Product Stewardship "Ghost Tonnage" E-waste

At some risk to my personal reputation among well-meaning and enthusiastic colleagues and clients, I've posted a few critical essays (blogs) on the concept vs. implementation of some "product stewardship" laws concerning "e-waste".

First : I just found this 2004 OECD Study, "Addressing the Economics of Waste". It's smarter than a tree full of owls.

Second, I wanted to make clear that true product stewardship, as in shared and cooperative responsibility, can be a great thing, as is the case of the Sony, Panasonic, Sharp, and Toshiba involvement in our Vermont "Coupon" program. Sony Electronics recognized that self-started programs like Vermont were not being recognized, and started the ball rolling by paying for their own products. Other manufacturers (OEMs) are joining in handing out $10-20 coupons for the recycling costs of their particular brands. This supports Vermont's system, which provides 6-day per week access to TV and computer recycling for 83% of all Vermont residents within their county, many like CSWD with multiple public and private collection points.

The Vermont system is based on the Massachusetts and California "waste ban" models, which intend for TVs to be collected in the same infrastructure as white goods, freon appliances, tires and auto batteries (all of which have 85% recovery nationwide - that's "NATIONWIDE"). Those products might be collected curbside where there are bulky collections, door to door by charities, at retailers through convenience fees, drop-offs, etc. Vermont gets almost the same diversion without even having implemented the current federal CRT waste ban (which I'd dearly like them to do).

Perhaps the coupon participation never would have happened without the threat of other product stewardship laws. Still, there are fundamental flaws in "command and control" planning. My last post describes how one particular method, e.g. retail takeback, can skew the economics of competing collections (if they go after only the money items).  Here in more detail is another example of unintended consequences of some e-waste laws... command-and-control ewaste planning finds itself in the high weeds of scrap dealer shenanigans...

Ghost Tonnage:

Minnesota and Rhode Island and Maine "product stewardship" programs require each manufacturer to take responsibility for a certain amount of tonnage, based either on current sales or on past sales. Once the rules are established, we can see how payment for tonnage creates a "sinkhole" where "non-covered" material just moves "downhill"... Scrap metal from CPU desktops, movement of material from non-covered states to covered states (demonstrated in the Seinfeld "Deposit" episode.  Maine's expanded bottle bill was famous for collecting back over 100% of the bottles and cans sold in Maine).

Newest observation... Ghost Tonnage. If a manufacturer is responsible for getting 1 million pounds of product out of a state system, based on a calculation of their market share, and they are told they can buy the tonnage from any recyclers they want at whatever price they negotiate, which of these will they buy?

Recycler A: subtracts the weights of pallets and charges $100,000 for the 1 M pounds he collected (10 cents per pound x net weight).

Recycler B: does not subtract tare weight, and charges $100,000 for the 1.1M pounds he collected (tonnage credit can be carried forward in MN).

Recycler C: buys 1M lbs of steel from 10 e-waste recyclers, for which he pays 5 cents per pound. He now "sells" the steel casing tonnage for $10 (getting lunch money for something he was already doing).

Recycler D: Plans to collect 1M lbs, budgets for it, but didn't quite get around to collecting more than 2,000 lbs. But it's out there at the collection sites, he'll go get it eventually. Meanwhile, he sends in the weight slip to the OEM for 1M lbs, which he sells for 3 cents per pound or $30,000.

What would you expect from a system which is open to "sinkhole" accumulations of non-covered tonnage, or outright tare weights and scale tipping?  The manufacturer, obligated to fetch an arbitrary tonnage, and penalized if they fail, has absolutely No Incentive to police the weights.   In a normal free market, the buyer of the tonnage has incentives, rights, and mandates to enforce against scale-tipping. But in the current design of MN, RI, ME legislation, the legitimate Recycler A (charging exactly the right amount for exactly the intended material) is the least likely to succeed... on a price basis, B, C and D win. And if the OEM is not actively engaged in the product stream, what incentive would they have to audit and control against "ghost tonnage?"

Guess what the recovery rate per capita is in Minnesota? Seven pounds per resident. That's several times more than free collections get at municipalities in MA or VT! And yet, Minnesota has another nickname to its credit - "Orphan Tonnage". Some recycler As (Waste Management Inc.) collected covered tonnage from municipalities at a cost, and found that the OEMs had all "met their quota" (having bought their full obligations from little cats B, C and D.)

Recycler A is not only at risk of losing contracts due to higher costs, but may actually have tonnage they collected go unpurchased when other recyclers give the OEMs all the ghost e-waste they require.  And the OEM who refuses to accept ghost invoices is at risk of punishment and penalty, there is no defined penalty for accepting a bad receipt.

In these times of tight municipal budgets, layoffs at state environmental offices, hysteria over ewaste exports, and smart do-gooders posted in influential "command and control" positions, the Product Stewardship Legislation looks really tasty. But in the end, how much of it is arbitrage, claims, rights, double-counted tonnage, steel scrap, off-lease products, obsolescence-in-hindsight / gray market diversion, underbidding established successful collections, exaggeration, and fraud? For the system to work, the two people involved in the transaction each have to have incentives to enforce against legitimate mistakes and accidents, not to mention fingers-on-scales. If you remove that incentive, or try to replace it with regulation, you will have unintended consequences.

How different is this American system from the brokers in Hong Kong who buy scrap material, wheeling and dealing it, so it changes hands a few times before it gets to the BSFs (Big Secret Factories)?  When we discovered the BSFs, the problem WR3A grappled with was proving the stuff really got to the right place and the Buyers really did what they said they would do.

Artificially creating command and control economies should always be the last resort. You should really try to prove the waste ban, tire, auto battery, freon scrap model isn't working first. Better yet, reform the mining waste and mineral policy laws that make copper so cheap that people can afford to throw it away. Then you'd get the secondary market back on equal footing. This entire mess was created by subsidizing extraction and then subsidizing disposal of the waste that the extraction created. It's tough for e-waste recyclers to compete in that free market, but let's start by rewarding those of us who are honestly trying, not the little cats B, C and D.

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