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
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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
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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.
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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
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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
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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.
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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
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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."
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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,
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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
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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.
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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
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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.
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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."
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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
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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.
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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
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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.
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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
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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.
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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.
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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.
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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.
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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.
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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/
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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
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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
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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.
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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
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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.
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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.
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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).
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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.)
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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
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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.
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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.
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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.
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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.
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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 $35 per ton to take into account the
more stringent disposal standards in 1985.
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33
III. Analysis of Costs and Benefits
Given these assumptions, the KTI/FEA computer program was used
to project the low response (Mix I) and high response (Mix II) outcomes
for 1985 used as the basis for the Resource Conservation Committee
staff analysis of benefits and costs. The computer model directly
projects a large number of comparisons between baseline estimates and
scenario results, including numbers of containers, detailed sectoral
employment, energy requirements, total consumer expenditures, quantities
of containers recycled, and many others. The RCC staff also made a
number of additional calculations to translate some of these values
into other results not directly produced by the model. These primarily
included impacts on solid waste, litter, raw material requirements,
and selected environmental impacts.
These cost and benefit estimates are summarized in Table V and
discussed in the remainder of the paper.
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34
Table V
Summary of National Costs and Benefits of Mandatory
Federal Beverage Container Deposit Legislation
(Estimates for 1985 Scenarios)*
1. Net Direct Cost Savings to Consumer
($ 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.
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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
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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
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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.
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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.
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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.
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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.
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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.
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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.
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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?
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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
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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.
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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
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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:
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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.
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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.
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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.
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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,
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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.
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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.
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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.
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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.
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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%
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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
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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
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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.
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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.
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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
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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.
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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
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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.
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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.
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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.
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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.
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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
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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.
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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
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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
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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.
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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.
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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.
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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
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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.
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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.
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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
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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.
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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.
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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
-------
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102
-------
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103
-------
FIGURE 3
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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
-------
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RETURN RATE - NONREFILLABLE CONTAINERS (PERCENT)
1 = MIX I - PREDICTED IN STAFF PAPER #5
106
-------
Figure 5
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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
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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.
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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
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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
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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
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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
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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
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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.
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RESOURCE
CONSERVATION
COMMITTEE
THC FEDIRAL INTIMAOINCY COMMITTtt ESTAIUSHIO UNOIR PUtUC LAW M-MO
401 M Smx, 8.W.. w«^
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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?
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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?
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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
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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
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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
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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
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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
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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
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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
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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
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