RESOURCE CONSERVATION COMMITTEE
FINAL REPORT to the
PRESIDENT and CONGRESS
JULY 1979
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Single copies of this report (SW-779) are available from:
Solid Waste Information
U.S. Environmental Protection Agency
Cincinnati, OH 45268
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RESOURCE CONSERVATION COMMITTEE
FINAL REPORT to the
PRESIDENT and CONGRESS
JULY 1979
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RESOURCE CONSERVATION COMMITTEE
Washington, D.C. 20460
July 13, 1979
To the President and Congress of the United States:
It is my honor to transmit for your consideration the fourth and final
report of the Resource Conservation Committee, Choices for Conservation.
The Committee was established under Section 8002(j) of Public Law
94-580, the Resource Conservation and Recovery Act of 1976. This legisla-
tion directed the Committee to "conduct a full and complete investigation
and study of all aspects of the economic, social, and environmental conse-
quences of resource conservation" with respect to present and proposed
Federal policy choices affecting the use of material resources. This report
brings together the results of the Committee's work on this subject.
While we do not appear to be facing an imminent shortage of material
resources similar to that which we face with energy resources, we must be
aware that we have no cause for complacency about the rate at which we
consume our natural endowment. Our material use practices affect environ-
mental quality, energy consumption, waste generation, the balance of trade,
and other important national concerns. Individuals, private companies, local
governments and the Federal Government all make choices every day which
affect our use and conservation of resources. Choices for Conservation
describes how some of these decisions might be affected by ten present or
proposed Federal policies.
The Committee has agreed on a series of findings for each policy. Members
of the Committee have also made recommendations on each policy. This
report shows where there was consensus and where members took different
positions.
The Committee was fortunate to have a high degree of public participation
throughout its deliberations. We held eight public meetings in varying
locations across the country to listen to peoples' opinions on the policies we
reviewed. The advice that many interested individuals and representatives of
public and private organizations offered in these meetings has been invalu-
able. We are highly appreciative of their interest.
Respectfully submitted,
DOUGLAS M. COSTLE
Chairman
Enclosure
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RESOURCE CONSERVATION COMMITTEE
DOUGLAS M. COSTLE, Chairman,
Administrator, Environmental Protection Agency
JUANITA M. KREPS, Secretary of Commerce
JAMES R. SCHLESINGER, Secretary of Energy
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
CHARLES L. SCHULTZE, Chairman, Council of Economic Advisers
ELIOT CUTLER, Office of Management and Budget
IV
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RESOURCE CONSERVATION COMMITTEE
PRINCIPALS AND SENIOR ADVISORS
Principals Senior Advisors
ENVIRONMENTAL PROTECTION AGENCY
Barbara Blum
Deputy Administrator
(Acting Chairperson, Resource
Conservation Committee)
Steffen W. Plehn
Deputy Assistant Administrator
for Solid Waste
(Chairperson, RCC Senior Advisors Group)
DEPARTMENT OF COMMERCE
Jordan Baruch
Assistant Secretary for Science
and Technology
Alvin L. Aim
Assistant Secretary for Policy
and Evaluation
Richard J. Herbst
Office of Environmental Affairs
DEPARTMENT OF ENERGY
John Hemphill (until 1/78)
Director, Office of Conservation Policy
Michael Loube (starting 1/78)
Office of Conservation and Advanced
Energy Systems Policy
DEPARTMENT OF THE INTERIOR
Joan Davenport
Assistant Secretary for Energy
and Minerals
James L. Holt (until 8/78)
Office of the Assistant Secretary
for Energy and Minerals
Anthony Raspolic (starting 8/78)
Office of Minerals Policy and
Research Analysis
DEPARTMENT OF LABOR
Peter Henle
Deputy Assistant Secretary for
Policy Evaluation and Research
Dr. Hugh Pitcher (until 9/78)
Office of Policy Evaluation and
Research
Dr. Marguerite Connerton (starting 9/78)
Office of Policy Evaluation and
Research
DEPARTMENT OF THE TREASURY
Emil Sunley
Deputy Assistant Secretary for Tax
Policy
Dr. Seymour Fiekowsky
Assistant Director, Office of Tax
Analysis
Dr. Eric Toder, Office of Tax Analysis
COUNCIL OF ECONOMIC ADVISORS
Nina Cornell (until 8/78)
Lawrence J. White (starting 8/78)
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RESOURCE CONSERVATION COMMITTEE
PRINCIPALS AND SENIOR ADVISORS (Continued)
Charles Warren
Chairman
Gus Speth
Council Member
COUNCIL ON ENVIRONMENTAL QUALITY
Dr. Edwin H. Clark, II (until 4/78)
David W. Tundermann (4/78 to 9/78)
Rick Jones (9/78 to 1/79)
David E. Burmaster (starting 1/79)
OFFICE OF MANAGEMENT AND BUDGET
Eliot Cutler
Associate Director for Natural Resources,
Energy and Science
Jim Tozzi
Chief, Environment Branch
RESOURCE CONSERVATION COMMITTEE STAFF*
Frederick W. Allen
Staff Director
William E. Ades
David G. Arella
Merrilee Bonney
Harry P. Butler
Bernard F. Heiler
Theodore R. Breton
Cornelius M. Cosman
John R. Adams
Angela S. Wilkes
Patricia L. Key
Delia-Ann Lehmann
Vera K. Robinson
John F. Robinson
Executive Director
Technical Staff
Consultants
Editorial Staff
Support Staff
Dr. Frank A. Smith
Technical Staff Director
Brian W. Helvey
Susan B. Mann
Charles W. Peterson
David J. Smith
Fred L. Smith, Jr.
W. David Conn
William E. Franklin
Emily H. Sano
Carolyn A. Turner
Rebecca A. Vidi
* Includes both full-time and part-time staff.
VI
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CONTENTS
Executive Summary: Findings and Recommendations ix
1 Choices for Conservation 1
2 Material Conservation Issues 5
Patterns and Trends in Material Use 5
Adequacy of Material Supplies and Related Issues 14
Environmental Protection and Waste Management 22
3 Resource Conservation: Historical Context and Perspectives.... 33
Recent Evaluations of Resource Conservation Policy 33
The Resource Conservation Committee 37
4 Tax Policies Affecting the Extraction Industries 42
Existing Federal Tax Subsidies for Virgin Materials 43
Extraction Taxes on Virgin Materials 54
5 Resource Recovery Policies 60
Subsidies for Resource Recovery 61
Railroad Freight Rate Discrimination 68
Product Regulations 77
6 Product Use and Disposal Policies 83
Beverage Container Deposits 84
Deposits and Bounties on Durable and Hazardous Goods. 98
National Litter Tax 102
7 Pricing Policies for Municipal Solid Waste 107
Local User Fees 108
National Solid Waste Disposal Charge 113
Appendices
A. Legislative Charter 121
B. Resource Conservation Committee Reports and Records 122
C. Acknowledgements 130
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TABLES
1. U.S. Consumption of Major Raw Materials and Fuels,
1948 and 1978
2. Examples of Environmental Effects of Economic Activities ......................................
3. Trends in U.S. Consumption of Major Raw Materials and Fuels, ~0
1948 - 1978 [[[ 28
4. Trends in U.S. Material and Energy Use Relative to Total
National Product and Population, 1948 - 1978 [[[ 2"
5. U.S. Reliance on Raw Material and Fuel Imports, 1978 ^0
6. Subsidies for the Natural Resource Extraction Industries, 1978 47
7. Subsidies Examined by the Resource Conservation Committee 63
8. Classes of Subsidies , 64
9. Comparison of Railroad Freight Rate Revenue-to-Variable-Cost
Ratios for Selected Secondary and Virgin Commodities 72
10. Estimated Effect of Removing Railroad Rate Discrimination
on Delivered Prices for Scrap Materials 74
11. Staff Background Papers on Beverage Container Deposits 87
12. Assumptions Used in Estimating Costs and Benefits
of a Deposit System 88
13. Summary of Benefits of National Mandatory Federal
Beverage Container Deposit Legislation (Estimates for 1985) °9
14. Some Hazardous Components in Solid Waste 101
FIGURES
1. Material Flows in the National Economy 7
2. Growth Rates in U.S. Raw Material Consumption
Declined During the Past Decade 10
3. Material Consumption Per Dollar of GNP Has Been
Declining in Recent Years 10
4. Growth in Metals and Wood Products Consumed Per
Capita Has Levelled Off in Recent Years 11
5. Post-Consumer Solid Waste Generation Grew Rapidly
Between 1960-1973, but Has Levelled Off Since 1973 13
6. Worldwide, Known Reserves of Many Key Minerals Are Substantial 17
7. Potential Reserves Are Believed to Greatly Exceed Known
Reserves of Many Key Minerals 17
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EXECUTIVE SUMMARY:
FINDINGS AND RECOMMENDATIONS
The Resource Conservation Committee was established under the man-
date of the Resource Conservation and Recovery Act of 1976 (RCRA) for the
purpose of studying present and proposed Federal policies that might affect
the choices of individuals, industry, and governments to consume or conserve
material resources.
Several major concerns about our pattern of material use led to the passage
of RCRA and the creation of the Resource Conservation Committee:
problems of industrial pollution and environmental degradation;
community problems of solid waste management;
the availability, cost, and efficient use of material resources;
energy supply and consumption;
international trade, dependency, and security;
the material welfare of future generations.
Problems of material supply do not presently appear to be as serious as
those we face with energy resources. The threat of temporary shortages will
probably always be with us, but our best judgment is that we are not in serious
danger of soon exhausting or being unable to obtain the major raw materials
on which we depend. Nevertheless, the economic, environmental and other
concerns noted above should prevent us from being complacent about the
rate at which we consume our endowment of material resources.
Resource conservation — consuming less of our virgin natural resources
than we otherwise would — is often suggested as one approach to these
problems. Materials can be conserved at any or all stages in their life cycle:
less total extraction; more complete use of what is extracted (less processing
waste); longer-lived products and multiple use of material before disposal
(more reuse, recycling, or conversion into energy); and, in the case of
renewable resources such as timber, more replanting and improved husban-
dry of the land. Consuming less of a material also means that less of it will
ultimately have to be handled as waste.
There are many existing and potential Federal policies relating to resource
use that the Resource Conservation Committee could have studied. The
Committee chose 10 policy areas for study and spent a relatively large
amount of time on two of them — beverage container deposits and the solid
waste disposal charge. The Committee chose these 10 areas because of the
legislative mandate, Congressional and public interest, and a desire to review
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a full spectrum of policy alternatives. Each of the policies studied is focused
on a particular stage in the materials life cycle. However, if effective, each
would cause a "ripple effect" throughout the cycle, affecting people's choices
to consume or conserve at the extraction stage, through processing and use,
to disposal or recovery.
The 10 policy areas which the Committee studied are:
1. Existing Federal Tax Subsidies for Virgin Materials
2. Extraction Taxes on Virgin Materials
3. Subsidies for Resource Recovery
4. Railroad Freight Rate Discrimination
5. Product Regulations
6. Beverage Container Deposits
7. Deposits and Bounties on Durable and Hazardous Goods
8. National Litter Tax
9. Local User Fees
10. National Solid Waste Disposal Charge
The remainder of this summary consists of the Committee's findings and
recommendations regarding each of these policy areas.
Existing Federal Tax Subsidies
for Virgin Materials
Committee Findings
Based on staff analysis conducted by the Treasury Department and other
considerations, the Resource Conservation Committee finds that:
• Several Federal tax subsidies significantly reduce supply costs for
domestic virgin materials. Important among these are:
- percentage depletion for minerals
- favorable tax treatment of mineral exploration and development
costs
- capital gains treatment for timber
- mismatching of income and expenses in timber growing and
harvesting.
• Such subsidies encourage overuse of virgin domestic resources. How-
ever, the negative effect on recycling appears to be small (less than 5
percent), although significant uncertainties exist in analyses of the
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elasticities of domestic and foreign supply and of substitution be-
tween virgin and recycled materials.
• As presently designed, these subsidies are not cost effective compared
to appropriated subsidies with the same budgetary cost.
• There is no public policy justification for subsidizing virgin materials
over secondary materials.
• Removal of these subsidies would probably increase imports of iron
ore, copper, lead, and zinc; it would decrease export volume of
phosphate rock and timber.
Committee Recommendations
Only one of the nine members of the Committee is prepared to make an
immediate recommendation for elimination or modification of the tax subsid-
ies presently granted to the domestic virgin materials extraction industries.
This member asserts that Federal tax policies should be neutral, and therefore
not favor domestic natural resource development or virgin materials. On the
other hand, only one member specifically recommends that no changes be
considered at the present time, citing estimates of low impacts on recycling
and general uncertainty about what the other effects of such an action would
be.
All the members agree, however, that the issue of reducing existing Federal
tax incentives for extraction industries is worthy of further consideration.
Eight members join in recommending that the arguments for revising virgin
materials tax policy be included in a broad review of U.S. minerals policy.
They therefore recommend that the Administration's (interagency) Task
Force on Non-Fuels Minerals Policy, upon completion of an analysis of this
subject by the Treasury Department, consider elimination or modification of
these tax subsidies in light of overall national objectives such as resource
supplies, environmental protection, economic health, and national security.
Four of those members recommend further that the Administration under-
take such a review as part of the next tax reform package. The ninth member
of the Committee stresses that any further study or other consideration
should include public participation.
Extraction Taxes on Virgin Materials
Committee Findings
.j^s a result of their evaluation, the members of the Resource Conservation
Committee reached the following findings regarding taxes on virgin material
extraction:
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• Virgin material extraction taxes, accompanied by complementary
tariffs, would make virgin materials more expensive and encourage
resource conservation. However, the RCC did not undertake specific
quantitative studies to estimate the reduction in consumption that
might accompany the taxes.
• If virgin material extraction taxes are not matched by tariffs on
imports, domestic production could be at least partially displaced by
imports of materials and fabricated goods.
• Administration of a set of complementary virgin material extraction
taxes and tariffs would be complex.
• The virgin material extraction tax concept runs directly counter to
existing Federal tax policy, which encourages domestic virgin re-
source use.
• Virgin material extraction taxes could be the most direct and broadly
based financial incentive to accomplish resource conservation.
• Virgin material extraction taxes which are large enough to signifi-
cantly affect domestic resource use would cause economic disloca-
tion in the extraction industries and in some communities unless
phased in over time; they would also lower living standards in the
short run.
Committee Recommendations
None of the members of the Committee favor recommending that virgin
material extraction taxes be developed or proposed at this time. Two
members, however, endorse taxes on virgin material extraction as a potenti-
ally useful tool to encourage resource conservation; one of these members
recommends further study.
Two members oppose virgin material extraction taxes generally, although
one of them also recommends further study. One other member also
recommends further study to determine the specific impacts of the taxes,
without taking a further position at this time.
Six members of the Committee emphasize that existing tax policies to
encourage virgin material production should be eliminated before any new
extraction taxes are considered further. Taxing virgin material extraction to
foster resource conservation would be virtually the reverse of the present tax
advantages enjoyed by the extractive industries.
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Subsidies for Resource Recovery
Committee Findings
The Committee concluded the following with respect to subsidies for
resource recovery:
• Subsidies for resource recovery can be an effective although potenti-
ally costly tool to stimulate resource conservation.
• Subsidies can be particularly useful in the "short term" to help local
governments plan resource recovery operations and to aid the
development of "infant industries."
• Subsidy programs should be designed so as not to create undue biases
towards capital intensive solutions.
• Appropriated subsidies are preferable to tax subsidies.
• The Federal Government currently has two subsidy programs for
resource recovery: differential tax treatment of capital investment
and grants for demonstration projects and local implementation
planning.
• Subsidy approaches are generally contrary to the polluter-pays princi-
ple: they substitute payments by taxpayers for payments by benefici-
aries of the subsidized activity.
Committee Recommendations
Having found that subsidies designed specifically for resource recovery can
be an effective, although potentially costly, tool to stimulate resource
conservation, the Committee nevertheless unanimously agrees that no new
specific subsidies should be proposed at this time.
There are many ways that subsidies might be used for resource recovery,
and five members join in calling for further research on the subject before
firmer policy conclusions are drawn. Only two members are willing to take
positions on the overall advisability of instituting subsidy programs for
resource recovery: One member gives general endorsement, while the other
recommends against any form of specific subsidy and further recommends
repeal of existing subsidies, seeing no need for them.
Some of the members wish to state the conditions under which they would
consider adopting subsidies and the types of subsidies they would prefer if
subsidies are adopted. Four members are willing to endorse subsidies as a last
resort in order to offset existing virgin material economic advantages (e.g.,
tax advantages, freight rates, municipal solid waste costs). One of these
members also emphasizes that subsidies can be appropriately employed in the
technology development process. Three members specifically recommend
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that any future subsidies be designed to avoid undue biases toward large-
scale, capital-intensive solutions, citing significant opportunities in this area
for small-scale and more labor-intensive technologies.
Railroad Freight Rate Discrimination
Committee Findings
The Resource Conservation Committee concluded the following with
respect to railroad freight rate discrimination:
• Based on presently available Interstate Commerce Commission cost
and revenue information, railroad rates for wastepaper, glass cullet,
and scrap copper reflect a higher ratio of revenue to variable cost and
thus are probably discriminatory in comparison with rates for
related virgin materials. ICC data do not confirm a higher ratio
nationwide for iron and steel scrap, but this conflicts with evidence
provided by other sources.
• If such discrimination exists, it probably makes only a very small
difference in the amount of most secondary materials used. The
largest relative impacts appear to be on glass cullet and wastepaper.
• There is no public policy reason for discriminating between virgin and
secondary materials.
Committee Recommendations
The members of the Resource Conservation Committee fully recognize
that the Congress and the Courts have already established ,a clear public
policy in ordering the Interstate Commerce Commission to eliminate railroad
rate discrimination between virgin and recycled raw materials and products.
The Committee also recognizes that its findings regarding the existence and
degree of discrimination for individual materials must be considered prelimi-
nary, given the data on which they rest, and that later review by the ICC
using improved statistics may provide more valid estimates.
Most of the members recommend that the Administration file a brief with
the ICC, stating the results of the Committee's research and expressing the
Committee's interest in achieving compliance with Section 204 of the
Railroad Revitalization and Regulatory Reform Act of 1976, the purpose of
which is to eliminate discriminatory pricing. Several members feel that the
Administration does not need to file the brief because the ICC is upder court
order to conduct a new investigation into rate discrimination.
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One member favors allowing competition to establish the rates, acknowl-
edging that such a recommendation would imply outright deregulation of
rates for rail freight carriers. However, other members feel that, whether
railroad deregulation has merit or not, the RCC is an inappropriate forum in
which to consider this broader question.
Product Regulations
Committee Findings
The Resource Conservation Committee reached the following conclusions
with respect to product regulations:
• Product design regulations could be effectively employed as a re-
source conservation tool.
• Direct regulation imposes costs on the economy by circumventing the
free market system and reducing flexibility; direct regulation may
also discourage technological innovation.
• Administration of mandatory design and packaging standards would
present enforcement problems and costs and would add to the
burden of Federal regulations on the private sector.
• There may be some areas where such direct intervention is appropri-
ate, such as in areas where the risks associated with improper
management are very great. (Two examples might be the handling
and storage of toxic and hazardous wastes or where certain materials
might significantly inhibit resource recovery operations.) In these
cases, product design regulations should probably be part of or at
least be done in coordination with regulations on toxic and hazard-
ous wastes.
• More research is needed on the following topics before specific pro-
posals can be developed: (1) the identification of objectives to be
served by mandatory design standards, (2) materials flow through
the production process, and (3) the effects of such regulations.
Committee Recommendations
The full committee agrees that product regulations should not presently be
proposed as a general-purpose tool for resource conservation. The members
cite problems with administration and enforcement, the burden on busi-
nesses, possible inflation effects, and general cost-ineffectiveness.
Nevertheless, all but one of the members agree that the Government
should sponsor further research on the use of regulations for resource
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conservation in the areas of toxic and hazardous wastes and products made
with materials that especially impede resource recovery. Half of those
members state explicitly that there might be a role for product regulation in
the areas recommended for further study; the other half make clear their
desire to express general opposition to the idea of product regulations unless
the studies show very positive opportunities.
One member recommends against direct regulations in all circumstances.
Beverage Container Deposits
Committee Findings
Based on empirical studies and economic modeling reviewed or conducted
by its staff, the Resource Conservation Committee made the following
findings with respect to national beverage container deposit legislation:
• Imposition of mandatory deposits is an effective means for reducing
litter associated with beverage containers.
• Up to two percent of municipal solid waste would be eliminated by the
imposition of mandatory deposits.
• Beverage container deposits would result in significant conservation
of virgin material and energy resources at a return level of at least 85
to 90 percent.
• The precise effects of a deposit system on beverage prices ase djMemlt
to project. However, the experience to date in two States where
legislation has been in force for several years indicates that the retail
price effects generally appear to fall within a range of plus or minus
several percent. Caution should be used in extrapolating from this
data.
• Most consumers would experience some inconvenience as a result of a
mandatory deposit system.
• A net increase in jobs would occur, although some industries would
experience significant dislocations. Both high- and low-skilled jobs
would be affected. While some portion of the higher skilled jobs that
would be lost appear to be offset by gains in high-skilled jobs in other
sectors, the main effect would be an increase in low-skilled jobs to
account for the total net employment increase. The dislocation in the
job market needs to be addressed in the event of legislation.
• The deposits would reduce the volume of glass and metal in the waste
stream, thus simplifying the operation of certain resource, recovery
facilities, notably combustion-based facilities in which glass, c$n
cause significant slagging problems. Similarly, deposits should help
to eliminate difficult-to-recycle containers (e.g., bimetallics) since
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the deposits will induce either recycling of containers or conversion
to refillables.
• The benefits of deposits do not appear to decrease disproportionately
with a reduction in return rates.
• The experience to date with deposits in two States (Oregon and
Vermont) has indicated high levels of both public acceptance and
return rates. However, because there has been very little experience
in industrial States, the applicability of this experience to a nation-
wide deposit system is uncertain.
Committee Recommendations
I. Design Recommendations
If beverage container deposit legislation is adopted, there are a number of
ways it could be designed. The Committee endorses the following features for
a deposit system, if one is adopted.
1. The deposit should cover beer and carbonated soft drinks in sealed
containers, with a discretionary option for the EPA Administrator
to include others by regulation (subject to guidelines in the law).
2. The deposit should cover all sealed containers for the designated
beverages, regardless of material used, with a discretionary option
for the EPA Administrator to include or exclude others by
regulation (subject to guidelines in the law).
3. The deposit should be a minimum of five cents, indexed to the
Consumer Price Index, in full-cent increments.
4. The deposit should be specified as a uniform minimum deposit on
all beverages and containers.
5. The deposit should begin at the distributor wholesaler stage of the
distribution system.
6. The effective date of any legislation should be two years from the
date of passage.
7. Existing Federal employment impact assistance programs should
be examined as a possible means of mitigating the adverse affects
of job dislocations directly attributable to the introduction of a
beverage container deposit system mandated by the Federal
Government.
8. Nonrefunded deposits should not be taxed away or regulated
(other than as normal contribution to income). No special tax
provisions are necessary. The present tax code is sufficient.
9. The legislation should not ban pull tops.
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10. Cartons or carriers should not be regulated.
11. No position is taken on the question of whether State and local
deposits should be preempted by Federal law.
One of the members further notes that, although these design features are
reasonable, the States should be actively consulted on this subject.
II. Policy Recommendations
Four of the eight members taking a position on national beverage container
deposit legislation recommend that it be adopted. Two members recommend
against such legislation, two favor postponing consideration of national
legislation until there has been more experience at the State level, and one
member takes no position.
The four members in favor cite expected savings in materials and energy, as
well as reductions in expenditures for solid waste management and litter
control. They point out that consumer inconvenience appears to be more
than offset by the popular support that has been expressed in a number of
public opinion polls. Moreover, a national beverage container deposit pro-
gram is a resource conservation measure that would impose no significant
administrative costs on the Treasury. Two members, noting the job losses
that might accompany such a program, make a special point of suggesting
either that the program be implemented gradually or that the Federal
Government give assistance to mitigate any adverse effects on labor.
Two members recommend against beverage container deposit legislation,
noting that the costs would likely outweigh the benefits. One of those
members further observes that consumers currently have the opportunity to
choose returnable containers and suggests that they could retain that choice
without a mandatory deposit system. This member believes that the data
generated by different sources interested in this issue, such as that regarding
public support and energy usage, are unpersuasive. For example, a number of
States in recent years have defeated deposit referenda.
Two members favor postponing consideration of mandatory national
beverage container deposit legislation until the State programs in Michigan,
Connecticut, and Iowa have been fully implemented and more empirical
evidence on the effectiveness of State programs is available. Currently,
information is available from only two States — Oregon and Vermont. One of
these members further recommends that individual States give full and fair
consideration to the enactment of State beverage container deposit legisla-
tion, based on an assessment of the benefits and costs in their areas. The
member notes that different legislation in different States probably would not
impose undue hardship on the beverage industry.
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The final member takes no position on the issue, recognizing the arguments
in favor but noting that sufficient attention has not been paid to the private
inconvenience which would result from such legislation.
Deposits and Bounties on Durable and
Hazardous Goods
Committee Findings
The Resource Conservation Committee concluded the following with
respect to deposit and bounty systems for consumer durables and hazardous
goods:
• Deposits and bounties could be effective in
- achieving source-separated delivery of discarded durable and
hazardous goods to specific points;
- reducing improper disposal;
- reducing uncontrolled dumping.
•The extent of the problem of littering and improper disposal of durable
and hazardous goods is unclear.
• Hazardous materials appear to be the most likely candidates for this
approach in the future.
Committee Recommendations
Because the Committee has not studied any specific applications of
deposits or bounties for durable or hazardous goods, none of the members is
prepared to recommend that the Federal Government apply either of these
tools to specific products. Nevertheless, most of the members endorse the
concept as potentially useful. Several members express special interest in
using these tools for hazardous products, and one member endorses the
general concept, while expressing reservations about mandatory national
programs. All the members join in recommending further research on the
subject.
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National Litter Tax
Committee Findings
(Findings on the national litter tax relate only to litter taxes as they might
be used to raise revenue and to provide incentives against littering; they do
not address funding of litter control programs.)
• A broad-based litter tax is an effective means of raising revenue to fund
litter collection and abatement programs but is generally regressive
and may be inflationary.
• At the national level, the income tax provides a more equitable means
of revenue raising.
• A litter tax provides no incentive for either cleaning up litter or
reducing the rate of litter generation.
• Unless the tax is extremely high, and thus unrelated to the cost of litter
control, it would have no effect on resource' conservation.
• A litter tax is generally inconsistent with the "polluter-pays" principle.
• Without prejudging the merits of a beverage container deposit system,
a litter tax is not an effective substitute for a beverage container
deposit system.
Committee Recommendations
The Committee unanimously recommends against national litter tax
legislation, having found that a litter tax would not provide any incentive to
clean up litter or reduce the rate of litter generation, and that a litter tax is not
an effective substitute for a beverage container deposit system. One member
further asserts that litter should be considered a State problem and not a
Federal problem. Because the subject of litter has not been well analyzed at
the national level, two members also recommend further study of the litter
problem.
Local User Fees
Committee Findings
Based on a review of the theoretical basis supporting local user fees to
finance collection and disposal of municipal solid waste and the studies of
actual experience to date, the Resource Conservation Committee has
concluded:
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• Quantity-based local user fees have the potential to stimulate a reduc-
tion in the quantity of waste put out for collection and disposal by
individuals and to increase the amount of waste material separated
and recovered.
• There is some empirical evidence that quantity-based local user fees
can cause reductions in the generation of municipal solid waste.
• Administrative costs of existing local user fee systems are generally
low.
• Local user fees which vary based on services provided offer a means of
payment for waste collection and disposal that is more consistent
with the polluter-pays principle than are the predominantly used
flat-fee and local-tax-financed systems.
• Federal tax and revenue-sharing policies discourage the adoption of
local user fees by encouraging localities to use taxes rather than user
fees to finance municipal solid waste collection and disposal.
Committee Recommendations
The Committee unanimously endorses the concept of local user fees for
solid waste management. By "local user fees," the Committee means variable
fees that change according to the quantity of waste put out for collection. (In
addition, such fees can also vary according to the frequency of service and
other major determinants of the actual costs of collection and disposal.) The
Committee's endorsement is based on evidence that variable fees may
encourage more economical use of solid waste management services.
The Committee also unanimously recommends additional study of Federal
policies that inhibit local user fees, including the non-deductibility of fees for
Federal personal income tax purposes and the current exclusion of user fees
from the local tax base calculation used for Federal revenue sharing.
Nevertheless, the Committee has decided not to recommend precisely how
these disincentives should be removed because the options for removing them
and the implications of those options have not been studied in sufficient
detail.
Finally, although the Committee members agree that the present state of
knowledge makes it premature to create positive incentives for local govern-
ments to adopt user fees for solid waste management, they unanimously
recommend that the Federal government provide localities with information
and/or technical assistance on local user fees.
Some members of the Committee suggest stronger Federal action. One
member recommends not only that Federal disincentives should be studied
but also that the Committee should go ahead now and recommend ending
them. Two other members recommend further studies that would include
demonstration programs involving, among other things, source separation of
materials for resource recovery in conjunction with variable fees.
xxi
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National Solid Waste Disposal Charge
Committee Findings
Based on the staffs analysis of the national solid waste disposal charge (a
Federal excise tax on consumer products and packaging designed to reflect
their contribution to local community solid waste management costs), the
Resource Conservation Committee found:
• There is a theoretical justification for internalizing municipal solid
waste management costs.
• The analysis of the likely effects of a disposal charge based on national
average marginal costs for municipal solid waste management indi-
cates that the net economic benefits and impact on materials flows
would be low in practice.
• There is no definitive evidence that the failure to include the cost of
disposal in the price of materials which enter the municipal solid
waste stream has a measurable effect on consumption of virgin
materials.
• Data on which the analysis is based, particularly price elasticities and
marginal cost of municipal solid waste, are highly uncertain.
• The variability of municipal solid waste costs between communities
significantly reduces the potential benefits of a uniform national
charge.
• The design of a disposal charge which could achieve the theoretical
objectives would be complex in practice.
Committee Recommendations
None of the members of the Committee recommend legislation at this time
to institute a national solid waste disposal charge. Members cite the low
projected impact on materials use, recycling, and disposal; the complex
administrative problems that would be involved; the difficulty of designing a
charge that would achieve the theoretical objectives; and the inefficiencies
that might result from its application at the national level.
Although none of the members is in favor of legislation at this time, a few
indicate that the uncertainties in the empirical analysis make it imprudent to
recommend entirely against the general concept of a national disposal charge.
These members note that the basic concept of including disposal costs in
decisions on use of materials is consistent with achieving a better balance
between conservation and other social goals. Even though they agree that the
current analyses show only small gains in resource conservation from
imposing a charge, they feel that the uncertainty in the data and the
possibility that conditions could change make it desirable to "leave the door
open" to reconsideration of the proposal at a later date.
xxii
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CHOICES FOR CONSERVATION
A wide variety of choices to consume or conserve material resources are
made every day. These choices are made by people throughout our economy:
• Individuals purchase and use an enormous array of products in many
types of packaging. When they have finished using them, a small
fraction is. set aside for reuse or recycling; most is simply discarded as
waste. Although individuals do have opportunities to change this
pattern — through selective buying, reuse, and increased recycling
— these opportunities are generally limited and there is little
incentive to take advantage of them.
• Private companies decide what combinations and quantities of ma-
terials will go into their products and packaging and what to do with
the scrap materials left over from the manufacturing process. Rela-
tive prices and customer preferences generally dictate these choices.
• Local government officials decide what to do with municipal solid
waste: whether materials and energy will be recovered from it and
how residents of their community will pay the bill for waste manage-
ment. Local tax and land use policies are often major determinants in
these choices.
• Federal officials make decisions about taxes, trade policies, subsidies,
and regulations which broadly affect the choices by individuals,
private companies, and local government officials to produce, con-
sume, recycle, and dispose of materials. The full range of national
goals and objectives enter into these decisions, and tradeoffs must be
made among conflicting objectives.
This is a report about 10 existing or proposed Federal policies that might
affect these various choices to consume or conserve.
The material resources considered in this report consist primarily of non-
fuel minerals (such as iron and aluminum) and forest products. We cannot
avoid choices to, consume or conserve these resources at any decision-making
level. "Business as usual" itself implies choices. Whether by design or not,
1
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often without regard for the full costs to the public, the choices have been to
use more (and reclaim fewer) resources.
Many of these choices may have served us well when our "Land of Plenty"
was undeveloped, and they may still be appropriate (or unavoidable) in light
of our varied and often conflicting national goals. But awareness of problems
resulting from this pattern led the Congress in 1976 to pass the Resource
Conservation and Recovery Act (RCRA). Among other things, this Act
created the Resource Conservation Committee to study "all aspects of the
economic, social, and environmental consequences of resource conservation"
and, in particular, the Federal policies affecting choices for resource con-
sumption and conservation.
Although we will probably face temporary shortages of certain industrial
raw materials from time to time, we do not appear to be in serious danger of
soon exhausting or being unable to obtain the major mineral and timber
resources which form the basis of our economy and lifestyle. However, we do
not have cause for complacency about the rate at which we consume our
natural endowment.
The price we pay for resource consumption cannot be easily quantified, but
it is high and promises to become higher, possibly foreclosing some options
for resource use in future generations. This price includes not only direct
extraction and manufacturing costs, but also present and future environmen-
tal damages and costs of waste treatment and disposal that often have been
neglected. For example:
• Mineral extraction disturbs the land. Even where the land can be
reclaimed, the cost may be high.
• As lower grade, more inaccessible ores are mined, mining waste and
energy usage typically increase. If technology does not improve
rapidly enough, total extraction costs will increase as well.
• A growing percentage of the raw materials we use are imported,
contributing to deficits in our balance of trade and in some instances
raising questions about national security interests.
• Despite environmental controls and standards for many pollutants,
the increased extraction, processing and disposal of materials inevi-
tably leads to more environmental contamination from pollutants as
yet unregulated or even unidentified, as well as from those presently
controlled.
• The national bill for municipal solid waste management is presently
about $6 billion annually, and much disposal is not yet environmen-
tally acceptable. These costs will rise in the future as disposal
requirements become more stringent, present disposal sites are
exhausted, and more expensive alternatives must be used.
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Portions of these costs might be avoided by making conscious choices for
conservation. But what, specifically, is conservation?
As President Taft once said, "There are a great number of people in favor
of conservation no matter what it means." Not suprisingly, what the "great
number of people" mean or do not mean by the term "resource conservation"
has a great deal to do with how they view policies for achieving it. Many
popular definitions of resource conservation vaguely emphasize the "intelli-
gent use" of resources in the "public interest," but because they are so vague
they are of little use as guides to policy. Other definitions are internally
inconsistent or openly in conflict with one another. Some are simply synony-
mous with economic efficiency in the use of resources.
Reduced to basics, resource conservation simply means consuming less
virgin natural resources than we otherwise would.
Conservation can occur at any or all stages in the life cycle of a material:
less total extraction; more complete use of what is extracted (less processing
waste); longer lived products and multiple use of materials before disposal
(more reuse, recycling, or conversion into energy); and, in the case of
renewable resources such as timber, more replanting and improved husban-
dry of the land. Consuming less of a material also means that less of it will
ultimately have to be handled as waste.
The definition of resource conservation in the Resource Conservation and
Recovery Act includes many of these elements explicitly:
The term 'resource conservation' means reduction of the amounts of
solid waste that are generated, reduction of overall resource consump-
tion, and utilization of recovered resources . . . [which are defined as]
material or energy recovered from solid waste. — RCRA, Section
1004(21) and (20)
Defined in this way, the term resource conservation makes no assumptions
about or distinctions between materials, methods, motives, values, or ulti-
mate effects on the economy or society at large. Instead, it serves as a point of
departure for evaluating existing and proposed policy choices.
The succeeding chapters of this report describe why there is currently a
renewed interest in resource conservation, some of the policy choices for
conservation that can be made at the Federal level, and the likely effects these
choices would have on choices at the individual, corporate, and local
government levels.
Chapter 2, "Material Conservation Issues," outlines in further detail the
problems of natural resource use that the policies studied by the Resource
Conservation Committee are intended to address. Chapter 3, "Resource
Conservation: Historical Context and Perspectives," describes other efforts
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to evaluate resource problems and policies and presents the framework of the
Committee's policy analysis.
Chapters 4 through 7 focus on Federal policy choices. There are many
policies that the Committee could have studied. Working from its legislative
mandate and public comment on its draft plans, the Committee chose 10
policies on which to concentrate. Each of them would affect materials
throughout their life cycles — from extraction, to use, to recycling and,
finally, to disposal. For purposes of discussion in this report, however, the
policies have been grouped in four sets according to the phases of the
materials life cycle they would affect most directly.
• "Tax Policies Affecting the Extraction Industries" (Chapter 4): The
effects of several existing Federal tax subsidy policies on the
production of virgin materials and a possible extraction tax for virgin
raw materials.
• "Resource Recovery Policies" (Chapter 5): Present and proposed
subsidies for resource recovery, railroad freight rates regulated by
the Interstate Commerce Commission for secondary materials, and
product regulations as a possible strategy for resource conservation.
• "Product Use and Disposal Policies" (Chapter 6): Proposed man-
datory beverage container deposits, possible deposits and bounties on
durable and hazardous consumer goods, and proposed national litter
taxes.
• "Pricing Policies for Municipal Solid Waste" (Chapter 7): Local
user fees for solid waste management based on quantities of waste
discarded, and the proposed national solid waste disposal charge.
The Committee has studied these policies in various degrees of detail, and
in each case has concluded with a series of findings and recommendations. In
several cases members of the Committee have recommended additional
study, believing that although the present state of knowledge and analysis
does not indicate a recommendation at this time, a desirable policy choice
may become clear upon further examination.
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MATERIAL CONSERVATION ISSUES
For generations, economic development in the United States has brought
about a continually expanding standard of living for a rapidly increasing
population. It has also meant increasingly intense demands on natural
resources for industrial raw materials, as well as energy, food, water supplies,
and recreation.
In the Resource Conservation and Recovery Act, Congress recognized
several important implications of the long-term increase in the economy's use
of materials, including:
problems of industrial pollution and environmental degradation;
community problems of solid waste management;
the availability, cost, and efficient use of material resources;
energy supply and consumption;
international trade, dependency, and security;
the material welfare of future generations.
As background for the discussion of policies affecting these problems, this
chapter first reviews recent trends in our use of material resources and then
summarizes available data and prominent viewpoints relating to the major
concerns.
Patterns and Trends in Material Use
Unlike earlier Federal commissions assigned to study U.S. natural resource
issues, the Resource Conservation Committee did not undertake an extensive
analysis of resource availabilities or future raw material supply and demand.
Instead, we have relied primarily on the work already completed in these
areas and on available statistical data provided by the U. S. Departments of
Interior, Commerce, Agriculture, and Energy. The only exception was in the
estimation of post-consumer solid waste and resource recovery, for which the
-------
Committee sponsored a study to extend and update the Environmental
Protection Agency's material flow estimates.1
The General Pattern of Material Use
Figure 1 provides a general picture of the flow of materials in the national
economy. In brief, the main components of the system include:
• Extraction. Virgin raw materials enter the economic system
through the mining, forestry, agriculture, and fishing industries.
Several billion tons per year are involved, of which the major part is
stone, sand, gravel, clays, and other non-metallic minerals. Although
difficult to define and estimate, solid waste generation by these
industries (including mine tailings and spoils, forest residues, and
crop residues) is probably about 2 to 3 billion tons per year.
• Material refining. Most crude material goes through one or more
stages of purification, chemical refinement, physical forming, or
cleaning on the way to becoming a "finished" raw material (steel
from iron ore, lumber from saw logs, wood pulp from pulpwood).
These include the heavy processing stages for most materials, gener-
ating very large volumes of liquid, gaseous, and solid wastes that are
often among the most harmful to the environment and the most
difficult to control. These are also among the most energy intensive
sectors. Increasingly, efforts have been directed to produce bypro-
duct raw materials (from such wastes as slags, sawdust, pulping
liquors) and to reclaim and recycle processing chemicals and other
materials within the plant.
• Finished product converting, fabricating, assembling. Including
semi-finished and final product manufacturing and the construction
industries, this sector currently uses over 2.5 billion tons of raw
materials annually to produce the economy's output of finished
capital and consumer goods.2 For the most part, these represent
"lighter" industries, usually with much lower volumes of waste
relative to finished product, than the crude material refining and
processing industries.
In certain of these industries, particularly the metal working and
paper product converting industries, a very large percentage (pos-
sibly over 90 percent) of the scrap waste generated is recycled as so-
called "prompt" or "new industrial" scrap. Recent estimates place
scrap metal recycling from this sector at over 20 million tons, and
paper and paperboard converting scrap recycling at over 5 million
tons per year.3
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Figure 1: MATERIAL FLOWS IN THE NATIONAL ECONOMY
FINAL PRODUCT
WASTE DISPOSAL
BUILDING
DEMOLITION
OTHER DEMOLITION
HOUSEHOLD AND
I COMMERCIAL
»
LITTER
MUNICIPAL
SEWAGE SLUDGE
Source: Resource Conservation Committee Staff
Final "consumption". Households, business firms, and government
agencies are all purchasers of final products. In physical terms, by far
the greatest volumes of final products are in the form of long-lived
capital goods: industrial plant and equipment, transportation sys-
tems (highways, railways, bridges) and equipment, military require-
ments, homes, and office buildings. There is very little accurate or
comprehensive data on average lifetimes and ultimate disposition of
capital goods. As a practical matter, some last "forever" (monu-
ments, shrines) and a great many are simply abandoned to decay.
Most are eventually subject to demolition, either for systematic
salvaging of valuable materials or to clear space for new construction
or equipment. Current estimates of "old scrap" consumption indi-
cate that about 26 million tons of metals (over 90 percent ferrous) are
recovered, from salvaging capital goods, including junked autos and
other transportation equipment, railroad rails, and other structures
and equipment.4
Durable and nondurable household consumer goods, office sup-
plies, and packaging materials together currently account for about
115 million tons of the economy's final product, non-food output.
-------
Correspondingly, in 1978 household, commercial, and government
office activities together generated about 100 million tons of post-
consumer product solid waste, of which about 11 million tons is
currently recovered for material recycling and another small fraction
burned for energy recovery.5
In addition to the material flow system there is a similar and related energy
flow system, supplying direct (fuel) and indirect (electrical) energy for heat,
light, and power for all the sectors of the economy. In 1978, the U. S.
economy consumed as energy sources 618 million tons of coal, 1,120 million
tons of petroleum, and 434 million tons of natural gas. All of this fossil fuel
material, together with the air combined in combustion, became waste in the
form of fly and bottom ash, air-borne particulates, and gaseous emissions
from industrial and powerplant boilers, homes and office buildings, and from
auto, truck, and other transportation uses. In addition, the total energy value
of this fuel — almost 72 quadrillion Btu's in 1978 — ultimately resulted in the
generation of waste heat, after performing its useful energy functions. Of the
total primary energy consumed, about 36 percent is currently used in the
industrial sectors, 38 percent for residential and commercial heat and light,
and 26 percent for transportation in all forms.6
In summary, virgin raw materials and fuels enter the economy through the
extractive industries. Some of the material is accumulated in the economy in
the form of long-lived durable goods and as an inventory of periodically
recycled scrap materials. Aside from these stock accumulations, most of the
original raw material leaves the economic system in the form of solid, liquid,
and gaseous waste which is disposed of into the land, water, and atmosphere.
Historical Trends
The United States has been noted for its high rate of economic growth over
the two centuries of our existence as a nation. To a large extent, this growth
has been sustained by the continuous availability of extensive natural re-
sources of high quality.
Table 1 compares U.S. consumption of major raw materials and fuels in
1978 and 1948, together with figures on gross national product and popula-
tion. Figures 2 through 4 picture more detailed trends in decade-to-decade
growth rates for selected material categories over the past 30 years and
illustrate changes in material consumption relative to economic activity and
population.
Several trends are evident from this data.
1. The economy consumed several times as much material in 1978 as in
1948. In absolute terms, the tonnage of raw materials consumed
increased by several hundred million tons, mainly in building materi-
8
-------
als, other non-fuel minerals, and forest products. All major material
categories showed increases of from about 50 to several hundred
percent, with especially high percentage growth in aluminum and
plastics. Fossil fuel consumption, led by natural gas and petroleum,
also increased substantially. Real GNP grew by 184 percent and
population by almost 50 percent in this 30-year period.
Table 1
U.S. CONSUMPTION OF MAJOR RAW MATERIALS AND FUELS
1948 and 1978
Quantities Consumed Per Year
(Millions of tons except as noted)
1948 1978
Ferrous metals
Aluminum
Copper, lead and zinc
Building materials'
Other non-fuel minerals2
Forest products
Lumber, plywood and veneer3
Pulp, from roundwood
Plastic resins
Coal
Petroleum4
Natural gas'
Gross National Product
(billions of 1972 dollars)
Population (millions)
63
0.8
3.4
580
32
6,000
15
0.7
531
2.1
4.9
488
147
115
6.0
5.0
2,021
107
8,700
31
18.8
618
6.8
19.4
1,385
218
Percent Growth
1948 to 1978
83
650
47
248
235
45
103
2,420
16
224
293
184
49
i Sand and gravel, crushed stone, and cement.
2 Phosphate rock, lime and salt.
3 Expressed in millions of cubic feet of roundwood needed to supply actual output.
4 Expressed in billions of barrels.
5 Expressed in trillions of cubic feet.
Source: Resource Conservation Committee Staff, based on Mineral Commodity Summaries 1979 and
Minerals Yearbooks of 194%, 1958 and 1968, Bureau of Mines, U.S. Department of Interior; The Demand
and Price Situation for Forest. Products, 1976-77, Forest Service, U.S. Department of Agriculture;
Monthly Energy Review, March 1979, Energy Information Administration, U.S. Department of Energy;
Facts and Figures of the Plasifcs Industry, 1978, and personal communications from the Society of the
Plastics Industries.
-------
Figure
DKCADE • TO - DECADE.
r* GROWTH
250 - _
225 __
200 4-
175
ISO
125
GROWTH RATES IN U.S. RAW MATERIAL
CONSUMPTION DECLINED
DURING THE PAST DECADE
% GROWTH
|||_ 1948 - 58
r~\- 1958 - 68
•- 1968 - 78
FERROUS NONFERROUS NONMETALUC LUMBER
METALS METALS STRUCTURAL PRODUCTS
MINERALS
WOODPULP
FROM
ROUNDWOOD
PLASTICS
Figure 3: MATERIAL CONSUMPTION PER DOLLAR OF GNP
HAS BEEN DECLINING IN RECENT YEARS
TONS CONSUMED
PER S MILLION GNP
200 _
175 _
150_
125
100 _
75 _
50 _
25 .
o
h
BBH|
II|[I!IM
II
MS
1
II
•
I
[Qj- PLASTICS
p|- PULPWOOD
• NONFERROUS
METALS
PI- FERROUS METALS
*t
1
*— -- •
1948
1958
1968
1978
Source: Resource Conservation Committee Staff (Reference Tables at the end of Chapter 2).
-------
Figure 4: GROWTH IN METALS AND WOOD PRODUCTS
CONSUMED PER CAPITA HAS LEVELLED OFF
IN RECENT YEARS
1600 -
1400 -
1200 -
1000 -
Pounds Per Person
Per Year
800 -
600 -
400 -
200 -
1 1 I 1 1 1 1 ( 1
^^^^^
^^^
1
™
HI
|
|
TT
I
••
I
M
1
m
\
1
•
1
fl
1
-
c
n
•
1 C
PLASTICS
H PULPWOOD
NONFERROUS
METALS
FERROUS
METALS
1948
1958
1968
1978
2. Growth rates have slowed significantly in the past decade
(1968-78). The economy as a whole, measured by constant dollar
GNP, grew substantially more slowly over the past decade (2.8
percent per year) than in either of the previous two decades (4.1
percent per year in 1958-68 and 3.7 percent per year during
1948-58). Population showed a continuous decrease in decade-to-
decade growth rate over the period. All the major raw material
groups showed substantially slower percentage growth rates during
1968-78, even though many categories had experienced increased
growth rates in 1958-68 over the preceding decade (Figure 2).*
Nevertheless, in absolute terms, tonnage increments remain
high, even at slower percentage growth rates, because of the high
has© levels achieved during the 1960's and early 1970's.
*For more detailed figures, pertaining to this and other conclusions, see statistical reference tables 3
and 4 at end of this Chapter.
11
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3. Material consumption is increasing more slowly than GNP. As
reflected in Figure 3, there has been a continued decrease in the
quantity of materials consumed per dollar of "real" GNP (after
adjustment to eliminate the effects of inflation). This is true for most
categories of raw materials over the entire 30-year period, and for all
major categories during the most recent decade, with the notable
exception of plastics. Among the fossil fuels, only petroleum contin-
ued to increase relative to GNP during the past decade.
4. Per capita consumption of most materials in the U.S. was almost
stable between 1968 and 1978. Although per capita consumption
increased substantially between 1948 and 1968 for almost all indus-
trial raw materials and for the fossil fuels except coal, the most recent
decade experienced:
• a slight decrease in per capita consumption of the high volume
metals other than aluminum;
• only small increases (2 to 8 percent) in per capita use of
non-metallic (non-fuel) minerals;
• virtually no change in forest products, per capita;
• a continued steep increase (100 percent) in per capita consump-
tion of plastics;
• substantial increases for petroleum (30.4 percent) and coal (13.8
percent), but a decrease in natural gas (8.4 percent) per capita.
Figure 5 provides a summary view of post-consumer residential and
commercial solid waste generation and disposal for the period from 1960 to
1978. It reflects an overall trend similar to that shown for aggregate material
consumption. Total and per capita growth in municipal solid waste has
slowed substantially in the past 5 years, contrasted with the previous rapid
growth in the 1960's and early 1970's.
It is not clear whether material consumption relative to GNP and per
capita growth rate will continue to decrease, stabilize at present levels, or
return to the experience of the 1950's and 1960's. If the present low growth in
material consumption relative to population size and overall economic
activity continues, or decreases even further, it represents a major shift in the
long-term economic history of the nation.
12
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Figure 5: POST—CONSUMER SOLID WASTE GENERATION
GREW RAPIDLY BETWEEN I960- 1973,
BUT HAS LEVELLED OFF SINCE 1973
150
MILLION TONS
PER YEAR
125 -- Total Waste Generated
100 J_
75
Waste Requiring Disposal
[i&ij Resource Recovery
1960
1965 1970
1975
1980
1400
1200
1000
POUNDS PER PERSON
PER YEAR 80°
600 ._
400 ,_
200
Total Waste Generated
Waste Requiring Disposal
1960
Ijjijijij Resource Recovery
1965 1970
1975
1980
Source: Resource Conservation Committee Staff based on estimates developed for the Committee by Franklin Associates, Ltd.
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Adequacy of Material Supplies and Related Issues
The question that is invariably raised following a discussion of trends in
resource use is "Do we have adequate supplies?" The answer to this question
is central to any discussion of resource conservation.
There have been many excellent studies on the adequacy of material
supplies performed in recent years.7 The Committee reviewed several of these
studies and used them as a starting point in its own policy analysis. In
addition, the final report of the National Commission on Supplies and
Shortages (NCSS), Government and the Nation's Resources, contains an
excellent summary of the issues and analysis.
Several major conclusions can be drawn from the literature on the
adequacy of future supplies. Most importantly, it is clear that there is no
determinate amount of any given raw material that can be considered the
minimum "adequate" supply. Given enough time, we can fill most material
needs or functions by a variety of different raw materials; very few, if any,
individual materials can be considered absolutely essential over the medium
to long-term time frame.
Consequently, supplies of materials can be considered adequate if the price
and availability of individual materials do not change too rapidly and if
materials in general continue to be available at prices that do not rise faster
than our overall inflation rate. Our situation with respect to material supplies
may be summarized as follows:
1. While it appears that (in the words of the NCSS) "no physical lack
of resources will seriously strain our economic growth for the next
quarter century and probably for generations thereafter,"8 there
are potential problems concerning our domestic resource base.
2. The country's dependence on certain imported resources seriously
affects our balance of payments and can result in short-run
economic disruptions when imported supplies of some materials
fall below critical levels.
3. The United States may not be using its material resources most
efficiently because of anomalies in the pricing system and policies
mandated by the government. If this is so, we are wasting not only
the resources themselves, but also the capital and labor required to
produce them.
4. The production and use of materials, however plentiful or scarce,
requires the production (or importation) expenditure of valuable
energy resources.
5. There is a philosophical issue relating to "intergenerational eq-
uity" in the use and endowment of natural resources. Closely
14
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related to this issue is the debate between those favoring the ethics
of a "conserving" as opposed to a "consuming" society.
These issues are developed more fully in the following paragraphs.
Resource Availability
Concern about resource scarcity in a finite world is as old as humankind.
Civilizations have been made rich, laid low, and have fought wars over access
to natural resources. Depletion of resources has spurred vast social changes.
For example, the depletion of forests was one of the important contributing
causes bringing about the Industrial Revolution in England. Immigration
from resource-poor lands to the "land of plenty" is part of the American
folklore, as are the deserted mining towns of the West. Today gasoline
shortages disrupt our way of life. At the philosophical level, the works of the
19th century English economists Thomas Malthus, David Ricardo, and John
Stuart Mill, the American Conservationists of the early 20th century, and the
Club of Rome of the 1970's have continually made people aware of our
dependence on material resources and the possibilities of eventual exhaustion
of finite reserves.
There has always been debate over future availability of world resources.
One point of view, which was expounded by Malthus and recently drama-
tized by the Club of Rome in Limits to Growth (1974), stresses that the
exponential growth in population and income, coupled with the finite nature
of land, mineral resources, and the earth's capacity to assimilate pollution,
could lead to resource exhaustion and economic stagnation within 100 years
if current resource consumption and pollution trends continue.
There is another point of view which is more optimistic. It stresses that the
price mechanism adjusts for changes in supply and demand, that new
resources are constantly being discovered, that new technology is constantly
being developed to extract minerals from lower grade ores, and that new ways
of reusing material, using less material, or substituting abundant materials for
scarce ones are always being found. Today, for example, we derive copper
from ore that has one-tenth the copper concentration that was economical to
process in 1900. Our "known reserves" (deposits considered economically
viable) of iron increased over twelvefold in the period from 1950 to 1970,
mainly due to improved mining and processing techniques. Miniaturized
electronic instruments require a fraction of the materials needed by their
predecessors. Over one-quarter of all aluminum beverage cans are now being
recycled.
, Baraett and Morse, in their landmark study, Scarcity and Growth;
Economics of Natural Resources Availability (1963), and, more recently,
Robert Manthy, Natural Resource Commodities - A Century of Statistics
15
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(1978), provided evidence that in real terms (i.e., adjusted for inflation), labor
and capital costs of mineral extraction have for the most part been either
holding steady or declining since the 1870's. This suggests that, relative to
our capabilities for extracting and processing them, many of these materials
have been increasing in "availability." However, the costs examined did not
include the environmental costs of extraction and use, which are discussed
later in this chapter.
Figure 6 illustrates, on a worldwide scale, the relationship between known
reserves and annual consumption for a number of important metals. It
illustrates that, even from the standpoint of physical availability alone and
without major economic substitutions or new discoveries, there are consider-
able resource supplies available under current technology and economics for
several of the most important industrial raw materials. Figure 7 shows the
relationship for the same metals between ultimate recoverable resources
(what geologists predict will be available eventually) and current known
reserves (circa 1972) for both the U.S. and the world. These multiples
indicate further that many of the key materials should continue to be in
abundant supply for generations to come.
In contrast to the oil situation, it does not appear that critical long-term
materials shortages will develop within the next generation or, in most cases,
in the foreseeable future. This was essentially the conclusion of both the
National Commission on Supplies and Shortages and of the National Com-
mission on Materials Policy. While the contrast with oil supplies and the lack
of an immediate crisis may seem heartening, there are nevertheless potential
problems associated with high rates of consumption of raw material
resources.
Import Dependence
Although the United States has but 6 percent of the world's population and
land area, it accounts for 30 percent of annual world resource consumption.
Because minerals are unevenly distributed in the earth's crust, we import
many of the materials needed to support our industrial society. Although by
comparison with other industrialized countries we enjoy a fairly high degree
of self-sufficiency, we have been a net importer of several materials for many
years. (Table 5 at the end of this chapter presents data on net imports and
exports relative to our total consumption of materials.)
Import dependence is unavoidable if the United States contains no reserves
of a material. In other cases it may be economically preferable if U.S.
resources are more expensive than imported foreign raw materials. In almost
all cases, import dependence can be avoided, at a price, over the long run
because most products could be made of different materials.
16
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Figure 6: WORLDWIDE, KNOWN RESERVES
OF MANY KEY MINERALS ARE SUBSTANTIAL
o
03
Z
g
on
a
u.
O
O
oi
75 - -
50 --
25 --
COPPER
IRON MOLYBDENUM LEAD
ZINC
ALUMINUM
u.
O
O
Figure?: POTENTIAL RESERVES ARE BELIEVED
TO GREATLY EXCEED KNOWN RESERVES
OF MANY KEY MINERALS
S3
> 100
LU
Z
o
50 -•
24,000 3,000
COPPER
IRON MOLYBDENUM LEAD
ZINC
ALUMINUM
Source: Resource Conservation Committee Staff, based on United Stales Mineral Resoi.rccs
(U.S. Geological Survey Professional Paper 820), 1973.
-------
However, in the short run manufacturing flexibility is much more limited,
and a severe economic penalty could result from an inability to obtain even a
relatively few "essential" materials, for example, steel alloying metals such as
manganese and chrome.
Even very high reliance on imports of a material need not necessarily be
cause for alarm. For example, although the United States has very large
deposits of low-quality aluminum-bearing clays, the Bureau of Mines projects
a continuing reliance on higher grade bauxite imports for about 90 percent of
the aluminum supply because this has continued to be the least costly way to
supply aluminum. The major sources of U. S. bauxite imports are Jamaica,
Surinam, Guyana, and the Dominican Republic. Australia also produces
large amounts of bauxite but has not been a major U. S. supply source. Brazil
has extensive reserves but has not yet become a major supplier. Therefore,
although a 90 percent "dependence" on imports is potentially worrisome,
there are many alternative sources of bauxite close to the United States, and,
at only moderately higher cost, we could turn to various lower-grade
domestic deposits if necessary.
The United States is less import-dependent in the case of iron ore. Once
again, although we have extensive reserves, imports are used to reduce raw
material costs. The principal sources of imports are Canada and Venezuela,
but iron ore is also imported from Liberia, Brazil, Peru, Australia, Sweden,
and Chile.
The Committee staff reviewed the issue of dependence on petroleum
imports in terms of its implications for plastics. Plastics accounted for 1.5
percent of total petroleum consumption in 1974, of which one-fifth was for
plastic packaging (0.3 percent of the total). Recycling or replacing the
plastics used in consumer products with other materials might reduce
petroleum use somewhat, but processing and transporting other materials
also involve the use of petroleum. Over the longer term plastics could be
made from coal, forest products, or agricultural crops. However, making
plastics from coal, for example, would at present be 2 to 3 times as expensive
as making them from petroleum.
A number of circumstances could cause shortages of imported materials -
foreign embargoes on shipments to the United States, the organization of
mineral cartels, and military or civil conflicts involving exporting nations.
Of these three, the latter probably presents the greatest risk of prolonged
supply curtailment. The Strategic Materials Stockpile has been accumulated
as a buffer against shortages resulting from such risks. If a principal supplier
were to become involved in a conflict with another nation or suffer severe
internal disorder, interruption in supply could be relatively complete and
long lasting. In general, the National Commission on Supplies and Shortages
concluded that stockpiles should in most instances be the preferred approach
for reducing risks of short term supply interruptions.9
18
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Mineral cartels or embargoes, while possible, do not appear to pose serious
threats at this time.10 In order for either to be effective, all principal exporters
of a commodity must perceive similar interests, and, in the case of embargoes,
must be willing to forego the revenues that their exports bring them.
Moreover, there must be few close substitutes for the commodity available
from sources outside the cartel. Although petroleum exporters have em-
ployed these techniques quite effectively since 1973, the conditions necessary
for success do not appear to exist among exporters of most other minerals.
Economic Efficiency in the Use of Materials
If we are not using resources in the most economically efficient manner, we
are not only wasting the resources themselves but also the capital and labor
required to produce them. The Resource Conservation Committee was
especially concerned that any potential conservation policies enhance eco-
nomic efficiency, or at least not decrease efficiency without clear recognition
of consequences. The Committee made this one of its explicit criteria for
evaluating policies (see Chapter 3).
Generally speaking, the United States has relied on the market mechanism
to assure efficient use of all economic resources, including natural resources
as well as labor and capital. As one resource economist, Talbot Page, has
expressed it, the market "defines a balance between depletion and conserva-
tion, recycling and disposal, and durability and initial cost. Market forces
lead to a certain flow of materials through the economy, extending from
extraction to discharge into the environment."11 Whether or not the balance
the market strikes between depletion and conservation is the "right" balance
depends on: (1) whether the market is operating efficiently, and (2) whether
the market accounts adequately for the future. The first issue is discussed
below, and the second is discussed later in this section.
The Resource Conservation Committee looked most closely into two
factors which can cause materials markets to operate inefficiently. First, the
failure of the market to incorporate environmental costs and collection and
disposal costs of products entering the municipal solid waste stream into the
prices of finished products has long been suspected of leading to a higher rate
of materials consumption than would otherwise be the case. Although many
environmental costs have recently been "internalized" by industries' installa-
tion of pollution control equipment, substantial environmental costs still
exist. Because these "social costs" and collection and disposal costs are
generally borne by the public at large, the product prices do not reflect them
and they do not properly affect consumer decisions.
The Committee studied the effect of not including community solid waste
management costs in product prices at great length, particularly in connec-
tion with the product charge and local user fees. The conclusion reached by
19
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the Committee, given the best information available, was that not including
municipal solid waste costs makes a difference of several percent in the
amount of virgin raw materials used in final consumer goods and packaging.
This issue is one of the major topics of Chapter 7, "Pricing Policies for
Municipal Solid Waste."
The second factor related to market inefficiency is government-induced
"distortions" in the marketplace. For instance, Federal income taxes on the
extractive sector have historically not been as heavy as on other sectors of the
U. S. economy. This has been attributed to deliberate government efforts,
dating back several decades, to encourage domestic resource development.
The effect of these tax advantages has been twofold. Not only has extraction
proceeded at a faster rate than it would have without differential tax
treatment, but also, to some degree, our primary materials industries have
developed at the expense of secondary materials industries. These policies
have also tended to stimulate U. S. exports and inhibit imports. This subject is
discussed in detail in Chapter 4, "Tax Policies Affecting the Extraction
Industries."
A similar allegation has been made in the case of railroad freight rates for
secondary materials, as regulated by the Interstate Commerce Commission.
The Committee found that the rates probably have discriminated against
many secondary materials (compared with the virgin materials against which
they compete). This subject is discussed in Chapter 5, "Resource Recovery
Policies."
Energy Usage
The production of materials, whether they are plentiful or scarce, inevita-
bly requires the use of energy. Over one-third of U. S. primary energy
consumption is directly attributable to industrial demands, mostly to ma-
terial processing. Another 26 percent goes to transportation, of which a
substantial part is related to shipment of raw materials and finished products.
Moreover, the lower grades of ore that must be mined in the future, when the
higher or more accessible grades have been exhausted, will probably require
significantly more energy to mine and refine. If we had an unlimited source of
cheap energy, the likelihood of minerals becoming scarce at affordable prices
would be considerably reduced.
(At a time when energy resources are in short supply, conservation of
materials may be an effective way to save energy. This does not necessarily
mean "doing without." For example, recycling can often significantly reduce
energy consumption, although the amount varies greatly with the materials
involved and the processes used. One of the most dramatic examples of
energy saving through recycling is the case of aluminum. The extraction of
aluminum from bauxite, an extremely energy-intensive process, requires the
20
-------
equivalent of about 1 gallon of petroleum or 10 pounds of coal per pound of
finished aluminum. Recycling aluminum cans saves 95 percent of the energy
required to produce an equal amount of aluminum from bauxite.
Intergenerational Equity and the "Ideal" Society
Even if the market system does function reasonably well in allocating
resources among current needs, there is a growing controversy over whether
it can allocate resources fairly between generations. Economists have tradi-
tionally pointed to the economic factors (such as the "discount rate") used in
making business decisions for the future and argue that it does. Others have
argued that markets do not inherently take into account the interests of
future generations. There is even debate as to whether this question should be
considered. There are many who feel that one generation does not "owe"
resources to succeeding generations.
Among those who are concerned for future generations, some people argue
that virgin material extraction is a vehicle for economic growth and that
future generations can best be served by being bequeathed the most
productive economy possible. Others argue that future generations should be
left as large a stock of materials and undisturbed natural areas as possible,
and that a policy of slower-than-market rate of material extraction is most
appropriate.
One of the best synopses of the issues associated with the intergenerational
equity question is presented by Talbot Page in his book, Conservation and
Economic Efficiency:
The burdens associated with resource use that we are placing upon
the future are largely risk burdens. With respect to both material
wastes and depletion, the equity question is: What is a fair distribution
of risk to impose upon the future?. . .
While technology is ultimately the only way of renewing "non-
reneWable" material resources, it adds to the legacy of risk to be
bequeathed to the next generation. Technological solutions are not
inevitable. As the flows of "non-renewable" resources become larger
for the United States and increasingly so for other countries, our
dependence on technological fixes becomes greater. The power of
technology itself becomes greater, with uncalculated and perhaps
unmanageable side effects. Thus, the burden as we use up oil is the risk
burden that we will not come up with a substitute technology in
time. . . . Our legacy to the future is not homogeneous and is not
composed entirely of benefits. Intertemporal equity emerges as an
important problem because there is no easy way to add up the costs and
21
-------
risks along with the benefits and no way to guarantee that the future is
going to be better off than the present.12
In the final analysis, the question of intergenerational equity becomes a
question of personal values, and can be answered most directly on that level.
It is also close to the heart of the distinctions between a "conserving" society
and a "consuming" society (sometimes referred to as the "throwaway"
society). Each of these "ideal" societies implies an ethical framework, often
with deep socio-religious roots. Considerations of this type are outside the
realms of economics or geology. Ethical judgments are often made uncon-
sciously, but they often cannot be avoided in making choices for consumption
or conservation.
Perhaps the most difficult problem in dealing with the question of
adequacy of supply is that we do not face an immediate crisis. We are in the
position of a driver who hears a rattle in his car which could slow him down
ahead if he does not get it fixed, but which has not yet impeded his progress.
While we do not appear to be facing immediate difficulties with the supplies
of material resources, it may not be wise to act as if this could never happen.
Environmental Protection and Waste Management
A second major focus of interest in discussions of resource conservation
has been the relation between material consumption and environmental
quality. This section discusses the environmental impacts of material sys-
terns, implications of economic growth, and the relationships between re-
source conservation, waste management, and environmental protection.
Environmental Effects
The multiple relationships between the economy's system of material and
energy flows and the natural environment are reasonably well known, in
general terms if not in all details. With very few exceptions, the effects of
extracting and "consuming" raw materials and fossil fuels on ecosystems,
and on air and water quality generally, are adverse.
Table 2 provides a reminder of how pervasive and diverse these effects can
be. Every material in every final product and its packaging has gone through
a chain of extraction, refining, manufacture, and distribution (as depicted
earlier in Figure 1), and has usually been transported several times. Every
material has likewise required electric power at several stages, and ultimately
virtually every product ends up as solid waste.
Each step in the life cycle of a consumer product or item of capital
investment has its own ecological, public health, economic, and aesthetic
22
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Table 2
EXAMPLES OF ENVIRONMENTAL EFFECTS
OF ECONOMIC ACTIVITIES
Activities
Typical Environmental Effects
E
X
T
R
A
C
T
I
O
N
Mining
- Deep tunnel and open pit
- Petroleum
Agriculture - general
- plus, if practices are poor
Forestry - thinning of growth
- plus, if clear cutting
Tailings, leachates, mine acid drainage, underground fires,
land surface disruption.
Sludge ponds, oil spills, land subsidence.
Land surface changes, disruption to pre-existing habitats,
waterborne minerals get concentrated.
Soil erosion and siltation, nutrient enrichment and
eutrophication, toxic pesticides.
Habitat disruption from logging, use of roads and increased
human accessibility; pesticides.
Habitat destruction, soil erosion.
P Raw Materials Processing
R - Size classification and reduction
O - Sintering, roasting and smelting
C - Cooking
E - Distilling
S - Washing
S - Separating
I Product Finishing, Converting and
N Assembly
G
Noise, dust, tailings, sludges.
Dusts, aerosols, gases, acid rains, slags.
Pressings, sludges, aerosols, gases.
Sludges.
Suspended and dissolved solids in water.
Sediments, elutriates, and sludges.
Dusts, oils and other contaminants in water, noise, scrap
(reusable), heavy metal plating wastes.
P
O
w
E
R
Stationary
- Fossil fuel power (steam, elec-
tricity, and direct drive)
- Nuclear power
- Electricity distribution
Transportation
Boiler ash, fly ash, low level radiation in ashes, aerosols,
gases, acid rain, thermal pollution of waterways, steam
plumes, flue' gas desulfurization sludges, CO2-induced
weather modification.
Radioactive waste fuel rods, nuclear fallout.
Transmission right of ways.
Emissions from internal combustion engines (CO, NOx, CO2,
hydrocarbons, lead), waste lubricating oils, land
surface disruptions for road right of ways, oil and
chemical spills.
P
O
S
T
C
O
N
S
U
M
E
R
Demolition (and Construction)
Commercial and Household
- Littering
- Land disposal
- Volume reduction
Water and Sewage Treatment
Dust, noise, scrap (reusable), debris, land surface
disturbance, erosion, stream siltation.
Litter
Noise, land use disruption, noxious leachates, landfill gas.
Incinerator emissions.
Sludges, chlorine and other chemical residuals.
23
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environmental implications. They can range from the micro-habitat or local
level to broad regional or even global proportions. Some involve mere
nuisance, while others may, if unchecked, portend global catastrophe. Many
of the effects are irreversible, and most are costly to control.
Economic Growth and Environmental Quality
In many respects, economic growth and development seriously aggravate
problems of maintaining or restoring environmental quality. For example,
consider the following:
(1) Compound growth. In recent years the economy has grown at an
average annual rate of 2.5 to 4 percent after discounting for
inflation. At this rate, GNP doubles or triples every 20 to 30 years.
If resource extraction, energy use, and waste generation grow at
similar rates, this implies a two- to three-fold increase in mining
activity, power-generating capacity, raw material processing, and
pollution control requirements over the same brief period. In 50
years the effect is about twice again as great — a four- to six-fold
increase. As discussed earlier, the growth in materials con-
sumption and waste generated per dollar of GNP and per capita
appears to be slowing, but this only partially compensates for the
power of compound growth. ;
(2) Fixed assimilative capacities. Most natural systems have limited
capacities for absorbing, transporting, and neutralizing waste
products. Thus, as the number of waste sources (autos, factories)
increases, the amount of waste treatment or prevention required to
maintain environmental quality must be increased.
(3) Increasing costs of treatment. At higher required levels of control,
waste treatment costs often increase disproportionately fast rela-
tive to improved control. Where incremental costs of control are
rising, the economic feasibility and political acceptability of envi-
ronmental protection are both weakened.
(4) Lower grade resources. As higher grade and more accessible
mineral supplies are depleted, extraction and processing must
depend on lower grade and/or deeper deposits. These involve
more overburden, tailings, processing residuals, and other waste
per unit of refined product. Typically, more total energy is
required as well, for both extraction and processing.
(5) New chemical substances. As our economy becomes more so-
phisticated in applied science and technology, the varieties of new
synthetic materials and esoteric chemicals appear to increase
without limit. Some of these chemicals turn out to be particularly
24
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hazardous to natural ecosystems and to human health. Long-
lasting toxic substances that do not break down in the environ-
ment are of special concern.
It is for reasons such as these that advocates of "zero economic growth"
argue that continued economic growth at historical rates can only mean
environmental catastrophe.
There is of course another side to the ledger. Economic growth and
development bring added capabilities for dealing with such problems. In-
creasing national productivity means that more economic resources will be
available to devote to environmental protection without extreme economic
sacrifice. Within the present decade we have finally begun to apply a
substantial amount of economic resources to controlling m'any forms of
pollution and to prevent or repair some forms of habitat destruction.
Moreover, the same modern science and technology that appear to cause so
many of our environmental problems can also help control them.
It is also possible that the growth in material consumption may slow down
relative to overall 'economic activity as the economy matures. As discussed
earlier, there is evidence that the economy's appetite for material throughput
has slackened somewhat in recent years. Although the reasons are not yet
clear, consumption of most materials has grown considerably less rapidly
relative to real GNP and relative to the size of our population in the 1970's
than in earlier decades. In addition, population growth has also slowed and
may possibly stabilize early in the 21st century.
Thus, continued economic growth is not a simple br one-sided issue as far
as its implications for environmental quality are concerned. On balance,
however, it does raise serious concerns regarding our capabilities to continue
to grow at or near past rates without experiencing substantial further
environmental degradation. The fact remains that in absolute terms we are
continuing to consume vast amounts of raw materials and fossil fuels. When
imposed on high base levels, even relatively small percentage increments can
yield very large absolute annual increases in material and energy flows, and
this continues to jeopardize the quality of our environment.
Problems of Solid Waste Management
One of the principal reasons for the passage of the Resource Conservation
and Recovery Act of 1976 (RCRA) was the growing problem of dealing with
post-consumer solid waste at the local level. In Section 1002(a)(3) of RCRA
the Congress found that:
the continuing concentration of our population in expanding metro-
politan and other urban areas has presented these communities with
25
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serious financial, management, intergovernmental, and technical problems
in the disposal of solid wastes resulting from the industrial, commercial,
domestic, and other activities carried oiiit in such areas.
The Environmental Protection Agency has studied, and is continuing to
study, the environmental and aesthetic impacts of improper disposal and the
local public management problems associated with locating disposal sites for
waste materials. The RCC staff spent considerable time estimating the costs
of municipal solid waste management and assessing the importance of waste
disposal pricing methods as a factor in the overall solid waste management
problem.
Environmental Impacts of Improper Disposal Practices. Traditionally,
incinerator emissions and the breeding of disease-bearing insects and rodents
at collection, storage, and dumping sites have been the principal environmen-
tal and public health concerns in municipal solid waste management.
Although these problems are still a concern, increasing attention is now being
focused on the effect of improper solid waste management on water quality
because of evidence that surface runoff and underground leachate from
landfills can contaminate surface waters and ground waters.
Contamination of ground water is particularly serious because, once it
occurs, there is no technology presently available to reverse the effect, and an
aquifer may then be unusable as a source of drinking water for generations.
Currently, about half the U. S. population relies on ground w\ater for drinking
water supplies, and the use of ground water is increasing rapidly.
Aesthetic Effects of Improper Disposal Practices. Everyone is aware of
the aesthetic problem associated with improper solid waste disposal prac-
tices. The results of illicit dumping and littering are apparent in the garbage
washed up on beaches, the trash scattered through urban, rural, and even
wilderness areas, and the durable products, such as refrigerators and automo-
biles, which are abandoned in alleys and vacant lots. With some exceptions —
cuts from broken bottles, accidents to children playing in abandoned vehicles
or appliances, occasional injuries to animals — litter is primarily an aesthetic
problem rather than a public health or ecological hazard. Nevertheless,
perhaps $500 million is spent annually by State and local governments and
private agencies for litter pickup, antilitter promotions and other control
efforts. Considering the relatively small quantities of littered waste involved,
our willingness to finance these programs indicates that we consider the
aesthetic problem to be significant. Littering and unsanctioned dumping are
often very hard to control because they are the result of individual actions
which are already generally illegal.
The Resource Conservation Committee addressed the litter »probl£hi in
several of its policy evaluations, including mandatory beverage container
deposits, deposits and bounties on durable and hazardous products, and the
26
-------
concept of a national litter tax. The results and recommendations are
reported in Chapter 6, "Product Use and Disposal Policies."
Local Public Management Problems. Although municipal solid waste
management is a significant portion of local government budgets, often the
biggest problem at the local level is finding sites for new landfills rather than
the money to pay for them. It has become very clear that people do not want a
landfill located in their neighborhoods. In one survey, 70 percent of the
residents surveyed felt that proposed landfills should be at least 1 mile from
their residences.13
Local residents are concerned about the environmental and public health
problems associated with improperly managed landfills. Odors, unsightly
appearance of the site, trash blowing around their neighborhood, increased
truck traffic, and possible effects on property values are major concerns.
Promises made by State and local officials that landfill operations will not
have adverse impacts do little to sway citizen objections; and the opportunity
to have a new park or recreation area after the landfilling is completed is
apparently unconvincing or of little importance to most residents in deter-
mining their attitudes.
When local landfill sites are not available, local officials may become
involved in jurisdictional disputes over where trash can be sent for disposal.
In some cases siting problems can lead to expensive long-distance hauling of
trash and provide a strong stimulus to convert the trash into usable materials
or energy.
Solid Waste Management Costs. As a part of its investigation into the
effects of waste management service prices on resource conservation, the
Committee staff revised previous Environmental Protection Agency esti-
mates of the cost of municipal solid waste management which had indicated
that collection and disposal had averaged about $30 per ton for U.S.
communities in 1976. The revised estimates indicate that collection and
disposal activities averaged about $43 per ton in 1978, or over $25 per person
per year. General inflation will cause these costs to increase, but constant
dollar (deflated) costs are also expected to grow because of rising land values,
longer haul distances to disposal sites, more stringent environmental require-
ments for landfills and incinerators, and more stringent noise and safety
regulations for refuse collection vehicles. However, analysis of collection
operations indicates that there is considerable potential for increasing effi-
ciency which, if realized, could reduce costs in the future.
Collection and disposal costs vary considerably among cities. Collection
costs, for example, reportedly range from $7 to over $100 per ton in 1978
dollars. The larger cities - those over 100,000 in population - appear to have
generally higher average costs.
The RCC was also interested in determining what fraction of municipal
solid waste management costs could be saved through a reduction in the
27
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waste entering municipal collection and disposal systems. Since service must
still be provided on a regular basis, the potential savings from reduced waste
collection are less than the average per ton costs.
The staff analyzed the savings associated with reductions in wasteloads
using both econometric and process engineering techniques. Although the
results from the two estimating methods were not completely consistent, the
staff concluded that reducing municipal solid waste requiring collection and
disposal would, on the average, save about $15 for each ton of waste that did
not have to be handled. Differences among communities and their respon-
siveness to opportunities for cost reduction would cause individual cases to
show higher or lower incremental savings. The staffs analysis of these costs is
discussed in detail in Staff Background Paper No. 11, "A Cost Analysis of the
Solid Waste Management Industry."
Table 3
TRENDS IN U.S. CONSUMPTION
OF MAJOR RAW MATERIALS AND FUELS, 1948 - 1978
Quantities Consumed
(Millions of tons per year except as noted)
1948
19581
1968
1978
Percent Growth
1948- 1948- 1958- 1968-
1978 1958 1968 1978
Ferrous Metals2
Aluminum
Copper, Lead and Zinc
Building Materials3
Other Non-Fuel Minerals4
Forest Products
Lumber, Plywood & Veneer5
Pulp, from Roundwood
Plastic Resins
Coal
Petroleum6
Natural Gas7
Gross National Product
(billions of 1972 dollars)
Population (millions)
62.9
0.8
3.4
580.1
31.9
6,000
15.
0.7
531.1
2.1
4.9
487.7
146.6
71.5
2.2
4.0
1,291.0
49.4
6,240
20.4
2.5
366.7
3.3
10.8
697.3
174.9
107.3
4.7
5.2
1,812.8
91.0
7,680
28.1
8.6
498.8
4.8
19.5
1,051.8
200.6
115.0
6.0
5.0
2,020.6
106.8
8,700
30.5
18.8
618.0
6.8
19.4
1,385.3
218.4
83
650
47
248
235
45
103
2,420
16
224
293
184
49
14
175
18
123
55
4
36
240
-31
57
118
43
19
50
114
30
40
84
23
38
240
36
45
81
51
15
7
28
-4
11
17
13
9
118
24
42
0
32
9
1 Except for forest products and fuels, 1958 figures are annual averages of 1956 through 1960.
2 Steelmill shipments plus imports net of exports.
3 Sand and gravel, crushed stone, and cement.
4 Phosphate rock, lime and salt.
5 Expressed in millions of cubic feet of roundwood needed to supply actual output.
6 Expressed in billions of barrels.
7 Expressed in trillions of cubic feet.
Source: Resource Conservation Committee staff, based on statistical sources listed under Table 4.
28
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Table 4
TRENDS IN U.S. MATERIAL AND ENERGY USE
RELATIVE TO TOTAL NATIONAL PRODUCT AND POPULATION
1948 - 1978
1948
Tons Consumed per $ Million of
Gross National Product (1972 Dollars)
1958 1968
1948
Pounds Per Person Per Year
1958 1968
1978
Ferrous Materials
Aluminum
Copper, Lead and Zinc
Building Materials
Other Non-Fuel Minerals
Lumber, Plywood and Veneer1
Pulp from Roundwood
Plastic Resins
Coal
Petroleum2
Natural Gas3
128.9
1.6
7.0
1,189.4
65.4
12.3
30.8
1.5
1,089.0
4,335.0
10,140.0
102.5
3.1
5.7
1,851.4
70.8
8.95
29.3
3.6
525.9
4,754.0
15,430.0
102.0
4.4
4.9
1,723.5
86.5
7.3
26.7
8.2
474.2
4,553.0
18,500.0
83.0
4.3
3.6
1,458.6
77.1
6.3
22.0
13.6
446.1
4,924.0
14,010.0
1978
Ferrous Materials
Aluminum
Copper, Lead and Zinc
Building Materials
Other Non Fuel Minerals
Lumber, Plywood and Veneer4
Pulp, from Roundwood
Plastic Resins
Coal
Petroleum5
Natural Gas6
858.1
10.9
46.4
7,914.0
435.2
40.9
204.6
10.1
7,245.6
605.6
33.7
817.6
25.2
45.7
14,762.7
564.9
35.7
233.3
29.0
4,193.3
796.0
61.5
1,069.8
46.9
51.8
18,073.8
907.3
38.3
280.2
85.9
4,973.1
1,002.7
97.0
1,053.1
54.9
45.8
18,503.7
978.0
39.8
279.3
172.2
5,659.3
1,307.7
88.9
1 Thousand cubic feet of roundwood per million dollars.
2 Barrels per million dollars.
3 1,000 cubic feet per million dollars.
4 Cubic feet of roundwood per person per year.
5 Gallons per person per year.
6 1,000 cubic feet per person per year.
Source: Resource Conservation Committee Staff, based on Mineral Commodity Summaries 1979 and Minerals
Yearbooks 1948, 1958, and 1968, Bureau of Mines, U.S. Department of Interior; The Demand and Price Situation for
Forest Products, 1976-77, Forest Service, U.S. Department of Agriculture; Monthly Energy Review, March 1979,
Energy Information Administration, U.S. Department of Energy; Facts and Figures of the Plastics Industry, 1978, and
personal communications from the Society of the Plastics Industries.
29
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Table 5
U.S. RELIANCE ON RAW MATERIAL AND FUEL IMPORTS
1978
Materials
Imports Exceed 50% of Consumption1
Aluminum (content)
Asbestos
Chromium
Fluorspar
Manganese
Natural Rubber
Nickel
Potash
Rutile
Tin
Zinc
Zirconium
Moderate Reliance on Imports3:
Barite
Copper
Forest Products
Gypsum
Ilmenite
Iron and Steel
Lead
Peat
Petroleum
Silicon
Sulfur
U.S.
Consumption
1.2.
6,000,000 tons
583,000 tons
600,000 tons
1,250,000 tons
1,415,000 tons
856,000 tons
232,000 tons
4,880,000 tons
280,000 tons
66,500 tons
1,114,000 tons
110,000 tons
2,800,000 tons
2,480,000 tons
13.5 billion cubic feet
22,323,000 tons
1,005,000 tons
135,000,000 tons
1,350,000 tons
1,170,000 tons
6.8 billion barrels
650,000 tons
14,000,000 tons
Net Imports
as % of Consumption
85
84
92
82
100
100
77
61
90
81
62
50
40
19
10
34
39
28
13
32
48
18
10
(Continued)
1 90 to 100% reliance on imports also exists for:
Berylium Columbium
Bismuth Corundum
Cesium Diamonds
Cobalt Gem Stones
2 50 to 70% reliance on imports also
Antimony Cadmium
Arsenic Mercury
Graphite
Iodine
Mica Sheets
Platinum
exists for:
Selenium
Tungsten
Radium Strontium
Rhenium Tantalum
Rubidium Thorium
Scandium
Yttrium
3 10 to 50% reliance on imports also exists for:
Gallium Germanium Indium
Tellurium
Thallium
30
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Table 5 (Continued)
U.S. RELIANCE ON RAW MATERIAL AND FUEL IMPORTS
1978
Materials
U.S.
Consumption
Net Exports
as % of Consumption
Self-Sufficient or Net Exporter4:
Boron
Bromine
Clays
Diatomite
Feldspar
Helium
Iron and Steel Scrap
Lithium
Magnesium
Mica, Scrap and Flake
Molybdenum
Phosphate Rock
Sand and Gravel
Sodium Carbonate
Talc & Pyrophyllite
Titanium
Coal
1,390,000 tons
179,000 tons
53,167,000 tons
510,000 tons
770,000 tons
5,000 tons
42,700,000 tons
4,300 tons
110,000 tons
194,000 tons
33,000 tons
36,800,000 tons
933,700,000 tons
7,500,000 tons
1,037,000 tons
19,000 tons
625,000,000 tons
9
16
5
31
1
19
17
47
25
4
100
33
0.3
10
22
26
9
4 Other commodities for which the U.S. is either self-sufficient or imports less than 10% of its consumption:
Argon Lime Pumice Stone
Cement Nitrogen Rare-earths Uranium
Garnet Oxygen Salt Vermiculite
Hafnium Perlite Sodium Sulfate
Source: Resource Conservation Committee Staff, based on: Mineral Commodity Summaries, 1979,
Bureau of Mines, United States Department of the Interior; The Demand and Price Situation for Forest
Products 1976-1977 plus updates, Forest Service, U.S. Department of Agriculture; Monthly Energy
Review, March 1979, Energy Information Administration, U.S. Department of Energy.
31
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Notes and References
1. Franklin Associates, Ltd. Post-Consumer Solid Waste and Resource
Recovery Baseline. Report prepared for the Resource Conservation
Committee. (Draft.) April 6,1979.
2. Estimates for such broad aggregates can be only approximate and
depend heavily on specific stages of production at which accounting
takes place. See Material Needs and the Environment Today and
Tomorrow; Final Report of the National Commission on Materials
Policy, U.S. Government Printing Office, Washington, D.C., June
1973, p. 2-6; and U.S. Bureau of Mines, Status of the Mineral
Industries, Washington, D.C., December 1978, p. 2.
3. Unpublished estimates by Resource Recovery Division, Office of Solid
Waste, U.S. Environmental Protection Agency, based on U.S. Bureau
of Mines data for metals and U.S. Bureau of Census data for paper
fiber.
4. U.S. Bureau of Mines, Status of the Mineral Industries, December
1978, p. 2.
5. Unpublished estimates by Franklin Associates, Ltd., for the Resource
Conservation Committee.
6. All statistics in this paragraph are from the Energy Information
Administration, U.S. Department of Energy.
7. Among the best known of these are H. L. Landsburg, L. L. Fischman,
and J. L. Fisher, Resources in America's Future: Patterns of Require-
ments and Availabilities 1960-2000, Johns Hopkins Press for Re-
sources for the Future, Inc., Baltimore, 1963; and H. J. Barnett and C.
Morse, Scarcity and Growth, The Johns Hopkins University Press for
Resources for the Future, Inc., Baltimore, 1963. Also see H. E. Goeller
and A. M. Weinberg, "The Age of Substitution," Science, 191:637,
February 20, 1976.
8. Government and the Nation's Resources; Report of the National
Commission on Supplies and Shortages, U.S. Government Printing
Office, Washington, D.C., December 1976, p. x.
9. Government and the Nation's Resources, p. xvi-xvii, pp. 30-33, and
Chapter 7, "Economic Stockpiling."
10. Government and the Nation's Resources, p. 33.
11. Talbot Page, Conservation and Economic Efficiency: An Approach to
Materials Policy, Johns Hopkins Press for Resources for the Future,
Inc., Baltimore and London, 1977, p. 4.
12. Page, Conservation and Economic Efficiency, pp. 10-11.
13. Dean T. Massey, Attitudes of Nearby Residents Towards Establishing
Sanitary Landfills. U.S. Department of Agriculture; Economics, Statis-
tics, and Cooperative Service, January 1978, 66pp. Available from
National Technical Information Service, Springfield, Va. 22161
(Order No. PB-278 905).
32
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RESOURCE CONSERVATION:
HISTORICAL CONTEXT
AND PERSPECTIVES
Resource conservation is hardly a new idea. The historical views of the
concept, especially in the most recent generation, and the explicit approach
that the Resource Conservation Committee took are important to under-
standing resource conservation in general and the work of the Committee in
particular.
Recent and Contemporary Evaluations
of Resource Policy
During the past quarter century, five major government groups have been
established to report on the general subject of materials policy: the Presi-
dent's Materials Policy Commission, better known as the Paley Commission
(1951-52); The National Commission on Materials Policy (1971-73); the
National Commission on Supplies and Shortages (1974-76); the Resource
Conservation Committee (1977-79); and the Non-Fuels Minerals Policy
Task Force (established in 1977, work still in progress). In addition, other
government offices have done considerable work in this area.
Each of these groups has had a different mandate, but they all have made
major statements concerning resource use and conservation. Together they
reflect a changing perception of "problems" connected with natural re-
sources. The focus of national policy has been moving from assuring
development of resource supplies to managing resource development under
greater constraints, particularly environmental ones. The Resource Conser-
vation Committee's Staff Paper No. 17, "Findings and Recommendations by
Predecessor Commissions, Committees, and Associations on Resource Con-
servation Issues," quotes from the reports of these groups as well as a number
of studies by private organizations. The Resource Conservation Committee
built on the work of these groups, adding its own perspective where
appropriate.
33
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Paley Commission
The threat of shortages of strategic materials following the outbreak of the
Korean War led President Truman to appoint the President's Materials
Policy Commission, better known under the name of its chairman as the
Paley Commission. The concerns at the time were best expressed in the title
of its final report, Resources for Freedom. The focus of the Commission's
work was on the supply of raw materials for the industrial engines of the
"Free World," especially the United States. At issue were security and the
availability of resources; the Commission also examined how well existing
instruments of government could cope with these problems.
This emphasis was summarized in the Commission's overall objective for a
materials policy, which, it said, should "insure an adequate and dependable
flow ... at the lowest cost consistent with national security and with the
welfare of friendly nations" (p. 3). As a result, the report generally looked
toward the use of abundant domestic resources in preference to importing
scarce foreign materials. In this context, the Commission gave resource
conservation and reuse comparatively little attention.
National Commission on Materials Policy
The establishment of the National Commission on Materials Policy in
1970 coincided with the gathering momentum of the environmental move-
ment. The scope of its concern was consequently different from that of the
Paley Commission.
Highlighting this change was the fact that the Commission was established
by the Resource Recovery Act of 1970, a set of amendments to the Solid
Waste Disposal Act of 1965. In contrast to the Paley Commission, the
National Commission on Materials Policy gave the "need to protect" equal
weight with the "need to produce" in its final report, Materials and the
Environment, which was published in 1973.
Recognizing the full costs of materials usage from extraction to disposal,
the Commission recommended that environmental costs be computed at all
steps of the materials cycle. It stressed that, before materials are extracted,
rehabilitation or enhancement of the site should be assured. The Commission
made many other recommendations affecting resource use, including the
encouragement of recycling and increased attention to waste management as
a part of overall materials policy. The recommendations of this report gave
significant impetus to the "full-cost" orientation that the Resource Conserva-
tion Committee later adopted.
34
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National Commission on Supplies and Shortages
In 1973 and 1974, unexpected and dramatic short-term scarcities in many
sectors, including energy, led to a widespread fear of general shortages of
materials. The National Commission on Supplies and Shortages was estab-
lished in 1974 to investigate why those shortages were occurring and to
determine what the government might do to improve the situation. The
Commission's final report, Government and the Nation's Resources, was
published in December 1976. The report provided an important starting
point for the work of the Resource Conservation Committee.
The most important finding of the Commission on Supplies and Shortages
was that they could see no geologic, economic, or demographic evidence for
concern about the availability of resources. The Commission concluded that
impending exhaustion of a specific raw material will be signaled sufficiently
ahead of time to allow for a period of adjustment. However, they warned that
the adjustment mechanism must not be subverted by actions taken by the
public or private sectors. In addition, the Commission noted that the mag-
nitude of government influence over the materials industry has not always
been fully appreciated, and it is important that the spectrum of government
policies be consistent with efficient use of materials.
The Commission recommended that the government consider policies
which would reflect the cost of disposal in the prices consumers pay for
products. Among the means of "internalizing" the cost of disposal, the
Commission listed mandatory deposits on beverage containers, excise taxes
on nonreturnable containers, and product disposal charges on other con-
sumer packaging and paper.
The Commission generally rejected the idea of Federal funding for recov-
ery of materials or energy from waste, citing hidden costs and lack of cost
effectiveness. While recycling can be used as a source of supply and can help
reduce escalating capital requirements, environmental degradation, energy
demand, and import dependence, the Commission observed that recycling is
not a "good" per se and should be judged only in competition with other
national goals.
For this same reason, the Commission generally did not favor subsidizing
virgin materials. It was unable to acquire sufficient information to make
specific recommendations regarding capital gains treatment of income from
timber, but it did state that unless compelling evidence for continuing the
percentage depletion allowance for minerals could be shown, it should be
repealed.
35
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Task Force on Non-Fuels Minerals Policy
The Task Force on Non-Fuels Minerals Policy, established by the Presi-
dent in December 1977, is presently studying a very broad range of concerns
that have been raised in recent years regarding Federal policy affecting non-
fuel minerals. The group is chaired by the Secretary of the Interior and
includes the chief officials of 13 other Federal agencies and offices, all of
whom are also members of the Resource Conservation Committee.
The study has two basic objectives: (1) to submit for Presidential consider-
ation appropriate policy options, analyses, and recommendations on current
and anticipated problems related to non-fuel minerals, including an assess-
ment of existing and alternative Government policies to address these
problems; and (2) to develop a process or framework for policy analysis
which Federal decisionmakers can use to assess minerals-related problems in
the future.
The study itself is divided into two phases: problem analysis and policy
analysis. Twelve representative non-fuel mineral commodities have been
selected for specific examination in the following nine problem areas:
• Major mineral supply problems;
• Availability of foreign minerals to the United States and its allies;
• Relationship of environmental quality, health, and safety to price and
availability of minerals;
• Mineral resource potential of Federal lands;
• Financing, capital formation, and tax policies;
• Competitiveness of the U.S. mineral industry versus foreign mineral
industries;
• Conservation, substitution, and recycling;
• Adequacy of mineral-related research and development; and
• Adequacy of existing government capabilities to support Federal
policymaking.
In some respects the Task Force is building on the work of the Resource
Conservation Committee, but in general its efforts are much broader than
those of the Committee.
Other Government Offices
Nearly all the major offices of the Federal Government, including the
members of the Resource Conservation Committee, are presently engaged in
projects affecting resource conservation and recovery.
The Environmental Protection Agency has worked closely with communi-
ties across the nation to assist them in the area of resource recovery,
36
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principally through various types of technical assistance. The agency is also
developing a solid waste regulatory program and has done considerable
research in the area of solid waste and resource recovery. The Resource
Conservation Committee staff drew heavily on this research.
The Department of Energy is working on several projects to demonstrate
how energy can be recovered from waste. The Treasury Department cur-
rently administers tax subsidy programs for materials production and re-
source recovery and constantly analyzes the effects of those programs. The
Treasury recently completed a study, Federal Tax Policy and Recycling of
Solid Waste Materials (February 1979), which the Resource Conservation
Committee used in its deliberations.
Likewise, the Departments of Commerce, Interior, and Agriculture are
conducting programs to monitor materials stocks, production, and flows;
find better ways of using all types of materials; and encourage the use of
different kinds of materials.
The Office of Technology Assessment, a staff office of the U.S. Congress, is
currently completing two major studies on the conservation of non-
renewable, non-fuel resources. Two reports will be published in the summer
of 1979 covering some subjects addressed by the Resource Conservation
Committee, as well as several others. The first study, Materials and Energy
from Municipal Waste, examines the potential for, and barriers to, recovering
and recycling materials and energy from municipal solid waste. The second
study, Technical Options for Conserving Metal, evaluates options for con-
serving metals in the design, manufacturing, use, and disposal of products.
The Resource Conservation Committee
The Resource Conservation and Recovery Act of 1976 (RCRA) was a set
of amendments to the Solid Waste Disposal Act. Citing serious problems in
solid waste, environment and health, materials, and energy, RCRA estab-
lished far-reaching programs affecting many aspects of solid waste manage-
ment and resource usage. Most importantly, the Act set up specific programs
in the areas of hazardous waste management and State and regional solid
waste management plans.
Because information on which to base non-technological resource conser-
vation policies and programs was scarce, and this lack of knowledge threat-
ened to limit the range of alternatives open to the Congress in the future, the
legislation established the Resource Conservation Committee to examine a
variety of present and potential government policies that might affect
resource conservation.
37
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The Resource Conservation Committee's legislative mandate caused its
scope of work to be somewhat different from those of its predecessors.
Specifically, the Committee's charge was to examine the "economic, social,
and environmental consequences" of a range of policy issues, including the
following in Section 8002(j)(l):
"(A) the appropriateness of recommended incentives and disincen-
tives to foster resource conservation;
"(B) the effect of existing public policies (including subsidies and
economic incentives and disincentives, percentage depletion allow-
ances, capital gains treatment and other tax incentives and disincen-
tives) upon resource conservation, and the likely effect of the modifica-
tion or elimination of such incentives and disincentives upon resource
conservation;
"(C) the appropriateness and feasibility of restricting the manufac-
ture or use of categories of consumer products as a resource conserva-
tion 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 demonstra-
tion in the area of resource conservation."
Working from this mandate and from public comment in response to the
Committee's draft implementation plan and at a series of public meetings, the
Resource Conservation Committee drew up a list of policies which were
either known to affect or suspected to affect resource conservation. The
Committee studied these policies in varying degrees of detail, depending on
the possibilities each appeared to offer. It settled on the following 10 policy
areas:
1. Present Federal tax policies affecting the extraction industries;
2. A proposed tax on virgin materials extraction;
3. Proposed subsidies for resource recovery;
4. Railroad freight rates that are alleged to discriminate against
secondary materials;
5. Proposed regulations on product design;
6. Proposed national mandatory beverage container deposits;
7. Proposed deposits or bounties on durable and hazardous goods;
38
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8. A proposed national litter tax;
9. Proposed quantity-based user fees for local solid waste collection
and disposal; and
10. A proposed national solid waste disposal charge.
Because the Resource Conservation Committee's mandate emphasized
policies rather than strictly supply or technology, the Committee made no
independent assessments of the latter subjects. Instead, the Committee
depended on the work of others on these subjects, particularly the Commis-
sion on Supplies and Shortages (1976).
Nor did the Committee work to develop policies explicitly directed at
materials in shortest supply. In fact, due to its major concern with solid waste
problems and environmental protection, the Committee examined policies
which tend to have their strongest impact on the materials in greatest supply
and which are produced and discarded in the greatest quantities: wood
products (including paper), iron and steel, aluminum, and glass. In general,
the Committee concentrated more on consumer goods and waste rather than
on industrial goods and waste.
The Committee paid little explicit attention to conservation of energy
resources, electing to concentrate on nonenergy resources and to leave work
directed explicitly at energy to the Department of Energy and other agencies
concerned with that area.
In studying these 10 policy areas, the first consideration was the actual or
projected effect of each policy on resource conservation. The nation has a
variety of competing goals, however; no single objective — resource conser-
vation included — can be considered in isolation. Therefore, the Committee
specified five additional criteria to be considered in evaluating the economic
and social consequences of resource conservation policies: (1) adherence to
free market principles, (2) consistency with the "polluter-pays" principle, (3)
social and economic equity, (4) economic efficiency, and (5) administrative
feasibility and cost.
1. Free Market Principles. As much as possible, conservation policies
should not interfere with the free choice of producers, consumers, and local
governments to make decisions. This criterion is consistent with the broader
democratic philosophy of freedom of choice and also represents the basic
belief in the United States that the private market system should be the
primary mechanism for allocating society's resources.
Adherence to this principle does not mean blind faith in the status quo.
Shortcomings in market structure (e.g., monopoly) or the absence of effective
private mechanisms to provide for public goods such as environmental
protection require government involvement to assure the efficient and equita-
ble functioning of the competitive private enterprise system.
39
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2. The "Polluter-Pays" Principle. In simple terms, the "polluter-pays"
principle means that whoever is responsible for pollution should pay for
preventing, controlling, or correcting the damage. Although there are excep-
tions to any rule, pollution costs should be neither subsidized by taxpayers in
general nor borne directly by those exposed to the pollution.
"Polluters" can include not only the industry in question but also the
consumers of that industry's products: the principle is broad enough to mean
that those who produce and use pollution-associated products should pay.
The proposition that the polluter should pay has been enunciated in some
detail by the Organization for Economic Cooperation and Development
(OECD) — an international agency for research and policy formulation
comprised primarily of the governments of western industrial nations. The
principle has been accepted as a basic tenet of pollution control by all OECD
member nations, including the United States, to help ensure equitable
international trade policies in a period when pollution control costs are
becoming an increasingly significant factor in product prices.
3. Social and Economic Equity. Any significant new policy will, if
effective, create changes. Often such changes will be more beneficial to some
groups than to others. The short-term consequences of a conservation policy
might be that specific industries, labor groups, and geographical regions of
the nation would experience "windfall" gains or losses. For example, some
consumer groups may find their living costs rising much more rapidly than
others as a result of a policy directed at conserving the entire nation's
material resources.
Such questions relate to the distribution of costs and benefits, as opposed to
their total magnitude. Often equity is the major feature which determines
whether a specific proposal will be accepted or rejected. For example, any tax
that is seriously regressive — that is, imposes a disproportionate burden on
the poor — is unlikely to receive much consideration in the political forum in
which all policies must be heard.
Emphasizing equity is not arguing against change. Rather, the issue is that
we must, in developing, evaluating, and recommending policies for conserva-
tion, consider how the interests of various groups will be affected. If serious
inequity appears likely with a specific proposal, the government may be able
to minimize it through changing the design. For example, the introduction of
the policy could be stretched out to reduce dislocations during the transition.
Alternatively, some groups could be exempted from the requirements. In still
other cases, society might directly compensate groups hurt by the policy or
might impose special taxes on groups enjoying unearned gains.
4. Economic Efficiency. Economic efficiency — 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 —
requires comparing total social benefits with total costs to ensure that society
40
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does not sacrifice more goods and services than are justified by the benefits of
the policy.
So long as resource recovery and other conservation approaches cause a
reallocation of economic resources from some industries or products to
others, there will be costs as well as benefits. Both require evaluation. The
concept of economic efficiency is also discussed in Chapter 2.
5. Administrative Feasibility and Cost. A conservation 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 of any
given policy for both public administrative agencies and private parties
should be small compared to the benefits derived.
In applying these five criteria, the Committee was primarily interested in
resource conservation, and not, for instance, in correcting economic ineffi-
ciencies per se. However, the case for a policy to encourage resource con-
servation is strengthened to the degree that it would also bring about an
improvement in economic efficiency or serve other generally accepted envi-
ronmental or social goals.
41
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Illll
TAX POLICIES AFFECTING
THE EXTRACTION INDUSTRIES
The "extraction sector" of the economy includes all mining, agricultural,
forestry, and fishing industries engaged in obtaining raw materials, energy,
and food products from natural resources. Financial incentives or disincen-
tives for this sector can thus have far-reaching implications, not only for the
quantities of natural resources used but also for the volume and composition
of resulting waste products and related environmental effects.
The Resource Conservation Committee restricted the scope of its work on
the extraction sector to tax-related incentives affecting primarily the non-fuel
mineral and forest products industries, although parts of the analysis may
also apply to other extractive industries as well. In particular, the Committee
studied two sets of Federal tax policies for the extractive sector with respect
to their implications for conservation. The first involves existing Federal tax
advantar^s (or "tax subsidies"), which are generally viewed as a stimulus to
domestic non-fuel mineral and forest industries. The second policy relates to
new extraction sector taxes that might be imposed as a disincentive to slow
down the rate at which we use up our natural resources.
As explained more fully in the next section, existing extraction industry
tax advantages — such as percentage depletion allowances for mining and
capital gains treatment of income from timber growing — are viewed by
economists and tax specialists as subsidies because they depart from normal
methods of taxing income from business investments and provide special
economic benefit to the favored industries. In effect, they shift part of the real
economic cost of virgin materials from the producers and users (i.e., the
market) to the general taxpayer, thus making materials appear less costly in
the marketplace. In assessing the effects of these subsidies, the Committee
relied heavily on a recent report to Congress, Federal Tax Policy and
Recycling of Solid Waste Materials (February 1979), by the U. S. Depart-
ment of the Treasury.
Those who favor the subsidies are usually interested in encouraging
development of our domestic resources. Those who oppose them feel that the
treatment creates an undesirable incentive for more extensive production
42
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from domestic natural resources than the free market would otherwise
provide, thereby causing inefficiency in the use of resources.
The Resource Conservation Committee considered the policy question to
be whether these tax subsidies for extractive industries should be reduced or
eliminated to achieve a more neutral Federal position relating to resource
conservation. Most members of the Committee agree that a neutral tax policy
towards virgin material extraction is preferable on grounds of resource
conservation and long-range economic efficiency. However, the Committee
also recognizes that other national objectives relating to domestic economic
stability and national security, particularly with regard to strategic or
economically significant minerals that may be subject to foreign-imposed
supply restrictions, should also be included in a comprehensive policy
decision.
The second policy approach, a virgin material extraction tax, would
impose either a unit or a value-related tax on mineral and timber production
or sale. Its purpose would be to increase production cost and market prices,
and thereby potentially both restrain demand for virgin materials and
indirectly stimulate secondary material use. Such a policy would presuppose
a national consensus favoring increased material conservation. It would
operate in precisely the opposite direction from existing tax subsidies, which
stimulate virgin materials production, and therefore represents a reversal in
national policy. The Resource Conservation Committee recognizes that it
would not make consistent policy sense to impose new extraction taxes while
at the same time retaining percentage depletion and other tax incentives for
the extraction sector.
At the outset, the Committee defined its interest in new extraction industry
taxes to be exploratory rather than for the development of an immediate
policy iflitiative. The analysis presented in Staff Background Paper No. 19,
"A Conceptual Evaluation of a National Virgin Material Extraction Tax as a
Resource Conservation Policy," therefore provides only a conceptual evalua-
tion of the feasibility and implications of this approach. While no Committee
members favor recommending immediate consideration of new extraction
taxes as a conservation policy, some members endorse them as a potentially
useful tool and recommend further study.
Existing Federal Tax Subsidies
for Virgin Materials
Background
Several provisions of the Internal Revenue Code afford special Federal tax
advantages to mining and timber growing that are not available to other
economic activities. Most students of the subject agree that these "tax
43
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subsidies" tend to encourage investment and production in these industries
beyond the levels that would be profitable under a neutral tax policy.
The general argument in support of these tax advantages has bec^n that they
stimulate natural resource development and thereby contribute to economic
growth. Proponents also note that incentives for virgin domestic materials
contribute to national self-sufficiency and security and improve our interna-
tional balance of payments by reducing our reliance on foreign sources.
On the other side of the controversy, many economists and public finance
specialists have long criticized these tax subsidies on grounds of general
economic inefficiency as well as tax inequity. More recently, reports by the
Environmental Protection Agency and others have questioned the wisdom of
virgin material subsidies of all kinds in terms of their implications for
domestic resource conservation and environmental quality. According to
these arguments, subsidizing virgin materials biases economic choices
throughout the economy towards more material-intensive manufacturing
processes, products, packaging, and consumer lifestyles. The net effect is a
faster rate of depletion of our nation's mineral resources, increased energy
usage, more extensive exploitation of land resources, increased air and water
pollution, and a larger volume of waste than there would otherwise have been
under a neutral tax policy.
In the legislation creating the Committee, Congress specifically instructed
the Resource Conservation Committee to study:
... the effect of existing public policies (including . . . percentage
depletion allowances, capital gains treatment and other tax incentives
and disincentives) upon resource conservation, and the likely effect of
[their] modification or elimination. . . . (RCRA, Section 8002Q).
In approaching this task, the Committee has relied heavily on work by the
U.S. Department of the Treasury; this chapter in particular draws on the
recent Treasury report to Congress on Federal tax policy. That report
identified three major forms of tax subsidy for mining and three others for
timber growing.
Types of Tax Subsidies
The major tax subsidies for mining, as reviewed in the Treasury's report,
include percentage depletion, "current expensing" of certain exploration and
development costs, and capital gains treatment of royalty income from
properties used in mining iron ore and coal.
Under percentage depletion, the mining enterprise is allowed to deduct a
specified fraction of the gross annual value of a mine's production as a
business expense from its current income when calculating its tax liability.
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The allowable annual percentage deduction ranges from 5 percent for sand
and gravel up to 22 percent for lead, zinc, sulfur, and certain other non-fuel
minerals.
Tax specialists define the subsidy element of percentage depletion as the
decrease in the firm's net tax liability using the percentage measure compared
with what the liability would have been under cost depletion. For tax
accounting purposes, cost depletion is equivalent to ordinary capital depreci-
ation as a means of allocating the initial costs of exploration, acquisition, and
development over the life of a mine.
Unlike the cost depletion alternative or ordinary tax depreciation of capital
assets in other kinds of business, the amount of tax deduction under
percentage depletion does not have to bear any relationship to the taxpayer's
original investment or "cost basis" in the mineral deposit. In fact, it is
possible under percentage depletion to take tax deductions that add up over
time to several times the original investment in the mine. Percentage
depletion has been available for petroleum and natural gas since the Internal
Revenue Act of 1926; it was extended to metallic ores in 1932, and by 1954 all
minerals were covered. Its application to petroleum and gas has recently been
severely reduced.
Treating mine exploration and development costs as current expenses,
rather than including them in the cost basis of the mine, provides a financial
advantage by allowing an immediate tax deduction instead of a gradual cost
depletion deduction as the mineral is "used up" by mining. This "current
expensing" yields an improved cash flow and can be considered equivalent to
an interest-free loan from the Federal government.
The taxation of royalty income at capital gains rates (40 percent of the
ordinary income tax rate for individual taxpayers and 28 percent instead of 46
percent for corporations) is of obvious direct benefit in mine leasing arrange-
ments. Although percentage depletion cannot be taken against royalty
income treated as "capital gains," the lower capital gains tax more than
compensates for this. As with the other tax subsidies, it has the effect of
lowering the supply price of mineral deposits, thus increasing the amount
available for development by the mineral industries.
For timber growing, the major tax subsidies are capital gains treatment of
income, "mismatching" of income and expense, and deductibility of expenses
used to create capital gains in timber growing against current income from
other company operations.
Basically, taxing the income from timber growing at capital gains rates
reduces the tax rate for timber growing companies by almost 40 percent
below the rates usually applied to corporate income. This practice was
introduced into the Internal Revenue Code in 1944. It encourages the use of
forest resources for timber and the renewal of timber stocks following cutting.
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The "mismatching" of income and expense relates to the timing of tax
deductions on expenses for timber growing, such as planting, spraying, and
thinning. Present tax practice allows for deducting such expenses as they
occur, rather than requiring the more usual method of "capitalizing" the
costs over time and deducting them from income received at the time the
timber is sold. This form of "current expensing" for timber growing is similar
in its effect on profits to the current expensing of exploration and develop-
ment costs in mining, in that it is equivalent to a very long-term interest-free
loan from the Federal government.
Finally, currently deductible expenses incurred by a company in growing
timber can also be claimed as a business expense to reduce tax liabilities in
other, unrelated activities of the same company, where the marginal corpo-
rate tax rate is at the normal 46 percent rate (48 percent in past years) rather
than being deducted against capital gains from sale of the timber itself which
is taxed at a 28 percent rate. In effect, according to the U.S. Treasury
analysts, this deduction has the effect of converting ordinary income in the
company's manufacturing or other business lines into capital gains in timber
growing.
Size of the Tax Subsidies
Estimating the size of the tax subsidies is a necessary beginning in
evaluating their effects on natural resources and the economy. Since tax
accounting can be complicated and because much necessary data is not
available for individual investment properties, calculating the actual value of
the various tax subsidies to mining and timber growing is difficult and subject
to error. Not the least of the difficulties is determining valid sales values for
ores and timber; both are substantially controlled by vertically integrated
enterprises and often transferred between divisions of the same company
instead of being sold on the open market. Nevertheless, several estimates have
been made, using various accounting assumptions, including two approaches
used by the U. S. Department of the Treasury which are summarized here.
One approach has been to perform sample corporate income tax calcula-
tions for "typical" mine and forest properties, comparing resulting tax
calculations under the subsidy allowances with what taxes would have been
under normal corporate tax rules. Using this approach, the recent U. S.
Treasury Department report, Federal Tax Policy and Recycling of Solid
Waste Materials, estimated the before-tax cash value of the three listed
mineral industry subsidies at 8 to 12 percent of the value of output for United
States ore and copper extraction. Among the three types of mineral subsidies,
percentage depletion accounted for most of the total value.
The Treasury estimated the combined (before tax) value of the three
subsidies for timber at between 35 and 45 percent of the standing value of
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timber before cutting. The three forms of subsidy are interrelated. Capital
gains treatment and mismatching of income and expense would each have
larger impact individually if the other form did not exist; the effect of
deduction of expenses against other ordinary income, however, is magnified
by the existance of the other two factors.
An alternative approach, based on an evaluation of tax returns and data on
total annual production, has been used by the Treasury's Office of Tax
Analysis to calculate the total "tax expenditure" impact of these subsidies,
among others, on the Federal budget. Table 6 summarizes the results of these
calculations for the fiscal year 1978.
Table 6
ESTIMATED COST TO THE U.S. TREASURY
OF TAX SUBSIDIES FOR THE NATURAL RESOURCE
EXTRACTION INDUSTRIES, 1978 (Millions)
Tot*!
Non-fuel Mineral Timber
Type of Subsidy Minerals Fuels Growing
Percentage Depletion $350 $1,110 — $1,460
Expensing Exploration 15 1,170 — $1,185
and Development Costs
Capital Gains Treatment
(a) Iron ore and coal 10 65 — 75
royalties
(b) Timber income — — 275 275
Total Budget Value $375 $2,345 $275 $
of Tax Subsidies
Source: Calculations by Office of Tax Analysis. U.S. Department of the Treasury, for the Resource Conservation
Committee. Based on estimates and procedures used in calculating tax expenditure estimates by function in S
Analyses: Budget of the United States, Fiscal Year 1979, Special Analysis G, pp. 155-158.
The figures in Table 6 are estimates of the foregone Federal income tax
revenues that constitute the various tax subsidies. Thus, for all non-fuel
minerals, the cost to the Treasury in 1978 was estimated at $375 million.
However, these subsidies are "paid" in tax-exempt form; they are thus
equivalent to an appropriated cash subsidy of $720 million at the (then
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existing) corporate tax rate. The revenue impact of these subsidies for fossil
fuels in 1978 was over $2.3 billion (about $4.4 billion on a before-tax basis).
For the timber industry, only capital gains treatment of timber income is
included in the budget cost figures because of difficulties in estimating the
values of the other tax subsidies. However, on the assumption that capital
gains treatment accounts for roughly one half of the total subsidy to timber
growing, the total tax saving would be twice the $275 million estimate shown
in Table 6, or $550 million. This converts to the equivalent of a (before-tax)
appropriated cash subsidy of about $1.06 billion per year to U. S. timber
growers.
Economic Effects
Tax subsidies to virgin materials, by transferring part of the real costs of
material extraction to the Federal budget, have the general effect of making
virgin domestic materials appear less costly in the marketplace than they
really are. Economic theory suggests a variety of implications of understating
the true costs of domestic virgin materials, depending particularly on the
position of the material in world trade.
Where commodities are widely traded on world markets and the nation is a
substantial net importer, it is likely that the major effect of subsidizing a
domestic virgin raw material is to cause expanded production and substitu-
tion of the domestic for the imported material. There will be increased
development and use of the domestic natural resource, but relatively little
effect on price of the raw material which is largely determined in the more
competitive world market. Consequently, the "material-intensiveness" of the
economy would not be significantly effected. However, depending on the size
of subsidy and on cost conditions for the domestic virgin material, the rate of
extraction of the virgin resource could be significantly increased.
Under alternative circumstances where a material is not widely traded on
the world market, due to high relative cost of transportation, or where the
domestic firms provide a significant portion of the world supply, the
implications of subsidizing the country's virgin resource extraction can be
somewhat more complex. Under these conditions, subsidizing the domestic
virgin material may produce a downward shift in the commodity's market
price, inducing a variety of other substitution effects in domestic material
markets.
For example, to the extent that prices of raw materials are reduced:
(1) Raw material processing may be less technologically effi-
cient. There may be less incentive to economize in processing it
or to develop more efficient (material-conserving) processing
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technology. The processing sector will then tend to consume more
crude raw material per unit of finished product than it would in
the absence of subsidies.
(2) Secondary (recycled) raw materials may be less in demand, and
there may be less recycling. If virgin raw materials are suffi-
ciently subsidized, secondary materials recovered from the waste
stream become less competitive.
(3) Products may be designed to use more materials. To the extent
that raw materials in general are made relatively less costly, there
will be less incentive to economize on materials and there will be a
tendency to design products and packaging that are relatively
more "material-intensive." This applies to capital goods (indust-
rial equipment and buildings) as well as to consumer goods.
Material-intensive consumer goods may take the form of larger,
heavier products and more packaging.
(4) Consumers may be encouraged to buy more material goods and
less services. If material-intensive goods become relatively less
expensive compared with more labor-intensive services (or
leisure), consumers will tend to consume more of the former. To
the extent that the government sector bases decisions on relative
costs, public choices will be similarly skewed in the direction of
material goods.
In a "closed economy" or a relatively isolated nation that depended
primarily on domestic raw materials - a condition that characterized the U.S.
during most of its history - these types of price-induced effects would likely
be much more probable and pronounced. In a world in which there is
extensive international trade in a great many basic raw materials (for
example, see Table 5 in Chapter 2), the more competitive world prices will
exercise a moderating or controlling influence on domestic raw material
prices.
Empirically, there is still much to be learned about the quantitative
dimensions of these domestic and international economic effects. Because of
the complexities involved, no one has yet made comprehensive estimates.
However, several analyses have attempted to estimate the effects of extraction
industry tax subsidies on finished raw material prices and the rate of
recycling. Among the more well known are two studies for the Environmen-
tal Protection Agency: An Evaluation of the Impact of Discriminatory
Taxation on the Use of Primary and Secondary Raw Materials (1974), by
Booz, Allen and Hamilton; and Impacts of the Federal Tax Code on
Resource Recovery (1976), by the Environmental Law Institute. The most
recent is the aforementioned report by the U.S. Treasury Department,
Federal Tax Policy and Recycling of Solid Waste Materials (1979).
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The most carefully studied relationship has been that between tax subsidies
and material recycling. Based on conventional statistical-economic methods,
the general conclusion from several studies, including the Treasury's report,
has been that recycling of the major materials in solid waste would increase
by only a few percentage points, at most, if existing virgin material subsidies
were to be eliminated. The lower range of estimates has been a less thae one
percent increase for some secondary materials.
One principal reason for this lack of response in recycling is that the crude
raw material (mined ore, standing timber), of which the tax subsidy is a
relatively large percent, contributes only a modest fraction to the total cost of
the finished or refined raw material (steel, paper). Thus, the relative impact
of the tax subsidy on refined raw material prices is much less than its initial
percentage of extraction prices.
Another major reason for the relatively low estimates of recycling effects is
that most investigators have found low responses to market price changes
both on the part of manufacturing industries that can use secondary raw
materials and on the part of secondary material suppliers. These low "price
elasticities" of secondary material demand and supply have been estimated
by researchers applying statistical techniques to historical market data.
Though subject to various shortcomings, the methods represent the Haost
advanced quantitative approach available.
The "state-of-the-art" economic analyses thus predict a positive but
relatively small recycling impact from removing virgin material tax subsidies.
However, these conclusions should not be accepted without some
qualification.
In particular, the conventional econometric analysis underlying these
market estimates assumes highly competitive industries, using responsive
competitive prices as the principal means of allocating resources to the
production of virgin and secondary materials and of allocating supplies of
these competing raw materials among potential manufactured-goods mar-
kets. In reality, the major raw material industries in the United States are
heavily integrated "vertically" from virgin raw material extraction (both
domestic and foreign), to final finished material, and often into final manu-
factured goods as well. They are also highly concentrated "horizontally,"
with a small number of firms dominating each material market. For example,
eight major vertically integrated firms control 75 percent of the steel industry
in the United States, and in 1974, 85 percent of their iron ore consumption
came from company-owned sources.
Under these market structures, published prices of virgin crude materials
and of secondary materials may not reflect relevant opportunity costs or
retain their traditionally assumed significance in determining raw material
production and allocation decisions. Data on price and quantity relationships
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from these industries may also bias the results of econometric models
attempting to project responses to changes in subsidies.
The final report of the National Commission on Supplies and Shortages
suggested, but offered little evidence to support the thesis, that percentage
depletion and other tax subsidies have encouraged the growth of vertical and
kmzontai concentration in the primary materials industries. If true, these
subsidies may also continue to give the dominant primary material firms
reason to reinvest profits primarily into virgin resources and processing,
rather than towards competing secondary material supply sources or process-
ing technologies.
The dominant firms tend to control the major private sector sources of
funding for innovative activity in the material industries — invention,
research, development, marketing. If it could be demonstrated that basic
innovation is biased towards virgin materials by present tax subsidies, then
removing these subsidies could have a much more profound long-term
influence on secondary material recycling and conservation than the eco-
nomic models suggest. It is not possible, under present knowledge, to
demonstrate that the pattern of innovation in raw material processing and use
has in fact been significantly influenced by virgin material subsidies, although
this effect has been suggested by secondary raw material dealers.
Recently, in two of the most important modern examples of innovation in
the use of secondary materials, the Garden State Paper Company has
achieved full-scale commercial production of newsprint based on 100-percent
secondary fiber, and companies in the primary aluminum industry have
undertaken wide-scale recycling of aluminum beverage cans. Both cases are
of particular interest in that they also involve a new type of vertical
integration — not to domestic or foreign virgin raw materials but into
domestic systems of source-separated, post-consumer waste. In both in-
stances, the innovations were undertaken by companies that did not have
vertical control of a domestic virgin resource supply. In the case of Garden
State Paper, this innovation was achieved by a new entrant into the newsprint
sector, integrating backward from publishing operations, rather than the
traditional integrated forest-product firms. In the aluminum example, the
traditional primary firms do not have the low cost bauxite as a domestic
resource option.
Examples such as these suggest, though they certainly do not prove, that if
domestic virgin resource extraction were less encouraged by governmental
subsidy, the raw materials industries might shift their investment forms and
innovational efforts somewhat more towards secondary materials.
The general conclusion of the analysis is that removal or reduction of
existing Federal tax subsidies to the extraction industries would conserve
domestic natural resources, save energy, and reduce the domestic environ-
mental damages associated with basic material extraction and processing.
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The extent of these conservation effects is somewhat uncertain, but the
preponderant available evidence suggests rather weak effects on overall
material consumption and recycling, at least in the short to medium term for
which predictions have been made.
Other Policy Issues
In addition to natural resource and environmental implications, several
other economic, social and administrative consequences of virgin material tax
subsidies were also reviewed by the Committee:
Free Market Principles; Economic Efficiency. Economists have long
argued that subsidizing domestic virgin materials tends to reduce national
economic welfare by encouraging an inefficiently high investment in develop-
ment and use of those materials at the expense of other sectors. In effect,
subsidies distort free market choices of "what to produce" and "how to
produce" by favoring some products and raw materials over others. In
addition, to the extent that these subsidies have artificially stimulated those
economic sectors (primarily basic mining, processing, and energy) that have
the most adverse domestic environmental effects, they contribute to the
economic costs of pollution. Thus, removal of these subsidies would be
entirely consistent with the principles underlying a competitive market
economy, thereby contributing to improved overall allocation of the nation's
resources.
The "Polluter-Pays" Principle. Subsidy approaches are generally contrary
to the "polluter-pays" principle: they substitute payments by taxpayers for
payments by beneficiaries of the subsidized activity.
Social and Economic Equity. Tax subsidies to virgin materials raise
several issues concerning economic equity or justice. Those noted in the
literature include transferring income from general taxpayers to the windfall
benefit of the favored landholders and benefiting larger integrated companies
over smaller, nonintegrated competitors in the forest products industry.
Secondary materials producers have long argued that their competitive
position in materials markets has been diminished by subsidies to virgin
materials.
In addition, some have argued further that the present tax subsidies hasten
natural resource depletion and environmental degradation, thereby impover-
ishing future generations and contributing to "intergenerational inequity."
Others have argued that this has not been demonstrated historically, at least
in relation to material availability, pointing out that technological innovation
has enabled use of lower grade resources and provided substitutions at equal
or lower cost.
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Administrative Feasibility and Cost. There is little question that the
present tax subsidies complicate the tax code and raise administrative costs of
the Internal Revenue Service for review and monitoring. Although there is no
present estimate of the amount of these costs, removing these provisions
could only increase the efficiency of the tax collection system. However,
simply reducing the level of the subsidies (for example, by reducing the
percentage rates for depletion allowances) would probably have little or no
effect on administrative costs, although it would result in increased net tax
revenue.
The Department of the Treasury has also pointed out that, in this context
and many others, providing subsidies to industries through tax deductions is
more costly to the government than an appropriated (direct) subsidy of the
same budgetary cost (see Chapter 5).
Committee Findings
Based on staff analysis conducted by the Treasury Department and other
considerations, the Resource Conservation Committee finds that:
• Several Federal tax subsidies significantly reduce supply costs for
domestic virgin materials. Important among these are:
- percentage depletion for minerals
- favorable tax treatment of mineral exploration and development
costs
- capital gains treatment for timber
- mismatching of income and expenses in timber growing and
harvesting.
• Such subsidies encourage overuse of virgin domestic resources. How-
ever, the negative effect on recycling appears to be small (less than 5
percent), although significant uncertainties exist in analyses of the
elasticities of domestic and foreign supply and of substitution be-
tween virgin and recycled materials.
• As presently designed, these subsidies are not cost effective compared
to appropriated subsidies with the same budgetary cost.
• There is no public policy justification for subsidizing virgin materials
over secondary materials.
• Removal of these subsidies would probably increase imports of iron
ore, copper, lead and zinc; it would decrease export volume in
phosphate rock and timber.
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Committee Recommendations
Only one member of the Committee is prepared to make an immediate
recommendation for elimination or modification of the tax subsidies pres-
ently granted to the domestic virgin materials extraction industries. This
member asserts that Federal tax policies should be neutral, and therefore not
favor domestic natural resource development or virgin materials. On the
other hand, only one member specifically recommends that no changes be
considered at the present time, citing estimates of low impacts on recycling
and general uncertainty about what the other effects of such an action would
be.
All the members agree, however, that the issue of reducing existing Federal
tax incentives for extraction industries is worthy of further consideration.
Eight members join in recommending that the arguments for revising virgin
material tax policy be included in a broad review of U.S. minerals policy.
They therefore recommend that the Administration's (interagency) Task
Force on Non-Fuels Minerals Policy, upon completion of an analysis of this
subject by the Treasury Department, consider elimination or modification of
these tax subsidies in light of overall national objectives such as resource
supplies, environmental protection, economic health, and national security.
Four of those members recommend further that the Administration under-
take such a review as part of the next tax reform package. The ninth member
of the Committee stressed that any further study or other consideration
should include public participation.
Extraction Taxes on Virgin Materials
If the nation should decide to pursue a more aggressive resource conserva-
tion policy, one option to consider would be disincentive taxes applied to
virgin material extraction. The purpose of such taxes would be to slow the
rate of domestic natural resource development by increasing the prices of
domestic virgin materials, thereby discouraging the demand for them in less
essential uses.
Several State governments have long employed severance taxes on mining
operations in order to raise revenue. These taxes are levied at relatively low
rates so as not to discourage production and are sometimes used as a
substitute for property taxes. The Federal government does not presently levy
such taxes, although from an administrative standpoint the strip-mine
restoration tax and the royalty fees charged some private mining operations
on Federal lands are similar in form and point of application.
Interest in national extraction, or "severance," taxes has been stimulated in
academic and conservationist circles by the recent work of Talbot Page at
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Resources for the Future and others on intergenerational equity in the use of
natural resources and long-term conservation policy. In that context, the
term "severance tax" has been used broadly to refer to the concept of
applying unit or value taxes at the point of raw material extraction. The
Resource Conservation Committee has used the broader term, "extraction
taxes," to refer to this concept, because traditionally severance taxes have
applied only to mining and because they may also, according to some writers,
involve Constitutional implications which limit their use to State govern-
ments. For present purposes, then, the Resource Conservation Committee
has viewed extraction taxes as Federal excise taxes on the output or sales of
timber or material obtained through mining.
As discussed in Chapter 2, there are several reasons why it might become
desirable to slow the rate of virgin material use. One reason, for example,
might be a desire to restrict production and use of virgin materials in the
short run as a means of encouraging development of substitute materials and
technologies; this could be a way to relieve future pressures on natural
resources and stabilize real costs of materials in the long run. Efforts to
restrict current virgin material use demonstrate a conservative preference to
reduce risks of future resource exhaustion or shortage in an uncertain world.
Another reason is that it may be desirable at some time to employ a general
strategy of restraint on material use as a long-term environmental protection
measure and as a way of reducing the total cost of pollution control and land
protection. All of the rationales cited presuppose a long-range viewpoint and
a sense of conservatism regarding future material use and environmental
prospects.
If the policy were intended to conserve domestic virgin resources only,
then the tax would only have to be applied domestically. However, if the
objective of the policy were to reduce all domestic use of virgin material (both
home and imported), then taxes or other restrictions would also have to be
applied to imported virgin materials and to imported goods containing virgin
materials.
As noted previously, the Resource Conservation Committee's interest in
extraction taxes as a conservation policy was primarily exploratory, and staff
work was limited to a conceptual evaluation of general feasibility and
impacts. Staff Background Paper No. 19, "A Conceptual Evaluation of a
National Virgin Material Extraction Tax as a Resource Conservation Pol-
icy," presents the results of the staffs analysis.
Consequences of Extraction Taxes
In principle, extraction taxes should produce the same general types of
responses as those indicated for virgin material tax subsidies discussed
previously, but in the reverse direction. In a closed economy (no international
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trade) the economic theory of substitution suggests that if a virgin materials
extraction tax were imposed:
1. Products and service systems would be designed to use less
material per unit of product or service provided.
2. Raw material processing would tend to be performed more effi-
ciently from a materials standpoint, leaving less process waste and
requiring less raw material per unit of finished material.
3. Consumers (both private and government) would be encouraged
to buy fewer (and less material-intensive) goods and more services.
In certain instances, the population might choose more leisure and
less consumption.
4. Secondary (recycled) materials would be used more extensively in
place of virgin materials.
In an open economy (with international trade) the country would import
more and export less of the taxed domestic raw materials and products
manufactured from them. If imported materials and goods were also taxed,
imports might not increase, but exports of raw materials and products
manufactured from them would still be reduced.
The net effect of taxing both domestic virgin materials and imported goods
and materials would be a less "material-intensive" economy. A given level of
gross national product would require less in the way of natural resources to
sustain it, and would generate a lower rate of waste products and pollutants.
In addition, energy use would be less, partly because material use and
industrial energy requirements are complementary and also because second-
ary material supply systems typically use less energy than virgin material
supply operations. However, some uses of energy substitute for materials or
consumption of goods, at industrial or household levels, and the net effects
would have to be studied in detail empirically to reach firm conclusions.
Much of the impact of extraction taxes depends on the role and responsive-
ness of foreign trade. If foreign sources of the taxed virgin materials are
readily available at competitive cost, unrestricted by import quotas or tariffs,
then import substitution would partially or substantially short-circuit the
impact of the tax on material and energy use. The use of domestic virgin
material would still be expected to decline, but changes in overall raw
material and energy prices would be tempered by imports, thus weakening
the market incentives for greater efficiency in material use and for increased
recycling. Thus, under free trade, many of the conservation objectives of an
extraction tax policy — especially those related to waste generation and
domestic pollution control — could be largely unattainable.
Moreover, under free trade, part of the price of using extraction taxes for
conservation purposes could be a shift in the balance of payments and a
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possible reduction in the international value of the dollar. Clearly, in
addressing extraction taxes, policymakers would be well advised to consider
imposing an equalizing import tariff on raw materials and/or rebating the tax
for materials and products exported to neutralize the foreign trade
implications.
The Committee staff did not develop numerical estimates of the effects that
extraction taxes might have on virgin material use or other economic and
environmental consequences. Some inferences can be drawn, however, from
the analyses of existing tax subsidies noted previously in this chapter.
Basically the "econometric" analyses indicate that the economy would be
relatively unresponsive to virgin raw material price increases. If true, this
would mean that very high tax rates, perhaps 10 to 50 percent of the value of
mineral or timber production, might be required to achieve "meaningful"
conservation results (say, 2 to 5 percent reduction in virgin material
extraction). There is considerable room for uncertainty and speculation
concerning these relationships, and more work would need to be done before
drawing any firm conclusions.
Other Policy Issues
In addition to examining their implications for conservation and the
environment, the staff also evaluated extraction taxes from the standpoint of
economic efficiency, social equity, and administrative practicality.
Free Market Principles; Economic Efficiency. Extraction taxes would be a
major intervention by the Federal government into the private market system
of resource allocation. However, given a national decision to pursue a policy
of material conservation, extraction taxes would be generally consistent with
decentralized decisionmaking and free-market resource allocation.
In contrast with other policy options for regulating virgin material
production or use, such as production quotas or rationing, extraction taxes
would preserve the traditional role for the private sector regarding how
natural resources are to be allocated among products. In essence, national
priorities regarding how much domestic virgin resources to consume could be
influenced through extraction taxes, while leaving choices about specific
allocations to the marketplace. In theory, this would represent a minimal
interference with the efficient operation of the market economy.
The "Polluter-Pays" Principle. If extraction taxes were adopted to mini-
mize the environmental damage associated with material use, they would be
consistent with the polluter-pays principle. Otherwise the polluter-pays
principle would not be relevant to extraction tax policy.
Social and Economic Equity. The primary short-run equity issue involved
in levying extraction taxes involves windfall gains and losses. The major
losers would be the owners of those mine and forest properties that would be
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hurt by the decrease in value of properties made less profitable by the tax
policy. Principal short-term gainers would include owners of virgin materials
overseas if imports were not taxed and exports were not credited and those
with present investments in domestic secondary material supply systems if
imports were taxed.
If the negative effects on mining or forest investment were substantial and
if the transition occurred rapidly, there could also be locally concentrated
unemployment and other adverse community impacts. The Committee did
not study these effects.
In the long term, future generations of Americans would presumably be
better off because they would inherit a less depleted or degraded endowment
of natural resources than they otherwise would have. On the other hand,
because the rate of natural resource development and consumption would
have been slowed and more expensive methods of providing goods and
services would have been substituted, present generations would probably
have had to accept a somewhat lower standard of living.
Administrative Feasibility and Cost. Extraction ("severance") taxes have
long been used by State governments, suggesting that they are feasible from
an administrative and enforcement standpoint. It is also possible that, once
implemented, a well designed extraction tax might be less complex and costly
to administer than the present tax subsidies for the extraction industries.
However, if the conservation tax policy also involved a system of tariffs or
quotas on virgin material and product imports to complement domestic
extraction taxes and a rebate for exports of goods and materials,, the
administrative considerations would be very complex. Since the Committee
has not investigated these considerations in any detail, no firm conclusions
are warranted.
Committee Findings
As a result of their evaluation, the members of the Resource Conservation
Committee reached the following findings regarding virgin material extrac-
tion taxes:
• Virgin material extraction taxes, accompanied by complementary
tariffs, would make virgin materials more expensive and encourage
resource conservation. However, the RCC did not undertake specific
quantitative studies to estimate the reduction in consumption that
might accompany the taxes.
• If virgin material extraction taxes are not matched by tariffs on
imports, domestic production could be at least partially displaced by
imports of materials and fabricated goods.
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• Administration of a set of complementary virgin material extraction
taxes and tariffs would be complex.
• The virgin material extraction tax concept runs directly counter to
existing Federal tax policy, which encourages domestic virgin re-
source use.
• Virgin material extraction taxes could be the most direct and broadly
based financial incentive to accomplish resource conservation.
• Virgin material extraction taxes which are large enough to signifi-
cantly affect domestic resource use would cause economic disloca-
tion in the extraction industries and in some communities unless
phased in over time; they would also lower living standards in the
short run.
Committee Recommendations
None of the members of the Committee favor recommending that virgin
material extraction taxes be developed or proposed at this time. Two
members, however, endorse taxes on virgin material extraction as a potenti-
ally useful tool to encourage resource conservation; one of these members
recommends further study.
Two members oppose virgin material extraction taxes generally, although
one of them also recommends further study. One other member also
recommends further study to determine the specific impacts of the taxes,
without taking a further position at this time.
Six members of the Committee emphasize that existing tax policies to
encourage virgin material production should be eliminated before any new
extraction taxes are considered further. Taxing virgin material extraction to
foster resource conservation would be virtually the reverse of the present tax
advantages enjoyed by the extractive industries.
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RESOURCE RECOVERY POLICIES
One method of conserving virgin materials without having to "make do
with less" is to recycle materials. Today the United States reclaims only about
8 percent (by weight) of its municipal solid waste — tin cans, bottles, paper,
refrigerators — to recover the resources contained in them. We simply throw
away the other 92 percent.
The Resource Conservation Committee examined a number of policies
that might lessen the financial or technical impediments to resource recovery.
The three policies discussed in this chapter — subsidies for resource recovery,
revision of railroad freight rates that may discriminate in favor of primary
(virgin) over secondary (recycled) materials, and product design regulations
— have increased resource recovery as their explicit goal, although many of
the other policies the Committee studied would also have a similar effect.
The Committee defined subsidies for resource recovery as explicit Federal
payments or tax advantages which are specifically granted to promote
resource recovery. These payments shift part of the cost of recovering
materials or energy from producers and consumers to taxpayers. The
subsidies studied by the Committee do not include assistance specifically for
research and development or for technological improvement, although these
are undeniably forms of government subsidy.
With respect to freight rates for primary materials, scrap dealers and their
trade associations have long alleged that railroads have systematically
charged higher freight rates relative to costs for transporting secondary
materials than for their primary material counterparts. If the allegation is
true, and if, moreover, the differences are unwarranted, substantial, and
systematic, the structure of railroad freight rates could be artificially encour-
aging use of virgin materials at the expense of reclaimed materials. This
disparity, in turn, would interfere with more fully recycling our wastes. The
issue has been under review by the Federal Courts and by the Interstate
Commerce Commission, the Federal agency responsible for regulating rail-
road rates. The Resource Conservation Committee had a direct interest from
the standpoint of whether existing public regulatory policy might be operat-
ing against material conservation.
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Product regulation is a broad term which, in general, refers to direct,
mandatory controls restricting the design, manufacture, or use of consumer
products. Product design regulations could be used as a resource conserva-
tion tool in two principal ways: (1) to promote a reduction in the rate at which
resources are consumed and wastes are generated (e.g., by requiring the
production of reusable or more durable products or by requiring product
designs which reduce the quantities of material used per unit) or (2) to
promote the recovery of energy and materials from the waste stream once
generated (e.g., by prohibiting materials or designs that inhibit resource
recovery or by requiring the use of recovered materials in manufacturing).
Although all of these policies are aimed at increasing the rate of resource
recovery, they would achieve that end through very different means. Subsid-
ies for resource recovery would be a positive step on the part of the Federal
government to encourage the development and use of resource recovery
systems. Product design regulations would also be an explicit measure to
stimulate either the use of less virgin materials or the supply of or demand for
recycled materials. Removing any discrimination in the setting of freight
rates would neutralize existing Federal policy by removing an artificially
created competitive disadvantage.
The Committee found that all three policies could be effective in furthering
resource recovery. The complete evaluation, which is summarized in the
following sections, led the Committee to recommend only more study of
subsidies and product regulations, however, since economic, administrative,
and other problems do not make them suitable to recommend at this time.
The Committee found that freight rates probably discriminate against many
secondary materials, although not all. However, subsequent to the Commit-
tee's analysis and final deliberations, the Interstate Commerce Commission
recently ordered widespread reduction in secondary material railroad freight
rates. Although the reductions are generally consistent with resource conser-
vation objectives, the Committee did not have an opportunity to review and
comment on them in detail.
Subsidies for Resource Recovery
Governments frequently supply economic assistance — subsidies — when
they wish to encourage behavior that would be difficult to bring about
without the assistance. Grants to communities to build wastewater treatment
plants are a typical example: the Federal Government supports a policy
(preventing water pollution) that would be difficult to carry out without
intervention. With respect to resource recovery, the government could use
subsidies to encourage the creation and operation of facilities for processing
mixed municipal wastes or to encourage source-separated materials recovery,
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which would involve public education on how to separate materials as well as
facilities to recover materials from the separated wastes.
Although the Committee found that subsidies could be effective in promot-
ing resource conservation, it does not recommend subsidies at this time,
primarily because of the costs involved. These costs can include not only the
direct budgetary costs to the government, but also indirect costs; for example,
one might ask if it is fair for all taxpayers to pay for subsidies that benefit only
a few. Transferring the cost burden for subsidized resource recovery to all
taxpayers would violate the "polluter pays" principle. Subsidies also disrupt
normal market operations and in some cases may encourage levels of
recycling that could cost more to subsidize than they return in benefits.
The Committee elected to defer recommending further subsidies until such
time as the government judges that it would be to the public good to have
more recycling than the market itself and present subsidies provide.
Although the Committee did not favor recommending new subsidies, it did
evaluate different forms that a subsidy might take, should it later become a
national priority to increase recycling through subsidization. The RCC did
not attempt to analyze in depth any questions of detailed policy design or
cost-effectiveness. Within those restrictions, the Committee staff evaluated
ten forms of government subsidies for resource recovery in Staff Background
Paper No. 15 "Preliminary Staff Report on Recycling Subsidies." The ten
general forms, and a definition of each, appear in Table 7.
The Department of the Treasury report, previously referenced in Chapter
4, Federal Tax Policy and Recycling of Solid Waste Materials, also covers
many of the same subsidy topics as the RCC staff report and reaches similar
conclusions.
Characteristics of Subsidies
The ten subsidies share several characteristics that allow us to classify
them. Table 8 sets out one arrangement. Subsidies can be classified by
whether they relate to capital (plant, equipment) or to throughput (quantity
or value of material sold, purchased, or processed). Of the 10 subsidy forms
listed in Table 7, cash bounties for recycled materials and tax credits for
recycled materials are throughput or operating subsidies; the remaining eight
are capital subsidies.
Those who believe that an initial reduction in facility or equipment costs is
necessary generally advocate capital subsidies. That stress on investment,
however, encourages the construction of resource recovery facilities that have
higher capital costs as a percent of total costs than might otherwise be the
case.1 The resulting technological bias can lead to premature replacement of
existing facilities and failure to adopt systems (including labor-intensive
1 See, especially, Federal Tax Policy and Recycling of Solid Waste Materials, Chapter 4; Department of
the Treasury, February 1979.
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Table 7
SUBSIDIES EXAMINED
BY THE RESOURCE CONSERVATION COMMITTEE
Type of Subsidy
Definition
1. Construction and
Equipment Grants
Outright cash payments by the Federal government to private groups or individuals
or to states or municipalities; reduces out-of-pocket costs of building resource
recovery facilities or purchasing equipment.
2. Construction and
Equipment Loans
Loans by the Federal government to cover costs of constructing plants or purchasing
equipment; provides financing for resource recovery facilities when the risk is too
high for a private lending institution or provides financing at a lower rate of
interest than that prevailing in the market.
3. Loan Guarantees
Promises by the Federal •jvernment to make payment to the lending institution if
the borrower defaults on a loan; lowers the risk to the lending institution and
therefore makes financing less costly or more available than it otherwise might be
(similar to #2 in effect).
4. Investment Tax
Credit
A provision in the Internal Revenue Code which would allow investors to pay a
smaller tax on earnings from an investment in resource recovery than they would
on other earning; encourages investment in resource recovery facilities.
5. Accelerated
Depreciation
A provision in the Internal Revenue Code which would allow depreciation on resource
recovery plants and equipment to be written off sooner rather than later; defers
tax payments to the later years in the life of the facility than would otherwise be
the case and thus reduces the cost of recovering energy or materials.
6. Tax-Exempt Bond
A provision in the Internal Revenue Code which exempts interest earned on State
and municipal financial instruments from federal income taxes; enables States
and municipalities to raise capital at a lower rate of interest.
7. Industrial Financial instruments which raise capital for private business enterprises but are
Development Bonds nominally issued by state or local governments; allows private businesses to take
advantage of state or local bond tax exemption and thus build resource recovery
facilities at lower costs.
8. State and Local Partial payment by the Federal government of interest due on a taxable obligation;
Taxable Bond Option reduces the costs borne by states or municipalities of resource recovery plant
construction.
9. Cash Bounties for
Recycled Materials
Direct cash payment by the Federal government to a private firm, State or
municipality engaged in resource recovery, based on the amount of recycling
achieved; reduces the marketing cost of recycling materials and the out-of-pocket
purchase prices of recovered materials.
10. Tax Credits for
Recycled Materials
A provision in the Internal Revenue Code granting a credit to a taxpayer based on
the amount of recycling achieved or on the volume of recycled material used;
encourages recycling by lowering tax liability.
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Table 8
CLASSES OF SUBSIDIES
Capital Throughput
Construction and Cash Bounties for
Cash Equipment Grants Recycled Materials
Credit Construction and
Equipment Loans
Loan Guarantees
Investment Tax Credits Tax Credits for
Recycled Materials
State & Local Taxable
Bond Option*
Tax
Accelerated Depreciation
Industrial Development Bonds*
Tax-Exempt Bond Financing*
* Subsidies marked with an asterisk are also credit-capital subsidies: they encourage investment by giving
the investor a tax break on the income from the investment. The effect is to make financing available at an
interest rate that is less than the prevailing private market rate.
solutions) which minimize total cost. Operating or "throughput" subsidies
avoid this technological bias, since capital-intensive as well as labor-intensive
processes compete for the subsidy on a least-total-cost basis.
A second method of distinguishing among subsidies is by type of transfer
mechanism, i.e., whether they involve (1) cash payments (construction and
ec, sipment grants, cash subsidies for recycled materials); (2) credit arrange-
ments (construction and equipment loans, loan guarantees, industrial devel-
opment bonds, tax-exempt bond project financing); or (3) reduction in tax
liabilities (investment tax credits, accelerated depreciation, State and local
taxable bond option, tax benefits for recycled materials). (See Table 8.)
Cash subsidies include not only direct cash payments to private sector
firms and individuals, but also direct grants from the Federal government to
States or municipalities. Depending on their design, cash subsidies can be
limited or open-ended in terms of the amount of funds made available, and,
compared to other types of subsidies, can be changed fairly easily over time
(e.g., through budgetary amendments).
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Credit subsidies arise whenever the government enters a loan transaction
to lower the rate of interest below what the borrower would otherwise pay.
Credit subsidies can take the form of direct loans, involving the flow of funds
from and back to the government; interest rate subsidies; or loan guarantees,
which involve the transfer of funds only if the recipient defaults on a loan
from another source.
A tax subsidy is a special provision in the tax code which allows an
individual or a company that engages in a specified activity covered to make a
smaller tax payment to the government than would otherwise be required.
For example, the Energy Tax Act of 1978 provides for a 10 percent business
tax credit for investment in equipment which recycles solid waste or recovers
energy from waste.
The Committee found several inherent weaknesses in tax subsidies. There
is no fixed budget ceiling, because the amount of the subsidy is typically open-
ended, depending on the level of economic activity. Furthermore, unless
there is a fixed time duration specified in the law, tax subsidies are also open-
ended in time, remaining in the Internal Revenue Code until removed. In
addition, this form of subsidy does not fall under the same scrutiny as
budgeted items, because it does not involve annual appropriations. Therefore,
the Committee considers appropriated subsidies — for which specific
amounts are set aside for each government program, all of which must
compete for funding with other programs — more desirable.
A third way of distinguishing among subsidy programs is to separate them
into two categories which the Committee chose to call "short-term" and
"long-term." Subsidies designed to help overcome barriers to the commence-
ment of resource recovery (examples are technical assistance, research and
development, local implementation planning, and aid to newly developing, or
"infant" industries) are "short-term" assistance; the others provide continu-
ing, and usually much more costly, assistance over the "long-term," as is the
case with capital and operating subsidies. All of the subsidies the RCC
evaluated were of the "long-term" type.
While the Committee did not look favorably on the idea of establishing
new "long-term" subsidies, it did point out that "short-term" subsidies can be
an appropriate and useful way of helping to launch resource recovery
activities that will later be self-supporting. An example of this "short-term"
approach is a current Federal program of grants to help local governments
plan for resource recovery. These grants, which are authorized under the
Resource Conservation and Recovery Act, and were developed as a part of
the President's Urban Policy, amounted to $15 million in Fiscal 1979.
Administering Subsidies
The prospect of subsidy programs for resource recovery raises a number of
administrative issues. For instance, equipment purchased to process second-
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ary materials can sometimes process virgin raw materials as well. Policymak-
ers must decide how much of the capital subsidy should be allowed for this
dual-use equipment.
Similarly, if the government designs an operating subsidy to apply to a
specific type of solid waste (say, post-consumer solid waste), then post-
consumer materials must be distinguished from the same materials obtained
from other types of waste (e.g., industrial solid waste). These different names
for what is physically the same substance may create severe administrative
problems in practice: shredded steel from junked automobiles may be similar
to "new" or "prompt" shredded ferrous scrap from an industrial fabricating
source.
These difficulties in administering capital and operating subsidies suggest
that a potentially expensive inspection system would be necessary to insure
that the objectives of the subsidy are in fact being met.
Many innovative subsidies (as opposed to more traditional tax write-offs)
would require the administering agency to establish a new and perhaps
complex organizational structure in order to distribute funds and monitor the
activities of the recipients. Tax subsidies do have the advantage of using
existing Internal Revenue Service procedures to deliver the benefits to private
enterprises. However, the fact that another Executive Branch agency must
help the IRS to draft the regulations and possibly to certify claims by the
recipients diminishes the advantage of tying into a well-established program
(e.g. tax subsidies). The additional cross-agency coordination could well
strain the mechanism for granting the subsidy.
In brief, the Committee's finding that appropriated subsidies are more
desirable than tax subsidies stands, even taking administration into account.
Other Policy Issues
In addition to their implications for conservation and resource recovery,
the Committee also evaluated subsidies for their consistency with its five
criteria.
Free Market Principles. While subsidies take advantage of certain aspects
of the free market, they are a direct public intervention into the free market.
By lowering the effective market prices of resource recovery, subsidies would,
through normal market responses to price and cost, encourage resources to
flow into the secondary materials sector. Thus, while subsidies affect prices,
they do not affect the mechanisms by which the market adjusts to prices. For
these reasons they are often preferred to direct regulation as a means of
accomplishing public policy goals.
The "Polluter-Pays" Principle. Subsidy approaches are generally contrary
to the "polluter-pays" principle: they substitute payments by taxpayers for
payments by beneficiaries of the subsidized activity.
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Social and Economic Equity. Public subsidies generally shift the cost of
resource recovery activities from those most directly involved to the public at
large. To the extent that this causes some specific groups or firms to benefit at
the expense of others, they may be considered inequitable.
Economic Efficiency. Subsidies for resource recovery could offset losses in
economic efficiency arising from existing government policies that encourage
virgin material extraction (such as discriminatory rail rates, percentage
depletion allowances, and capital gains). In the absence of those other
policies, however, a program of subsidies for resource recovery would
generally not improve economic efficiency. Subsidies would direct economic
resources away from other sectors and into resource recovery by changing
effective market prices. This would be considered an improvement in effi-
ciency only if the subsidies had been adopted in the first place as a measure to
correct a perceived market failure (and, of course, if no new inefficiencies are
created). In most instances, subsidies are not enacted for this reason, but
rather to further some national goal.
Administrative Feasibility and Cost. It is feasible to administer subsidies,
as demonstrated by Federal government subsidy programs in areas other
than resource recovery. Administrative costs and the benefits derived will
vary for each type of subsidy, making it very difficult to generalize about the
relative significance of the costs.
Committee Findings
The Committee concluded the following with respect to subsidies for
resource recovery:
• Subsidies for resource recovery can be an effective although potenti-
ally costly tool to stimulate resource conservation.
• Subsidies can be particularly useful in the "short term" to help local
governments plan resource recovery operations and to aid the
development of "infant industries."
• Subsidy programs should be designed so as not to create undue biases
towards capital intensive solutions.
• Appropriated subsidies are preferable to tax subsidies.
• The Federal Government currently has two subsidy programs for
resource recovery: differential tax treatment of capital investment
and grants for demonstration projects and local implementation
planning.
• Subsidy approaches are generally contrary to the polluter-pays princi-
ple: they substitute payments by taxpayers for payments by benefici-
aries of the subsidized activity.
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Committee Recommendations
Having found that subsidies designed specifically for resource recovery can
be an effective, although potentially costly, tool to stimulate resource
conservation, the Committee nevertheless unanimously agrees that no new
specific subsidies should be proposed at this time.
However, because there are many ways that subsidies might be used for
resource recovery and many people feel that further research is needed on the
subject before firmer conclusions can be drawn, only two members are willing
to take positions on the overall advisability of instituting subsidy programs
specifically for resource recovery. One member gives general endorsement to
the use of subsidies as a tool in this area, while the other recommends against
any form of specific subsidy and further recommends repeal of existing
subsidies, seeing no need for them. Five members join in calling for further
study.
Some of the members wish to state the conditions under which they would
consider adopting subsidies and the types of subsidies they would prefer if
subsidies are adopted. Four members are willing to endorse subsidies as a last
resort in order to offset existing virgin material economic advantages (e.g.,
tax advantages, freight rates, municipal solid waste costs). One of these
members also emphasizes that subsidies can be appropriately employed in the
technology development process. Three members specifically recommend
that any future subsidies be designed to avoid undue biases toward large
scale, capital-intensive solutions, citing significant opportunities in this area
for small scale and more labor-intensive technologies.
Railroad Freight Rate Discrimination
Transportation typically accounts for a very large fraction (often over 50
percent) of the delivered cost of crude raw materials like mineral ores, timber,
and most types of scrap. These basic commodities are shipped in bulk, and
longer distance shipments usually travel by rail or water to minimize costs.
Ideally, competition among carriers would cause all shipments, of what-
ever material, to travel at prices that just cover all costs (including normal
profit) necessary to ship the individual raw materials. However, to the extent
that different commodities or shippers are charged rates that differ relative to
the required costs incurred by the carrier, a condition exists that economists
refer to as freight rate "discrimination." If substantial and systematic, rate
discrimination can be considered unfair to competition among shippers, and
it can also contribute to inefficient allocation of resources among products,
consumers, transportation modes, or geographic regions.
The Resource Conservation Committee addressed the question of railroad
freight rate discrimination because of a long-standing concern that railroad
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rate-setting practices in the United States may in fact have resulted in
discrimination against shipments of secondary (recycled) materials to the
competitive advantage of virgin raw materials.
From the Committee's viewpoint, the central issue was not so much the
question of economic efficiency or fairness, but rather that unwarranted rail
rate discrimination may be contributing to an unnecessarily rapid rate of
natural resource use and consequent environmental degradation. Moreover,
since railroad shipping rates have long been regulated by an agency of the
U.S. Government, the Interstate Commerce Commission (ICC), this may
have been a situation in which the Federal government itself has been
working against natural resource conservation.
Recent Developments
In fact, Congress firmly enunciated national policy on secondary material
rail rate discrimination in 1976, following several years of debate, when it
included Section 204 in the Railroad Revitalization and Regulatory Reform
Act (P.L. 94-210), often referred to as the "4R Act." In Section 204,
Congress responded favorably to long standing allegations of discrimination
by scrap material dealers and environmentalists, by specifying that railroad
rate setting should not discriminate against scrap materials, and, further, by
requiring that the ICC investigate current practices and revise any rates or
practices found to be discriminatory.
Following its investigation, the Commission returned its initial ruling in
early 1977. Referred to by the Commission's case docket number, "Ex Parte
319," the ruling stated that the existing rates were not "discriminatory"
under the Commission's definition of the term. In Ex Parte 319, the
Commission basically reaffirmed its traditional position that three conditions
must hold for a finding of rate discrimination. Thus, not only did the
Commission have to find (1) disparity in rates not justified by costs, but it also
had to find (2) that the materials in question did in fact "compete" by being
physically used or potentially usable in the same technological process, and
(3) that the rate disparity must also significantly and adversely affect
competition on the part of the secondary material shipper (i.e., that damages
be shown).
The ICC ruling was appealed to the U. S. Courts by two secondary
material industry trade associations, the National Association of Recycling
Industries (NARI^and the Institute of Scrap Iron and Steel (ISIS). The U. S.
Department of Energy (then the Federal Energy Administration) and the
Environmental Protection Agency joined to support the trade associations'
position that a broader definition of competition should rule (that is, one that
includes competing technologies and final products), and that the intent of
Congress did not require proof of damages. In August 1978, the U.S. Court of
Appeals for the District of Columbia ordered the ICC to reexamine these
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rates, looking particularly at the question of comparative costs and revenues
associated with transporting virgin and secondary materials. Furthermore,
the Court did not accept the ICC's narrow interpretation of material
competition, affirming the broader interpretation argued by the secondary
material industries. In addition, the Court held that under the 4R Act the
burden of proof was shifted from the shipper, who should not have to show
damages for a finding of discrimination, to the railroad, which should have to
justify any rate differentials not based on cost.
The Court of Appeals thus reaffirmed Congress' intent to end rate
discrimination between virgin and secondary commodities, stipulating that
rate differentials unjustified by cost constitute prima facie evidence of
discrimination, and returning the case to the ICC for further proceedings.
Operating under a Court-imposed deadline, the Commission reopened the Ex
Parte 319 investigation to obtain further evidence, and issued a new decision
on April 16,1979.
In this latest action, the ICC found, in accordance with the Court's August
decision, that several secondary commodities suffered rate discrimination
relative to the competing virgin materials, and ordered reductions in second-
ary material rail rates to equalize the relationship between rates and variable
costs on a regional basis. On grounds of discrimination, the ICC ordered
secondary material rates to be reduced on scrap iron and steel (south and
west); aluminum scrap (east and south); copper and alloy scrap (west); lead,
zinc, and alloy scrap (south); and wastepaper (west and south). Because of
time limitations these decisions were based on previously gathered data on
revenues and costs, updated by the Commission.
In a companion issue the Commission also reviewed the "reasonableness"
of secondary material rail rates relative to variable costs of shipping.
(Variable costs represent costs directly attributable to specific shipments as
opposed to more general fixed overhead costs and return on investment.) In
all instances where secondary material ratios of revenue to variable cost were
greater than 180 percent, the Commission ordered them reduced to that level,
taking 180 percent to be "reasonable" from the standpoint of the railroads'
recovery of fixed costs and profit. The secondary material trade associations
objected to this position and immediately (April 17) filed a complaint in the
U.S. Court of Appeals, arguing that "reasonableness" should mean a ratio of
revenue to variable cost of 127 percent, the estimated nationwide average for
all commodities.
Scope of RCC Analysis
The Resource Conservation Committee studied only the question of rate
discrimination and did not assess either the issue of "reasonableness" of
secondary material rates or the broader subject of the implications of railroad
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deregulation for natural resource conservation. Moreover, due to the fact that
the Committee conducted its analysis before the 1978 Court of Appeals
ruling, the analysis was focused primarily on an examination of then-
available ICC evidence on discrimination and an evaluation of general
implications for resource recovery and conservation. The staff did not
attempt to evaluate all secondary commodities, but focused principally on
major obsolete or "old scrap" materials.
Railroad rate setting is an inherently complex procedure, involving varia-
tions in volumes, distances, alternative routings, and special handling and
transfer characteristics of specific commodities. Thus, straightforward com-
parisons of freight rates and tons shipped between virgin materials and scrap
commodities are seldom very meaningful. In addition, although fairly easy to
define in the abstract, the concept of rate discrimination itself has not been
easy to translate into workable cost-accounting terms as a basis for practical
measurement.
Most students of the subject appear at least to agree that the issue in fact
relates to the comparative relationship between rates charged and shipping
costs incurred, although some would argue that available cost accounting
data are not adequate to make proper judgments. As a measure of this
relationship, comparison between the competing commodities' revenue-to-
variable-cost ratios has gained increasing acceptance as a working basis for
defining and measuring the extent of rate discrimination. Hence, if the
revenue-to-variable-cost ratio is consistently higher for shipments of a
secondary material than for its primary counterpart, the secondary material
is paying more than its share of the railroad's fixed costs (equipment, track,
rail bed, administrative overhead, and return on investment) compared to the
virgin material. Variable cost — the difference between fixed cost and total
cost — includes those operating costs directly incurred by or allocatable to a
specific shipment, such as fuel, electric power, crew time, special equipment
rentals, and the like.
Based on this working definition of rate discrimination, and relying heavily
on available ICC data on railroad costs and revenues for virgin and scrap
commodities (assembled in the course of its earlier Ex Parte 319
investigation), the Resource Conservation Committee staff conducted a brief
quantitative analysis to assess the extent of discrimination and its possible
impact on recycling. The analysis went through three steps. The first was a
comparative review of ICC revenue and cost data for seven groups of
competing virgin and secondary commodities. Then, for a selected set of
commodities for which discrimination appeared evident, a further analysis
was done to determine the effect of the discrimination on delivered prices of
the affected secondary materials. Finally, based on available estimates of
demand and supply responsiveness, the staff calculated how much additional
recycling might result if discrimination were removed.
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Results of RCC Analysis
The Committee found that freight rates probably have discriminated
against many, but not all, important secondary materials. As discussed
below, among the materials studied, the most significant adverse differentials
were observed for wastepaper, glass cullet, and scrap copper.
Assessment of Rate Differentials. The results of the RCC staffs analysis
of railroad revenue and cost data are summarized in Table 9. Estimates of the
U.S. average ratios of railroad revenue-to-variable-cost are presented in the
first two columns for secondary and competing virgin materials. In all
instances (except as indicated for some of the iron and steel data) the figures
in this table are based on 1975 regional data assembled and processed by the
ICC and combined into weighted national averages by the RCC staff.
Table 9
COMPARISON OF RAILROAD FREIGHT RATE
REVENUE-TO-VARIABLE-COST RATIOS FOR
SELECTED SECONDARY AND VIRGIN COMMODITIES*
Commodities
Ratio of Revenue
to Variable Cost
Secondary
Virgin
Difference
in Ratios (S/V)
(Percent)
Substantial Differential
Wastepaper vs. virgin fiber** 1.45
Copper scrap vs. ore 2.03
Glass cullet vs. glass sand 2.02
Possibly Substantial Differential
Iron and steel scrap vs. ore:
ICC (1975) 1.55
Moshman (1969) 1.95
Moshman (1972) 1.30
ISIS (1975) 1.56
No Substantial Differential
Aluminum scrap vs. bauxite 1.74
Lead/zinc scrap vs. ore 1.89
1.05
1.50
1.51
1.53
1.71
1.01
1.20
1.60
1.86
+ 38
+ 35
+ 34
+ 1
+ 14
+ 28
+ 29
-' + 9
T + 2
* Computations by Resource Conservation Committee Staff involving weighted averages of 1975 regional
freight revenue and cost data compiled and adjusted by the Interstate Commerce Commission under Ex
Parte 319. Exceptions for iron and steel data as noted in text.
** Virgin fiber represents weighted average for shipments of roundwood, wood chips, and woodpulp.
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These ratios represent the extent to which the rates charged each commod-
ity contribute to the railroads' fixed costs and investment return, over and
above allocatable variable operating costs of shipping. Thus, for example, in
the case of aluminum materials, scrap (with a ratio of 1.74) was estimated to
contribute $0.74 to overhead and profit for every $1.00 charged to cover
current operating costs; bauxite and semi-processed aluminum ores contrib-
uted $0.60 per $ 1.00 of variable costs.
Of the six commodity groups shown, there was none for which the virgin
material showed a higher ratio of revenue to variable cost on a nationwide
average basis than the secondary material. At the regional level, however,
there were a few exceptions; and there were other materials, such as scrap
rubber and certain textile wastes for which the ICC data indicated higher
ratios for virgin commodity shipments. The "Difference" column of Table 9
presents the percentage differences by which the secondary ratios exceeded
the corresponding virgin material ratios. These differences were substantial
for three materials — paper (38 percent), copper (35 percent), and glass (34
percent). For aluminum (9 percent) and lead/zinc (2 percent), the ratios were
not appreciably different. In the case of iron and steel scrap, the ICC figures
showed no industrywide rate discrimination. However, because of the great
quantitative importance of ferrous scrap and because the ICC's ferrous metal
statistics have been severely criticized, three other sources of data on this
material have also been included in the RCC review.
These other sources — two studies by Moshman Associates based on
published waybill statistics for 1969 and 1972, and an analysis of 1975 data
conducted by the Institute for Scrap Iron and Steel — fail to confirm the
finding of no discrimination based on the ICC's Ex Parte 319 data for 1975.
The second (more recent) Moshman analysis and the ISIS figures both
indicate a differential of almost 30 percent. The reasons for these significant
differences are not fully understood, but in a large measure they reflect
different judgments used in selecting weights for scaling regional sample data
into regional averages. Whatever the reasons, the need for an official
reexamination to resolve the conflicting findings appears self-evident.
The RCC staff analysis thus confirms that for the two largest components
of post-consumer municipal solid waste, paper and glass, railroad freight
rates do appear to discriminate substantially against secondary materials. For
the third largest component of municipal waste and the largest volume scrap
material overall, ferrous metal, there is conflicting evidence, but a possibility
of substantial discrimination also exists. In the case of the non-ferrous metals
studied by the RCC staff, the ICC data did not indicate substantial differ-
ences in rates between virgin and secondary materials except for copper.
Effects on Delivered Prices and Recycling. If discrimination were ended
by equalizing virgin and secondary revenue-cost ratios, what would be the
effect, initially, btf delivered prices of secondary materials and, ultimately, on
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levels of recycling? The RCC staff attempted to answer this question for the
four materials prominent in post-consumer waste — wastepaper, glass cullet,
aluminum scrap, and ferrous scrap.
Table 10 summarizes the results relating to the effect of removing discrimi-
nation on delivered prices of secondary materials. In estimating the effect on
delivered prices, the staff assumed for analytical purposes that eliminating
discrimination would involve reducing secondary material freight rates to the
level where the revenue-to-variable-cost ratios were the same as those for the
counterpart virgin materials, this would imply average rate reductions of 38
percent for wastepaper, 34 percent for glass cullet, 1 to 29 percent for ferrous
scrap, and 9 percent for aluminum (Table 9). Then, using actual 1976 average
delivered prices and the contribution of railroad freight rates to those prices,
the staff calculated the effect of reduced freight rates on the delivered prices
shown in Table 10. In two cases the price effect appeared significant: the
average delivered price of glass cullet shipped by rail would be reduced by
about 15 percent and the average price of wastepaper by about 12 percent,
according to these estimates.
Table 10
ESTIMATED EFFECT OF REMOVING
RAILROAD RATE DISCRIMINATION ON
DELIVERED PRICES FOR SCRAP MATERIALS
Decrease in Delivered Price of Scrap
With Revenue/Cost Ratios Equalized*
Scrap Materials
Dollars/Ton** Percent
Glass cullet
Wastepaper
Aluminum Scrap
Ferrous scrap
$4.70
3.57
1.92
15.4
12.4
0.6
ICC (1975) 0.11 0.2
Moshman (1969) 1.06 1.7
Moshman (1972) 1.90 3.0
ISIS (1975) 1.96 3.1
* Estimates by Resource Conservation Committee staff, based on assumption that ratios of revenue-to-
variable-cost for scrap shipments would be set equal to ratio for corresponding virgin material by reducing
the average railroad shipping charge for secondary material.
** Based on 1976 delivered scrap prices and rail rates of October 1975, as researched by Moshman
Associates.
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For ferrous scrap, even the high estimate of price discrimination (29
percent) resulted in only a 3 percent reduction in average delivered price,
because freight charges were at that time a much smaller fraction of the
delivered price of iron and steel scrap than of wastepaper or glass. Wastepa-
per and glass are less dense and have lower market values per unit weight
than ferrous metal, on average.
The small reduction (less than 1 percent) for aluminum scrap results from
its low rail freight differential and its high unit price.
These estimated changes in freight rates were then combined with informa-
tion on quantities of rail shipments and available statistical estimates of
demand and supply elasticities for the secondary materials to calculate
expected impacts on recycling of wastepaper, glass cullet, and ferrous scrap.
The conclusion from this standard economic estimating approach is that
one should not expect much more than a 1 percent increase in recycling for
any of these waste materials following elimination of railroad freight rate
discrimination. In fact, a less than 1 percent increase for each of the three
commodities is consistent with these numerical results. There are two
primary reasons for this. First, substantial quantities of secondary materials
do not travel by rail — 55 percent of wastepaper, 35 percent of ferrous scrap,
and 90 percent of glass cullet travel by other modes, primarily trucks — and
the analysis conservatively assumed that these large market segments would
be unaffected by rail rate reductions. Second, estimated demand and supply
elasticities for secondary paper and steel are low, meaning that these markets
are judged to be relatively unresponsive to a decrease in delivery costs. In
addition, there is the smallness of the estimated national average change in
delivered price of ferrous scrap.
However, these estimates undoubtedly understate somewhat the effect on
recycling of eliminating rail freight discrimination. For one thing, a reduction
in rail freight rates would probably shift traffic towards rail, at the same time
exerting a downward pressure on trucking rates for secondary materials.
Both of these responses could broaden the delivered price reductions at user
millSj but neither was factored into the analysis. In addition, it is quite
possible that the available statistical measures of demand and supply elastici-
ties relate primarily to short-term responsiveness of these secondary material
markets. If true, then longer-term responses, involving more fundamental
industry adaptations and investment options, could be more dynamic,
leading to substantially greater long-term increases in recycling rates than the
numerical analysis suggests. It is clear from testimony presented to the ICC
under Ex Parte 319 that secondary material shippers, and many users as well,
believe that recycling will increase substantially when discrimination is
ended.
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Other Policy Issues
In addition to its effects on conservation, removing railroad rate discrimi-
nation would have other economic and social implications relevant to public
policy. The following discussion briefly summarizes the expected implica-
tions for free market principles, economic efficiency, equity, and public
administration. This issue was not considered directly relevant to the
"polluter-pays" principle.
Free market principles. The railroads have long been regulated as a
public utility under the Interstate Commerce Act. Removing rate discrimina-
tion would not, in itself, have any institutional effect on opportunities for free
choice among either shippers or carriers. It could, of course, by reducing
shipping costs and increasing feasible shipping distances expand the market-
ing options of buyers and sellers of secondary commodities.
Economic efficiency. Although the overall effects on the economy may
not be large, the removal of discrimination in freight rates would be expected
to improve economic efficiency in resource allocation. Currently, according
to data used in the ICC Ex Parte 319 docket, the fixed costs of shipping
several scrap materials by rail are overstated in the rates paid, and this
overstatement eventually appears in the delivered price of the scrap material.
Because the higher prices distort the true relative costs of using virgin rather
than secondary materials, the economy is encouraged to use an inefficiently
large quantity of virgin resources and "too few" secondary materials. Freight
rate discrimination also tends to bias selection of transport modes by
secondary material shippers towards less efficient forms of motor transport.
Social and economic equity. Removing discrimination would equalize
the relative share of fixed costs borne by primary and secondary materials
shippers. This in turn would equalize competitive opportunities among virgin
and secondary industry suppliers, at least insofar as freight rates are con-
cerned, and would thus represent an improvement over the current situation.
Administrative feasibility and cost. The ICC reviews rate changes as part
of its ordinary business. Changing allowable rates in this case should not
cause the ICC to incur any unusual expenses, since the issue in question
would relate to a change in criteria for rate making rather than imposing a
new regulatory burden. The new criteria, however, may require additional
data and analysis not now routinely provided, and the railroads may
consequently incur additional expense for compliance. No direct estimates of
additional cost were made by the staff or brought to the Committee's
attention.
Committee Findings
The Resource Conservation Committee concluded the following with
respect to railroad freight rate discrimination:
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• Based on presently available Interstate Commerce Commission cost
and revenue information, railroad rates for wastepaper, glass cullet,
and scrap copper reflect a higher ratio of revenue to variable cost and
thus are probably discriminatory in comparison with rates for
related virgin materials. ICC data do not confirm a higher ratio for
iron and steel scrap nationwide, but this conflicts with evidence
provided by other sources.
• If such discrimination exists, it probably makes only a very small
difference in the amount of most secondary materials used. The
largest relative impacts appear to be on glass cullet and wastepaper.
• There is no public policy reason for discriminating between virgin and
secondary materials.
Committee Recommendations
The members of the Resource Conservation Committee fully recognize
that the Congress and the Courts have already established a clear public
policy in ordering the Interstate Commerce Commission to eliminate railroad
rate discrimination between virgin and recycled raw materials and products.
The Committee also recognizes that its findings regarding the existence and
degree of discrimination for individual materials must be considered prelimi-
nary, given the data on which they rest, and that later review by the ICC
using improved statistics may provide more valid estimates.
Most of the members recommend that the Administration file a brief with
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it; individuals retain their freedom to make choices, although they do so
under a new set of constraints. The regulatory approach, on the other hand,
bypasses the market system and uses the threat of legal sanctions to impose
the desired physical outcome directly.
Product regulations, since they apply so directly, could be a powerful tool
to encourage resource conservation. But, like any powerful tool, product
regulations can raise difficult problems and impose significant costs. Regula-
tions intended to have one effect can have unintended "secondary" effects on
other products or industries. Moreover, the burden of making the necessary
trade-offs among primary and secondary effects lies directly on the regulator
— not on the market, which, in this country, has traditionally been the
mechanism for making these tradeoffs.
There are many possible forms of product regulation. The Federal Govern-
ment could place controls on the volume of sales or on the physical design
characteristics of specific products or groups of products. The level of
regulation could vary from an outright ban on the sale of certain products
(such as bi-metallic cans) or on the use of certain materials (such as those in
critically short supply), to more limited requirements (such as specifying the
minimum proportion of recycled material to be used in particular products).
Even the term "product" allows leeway: it could apply either to a final item of
manufacture (such as an automobile or beverage container) or to an interme-
diate product (such as a refined metal).
The Resource Conservation Committee limited its investigation to those
forms of product regulations it believed would have the greatest effect on
resource conservation. These forms fall into two broad classes: (1) regulations
to promote a reduction in the rate at which we consume resources and
generate waste, and (2) regulations to promote the recovery of energy and
materials from the waste stream. Staff Background Paper No. 18, "Product
Regulation as a Resource Conservation Strategy," discusses the two classes
in detail.
Product regulations in the first class — waste reduction — could be
directed at reducing the quantities of materials used per unit (e.g., less glass
per bottle), increasing the production of reusable or more durable products
(e.g., cloth napkins instead of paper napkins, longer lasting appliances), or
minimizing the manufacture or sale of products causing problems in waste
management. This last category could encompass products like tires, which
may interfere with recovery machinery and which also may cause problems
— e.g., shifting — in landfills. The category could also encompass hazardous
products — for example, those made with heavy metals (lead, cadmium). The
Committee saw promise in coordinating a product regulation aimed at
resource conservation with regulations that have other primary purposes, for
example, controlling toxic substances or hazardous waste.
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Regulations in the second class — resource recovery — could be directed
at stimulating either the supply of recycled materials (e.g., by controlling
product design to eliminate materials or design configurations that inhibit
resource recovery) or the demand for recycled materials (e.g., by requiring
the use of materials recovered from solid waste in the manufacture of new
products).
Rather than separately applying individual regulations that fall into one or
both classes, the government might establish a comprehensive regulatory
framework under which all the characteristics of a product would be screened
at one time to ensure consistency with its overall objectives in resource
conservation. Such an approach has been proposed in draft Federal legisla-
tion, and proposed or adopted in at least two States and two European
countries, although it remains to be fully applied anywhere.
Closely related to the direct approach of applying controls on product
design and use would be the indirect approach of requiring conservation-
related labels on products. The Federal government already requires labels
for other purposes; for example, to warn of hazards or to ensure truth in
lending. Conservation-related labels could simply provide consumers with
better information on which to base their purchase decisions, or they could
actively seek to persuade consumers to make purchases that are more
conserving of resources. The RCC staff examined labeling in an appendix to
Background Paper No. 18; however, since labeling differs in many respects
from the direct regulatory approach, it is not incorporated in the full
Committee's findings and recommendations on product regulations.
The Effectiveness of Product Regulations
Although product regulations could increase resource recovery in theory,
there are a number of design problems which could undermine their effective-
ness in practice, among them technical feasibility, enforceability, flexibility,
effect on innovation, and ease of modification.
Technical feasibility can pose an obvious limitation on the degree to which
recovered materials can be substituted for virgin materials in the manufacture
of some products without interfering with the process or changing the
characteristics of the product. If too much recycled glass is used to make new
bottles, or if the recycled material is contaminated, the quality of the product
—its color or durability — may be significantly impaired.
Another important concern is the enforceability of a regulation. Regula-
tions requiring specified proportions of recovered material in new products
would not be effective if they were widely ignored or could not be enforced. A
regulation requiring newsprint to be made from recycled paper could not be
enforced, for example, if not enough newsprint were available at reasonable
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cost or if it were too difficult to verify that the newsprint did in fact contain
the specified proportion of recycled fiber.
Secondary effects could also diminish or even outweigh a regulation's
effectiveness. Assuming that a regulation requiring the use of recovered
materials in newsprint could be enforced, its net effect would be small if the
recycled fiber were simply diverted from use in other products, like insulation
or packaging filler. In addition, if a regulation required that a product be
made with a high percentage of recycled materials and this caused product
durability to decrease, then the increased demand for the product could cause
total virgin material consumption to rise.
Designing regulations with sufficient flexibility is often difficult. The need
to keep regulations administratively manageable, for example, encourages
regulators to draw them up narrowly; however, that narrowness may limit
manufacturers' freedom to design new products or to modify their processes.
At a time when lack of innovation has received considerable attention from
both the public and private sectors, this limitation poses an especially grave
problem.
The regulations may also send "false signals" to manufacturers. For
example, regulations that set minimum levels of performance may also have
the effect in practice of setting maximums, unless manufacturers are given
some incentive to exceed the levels specified. Moreover, variation from the
standards contained in the regulation might appear to be a departure from
compliance, so that change is discouraged.
Another problem is that product regulations could promote the growth of
one particular technology over another, without giving adequate weight to
such considerations as economics, energy efficiency, and pollution. For
example, if a product regulation required the steel used in a product to have a
very high minimum content of recycled material, the regulation could create
serious difficulties for some steel mills (e.g., those employing the predominant
basic oxygen furnace, in which the temperature-oxygen balance is upset by
excess amounts of scrap) while encouraging the expansion of others (e.g.,
those using electric arc furnaces, which accept larger quantities of scrap). The
regulation — by itself — could shift the balance of technologies. The
objectives of any mandatory design standard need to be debated in light of
other national objectives.
Finally, regulations may be difficult to modify, once established, to meet
changing conditions, such as advances in technology. Because it may take
several years or more (as well as substantial resources) to complete all the
steps required for rulemaking, there is likely to be considerable inertia in the
system.
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Other Policy Issues
Free Market Principles. By their very nature, regulations controlling the
design or sale of products violate the free market principle. Rather than
emerging from the decentralized workings of the market system, the outcome
of a product regulation is imposed by the regulator.
The "Polluter-Pays" Principle. To a large extent, the way in which a
regulation is drafted can determine who pays for its implementation. Thus
appropriately-worded product regulations can be entirely consistent with the
"polluter-pays" principle, although adjustments that pass on the costs in
unexpected (and perhaps undesirable) ways must be guarded against.
Social and Economic Equity. Product regulations could reduce the
availability of some products and increase the prices of others, leading to
different effects on different groups in society. For example, price increases
for products that are normally considered "necessities" (rather than "luxu-
ries") are likely to be regressive; that is, to have a relatively greater adverse
effect on the poor than on the rich. It is difficult to generalize, however,
regarding the equity of all product regulations.
Economic Efficiency. Regulations typically impose particular technical
solutions rather than relying on producers to exercise creativity in developing
least cost solutions. This is not to say that all product regulations would
impose more costs than they would yield in benefits; but the benefits of
resource conservation in general remain to be fully defined, much less
quantified. At the moment, we must use our judgment for each product to
decide whether a regulation would, in fact, meet the Committee's criterion of
economic efficiency.
Administrative Feasibility and Cost. The difficulties associated with
administering product regulations could make administration time-
consuming and costly, especially if rules have to be established, product-by-
product, for a large number of products; if the criteria for rule making are not
specific; or if, as often happens, the rules are subject to disagreement among
interested parties or to protracted litigation.
Because so many different forms of product regulation are available, the
RCC found it difficult to generalize about the feasibility and cost of
administering the regulations for resource conservation purposes. Many
manufacturers are already subject to other regulations (for example, regula-
tions to protect health, safety, and the environment). Regulations with
resource conservation in mind would need to be analyzed carefully, case by
case, to establish that their costs do not outweigh their benefits.
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Committee Findings
The Resource Conservation Committee reached the following conclusions
with respect to product regulations:
• Product design regulations could be effectively employed as a re-
source conservation tool.
• Direct regulation imposes costs on the economy by circumventing the
free market system and reducing flexibility; direct regulation may
also discourage technological innovation.
• Administration of mandatory design and packaging standards would
present enforcement problems and costs and would add to the
burden of Federal regulations on the private sector.
• There may be some areas where such direct intervention is appropri-
ate, such as in areas where the risks associated'with improper
management are very great. (Two examples might be the handling
and storage of toxic and hazardous wastes or where certain materials
might significantly inhibit resource recovery operations.) In these
cases, product design regulations should probably be part of or at
least be done in coordination with regulations on toxic and hazard-
ous wastes.
• More research is needed on the following topics before specific pro-
posals can be developed: (1) the identification of objectives to be
served by mandatory design standards, (2) materials flow through
the production process, and (3) the effects of such regulations.
Committee Recommendations
The full committee agrees that product regulations should not presently be
proposed as a general-purpose tool for resource conservation. The members
cite problems with administration and enforcement, the burden on busi-
nesses, possible inflation effects, and general cost-ineffectiveness.
Nevertheless, all but one of the members agree that the Government
should sponsor further research on the use of regulations for resource
conservation in the areas of toxic and hazardous wastes and products made
with materials that especially impede resource recovery. Half of those
members state explicitly that there might be a role for product regulation in
the areas recommended for further study; the other half make clear their
desire to express general opposition to the idea of product regulations unless
the studies show very positive opportunities.
One member recommends against direct regulations in all circumstances.
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PRODUCT USE AND
DISPOSAL POLICIES
When consumers no longer have any use for a product or its packaging
they have three choices of what to do with it: (1) set it aside for reuse,
recycling, or special disposal; (2) discard it ("properly") into the regular
mixed municipal solid waste stream; or (3) carelessly discard it as litter.
The preceding chapters have discussed resource conservation policies
directed primarily at the production of goods before they reach the consumer
and on recycling markets. This chapter presents the RCC's evaluation of
three policies that relate to the consumers' three choices of what to do with
products or packaging when they no longer wish to retain them, namely:
mandatory nationwide beverage container deposits, deposits and bounties on
durable and hazardous goods, and a national litter tax. The first two policies
provide a direct, on-the-spot reward to the consumer for setting a product or
packaging aside for reuse, recycling, or special disposal. The litter tax is
usually considered to be primarily a revenue-raising device, but it could also
be formulated to have anti-littering incentive effects.
A beverage container deposit is a fee added to the price of a beverage
which is refunded when the container is returned. The containers may then
be reused or recycled, although there is no requirement that this be done.
Mandatory beverage container deposits for beer and soft drinks have been
proposed as a means of reducing solid waste and litter, materials use, energy
use, and pollution.
Deposits for durable and hazardous goods would in most respects operate
the same way as those on beverage containers. Bounties are analogous to
refunds (without deposits) and represent subsidies for delivering the items to
designated redemption centers. Deposits and bounties have been suggested
for durable goods, such as household appliances, and other goods that could
be hazardous if not disposed of properly. They would provide an incentive for
people to deliver these goods to appropriate recycling centers or approved
disposal sites, and they would also encourage scavengers to pick up littered
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items and redirect them into the proper channels for recycling or safe
disposal.
A litter tax is a levy placed on items that are frequently littered. It is
generally understood to be a broad-based, ad valorem excise tax applied to
consumer goods for the purpose of financing nationwide litter control
programs carried out by State and local governments. Such a tax could also
be formulated to discourage the production and purchase of items frequently
littered. The Resource Conservation Committee studied the litter tax in
response to suggestions made at its public hearings that a national litter tax
might be a useful alternative to national beverage container deposits.
All three of the policies discussed in this chapter address litter, but only the
deposit and bounty policies have any significant implications for materials
conservation. Beverage container deposits, and deposits and bounties on
durable and hazardous goods provide both an incentive (collecting the refund
or bounty) to conserve resources by stimulating reuse and recycling, and a
disincentive (forgoing the refund or bounty) to regular disposal or to littering.
Litter taxes, as generally proposed, do neither of these things; rather, they
generate revenues which can be earmarked to finance litter clean-up, public
education, or similar programs.
Beverage Container Deposits
Although the metal beverage can and the "one-way" bottle are fixtures in
the United States today, they were virtually nonexistent thirty years ago. The
increased use of these nonrefillable containers and the decline in the use of the
refillable bottle have been dramatic. Introduced as "convenience" containers,
not only have metal cans and nonrefillable bottles captured all the growth in
the beverage industry since 1947, but they have even caused an absolute
decline in the use of refillable bottles. Figure 8 chronicles those developments.
Concern about these trends led to the first "ban-the-can" and "bottle bill"
efforts in the early 1950s, and to later attempts to pass less restrictive "deposit
laws" at both State and Federal levels. The first deposit law, passed in
Vermont in 1953, simply banned the sale of beer and ale in nonreturnable
bottles. That law was allowed to expire in 1957, but in 1972 Vermont passed a
new law requiring deposits on all beer and soft drink containers. Oregon had
passed a container refund the year before; other States have followed with
similar laws. A law in Maine went into effect at the beginning of 1978, and a
law in Michigan became effective in December 1978. Deposit laws in Iowa
and Connecticut take effect in July 1979 and January 1980, respectively, and
in Delaware the law becomes effective late in 1980, or 6 months after both
Pennsylvania and Maryland enact similar laws, whichever comes last.
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Figure 8: THE GROWTH OF NONREFILLABLE BEVERAGE
CONTAINERS: 1947 - 1977
40--
g
LlJ
z
o
o
u.
o
(/]
O
•j 10
oj
BEER
1947
1957
1967
1977
40--
REFILLABLE BOTTLES
NONREFILLABLE BOTTLES
|SgJ METAL CANS
PLASTIC BOTTLES
1947
1957
1967
1977
Sources: Research Triangle Institute; Beverage Industry Annual Manual, 1978 - 1979.
Early proponents of mandatory deposits were primarily concerned with
the frequent appearance of "no-deposit, no-return" beverage containers in
roadside litter. Growing national interest in environmental protection and
resource conservation — and the "energy crisis" of the 1970s — have created
increased interest in beverage container deposit laws because of their poten-
85
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tial for reducing the consumption of steel, aluminum, and energy and the
generation of solid waste and industrial pollution.
Over the past several years, various bills have been introduced in the
Congress which would create a nationwide retail trade requirement that all
beer and soft drink bottles and cans carry a minimum 5 cent refundable
deposit. The Resource Conservation Committee has been considering a
similar law. Such a national law is not envisioned to ban one-way containers;
rather, it would create a financial incentive for consumers not to litter and not
to discard their beverage containers into the municipal solid waste stream.
Since consumers would have a financial incentive to return the containers to
collection points, the deposit law should make it easier to reuse or recycle the
containers.
A deposit law could incorporate any of a number of features. The seven
State laws passed to date all vary in detail. Two of the States (Oregon and
Michigan), for example, encourage the use of "certified" refillable bottles
(bottles that may be used by more than one company) with a lower deposit on
those bottles. One State (Iowa) also places a deposit on liquor bottles. All
seven of the States ban removable "tab-tops" on cans, which is not an element
of the national law as considered by the Committee. Four additional States
also ban "tab-tops", although they do not have mandatory deposits. Four
deposit States (Vermont, Maine, Connecticut, Iowa) either allow or require
that retailers be paid a fee (funded out of deposit revenues) to cover the extra
costs incurred in handling returned containers.
No serious difficulties have yet arisen as a result of variations in State laws.
However, bottlers or distributors that serve two or more States with conflict-
ing deposit requirements do face potential problems, which could increase if
more states which are closer together implement different legislation.
Beverage container deposits have aroused more public interest than any of
the other policies the RCC studied. Opponents to national deposit legislation
argue that industry dislocation, consumer inconvenience and possibly higher
prices would outweigh the benefits arising from such a law, and that other
alternatives (such as litter taxes, Federal subsidies for resource recovery,
increased funding of litter cleanup, and public education) would provide
more comprehensive and equitable benefits.
Staff Analysis
Because of the interest in this issue, the RCC staff intensively analyzed the
costs and benefits of a national deposit law. This analysis is described in detail
in eight Staff papers, the first six of which appear in the Committee's Second
Report.' Table 11 lists the titles and topics of the papers.
'Staff Background Papers No. 1 through No. 6 were previously published by the Resource Conservation
Committee in its Second Report to the President and Congress, Committee Findings and Staff Papers
on National Beverage Container Deposits, January 1978.
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Table 11
STAFF BACKGROUND PAPERS
ON BEVERAGE CONTAINER DEPOSITS
1. "Rationale for Beverage Container Deposit Legislation" — The reasons generally put
forth for Federal involvement.
2. "Costs and Benefits of National Beverage Container Deposit Legislation" — A
quantitative assessment of likely ranges of costs and benefits, based largely on a computer
model of the beverage producing and distributing sectors.
3. "Issues Regarding National Beverage Container Deposit Legislation" — Design issues
such as the size of the deposit and what kinds of containers should be included.
4. "Transitional Impact of National Beverage Container Deposit Legislation" — Transi-
tional effects of a deposit law on container production, employment, and capital equipment.
5. "Beverage Container Return Rates" — Assumptions made in the RCC analysis about
present and future return rates (the proportion of containers that are returned for deposit).
6. "Localized Employment Impacts, Glass Industry" — Effects of a deposit law on
employment in the glass industry.
7. "The Sensitivity of Benefit Impacts of Beverage Container Deposits to Variations in
Container Return Rate Assumptions" — The effect on benefits of changes in assumptions
about the proportion of containers returned.
20. "Summary of Projected Labor Impacts of a Nationwide Beverage Container Deposit
System" — The employment impact of a deposit law, specifically looking at the skill levels
of jobs to be gained or lost if the law were adopted.
Five major issues emerged in the staff analysis, and are described in the
following pages:
(1) benefits and costs of the policy;
(2) effect on prices;
(3) effect on consumers;
(4) effect on employment; and
(5) government administrative costs.
The analyses of the five issues, especially the benefits and costs and the
employment impacts, were based largely on a computer model of the
beverage producing and distributing sectors. The model was originally
developed by the Research Triangle Institute (RTI) for use in its 1976 study,
"Energy and Economic Impacts of Mandatory Deposits," prepared for the
Federal Energy Administration. Many interested parties supplied informa-
tion and commented on the FEA study prior to its publication.
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The RCC staff updated and expanded the RTI model and used new
estimates as input to the model. Table 12 contains those assumptions. It
shows the situation as of 1977 (the same as in Figure 8) and three projections:
a "baseline" continuation of present trends and two "scenarios" that bound
the likely range of results of a deposit law. The Low Change Scenario assumes
a modest shift to refillable bottles, and the High Change Scenario a fairly
dramatic shift. The Low Change Scenario includes more conservative (lower)
estimates of return and recycling rates than does the High Change Scenario.
Table 12
ASSUMPTIONS USED IN ESTIMATING COSTS
AND BENEFITS OF A DEPOSIT SYSTEM
Model Input
1977
(Estimated)
Baseline
1985 Projections
Low Change
Scenario
High Change
Scenario
Container Market Share
(Percent of Volume)
Refillable Bottles 27%
Nonrefillable bottles 25
Plastic bottles 0
Metal cans 48
Container Retuin Rates
Refillable bottles 91
Nonrefillable containers —
All containers average 25
Recycling Rates
Steel cans
Aluminum cans
Glass containers
20%
15
10
55
91
18
10
40
5
40%
10
10
40
90
80
85
40
80
20
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 are
based in part on trends projected by the General Accounting Office.
The RCC staff used the RTI model to estimate the quantitative effects of a
national beverage container deposit system. The model produced values for
material and energy requirements, solid waste generation, employment, and
costs to consumers. The staff then employed those values to estimate
environmental effects and savings in solid waste management costs. Table 13
summarizes the estimates.
-------
Table 13
SUMMARY OF BENEFITS OF NATIONAL MANDATORY
FEDERAL BEVERAGE CONTAINER DEPOSIT LEGISLATION
(Estimates for 1985)*
Low Change
Scenario
High Change
Scenario
1. Consumer Savings
Net Direct Cost Savings to
Consumer ($ Million)
Net Savings Per Filling (cents)
2. Post Consumer Solid Waste Savings
Solid Waste Collection and
Disposal Savings ($ Million)
Litter Reduction
3. Environmental Benefits
Industrial Solid Waste Reduction
(million cubic feet)
Atmospheric Emission Reduction
(million pounds)
Waterborne Waste Reduction
(million pounds)
4. Natural Resource Conservation Benefits
Reduction in Bauxite Consumption
(million tons)
Reduction in Iron Ore Consumption
(million tons)
Net Energy Reduction (Trillion Btu)
656
0.6
25
1,757
1.5
50
Total litter volume reduced 35%;
total items by 15 to 20%
270
750
140
1.0
1.3
70
450
1,200
210
1.5
2.4
130
* Assumed passage of legislation in 1978, effective beginning in 1980.
(1) Benefits and Costs
Based on the model, the RCC staff analysis indicates that a national
deposit law for beverage containers would reduce municipal solid waste by
0.5 percent to 1.5 percent (by weight) at projected 1985 generation rates, with
annual savings in expenditures for collection and disposal of $25 to $50
million nationwide. The law would reduce the number of littered containers
by approximately 70 percent. Total litter volume would decrease by about 35
percent and the number of littered items by 15 to 20 percent.
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With respect to raw materials, the analysis indicates aluminum savings of
approximately 250,000 to 380,000 tons per year by 1985 (5 to 10 percent of
estimated 1985 United States annual production) and steel savings of 900,000
to 1,700,000 short-tons per year (1 to 2 percent of U.S. annual production).
Deposits should also assist in the conservation of materials used in beverage
containers by discouraging production of difficult-to-recycle containers.
Bottlers and distributors to whom used containers will be returned will be
able to sell easy-to-recycle containers to scrap dealers but may not be able to
sell the difficult-to-recycle containers (such as bimetal cans). They, therefore,
will have an incentive to sell beverages in easy-to-recycle containers in the
first place.
Net energy savings attributable to a nationwide deposit law, as estimated
by the RTI/FEA model, would amount to 70 to 135 trillion Btu's per year by
1985, or 20 to 40 percent of the annual requirements of the packaged
beverage industry. This savings is equivalent to between 12 to 23 million
barrels of oil per year, or about 0.1 percent of total U.S. primary energy
consumption. The various segments of the beverage and packaging industry
would experience different energy effects. Distribution would require some-
what more energy, both electric and petroleum. These increases, however,
would be more than offset, both in terms of total energy and in terms of
petroleum use, by savings in other sectors.
Yet another benefit relates to simplifying the operation of resource recov-
ery systems, although its exact magnitude is difficult to calculate. Because
more containers would be recycled, fewer would end up in the waste stream.
The reduced amount of glass, in particular, would simplify the operation of
some resource recovery facilities — notably combustion-based facilities that
must be shut down periodically to remove a hard-to-handle glassy residue, or
slag. Staff studies have further determined that any lost revenue from
eliminating beverage containers in resource recovery systems would not
significantly alter their economic viability.
While the staff is confident that these estimates of return rates and
projected national benefits bound the likely effects of the proposed law, the
outcome is by no means certain. However, the staff analysis indicates that the
principal benefits of mandatory beverage container deposits do not appear to
decrease disproportionately with a reduction in return rates. In other words,
if return rates fall short of the staffs assumption, the benefits would tend to
change in proportion to the shortfall, and not more drastically. In fact, for
most of the benefit categories the staff analyzed, benefits change at a slower
rate than do nonrefillable container return rates. This subject is discussed in
greater detail in Staff Background Paper No. 7, "The Sensitivity of Benefit
Impacts of Beverage Container Deposits to Variations in Container Return
Rate Assumptions".
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One of the reasons for the uncertainty about the impact of the proposed
law is that although the experience to date with deposits in two States
(Oregon and Vermont) has indicated high levels of both public acceptance
and return rates, there has been no experience of comparable duration in
industrial States. Thus, the Committee feels that the applicability of this
experience to a nationwide deposit system is uncertain.
It is also difficult to predict the exact effect of deposit legislation on the
container manufacturing industry, and it would likewise be difficult to
measure afterwards. Several factors are making this a changing industry.
First, more and more beverage companies are making their own containers,
creating less demand among present container manufacturers than there
would otherwise be. Second, plastic bottles, many of which are not made by
the traditional container manufacturers, are taking a progressively larger
share of the market. To the extent that plastic bottles are presently non-
refillable and non-recyclable, an increasing market share will decrease the
benefits of beverage container deposits, except for litter reduction. The staff
analysis of benefits and costs takes these factors into account by projecting a
10% market share for plastic bottles in 1985 and no refilling or recycling. It
should be noted, however, that while refillable and/or recyclable plastic
bottles are not presently on the market, the industry is working to develop
them. If they are successfully introduced, the benefits of beverage container
deposits would be correspondingly increased.
(2) Effect on Prices
Concern with inflation has led to strong interest in the effect national
deposit legislation would have on consumer prices for beer and soft drinks. It
is extremely difficult to project the precise effects of a deposit system on
beverage prices, although they are likely to be small.
The RCC staff analysis indicates that consumers should face slightly lower
average beverage prices, to the extent that they purchase more lower-cost
refillable bottles. This effect will be smaller for beer than for soft drinks. The
Committee elected to state in its findings only that experience to date in the
two States where legislation has been enforced for several years (Oregon and
Vermont) indicates that the effects generally appear to fall "within a range of
plus or minus several percent."
The existing data on prices must be used with caution because they are
simply too sketchy to extrapolate with confidence. Further staff analysis
indicates that shelf prices for individual container types in Oregon and
Vermont have at most risen only very slightly as a result of the deposit laws.
In both these States, however, many consumers have shifted to refillable
bottles. Because beverages in refillable bottles have traditionally been less
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expensive than those in nonrefillable containers, this shift has apparently
reduced the cost of the total "market basket" of beverages that consumers
purchase. The staff analysis predicts a similar shift nationwide — in other
words, consumers would spend slightly less in total to purchase the same
volume of beverages.
(3) Effect on Consumers
Consumer choice of container types should not be seriously reduced by a
deposit law and may be increased. The law the Committee studied would not
ban "one-way" containers. Consequently, metal cans should remain avail-
able, based on their competitive merits. Refillable bottles are expected to be
more widely available than at present, thus expanding the range of choices,
especially for consumers who wish to purchase beverages in refillable bottles.
If there is an increased demand for refillable bottles it will be satisfied
primarily at the expense of non-refillable bottles.
Consumers who currently use refillable bottles or who already recycle
nonrefillable containers will find it more convenient to do so because the
number of places where they can purchase and return them will increase. For
many consumers, though, there will be some added inconvenience because
they will have to store and return containers to avoid forfeiting the deposit.
The staff has found no satisfactory method of imputing a monetary value
to added inconvenience. In Vermont and Oregon, however, total sales of
beverages do not appear to have been significantly affected by passage of
deposit laws, suggesting that consumers, at least in these States, do not
perceive the resulting inconvenience as a cost that they are unwilling to bear.
In polls conducted after deposit laws had been in effect in these States for
several years, 90 percent of the respondents in Oregon and 93 percent of the
respondents in Vermont favored continuing the deposit system. However,
citizens in States which have not tried beverage container deposit systems do
not always share this attitude. Statewide referendums to adopt beverage
container deposits have been hotly contested in several States during the past
few years and in some instances have been defeated.
A national survey, performed for the Federal Energy Administration in
February 1975, provides an additional indication of consumers' perceptions
of the value of the inconvenience associated with a deposit law. In that
survey, 73 percent of those questioned indicated that they would favor a
national deposit law. Those who responded favorably apparently perceive the
costs associated with such a law (including inconvenience) to be less than the
value of the benefits to be gained.
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(4) Effect on Employment
The greatest potential for employment disruption will be in manufacturing
of glass bottles and metal cans, with additional but less significant negative
effects in industries supplying raw materials. Current studies reviewed and
performed by the RCC staff indicate that, in 1985, employment in container
manufacturing would be reduced, in comparison with projected 1985 em-
ployment, by about 19,000 to 38,000 jobs. The steel and aluminum metal can-
stock industries would undergo an additional reduction of about 6,000 to
11,000 jobs, for a total reduction in employment of 25,000 to 50,000. (Lower
estimates relate to the "low change scenario" as portrayed earlier in Table 12,
the higher estimates to the "high change scenario.") For the maximum case,
the staff estimates total job losses of 10,400 at glass container plants (14
percent of the total jobs in 1977), 28,000 in metal beverage can production
(about 28 percent of the total in 1977), 5,800 in steel production and 5,100 in
aluminum production over a 5-year transition period (1980 to 1985, assum-
ing implementation by 1980). The actual number of workers displaced over
the transition period would be somewhat lower, however, since normal
attrition and transfer to other container manufacturing jobs would alleviate
the impact.
On the other hand, prospective increases in employment in beverage filling,
distribution, and retailing are estimated at 80,000 to 100,000 jobs, resulting in
a net increase in beverage-related employment of 50,000 to 55,000 jobs for
1985.
It is sometimes assumed that the jobs lost in the primary metals, glass
container, and metal can manufacturing industries would be "highly skilled"
(and, therefore, earn high pay) and that the jobs gained in other sectors would
be "low skilled" (and earn low pay). There is only fragmentary evidence
bearing directly on the question of comparative skills among jobs gained and
lost, but data on average earnings in the affected sectors suggest that,
although valid hi some respects, this assumption on relative job skills is only
partly true.
The 25,000 to 50,000 manufacturing jobs lost in the metals and glass
sectors would involve relatively high average annual earnings (ranging in
1976, for example, from $12,000 in glass containers to $15,600 in metal can
manufacturing), while the 60,000 to 65,000 jobs gained in retail distribution
would be generally low paid ($4,300 to $7,400 in 1976). However, many of
the 20,000 to 38,000 jobs created in the beverage industry (bottle washing and
filling) and in wholesale distribution (inventory management, truck driving)
will be relatively highly paid. In 1976 average earnings in these sectors ranged
from $9,100 in soft drink bottling, to $11,600 in wholesale malt beverage
distribution to $ 17,100 in breweries.
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The Committee places great importance on the projected labor impacts
and notes in its findings and recommendations that employment dislocation
would need to be addressed as part of any nationwide deposit legislation. The
subject of employment impacts is addressed in three Staff Background
Papers: No. 4, "Transitional Impact of National Beverage Container Deposit
Legislation;" No. 6, "Localized Employment Impacts, Glass Industry;" and
No. 20, "Summary of Projected Labor Impacts of a Nationwide Beverage
Container Deposit System."
(5) Government Administrative Costs
One of the positive aspects of a deposit system is that it can be self-
administered without government being involved directly in operations. If
such legislation is adopted, the Federal government will most likely want to
limit its role to monitoring effects and providing information and interpre-
tation to Congress, industries, and the general public. The deposit itself can
be enforced through a provision in the law for citizen suits, although the costs
of such suits cannot be estimated. The RCC staff has estimated that the costs
to the government in the initial two to four years of monitoring should not
exceed $1 million per year.
Other Policy Issues
The analysis performed by the RCC staff suggests imposition of beverage
container deposits is consistent with all five of the criteria used by the
Resource Conservation Committee to evaluate proposed policies:
Free Market Principles. Mandatory deposits penalize consumers for not
returning containers and require retailers and distributors to perform certain
functions. However, the deposit requirement works within the current
market structure by allowing full freedom of choice to producers and
consumers in making their production, packaging, and purchasing decisions.
The "Polluter-Pays" Principle. A deposit scheme assigns responsibility
for solid waste and litter problems caused by beverage containers to those
selling and consuming beverages. This is consistent with the "polluter-pays"
principle.
Social and Economic Equity. The deposit mechanism should not impair
the longTterm 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. Beverage prices to
consumers should, in the aggregate, decrease slightly.
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Economic Efficiency. Mandatory deposits would modify the private
sector trends in the design and disposal of beverage containers. The best
estimates of the RCC staff are that, following initial industry transition,
consumers would pay a slightly lower net cost for beverages, indicating that
less total national resources would be required to deliver a given volume of
packaged beverage (see the cost analysis earlier in this section). At worst,
there would be little noticeable change in net beverage costs. In addition,
costs of litter pickup and solid waste management would also be somewhat
reduced and the population would also enjoy the aesthetic but non-priced
benefit of a less-littered environment. These factors all suggest that overall
economic efficiency in providing beverages and disposing of container waste
would be improved.
However, against this must be counted the decrease in consumer conve-
nience (generally considered the major economic benefit of disposable con-
tainers) involved in having to return containers to avoid forfeiting deposits.
Those who feel that this (unmeasured) cost is too high a price to pay for the
waste management and possible consumer cost savings and environmental
benefits will judge the mandatory deposit system to be economically
inefficient.
Administrative Feasibility and Cost. The feasibility of administering
deposit systems within the private sector has been demonstrated not only
historically but also in the States that now have such laws in force. Public
sector administrative costs should be negligible since no direct Federal
regulatory or fiscal actions are required. The only government costs should
be for monitoring the impacts of the legislation.
Committee Findings
Based on empirical studies and economic modeling reviewed or conducted
by its Staff, the Resource Conservation Committee made the following
findings with respect to national beverage container deposit legislation:
• Imposition of mandatory deposits is an effective means for reducing
litter associated with beverage containers.
• Up to two percent of municipal solid waste would be eliminated by the
imposition of mandatory deposits.
• Beverage container deposits would result in significant conservation
of virgin material and energy resources at a return level of at least 85
to 90 percent.
• The precise effects of a deposit system on beverage prices are difficult
to project. However, the experience to date in two States where
legislation has been in force for several years indicates that the retail
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price effects generally appear to fall within a range of plus or minus
several percent. Caution should be used in extrapolating from this
data.
• Most consumers would experience some inconvenience as a result of a
mandatory deposit system.
• A net increase in jobs would occur, although some industries would
experience significant dislocations. Both high- and low-skilled jobs
would be affected. While some portion of the higher skilled jobs that
would be lost appear to be offset by gains in high-skilled jobs in other
sectors, the main effect would be an increase in low-skilled jobs to
account for the total net employment increase. The dislocation in the
job market needs to be addressed in the event of legislation.
• The deposits would reduce the volume of glass and metal in the waste
stream, thus simplifying the operation of certain resource recovery
facilities, notably combustion-based facilities in which glass can
cause significant slagging problems. Similarly, deposits should help
to eliminate difficult-to-recycle containers (e.g., bimetallics) since
they will induce either recycling of containers or conversion to
refillables.
• The benefits of deposits do not appear to decrease disproportionately
with a reduction in return rates.
• The experience to date with deposits in two States (Oregon and
Vermont) has indicated high levels of both public acceptance and
return rates. However, because there has been very little experience
in industrial States, the applicability of this experience to a nation-
wide deposit system is uncertain.
Committee Recommendations
I. Design Recommendations
If beverage container deposit legislation is adopted, there are a number of
ways it could be designed. The Committee endorses the following features for
a deposit system, if one is adopted.
1. The deposit should cover beer and carbonated soft drinks in sealed
containers, with a discretionary option for the EPA Administrator
to include others by regulation (subject to guidelines in the law).
2. The deposit should cover all sealed containers for the designated
beverages, regardless of material used, with a discretionary option
for the EPA Administrator to include or exclude others by
regulation (subject to guidelines in the law).
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3. The deposit should be a minimum of five cents, indexed to the
Consumer Price Index, in full cent increments.
4. The deposit should be specified as a uniform minimum deposit on
all beverages and containers.
5. The deposit should begin at the distributor-wholesaler stage of the
distribution system.
6. The effective date of any legislation should be two years from the
date of passage.
7. Existing Federal employment impact assistance programs should
be examined as a possible means to mitigate the adverse affects of
job dislocations directly attributable to the introduction of a
beverage container deposit system mandated by the Federal
Government.
8. Nonrefunded deposits should not be taxed away or regulated
(other than as normal contribution to income). No special tax
provisions are necessary. The present tax code is sufficient.
9. The legislation should not ban pull tops.
10. Cartons or carriers should not be regulated.
11. No position is taken on the question of whether State and local
deposits should be preempted by Federal law.
One of the members further notes that, although these design features are
reasonable, the States should be actively consulted on this subject.
II. Policy Recommendations
Four of the eight members taking a position on national beverage container
deposit legislation recommend that it be adopted. Two members recommend
against such legislation, two favor postponing consideration of national
legislation until there has been more experience at the State level and one
member takes no position.
The four members in favor cite expected savings in materials and energy, as
well as reductions in expenditures for solid waste management and litter
control. They point out that consumer inconvenience appears to be more
than offset by the popular support that has been expressed in a number of
public opinion polls. Moreover, a national beverage container deposit pro-
gram is a resource conservation measure that would impose no significant
administrative costs on the Treasury. Two members, noting the job losses
that might accompany such a program, make a special point of suggesting
either that the program be implemented gradually or that the Federal
Government give assistance to mitigate any adverse effects on labor.
Two members recommend against beverage container deposit legislation,
noting that the costs would likely outweigh the benefits. One of those
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members further observes that consumers currently have the opportunity to
choose returnable containers and suggests that they could retain that choice
without a mandatory deposit system. This member believes that the data
generated by different sources interested in this issue, such as that regarding
public support and energy usage, are unpersuasive. For example, a number of
States in recent years have defeated deposit referenda.
Two members favor postponing consideration of mandatory national
beverage container deposit legislation until the State programs in Michigan,
Connecticut, and Iowa have been fully implemented and more empirical
evidence on the effectiveness of State programs is available. Currently, infor-
mation is available from only two States - Oregon and Vermont. One of these
members further recommends that individual States give full and fair
consideration to the enactment of State beverage container deposit legisla-
tion, based on a full assessment of the benefits and costs in their areas. The
member notes that different legislation in different States probably would not
impose undue hardship on the beverage industry.
The final member takes no position on the issue, recognizing the arguments
in favor, but noting that sufficient attention has not been paid to the private
inconvenience which would result from such legislation.
Deposits and Bounties on Durable and
Hazardous Goods
Interest in deposit-refunds or bounties for products other than beverage
containers can be traced back at least to the mid-1960s. The focus at that time
was on abandoned automobiles, an ugly sight and a costly problem in many
areas. Several European countries and the State of Maryland have applied
bounty systems to cars, and the Resource Conservation Committee was
interested to see if they could be expanded to other items consumers discard,
notably durable and hazardous goods.
Deposit-refund and bounty systems create a "market" for goods that no
longer serve a purpose for their owners. Redemption centers become the
"buyers" of the used goods, and those who redeem the goods become the
"sellers." The purpose of these systems would be to induce separation of
wastes at their source and encourage proper channeling of specific wastes,
thus contributing to the broader objectives of either resource recovery or
proper disposal of toxic and other bothersome wastes. Placing a value on
these wastes would also reduce litter and discourage dumping at unapproved
locations.
There are several possible roles for government in relation to these systems.
The most direct form of intervention by the Government is with bounties.
Under this system, the Federal Government would establish redemption
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centers funded from taxes. Slightly less direct are mandated deposit-refund
systems, which involve requiring redemption centers to be set up before
goods can be sold. The Government would require these centers to redeem
goods when returned, using deposits collected on new goods to pay for the
redemptions. The third system, currently most prevalent, is already in place
to meet special conditions in the private sector. These independent deposit-
refund systems, which require no Government action, are set up by produc-
ers or sellers as a way of inducing the return of the used goods.
The Resource Conservation Committee concluded that deposit-refund
systems and bounties could be a useful tool to promote source-separation and
reduce improper disposal. The Committee views hazardous materials as
especially appropriate candidates. The case for using these tools for durable
goods, however, is less clear because most of the possible benefits of these
incentives are already being achieved.
The RCC staff also looked briefly at how deposits and bounties might be
applied to representative products, in order to evaluate the systems in general
but not to develop specific proposals. Most of the Committee was willing to
recommend deposits and bounties in principle, and agreed to recommend
further research to see how these ideas might be applied.
Durable Goods
Current estimates indicate that about 15 million tons of used durable
goods, excluding automobiles,1 are discarded annually as waste, and in their
current disposal pattern have little potential for reuse or recycling. These
consumer durables — stoves, refrigerators, furniture, and the like — consti-
tute about 11 percent of total household and commercial waste and 20
percent of the nonfood packaging and product waste stream.
Large items, with or without hazardous constituents, are usually delivered
or collected separately. When they are included in mixed waste during
collection, they are traditionally separated before final disposal. Even when
bulky items are not part of the formal collection system, disposal operators
still try to keep them separate from other refuse.
Bulky wastes are not always disposed of properly, but the incidence of
improper disposal or littering appears to be relatively low. Published esti-
mates indicate a range of 1 to 15 percent, depending on product type.
Minnesota, for example, reports that about 10 percent of the motor vehicles
retired each year in that State are abandoned.2
1 Automobiles, retired at the rate of 8 to 9 million per year, represent an additional 10 to 15 million tons of
material. In general, autos are stripped for usable parts, and the hulks are shredded to produce steel scrap.
2 Personal communication with Mr. Sam Hasson, Administrator of the Minnesota abandoned motor
vehicles program, December 14,1978.
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In other words, the existing voluntary systems for disposing of bulky
wastes work successfully for 85 to 99 percent of the waste, and that which is
delivered for disposal — because it is usually separated from other wastes at
the site — is in a condition almost as amenable to resource recovery as it
would be if delivered to a redemption center.
These facts undermine the cost-effectiveness of bounty systems for bulky
wastes, because the improvement in disposal of these wastes may not be
sufficient to justify the cost of the program. Abandoned automobiles are a
case in point. At least in one State, 9 out of 10 junk autos are already being
delivered to a proper disposal site. If a bounty of, say, $100 per car is offered
by the government and this succeeds in bringing in all 10 cars, the govern-
ment would in effect be paying $1,000 in order to entice delivery of the tenth
car.
Hazardous Goods
Hazardous products and materials in post-consumer solid waste are those
which can be harmful to workers involved in solid waste collection and
processing, to the equipment used to process solid waste, or to the environ-
ment after they are disposed of. Materials in question include pesticides,
organic chemicals, petroleum products, and heavy metals. Table 14 identifies
some of these materials and the components of the waste stream — batteries,
waste oil, pesticide containers, refrigerators, small electrical appliances, and
other products — that contain one or more of these substances.
Deposits or bounties could reduce the risk of these hazardous wastes by
encouraging the public to separate them from the mixed waste stream.
Tackling this contamination problem with an incentive system might reduce
any need for product regulation, another policy the Committee examined.
Yet another benefit of deposits or bounties arises in the processing of mixed
waste for resource recovery. For example, excessive amounts of waste
lubricating oil in mixed waste can require additional control measures: if the
wastes are burned, the incinerator might need additional pollution controls.
A system for separating out hazardous wastes may also reduce problems in
the design and operation of environmentally acceptable landfills.
Additional advantages of separation result from the revenues received for
recovered materials, plus the savings from not having to pay for disposal of
items that are recycled or reused.
Other Policy Issues
The Committee noted that controlling the waste flow does not, in itself,
create or guarantee either resource recovery or proper waste disposal.
Deposits and bounties should be viewed as general purpose incentives for
controlling categories of materials. As conservation measures', they are more
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Table 14
SOME HAZARDOUS COMPONENTS IN SOLID WASTE*
Contaminant Possible Source Hazard
Pesticides Household and s v> Nervous disorders.
commercial pesticide Some are known
containers carcinogens.
Polychlorinated Small electric Toxic; accumulates
biphenyls appliances in tissue
Fluorocarbons Refrigerators, air Claimed to harm
conditioners ozone layer
Petroleum Products Waste crankcase oil Heavy metals, ground
water contamination
Lead Automobile batteries Nervous disorders
Cadmium Batteries Kidney and repro-
ductive damage
* Not all of the possible sources contain these contaminants.
suitable to product-by-product applications as a "fine tuning" device within
the context of a broader waste management setting that also includes
provisions for regulated disposal or recycling.
Free Market Principles. Bounty or refund programs allow individuals to
exercise free market choices.
The "Polluter-Pays" Principle. Under a deposit or bounty system con-
sumers who dispose of their wastes improperly forfeit their rights to the
deposit or bounty. This loss is equivalent in effect to a pollution penalty, so
that the system is consistent with the polluter-pays principle.
Social and Economic Equity. Because of the general nature of the
Committee's investigation of deposits and bounties, it is not possible to
evaluate them from the point of view of social and economic equity.
Economic Efficiency. The degree of economic efficiency will be deter-
mined by the total price that is paid to bring about an incremental improve-
ment in waste disposal or resource recovery; it will vary with each product
and return scheme.
Administrative Feasibility and Cost. Like a beverage container deposit
system, deposit systems for durable and hazardous goods should be relatively
easy to administer. Government-financed bounties would be more difficult
because of the normal restrictions relating to expenditure of public funds. In
all cases, the costs will vary with different products and different systems.
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Committee Findings
The Resource Conservation Committee concluded the following with
respect to deposit and bounty systems for consumer durables and hazardous
goods:
• Deposits and bounties could be effective in
- achieving source separated delivery of durable and hazardous
goods to specific points;
- reducing improper disposal;
- reducing uncontrolled dumping.
• The extent of the problem of littering and improper disposal of dura-
ble and hazardous goods is unclear.
• Hazardous materials appear to be the most likely candidates for this
approach in the future.
Committee Recommendations
Because the Committee has not studied any specific applications of
deposits or bounties for durable or hazardous goods, none of the members is
prepared to recommend that the Federal Government apply either of these
tools to specific products. Nevertheless, most of the members endorse the
concept as potentially useful. Several members express special interest in
using these tools for hazardous products, and one member endorses the
general concept, while expressing reservations about mandatory national
programs. All the members join in recommending further research on the
subject.
National Litter Tax
Although litter is a highly visible and irritating problem in many commu-
nities, it is not a major issue from a material conservation or resource
recovery standpoint because, even in the aggregate, it involves relatively
small quantities of material. From an environmental perspective, litter is
primarily a problem of "aesthetic insult" rather than a threat to public health
or a major ecological hazard. Nevertheless, it is a problem of some impor-
tance in terms of the high costs of controlling it (estimated at over $500
million per year) and the aesthetic costs related to failure in, control. In these
terms, it is a significant, if often overlooked, aspect of solid waste manage-
ment, and deserving of special attention.
The Resource Conservation Committee thus gave serious consideration to
litter problems as part of several of its policy studies. Most importantly, the
Committee looked at litter when assessing the potential costs and benefits of a
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national beverage container deposit policy. Litter is also an important aspect
of the analysis of the use of deposits and bounties on durable and hazardous
goods. Congress also instructed the Committee to consider the costs of litter
pickup as an element in evaluating the appropriateness of solid waste disposal
charges.
Several States currently employ dedicated litter taxes as a means for
financing State litter control programs, and the concept of a Federal litter tax
was suggested to the Committee, both as an alternative and as a complement
to other policies, especially beverage container deposits. Thus, the Committee
conducted a brief evaluation of litter taxes while recognizing that litter might
be of little relevance to its central focus on resource conservation.
The Committee considered two different concepts for a national litter tax.
The first is that of a broadly based tax on consumer goods designed to raise
revenues to support a nationwide program of litter cleanup, education, and
other control efforts. This is similar in purpose and form to litter taxes
recently enacted in at least six States: California, Colorado, Connecticut,
Kentucky, Virginia and Washington. Generally these taxes amount to a small
fraction of one percent of sales.
The second concept for a litter tax is that of imposing selective excise or
product taxes as an anti-litter incentive by raising prices on extensively
littered products. This is a quite different approach. Various options are open
in this regard, and several were briefly evaluated by the RCC staff.
While acknowledging that it would be feasible to raise revenues by levying
a dedicated litter tax, the Committee was not favorably disposed towards the
idea of a national litter tax in either its revenue raising or disincentive
formulations. Moreover, the Committee found that a national litter tax
would not be an effective substitute for beverage container legislation. By
offering a reward, deposit systems not only provide a more direct incentive
for the public to clean up accumulated litter, but also more effectively
discourage litter in the first place.
Committee Analysis
The Committee found that a broad-based litter tax could be an effective
revenue-raising mechanism to finance litter control activities at the local,
State, or Federal level. However, conceived of solely as a funding mechanism,
a litter tax would not have a direct effect on resource conservation: an excise
tax designed to raise revenue does not necessarily provide an incentive to
reduce the consumption of materials, increase recycling, or otherwise reduce
the amount of waste. (See Staff Background Paper No. 14, "Preliminary
Analysis of a National Litter Tax.")
Another difficulty with a litter tax designed primarily to raise revenue is
that it is very hard to determine either current litter control costs nationwide
•>
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or future expenditure requirements. The Committee staff estimates that
current expenditures for litter pickup nationwide may run at about $500
million annually; this figure is probably too low, since it excludes expendi-
tures associated with penalty enforcement, provision of receptacles, public
education, and anti-litter advertising.
The Committee did not, however, explore the specifics of revenue expendi-
ture. The question of how generated revenues might be used to pay for litter
control activities at various levels of government raises a number of issues
which go beyond the scope of Committee review. These issues include the
problem of accurately estimating the cost of litter control at the local, State
and Federal levels, as well as the problem of administering what would
amount to a dedicated revenue transfer program where funds are earmarked
for litter control. These important elements of a litter tax proposal would
clearly warrant closer examination if a decision were made to proceed with a
national litter tax.
A litter tax could also be designed to have an indirect effect on resource
conservation, principally as a disincentive to littering. Conceived in this way,
a litter tax would aim to reduce litter by causing prices to be higher for
selected "litter prone" products. Consumers could respond by reducing their
purchases of those products, while producers could respond by redesigning
product and packaging characteristics to eliminate particularly litter-prone
features and thus escape the tax. However, even if designed in this manner, a
national litter tax would be a difficult means of reducing the rate of litter
generation at the source — i.e., the consumer. As a practical matter, it would
obviously be impossible to tax the individual act of littering, simply because
most littering is surreptitious.
Although a national tax could be designed specifically to discourage
littering, such a levy would probably be ineffective unless the tax rate were
extremely high. The reason is that consumer demand for products potentially
subject to a litter tax appears to be relatively unresponsive to prices.
Technically speaking, price elasticities of demand for such products are
seldom much higher than 1.0, and are frequently as low as 0.5. This means,
for example, that a reduction in consumption (and presumably also of litter)
of 20 percent would generally require price increases on the order of 20 to 40
percent or more for the individual products. Price increases of that magni-
tude would probably be considered inflationary. It is improbable that the
nation would want to approach its litter problem via a general reduction in
consumption.
Moreover, even if the higher prices would be tolerated, the litter tax would
be economically inefficient. The tax would raise the price of all targeted goods
to keep a small fraction from being littered. A cost-benefit analysis would
show that a great deal of tax would have to be collected for each item not
littered.
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An alternative to a general litter tax would be a tax on specific design,
packaging, or marketing features rather than the product itself. Such an
approach would require a detailed product-by-product treatment. This
approach would resemble product regulation, since the taxes would be used
to induce administratively determined changes in product characteristics.1
With few exceptions, such as the issue of beverage can "ring tabs," the
relations between product/packaging design aspects and littering has not
been studied sufficiently to draw general conclusions about the feasibility or
effectiveness of such a selective approach.
Other Policy Issues
Although the Committee did not examine the litter tax in terms of how the
revenues obtained from it would be used, it did evaluate the economic
efficiency, equity, and administrative aspects of using a litter tax as a revenue-
raising device.
Free Market Principles. A national litter tax would not ban the
production or sale of any product. It would alter the relative prices of selected
products, but consumers would remain free to adjust to those price changes
in a decentralized fashion.
The "Polluter-Pays" Principle. A litter tax would be generally inconsis-
tent with the polluter-pays principle: all consumers of litter-prone products
would have to pay the tax in order to reach the "polluters" — the minority
who actually litter.
Social and Economic Equity. A national litter tax without complicated
rebates would be regressive with respect to personal disposable income.
Although the products most likely to be covered under a litter tax (candy,
gum, soft drinks, beer, and cigarettes) are generally minor items in consumer
budgets, expenditures on these items tend to increase as a percentage of
disposable income for those with less personal income.
Economic Efficiency. Strictly as a revenue raising measure, a litter tax
would not improve the efficiency of resource allocation in the economy. By
changing effective market prices, the tax would direct resources away from
the products subject to the tax and toward other products for reasons
unrelated to any particular failure of the market.
If taken as a means of superimposing litter control costs on product prices
— internalizing those costs — a litter tax would theoretically generate
marginal improvement in resource allocation. The shift would therefore
improve economic efficiency, since it would represent a movement from
partial to full cost pricing. Operational problems might negate this advan-
tage; however, the tax must be placed on the right products and at the right
1 For discussion of product regulations, see the section on product regulations in Chapter 5 and also Staff
Background Paper No. 18, "Product Regulations as a Resource Conservation Strategy."
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amount in order to avoid upsetting the balance of the market. A litter tax
designed to internalize litter control costs could improve efficiency in
resource allocation in theory, but there is no assurance that it would in
practice. The tax would probably be too small to change many decisions.
A litter tax made high enough to affect the rate of litter generation would
be economically inefficient. A great deal of tax would have to be collected for
each item not littered.
Administrative Feasibility and Cost. A review of State experience with
litter taxes indicates that tax collection costs have been relatively low, ranging
from 1 to 5 percent of revenue yield. Generally, litter tax assessments have
been added onto existing State sales or excise taxes, a procedure often called
"piggybacking." Since there are no Federal sales taxes, and few Federal
selective excise taxes, the State experiences probably provide little guidance
in estimating the costs of administering a national litter tax. Moreover, even if
there were Federal sales taxes, the State experiences might not provide very
good guidance.
Committee Findings
(Findings on the national litter tax relate only to litter taxes as they might be
used to raise revenue and to provide incentives against littering; they do not
address funding of litter control programs.)
• A broad-based litter tax is an effective means of raising revenue to fund
litter collection and abatement programs but is generally regressive
and may be inflationary.
• At the national level, the income tax provides a more equitable means
of revenue raising.
• A litter tax provides no incentive for either cleaning up litter or
reducing the rate of litter generation.
• Unless the tax is extremely high, and thus unrelated to the cost of litter
control, it would have no effect on resource conservation.
• A litter tax is generally inconsistent with the "polluter-pays" principle.
• Without prejudging the merits of a beverage container deposit system,
a litter tax is not an effective substitute for a beverage container
deposit system.
Committee Recommendations
The Committee unanimously recommends against national litter tax
legislation, having found that a litter tax would not provide any incentive to
clean up litter or reduce the rate of litter generation, and that a litter tax is not
an effective substitute for a beverage container deposit system. One member
further asserts that litter should be considered a State problem and not a
Federal problem. Because the subject of litter has not been well analyzed at
the national level, two members also recommend further study of the litter
problem.
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PRICING POLICIES
FOR MUNICIPAL SOLID WASTE
When we buy an item marked "59*T in a store, we pay just that for it — not
"59 cents plus the costs for adequate disposal of the item and its packaging."
Some economists and others have argued that the current system prevents us
(as a society) from allocating resources efficiently. Generally we pay for
municipal solid waste management through property taxes or as a uniform
charge each month. The costs of disposal are distant from our decision to
purchase; the costs do not vary with how much we throw away. As a result,
from producers to consumers we ignore those costs in deciding which
products to produce and purchase.
Because disposal costs are not included in purchase prices, we do not have
an incentive to "economize" on disposal services. We have little motivation to
separate and recycle usable waste materials or to select types of packaging
(e.g., returnable bottles) which need not end up as solid waste. The result can
be an overuse not only of the resources needed directly for disposal (e.g., land
for sanitary landfills), but also of the materials used in consumer goods and
packaging which are then thrown away.
The Resource Conservation Committee examined two methods of assign-
ing prices to solid waste management services, local user fees and a national
solid waste disposal charge, to determine their appropriateness and feasibility
as resource conservation policies.
Local solid waste user fees are charges paid by users of municipal solid
waste collection and disposal services which relate directly to the amount of
service provided. If a household discards less waste, it would pay less for
waste management services. Several researchers have hypothesized that the
widespread introduction of quantity-based solid waste user fees could have
important implications for resource conservation by providing an economic
incentive to households and commercial establishments to reduce waste and
increase recycling.
A solid waste disposal charge (or "product charge") would be a national
excise tax on the virgin materials in consumer products and packaging that
enter the municipal solid waste stream. Though varying in specific design,
most proposed product charge schemes have included (1) a weight- or unit-
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based Federal excise tax on consumer products and packaging tied directly to
projected costs for disposal (e.g., $X per ton or Y£ per container); (2) an
exemption from the tax for secondary (recycled) materials used in products
and packaging; and (3) redistribution of the revenues obtained from the tax to
local governments.
The idea behind a solid waste disposal charge is a fairly simple one: it is a
way of charging for disposal at the time a product is purchased. Since
disposal costs are normally not included in the price of the product, neither
producers nor consumers of goods pay more for disposal when they are
responsible for generating more waste: producers do not pay at all, and
consumers pay only in the aggregate, in most instances through their local
property taxes or through flat fees. A national disposal charge can be formu-
lated to include these costs in the price of the materials, thereby "internaliz-
ing" them, so that decisions to use the materials will take all costs into
account.
Although local user fees and a national solid waste disposal charge are both
methods of adding in the costs of solid waste management services, they
differ in several important respects, specifically: (1) in their point of applica-
tion, (2) in the level of government that applies them, (3) in how closely the
charges can reflect the costs they are intended to cover, and (4) in the
incentives they create to change the use of materials in the nation. In spite of
their differences, however, incremental quantity-based local user fees and a
national solid waste disposal charge are basically alternatives for achieving
the same ends. Imposing both at once would have a larger effect on resource
conservation than imposing only the charge or the fee, but it would be
double-charging for the provision of solid waste management services, which
may be just as detrimental to economic efficiency as not charging at all.
Local User Fees
Very few local waste collection systems actively encourage users to discard
less waste. Only about a quarter of collected waste is subject to variable user
fees — fees which change in relation to the costs that consumers impose on
the solid waste management system. Of these variable fees, most are service
based (change when the frequency of collection or the location of pick-up
change), rather than quantity based (change in relation to the amount of
waste discarded), and thus create little or no incentive for reducing the
amount of waste. Local jurisdictions collect revenues for the remaining three-
quarters of the waste through local property taxes or flat-rate fees, which
provide no incentive for conservation.
There are feasible methods by which local jurisdictions can use the
quantity of waste to determine the price of waste collection. Several public
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and private collectors already do this, although most of their methods are
relatively simple. Some organizations charge fees based on the number or
average size of refuse cans which discarders regularly want emptied over the
course of a long-term contract. A few use a more precise method to monitor
volume: "metered bags." Under this system, the service supplier or an
authorized distributor sells pre-labeled plastic bags; the price of the bag
includes the cost of pickup and disposal of the contents. Metered bags appear
to be the most precise and practical method presently available for charging
quantity-based fees, and their use appears to cause collection costs to be lower
than they would be with refuse cans from households in single-family
residences. A variation on this method has been tried in Europe, where
stickers have been sold for attachment to refuse containers.
A quantity-based variable fee makes sense as an incentive for resource
conservation only if households and commercial establishments can in fact
respond by reducing the amount of waste they put out. The RCC analysis
suggests that they can. They can shift their purchases of goods (and
packaging) toward low-waste items (e.g., reusable containers and tableware,
longer-lived goods). They can also seek out opportunities for recycling:
composting leaves and clippings in their own yards, taking metals, glass, and
paper to local recycling centers, and (for larger commercial or institutional
establishments) entering into contracts with dealers in secondary raw materi-
als for specialized source-separated collection of corrugated paper or high-
grade office paper. In the longer run, households and commercial establish-
ments might, through changes in what they buy, encourage producers to
create products and packaging that are less wasteful and more readily
recyclable.
Effectiveness of Variable User Fees
Although quantity-based local user fees are feasible, the crucial test of their
usefulness is whether consumers will actually reduce the amount of waste
they put out for collection, without, of course, resorting to uncontrolled
"midnight" dumping. Several studies have been performed in an attempt to
determine whether the presence or absence of incremental fees affects the
quantity of waste discarded. (These studies are described in Staff Background
Paper No. 13, "Local User Fees for Solid Waste Services as a Resource
Conservation Policy.")
Some of the studies suggest that variable local user fees do lead to changes
in waste generation. But there is also evidence to suggest that the user fees
charged in the past have had little or no such effect. Thus, while one cannot
make an unequivocal case for local user fees as a resource conservation
measure, the documented experience to date does suggest that they may be a
useful tool. There is still a need, however, for more carefully designed field
studies on this subject.
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There are benefits other than resource conservation associated with the
variable fees. In theory, a user fee based on the incremental cost of providing
service should improve the efficiency with which the municipal solid waste
management system operates. System operators have noted, for example, that
charging for each container (i.e., a volume-related fee) causes households to
pack more waste into each container. The result is fewer containers and less
time spent on collection, enabling the same level of service at a lower total
cost — unless, of course, the tightly-packed containers become too difficult to
handle. Uncontrolled, "midnight" dumping, another potential drawback to
local fees, has generally not been a problem in this country, although it has
been reported as a problem in Europe.
Variable fees could also make it economically and politically feasible to
offer a broader array of services. Individuals who demand a costlier level of
service (e.g., more frequent collection or pickup in the back yard rather than
at the curb) would be able to purchase it. Of course, too many service options
with different fees could overload the administration of the system, so there is
a practical limit to what could be offered.
Administering Local User Fees
The cost of administering user fees depends on the type of fee system used.
Because some sort of billing is required with a fee system, it is more expensive,
other things being equal, than a tax-supported system. A metered bag system,
however, is relatively inexpensive to administer. For most types of fees,
billing costs run less than 5 percent of the total cost of collection and disposal
(about $2 per ton for billing, on the average) when billing for solid waste is
combined with billing for other municipal services such as water and sewer.
Completely separate billing can run as high as 10 to 15 percent of total waste
management costs in some cases.
With variable fee systems other than metered bags, monitoring is required
in addition to billing. The collector must keep records so that the household is
charged the correct rate, and the crews must be told who has purchased what
service. The route books and updates typically involved will be costly only if
the collection crews have to consult them regularly; however, in practice, this
does not appear to be a problem. The available evidence suggests that the
crews usually know who has purchased what service and can provide it
without constantly referring to the route books.
Two final impediments, aside from administrative cost and monitoring,
discourage local officials from adopting local user fees. Both are existing
Federal policies. The first is that user fees are not deductible from income
taxes. Users must pay the fee out of after-tax income, while local taxes — for
example, the property taxes often used to pay for solid waste management —
are deductible from income taxes. The second policy is related to Federal
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revenue sharing: user fees cannot be used in the formula to calculate the local
tax base. (The amount of Federal revenues a community receives is based in
part on the level of local taxation — high local taxes mean more revenue
sharing, but user fees cannot be counted.) While the Committee did not study
in any detail the implications of altering or removing these policies, it is clear
that such study is necessary.
Other Policy Issues
The RCC staff analysis suggests that making the costs of solid waste
management more explicit through incremental user fees is consistent with at
least four of the RCC's five criteria for evaluating proposed policies. Only the
costs of administration may interfere.
Free-Market Principles. Because the charge to each discarder is related
to the cost of providing the service, discarders can decide how much service
they want and can pay only for that service. When they respond to the now-
explicit price signals, they have the opportunity to make their decisions just
as they do in other free markets.
The "Polluter-Pays" Principle. With quantity-related incremental user
fees, consumers can pay for service in proportion to the costs of preventing
environmental damage from the waste they generate (i.e., the costs of
disposing of waste in an environmentally acceptable fashion).
Social and Economic Equity. User fees improve the general "fairness" of
the waste management system, since people who make more costly demands
on the waste management system would bear a greater share of the costs. It is
not clear whether user fees would generally be more regressive or progressive
than the present local property tax systems.
Economic Efficiency. With an incremental fee system, people would
have the opportunity to order service geared to their own real needs, saving
resources which might otherwise be needlessly spent. A flat fee system,
however, would not be an improvement over a tax-supported system in this
respect.
Administrative Feasibility and Costs. It is difficult to make a judgment
with respect to this criterion. Administrative costs for incremental fee
systems appear to be reasonable, judging by the communities that already use
them. (It is fair to assume that those communities feel that the benefits from
the fee system outweigh its costs.) We cannot generalize this conclusion to all
communities, however.
Committee Findings
Based on a review of the theoretical basis supporting local user fees to
finance collection and disposal of municipal sold waste and the studies of
actual experience to date, the Resource Conservation Committee has
concluded:
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• Quantity-based local user fees have the potential to stimulate a reduc-
tion in the quantity of waste put out for collection and disposal by
individuals, and to increase the amount of waste material separated
and recovered.
• There is some empirical evidence that quantity-based local user fees
can cause reductions in the generation of municipal solid waste.
• Administrative costs of existing local user fee systems are generally
low.
• Local user fees which vary based on services provided offer a means of
payment for waste collection and disposal that is more consistent
with the polluter-pays principle than are the predominantly used
flat-fee and local-tax-financed systems.
• Federal tax and revenue-sharing policies discourage the adoption of
local user fees by encouraging localities to use taxes rather than user
fees to finance municipal solid waste collection and disposal.
Committee Recommendations
The Committee unanimously endorses the concept of local user fees for
solid waste management. By "local user fees," the Committee means variable
fees that change according to the quantity of waste put out for collection. (In
addition, such fees can also vary according to the frequency of service and
other major determinants of the actual costs of collection and disposal.) The
Committee's endorsement is based on evidence that variable fees may
encourage more economical use of solid waste management services.
The Committee also unanimously recommends additional study of Federal
policies that inhibit local user fees, including the non-deductibility of fees for
Federal personal income tax purposes and the current exclusion of user fees
from the local tax base calculation used for Federal revenue sharing.
Nevertheless, the Committee has decided not to recommend precisely how
these disincentives should be removed because the options for removing them
and the implications of those actions have not been studied in sufficient
detail.
Finally, although the Committee members agree that the present state of
knowledge makes it premature to create positive incentives for local govern-
ments to adopt user fees for solid waste management, they unanimously
recommend that the Federal government provide localities with information
and/or technical assistance on local user fees.
Some members of the Committee suggest stronger Federal action. One
member recommends not only that Federal disincentives be studied but also
that the Committee go ahead now and recommend ending them. Two other
members recommend further studies that would include demonstration
programs involving, among other things, source separation of materials for
resource recovery in conjunction with variable fees.
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National Solid Waste Disposal Charge
The Committee found similar theoretical justification, but more practical
difficulties, in an alternative to local user fees — the national solid waste
disposal charge. Under this policy, the Federal Government would charge
producers directly for disposal at the time they manufacture a product; the
cost would then be passed on to consumers. The money collected under this
plan would then be distributed to local governments. The principle behind
this policy, as in local user fees, is that consumers and producers should be
made to realize that disposal is not free.
The principal difference between local user fees and solid waste disposal
charges is their point of application: the disposal charge would incorporate
the cost of disposal into the price of a product, rather than charging when it is
discarded. As visualized by the Committee, the charge would apply only to
virgin material content and not to recycled material content (on which a
charge presumably had already been paid once). This method would raise
prices more for high-waste items, thus discouraging consumers from buying
these items in preference to low-waste items, and encouraging the use of
recycled materials.
As a result, the incentives of the disposal charge are directed toward
decisions on production and consumption rather than toward disposal: the
local user fee encourages recycling by charging consumers for the materials
they do not recycle; the disposal charge encourages recycling by charging
only when primary materials are used and thereby changing the relative
prices of primary and secondary materials.
The Resource Conservation Committee concentrated on the disposal
charge as a way of incorporating the cost of disposal into decisions on
resource use. However, the disposal charge could also serve objectives that
the Committee did not study. For example, the charge could have the
objective of increasing recycling or resource conservation per se; or it could
compensate for existing government policies which encourage the use of
virgin materials (such as tax subsidies for virgin materials or freight rates
which discriminate against recovered materials). Although the Committee
addressed the issues associated with these objectives, it did not evaluate the
disposal charge as a means of achieving these objectives.
Design Features
Disposal charges are inherently complex. Striking a balance between
administrative feasibility and effectiveness for waste reduction, decreasing
virgin material use, and recovery involves the interplay of many interrelated
design options. Staff Background Paper No. 9, "Solid Waste Disposal Charge
Design Issues" discusses these issues.
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The national disposal charge that the Committee studied would apply to 75
percent of the non-food component of municipal solid waste, or just less than
half of total municipal solid waste, including food and yard wastes (Figure 9).
The charge would apply to plastic, metal, paper packaging, and other (non-
packaging) paper products.
Figure 9: COMPOSITION OF MUNICIPAL SOLID WASTE (1976), SHOW-
ING PORTION THAT WOULD BE COVERED BY SOLID WASTE
DISPOSAL CHARGE EVALUATED BY THE RCC
MISC. INORGANICS
1%
Portion covered by charge
(47% of total MSW, and
75% of nonfood product
waste).
Nonfood product waste (63% of MSW)
includes paper, glass,
metals, plastics, rubber, leather,
wood and textiles.
Source: Environmental Protection Agency and Resource Conservation Committee Staff.
The principal consumer products excluded, other than food, were durable
goods. Durable goods — e.g., appliances and furniture — differ from non-
durables principally in that they are not discarded for many years after
purchase, making the appropriate charge rate difficult to determine. Because
these goods are sometimes littered or abandoned in alleys or along the
roadside, a deposit or bounty mechanism appeared to be a more suitable way
to deal with them than a solid waste disposal charge.
Ideally, a disposal charge would be levied on everything entering the
municipal solid waste stream. In practice, however, a national solid waste
disposal charge could be levied only on items which are sold as products,
excluding other items in the waste stream such as lawn trimmings, leaves,
dirt, and construction debris.
It appeared from available information that the only feasible basis for a
product disposal charge would be to make it a weight-based charge, rather
than a volume-based charge.
The Committee decided that the most appropriate level for a disposal
charge designed to improve economic efficiency would be to make it equal to
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the national average cost of collecting and disposing of an additional quantity
of municipal solid waste (i.e., the marginal, or incremental cost of solid waste
management). A uniform charge for all products, rather than a product-
specific or location-specific charge, would be the only administratively
feasible approach for a national-level charge. Using averages, however,
causes the charge to lose precision and effectiveness as a means to improve
resource use. The incremental cost of collection and disposal differs from
location to location and from product to product and a charge based on
averages does not capture these differences.
It is difficult to estimate the national average incremental cost of solid
waste management. The available estimating procedures are crude, and there
is considerable uncertainty regarding the quality of the basic data. After
considerable analysis, the staff determined that the national average incre-
mental cost of municipal solid waste management is approximately $15 per
ton in 1978 dollars, and this was the charge level that the Committee staff
used to evaluate quantitative impacts. This estimate was based on statistical
and engineering modeling, and is discussed in detail in Staff Background
Paper No. 11, "A Cost Analysis of the Solid Waste Management Industry."
An exemption from the charge for the secondary (recycled) material
portion of consumer products and packaging was another important feature
of the proposal studied. The recycling of waste material avoids some disposal
costs, and the exemption would provide an incentive for producers to make
greater use of recycled materials.
The final important design feature of the proposal studied by the Commit-
tee relates to the use of the revenues generated by the charge. Feasible options
examined by the staff included: simply allocating the revenues to the general
fund of the Federal treasury; returning the proceeds to households through
income tax rebates; and transferring the funds to State and local governments
through some form of revenue sharing system. The staff analysis looked most
closely at General Revenue Sharing as a model. When the money reaches
local governments it would become part of "general funds," and the localities
would be able to lower their taxes (or at least not raise them in the future) or
increase local services by the amount received. Thus, although the charge
would increase prices of certain consumer goods, it would also most likely be
reflected in decreases in other types of taxes.
Analysis and Implications
Although the Committee found the concept of including disposal costs in
the price of products to be theoretically justifiable, the staffs analysis
indicated that, in practice, under current conditions the introduction of a $15
per ton solid waste disposal charge would probably produce only modest
resource conservation and would probably be only a little better than a break-
even proposition, at best, from an economic standpoint. A complete analysis
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of the benefits and costs of a $15/ton disposal charge is contained in Staff
Background Paper No. 12, "Benefits and Costs of a National Solid Waste
Disposal Charge."
In performing this analysis, the RCC staff used a computer model of the
paper and packaging industries developed specifically to evaluate the effects
of a series of different charges on waste generation and recycling and on the
use of virgin materials in affected industries.
Based on the policy design features described, the estimates developed with
this model projected that recycling would increase by approximately 1.2
million tons and waste generation (before recycling) would decrease by about
another 1.2 million tons, compared with their respective 1985 baseline levels,
for a total net decrease in municipal solid waste disposal of 2.4 million tons
below what it would have been otherwise. This reduction would represent
approximately 1.2 percent, by weight, of total municipal solid waste, or
approximately 2.7 percent of the products directly subject to the charge. Net
disposal of wastepaper would be reduced by about 1.3 million tons (2.3
percent), glass by 880,000 tons (5 percent), steel by 220,000 tons (4 percent),
and other materials by lesser amounts.
In other words, a $15/ton disposal charge would probably have only a
relatively small overall effect on resource conservation and solid waste.
The measurable economic benefits from a national solid waste product
charge would be primarily attributable to local community savings in solid
waste collection and disposal costs. At an average incremental cost savings of
$15 per ton, the reduction in net waste disposal of 2.4 million tons would
achieve a nationwide saving in solid waste costs of about $33 million per year.
Against this, however, would have to be subtracted the direct governmental
costs of administration, roughly estimated at about $10 million per year.
In addition there are other reductions that should be made to correct the
benefit estimate for market inefficiencies and consumer losses introduced by
the charge itself. As discussed in the staff background paper on "Benefits and
Costs," these involve factors such as using a national average rather than
locally specific charge rates. Although the size of these technical adjustments
is difficult to estimate, under certain assumptions they could be large enough
to reduce the economic benefits of imposing the charge to zero or even cause
them to become negative.
Even if we discount these technical reductions, however, net economic
benefits would not be substantial enough for the policy to have much more
than a break-even prospect from an economic perspective. The most impor-
tant factor underlying this conclusion is the apparent low response that can
be effected in the materials industries and packaging markets to the imposi-
tion of the charge.
The changes in the use of materials following introduction of a disposal
charge depend partly on the responsiveness of consumers to higher prices for
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consumer products and, more importantly, on the responsiveness of manu-
facturers and raw material suppliers to changes in recycled and virgin
material prices. Figure 10 shows the process by which material use would
change. Despite the fact that the RCC staff and several private contractors
spent considerable time attempting to quantify these relationships (technic-
ally known as "price elasticities"), the magnitudes of these factors remain
highly uncertain. The staff generally believes that the elasticities used
understate the true long-run responsiveness of the market. However, the
results of the available statistical estimating methods do not support higher
elasticities. Additional research is needed. The estimates of these elasticities
are presented in Staff Background Paper No. 12, and contractor reports are
available which document their development.
Figure 10: EFFECT OF A NATIONAL DISPOSAL CHARGE
TAX REVENUES
TAX REDUCTIONS
VIRGIN MATERIALS
$1S/TON TAX
CAUSES AMOUNT TO FALL
RECYCLED MATERIALS
I
HIGHER
VIRGIN MATERIAL PRICE
CAUSES AMOUNT USED TO RIS!
HIGHER VIRGIN
MATERIAL PRICE
CAUSES PAPER AND
PACKAGING PRICE TO RISE
MANUFACTURERS
BUY LESS VIRGIN MATERIAL,
MORE SECONDARY MATERIAL
TO KEEP COSTS DOWN.
OF MATERIAL INTENSIVE GOODS
TO RISE
©
MANUFACTURERS
SWITCH TO LIGHTER
WEIGHT PRODUCT DESIGNS
TO KEEP COSTS DOWN.
MATERIAL DEMANDS AND
PACKAGING WILL BE REDUCED
CONSUMERS BUY LESS OF THE
MATERIAL INTENSIVE GOODS
WHICH INCREASE
MOST IN PRICE,
BUT BUY MORE OF OTHER THINGS.
NET WASTE GENERATION
DECREASES
INCREASED DEMAND AND PRICES
FOR RECYCLED MATERIALS
CAUSES MORE CONSUMER WASTE
TO BE DIVERTED
F-flOM DISPOSAL
The imposition of the national disposal charge would raise the price of
goods and services that use paper and packaging. For example, the $15 per
ton charge would increase the cost of paper products and packaging materials
by $1.35 billion (1978 dollars) in 1985, which would be about 1/20 of one
percent of GNP,1 and approximately this amount would be collected in
Federal revenues and, less administrative costs, transferred to local govern-
1 A $1.4 trillion GNP (1974 dollars) in 1974 growing at 3 percent annually would reach $2.6 trillion in
1978 dollars by 1985.
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ments as revenue transfers. These revenues would be almost entirely returned
to consumers through net tax reduction or increases in government services
at the local levels. Consequently, the charge should not be inflationary from a
macroeconomic standpoint.
The RCC staff also investigated the effects of a $30/ton disposal charge.
Although the higher charge level would approximately double the waste
reduction and recycling effects, it could be less efficient economically because
more people would be overcharged for solid waste services.
Other Policy Issues
In addition to analyzing the resource conservation effects of a national
disposal charge, the RCC also evaluated the policy in terms of economic
efficiency, social and economic equity, and administrative cost.
Free Market Principles. A solid waste disposal charge would incorpo-
rate the cost of disposal into the price of certain consumer products and
packaging. Consumers and producers would retain their freedom to make
choices, but they would do so under a new set of constraints (prices) —
constraints which reflect the national average costs that their choices impose
on the waste management system. Thus, a disposal charge would be entirely
consistent with the free market philosophy.
The "Polluter-Pays" Principle. A disposal charge conforms to the
"polluter-pays" principle by forcing those who buy and sell products to bear
the costs of disposal. However, to the extent that some disposers already pay
directly for waste services, it would not be totally consistent with the
"polluter-pays" principle.
Social and Economic Equity. As a percentage of income, the product
charge would appear to fall more heavily on lower income families which
spend a greater portion of their income on packaged food, clothing, pharma-
ceuticals, and other necessities which use paper than higher income families
do. However, the average impact for all families would only be about $25 a
year, and the impact on lower income families would be less. More impor-
tantly, if the revenues collected are returned to municipal governments the
net effects would be either neutral or "progressive" with respect to different
income groups. Finally, it should be noted that the present system for
financing municipal solid waste collection and disposal largely out of prop-
erty taxes is already regressive and may be more regressive than a disposal
charge.
Economic Efficiency. By forcing consumption and production activities
to bear the full costs of municipal solid waste management, a disposal charge
would improve economic efficiency. If consumers do not face any penalty for
disposing of the goods they buy, they will tend to buy more goods requiring
disposal than they would otherwise. Similarly, if producers face no penalty
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for manufacturing high-waste products, they will continue to produce them
at higher rates than they would otherwise. A disposal charge would force
both these groups to realize that disposal is not free and would induce choices
on both their parts that are more efficient economically. However, for those
who already pay directly for waste management it would be less efficient
economically.
Administrative Feasibility and Cost. The disposal charge system that the
Committee staff analyzed appears to have high administrative costs relative
to the benefits it would generate. The costs (about $10 million per year)
would probably more than offset any gain attributable to the policy.
Committee Findings
Based on the staffs analysis of the national solid waste disposal charge (a
Federal excise tax on consumer products and packaging designed to reflect
their contribution to local community solid waste management costs), the
Resource Conservation Committee found:
• There is a theoretical justification for internalizing municipal solid
waste management costs.
• The analysis of the likely effects of a disposal charge based on national
average marginal costs for municipal solid waste management indi-
cates that the net economic benefits and impact on materials flows
would be low in practice.
• There is no definitive evidence that the failure to include the cost of
disposal in the price of materials which enter the municipal solid
waste stream has a measurable effect on consumption of virgin
materials.
• Data on which the analysis is based, particularly price elasticities and
marginal cost of municipal solid waste, are highly uncertain.
• The variability of municipal solid waste costs between communities
significantly reduces the potential benefits of a uniform national
charge.
• The design of a disposal charge which could achieve the theoretical
objectives would be complex in practice.
Committee Recommendations
None of the members of the Committee recommend legislation at this time
to institute a national solid waste disposal charge. Members cite the low
projected impact on materials use, recycling, and disposal; the complex
administrative problems that would be involved; the difficulty of designing a
charge that would achieve the theoretical objectives; and the inefficiencies
that might result from its application at the national level.
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Although none of the members is in favor of legislation at this time, a few
indicate that the uncertainties in the empirical analysis make it imprudent to
recommend entirely against the general concept of a national disposal charge.
These members note that the basic concept of including disposal costs in
decisions on use of materials is consistent with achieving a better balance
between conservation and other social goals. Even though they agree that the
current analyses show only small gains in resource conservation from
imposing a charge, they feel that the uncertainty in the data and the
possibility that conditions could change make it desirable to "leave the door
open" to reconsideration of the proposal at a later date.
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APPENDIX A
RESOURCE CONSERVATION COMMITTEE
LEGISLATIVE CHARTER
The RESOURCE CONSERVATION AND
RECOVERY ACT OF 1976 (Public Law 94-580)
Section 8002(j)
As Amended by the Quiet Communities Act
of 1978 (Public Law 95-609)
"(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 Interiorjthe Secretary of Energy, the Chairman of the
Council of Economic Advisors, 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 and 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 (1XD) may include pilot
scale projects, and shall consider and evaluate alternative strategics fto)ects-
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 (1) of Study design.
this subsection shall include timetables for the completion of the study.
A preliminary report putting forth the study design shall be sent to Report 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.
Pilot scale
and
Report to
President and
Congress.
Appropriation
authorization.
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APPENDIX B
RESOURCE CONSERVATION COMMITTEE
REPORTS AND RECORDS
Contents
I. Committee Reports to the President and
Congress 123
II. Transcripts of Public Testimony Presented
to the Committee at Scheduled Public
Meetings and Written Comments Submitted
for the Meeting Records 123
III. Committee Staff Background Papers , 123
IV. Contractor and Consultant Reports and
Technical Memoranda 125
V. Papers Presented at the Brookings
Institution Conference on Issues in
the Conservation of Non-Fuel Minerals
and Timber, January 15-17, 1979,
Washington, D.C 128
122
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I. COMMITTEE REPORTS TO THE PRESIDENT AND CONGRESS1
Implementation Plan for the Resource Conservation Committee. April 1977. Order
No.SW-618
Committee Findings and Staff Papers on National Beverage Container Deposits.
January 1978. Order No. SW-733
Status Report on Solid Waste Disposal Charge Analysis. July 1978. Order No. SW-
708
Choices for Conservation: Final Report of the Resource Conservation Committee.
June 1979. Order No. SW-779
II. TRANSCRIPTS OF PUBLIC TESTIMONY PRESENTED TO THE COMMITTEE
AT SCHEDULED PUBLIC MEETINGS AND WRITTEN COMMENTS SUBMIT-
TED FOR THE MEETING RECORDS1
Public Comments on the Draft Implementation Plan for the Resource Conservation
Committee. (Printed as an Appendix to the Implementation Plan). Meeting held
April 6,1977, in Washington, D. C. Order No. SW-618
Public Meeting of the Resource Conservation Committee on Beverage Container
Legislation. October 19,1977, in Washington, D. C. Order No. SW-654
Public Meeting of the Resource Conservation Committee on Solid Waste Product
Charge Issue
November 17,1977, in Washington, D. C. Order No. SW-662
November 18,1977, in Cincinnati, Ohio.Order No. SW-672
November 21,1977, in Portland, Oregon. Order No. SW-664
Public Meeting of the Resource Conservation Committee on Other Policy Topics
June 23,1978, in Chicago, Illinois. Order No. SW-739
June 26,1978, in Washington, D. C. Order No. SW-720
June 30,1978, in San Francisco, California. (Copies no longer available)
III. RESOURCE CONSERVATION COMMITTEE STAFF BACKGROUND
PAPERS2
No. 1 Rationale for National Beverage November 5, 1977
Container Deposit Legislation
No. 2 Costs and Benefits of a National November 7, 1977
Beverage Container Deposit System
1 Copies available from: Solid Waste Information, U.S. Environmental Protection Agency, Cincinnati,
Ohio 45268
2 The 20 background papers have been compiled in a single volume (order no. SW-788); a limited number
of copies are available from Solid Waste Information, U.S. Environmental Protection Agency, Cincinnati,
Ohio 45268. Papers 1-6 also appear in the Committee Report Committee Findings and Staff Papers on
National Beverage Container Deposits (SW-733), and papers 8-10 appear in the Committee Report Status
Report on Solid Waste Disposal Charge AnaJysis(SW-7Q%). The compilation of papers will be permanently
available for purchase from the National Technical Information Service, Springfield, Va. 22161.
123
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No. 3 Issues Regarding National Beverage
Container Deposit Proposals
No. 4 Transitional Adverse Economic Impacts
of National Beverage Container Deposit
Legislation: An Analysis of the Worst
Case
No. 5. Beverage Container Return Rates
No. 6 Localized Employment Impacts, Glass
Industry
No. 7 The Sensitivity of the Benefit
Impacts of Beverage Container
Deposits to Variations in Container
Return Rate Assumptions
November 5, 1977
December 20, 1977
November 6, 1977
December 20, 1977
June 1, 1978
No. 8 Rationale for National Solid Waste
Disposal Charge Legislation
No. 9 Solid Waste Disposal Charge Design
Issues
No. 10 A Review of the Current Status of
Municipal Solid Waste Management
No. 11 A Cost Analysis of the Solid Waste
Management Industry
No. 12 Benefits and Costs of a National
Solid Waste Disposal Charge
No. 13 Local User Fees for Solid Waste
Services as a Resource Conservation
Strategy
No. 14 An Evaluation of National Litter Tax
Concepts
No. 15 Federal Subsidies for Recycling
No. 16 Deposits and Bounties for Controlling
the Flows of Durable and Hazardous
Consumer Product Wastes
No. 17 Compendium of Selected Findings and
Recommendations by Predecessor
Commissions, Committees, and Associa-
tions on Resource Conservation Issues
No. 18 Product Regulations as a Resource
Conservation Strategy
No. 19 A Conceptual Evaluation of a National
Virgin Material Extraction Tax as a
Resource Conservation Policy
No. 20 Summary of Projected Labor Impacts of
a Nationwide Beverage Container Deposit
System
June 15, 1978
June 26, 1978
July 10, 1978
December 11, 1978
February 6, 1979
November 17, 1978
October 10, 1978
September 25, 1978
November 6, 1978
December 18, 1978
March 18, 1979
May 3, 1979
January 25, 1979
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IV. CONTRACTOR AND CONSULTANT REPORTS AND TECHNICAL
MEMORANDA1
CHAUNCEY BELL AND ASSOCIATES, INC.
Revenue Transfer Mechanisms: An Analysis of Options for EPA's Product Charge
Initiative, February 21,1978.
GERARD M. BRANNON
Tax Provisions for Non-Energy Minerals and Timber, 1977.
ECODATA, INC. (BARBARA STEVENS)
Price Index for Solid Waste Collection and Disposal, September 29,1977.
Pricing of Solid Waste Collection and Disposal, September 29,1977.
Density of Residential Solid Waste, October 3,1977.
Cost Indexing for the Product Charge, October 5,1977.
Reporting Requirements for Local Jurisdictions, October 5,1977.
Distribution of Revenues from a Disposal Charge, December 5,1977.
Short and Long Run Tradeoffs in Refuse Collection Production Functions,
December 30,1977.
Cost of Refuse Collection and Disposal, March 1,1978.
Regression Analysis of Quantity Based User Fees, December 27,1978.
ENVIRONMENTAL LAW INSTITUTE
Constitutional Aspects of Economic Disincentives With Emphasis on Product
Charges, by Ivan J. Tether, July 21,1978.
An Analysis of Scrap Material Supply and Demand, by Robert Anderson, Roger
C. Dower, and Elizabeth H. Granitz, May 1979.
FRANKLIN ASSOCIATES, LTD.
Extra-Industry Recycling Issues, by Robert Hunt, September 27,1977.
Analysis of Specific Product Categories for Inclusion Under Product Charge
Schemes, by Robert Hunt, Jacob Beachley, September 27,1977.
Alternative Bases for Product Charge, by Robert Hunt, William Bider, December
14,1977.
Energy Impacts of Product Charge Legislation, by Robert Hunt, William Bider,
December 14,1977.
Preliminary Design Considerations of Recycling Incentives Accompanying
Product Charge Legislation, by Robert Hunt, William Bider, and John Trievolla,
January 10,1978.
1 These reports and memoranda are on file and available for perusal in the offices of the Technical
Information Staff, Office of Solid Waste, U.S. Environmental Protection Agency, 401 M Street, S.W.,
Washington, D.C.
125
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Post-Consumer Solid Waste Resource Recovery Baseline (Draft report), April 6,
1979.
Post-Consumer Solid Waste and Resource Recovery Baseline—Working Papers
(Draft), May 16, 1979.
Impact of Product Charge on Selected Consumer Purchases (Memorandum),
October 4, 1977.
Should Recycling Incentives Accompany Product Charges? (Memorandum) Octo-
ber 7, 1977.
Establishments Involved in Extra-Industry Recycling (Memorandum), October 7,
1977.
Product Charge Incentives for Energy Recovery (Memorandum), October 17,
1977.
Energy Conservation from Product Charge Legislation (Memorandum), October
21, 1977.
Effects of Product Charge on Energy Consumption (Memorandum), October 27,
1977.
Energy Impacts From Product Charge Legislation (Memorandum), November 7,
1977.
Background Data for Packaging Product Systems (Memorandum), November 7,
1977.
Compaction of Flat Paper Products and Aluminum Foil in Solid Waste Processing
(Memorandum), December 12, 1977.
Certificate Program for Recycling Incentives (Memorandum), January 20, 1978.
Preliminary Data on 1976 Waste Paper Supply and Demand (Memorandum),
February 17, 1978.
Preliminary Data on Gullet Supply and Demand (Memorandum), February 17,
1978.
Preliminary Data on 1976 Post-Consumer Ferrous Scrap Supply and Demand
(Memorandum) February 17,1978.
Rail Transportation Costs for Secondary Materials (Memorandum) February 18,
1978.
Theoretical Waste Paper Surplus and Deficiency by Geographical Region
(Memorandum), February 21,1978.
Theoretical Glass Container Gullet Surpluses by Geographical Region
(Memorandum), March 1,1978.
Theoretical Steel Scrap Surpluses by Geographical Region (Memorandum), March
1, 1978.
Assessment of Contamination in Glass Gullet (Memorandum), March 3,1978.
Contaminants in the Recovered Ferrous Fraction of Municipal Solid Waste
(Memorandum), March 3,1978.
Assessment of Contamination in Waste Paper (Memorandum), March 3,1978.
126
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The Significance of Imports and Exports in a Product Charge System
(Memorandum), April 5,1978.
Costs of Recovering Waste Paper by Mandatory Recycling (Memorandum), April
28,1978.
Resource Recovery Plant Costs: Semisuspension Incinerators and Small Modular
Incinerators With Materials Recovery (Memorandum), May 22,1978.
Detailed Analysis of Specific Product Categories for Inclusion Under Product
Charge Schemes (Memorandum), June 7,1978.
ICF, INC.
Recycling the Materials in Municipal Solid Waste: Estimates of the Elasticities of
Secondary Material Substitution and Supply, January 31,1979.
Resource Conservation and Industrial Solid Waste, February 1979.
META SYSTEMS, INC.
Deposit and Bounty Systems for Controlling the Discard of Durable Goods and
Hazardous Items in Post-Consumer Waste Flows, by Meta Systems, Inc., April
1979.
PUBLIC INTEREST ECONOMICS FOUNDATION
Evaluation of Research on the Solid Waste Disposal Charge, by Steve Buchanan
and Leonard Lee Lane, September 1977.
Analysis of Solid Waste Disposal Charge Design Issues, by Steve Buchanan,
March 10,1978.
Comparing the Efficiencies of Financing Municipal Solid Waste Services from
Property Tax and Solid Waste Charge Revenues, by Steve Buchanan, September 7,
1978.
PUTNAM, HAYES & BARTLETT, INC.
Effectiveness and Efficiency of Environmental Regulations, by Stephen A. Besse,
June 23,1978.
RESEARCH TRIANGLE INSTITUTE
Beverage Consumption and Container Requirements: 1947-1985, by Jerome Olsen,
March 1978.
The Supply of Secondary Aluminum Cans, by Jerome Olsen and James Watts,
April 1979.
An Econometric Analysis of Secondary Ferrous Supply, by J. Lew Silver, April
1979.
Estimates of Secondary Materials Supply from Municipal Solid Wastes: A Process
Analysis, by Taylor H. Bingham, Curtis Youngblood, and Philip C. Cooley, April
1979.
Modeling the Effects of a Product Disposal Charge, by Allen K. Miedema, Curtis
E. Youngblood, and Philip C. Cooley (Draft final report), April 1979.
HAROLD SAMTUR
Litter Prevention and Abatement Strategies, Draft Report, Winter 1978.
127
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RICHARD E. SLITOR
Overview Report on Waste Disposal Charge System: Implementation, Administra-
tion and Enforcement Issues, November 21,1977.
Overview Report on Waste Disposal Charge System: Economic Impact Issues,
December 16,1977.
Overview Report on Waste Disposal Charge System: Conceptual, Legal, and
Definitional Issues, December 27,1977.
Overview Report on Waste Disposal Charge System: Evaluation of Treasury
Department Comments on Overview Report on Waste Disposal Charge System,
February 16,1979.
URBAN SYSTEMS RESEARCH AND ENGINEERING, INC.
Review and Synthesis of the Literature on User Charges for Water Supply, Sewers,
and Solid Waste, by James Hudson, Draft, March 15,1977. (Final draft included in
#6.)
Review and Synthesis of the Literature and On-Going Studies on the Distribu-
tional Impacts of Materials Conservation Policies, by Elizabeth Lake and James
Hudson, May 22, 1978.
Review and Evaluation of Employment Impact Assessment Techniques and Data
Sources for Materials Conservation and Materials Recycling Policies, by Christo-
pher Pleatsikas, August 11,1977.
Litter: Cost, Measurement and Control, by Clark Binkley and James Hudson, July
11,1977.
Estimates of Employment Impacts of Product Charge on Product Packaging and
Paper-Paperboard Intermediate Product Sectors, by Christopher Pleatsikas, Feb-
ruary 12, 1978.
Issues in Pricing Solid Waste Management, by James Hudson, August 14,1978.
Industry Issues in Designing Solid Waste Charge Systems, by Elizabeth Lake et.
al., November 30,1977.
Design of Local User Charge Systems, by James Hudson, January 15,1979.
Projections of Solid Waste Management Costs, by James Hudson and Michael
Alford, February 11,1979.
A Model of Sanitary Landfill Costs, by James Hudson, January 25,1979.
V. PAPERS PRESENTED AT THE BROOKINGS INSTITUTION CONFERENCE
ON ISSUES IN THE CONSERVATION OF NON-FUEL MINERALS AND
TIMBER, JANUARY 15-17, 1979, WASHINGTON, D.C.1
On January 15 through 17, 1979, the Brookings Institution conducted a Conference on
"Issues in the Conservation of Non-Fuel Minerals and Timber," sponsored through a grant from
the Resource Conservation Committee. The purpose of the conference was to establish a
dialogue between those responsible for making public policy for conservation of resources and
those who are most directly affected by that policy. Approximately 75 senior officials represent-
ing the Federal Government, industry, labor, environmental and conservation groups, and
academia attended.
1 These papers are on file and available for perusal in the offices of the Technical Information Staff, Office
of Solid Waste, U.S. Environmental Protection Agency, 401 M Street, S.W., Washington, D.C.
128
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A series of papers were presented at the Conference, of which the following have been printed
and are available with the other papers of the Resource Conservation Committee.
Remarks by the Honorable Douglas M. Costle, Administrator, U.S. Environmental
Protection Agency.
Timber's Future — Conservation Through Use, Dr. M. Rupert Cutler, Assistant
Secretary of Agriculture for Conservation, Research, and Education.
Remarks by Joan M. Davenport, Assistant Secretary — Energy and Minerals, U.S.
Department of the Interior.
Remarks by George H. R. Taylor, Director, Department of Occupational Safety &
Health, American Federation of Labor and Congress of Industrial Organizations.
Impact of Public Policies on Non-Fuel Minerals, Simon D. Strauss, Vice Chairman,
ASARCO Incorporated, New York, New York.
The Entropic Obligation to Future Generations, Congressman James G. Martin.
Issues in Resource Recovery, John G. Whitaker, Vice President, Union Camp
Corporation.
Resource Conservation: Taking The First Steps Towards a More Secure Future,
Honorable Barbara Blum, Deputy Administrator, Environmental Protection Agency.
Remarks by Emery Castle, Vice President, Resources for the Future.
Issues in Minerals Conservation, Dr. Alan V. Kneese, Resourses for the Future.
129
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APPENDIX C
ACKNOWLEDGEMENTS
The Resource Conservation Committee wishes to express its gratitude to the many people
who have assisted it in its work.
All of the statutory Members of the Committee were assisted by a "Principal" and a "Senior
Advisor" from their Departments and Agencies. The Principals, who were generally officials at
the rank of Assistant Secretary, met several times to approve the Committee work plan and
decide on the official findings and recommendations which the Committee members for whom
they worked would send to the President and Congress. The Senior Advisors met regularly
(weekly during some critical periods) throughout the life of the Committee to discuss policy
issues in detail with the staff and to prepare the findings and options for recommendations. The
Principals and Senior Advisors are listed in the front of this report.
The Administrator of the Environmental Protection Agency, as Chairman of the Resource
Conservation Committee, provided the Committee with a staff and funds for research assistance.
The principal members of the staff are listed in the front of this report. In addition, the following
summer interns assisted the Committee staff: Carol Friedman (1977), Mary Gompers (1978),
Michael Abrams (1978), Janet Armitage (1978), Richard Bleicher (1978), and Gail Kendall
(1978). EPA personnel who assisted in other capacities included Frans Kok, Albert A. Peter, Jr.,
Marion Thompson, Clara Jones, Sarah Davis, Carol Lawson, Tom Williams, and Dotz Darrah.
Marshall Peterson provided valuable advice to the staff on several occasions.
The many contractors and consultants who provided technical assistance to the staff are listed
in Appendix B, together with the titles of their main written reports.
Several non-governmental groups assisted the staff in its public participation activities: the
League of Women Voters, the National Association of Counties, the National League of Cities,
the Environmental Action Foundation, and the National Wildlife Federation.
Numerous individuals, private corporations, trade associations, and other organizations
testified at the Committee's public meetings and provided written commentary on staff papers.
Both the list of those who testified and the testimony itself are available with the other papers of
the Committee (see Appendix B, "Resource Conservation Committee Reports and Records.")
Lists of those who testified and many written comments are reprinted in the Committee's First,
Second, and Third Reports to the President and Congress.
On January 15 through 17, 1979, the Brookings Institution conducted a Conference on
"Issues in the Conservation of Non-Fuel Minerals and Timber," sponsored through a grant from
the Resource Conservation Committee. A list of the papers presented is included in Appendix B,
part V. The Brookings staff that planned and led the Conference included Walter G. Held,
Director of the Advanced Study Program, Barbara D. Littell, Bradley H. Patterson, Jr., and
Warren I. Cikins, Senior Staff Members of the Advanced Study Program, and Robert W.
Crandall, Senior Fellow of the Economic Studies Program.
fcU.S. GOVERNMENT PRINTING OFFICE: 1980-308-194/6751
130
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RESOURCE CONSERVATION COMMITTEE
ENVIRONMENTAL PROTECTION AGENCY
DEPARTMENT OF COMMERCE
DEPARTMENT OF ENERGY
DEPARTMENT OF THE INTERIOR
DEPARTMENT OF LABOR
DEPARTMENT OF THE TREASURY
COUNCIL ON ENVIRONMENTAL QUALITY
COUNCIL OF ECONOMIC ADVISERS
OFFICE OF MANAGEMENT AND BUDGET
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