may be significant in terms of the incentive for returns and the total
 amount of financial resources tied up in the deposit system.

 Summary  of basic options:

 a.    Structure of deposit  system

      1.    One uniform deposit  (or minimum)  for  all
            types and  sizes  of containers.

            Different  deposits by size of  container

            Two-tier structure -  standardized bottles
            carry a lower deposit.

t.    :.'ize  of deposit

      -1 -     Bo not specify deposit size in  law.

      2.     5C minimum on all  containers.

      3.     10*  minimum on all containers.

     4.     5C  or  IOC increments for each 16-oz
            increase in container size.

-------
                         47
3.   At what stage of beverage production or distribution
    should the deposit originate?

    Beverage container deposit legislation should specify
where the deposit should originate:  the beverage container
manufacturer, the beverage producer-filler, the distributor-
wholesaler, or the retailer.  The point of deposit origin
may affect the degree to which the objectives of such
legislation will be met and the industry's administrative
and other costs of implementation.

    Effect on Objectives.  The level of attainment of
the objectives of deposit legislation is directly related
to return rates and recycle rates.  The possible effect
of point of deposit origin on return and recyling rates
stems from the fact that the originator of the deposit
might possibly gain by retaining un unredeemed deposits
from containers not returned to him.  Since the retailer
is the exchange link in the distribution chain most
directly able to affect consumer behavior, it is argued
that the incentive which results from unredeemed deposits
might cause retailers to discourage consumers from returning
containers.  In addition, if the deposit were to originate
at the retail level the accomulation of non-refillable
containers might be too small to encourage recycling, and
incentives would be generally weak.  Finally, as the deposit
origin is moved closer to the retailer, the probability
increases that an uneven or inequitable distribution of
returns might result.  If true, these arguments suggest
that the deposit should originate further back in the
distribution chain.

    Industry costs of administration and handling.  The
further back in the distribution chain towards the container
manufacturer that the deposit originates, the higher will be
the accounting and other transaction costs of administering
the deposit transfer system.  However, there may also be
some scale economies in system planning, transportation,
processing, and marketing the recyclable containers that
would make it more efficient, overall, for the deposit to
originate close to the container manufacturer.

    Again, the basic design options are to begin the
deposit at either:

     a.  Container manufacturer

     b.  Beverage producer-filler

     c.  Distributor-wholesaler

     d.  Retailer

-------
                            48
   4.   Implementation

       Three design issues have been identified relating to
   implementation and administration of a deposit system.  The
   first two—phasing and compensation for windfall losses--
   are concerned with means of mitigating transitional and
   income distribution problems.   The third is the question
   of  whether the Federal government should concern itself
   with the unrefunded deposits.

       a.  Phasing.   This is proposed as a means for mitigating
   the labor, capital, and regional economic impacts of the
   policy by providing for an extended adjustment period.
   Industry and container market  shifts cannot take place
   instantaneously for many reasons (see Staff Background
   Paper No. 4).   The question is whether the law itself should
   attempt to influence the length and pattern of the transition
   period.  Options include:

           1.  No legislative phasing.

           2.  Specifying a time  lag from passage of
               legislation to effective date, e.g., two
               years.

           3.  Specifying certain percentage of imple-
               mentation of deposits for all companies
               by certain dates.

           4.  Various effective  dates  for different
               container sizes, beverage types,  business
               sizes,  or other variables.


     b.   Compensation for windfall losses.  Few programs
are designed with specific provision to compensate those
adversely affected by government intervention, although it
is a commonly suggested approach to minimize the distributive
inequities of programs that appear otherv/ise sound.  There
are, of course, numerous Federal programs of a general
nature that would tend to mitigate transitional costs and.
windfall losses, such as provisions for capital loss write-
offs and new-capital tax credits in the tax code, unemployment
compensation, job training programs, etc.

     Introducing special compensation or other transitional
programs could be costly and would significantly complicate
the administrative aspects of implementing a federal deposit
lav;.  However, such programs  could be  --.amporarv and they
could be funded out of a temporary tax on unredeemed deposits
(which by some estimates may total several hundred million
dollars per year).  Targets for compensation or financial
aid would include:

-------
                            49
          1.   Disemployed workers.

          2.   Firms experiencing market losses or special
               transition costs.

          3.   Regional areas adversely impacted by plant
               closings or increased unemployment.

     c.   Should unrefunded deposits be taxed?  This question is
related to a possible windfall gain in the profits of firms
at the stage at which deposits are initiated.  Since deposits
would not be refunded on the 10 percent or so of containers
not returned, they would represent a substantial increase
in gross revenue for the industry  (on the order of $800
million per year in 1981 if 10 percent of containers are
not returned).   In a competitive industry this increase
in revenue would not, in theory, result in a permanent
increase in company profits.  Rather, it would be reduced
by price competition or be required to cover other cost
increases.  Legislative design options regarding such
deposits might include:

     1.  Ignoring them  (letting the "market" handle
         the problem).

     2.  Imposing a temporary or permanent tax to
         capture the windfall for the Federal Treasury
          (perhaps to finance litter or solid waste
         programs).

     3.  Requiring that the industry redistribute the
         net proceeds of their deposit accounts in
         some manner.

5.  Other design issues for consideration.

    a.  Should the legislation include a ban on pull tabs?
Most       deposit legislation and proposed Federal bills
have included provisions for banning pull tabs.  Pull tabs
have been singled out because they are littered often and
can be safety hazards.   Partially in response to efforts
to ban pull tabs, industry has developed several types
of self-opening devices that do not detach from the can,
and which are currently in use in some parts of the country.
The industry appears to be moving towards increased use of
the non-detachable opener.

-------
                          50
    An outright ban on pull tabs  is not consistent with
utilization of the market principle preferred by the
Committee.  Such a ban might also be considered inequitable
unless bottles were also required to have non-detachable
closures, a requirement that may complicate a returnable/
refillable system.

    b.  Should there be deposits or other regulations on
beverage container cartons or carriers?  Deposit legislation
is generally directed only at beverage containers.  However,
the same argument for placing deposits on beverage containers
can be made for container carriers.  In fact, the case carton
for refillable beer bottles does normally carry a deposit.
As an alternative to deposits, some State legislation has
proposed banning certain types of carriers.  High top
plastic cone carriers for cans have been banned in Vermont
since January.

     Summary of options:

     1.  Do nothing regarding carriers.

     2.  Deposit on carriers.

     3.  Ban on some types of carriers.

     c.  Should State and local deposit laws be preempted
 by any Federal deposit law?  In the case of deposit legis-
 lation,  a uniform law would generally be beneficial for
 industry.  However, several States currently have deposit
 legislation and the disruption to business appears minimal
 Those States  are primarily rural.   If each State decides to
 have its own  variation,  the effect could be significant.

     Summary of options:

     1.   Allow State and  local governments to have a
         more  stringent law.

     2.   Uniform national  law.

     3.   Uniform national  law  with  "grandfather  clause"
         providing for  current State  and  local  laws.

-------
                          51
                      II.   Impacts

    Following is a list of economic and environmental
impacts and effects related to a national deposit law.
Where practicable, these impacts have been subjected to
some form of quantitative estimation in documents pre-
viously distributed or in Staff Background Paper No. 2,
Costs and Benefits of National Beverage Container Deposit
Legislation.  Each Committee member should consider which
of these are most important, and whether the available
estimates are adequate for decision-making purposes.
(See Staff Background Paper No. 2 for a description of
the impacts.)
   1.    Impacts  on  the  Environment  and  Natural  Pesources

        a.    Post consumer  municipal  solid  waste.

        b.    Litter volumes and  impacts.

        c.    Industrial solid  waste.

        d.    National air and  water pollution.

        e.    National energy use.

        f.    National industrial raw  materials  use.

        g.    Disruption/destruction of  natural  environments.

   2.    Economic Impacts

        a.    Total  GNP  and  aggregate  economic efficiency.

        b.    Shelf  prices of beverages.

        c.    Total  employment  and labor incomes.

        d.    Transitional impacts and dislocations.

        e.    Redistributional  impacts on households,  industries,
             regions.

        f.    Environmental  protection and solid waste manage-
             ment costs and efficiencies.

        g.    International  trade.

        h.    Federal government  administration  costs.

        i.    Consumer inconvenience.

-------
                          52
         III.   Alternatives to National Beverage
                   Container Deposits


     Other policy approaches exist for dealing with litter,
solid waste,  and resource conservation problems, although
none has precisely the same focus or projected effects as
the deposit system.  These other policies may be either
favored or objected to in terms of various evaluation
criteria.  Some of these alternatives are discussed in
the Staff Background Paper No. 1, "Rationale for Beverage
Container Deposit Legislation."  A representative list
would include:


  1.    'To Federal action.

       i.   State and local deposit laws,  litter taxes,
            packaging regulations,  recycling efforts,
            solid waste user fees.

       b.   Boluntary industry programs.

       c.   Public interest group activities.

  2.    Alternative Federal regulations

       a.   "Ban the can"  or other direct product regulations.

       lr.   Industry recycling regulations (randated
            goals for returr. rates/recycling rates) .

  3.    Alternative Federal fiscal an:": incentive measures.
       a.    Litter taxes with earmarked distribution of funds.
                       •v
       b.    Recycling incentives (various subsidy and grant
            programs).

       c.    Solid waste product charge (with or without
            litter subcharge).

       d.    Federal severance taxes on primary raw material
            extraction.

       Federally funded education programs, including
       technical assistance.

       Federal research, development and demonstration programs,

-------
                                     53           STAFF BACKGROUND PAPER NO. t
                                                       November 7, 1977
                                                   Revised December 20, 1977
                TRANSITIONAL ADVERSE ECONOMIC IMPACTS OF
             NATIONAL BEVERAGE CONTAINER DEPOSIT LEGISLATION
                      AN ANALYSIS OF THE WORST CASE
                              I.  Summary
     A Federal law requiring a minimum 5 cent beverage container deposit
would cause a shift  in the beverage container mix to a greater reliance
on refill able bottles and a  lesser reliance on the use of one-way bottles
and metal cans.  An  analysis of the adverse economic impacts of such a
law indicates that the transition period would be long enough to ameliorate
many of  the possible adverse impacts.

     Even in the worst case after passage of deposit legislation, existing
glass bottle and metal can production capacity would decline more quickly
due to normal obsolescence than would the demand for glass bottles and
metal cans.  As a result, although those industries would lose volume
and profits, there would not be significant premature obsolescence of
capital  equipment.   Actual employment dislocations would probably occur
only in  the glass container and metal  can production industries,  because
dislocations in other industries would be a small fraction of total
employment and would occur over a long period.

     Ten thousand glass plant workers (about 13% of the total) and up to
22,000 metal can production workers (about 37% of the total) could lose
their jobs in the worst case as a result of mandatory deposit legislation.
Since this is a worst case analysis and does not include the effects of
attrition, the number of actual job dislocations should be much lower.
These job losses would occur over a four-year period and would be partly
ameliorated by normal attrition, but the structure of the container
industries implies that reductions would occur partly in conjunction
with the closure of  small plants.

                             II.  Introduction

     The passage of  Federal  legislation requiring a 5<£ deposit on all
beer and carbonated  soft drink containers would bring about substantial
changes  in the existing beverage packaging, distribution, and handling
system.  There would be a net increase in capital investment and  jobs as
a result of the legislation, but industries involved in the production
of beverage containers would be adversely impacted.   During the transition
period, the capital   stock in those industries would be reduced and jobs
would be lost.

-------
                                   54
     The Resource Conservation Committee staff analyzed the long run  >
costs and benefits of mandatory deposit legislation in Staff Background
Paper #2.  Questions have since been raised about the nature and the
severity of the adverse economic impacts which would occur during the
transition to a national  deposit system.  If the long-run changes are
viewed as beneficial, but the short-run transitional adverse impacts
are likely to be severe,  then the legislation could possibly be modified
to phase in the system over time or to compensate those most adversely
affected.

     This paper focuses only on the adverse economic impacts occurring
during the transition period; consequently, mere mention is given the
beverage distribution and retail sectors where investment and employment
would increase substantially.

                 III.  The Shift to a New Container Mix

     The severity of the adverse economic impacts associated with mandatory
deposit legislation is determined by the magnitude and the speed of the
change in the container mix caused by the legislation.   Given other
economic information (e.g. capital base, technology, employment), the
change in the mix will determine the impacts.  In order to analyze the
transitional economic impact of Federal mandatory deposit legislation,
there are three key elements of the transition process which must be
specified:
                                        •
          •    Baseline conditions -- what will  happen to the container
               mix in the absence of any Federal  initiative.

          •    Long-run new "equilibrium" container mix -- the market
               share of different containers after the industry has
               adjusted to the new legislation.

          •    Speed (and duration) of the transition -- the characteristics
               and timing of the shift to a new container mix.

Baseline

     In studies performed for government and*industry groups, baseline
projections have been made of the beverage container mix.  The baseline
used for this analysis is the U.S. General  Accounting Office revision of
the projection developed  by the Resource Triangle Institute.  Baseline
beverage container mix data for 1977 is shown in Table I.

-------
                                    55
                                Table I

                     1977 Beverage Container Mix
                        (% of beverage volume)
                             Malt Beverages     Soft Drinks     Total

Refillable Bottles                14                38           27

One-way Bottles                   23                26           25

Metal Cans                        66                36           48
Source:   U.S. General Accounting Office, A National  Mandatory Deposit:
          What would be the Effects?  January 1977 draft.


     A study performed by the Research Triangle Institute provides
information on the composition of metal cans by beverage type.  RTI
projects a shift in can composition from 74% steel and 26% aluminum
in 1973 to 56% steel and 44% aluminum in 1985.1  At the present time,
prices for the two types of cans are similar, and competition for
market share is intense.

     Conversations with Coca-Cola representatives indicate that the "PET"
plastic bottle is already being marketed successfully in the larger
container market, and a 10-15% penetration is projected in the soft
drink market for the 1980-85 period.2  The use of plastic bottles for
beer is not anticipated during that period.

     The RTI study projected a  3% growth rate for beer consumption and a
6% growth rate for soft drink consumption.3  Since average container
size for soft drinks is also increasing, an overall baseline container
growth rate of 4% is assumed in this economic impact analysis.  The
projected 1985 baseline container mix used here is shown in Table II.
The baseline projection includes a continuing increase in metal can market
share and significant penetration of the large non-refillable plastic
bottle into the soft drink packaging market.
     ^Research Triangle Institute, Energy and Economic Impacts of
Mandatory Deposits. Sept. 1976, NTIS PB-258-638, pp. B-19 and B-23.
     ^Conversation with John Parker, Coca-Cola - Atlanta on 9/29/77.
     3RTI, Op. Cit. pp. A-6 and A-ll.

-------
                                   56
                               Table II

                1985 Baseline Container Mix Projection
                           (% of containers)
      Container                                 Market Share

Refillable Glass Bottle                              20

One-Way Glass Bottle                                 15

One-Way Plastic Bottle                               10

Metal Cans                                           55

    Steel -- 56%

    Aluminum -- 44%
Source:  GAO projection (update of RTI analysis)  revised to account
         for plastic bottle market penetration.
Long-Run "Equilibrium" Container Mix

     "Equilibrium" is a strange term because historically there has been
constant flux in the packaging market share percentages within the
beverage industry.  Nevertheless, to estimate impact there must be a
specified container share mix that will  have evolved due to the legislation
by the end of the transition period.  This we have labeled "the long-run
equilibrium container mix."

     Previous government and industry studies have considered a wide
range of possible mixes which could result due to deposit legislation.
All of the studies assumed that no plastic containers would appear and that
the one-way glass container would disappear.  The scenarios most
frequently considered have been bottle/can percentage mixes of
40/60, 60/40, 80/20, and 100/0.  Each of these scenarios, of course,
was associated with a different set of impacts.

-------
                                    57
     The multiple scenario approach has been utilized as an alternative
to predicting the most likely, ultimate container mix.  The drawback of
this approach is that decision-makers have little guidance with regard
to the impacts most likely to occur after passage of legislation.   The
RCC staff and ICF, Inc., have developed a projection of the container
mix likely to occur as a result of the national  deposit requirement.
The projected impact of the legislation is shown in Table III.   The
analysis upon which the projection is based is included in the Appendix
to this paper.
                               Table III

    Projected Impact of National Deposit on Beverage Container Mix
                          (% of package mix)
                             1977      1985 Baseline      1985 Deposit

Refill able Bottles            27            20              40 - 60

One-way Glass Bottles         25            15               5 - 10

One-way Plastic Bottles        0            10                   10

Metal Cans                    48            55              25 - 40


Source:  RCC staff estimates

     In this paper, the "worst case" adverse economic impacts of
mandatory deposit legislation are examined.  The worst case is the most
extreme shift possible to refillable bottles because this causes the
largest reductions in the production of metal  and glass containers.
The worst case is defined by the following container mix:

                       Refillable Glass Bottles     --  60%

                       Non-refilTable Glass Bottles --   5%

                       Non-refillable Plastic  Bottles   10%

                       Metal Cans                   —  25%

-------
                                    58
     The metal  can mix could shift even more toward aluminum cans than
indicated in the baseline, because returned aluminum containers are
worth almost U more than steel  cans in recycling markets.   This shift
would be limited by the very low new investment anticipated in aluminum
can production during the transition period.

     This is a worst case because evidence exists that the can share
will not shift all the way to 25% and that the one-way glass bottle will
not be reduced to a 5% market share.  This evidence is presented in the
Appendix to this paper.   In either case, the adverse impacts on the can
or  the bottle manufacturers would be reduced because aggregate container
production would decrease to a lesser degree.

Characteristics and Duration of Transition

     The speed and duration of the transition to the new "equilibrium"
container mix are the principal  factors that determine the severity of
the transitional impacts.  Over time, capital equipment is depreciated,
there is natural attrition in the labor force, and the 4% annual growth
in  sales of beer and soft drinks can absorb some of the decrease in
container production caused by the deposit legislation.

     The transition will occur during two time periods:

          o  Between the enactment of the law and the effective date

          o  After the effective date

     For this analysis it is assumed that the law would pass in 1978
and would become effective two years later in 1980.  Existing studies
have postulated smooth three or five-year transitions, commencing at
the time of enactment of the law.  These scenarios are probably unrealistic.
Experience with legislation regulating private industry behavior suggests
that the period prior to the effective date would be a time of uncertainty
while the law would probably be challenged in the courts and in the
Congress.  As a result the major portion of the transition would not
occur until after the appeals have failed and the law is in effect.

     After passage of the law, planned investments to increase bottle
and can production capacity would be delayed, but other investment
would continue and the minimum investment needed for continued operations
under the law would be made.  In the worst case there is ultimately a
reduction in can production caused by the market shift and in bottle

-------
                                    59
production due to the replacement of one-way bottles by refilTables.
As a result, new can production and filling equipment investment
would cease, except for the conversion of can tops to eliminate the
pull-tab if required in the Federal law.  Investment would continue in
bottle filling, but not in bottle production equipment.  Toward the end
of the two-year period, the conversion to a largely refillable bottle
system would begin.

     Five factors would affect the speed of the transition after the
effective data of the law:

          •  Availability and cost of new bottle-filling equipment
             (glass bottle market share increases from 52 to 65% in
             the extreme case)

          •  Availability of bottle washers (almost half of the
             existing bottle lines must be converted to handle
             refillables in the extreme case)

          •  Availability and cost of  refillable bottles (more
             bottles needed initially until a "float" is built up)

          •  Speed of depreciation and obsolescence of can and
             bottle production equipment.

          •  Possible reduction in can and one-way bottle price to
             retain market share.

     The immediate changes in beverage container mix which occurred in
States where deposit legislation passed are not representative of what
would happen if there were a national deposit requirement.  Within the
national system, small States like Oregon and Vermont can drastically
change the composition of their container mix without placing any strain
on the capacity of the nation to provide additional bottles and other
necessary equipment.  This would not be true if the whole nation tried
to change at once.

                 IV.  Impacts on Container Production

Availability and Cost of New Equipment and Refillable Bottles

     It should be noted that the glass bottle market share would increase
25% in the extreme case, which would require substantial new investment in
bottle-filling lines.  Assuming a 4% growth in container sales, this would
be equal to a 58% increase in bottles filled during a six-year period.  The
increased use of refillable bottles would require an addition to the supply
of bottle washers which is greater than the existing stock.  There would also
be a short-term need for additional bottles to provide the refillable bottle
float, but this demand would be only temporary and could not justify any
increase in the stock of bottle-production equipment.  Much of this new
equipment and the additional bottles would therefore be produced through an

-------
                                    60
increase in overtime work,  which  would raise the cost and  limit the
short-term demand for  refillable bottles  and bottle-filling  equipment.

     Bottle-filling equipment has a 15-20  year life.4  If  industry equipment
production capacity is sufficient to replace the equipment every 15^years,
the yearly normal equipment production capacity would be equal  to 7%
of the existing stock plus  excess capacity to handle higher short-term
demand and annual growth.   However, the baseline projects  no  growth for
glass bottles due to the market penetration of the plastic bottle.
Production at double the normal capacity rate would appear to be the
maximum possible production output, which  suggests a four-year transition
period at a minimum before  the new equilibrium would be reached.b  This
would make the whole transition period six years in the worst case,
and the transition would not be complete until 1984.  Over this time
period, availability of bottle washers and refillable bottles should not  be
a constraint.

Impact on Metal Can Production

     In the worst case, there would be a shift  in market share  from 48% to
25% for metal cans over the six-year period.  However, little capital
investment would be made in can production or filling lines during the
two years prior to the effective date of the deposit legislation.
Concurrently, there would be a 4% per year increase in demand for beverages.
This would make the ultimate share after six years equivalent to 32% of
beverage container production in the base year (1978).
Production would be 50 billion cans in 1978 when the law is assumed to
pass.  Production would be  reduced to 33 billion cans in 1984 in the
worst case.
     ^Conversations with industry representatives, 9/30/77.

     5If 20% of the present stock is the maximum annual  production
rate and 7% is required for replacement, net capital  stock increase
would be 13% per year.  With some increase in production capacity, it
would take five years for the transition.

-------
                                    61


     Using age data about the existing capital  stock and assuming a
15 year life for can production and filling equipment, it is relatively
easy to project normal production capacity of equipment existing in
1978 during the 1978-84 transition period.6  The worst case supply
and demand for metal cans is shown in Figure 1.   When compared to the
demand for cans during the transition period associated with the
increase in bottle production and filling capacity, it is clear that
there would be little adverse financial impact on can producers due to
premature equipment obsolescence.  The demand for cans would exceed the
normal production capacity of the equipment existing in 1978 during
almost the entire transition period.  The principal impact would be orderly
reduction in market share, which would allow a good economic return on a
shrinking capital base, but ultimately would leave can producers and fillers
with less total annual volume and profit.

     The supply and demand analysis in Figure 1  indicates that the can
production and filling industries would suffer from slight overcapacity
only during the last year of the transition.  However, equipment would
be largely depreciated by this time, and, if necessary to retain market
share, can prices could be reduced somewhat without eliminating profits.

     Data developed by RTI indicates that average can prices could be
reduced up to  3<£ per container before  it would actually be worthwhile to close
down a can line.   When taking into account the increase in costs
associated with rapid production of refillable bottles and other
necessary equipment and the current price differential between small
refillable bottles and metal cans of only U-4<£ around the nation,« it
does not appear that many can lines would be scrapped before they complete
their useful life.  Rather it appears  that the transition period in the
worst case might be stretched out slightly beyond six years.

Impact on Bottle Production

     Assuming  a trippage rate of ten and a six-year transition, annual
bottle production directly related to  consumption in the worst caseqwould
fall from 24 trillion bottles in 1978  to about 14 trillion in 1984.   In
addition to the bottle production required for annual beverage consumption
in 1985, additional bottles would have to be produced to provide the
refill able bottle float.
     "The decline in can production capacity was calculated using historical
data on can production and assuming growth in each year was accompanied by
increased production capacity from 1963-70.  This is consistent with a
15-year life and almost negligible can production prior to 1955.  Data
taken from RTI, op.cit., pp. B-ia  and  tf-zz.
     'Research Triangle Institute, Preliminary Estimates of the Transitional
Price Impacts of Mandatory Beverage Deposit Legislation, June 1976, p. 17.
     ^1976 data on national soft drink consumer prices presented in
Coca-Cola briefing of 9/28/77.
     ^Calculations based on 85 trillion containers sold in 1973, 4% demand
growth rates, and market shares stated in Table III.

-------
Metal Cans
(billions)
 Per Year
         50
         40
         30
         20
                                                Figure 1

                 Worst Case — Supply and Demand for Metal Cans During the Transition
                                      Production from Equipment Existing
                                      In 1978
                                      Demand for Metal Cans
                  Law Passes  Law Effective     Transition Complete
                    1978
1980
1982     1984
1986      1988

-------
                                     63
      The  amount  of  bottles  required  for  the  float  is  higher for beer
 than  for  soft  drinks  because  the  beer distribution system contains
 an  additional  distribution  stage.  However,  assuming  that the average
 float is  equal to two months'  sales  of beverages in refillable bottles,
 then  2  billion bottles would  have to be  produced each year during the four-
 year  mix  shift to provide the refillable bottle float.'0

      Using  age data about the existing capital stock  and assuming a
 15-year life for bottle  production equipment, normal  production capacity
 from  equipment existing  in  1978 can  be projected for  the 1970-84 period.11
 The worst case supply and demand  for bottles is shown in Figure 2.

      Demand for  bottles  was projected at 4%  until  the effective date of
 the legislation  and then a  linear decline was projected during the remaining,
 four-year transition  period.   Subsequently,  the demand for bottles to
 make  up the refillable bottle float  was  added to the  projection.

      The  adverse impacts on bottle production of the  mandatory deposit
 legislation would be  similar  to the  impacts  on can production.  In the
 worst case, there would  be  no overcapacity in the glass container industry
 during  the  transition with  respect to the equipment existing in 1978.
 The impact  of  the legislation would  be to reduce bottle production and
 profits for the  industry, but the transition would be orderly.  No
 equipment would  be  discarded  prematurely, but much of the equipment
 would not be replaced when  it became obsolete.  In the early years the
 demand  for  bottles would rise temporarily above the longer term trend.
 Accordingly, some of  the additional  demand would probably be met through
 overtime  work.

 V.  Impacts on Employment

      The  long  run analysis  performed to  estimate the  employment impacts
 of  national deposit legislation in the worst case identified a gain of
 103,000 jobs aoove  the baseline in beverage  distribution ana t:ie retail.
 sector.   The analysis also  indicated a reduction from the baseline of
 about  49,000 jobs in  the glass container, metal can,  steel, and
 aluminum  production industries in  the worst  case.   These figures were
 developed by the RCC  staff  in conjunction with RTI, and they are broken down
 in  Staff  Background Paper #2, Table  VII.  The calculations indicate  tnat  the
 run net employment  impact of  container deposit legislation is positive.
     1027 billion fillings in 1978 would be associated with a two-month
float of 4.5 billion bottles.  79 billion fillings in 1984 would require
a two-month float of 13 billion bottles or an increase of 8.5 billion
bottles primarily during the 1980-84 period.
      'Based on historical bottle production  data from 1947-73 taken from
RTI, op. cit., pp. B-18 and B-22.

-------
Bottles
(billions)
Per Year
        30
        20
        10
                                               Figure 2

                   Worst Case — Supply and Demand for Bottles During the Transition
                 Law Passes  Law Effective    Transition Completed
                                                                    Production from Equipment Existing
                                                                    in 1978
                                                                    Demand for Bottles
                   1978      1980      1982     1984       1986      1988

-------
                                    65
     Employment changes occur  continuously  in  all  industries.   Between
1958 and 1974, for example, 26,000 workers lost their jobs in the malt
liquor industry as a result of industry centralization.^  Consequently,
this paper analyzes only the magnitude of the short-run employment impacts
which could occur as a result of national deposit legislation.^

     Net changes in 1985 employment in key industry sectors due to
mandatory deposit legislation were examined in Staff Background Paper
No. 2.  Actual job dislocations in an industry due to the legislation
would be lower than the net reduction in required employment due to
normal attrition and any baseline employment growth which might occur
during the transition period.  The 1985 net change analysis looks at the
reduction in employment levels from what might have been in 1985, which
in a growth industry would be greater than the number of jobs actually
lost since 1977.

     The beverage container component of metal  can production is a
growth industry.  The net reduction in 1985 employment in that industry due to
deposit legislation in the worst case is projected to be 28,000, but the actual
reduction in jobs from 1977 to 1985 would be 22,000.  The latter figure  is  a
better measure of actual job dislocations, but it still does not take
normal attrition into account.  Beverage container deposit employment
impact data is shown in Table IV.

     In a declining industry, job dislocations due to deposit legislation
would be only part of the total dislocations occurring between 1977 and
1985.  In this case the job dislocations due to legislation (ignoring
attrition) would be the same as the net loss in jobs from the baseline
in 1985.   For the beverage container component of the glass container
industry, the reduction in the worst case would be'10,400 jobs.
^Environmental  Action, Comments on the RTI Report, December 1975,
  ~
      dislocations are defined as absolute employment reductions between
1977 and 1985 caused by Federal  mandatory deposit legislation as dis-
tinguished from any dislocations occurring due to normal  market changes
in the baseline.

-------
                                     66
                                TABLE IV

                  Beverage Container Industry Sector
                          Employment Impacts
                                     1985         Net       Maximum
Industry      1977        1985     Worst Case    Change       Job
 Sector    Employment*  Baseline*  Legislation*   1985    Dislocations**

Glass
Container    33,500      23,500
Metal Can
Production   44,700      50,700
Steel
Production   10,900

Aluminum
Production    8,600
                                      13,100     10,400      10,400


                                      22,700     28,000      22,000


                          9,800        4,000      5,800       5,800
                          9,800        4,700      5,100       3,900

* Employment related to beverage container production only.

** Does not take attrition into account.

Source:  RCC staff estimates and RTI  model  based on RCC staff assumptions.


     Table IV looks at only the beverage  container employment assumptions
of each industry.   The importance of  the  impacts of beverage container
legislation on employment in the industries as  a whole is shown in Table V,
For the industry-wide analysis, employment figures were taken from the
Bureau of Census SIC codes corresponding  to the adversely impacted
industries.

-------
                                67
                                 TABLE V

                 Worst Case Impact of Legislation on Employment

                       1977        Ma'ximum Job         Maximum Jobs  Lost/Year**
Industry Sector     Employment     Dislocations     Number      Percent  of Total

 Glass Container
 Production            79,000         10,400         2,600             3.3

 Metal  Can
 Production            60,000         22,000         5,500             9.2

 Steel  Production   461,000           5,800         1,500             0.3

 Aluminum
 Production          114,000           3,900         1,000             0.9
 * RCC staff estimate of 1977 employment based on unpublished 1976 BLS
 employment data and a projection of the 1972-76 employment trends for
 SIC codes 3221, 3411, 3312, 334, 3353, 3354,  and 3355.

 ** Over the four-year period after the effective date of the legislation,
 excluding the effect of normal  attrition.

 Source:  RCC staff estimates and RTI model  results.
     Since   aluminum and  steel  plants  serve  numerous  industries and  labor
attrition rates are over 2%  per  year, the aluminum and  steel  industries
probably would not experience any actual job  disol cations as  a result of
deposit legislation.

     The  situation  in  the  glass  container and metal  can production
 industries  would  be very different.   In 1972  there were 116  glass and
 334  small-metal-container  plants located all  over the  country.14  The
 worst  case  impact of mandatory deposit  legislation could  reduce employment
 up to  13% in the  glass  container industry and up  to  37% in the metal  can
 industry  between  1978  and  1985.  (Since  this  is a  worst  case  analysis, the
 number of actual  job dislocations  should be much  lower.)  The  structure of
         Factory  Directory,  National  Glass  Budget,  1973  and  County  Business
 Patterns,  Bureau of  the  Census,  1972--cited  in  an  RTI unpublished  paper.
 dated April  10,  1974.

-------
                                 68
those industries implies that these reductions would occur partly through
the closure of small  plants, which would limit the degree to which these
job losses could be handled through normal  attrition.   The determination
of which plants would close would depend on the production costs of each
plant and the regional  change in demand for different types of containers.
Although the employment losses over the six-year transition period would
be significant in the worst case, they would be similar to what happens
in the marketplace due to normal competition.

                              VI.  Conclusions

     This analysis of the transitional  adverse economic impacts of a
Federal  mandatory beverage container deposit law indicates that the
impacts are significant.  In the worst case,  the analysis  indicates that
the transition would  occur over a six-year  or longer period.   As a result,
there would be virtually no premature obsolescence of equipment, because
the normal rate of obsolescence would reduce total  capital stock as quickly
as the demand for containers falls.

     Actual job dislocations would probably occur only in  the beverage
container and metal can production industries.   These dislocations would
occur over a four-year period in conjunction with the closure of small
plants and could eliminate up to 13% of the jobs in the glass container
industry and up to 37% of the jobs in the metal  can industry in the worst
case.  Since this is  a worst case analysis  and does not include the
effects of attrition, actual job dislocations  should be much lower.

-------
                                    69
                Appendix  to Staff Background Paper No. 4

             The Impact of National Deposit Legislation on
                   Beverage Container Packaging Mix


     "Before and after" information on beverage container mix exists for two
that instituted mandatory deposit legislation -- Oregon and Vermont.
Neither of these States is typical, but placed within the reference frame-
work of regional container mix data, their experience indicate the range of
the  likely change in the container mix due to national legislation.

     The container mix in Oregon shifted heavily to  refillable  bottles
after the State law went into effect.  The results from a study undertaken
in 1975 and more recent data are shown in Table A-I.

                               TABLE A-I

      Impact of Deposit on Oregon Beverage Container Mix  (per cent)



Refillabl
Non-ref i 1



e bottle
lable

Before
(1972)
36
31
Beer
After

1976*

1977*
(1974)
96
0
83
10
70
22
Soft
Before
(1972)
53
7
Drinks
After
(1974)
91
0
Coke
1977**

85
0
  bottle

Metal Can             33      4      7      8      40       9       15

*1977 USBA survey of brewers in or shipping to Oregon (first six months
of 1977).

**Conversation with John Parker, Coca-Cola-Atlanta on 9/29/77.

Source of Before and After data:  Dan Waggoner, "Oregon's  Bottle Bill
Two Years Later," Oregon Environmental  Council, May 1975.
     A review of the pre-law beveraae container mixes  inOreaonand  in the
nation indicates that refillable bottles were far more  popular  in Oregon
prior to passage of the Oregon bill than in the nation as  a  whole.  The
can container share in Oregon was similar to the national  average for
soft drinks, but was only half of the national  average for beer.  This
suggests that the shift to refillable bottles in Oregon caused  by the
deposit was greater than it would be in the rest of the country.

     The data in Table A-I also shows a growing market share for cans
after 1975.  The loss in can share was originally very severe  because
the Oregon law banned pull tabs at a time when  cans were not available

-------
                                    70
without them.  Current data is therefore more representative of the
possible impact of a national  law.  Recently one-way bottles and cans have
greatly increased their share  of the beer market in Oregon.  Out-of-state brewers
have found the 2<£ standardized refillable containers to be uneconomic
for them, so they have increased their use of one-way containers.   It
appears that the 2<£ refillables were being bought up by the in-state
brewers, and their container cost was being subsidized by the out-of-
state brewers.

     No complete study of beverage container mix is available to measure
the total impact of deposit legislation in Vermont, which became effective in
September 1973.  But data from two sources give a clear indication of what
occurred.  Table A-II presents data on the_impact of the deposit on soft drink
beverage containers.  Table A-III shows the impact on beer container packaging.


                              TABLE A-II

       Impact of Deposit on Soft Drink Container Mix in Vermont
                      (% of total package volume)

                            In Food Stores

                               Before (1973)              After (1975)

                         Pepsi-Cola    Industry    Pepsi-Col a    Industry

Refillable bottles            0            0           65           73

One-way bottles              80           75           19           14

Metal cans                   20           25           16           13


                        Pepsi  Only -- Total Market

                              Before (1973)               After (1975)

Refillable bottles                  0                        44

One-way bottles                    65                        28

Metal cans                         35                        28

Source:  Comments of Pepsi-Cola Company to RTI Report, December 1975,
           p. 18.

-------
                                     71
                              TABLE A-III

          Impact of Deposit on Beer Container Mix in Vermont
   (% of beer volume in each container -- not container mix exactly)

                                   1970           1976

Refillable bottles                  11             22

One-way bottles                     48             41

Metal cans                          41             36

Source:  Conversation with Phil Katz, U.S. Brewers Association, Washington,
           D.C., 9/30/77.


     Vermont is also atypical of the nation in that the refill able share
of container packaging was much lower than the national average prior to
the development of legislation.  This suggests that the shift to refillables
was much less in Vermont than it would be in the nation as a whole.   The
data in Tables A-II and A-III suggest that the overall post-law container
mix in Vermont is probably around 38% refillables, 32% one-way bottles, and
30% metal cans.  It is interesting to note that the one-way bottle is still
very popular even with the 5
-------
                                72
                              TABLE  A-IV

    1976  Soft  Drink  Container  Mix, National  and Regional  Home Markets
Refillable bottle
One-way bottle
Metal cans
U.S.
44.6
30.4
25.0
East
7.9
72.2
19.9
Mid-
East
53.9
28.4
17.7
Central
63
10
26
.1
.3
.6
N.W.
46.
13.
39.
4
7
9
S.E.
48.5
30.1
21.4
Mid-
South
60.7
18.8
20.5
S.W.
56.8
17.8
25.4
West
43.1
11.1
45.8
Source:   Coca-Cola adjustment of figures  taken  from a  proprietary Neil son
         Report  - presented in a briefing  to  Resource Conservation
         Committee Chairperson, Barbara Blum,  on  9/28/77.
                               TABLE A-V

    Projected Impact of National  Deposit on Beverage Container Mix
                          (% of package mix)

                         1975      1985 Baseline*      1985 Deposit**

Refillable bottles        27            20                 40-60

One-way glass bottles     25            15                  5-10

One-way plastic bottles    0            10                    10

Metal cans                48            55                 25-40

*6AO projection (update of RTI analysis) revised to account for plastic
  bottle penetration.

Source:  RCC staff
     The impact of the national deposit legislation on metal can composition
is impossible to quantify using State data, but the direction of the
impact is clear.  Aluminum and steel containers are currently similar in
cost.  A 1976 draft study for the U.S. Brewers' Association indicated
that aluminum containers cost 6.6<£ and steel containers 6.9
-------
                                 73
     Recycling centers are currently paying around $300/ton for scrap
aluminum and $30/ton for scrap steel.  This gives aluminum cans a 0.7<£
price advantage over steel cans when returned to the retailer under a
mandatory deposit system, which is 10% of the can's original value.
This price effect would tend to accelerate the shift to aluminum cans
already occurring in the baseline projections, but limited investment
during the transition period would slow this shift.

-------
                                  74
                                                      Staff Background Paper  No. 5
                                                      November 6,  1977
                   BEVERAGE CONTAINER RETURN RATES
                         I.  Introduction


     Whether beverage container deposit legislation achieves the benefits
of litter and solid waste reduction and energy and materials conservation
claimed by proponents is directly related to container return rates.
Thus, assumptions regarding return rate are key variables in any projection
of the impacts of such a system.   If a significant percentage of the
beverage containers sold are not returned, the costs of a returnable
system might outweigh the benefits achieved.  This is particularly true
if refillable bottles acquire a major share (50 to 65 percent) of the
beverage market, as expected.

     Return rate* is generally defined as the percentage of containers
sold that are returned for deposit refund.  It does not account for
shrinkage (those refillable bottles returned but not refilled) and it
does not distinguish between containers returned by the original purchasers
and those collected and returned by scavengers.

     There is considerable uncertainty concerning the return rate
that would exist under universal  deposits, because a change from a
predominantly throwaway system to a returnable system has never before
been made in any major country.  This paper presents and explains
the data and facts that describe existing or past U.S. and foreign
experience with deposit systems.   This information is then synthesized
and a most 1ikely return rate is predicted.

                      II.  Data From Return Systems

     Historic trends in the rate at which refillable bottles have been
returned in the United States may provide indications of future return
rates.  These trends are presented in Tables I and II for beer and soft
drinks, respectively.  In addition, a variety of other deposit or return
systems have been implemented or have existed in the past.  They are not
national in scope, but are of some value in predicting a reasonable
range of return rates.  Table III presents return rate data for those
systems.
*See Appendix I for a discussion of how "return rates" relate to "trippage".

-------
                                  75
                           TABLE  I

   U.S. AVERAGE RETURN RATE ESTIMATES FOR REFILLABLE BEER BOTTLES
                              RETURN                   REFILLABLES AS % OF
YEAR                           RATE (%)                  TOTAL  FILLINGS

1948                          96.8                          83.4

1950                          96.6                          73.3

1952                          96.5                          71.3

1954                          96.4                          64.8

1956                          96.1                          60.3

1958                          96.1                          57.4

1960                          96.0                          51.9

1962                          95.7                          48.3

1964                          95.3                          40.1

1966                          94.8                          35.0

1968                          94.4                          32.7

1970                          94.1                          26.4

1972                          93.6                          21.0

1973                          93.1                          20.5

1975*                         92.7                          15.2

   Source:   FEA Study,  Table  B-20
   *1975 data added by GAD update of FEA model.

-------
                               76
                        TABLE II
U.S. AVERAGE RETURN RATE ESTIMATES FOR REFILLABLE SOFT DRINK BOTTLES
YEAR
1948
1950
1952
1954
1956
1958
1960
1962
1964
1966
1968
1970
1972
1973
1975*
Source
*1975
RETURN
RATE (*)
95.7
95.4
95.2
95.1
94.6
94.7
94.5
94.1
93.5
92.6
91.9
91.4
90.6
89.8
90.5
: FEA Study, Table B-21
data added by GAO update of FEA model
REFILLABLEs AS
TOTAL FILLINGS
100
99.9
99.8
98.1
98.4
98.0
96.4
93.2
90.0
79.8
64.2
54.6
43.0
43.2
37.9



-------
                                   77
                               TABLE  III
                   OTHER RETURN RATE  EXPERIENCES*
                                   RETURN  RATE  (%)
YEAR
1973
1976
1976
1974
1972
--
--
--
1974
1972
1975
LOCATION
Oregon"1"
Vermont"1"
Yosemite Nat'l
Great Britain
Ontario
Australia
Germany
Switzerland
Denmark
Sweden
Finland
BEER SOFT DRINKS
91 90
__
Park+ --
92.5 88.9
95.5 92.3
84.6 95.2
96.0 88.5
98.6 97.8
_.
__
_ _ _ _
COMBINED

95.0
69.0
--
--
--
--
--
96.7
94.1
96.7
REFERENCE
3
4
6
7
7
7
7
7
7
7
7
*There is also a test of a deposit system being conducted  on  several
Department of Defense facilities.   For a discussion  of the early  results
of that test, see Appendix II.

+Return rate is weighted average for cans and refillable bottles.

-------
                                  78
                      III.  Discussion

     The data in Tables I, II, and III show that, with few exceptions,
past return rates in the United States and in other industrialized
countries have been about 90 percent.  They also show that return
rates in the United States have been declining,  however, although
the data on soft drinks is not complete,  the rate in 1975 was
apparently higher than in 1973, suggesting a possible bottoming
out in the downward trend.  These data and trends are helpful, but
not conclusive,  in drawing inferences as to the return rate following
national deposit legislation.  The experience of other countries
is also suggestive but may not parallel that of the United States
because of different life styles and economic conditions.  The
experiences of the States of Orgeon and Vermont and other relatively
small areas in the United States with mandatory deposits are subject
to outside influences that would not be felt under a uniform national
system.  Therefore, other theoretical factors must also be considered
in attempts to predict what national return rates would be.
  Effect of "Return Convenience"

Tables I and II show that there was,  at least up to 1975,  a downward
trend in U.S.  average return rates for refillable bottles.   Opponents
of deposit legislation argue that this trend is likely to  continue and
that consequently the projected future return rates used for calculating
costs and benefits of deposit legislation should be lower  than current
return rates.   However, from the data presented in those tables on the
proportion of refillable bottles in the system, it is also  possible to
infer a relationship between return rates and the convenience of return.
One might expect that the number of locations that will  accept returned
containers and the variety of brands  accepted by those that have also
fallen in relation to the decline in  use of refillable bottles.*  As the
number of locations stocking and accepting returns of refillable bottles
has declined,  it has become more difficult for the consumer to return
empty containers.  It could be theorized that this decline  in "return
convenience" has caused return rates  to decline.

     It may be hypothesized then, that if all beverage retail outlets
accepted returned containers, the return rate might increase from its pre-
sent level.  This hypothesis is supported by data obtained  i n Oregon by
*The League of Women Voters found  that most retail locations stock
refillable soft drinks.  However, the selection is limited, and consequently
return locations are limited, because, in general, retailers will not accept
empty refillable bottles in brands they do not sell.

-------
                                   79
    Oregon State University and reported by Gudger and Bailes.  This
data is based on questionnaires sent to all malt beverage distributors
and soft drink bottlers and to 400 retailers in the State.    It shows
that return rates for refillable bottles in Oregon increased  from 75
percent to over 90 percent for beer and from 80 percent to 92 percent
for soft drinks after the deposit law went into effect and are now well above the
national average.  Vermont return rates after their law went into effect are
approximately 95 percent;   this is higher than the National average.
There is no good data on Vermont return rates prior to passage of
there were so few refillable bottles available in the State at that time.

Bottle vs. Can (or "Marginal") Return Rates

     On the average, return rates in the United States are slightly above
90 percent.  Except for Oregon and Vermont, however, this is  the return
rate for refillable bottles only, and thus represents only 25 percent
of all beverages purchased (Tables I and II).  If all beverage containers
were made returnable by deposit legislation, the other 75 percent
(the marginal portion) would also be subject to return for refund.  It
might be unreasonable to expect this 75 percent to be returned at the same
rate as the first 25 percent.

     Because cans and one-way  bottles are considered   "convenience"con-
taniers   and convenience is viewed by many as "not having to return,"
it has been argued that those  consumers who now buy convenience containers
would have a tendency to continue to throw them away under a  deposit
system.  Thus, the return rate for cans and glass and plastic non-
refillable bottles would be lower than the present rate for refillable
bottles.

     There are thirteen locations where marginal  (non-refillable)
container purchasers have become subject to refundable deposits:  the
States of Oregon and Vermont,  Yosemite National Park, and the 10
Department of Defense facilities that are testing the EPA Beverage
Container Guidelines.  However, it is difficult to determine  from the
available data if the marginal purchaser does in fact return  empty
containers at a significantly  lower rate than those who have  purchased
returnable containers in the past.  As discussed in the following
sections, the results from Oregon lead to one conclusion, those from
Vermont to another; there is not enough data from DOD to warrant further
discussion at this time; and the Yosemite results are subject to qualification.

-------
                                   80
     Oregon.   Prior to enactment of the Oregon  Beverage Container Law,
32.1  percent  of beer and 60 percent of soft drinks  were sold in refillable
containers.   Beverage consumption in refillable bottles was  significantly
higher than  the national average, but return rates  were somewhat lower
than the national  average at 75 percent for beer and  80 percent for
soft drinks.   One  year after the Oregon legislation went into effect,
95 percent of beer and 91 percent of soft drinks were being  sold in
refillable bottles.  Return rates had increased to  95 percent for
certified (standard) beer bottles, 90 percent for non-certified beer
bottles, and  92 percent for refillable soft drink bottles.10 So, with the
addition of marginal purchasers to the returnable system and an increase
in return convenience in Oregon, the refillable bottle return rate
increased.

     On the other  hand, one year after the Oregon law went into effect,
the can return rate was lower than that for bottles:   70 percent for
both beer and soft drinks.   (It has been reported,3 but not  confirmed by
the staff, that return rates for cans in Oregon are now at 80 percent.)
Note, however, that at that time, only 5 percent of beer and 9 percent
of soft drinks were sold in cans,   and that it therefore might not be
appropriate to draw inferences from this low can return rate because it
represents such a  small portion of the market.   One could infer either
of two extremes from Oregon data:

     1.   With national deposit legislation, can return rates will be
          high because the 1.5 percent (30 percent  of 5 percent)*
          of total beer and 2.7 percent (30 percent of 9 percent)*
          of total soft drink containers that were  not returned represent
          those marginal purchasers who will continue to buy in cans
          and discard them.  The remaining 98.5 percent of beer consumers
          and 97.3 percent of soft drink consumers  will purchase in
          both bottles and cans and return them at  rates somewhat higher
          than 95  percent and 92 percent respectively.  Or,

     2.   With national legislation, the return rate  for cans, based
          on  data  from Oregon, will be only 70 percent (irrespective
          of the fraction of total purchasers represented).

A more reasonable  inference from Oregon data is that  return  rates for cans
will be somewhat lower than those for refillable bottles, but that,
in general, average return rates will increase.
*A 70 percent return rate means that 30 percent were not returned.  Five
percent of beer and 9 percent of soft drinks were sold in cans.

-------
                                    81
     Vermont.  Using beverage distribution industry data on unredeemed
deposits, Jeffords and Webster report that the return rate following     .
passage of the Vermont beverage container legislation is over 95 percent.
Prior to enactment of this legislation, there were virtually no refillable
containers available in the state.^   The effects of the increase in
availability of refillables plus some of the marginal purchasers shifting
to refillable bottles ha\e resulted  in return rates that are reportedly
higher than the current national average.  The data also indicate
that both bottles and cans are returned at the same rate in Vermont:
over 95 percent.  ''^   Therefore, it would appear from the Vermont
data that the addition of the marginal purchaser to a return system
would not necessarily decrease, and,  in the context of a universal
deposit system, may even increase average return rates.

     Yosemite National Park.   In the summer of 1976, in a four-month test
of a beverage container deposit system at Yosemite National  Park,
the average return rate was 69 percent.   Two major factors influence^
this return rate.  First, a visitor to Yosemite National  Park stays
an average of only 2 1/2 days.  In  this short time, consumers must be
educated to change their beverage container disposal habits.   For such
a transient situation, a 69 percent return rate might even be considered
high.  The Park's education efforts may not have reached or may not
have been effective on many of the  park visitors.  Second, because of
the transience of park visitors, it may be assumed that some visitors
have left the park with the unconsumed beverages they purchased in the
park.  Neither of these factors would affect return rates if beverage
container deposit legislation were  implemented nationwide.

     A final significant point is that virtually all beverages  sold in
the Park are in cans.  Therefore, based on the Yosemite experience
it might be inferred that, under national deposit legislation,  return
rates for cans will be at least 69  percent.

                      iv. CONCLUSION

     The discussion above presents  the available data on return rates.
It appears that for the purpose of impact assessments, can and  bottle
return rates should be dealt with separately instead of combined, as
in Staff Background Paper N°-  2-   Return  rates  for  refillable
bottles  should be  assumed  to  be  in the range of  90 to 95  percent

-------
                                   82
Appropriate return rates for cans are more difficult to determine.
Oregon and Yosemite data suggest a minimum level  of 70  percent.  Vermont
data suggests a maximum can return rate of 95 percent.   Neither extreme
seems to be a reasonable level  for a national average  return rate for
cans.  Consequently,  the staff believes that  it would  be  reasonable
to use a mid-range assumption of 80 to  85 percent for  the can return
rate in estimating the impact of  ational deposit legislation.

      SENSITIVITY OF IMPACTS TO RETURN  RATE ASSUMPTIONS

     Staff Background Paper No. 2
(RCC 2) assumed a 90 percent average return rate  for bottles and cans.
For container Mix I (40 percent refill able bottles, 60  percent  cans),
with lower level return rate assumptions (80  percent can/  90 percent
refillable bottles),  energy, material,  solid  waste, and litter  benefits
will be slightly lower than those shown in RCC 2.   Employment,  consumer
cost and consumer inconvenience should  not change appreciably.   For
container Mix II, where cans are only 20 percent  of the market, there
should be no appreciable difference in  costs  or benefits  between the
results of an 80 and  90 percent can return rate assumption.   At the
higher range of return rates assumed, the environmental and resource
benefit's would  increase and employment dislocations would be slightly
higher because  fewer bottles would have to be produced.

-------
                                   83
                              References
1.  Research Triangle Institute.   Energy and Economic Impacts of
Mandatory Deposits.  Research Triangle Park, N.C.,  September 1976.
Pages B-28 and B-18.

2.  Research Triangle Institute.   Energy and Economic Impacts.   Pages  B-29
and B-22.

3.  State of Oregon Department of Environmental  Quality,  Oregon's
Bottle Bill, the 1977 Report.  Salem, Oregon, 1977.   Page 4.

4.  Jeffords - Webster Report.  Draft.  1977.  Page  12.

5.  Unpublished Department of Defense data.

6.  Research Triangle Institute.   Yosemite National  Park  Deposit
Experiment.  Research Triangle Park, N.C., April  1977.  Page 15.

7.  Organization for Economic Cooperation and Development,  Beverage
Containers Case Study, Paris, 1977.   Page 34.

8.  Gudger and Bailes, The Economic  Impact of Oregon's  Bottle Bill,
Oregon State University, March 1974.  Page 5.

9.  Gudger and Bailes, Oregon's Bottle Bill.   Pages  24  and  26.

10. Gudger and Bailes, Oregon's Bottle Bill.   Pages  20, 22,  24,  and  26.

11. Jeffords - Webster Report.  Page 3.

12. Jeffords - Webster Report.  Page 20.

13. Peterson, C. - Price Comparison  Survey of Beer and  Soft  Drinks
in Refillable and Nonrefillable containers.   Environmental  Protection
Publication SW-531.  Washington,  1976.

-------
                                   84
                              APPENDIX I, Background Paper No. 5

                       Return Rate vs. Trippage
     Some writers refer to "trippage"  instead of return rate.   Trippage
is the number of round trips the average refiliable bottle makes between
filler and consumer.   This relationship is generally considered to be
direct (Trippage = 	]	),  although this  ignores shrinkage,
                   1  - return rate
i.e., those refillable bottles returned but not refilled.   Because
trippage has no meaning when referring to nonrefillable bottles and
cans, return rates are used  in this  paper.  The table below shows
the mathematical relationship between  selected trippage and return
rates.
RETURN RATE (%)
98
95
93.3
90
85
80
70
60
TRIPPAGE
50
20
15
10
6.67
5
3.3
2.5

-------
                                   85
                         APPENDIX II ,  Backgro und Paper No.  5

                 Department of Defense Test


     The Department of Defense (DOD) is currently testing beverage
container deposit systems on 10 military bases.  The tests were begun
at Ft. Knox, Kentucky in March    1977.  At the other nine facilities, tests
were started at varying times thereafter, the last test beginning
in June    1977.  All ten tests are scheduled to run for one year.
Preliminary return rate data from those test facilities are presented
in Table I.  That data is presented for each month following commencement
of the tests and in every case shows an upward trend.

     It is evident from the data in Table I that return rates have not
yet stabilized.  Therefore, we have not attempted to determine a "final"
return rate for the DOD test.  It is clear, though, that the average
return rate is now above 80 percent and will probably continue to rise
as the facilities which have started more recently begin to gain experience
and their consumers become more aware.

     It should be noted that a number of facilities have noted a
reduction in sales of beverages on-base and a corresponding increase
in sales by merchants off-base.  This should be expected where an easily
accessible alternative to a deposit system exists since consumers
can avoid the deposit at virtually no cost.  Such a reduction in
sales would be highly unlikely under a more extensive deposit require-
ment since the accessible alternatives would disappear.

-------
                                   86
              Monthly Return  Rates  at DOD Test  Facilities
                                     Return  Rates  for Succeeding Months
Facility
Ft. Knox, KY
Philadelphia, PA
Whidbey Is. MAS, WA
Ft. Riley, KS
Malmstrom AFR, MT
Ft. Huachuca, AZ
Laughlin AFB, TX
Patrick AFB, FL
Yuma MCAS, AZ
China Lake NWC, CA
1
59.5
28.2
26.3
37.7
44.4
40.3
23.9
23.0
19.7
84.6
2
72.9
52.1
151.1
70.0
69.8
76.0
54.3
57.5
61.9
70.8
3
79.4
64.0
71.3
77.5
72.0
58.8
60.8
62.8
77.5
66.4
4 5 fi
88.2 81.6 91.4
85.5
82.9
79.5
75.9
73.7
58.5
83.4 91.3
86.8 82.9

Average                38.76     65.0*     69.05     79.4      85.3  91.4
^Average over 9 facilities - Whidbey Island deleted for month 2    only

-------
   100%
                                           &7
                            AVERAGE MONTHLY RETURN RATE - TOD TEST
   90%
                                                                       **
   80%
   70%
   60%
 -  50%

c:
   40%
   30%
                                                          * 3 test sites  in  sample



                                                         ** 1 test site
  20%
         1234




         Months following test commencement

-------
                                    38     Staff Background Paper No.  6
                                           November 7, 1977
                                           Revised December 20,  1977
              LOCALIZED EMPLOYMENT IMPACTS,  GLASS INDUSTRY
     During our October 12,  1977/meeting,  several  advisory group
members expressed concern regarding possible local  employment impacts
that might follow a reduction in glass demand.   This paper reports on the  subsequent
of the potential for severe   local  impacts due  to  glass plant closings.

     Similar concerns have been expressed  regarding the metal beverage
can industry.  Currently, however,  no published data is available that
would allow a similar study  for the beverage can industry.   Consultants
for the RCC staff were told  by the  Can Manufacturers Institute that  they
were themselves compiling that data, which should  be available by the
end of the year.

     The purpose of this paper is to make  the Committee members aware of
areas where there is some potential for localized  impact.   It will  also
allow the Committee to put the potential  impact into perspective.  It
is not an attempt to determine what the exact magnitude of the impact
might be.

     In order to put glass beverage container employment into perspective,
it should be noted that total glass industry (SIC  3211, 3221, 3229,  and  3231)
employment is 173,000.*  The glass  container segment (SIC  3221), the 120
plants discussed in this paper, employs 73,000  persons* (42  per cent of
the total industry).  Approximately 50 percent   of glass container
production is for beer and soft drink containers.*  Assuming that there
is a direct relationship between employment and container  production,
glass beer and soft drink employment would be 50 percent  of glass  container
employment - 36,500 jobs, or 21 percent   of total  glass industry employment.

     There is no published data that shows which glass plants make  beverage
containers or what portion of their total  output is beverage containers.
Consequently, we had to start our investigation with plants  that make
glass containers and then attempt to narrow the field.
    1
      U.S. Department of Commerce, Bureau of Census.  Census of
Manufacturers, 1972.  Vol. II, Part 2.

-------
                                     89
     Data  on  the  120  glass  container  plants*  in  the  United  States  were
 analyzed (see  attached map) using  selected  population  and employment
 ratios.  Plant closings are much more likely  to  have a significant effect
 on  the community  in cities  and  counties  of  low population density.  Therefore,
 as  an initial, somewhat arbitrary  screening,  glass plants located  in or
 near cities with  a maximum  population of 50,000  and  in counties with a
 maximum population of 85,000**  were selected  for further study.   Forty
 glass plants fell into this category.  Their  locations are  indicated
 on  the attached map with x's.

     Next, we  developed additional criteria for  selecting from this
 group of 40 plants the areas most  likely to be severely affected by a
 reduction  in the  demand for glass  bottles.  Two  factors appear to  be
 relevant:  the portion of total county employment devoted to glass
 container  manufacturing; and the portion of total manufacturing
 employment in  the county devoted to glass container  manufacturing.***

     The staff arbitrarily  chose county  glass industry employment  that
 is  5 percent   or  more of the total county work force as an  initial
 screening  criterion.  In order  to  put that arbitrary selection into
 perspective, it should be compared to the average national  growth
 in  employment, which  is 2 percent  per year.  Thus,  if all  glass beverage
 container  plants  in a selected  county were shut  down and the workers,
 who constitute 5  percent     more  of  the county  work force, chose  not
 to  relocate, it would take  an average of 2 1/2 years or more for all of
 the unemployed to find new jobs in the county.   Total  unemployment in
 the selected counties is shown  in Table  I.  This should give some
 indication of  the relative ease with  which the displaced workers would
 be  able to re-enter the work force.   As  a point  of reference, the
 national average  unemployment is 6.9  per cent, which is higher than in
 all but two of the counties listed.
    * These data described plants that manufacture glass containers of
all kinds, not just beverage containers.

   ** The city population cutoff  of 50,000 was chosen arbitrarily.  It
was selected because the staff considered it to be large enough to
encompass all communities that would be severely affected by a reduction
in glass plant employment.  A county population of 85,000 generally
correlates to a city population of 50,000 persons.

  *** The staff concentrated on glass plant employment as a portion of
county employment instead of as a portion of city employment.  Because
many workers appear to commute into the city, county data was more
relevant than city data.  For example, employment in one plant was
466 percent  of the total population of the city in which the plant was
located.

-------
                                      90
       We can make additional inferences about the ability of an unemploymed
glass plant worker to find new employment by investigating the portion of th?
country workforce that is involved in manufacturing.  The staff arbitrarily
chose to highlight those glass plants where employment is 15 percent or more
of total manufacturing labor in the county.  Eighteen glass plants were
identified by this final criterion.

      We believe that using  the criteria discussed  above  results  in
 identifying a large number  of areas  that could  potentially experience
 severe impacts.  This will  be a conservative  estimate,  in that  it identifies
 all  those areas, as well  as others that probably will  not be impacted severely.

      As noted previously, no published  data indicates  which glass container
 plants manufacture beverage containers.   At the request  of the  RCC staff,
 the Glass Packaging Institute (GPI)  screened  the glass  plants  identified
 by the criteria discussed above and  found two plants that did not produce
 beverage containers and one that was no longer  in  operation.  The GPI also
 provided the staff with actual  employment data  for the  remaining plants.
 This showed that one plant  had so many  fewer  employees  than was  indicated
 in County Business Patterns that it  was dropped from the list.   The remaining
 14 plants, located in 10 counties, are  listed in Table I.

      These ten counties, out of a national  total of 3,141 counties, might
 be severely impacted if the 14 glass plants located in  those counties were
 completely shut down.  The  reader is cautioned  to  keep  the following in
 mind before drawing conclusions from Table I:

      a  This paper has only dealt with  the primary effect that  a
         plant closing might have on  a community.   This  understates
         the total effect on the community.   A number of  service-
         related jobs as well as retail  sales  might also  be affected.

      a  Any deposit legislation that is enacted is likely to have a
         phase-in period.  This would allow displaced workers some
         time to find other  suitable  employment.  However,  it is  possible
         that there might be few job  opportunities  for skilled glass
         workers and few alternative  jobs at a comparable skill  and wage
         level available in  the county.   Also  note  that  plants might not
         reduce employment in a phased manner, but  rather might  do so in
         a single step.

      a  During the transition to a new  packaging mix,  there will
         probably be an increase in bottle production to  build  up
         a float of refillable bottles.   However, much of this  increased
         production will probably be  handled on  overtime, not through
         increased employment.

-------
                                    91
             Many glass container plants make several types of containers
             for products other than beverages.  A reduction in beverage
             container production would more likely cause cutbacks, not
             plant closings, depending upon the portion of production that
             is beverage containers.

             Beverage container legislation is expected to reduce glass
             container employment by approximately 17%.*  Therefore, on
             average, only 17 percent  of the employees of the plants
             listed would be affected.  However, it is possible that
             older or less efficient plants would be phased out entirely.
    * There were 24 billion glass beverage containers manufactured in
1973.  After deposit legislation, 16 billion would be manufactured
annually.  (See Staff Background Paper No. 4.)  This represents a
33.3 percent  reduction in output, which could be assumed to cause a
33.3 percent  reduction in employment.  Because beverage containers
represent approximately 50 percent  of all glass container output
(Census of Manufacturers, 1972.  Vol. II, Part 2), the reduction in
glass container employment would be approximately 17 percent.

-------
                                                            ++ Table  I
                                    COUNTIES WHERE GLASS PLANT EMPLOYMENT IS GREATER THAN 5 PERCENT
                                  OF EMPLOYED PERSONS OR 15 PERCENT OF PERSONS  EMPLOYED IN MANUFACTURING
County Name
Total Glass Container
Industry Employment In
   County (1970)  ^ [ >
  Glass Container (2,3)
       Employees
as a Fraction of Employed
Persons In the County (%)
**Grant,
Indiana
Dearborn,
Indiana
Randolph,
Indiana
Lincoln,
Louisiana
Marion,
West Virginia
*Jefferson,
Pennsylvania
*Clarion,
Pennsylvania
Forest,
Pennsylvania
Pontotoc,
Oklahoma
Salem,
New Jersey
2,824
559
1,133
445
973
1,559
1,652
357
416
3,375
8.8
5.4
9.9
3.9
4.6
10.1
13.0
22.2
4.2
14.5
Glass Container (2,3)
    Employees
as a Fraction of Persons
Employed In Manufacturing
Industry In the County  (%)


        19.7


        12.6
                                                                          20.7

                                                                          35.6





                                                                          17.4


                                                                          29.7


                                                                          43.6

                                                                          55.5





                                                                          33.0


                                                                          32.5
            *   Totals for two glass container plants in the county.
            **  Totals for three glass  container plants 1n the county.
County Unemployment/
Percent Septl977  V
                                                                              5.4

                                                                              9.3


                                                                              2:5

                                                                              3.6




                                                                              5.9


                                                                              5.1

                                                                              4.1

                                                                              3.7




                                                                              4.7


                                                                              7.9
             ++  Plants where a portion of production 1s beverage containers.
              1 Employment data  supplied by  Glass  Packaging  Institute
              2 County Business  Patterns, 1974, U.S. Department  of Commerce,  Bureau  of Census  -  by State
              3 "County and city  Data Book, U.S. Department of  Commerce, 1972.                                   .    .
              4 Statistics supplied by  Silvia Small, Bureau  of Labor Statistics,  Office of Local  Area Statistics.
                                                                                                                          NJ

-------
U.S.  Glass Container  Plants
                                                                                 Legend
                                                                           • Cities more than
                                                                             50,000. Counties
                                                                             more than 85,000

                                                                           X Cities less than
                                                                             50,000, Counties
                                                                             less than 85,000

                                                                            Potentially
                                                                            severely inpacted
                                                                            area  due to drop
                                                                            in glass demand
                                                                                   '0

-------
          RESOURCE CONSERVATION COMMITTEE

           Staff Background Paper No.  7

                   June 1,  1978

          THE SENSITIVITY OF THE BENEFIT
      IMPACTS OF BEVERAGE CONTAINER DEPOSITS
      TO VARIATIONS IN CONTAINER RETURN  RATE
                    ASSUMPTIONS


                 I.  INTRODUCTION
     This paper presents the results  of  a  further test
of our computer model for a national  beverage container
deposit law.  In this experiment we wanted to see what
the impact would be if consumers did  not return containers
at the rates we expect once such a deposit lav; goes into
effect.  We lowered the return rate before programming our
model to measure the effect on solid  waste generation,
virgin steel and virgin aluminum consumption, energy con-
sumption and consumer expenditures for beverages.  This
analysis represents a case in which the  assumptions re-
garding return rates are lowered beyond  the staffs' best
estimates of the lowest likely rates.

     For more details on the model and the methodology
see Staff Background Paper No. 2, Costs  and Benefits of
a National Beverage Container DeposTt System.Stafl:
Background Paper No. 2 presented estimates for a number
of expected cost and benefit outcomes of a nationwide
beverage container deposit proposal.  The  results were
developed in the form of "high" and "low"  expected values,
based on two alternative sets of assumptions or "scenarios",
These assumptions reflected high and  low possible responses
to the deposit system of the container and beverage indus-
tries and their consumers.   The "high response scenario"
assumed:  (1)  a relatively extreme shift in the industry's
mix of containers towards refillable  glass bottles, (2) a
high return rate for all types of containers by consumers,
and (3) high material recycling rates for  nonrefillable
containers returned for deposit refund.  In contrast, the
"low response scenario" v/as designed  to  use lower-bound
esf-.imates for all of these important  variables.*

     This paper extends the previous  staff analysis by
evaluating the relationship between certain of the key
benefit categories and container return  rates, to assess
*Staff Background Paper  No.  2,  January,  1978,  pages 28-31
                        94

-------
whether unexpectedly low return rates might seriously
diminish the benefits of a national deposit system.
Specifically, it addresses the question of how sensi-
tive to return rates the previously estimated benefits
might be, especially if the return rates were lower than
those assumed in the "low-response scenario."

     The approach used in this analysis has been to re-
calculate the major benefit categories, retaining all of
the assumptions and input values of the low response
scenario,  but imposing substantially lower return rates
for containers.   The benefit categories evaluated include
solid waste generation, virgin steel and aluminum consump-
tion, energy consumption, and consumer expenditures for
beverages.   The method, assumptions, and scope of the
analysis are explained further in Section III below, and
Section IV provides the detailed results.

              II.  Summary of Results

     The results of the analysis indicate that,  with
changes in the return rate, the principal benefits of
a national beverage container deposit policy should
be expected to change at a constant rate rather  than
at an accelerating rate.  In addition,  the estimates
show that for most of the benefit categories analyzed,
benefits change at a slower rate than do nonrefillable
container return rates (Table 1).

     Thus,  for a point (70 percent return rate)  that is
12.5 percent* below the assumed return rate (the 80% "low
response"  base), the solid waste reduction, steel consump-
tion, and energy consumption benefits are reduced by
amounts varying between 6.8 and 10.0 percent of  their
respective base values.  Aluminum consumption savings
are reduced slightly more.  In contrast, consumer savings
on beverage purchases are actually slightly greater at a
lower return rate.

     Similar levels of sensitivity are registered for
benefits when nonrefillable container return rates are
above 80 percent and below the 70 percent level.   The
full ranges are shown graphically in Section IV.
     *It should be noted that a 12.5 percent  decrease
     (from 80% to 70%)  in return rate is  a  substantial
     change.  In fact,  it is equivalent to  a  50  percent
     increase (from 20% to 30%)  in the number of con-
     tainers thrown away.
                          95

-------
                           Table 1
         Effect of a 12.5 Percent Reduction in Non-
        Refillable Container Return Rate on National
        Benefit Estimates for "Low Response" Scenario
National Benefit         Hon-Refillable Return Rate    Percent Change
     Category            80% (Base)      70%               in Benefit
                                                           Category


Reductions in;

  Solid Waste Generation  1,487         1,385               -6.8%
    (thousand tons)

  Steel Consumption       1,614         1,472               -8.8%
    (thousand tons)

  Aluminum Consumption      354           305              -13.7%
    (thousand tons)

  Energy Consumption         70           63              -10.0%
    (trillion Btu)

  Consumer Savings           656           683              + 4.0%
    on Beverages
    (million dollars)
                              96

-------
     The general conclusion from this  sensitivity analysis
is that the major benefit categories are  relatively insen-
sitive to assumptions regarding return rates  falling below
those postulated as lower-bound values for  the low-response
scenario analysis.  A value 12.5 percent  less than the mini-
mum expected return rate should cause  three of the five
benefit estimates to decrease by less  than  9%, one to decrease
by slightly more than 12%,  and the fifth  (consumer savings)
possibly to increase.  The sixth major category (litter
reduction), should be expected to shift to  an extent approxi-
mately proportional to a change in nonrefillable return
rates,  although this was not specifically estimated.

               II.  METHOD AND SCOPE
General Approach

     The impact estimates presented here were derived
by applying different return rate assumptions to a com-
puter model of the beverage industry developed by Research
Triangle Institute (RTI).  The same model was used to
estimate impacts for Staff Background Paper  No. 2.  We
used the more conservative, or low-response  (Mix I) ,
scenario from Staff Paper ,No. 2 as the starting point
because the principal purpose of this analysis is to
evaluate the reduction in benefits that would result
from further reductions in the return rate.   The very
conservative return rate, recycling rate, and container
market share assumptions of Mix I constitute a "worst
case" scenario that would produce the minimum likely
benefits from national deposit legislation.

     The RTI model was used to calculate a series of
impact estimates based on the "Mix I" assumptions,
varying only the nonrefillable container return rate.
Therefore, any variations that result are attributable
only to changes in the assumed return rate.   The result-
ing estimates  (of such data as total consumer expenditures,
system energy consumed, or number of containers required)
were then used as the basis for calculating  alternative
impact levels for a series of major impacts.  The impacts
calculated are:  reduction of solid waste generation;
steel consumption, aluminum consumption; energy savings;
and consumer savings.
                             97

-------
Review of Scenario Assumptions

     A detailed discussion of the assumptions behind the
RTI baseline projections is available in Staff Background
Paper No. 2, "Costs and Benefits of a National Beverage
Container Deposit System".  In general,  RTI projected
historical trends in sales volume,  container market share,
refillable bottle return rates, recycling rates, and manu-
facturing efficiency to 1985 in order to develop a baseline
for comparison purposes.  The 1985  projected container
market share, return rate, and recycling rate are de-
tailed in Table 2 for both the baseline  and the low
response  (Mix I) scenario.

New Return Rates Analyzed

     The specific nonrefillable container return rates
analyzed ranged from 90 percent to  60 percent in 10 per-
centage point increments.  In the "Mix I" analysis, 20
percent of nonrefillable containers are  assumed to be dis-
carded (that is, 80 percent are returned).   In this
analysis, the 60 percent return rate level  implies that
40 percent are discarded.

     The refillable bottle return rate was  held constant
at 90 percent for the analysis.  Both the previous staff
analysis of this subject (see Staff Background Paper No. 5)
and historical trends strongly suggest that this is the
minimum return rate for refillable  bottles  that is accept-
able to the beverage industry.*  Actual  experience in
Oregon and Vermont confirms this expectation.

Impact Areas

     We have limited this analysis  to those impacts that
are most significant and likely to  illustrate  the greatest
sensitivity to changes in return rate.   Those  areas are:

     o    Reduction in Solid Waste  -

          As in Staff Background Paper No.  2,  the pre-
          dicted 1985 beverage container component of
          the municipal waste stream forms  the baseline
          for the calculations of changes in waste
          generation.
*See Appendix I.
                          98

-------
                      Table 2

      Comparative Model Input Assumptions for
         Baseline and Low Response Deposit
                 Scenario Analysis
                                                  Low Response
     Model Inputs             Baseline               Scenario
Container Market Share
(Percent of Volume)
     Refillable bottles         20%                    40%
     Nonrefillable bottles      15%                    10%
     Plastic Bottles            10%                    10%
     Metal Cans                 55%                    40%

Container Return Rates
     Nonrefillable Bottles      91%                    90%
     Nonrefillable Containers   —                     80%
Recycling Rates
     Steel Cans                 10%                    40%
     Aluminum Cans              40%                    80%
     Glass Containers            5%                    20%
                          99

-------
These calculations are based on the number and.
weight of containers used and the return and
recycle rates developed for Staff Paper No. 5.
It is assumed that all container materials that
are not reused or recycled become a part of the
waste stream.

Reduction in Steel Consumption -

Beverage industry steel consumption predicted
for 1985 by RTI is the baseline.  Changes in
consumption levels at various return rates have
been compared to that baseline to determine
changes.  Savings are dependent both on the
return rate and the rate at which returned
containers are recycled.

Reduction in Aluminum Consumption -

Beverage industry aluminum consumption pre-
dicted by RTI provides a baseline.  This
baseline includes an expected industry re-
cycling rate for aluminum containers of 40
percent in 1985.  Savings calculated (as
changes from the baseline with different
return rates) are attributable only to
deposit law effects.

Savings depend, as with steel cans, on both
return and recycling rates, as well as a modest
shift in container market share.

Reduction in Energy Consumption -

Energy savings are calculated as changes
from the RTI baseline projection for 1985.
The baseline estimates include energy savings
resulting from increased operating efficien-
cies.  Any consumption due to extraction,
transportation, refining of raw materials,
container filling, distribution, and final
discard is included in these calculations.

Change in Consumer Expenditures -

Baseline consumer expenditures on beer and
soft drinks were developed using historical
trend analyses of beverage consumption for
1985 and adjusted final retail prices.  In
calculating changes in consumer costs from
                 100

-------
           the baseline, lower costs result from any
           increased share of (lower priced) refillable
           bottles.  However, increased handling costs
           at l.OC per container for returned but non-
           refillable containers increase overall net
           expenditure.  Recycling revenues for aluminum
           at 0.75 cents per container have also been
           factored in, but due to market uncertainties,
           the conservative assumption has been made that
           glass and steel have no net recycle value.


       IV.  Results of Sensitivity Analysis


Reduction  in Solid Waste

     Figure 1 shows that the solid waste reduction would
be lower at return rates of less than 80%, than at the
predicted  80 percent minimum for nonrefillable containers.
The relationship between nonrefillable container return
rates and  solid waste reduction is linear; but the per-
centage decrease in solid waste reduction is less than
the percentage change in return rate.  For example, a
12.5 percent change in return rate (from 80 to 70 per-
cent) results in a 6.8 percent change (from 1.5 to 1.4
million tons)  in solid waste reduction.

Change in  Steel Consumption

     Figure 2 presents the reduction in beverage industry
virgin steel consumption at various assumed return rates
for non-refillable containers.   Steel savings would ob-
viously be lower at lower steel can return rates due to
the decrease in steel container recycling.  Again, how-
ever, benefits are relatively insensitive to variations
in return  rate.  For example, a 12.5 percent reduction
in return  rate (from 80% to 70 percent)  results in an
8.8 percent reduction in steel savings (from 1.6 million
tons to 1.5 million tons).

     Viewed another way, a 50 percent increase in the
assumed discard rate (a decrease in recycling)  in this
example reduces the savings in steel consumption by
about 9 percent or 100,000 tons.

Change in Aluminum Savings

     Figure 3 presents the reduction in beverage industry
virgin aluminum consumption at various assumed nonrefillable
container return rates.  Savings are predicted under the
low response scenario for a national deposit law as the
                        101

-------
 in
 oo
CO
I
&

I
H
B
CO
     3.0
     2.5
    2.0
    1.5
    1.0
     .5
                                         Figure 1



                                   SOLID WASTE REDUCTION



1








• r j

{ I
" ' j.
1


L l
it
i
1 i


i j
i I •

! '
• t I
- ' !
.4 1.

.I.!

i i
^ i

[ T
j J^
_ll-
, T
ii-
41-

-1 i
i
f i
1 ;
.1 i.
!
.!.
, ,1-
. I
|
.il
~i ~;
- - 4
•f •«
.L :
. :
H









.
1
1
"J
"l
1
i
- 1 -f-

•ffj

1 i
i
1

j
,
;
] j


'•it
vt-t
t-4-f
!1j


4. . L..

..l.i.L
-1.1 i
i.l4.i

T i ~| *~
trtT
-i 14-1
LflJ
1 f ! 1
4-J ! 1
!..! 1 L
4-i-l-i
|1 .!
U -4
J J J
; i. ..
L i. .t
IL
! t i
14 i- -
.1J .
1 1 il
: til
i -lal
•--144-
:. 1 1.
i... 4
t-m







-


i
T "
r ~~~
T~
1 |
r r •
i t
1 !
i t"
ti"
i i
h


jt
"T
I
{

1 I
it:
if
t ' j
1 1
. -r
•
\

.1.1.
! l
U-
J4 -
: T
.i 1,

1 [
] I
J ]_'
1 |
[ _[
i i
r
.. L

, 1




-.1.
--H

. .. J 	 ,













•




"











'








-






























T


i
!
1
'~*
1
"1


|

I
T
f-

l



•f-
1:
"j
i
i

1

!


i
-

1
i
j






i
i

1
•
|
I
i
j

1










l
•;
!



i
i





-1


!
I
|
1
i
i:


t
1


i
l"

f"
|
1.
j —


i

!
1
i
i
1
1
i



















J
^



i
!
1
i
I
f-H
L i
1

l
1
i

|
j
i
f






— •1—
I


..._.


1
t


.. J





i

—i...
_!
...I
_]
.-I
_L





























-






_






























-j































-

-






























-



f" 1

























.


















-







,-
"


h
^•











'





L
_.






-






















-











•

r









—

















-

















































•
^ .






.-



-


























h-





















1




























































•
1


•



-

-

--

















































:
...
-



L


-



-

















































•










-


























r—






















-








-
















































• -i


-








-
















































-


-




























































-








	




























— •































L -

I























































































I






















~






-^

~



















































:






*


-
\~


























-






















-






**

-

























t


— ,





























^

_.



















































-





f






















































-





^




























































^


























































1
f

L






















,






\























-




*

L


















.


































•
-
•-





































__






















-
'



^




-

-
























L-
























..
r


,


































i^






















-


ff





--



















\








U






















'-
1


•"



-•

_

"


























I-





























— ,



._












,











(— '

__






















--










\-


'


















L .
U-

_
























-










r-
r-

















































:.
H~








-























,
...


























~































                    20
                                40
                                            60
                                                        80
                                                                     100
                     RETURN RATE - NONREFILLABLS CONTAINERS  (PERCENT)



              1  = MIX I - PREDICTED IN RCC STAFF BACKGROUND  PAPER #2
                                         102

-------
                    FIGURE 2
00
en
rH
1
O
->
i
w
I
•H
QJ
1
STEEL SAVINGS







1800



1500

i OAn
IZUU





900

600
300
1

I !
^r










i







--

—^
—


































i
..
:.
-

i










i"


---






...
r-

















-
h

p
_










_
_


I




f

1- "-"
1 -L — i
&
h


m

n
t
t-











i








_.

._















-









































i
-h




























l:














-


















=


i
...


-















i.
i






















•-
















































--













































~\





























h-













-
--

-





h





















-


-






























-






























-








-






•-








































j




















--













-































































































































































...
1





































































-
















-















































-











~

















^




---,







h

_








__






•-





-
-


















-



















—





-



















--



















--









































•T"
_
1
.
,i ,
a-.
T
-t -
1

-



~




-














-

-
.


.--
-J
LJ
1




--)
-1

















;:























._




...




-























•r
i!
i _
i
4-
-4


.
-
















-




















~















-























-



-


-














-















































































-
































-



























































































-


-































-










--





-














-




























/












-
-















































/



























































-
?





































~











-





-
f-































































-




































t
t~*"
-m




















/













































+1


















^












































—

















2











































-
















^
4













































-















?











































-

















/
r

-



-























































/

















































-
u_













^

















































:1
-












J




















































































































































































































































































































































































































20          40          60           80          10o



 Return Rate - Nonrefillable Containers  (Percent)




 1 = Mix I - Predicted  in RCC Staff Background Paper #2




                   103

-------
                                   FIGURE 3
                             Aluminum Savings
in
co
        500
        400
        300
        200
        100
                                                      L ,  L.. L 4.14-4-
                                                                   .Li.i. LJ	i	
    -1 ii.ttlj.
    ..{I Li J.i 4
    .! i  i. i.J-il
      i
                                                       . _-

                                                      LL i UJ.1 LJ
                                                                   i  .. _.i—I.-  - 4
                                                                   ; i i.t.i : i-j-t
               i  Li l - L. L I  1 4

               !  i I ! !  I I  i. i
                                                      • '-  - [ ^ M
                                                      i .  - : H- f-i
                                                      ii  ' i_  -L i  '
                                                      ; L::ui.:.±i I
                                                                         _.  :

                                                                       I ii.l ;.L
                          20
40
                                                    60
80
                                       100
                    Return Rate - Nonref illable Containers  (percent)
                     1  = Mix I - Predicted in RCC Staff Background Paper #2
                                       104

-------
difference between the baseline and the reduction in
consumption calculated for the various return rates.
Aluminum savings would be lower at lower return rates.
Using the previous example, a 12.5 percent reduction
in return rate  (from 80 to 70 percent) results in a
13.7 percent reduction in aluminum savings (from 354
thousand tons to 305 thousand tons).   Aluminum savings
are thus somewhat more sensitive to nonrefillable con-
tainer return rates than were steel savings,  due to the
higher projected recycle rate for aluminum (see Table 1) .
However, even here the effect is approximately proportional.

Reduction in Energy Consumption

     Figure 4 illustrates that energy savings would be
lower at nonrefillable return rates lower than the mini-
mum estimated for the original low-response scenario.  The
relationship between nonrefillable container  return rate
and energy savings is less than directly proportional.  A
12.5 percent reduction in the return rate (from 80 to 70
percent) leads to a 10 percent reduction in energy savings
(from 70 to 63 trillion Btu).

Consumer Savings

     A 12.5 percent reduction in return rate  (from 80 to
70 percent) results in a 4 percent increase in consumer
savings (from 656 to 683 million dollars).

     Figure 5 shows consumer savings to be slightly
lower as nonrefillable container return rates in-
crease.  This may be explained by the fact that at
increased return rates, more steel cans and nonre-
fillable bottles are returned, incurring increased
handling costs.  Associated recycling revenues are
insufficient in this model to compensate completely
for those costs because of the zero net scrap value
of steel and glass assumed in the analysis.   Recycling
aluminum cans, on the other hand, results in  revenues
that are generally sufficient to cover increased handling
costs.
                          105

-------
 3
 o

OJ
1-1
 o
 iH


 w

 g
 H
     100
                                        Figure 4
                                    ENERGY  SAVINGS
                     20         40          60          80          100



                          RETURN RATE - NONREFILLABLE CONTAINERS  (PERCENT)








                     1 = MIX  I  - PREDICTED IN STAFF PAPER #5
                                        106

-------
                                          Figure 5
                                     CONSUMER SAVINGS
    1250
*-    750
OT
1
o
u
     500
     250












_
J
—
_i
















_

--









.











_

.1
-


















--i







,
-\












— 1
-
-•
















}

.
• 1
J
..




•

J
-












.J
1
















-\

.J








-
H









.


1
-•J
















h

..
-









































LJ

-







7]"











-

..
"
















.

.
..








tj











"
H
_.



















..






















-
_
















LJ

L
—
-







-






























.

•-
~








-












-
..




























-
•










-
-•
..
















L..


._
•-



















-
...

















.

•J
i.,
_







\.-












-
-
















-

-









bj












-









































-

...


















-
-








• —






























...


i--
Y-




















-

















-



-



















-




















-









-


































...







-











-
-
-


















-

--



















-
--
_"



—
























^













,


















-

•J







^











•-1


















_

-

.







L











-


















.-


--
-1






































-











...











...
r-





























-\






























-














































-•







:











-


















-



-








































-























-










































-


















__
-








-|











-
-








••




















H











--









»<




















•





















M


































-








h~









-
-








--






















••









-









-






















•-.









-

"







—






















•^









-
-








r


























































r






1









J









..























•*•






•1


-






















..
•-









**








-
-
-







.











._

..









SH








H

--














I

1
|
i
^
1"
t:
















-

^-








































-


"






















•-




















--







-:













-.



















~








._












-



















-









'-
                     20
40
60
80
                                                                     100
                      RETURN RATE - NONREFILLABLE CONTAINERS (PERCENT)
                    MIX I - PREDICTED IN RCC STAFF BACKGROUND PAPER fr2
                                          107

-------
                         Appendix I

                Refillable Bottle Return Rate
     The return rate for refillable bottles  is assumed to
remain at 90 percent.   There are two reasons for this
assumption.  First,  the National average return rate for
refillable bottles has never fallen below 90 percent and it
is well over 90 percent in both Oregon and Vermont.

     Second, the economics of refillable bottles will
operate to either maintain high return rates or eliminate
refillable bottles from the market.  Refillable bottles are
initially more costly for the filler than are equivalent
nonrefillable bottles.  Refillable bottles gain economic
advantage only through reuse, which distributes the higher
purchase price over several fillings.  The beverage industry,
particularly in soft drinks, has always recognized the
necessity of maintaining return rates for refillable bottles
at a level that provides that economic advantage.  If, for
some reason, increasing numbers of consumers fail to return
refillable bottles,  distributors increase the deposit on
those bottles.  This does three things:  1)  the increased
revenues from forfeited deposits help defray the increased
cost associated with lower reuse rates for the bottles; 2)
the higher deposit provides an increased incentive to
consumers  (and scavengers) to return the bottles for reuse;
and 3) the higher deposit further discourages those consumers
who do not return containers from buying refillable containers.

     If, under the deposit law, fillers had  to raise deposits
above the minimum level to encourage higher  return rates, a
point would eventually be reached at which nonrefillable
bottles were competitive with refillable bottles.  That is,
the deposit on refillable bottles would eventually become
high enough that, for a consumer who intends to discard his
empty containers and forfeit his deposit, cans or nonrefillable
bottles would be less expensive.  Thus, an equilibrium would
be reached in which the number of consumers  who throw away
refillable bottles would be small enough to  ensure an
economically adequate return rate.  If at a  later date the
return rate again became unacceptable to the filler, he
would again raise the deposit and the adjustment cycle would
be repeated.
                             108

-------
                 RESOURCE CONSERVATION COMMITTEE
                   Staff Background  Paper No. 20
                       January 25,1979

                SUMMARY OF PROJECTED LABOR IMPACTS
             OF A NATIONWIDE BEVERAGE CONTAINER SYSTEM


     This Appendix provides  a more extended RCC Staff Summary
of projected labor market impacts  of mandatory deposits.   Three
topics are treated:

     1)   Changes  in  the  general pattern of employment

     2)   Location aspects

     3)   Job skills  or earning  power of jobs affected

     Most of the basic projections in the RCC staff studies
of beverage container deposit impacts were  derived using  a
computerized model previously developed by  the Research
Triangle Institute (RTI)  for the (then)  Federal Energy
Administration and updated for the RCC  purposes.   As des-
cribed in Staff Background Paper No. 2,  two broad container
scenarios were exogenously developed by the RCC staff per-
taining to a high  ("mix 2")  and  low ("mix 1")  beverage
industry market responses in terms of container market
shares, consumer return rates, and material recycling for
nonrefillable containers  (Table  1).  These  two broad sce-
narios were then used in  conjunction with baseline pro-
jections in the model to  project alternative possible shifts
in 1985 material and  energy  requirements, shelf prices for
beverages, consumer expenditures including  forfeited de-
posits, and other  relevant outcomes  including broad employment
changes in the affected industrial sectors.

     The information  in this Appendix is drawn primarily
from Staff Background Papers No. 2,  "Costs  and Benefits,"
No. 4, "Transitional  Adverse Impacts,"  and  No.  6,  "Localized
Employment Impacts, Glass Industry."  Limited additional
attention has also been given to the question of  relative
job skills.

1.   Changes in the General  Employment  Pattern

     Based on unit labor  requirements previously  researched
by RTI, the RTI model projected  annual  labor requirements
for all principle  industries directly affected by  changes in
container requirements, as shown in  Table 2.   These figures
pertain to changes in total  numbers  of  jobs  attributable  to
the deposit policy after  allowing  a  transition period for
the industry to adjust to an equilibrium trend.
                             109

-------
                                        Table  1

                 Comparative Model  Input Assumptions for Baseline
                           and Deposit Scenario Analysis
Model Inputs
Container Market Share
(Percent of Volume)
Refillable bottles
Nonrefillable bottles
Plastic bottles
Metal cans
Container Return Rates
Refillable bottles
Nonrefillable containers
All containers average
Recycling Ratea
Steel cans
Aluminum cans
Glass containers
1977
(Estimated)

27%
25%
0
46%
91%
25%


1985
Baseline

20%
15%
10%
55%
91%
18%

10%
40%
5%
Projections
Low Change
Scenario
(Mix 1)

40%
10%
10%
40%
90%
80%
85%

40%
80%
20%

High Change
Scenario
(Mix 2)

60%
5%
10%
25%
92%
86%
90%

80%
95%
50%
 Source:   1977 estimate by RTI and  RCC Staff.  Baseline projection for 1985  and
           scenario estimates by RCC Staff, based  in part on General Accounting
           Office projected trends-.
                                        TABLB 2

                          1985 Employment Requirements (Man-Years)*

Glass Container Producer a
Metal Can Producers
Steal Producers
Aluminum Producers
Beverage Distribution
Retail Sector
Baseline
23,500
50,700
9,800
9,800
160,600
27,900
Mix I**
18,600
36,500
6,900
7,100
180,000
87,100
Mix II "*•
13,100
22,700
4,000
4,700
198,900
92,200
Net Mix I
-4,900
-14,200
-2,900
-2,700
+19,500
+59,200
Net Mix II
-10,400
-28,000
-5,800
-5,100
+38,300
+64,300
• Includes only employment in each industry related  to beverage  container production
  and excludes plastic-bottle-related  employment which should be relatively  unaffected
  by mandatory deposit  legislation.
** 40% refillable bottles, 10% non-reflllable glass bottles, 10% plastic
   bottles, and 40% metal cans

*** 60% refillable bottles, 5% non-retillable glass bottles, 10% plastic
    bottles, and 25% metal cans

Source: RTI beverage industry model results based on ROC staff assumptions
       used for Impact analysis and adjusted to account for sectors (e.g. non-
       refillable bottles) not in the model.

                                          110

-------
      In  general  the  changes in employment  requirements  are
of  two kinds:

      (1)  Decreases  in sectors producing containers  and
          supplying  container materials.   These  decreases
          are primarily caused by  the projected  increase
          in market  share of refillable bottles  (with~an
          average trippage of 10 to  12.5)  at  the expense
          of nonrefillable, single-use glass  and metal
          containers.  The total decrease  in  employment
          requirements across these  sectors was  projected
          in the two scenarios to  be on the order of  25
          to 50 thousand.

      (2)   Increases  in sectors involved in the handling
          of returned containers.  These involve retail
          and wholesale distribution activities,  and  the
          increases  are primarily  a  function  of  both  the
          refillable bottle share  (involving  the bottle
          washing and reuse cycle) and the return rates
          for all container types  affecting handling,
          transporting, storage and  material  recycling.
          Total projected increased  requirements  for
          these sectors was about  80 to 100 thousand
          jobs.

     Regarding the projected decrease in material and
container sector's 1985 employment requirements,  the  25 to
50 thousand decrease is substantially higher  than the number
of presently existing jobs that would be lost or  the  number
of actual worker lay-offs that would be incurred.  To some
extent,  the projected job change represents foregone  industry
growth that would be made unnecessary, rather than an abso-
lute decline from present levels.  To some degree, current
beverage container capacity can be shifted to other expand-
ing product lines over time.  And  in some  instances,  capacity
can be phased out over a long enough period so that normal
retirement and other voluntary attrition can  substantially
mitigate the need for actual lay-offs.

     A rough estimate by RCC Staff concluded  that in  the
worst case (high impact scenario)  the maximum number of job
losses would be 42,000 (compared to  the 1985  change in em-
ployment requirement of just over  49,000),  occurring over
a 4 year transition  period, or at a  rate of about 10,000
per year (see Staff  Background Paper No. 4).  This estimate
did not take account of possibilities for shifting capacity
into new product lines or the offsetting impact  of normal
attrition (retirements, etc.).  Capacity shifts  into new
product lines could be expected particularly  in  the primary
                             111

-------
product (steel and aluminum can stock)  sector comprising
about 25 percent of the total jobs, and actual lay-offs
in those very large sectors would probably be negligible.
Normal attrition should reduce the actual number of lay-
offs by an additional 2 to 5 percent per year.

2.   Location Aspects

     For the most part, the job gains in the retail and
distribution (wholesale and bottler-to-retail) sectors
should be geographically distributed rather evenly accord-
ing to general population densities since they are consumer
market oriented.  Job losses in container manufacture and
material supply, on the other hand, are expected to be
relatively more concentrated at a far smaller number of
manufacturing sites.

     There are no published data on the numbers of establish-
ments, their employment, or locations for plants specifically
producing beverage containers.  The glass container industry
as a whole (SIC)--3211), of which beverage containers is
about 50 percent of the total product,  included about 117
plants in 27 States in 1972.  Eighty of these plants were
concentrated in eight States, and four States accounted for
55, or almost half the total number.

     The metal can industry  (SIC—3411), which includes
beverage cans as a major product, has over 480 plants in
40 States, but substantially less than half the total are
thought to produce beverage containers.  Can plant capacity
appears to be much less geographically concentrated than
glass containers.

     It has not been possible to project how any given
pattern of change in beverage container markets would
impact on specific plants.  Presumably, the marginal
(high cost) plants in a given region would bear the bulk
of the production cutbacks.  In addition, plants in some
geographic regions might undergo much  smaller relative
reductions in demand than others, due to lesser shift
in container market and the offsetting effect of higher
than average population growth.

3.   Job Skills or Earning Power of Employment Shifts

     It is generally accepted that national beverage container
deposits would result in a net increase in total beverage-
related employment  (compare RCC projections in Table 2).
It is often assumed further that the jobs lost in the primary
metals, glass, and metal can industries are "high-skilled"
and that the jobs gained by  other sectors are "low-skilled."
                             112

-------
While  there  is  little comprehensive evidence bearing directly
on the question of comparative skills, data on average earnings
in the affected sectors suggests that this latter conclusion
on job skills is only partly true, and that taken literally
without qualification it can be quite misleading.

     The sectors projected to experience the major decreases
in future employment - glass containers, metal cans, and
primary metals  - were projected in the RTI/RCC model to have
a combined (1985)  decrease of about 25,000 to 50,000 jobs
below  their baseline trend.  These are also considered
relatively high-skilled labor sectors, and production
workers in these sectors received average annual earnings
in 1976 ranging from $12,000 in glass containers to $15,600
in metal cans.

     At the other extreme, the retail trades were projected
to gain on the  order of 60 to 65 thousand total jobs, and
these  can be expected to be primarily low-skilled and low
paid clerk and  stock-room employees.  Average annual earnings
in relevant retail sectors in 1976 (including part-time
jobs)  averaged  $4,300 to $7,400.  Comparisons between these
two broad groupings of container producers and retail out-
lets generally  appear to confirm the proposition that the
jobs lost are in fact high-paying relative to jobs gained.

     However, a third group of affected  sectors - including
soft drink and  beer production and filling plants and whole-
sale distribution activities - would also be expected to gain
significant numbers of employees.  In the two RCC scenarios,
these  industries were estimated to gain about 20,000 to
38,000 jobs, or roughly equivalent to 80 percent of the number
of jobs lost in container and metal supply.  Production worker
annual earnings in these industries in 1976 ranged from $9,100
in soft-drink bottling to $17,100 in brewery establishments.
Wholesale distribution of malt beverages (a largely indepen-
dent sector with no direct counterpart in soft drinks), in-
volving primarily storage, handling,  and trucking employment,
had average earnings in 1976 of $11,600.  While it is not safe
to assume that  the average new positions in these sectors
would be at industry-average pay scales, it is nevertheless
true that substantial numbers of new jobs (for example,
refillable bottle washing and filling line operators and
truck drivers)  would be at or above their industry averages.
By the same token, it may be that in some sectors the re-
duction in labor requirements might not be at the industry
average wage scales.

     Thus, while it is true that the  employment decreases
in the metal and glass sectors are relatively highly paid,
it must also be recognized that a substantial number of high-
                             113

-------
paid positions should also be expected to arise in the beverage
filling and distribution sectors.  Though the latter may not
equal the former numerically, they do provide an important
qualifier in discussions of the job-skills trade-offs.
                            114

-------
                           A-l
              APPENDIX TO THE SECOND REPORT
     The Resource Conservation Committee is committed to
involving the public in its decision-making.  As a part
of this commitment, the Committee sought both oral and
written comments from the public.  A copy of the letter
from the Committee announcing the October 19, 1977, public
meeting and inviting public input is attached.  Following
this letter is the formal record of the input received.
Volume I of the record is the transcript of the oral
presentations made at the October 19 meeting.  Volume II
is a compilation of the written statements presented by
the speakers at the October 19 meeting.  The distinction
between Volumes I and II is that many speakers submitted
lengthy statements (Volume II), and summarized that state-
ment in their oral testimony  (Volume I).  Volume III is a
compilation of the statements received from the public for
inclusion in the record.  The person or organization sub-
mitting the statement is listed in the index in alphabetical
order.  Volume IV is the documentation submitted by the
public in support of their statements.

-------
RESOURCE
CONSERVATION
COMMITTEE
THC FEDIRAL INTIMAOINCY COMMITTtt ESTAIUSHIO UNOIR PUtUC LAW M-MO
401 M Smx, 8.W.. w«^
-------
                                 A-3
                    RESOURCE CONSERVATION COMMITTEE

                 BEVERAGE CONTAINER DEPOSIT LEGISLATION

                           September 27, 1977

1. What should the Resource Conservation Committee recommend
   regarding the development of Federal beverage container
   legislation?  Should the Federal Government set general guide-
   lines or develop specific container legislation?

2. What alternatives to beverage container deposit legislation will
   accomplish similar results and what are their relative impacts
   on pollution and energy and materials consumption?

3. Should there be more guidelines for the States to develop their
   own respective legislation?  If Federal legislation were
   developed, should it supersede State and local laws?

4. What are the social aspects and consequences of beverage container
   legislation?  What sectors of society will be affected?  Can you
   identify specific impacts of experiences pertaining to beverage
   container legislation?

5. What are the economic consequences, both positive and negative,
   of resource conservation as it relates to beverage container
   legislation or guidelines?  Should there be compensation for
   economic losses and, if so, how should this be accomplished?
   Should any requirements be levied on unrefunded deposits?

6. What are the environmental impacts, both positive and negative,
   which may occur as a result of beverage container legislation
   or guidelines?

7. Is additional research on this subject necessary prior to a
   legislative proposal or the promulgation of guidelines?  What
   should such research focus upon?

8. What are the key elements that should appear in beverage container
   guidelines or legislation?

9. To what extent should this committee consider the- type of beverage
   container charge?  Should charges be focused upon the type of
   beverages or should they be focused on the type of container?
   Should the Committee consider containers other than beverage
   containers?

-------
                                  A-4
10. What should be the limits on the deposits considered?  Should
    they focus upon the size, the value of the container, the solid
    waste management costs,  including litter pickup,  the incentive
    necessary to assure high rates of return, or other factors?
    To what degree should container guidelines or legislation develop
    requirements on issues such as pull-top containers, or the
    standardization of containers?  Where in the distribution chain
    is the best point for a deposit to originate?

11. If beverage container deposit legislation is to be considered
    by the committee, how should its implementation be developed?
    To what extent are cost data available for the variety of State
    and local programs addressing beverage container  legislation?

-------
                            A-5
   PUBLIC MEETING  ON  BEVERAGE  CONTAINER DEPOSIT  ISSUE

                    OCTOBER 19,  1977

                    WASHINGTON,  D.C.

                       FORMAL RECORD
                       Sponsored  By

          The Resource Conservation Committee,
   The Federal  Interagency Committee Established Under
                    Public Law 94-580
Volume I - Official Transcript

Volume II - Written Statements Submitted by Speakers at
            October 19, 1977, Public Meeting

Volume III - Statements Received for Inclusion in the
             Record

Volume IV - Supporting Documentation Submitted

-------
                        A-6
                         VOLUME II

        Written Statements Submitted By Speakers At
             October 19,  1977,  Public Meeting

                           Index
 1.   American Iron and Steel Institute

 2.   Representative Les AuCoin

 3.   United States Brewers Association, Inc.
     Henry B. King, President
     Peter W. Stroh,  Chairman

 4.   Continental Group, Inc.
     Malcolm W.  Owings, Vice President

 5.   F.  D. Wharton, Jr.

 6.   Crusade for a Cleaner Environment

 7.   U.S.  Department of Defense

 8.   Environmental Action Foundation

 9.   Environmental Action

10.   Food  Marketing Institute

11.   Friends of  the Earth

12.   Betsy Classman

13.   Glass Packaging Institute

14.   Senator Mark 0.  Hatfield

15.   Representative William J. Hughes

16.   Representative James M. Jeffords

17.   League of Women Voters of the Fairfax  (VA) Area

18.   League of Women Voters of the United States

-------
                                  A-7



19.  Senator Patrick J.  Leahy

20.  Loudoun County (VA)

21.  Minnesota Pollution Control Agency

22.  April D.  Moore

23.  National Soft Drink Association
     William M. Landes
     Richard A. Posner
     Sidney P. Mudd
     Robert F. Testin,
     Reynolds Metals Company

25.  Rhode Island Solid Waste

26.  Mary Jo Salmon

27.  Sierra Club

28.  Society of American Travel Writers

29.  Stone, Glass and Clay Coordinating Conndttee,
     AFL-CIO

30.  Technical Information Project,  Inc.

31.  United Steelworkers of America

32.  Ellis Yochelson

33.  Judy Zuckerman

-------
                            A-8
                       VOLUME III

     Statements Received for Inclusion in the Record

                          Index
A.  Private Citizens (Statements received from approximately
    500 private citizens are in alphabetical order in
    Volume II.  In order to conserve space, their names
    are not indixed here.)

B.  Non-Governmental Organizations

    American Can Company
    Annapolis Engineering Association, Inc.
    Arizona Environmental Alliance
    Baltimore Environmental Center
    Bay Area Pollution Control District  (S.F., CA)
    Boston Baling Collective, Inc.
    B.R.I.N.G. Recycling
    Burroughs Willcome, Co.
    California Roadside Council (San Francisco)
    Can Manufacturers Institute
    Citizens Against Non-Returnables
    Citizens for Returnable Beverage Containers
    Clean Hawaii
    Committee for Mass Bottle Bill
    Committee of the West Michigan Environment Action Council
    Concern, Inc.
    Connecticut Citizen Action Group
    The Conservation Foundation
    Delaware Valley Citizens' Council for Clean Air
    East Michigan Environmental Action Council
    Environmental Action
    Environmental Action of Michigan, Inc.
    Environmental Association of Delaware and Otsego
       Counties, Inc.  (New York)
    Friends of the Earth
    The Garden Club of New Jersey
    The Georgia Conservancy
    Harvard Univeristy - Kenneth J. Arrow, James B. Conant
    Households Involved in Pollution Solutions
    Inland Beer Distributors Recycling Center
    International Association of Machinists and Aerospace
       Workers
    Island Beautification Committee
    Izaak Walton League (Prescott, Arizona)
    Keep Oklahoma Beautiful
    Kentucky Conservation Committee

-------
                        A-9


League Against  Waste  (Howard County, MD)
League of  Women Voters of  Arkansas
League of  Women Voters of  Delaware
League of  Women Voters of  Illinois
League of  Women Voters of  Maryland
League of  Women Voters of  Oregon
Maine Audubon Society
Maplewood  Environmental Action Group,  Inc.
Massachusetts Audubon Society
Petition - Menke Municipal Services for West Orange,
    New Jersey  (2,000)
Michigan United Conservation Clubs
Minnesota  Public Interest  Research Group
Monmouth County Environmental Council
Montana Outdoors Magazine
Moscow Recycling Center
Murfreesboro City  Beautification Commission
National Beer Wholesalers  Association
New Hartford Environmental Action Committee
Northern Arizona Audubon  Society
Northern California Grocers Association
North Carolina  Association - Soil and  Water
    Conservation Districts
Oklahoma Health Department
Passaic River Coalition
Peninsula  Conservation Center
Pennsylvania State University, Cooperative Extension Service
Portland Recycling Team
Sangamon State  University,  Springfield, Illinois
St. Cloud  Area  Environmental Council
Sierra Club - Los  Angeles
Sierra Club - Connecticut
Sierra Club - N.E. Regional Conservation Committee
Sierra Club - Delta Chapter
Society of American Travel  Writers
Society of the  Plastics Industry
Solid Waste Recovery Co.
Somerville Environmental Commission
South Carolina  Environmental Coalition
South Dakota Environmental  Coalition
Stephenson County  Audubon  Society
Students for Environmental  Concerns
Texas Committee on Natural  Resources
Topsfield  Recycling Group
Urban Aggregates,  Inc.
Vermont Natural Resources Council
Vermont Public  Interest Research Group, Inc.
Wawarsing  - Environmental Conservation Commission

-------
                            A-]0
C.   Government Organizations

     Alabama,  City of Huntsville,  Department cf Public Works
     California, City of Berkeley, Department  f Public Works
          California, Napa County, Board of Supervisors
     California, San Bernardino,  Public Wcrks Agency
     California, San Francisco,  Bureau of Engineering
     California, City of Santa Clara,  Director of Public Works
     Connecticut, State House of  Representatives,
          Representative Russell  Lee Post,  Jr.
     Department of the Army
     Department of State
     District  of Columbia, Department  of Environmental Services
     Florida,  Department of Environmental Regulation
     Maryland,  Howard County, Virginia M. Thomas, Chairperson,
          County Council
     Maryland,  Governors Task Force to Study Beverage Container
          Legislation
     North Carolina, Macon County, Soil and Water Conservation
          District
     South Carolina, City of North Myrtle Beach,  Street and
          Sanitation Department

-------
                            A-ll



                         VOLUME IV

            Supporting Documentation Submitted

                           Index



 1.  Alaska Bottle Bill Initiative

 2.  Annapolis Environmental Commission

 3.  Associated Students - University of Oregon

 4.  Beverage Industry Recycling Program of Arizona

 5.  Beer Distributors Recycling Fund

 6.  United States Brewers Association, Inc.

 7.  Citizens for Returnable Beverage Containers

 8.  Adolph Coors, Co.

 9.  Adolph Coors, Co.

10.  Bureau of Solid Waste Disposal, Boston Executive
     Office of Environmental Affairs, Department of
     Environmental Management

11.  Group for Recycling in Pennsylvania

12.  The Isaacs, Co.

13.  Keep America Beautiful, Inc.

14.  Mark Kopelkam

15.  Michigan United Conservation Club

16.  Maryland Environmental Trust

17.  National Association of Retail Grocers of the United
     States

18.  National Automatic Merchandising Association

19.  National Soft Drink Association

20.  National Soft Drink Association

-------
                             A-12




21.  National Soft Drink  Association

22.  National Wildlife Federation

23.  A Study of the Beverage Container Problem and  the
     Impacts of Proposed  Minimum Deposit Legislation  for
     North Carolina by William MacDowell

24.  Office of Appropriate Technology, Oregon

25.  Plaid Pantry Markets, Oregon

26.  Reynolds Metals  Company

27.  The Society of the  Plastics Industry,  Inc.

28.  Vermont -- 5C Deposit -- Congressman James  M.  Jeffords
     and Donald W. Webster

29.  Wheelabrator - Frye, Inc., Energy Systems Division
                                                     ua 1527b
                                                     SW-733
                                     •U.S. GOVERNMENT PRINTING OFFICK  1979 0-260-228/1(059

-------