E-Waste Ghost Tonnage: A Vicious (re)Cycle

How Is End-of-Life E-Waste Tonnage Reincarnated in Neighboring States?

In 2009, I wrote a blog about e-waste "Ghost Tonnage" in state mandated CRT and e-Waste Recycling Programs.  A trade publication spotted it and asked to re-run it.   I declined, as the causes and effects were a little confused at that point.  This was not a simple case of Kramer driving New York deposit bottles to Michigan.

Unfortunately, "fraud" is not particularly rare in recycling businesses.  Yesterday's post about the conviction of the Colorado "Executive" company is not the largest.  The Sacramento Bee had a front page story about Arizona recyclers turning TVs into California for "redemption",using CA addresses "freed up" by exporting monitors for reuse against SB20 terms.  A new report by Lauren Roman of Transparent Planet (my company is one of ten sponsors) scratches the surface of ewaste funding conspiracy theories, about stockpiled CRT glass, and market capacity for the glass.  (I only had 48 hours to comment but Lauren has promised it's a "living document". I will make a separate blog to crib the report... it's good in a glasnosty way to start the discussion, but bears the fingerprints of agendas, and some of the people NOT interviewed in the report will need a chance to respond to "stockpiling" accusations).

A recycler who declares an abandoned car ("A-Waste") to be "covered electronics" in a state program (it may have a radio and electronics, after all) certainly gets a lot of pounds in a short time, and can sell those tons to an OEM rather cheaply.  And a recycler who turns a ton of TVs for reimbursement by two different OEM sponsors has doubled not just his profits, but his entire revenue.   Clearly, anyone getting paid twice for the same recycling, or claiming auto scrap as a "covered device", plays mumblety peg with mug shot photographers.

The OEM may appear complicit in accepting cheap tons to meet a state stewardship mandate.  Because the volumes are so high, recyclers are forced to partner with consolidators, takebacks, and haulers - no recycler can get 10 million pounds directly from consumers and residents.   My company cleaned up abandoned TVs from the sides of roads in Rhode Island, "green up" days in Vermont, and abandoned lots in Massachusetts... can we know for sure?

California is a state run program.  But in the Stewardship Programs discussed in Lauren's report (she omits Massachusetts because the law came from executive branch order rather than legislation, even though MA has stockpiled glass) the state has created the obligation for the OEM to pick up a specific number of devices from homeowners in the state - a numbe derived via... some kind of state employee number crunching...  the ouija board tells OEMs how many TVs and computers they need to fetch, or pay fines for.

So the manufacturer in faraway Asia is given a specific number of pounds of electronics they must "get recycled" in Minnesota.  A number that is not even in metrics.  And if they don't pick up that number, they pay a fine.   Which recycler do we expect them to choose - one who is cheap and has "lots" of pounds, or one who is expensive and struggles to avoid the fine?

Data Data Meta Data:

The gross CED tonnage that each manufacturer is responsible for puts everyone in motion, the number of trucks, events, employees the recycler hires.   Perhaps the obligatory number is rationed on sales, perhaps by actual legacy equipment samples recovered, perhaps calculated against the ratio of weights of telephone books recycled (at least transparently arbitrary).  Companies with decades of legacy equipment - like IBM and Sony - push for retail sales to calculate the figure.  New companies with lots of market share, like Vizio, prefer sampling data.  The weight of phone books distributed does correlate to the weight of electronics generated that year...

However the Stewardship Programs calculate the amount, the OEMs have responsibility to hire someone to find it.    The same OEMs have responsibility to corporate shareholders.  At the end of the (fiscal) year, the Manufacturer must either pay a fine for missing tonnage, or accept the tons recycler turn in to them.   The state makes up data to define the obligation, and the manufacturer must collect data from recyclers to match it.

The data goal hit or missed is set by a state regulator who benefits from the penalty, and the data accepted or refused is determined by the manufacturers who pay the penalty.  Surprise, Surprise. The biggest predictor of what an OEM will pay recyclers for matches the size of the fine calculated by the state official. The biggest predictor of what recyclers charge is the amount they pay municipalities, which is based on the pressure from manufacturers (over penalty)... so municipal payments correlate with the same fine.   This sets off contradictory sets of forces for the recycler, who may be caught in the middle of a high stakes political war (see diagram).   Some may feel forced to find a way to "see the light" another day.

The Recycler's Dilemma:

On the one hand, a recycler is paid more for the tons in a high penalty-state.  But they are also forced into a bidding war to keep easy and valuable city programs they established before the law.  The recycler is betting against another recycler who may offer more by resorting to "ghost tons".   If a different recycler brings in material from out of state, or miscalculates their weights ten-fold, that recycler may win the OEM tonnage.  Once that material is processed into glass, aluminum, steel and plastic, there are no fingerprints, no serial numbers, and no amount of CSI E-Waste Victims Unit will sort last year's pile by zip code.

A year ago, my company lost our largest client, in Long Island. Ironically, that client had the nastiest, worst e-waste we managed - televisions collected from a curbside program, one that was hacked by scavengers who ran ahead of the city trucks, collecting any computer or laptop or anything of value - perhaps even turning that tonnage in to another OEM sponsor (at a cheaper rate), leaving us with the broken wood console TVs.  The city trucks dumped the TVs into a roll off container, and we had to hire people to empty it by hand out of an uncovered roll-off container.  It was not CRT-Rule friendly, but it was a lot of e-waste that was getting diverted from landfills, and we were properly recycling it.

To keep our client, eventually we were asked to pay the city for this junk.  We would pass those costs to the manufacturer - at least we WOULD have.  But then the state of NY announced that the manufacturers would pay no penalties in the first year.  We could blame the state regulator, or we could blame another recycler who might have met the little obligation remaining with "ghost tons", or we could blame recyclers who collected real tons but stockpiled the CRT glass, or we could blame the OEMs who had met their obligations or recognized the lack of fines, and didn't respond to our requests for payment... it didn't really matter who we accused.  These weren't "phantom tons", these were tens of thousands of pounds of junk electronics we were recycling every week, more expensive to recycle (having been cherry picked at the curb) and with NO ONE to send the bill to...

buh bye!
We could try to hire the "Long Island Medium" to communicate with manufacturer reps who would not return our calls... Or we could keep renewing the contract and meet our own corporate "end of life".  The only sane thing was to punt.  Another recycler sought a bizarre "sole source" method to take over our contract by calling consumer waste the same as computers generated by city offices.   Easy enough to appeal... but we grabbed it like a life raft...

Hullo Life of Pi.   Buh-bye Long Island Medium.

We couldn't get our calls returned or our invoices paid.  We were very lucky that another recycler took the program in a sole-source bid ... And to meet payroll and debt obligations, I could see my face turning into a tiger's.   I can see how a recycler like me, with 40 employees, might not have had the luck of another recycler canoodling the contract...

My company got a third NY company to pay off part of our tonnage (taking a few cents per pound to "broker" the recycling obligation), and we screamed like a banshee until we got just enough NY "allotment" to pay for the last loads of material in Long Island, by the time of the transition to the competitor recycling company (April 1).  As an entrepreneur company owner, who has a lot of "friends and family" money in my business, this was a "scary movie", and I don't mean comedy.

What did other recyclers do to survive?   If a recycler on the border between NY and NJ were stuck with "orphan material" in NY from the non-enforcement of NY penalties, they had a hungry state nearby.  NJ was setting high penalties on OEMs who failed to get the tonnage.  Having already collected the tonnage, and performed the recycling work, the recycler could either go out of business, default on its creditors, try to get its calls returned, or claim the tonnage came out of nearby NJ.

Victimless Environmental Crime?

Why the silence up to now?  Like in "Resevoir Dogs", we are all culprits, and no one's clearly a victim.

Does orphan material in Arizona defraud Californians?  Yes.  But when the costs are sent to a manufacturer who passes the costs to every buyer, who is the victim of orphan televisions in New York claimed in NJ?  Does this "defraud" NJ out of its OEM penalties?  Does it defraud the OEMs who would not have paid a penalty in NY?  Or would the victims be the employees, creditors, or environment if the recycler did not pass on the tons?

The story of "Ghost Tonnage" is not an easy problem to solve.  By creating "recycle-or-pay" penalties for electronics manufacturers, and turning over administration of the same program to the same OEMs, the product steward advocates have created a perfect storm for the Eastern seaboard.

psst - pre 1975 CRTs had the cadmium
It took the West Coast 10 years to figure out their Environmental Malpractice.  The SB20 system in California created perverse incentives to "cancel" (ruin) working equipment prior to export.  That in turn created massive piles of orphaned CRT glass, arrests of recyclers, and an expensive and bankrupt program.  Now Californian e-waste companies want permission to landfill their CRT glass... which would defraud California residents of the fees they were told would pay for recycling (unless the recyclers reimburse the state for SB20 charges).

The Stewardhip programs in NY and NJ are different. There is no direct line to whoever is defrauded by the e-waste sausage making.  The states have taken a back seat, and ordered OEMs to take over the role of CalRecycles.   The OEMs, who rarely are  on the same continent, understand USA federal and state law, or speak English, are supposed to oversee recyclers who collect from consolidators.  The Gadget Makers must decide from an office building in Seoul, Tokyo, Taipei or Guangzhou whether to reimburse a bill of lading with an abandoned TV on it ... or not.  If refusing to reimburse the bill of lading results in a fine... what on earth do stewards or recyclers expect to happen?

The Moral of Malpractice Insurance:

It's a new system, and as a former regulator (who found himself administering the first experimental curbside recycling "MRF" in the USA, in Springfield MA), I know about the "thankless task" of implementing legislation on a deadline.  I'm not finger-pointing at state regulators, at Stewarship advocates, or at competing recyclers, legislators, or other sausage makers.  There has been more than enough "negative marketing" in the e-waste business.

In political malpractice, it's not the mistake, it's the cover-up that gets you.   I'm just suggesting a little bit of comic relief, a little less chutzpah.  Lauren Roman's report is well worth the read in that it starts a discussion, a little bit sooner in the process.  If California had cared about Arizona televisions filling in for exported California computer monitors, other states would have learned not to "cancel" the value of working equipment.  But it needs to soften the "conclusions".  There is plenty of CRT glass recycling capacity if people are willing to pay the primary smelters, there are plenty of culprits in "ghost tonnage", and "speculative accumulation" calendars arbitrarily treat recycled material differently from mined material.   If California recyclers want to store their CRTs indoors for another year, I say let them.  If they don't want to pay to recycle them, nor to store them, then let them reimburse the taxpayers before they landfill the glass.

In Vermont, proponents of the Stewardship law held up Minnesota as a model and sang the praises of a state which collected something like 7 pounds per capita at a cost of less than 10 cents per pound.  Minnesota (where I went to college) waited several years after Massachusetts and California started a waste ban infrastructure.  When Minnesota's OEM-billing law finally passed, years of accumulated tonnage came out of the woodwork.  Like a neighbor who didn't mow their lawn for 6 months, Minnesota had a lot of material all at once.  That doesn't mean that the engineering of its lawnmower "cuts more grass".

g-g-ghost tons!
Minnesota also had some very low recycling fees coming from some very new recyclers.   Was there "A-waste" in the "E-Waste?"  Who knows.  Are there Illinois or Wisconsin firms doing business in MN?  An Illinois recycler took hundreds of thousands of tons of bald, processed CRT tubes from my dock in Vermont, charging us 5 cents per pound... it was the first year of the NY legislation.  What incentive did I have, prior to earning R2 certification, to track that end market for tons of material we weren't being reimbursed to recycle?  If we weren't reimbursed for it, and the recycler was turning it in to California or Illinois or Minnesota, was I supposed to play Scooby Doo and catch the ghost?

Environmentalists need to back away from this ewaste seance and let some Freakonomics economists pull a chair to the table.

Arizona has no ewaste recycling law at all.  California does.  Californians pay for the recycling of TVs from Arizona.  That was published on the front page of the Sacramento Bee 3 years ago.   But California diversion numbers are still compared to Massachusetts diversion numbers.  Massachusetts has no single-payer program, and no incentive for systematic import abuse.   A report which describes stockpiled CRT glass and "ghost tons", but doesn't look at perverse incentives to destroy reuse or successful MA programs with executive rather than legislated enforcement has the good fortune of a lot more work to do.

We need to laugh and learn.  In retrospect (for those who didn't hear me say it for the past 5 years), electronics had too many "moving parts" - reuse, state borders, foreign manufacturers - to become the first trial of "Product Stewardship" laws.  I'm not against Product Stewardship - we survived Vermont's law and make more money.   But carpets and light bulbs may be the place to start rather than laptops and working monitors (Vermont says they can be repaired and reused, but not "locally", and defines "local" as the 50 states of America).

Who Takes the Lead?

Who is in the best position to frame the discussion? NCER? NERC? NRRA? EPA? PSI? PSC?  The recyclers involved are simultaneously angry at having their legitimate tonnage "orphaned" (unsponsored by any OEM), desperate to claim the orphaned tonnage somewhere, afraid of disruptions to payments (audits, challenges, OEM disqualification), and enriched by the same system that dysfunctions in one state or another.  But worst of all, you cannot have a doctor investigating his own malpractice claim.   That's the problem in Lauren's report... stewardship advocates are investigating stewardship mistakes.

There are also recyclers who want to see how the laws play out.   My 2009 blog on "Ghost Tonnage" was too early... But now I feel like the vow-of-silence hermit in Monty Python's Life of Brian.

"Ohhh!  Damn!  You've broken my vow of silence!  I haven't spoken for 18 years."  

"Shh! Please, just five more minutes!"

We need economists and academics to begin by simply taking data from the past 15 years of TV and computer recycling programs, and ask basic questions about infrastructure and tonnage.  They should not ignore Massachusetts and put Texas (computers only) on the map if they want to be taken seriously.

They will see that the largest recyclers in the country are located close to the two states that originally banned dumping of CRT televisions and monitors, and created state contracts to procure services.  That was Massachusetts in 2000 and California in 2003.   The fraud came later.  NH and Arizona have no laws, but they are part of the interstate commerce in CRT glass storage, and are beneficiaries when their TVs cross the border.  The report should start with tons and what is happening to them, a little "holistic" approach.

Is stockpiled glass even a problem?  In my upcoming blog on the Transparent Planet report, I'll argue that making "speculative accumulation" into a crime is a direct incentive to mine ore from pristine mountainsides.  Metal Ore companies have no such rules over the leaded slag at the intake, in the flux, and in the slag piles ate the most environmentally destructive activity on the planet.  Whether you measure by carbon, by toxics, by endangered species habitat, or by sustainabilty, the worst recycling is better than the best mining.  The case can even be made that a little bit of "recycling fraud" offsets more than a century of the General Mining Act of 1872 and Superfund bankruptcy... but I'm not going to make it.

Let's start with facts and data.  I already know of a glaring hole in the report from CRT glass trucked to the smelter at Torreon, Mexico.   Lauren deserves a lot of credit for taking this on, and I think states and OEMs should support her by buying the report, but also demand a "living document" now that people accused of stockpiling get to see what's being said about them.

The best part of the report is on page 32 or 33.   If a smelter has a choice whether to use leaded silicate from virgin mining, or leaded silicate from recycling, the regulators need to back off and not create disincentives for the latter.

Let's not tell Vermont, which had TV collections five days per week for almost 90% of the population, that Minnesota is outperforming it.  Vermont has been "mowing its lawn" since 1999.  We can still celebrate the Vermont law for what it does do. The Stewardship Law in Vermont passed costs from consumer to OEM (who will probably pass it back to another consumer), and I admit that the 1/3 of residents who had not been paying $10 per item brought in a LOT of stuff.   The municipalities are no longer as much in the dilemma of either subsidizing e-waste or sacrificing participation.

If the state with the highest diversion is used by other states to set their goals (even if it's a state that has accumulated tons for years, or gets its tons from neighboring states), states will make up goals for OEMs enforced by penalties, which will create the climate for ghost tonnage in the Stewardship state.  Massachusetts, NH, and Vermont are a terrific "control group" to start with, and looking only at states which received the "treatment" is a glaring mistake.

The OEMs, responsible for more tons, look for cheaper sources.  Recyclers look for a way to get rid of orphaned material.  State officials look for an easy way to implement a new law.   The established municipal programs look for more money.  Municipalities auction the material, state officials earn penalty wages, and recyclers are left to speculatively accumulate, close one eye on recordkeeping, or go without pay.  They turn the tonnage in to the state program that needs it, increasing the per capita diversion, and the cycle begins anew.  It's almost as ugly as mining... but far from it.  Mining is a disaster and we can't be punishing recycling systems if they are really reducing, reusing, or recycling the material.

There's a certain amount of speculation I'm doing here.   I'm not claiming all of this to be fact.  That would be malpractice.  I'm claiming that "more tests need to be done" before every state is prescribed SB20 or Minnesota Stewardship.

More motherboards, fewer ouija boards.

No comments: