View all publications

4 Benefits of Recycling

4.1 Components of benefits

The benefits of recycling are comprised of:

  • market values of the materials collected

  • the avoided costs of collection and disposal

  • avoided external costs of landfill disposal

  • direct consumer benefits.

The market values are discussed separately in Section below. The other components of value are discussed in turn below.

4.2 Avoided costs of collection for landfill

The costs of collection of materials for landfill are saved when material is recycled. This is offset by the costs of collection for recycling, estimated in Section.

One of the key issues is the extent to which collection costs vary by location. We have used a generic assessment of costs but varied the total costs using the housing density of the different locations; this affects the distance per truck per day, households per truck and the tonnes per truck. The initial estimates for the city locations are given in Table 8.

Table 8: Waste collection cost assumptions







Truck ($/truck)



Lifetime (years)



Tonnes/truck per annum



Fixed costs ($/truck per annum)








Box/bin ($/item)




Lifetime (years)














Driver ($/hour)




Runner ($/hour)








Labour/truck per annum (40-hour week)









Distance per truck per day



Fuel price – diesel ($/litre)



Fuel ($/truck per annum)



Source: Industry interviews.

Table 9: Summary costs of waste collection

  Bag Bin
$/truck pa $/t $/truck pa $/t


























We have taken a weighted average of the bag and bin costs to derive an overall cost per tonne of waste collected for landfill. Assuming that 10 per cent of households use bins we get a cost of $52 per tonne of waste collected for landfill.

We have captured regional variations by estimating total kilometres travelled by all trucks transporting waste within a district as a function of household density within the region and overall waste being sent to landfill within the region. The formula fitted to existing collection cost data is:

Total kms equals a plus b divided by the square root of D plus c multipled by T.

D – Density of households (households/Km2) within the TA

T – Tonnes of waste sent to landfill in the TA

a, b, c – Parameters estimated (using OLS regression): a = 12.77823, b = 10.86465, c = 0.044572603

Estimated ‘TotalKms’ for a TA is then divided by the amount of waste being sent to landfill to estimate the kilometres of truck distance per tonne of waste being sent to landfill. Finally, the cost of collection is modelled as a function of kms/tonne, keeping Auckland as a base case.

4.3 Avoided financial costs of landfill

The financial costs of landfill that are appropriate for a cost benefit analysis for public policy purposes are measures of long run marginal costs (LRMC). This assumes that the benefits of savings in waste produced for disposal are those associated with the need for landfills in the long run, ie, the need for the next landfill.

We have used landfill gate rates derived from MfE’s Landfill Full Cost Accounting Model.15 The initial parameters used in the model are default or typical values across New Zealand for a Greenfield site; some of the major assumptions are listed below. The indicative gate rate assumes a 20 per cent mark-up for the landfill operator; this is not included in the cost benefit analysis as it is not a resource cost. Rather it is part of the producer surplus that results from a financial transfer from waste producers (businesses, households, local government) to landfill operators. The transfer of money no longer occurs if waste volumes to landfill reduce, but this is not a reduction in costs.

The land acquisition and associated setup costs are assumed to be a function of the capacity of the landfill. We have assumed a linear relation between the setup costs and the annual waste flow to landfill. Set-up costs range from $2 million to $30 million for landfills with annual capacities of 10,000 tonnes to 500,000 tonnes. The setup cost is then annualised and divided by the annual waste flow to get a cost per tonne, which is added to the economic cost of landfill.

Table 10: Assumptions for landfill costs

Input assumptions


Consented landfill operating life

35 years

Actual operating life

35 years

Aftercare period

30 years

Annual waste tonnage at start of operation

200,000 tonnes/year

Annual waste tonnage growth rate


Assumed compacted waste density

0.9 tonnes/m3

Footprint area

37 hectares

Disturbed area

51.8 hectares

Land acquisition and associated/set-up costs


Gross airspace

9,862,123 m3

In addition to landfill size, one of the key assumptions for the analysis of costs is the discount rate. The implications of discount rate and size are shown in Figure 3.

Figure 3: Variation in disposal costs with landfill size and discount rate

The shape of the curves is very similar to that seen in Australian data.16

In addition to these costs, we assume a transport distance to landfill based on the estimates of landfill locations consistent with Table 7 on page 14 (see Annex 1). An identified location is assumed for each TA to enable the distance to be calculated between it and every other TA. We have estimated the cost of freight using a published freight cost of $0.0226/m3 (in 2001)17 updated to 2007 dollars using a Producers Price Index (PPI)18 to produce a cost of $0.0279/m3. This is then combined with density data to provide a cost per tonne for waste sent to landfill. The same approach is used also for estimating the costs of sending recycled material to market. The material-specific freight costs are shown in Table 11.

Table 11: Freight cost estimates


Density (t/m 3 )

Cost ($/tonne)



















Source: Density data from: US EPA.

We have used different estimates of freight costs for end-of-life tyres and used oil. Our numbers are based on conversations with industry sources. Our estimates are shown in Table 12.

Table 12: Freight costs for end-of-life tyres and used oil ($/



End-of-life tyres


Used oil


Source: Industry estimates.

4.4 External costs of landfill

There are external costs of landfills that are not included in current prices and in our estimates of long run costs of supply above. These are the result of:

  • disamenity, which depends on the location of the landfill;

  • emissions to the atmosphere, which depends on the material being landfilled;

  • leachate levels, which depend on the material being landfilled.

4.4.1 Disamenity effects

Disamenity effects are generally defined as “localised impacts of landfill activity that generate negative reactions from those located in the immediate vicinity of a site”;19 the impacts include those associated with noise, dust, litter, odour and vermin.

Some of the disamenity effects of waste disposal will apply equally to recycling activity, including those associated with materials recovery facilities; the net effects will depend on whether waste is handled through a transfer station prior to landfilling or if collection trucks go directly to the landfill. Increasingly the norm in New Zealand is for waste to go through a transfer station where it is aggregated, prior to transfer to landfill. Thus we assume that the disamenity effects associated with recycling are equal to the effects of transfer stations and that the disamenity impacts of landfill are an additional cost of landfill disposal and a benefit of recycling.

Measuring the disamenity effects of landfill has been undertaken in overseas studies, particularly US hedonic pricing studies that measure the impacts of landfills on property prices. Figure 4 is taken from a UK report that summarises the results from a number of the US studies. No studies found effects at a distance greater than four miles (6.4 km) from a site and the study that found an impact out this far was for a toxic waste facility. As a general rule, house prices increased by 5–8 per cent per mile (3–5 per cent per km) distance from a landfill within this four-mile radius.20

Figure 4: Reduction in house prices as a function of distance from a waste facility

A European study that analysed the disamenity effects associated with landfills in Italy was used to recommend a disamenity cost impact for policy purposes throughout the EU.21 It suggested using a reduction in house prices, for policy purposes, of 2.8 per cent within the odour-affected area. This was based on a population density of 1,648 people/km2 and 2,000 tonnes per day of waste entering the landfill. Using these and other inputs, the Italian data were converted into a cost per tonne of solid waste of €13.2 per tonne.22 These input figures are high; the population densities are close to the density of a New Zealand city (the population density of North Shore city was 1,422 people/m2 in the 2001 census)23 rather than a rural area likely to be the site of a landfill, and the average input to a municipal solid waste landfill in New Zealand is approximately 156 tonnes per day.24 These factors would work in opposite direction in converting into an impact per tonne; the lower population density means fewer properties are affected but the fewer tonnes means that the impact is spread over fewer tonnes. This latter point requires clarification, and specifically whether the impacts relate to tonnes delivered or whether they are more fixed in nature, ie, whether house values drop simply because there is a landfill or if they drop more if the landfill takes in more waste and therefore produces more dust, litter and odour. This does not appear to have been addressed in the literature.

A UK willingness to pay (contingent valuation) study of a single landfill found 400 houses affected by the landfill and that, for these houses (73 responded to a survey), their willingness to pay for a days reduction in the impacts (dust, litter and odour) was £0.20–31; on the assumption that these effects occur for 50 days of the year, this was used to estimate a benefit of reduction in impacts of £13 per household per year.25 The landfill was taking in approximately 1,200 tonnes per day of waste and on this basis the impacts per tonne of waste would be only £0.01/tonne (cNZ$0.03/tonne). This study was for an existing landfill that had been established for some time, and it should be noted that marginal costs fall over the life of the landfill; a hypothetical representation of this effect from a UK study is shown in Figure 5.

US contingent valuation studies produced the following higher results:26

  • US$260/year per household for landfill to be located elsewhere (1991 study);

  • US$420–630 per household per year per mile from landfill, where householders were asked to choose a valuation of two houses with identical characteristics except their proximity to a landfill (1986 study).

The recent UK study, undertaken for policy purposes, 27 suggested that the hedonic (house price) studies were the most appropriate and that the value of housing stock close to landfills was being significantly lowered. It found that this was statistically significant within a 0.5‑mile radius. It estimated total disamenity impacts in the UK associated with landfills of £2.5 billion and an impact per tonne of £1.86 in 2003 prices or a range of £1.52–2.18/tonne. This was based on 1995 estimates of a £5,500 loss in value for houses within 0.25 miles of the landfill and £1,600 for houses in the 0.25–0.5 mile zone; these were updated using a consumer price index.

Figure 5: Hypothetical landfill disamenity impacts

The Australian Productivity Commission cited the work for the European Commission and others, in suggesting that, if a landfill is located more than five kilometres from residential areas, the costs of lost amenity are likely to be less than $0.01 per tonne of waste, but that if located in a built-up area and poorly managed, the loss of amenity can impose external costs up to $3.70 per tonne. The Commission assumed that the typical amenity cost of a properly-located, engineered and managed landfill is less than $1.00 per tonne of waste.

For New Zealand a number of telephone conversations with rural estate agents revealed views that varied between “landfills are never located anywhere near houses so they won’t have any effects on property prices” and that the impact will be significant.

For this study, it is assumed that most of the amenity effects are limited through location so that the number of houses affected by a landfill will be quite small and significantly lower than the numbers used in the European studies. The UK numbers generated for policy reasons above are equivalent to approximately NZ$4–6 per tonne, but again the assumption is that the property density and house prices will be higher.

For analysis we take the simple numbers suggested by the Australian Productivity Commission, ie, a cost of no more than A$1 per tonne, as a low-end estimate of disamenity costs of landfills; we assume a simple NZ$1 per tonne. For a high-end estimate, we use $8.94 per tonne, based upon the UK hedonic study value of £1.86/tonne.28

There is some argument that the amenity effects will differ between waste streams, ie, some waste smell and others produce litter. A UK study found a different willingness to pay related to these separate effects, however they were similar in size.29 We assume that the effects are not additive but similar in size and therefore use the same disamenity effect for all waste streams.

4.4.2 Emissions to air

Carbon dioxide (CO2) and methane are the most significant emission to air from landfills.30 However, methane is the only emission that is counted because the CO2 produced is associated with carbon that was recently absorbed (organic material) or for which emissions have already been counted.31 Methane emissions are the most significant. Baseline emissions are estimated using the same input assumptions and approaches as used in the national greenhouse gas inventory (Tables 13 and 14), although a slightly different methane density is adopted using MED assumptions.

Table 13: General Input assumptions for estimating methane emissions



Methane correction factor (MCF)


Fraction of degradable organic carbon that degrades


Fraction of C released as methane


Conversion C to CH4


Methane density (kg/m3) 1


Source: MfE (2006) New Zealand’s Greenhouse Gas Inventory 1990–2004 The National Inventory Report and Common Reporting Format; 1 MED (2007) Energy Data File September 2006.

Table 14: Methane emission generation potential for specific waste streams

  Quantity Waste composition Degradable organic carbon Methane generation potential
(tonnes) (%) (tCH4 /t waste) (m 3 /Gg)

























Source: MfE (2006) New Zealand’s Greenhouse Gas Inventory 1990–2004 The National Inventory Report and Common Reporting Format; Covec calculations.

These methane generation potential estimates are combined with assumptions that 72 per cent of landfills have gas capture systems and an average efficiency of capture of 44 per cent. The estimated net emissions includes an oxidation factor correction based on internationally agreed (IPCC) methodologies.32 A net emissions rate is calculated in terms of CO2 equivalents based on a Global Warming Potential (GWP) of 21 for methane (CH4).

Table 15: Net methane emission rates for specific waste streams



Methane generation potential

Gross annual methane generation

Recovered CH4

Net methane generation

1-oxidation factor

Net CH4 emissions

Net emissions rate


ktCH4 /kt waste


kt CH4

kt CH4


kt CH4

t CO2-e /t waste





































This is used to provide estimates of the value of diverting waste from different waste streams using values of CO2 emissions of $15 and $25/tonne (Table 16).

Table 16: Value of waste diversion

Waste stream

Net emissions rate
t CO2-e /t waste

$/t @ $15/t

$/t @ $25/t

















4.4.3 Leachate

Leachate is generated when soluble components of the waste stream are transported out of mixed waste through the action of water. Leachate can enter groundwater potentially resulting in environmental and/or health problems, particularly if it enters the food chain. Despite this process being well understood, there appears to be a shortage of scientific research and evidence regarding the actual effects of leachate, particularly how it is transmitted once it leaves a landfill.33

In addition, there is no certainty that a particular landfill will generate leachate; it could remain confined in a landfill indefinitely, or until it is appropriately treated and discharged to sewers. In other cases, leachate could leak through landfill liner but be confined by impermeable bedrock. The risks of damage from leachate depend on the location of the landfill, its construction and how leachate is managed. The New South Wales Environmental Protection Agency considered that landfills that comply with environmental management guidelines are unlikely to spill leachate into the surrounding environment and so would not generate any adverse external effects.34 The Australian Department of the Environment and Heritage stated:

... the majority of landfills currently servicing major population centres now meet stringent planning and regulatory requirements in relation to location, design, construction and operation. Consequently, such landfills generally do not present significant risks in terms of generating external environmental costs through air and water pollution, noise, dust and the generation and spread of disease. (sub. 103, p. 16)

Various studies have attempted to estimate the cost of leachate. The BDA Group and EconSearch35 estimated that the external cost of leachate from Australian landfills is less than A$0.01 per tonne of waste. Miranda and Hale estimated that the external cost of leachate from landfills in the United States is between zero and $1.40 (US$0.98) per tonne of municipal waste.36

Nolan-ITU estimated the benefits of reduced water emissions that arise from diverting mixed waste from a ‘best practice’ landfill in Australia.37 The Australian Productivity Commission’s interpretation of Nolan-ITU is that its estimate of the external cost of leachate from a ‘best practice’ landfill is between $48–$100 (A$43–$89) per tonne of mixed waste. The Australian Productivity Commission considered that Nolan-ITU had assumed that all the leachate generated in a landfill would escape and cause environmental damage, and that the cost of the damage is not influenced by the geological or other characteristics of the surrounding area. These assumptions do not appear to be consistent with the siting and design of a ‘best practice’ landfill. The Commission also considered that the Nolan-ITU estimate did not fully take into account the capture of contaminants by leachate treatment, or the capacity of clay liners to adsorb some of the pollutants in leachate.

The widespread use of best practice landfills limits the likely effects of any leachate that is generated. This suggests that an externality of around $1 per tonne is appropriate for such landfills. This is consistent with most of the international studies. However, because a proportion of landfills are not likely to adhere to best practice standards, a high-end estimate of external leachate costs of $37 is also included in our analysis. This is based upon the mid-range of the Nolan-ITU estimate, $74, scaled down 50 per cent. The Nolan-ITU estimate is scaled down to account for the fact that an increasing proportion of landfills will meet best-practice standards. Specifically, of the 43 landfills predicted to be operating in 2010:38

  • 43 per cent will be sited over low-permeability material

  • 67 per cent will have an engineered liner

  • 88 per cent will have leachate collection systems

  • all will have effective stormwater diversion in place

  • 67 per cent will treat stormwater prior to discharge

  • 93 per cent will cover waste on a daily basis.

Leachate benefits are applied to savings in landfilling of organic waste and used oil.

4.5 Direct consumer benefits

The direct consumer benefits of recycling are discussed in Section . As part of this study a survey of households was undertaken by AC Nielsen. The survey was conducted using the Nielsen Online Omnibus that covers 1,000 interviews with people aged 18 and over. A national sample is selected and results are weighted (by age, gender, region, internet access and frequency) to reflect the NZ population. Interviews were completed online between 23 and 30 January 2007. The set of questions asked is included in Annex 2.

To reduce any potential bias in the pricing questions, half the respondents were presented with a list showing low to high prices, whilst the other half saw the list reversed showing high to low prices.

The detailed analysis of the survey is presented in Annex 3. It assesses the willingness to pay to recycle in terms of time and money, for a number of different waste streams and compares this with the current time or money spent on recycling; the difference represents a consumer surplus used as an estimate of direct consumer benefit.

4.5.1 General household recycling

The data for general household recycling are assumed to apply to glass, plastics and paper; separate questions were asked for household organic waste. The survey found the difference between the current time households spent recycling and the willingness to pay for recycling is 10.1 minutes per week per household. Time saved was valued at $5.20 per hour using assumptions derived from transport studies;39 this results in a value of $0.88/household/week.

In estimating a willingness to pay per tonne of waste, one of the key issues is the appropriate denominator. There are a number of possibilities (Table 17). The mid-value ($183/tonne) assumes that the willingness to pay or spend additional time relates to the existing volume of collected material. The high value assumes that an additional amount (2.3 kg) was collected but would take no additional time. The low value assumes that the willingness to pay/spend time relates to the total inorganic recyclable volume but that collecting the additional quantity (2.3 kg) takes proportionally the same amount of time as collecting the existing volume.

Table 17: Value of household recycling

Categories of waste


a) Inorganic waste currently recycled by households with weekly collections


b) Inorganic waste not currently recycled but could be




Low (a + b = 7.1)


Medium (a)


High (b)


The resulting range of values is $44–383/tonne as a direct value to consumers of recycling, with a medium value of $183/tonne based on 4.8 kg. The survey also found that people were willing to pay $1.68/week to recycle plastics, paper and glass (PP&G), which implied a surplus of $350/tonne (based on 4.8 kg per week),40 thus the values used above are likely to be conservative.

4.5.2 Organic waste

Survey respondents said they were willing to pay $1.50/week to recycle organic waste. However, we do not have estimates of how much time it would take to recycle, ie, for households to separate this material for collection and recycling.

The total amount they are willing to pay is higher per week than it is for the other recyclables stream ($0.88/week), but it is likely that the costs or time taken by households would be higher also. We have assumed the same direct consumer benefits as for the other household stream.

4.5.3 Tyres and oil

For tyres and oil we assumed that households currently do not pay or spend time recycling these items, and the stated willingness to pay was a pure surplus. Households were willing to pay $2.22 for a tyre and $2.10 for each oil change. We assume that one tyre weighs 8 kg, 5 litres of oil are used in each change, and 1 litre of oil weighs 0.9 kg.41 We calculated this surplus as $278/tonne for tyres and $467/tonne for oil. There is some question over the validity of including these results for tyres and oil because of the lack of an obvious market failure, ie, garages could recycle and extract these amounts from consumers currently. However, market failures are likely to exist in the form of information failures (garages do not know of consumers’ willingness to pay) and co‑ordination failures (a single garage is unlikely to be able to find a ready market, particularly for the identified markets for tyres.

The range of assumption used in analysis is given in Table 18.

Table 18: Direct consumer benefits of recycling

Waste stream

Low value ($/tonne)

Best guess value ($/tonne)

High value ($/tonne)

Paper, plastic, glass, metals
















4.6 Total externalities

The total externalities are shown in Table 19. They are dominated by the estimated direct consumer benefits.

Table 19: Total external benefits (avoided costs) of recycling


Low value ($/tonne)

High value ($/tonne)

Avoided disamenity impacts (all waste)



Avoided greenhouse gases











Avoided leachate (organics, used oil)



Direct consumer benefits


Paper, plastic, glass, metals












16 Australian Government Productivity Commission (2006) Waste Management. Productivity Commission Inquiry Report No. 38, 20 October 2006, p. 70.

17 Transit New Zealand Heavy Vehicles Limits Project, Report 7 (May 2001), Table 5.1.

18 We use input figures of June 2001 = 1220 and December 2006 = 1507 (Statistics New Zealand).

19 Cambridge Econometrics, EFTEC and WRc (2003) A study to estimate the disamenity costs of landfill in Great Britain. Department for Environment, Food and Rural Affairs. London.

20 Cambridge Econometrics et al (op cit).

21 European Commission (1995) ExternE Externalities of Energy. In: Cowi Consulting (2000) A study on the Economic Valuation of Environmental Externalities from Landfill Disposal and Incineration of Waste Final Appendix Report. European Commission DG Environment.

22 Cambridge Econometrics et al (op cit).

23 StatsNZ.

24 3.25 million tonnes of waste going to 57 landfills (Ministry for the Environment data).

25 Garrod G and Willis K (1998) Estimating lost amenity due to landfill waste disposal. Resources, Conservation and Recycling 22(1–2): 83-95 In: Cambridge Econometrics et al (op cit) and Cowi Consulting (2000) A study on the Economic Valuation of Environmental Externalities from Landfill Disposal and Incineration of Waste Final Appendix Report. European Commission DG Environment.

26 Cambridge Econometrics et al (op cit).

27 Cambridge Econometrics et al (op cit).

28 The UK estimate has been adjusted to account for exchange rates and changes in house prices over time. The price deflator used in the study was 1.12 (to take back to 1995 values when the study was undertaken) and to adjust for differences in property values a UK average house price of £65,000 in 1995 ( and a current New Zealand average house price of $350,000 were used (Quotable Value Ltd).

29 Garrod G and Willis K (1998) Estimating lost amenity due to landfill waste disposal. Resources, Conservation and Recycling 22(1–2): 83–95 In: Cambridge Econometrics et al (op cit) and Cowi Consulting (2000) A study on the Economic Valuation of Environmental Externalities from Landfill Disposal.

30 European Commission DG Environment (2000) A Study on the Economic Valuation of Environmental Externalities from Landfill Disposal and Incineration of Waste.

31 Emissions from timber and timber products, including paper, are counted when trees are first felled.

32 MfE (2006) New Zealand’s Greenhouse Gas Inventory 1990–2004 The National Inventory Report and Common Reporting Format.

33 European Commission, 2000.

34 NSW EPA 1996, Proposed Waste Minimisation and Management Regulation, Regulatory Impact Statement, Sydney.

35 The BDA Group and EconSearch, 2004, Final Report to Zero Waste SA: Analysis of Levies and Financial Instruments in Relation to Waste Management, Zero Waste SA, Adelaide.

36 Miranda and Hale, 1997 ‘Waste not, want not: the private and social costs of waste-to-energy production’, Energy Policy 25(6): 587–600.

37 Nolan-ITU, 2004, Global Renewables: National Benefits of Implementation of UR-3R Process: A Triple Bottom Line Assessment, Sydney.

38 Ministry for the Environment (2003) 2002 Landfill Review and Audit.

39 See Annex 2. A value for car passenger time in non-work travel purposes was used.

40 If we use this stated willingness to pay as a substitute for time, then the suggested value of time in recycling is $9.98/hour.

41 Based on light fuel oil density – MED (2006) Energy Data File September 2006.