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Executive Summary

Waste minimisation – processes to minimise the quantity of material that requires final disposal – is encouraged in New Zealand through policies and programmes at national, regional and local levels. This has included the establishment of targets for recycling of individual materials.

This study examines the costs and benefits of recycling to address the following questions:

  • What are the economic costs and benefits of diverting a number of waste streams from current disposal practices?

  • What is the net economic effect of given levels of recovery of each of these wastes? ie, how do the costs and benefits compare?

  • Are there opportunities for net economic benefits from increased levels of diversion of individual waste streams?

The study is not comprehensive of all waste streams but assesses the costs and benefits of recycling some of the more important materials by volume. These are:

  • paper

  • plastics

  • glass

  • organic waste (kitchen waste and green waste)

  • construction and demolition waste

  • tyres

  • used oil.

In addition, the report does not consider the costs and benefits of all waste management options. Rather, it compares the costs and benefits of recycling, and particularly household kerbside recycling, relative to landfill disposal. Other options include waste reduction measures that limit waste at source and alternative approaches to collection of materials for recycling, including through deposit refund schemes or bring systems. This wider level of analysis is beyond the scope of this work. Also excluded is direct business-to-business recycling for which few data are available.

Element of analysis

The components of the analysis are shown in the figure below. The benefits of recycling are estimated from:

  • savings in landfill costs which are made up of the financial costs of landfill and externalities (environmental costs)

  • the saved costs of collection for disposal

  • other benefits, including ‘direct consumer benefits’ which are a measure of the extent of people’s personal preferences to recycle rather than create waste. Direct consumer benefits are expressed as the difference between people’s willingness to pay to recycle and the actual cost.

Components of the analysis

Costs of recycling are estimated from the costs of collection and sorting, less the value of material in end-use markets.

The analysis for each material uses three sets of assumptions:

  • an initial rate of recycling based on benefit estimates that include savings in landfill costs (using the social cost estimate rather than a market rate) but ignore the external costs associated with emissions, leachate and the direct consumer benefits

  • a low-benefit estimate that uses low estimates of external benefits of recycling

  • a high-benefit estimate that uses high estimates of external benefits of recycling.

The results are summarised in the table below. It shows the percentage of materials that are assumed to be technically recoverable using current technologies, the percentage currently recovered and percentages that could be recycled for each material with positive net benefits under high and low benefit assumptions. It shows the results using two discount rates: 5 per cent and 10 per cent.

The analysis suggests that there is the potential to increase rates of recycling at a positive net benefit for nearly all waste streams. The only exceptions to this are PVC, LDPE and organics for which, under low benefit estimates, the results suggest that recycling rates are currently higher than optimal. For organics, it should be noted that the analysis of costs assumes a different collection methodology from that used currently. Specifically, the analysis assumes that kerbside collection of organic material is used rather than the current drop-off system. Therefore the results cannot be used to conclude that current rates of recycling of organics are too high, but rather that switching to the different collection method is justified only under the high benefit value assumptions.

Clear glass shows net benefits of collecting close to current rates, although the estimates of current rates ignore the fact that considerable quantities are being stockpiled awaiting the identification of suitable markets. The analysis here suggests it is worthwhile collecting some of this material for low (zero) value markets.

The contributing factors to the net benefits vary by material, but where they are included (household waste, including organics, end-of-life tyres and used oil), direct consumer benefits, estimated from a willingness to pay study undertaken in parallel with this study, are the most significant contributing factor to total benefits. These are potentially the most contentious elements of the analysis partly because, to our knowledge, such estimates have not been included in other recycling cost benefit analyses. However, the legitimacy of this benefit seems clear.

Summary of results – recoverable, currently recovered and quantities that could be recycled with positive net benefits (%)

  Technically recoverable Currently recovered Low benefit values High benefit values
% % 10% d.r.
%
5% d.r.
%
10% d.r.
%
5% d.r.
%

Paper – household

75

67

75

75

75

75

Paper – commercial

75

51

75

75

75

75

Plastic – PET

58

16

58

58

58

58

Plastic – HDPE

58

16

58

58

58

58

Plastic – PVC

58

16

0

0

58

58

Plastic – LDPE

58

16

0

0

58

58

Glass – coloured

85

50

63

64

85

85

Glass – clear

85

50

47

50

85

85

Steel

85

51

85

85

85

85

Aluminium

85

51

85

85

85

85

Organics

85

34

7

9

85

85

Tyres

80

0

78

78

80

80

Used oil

100

60

100

100

100

100

Concrete

80

35

58

58

62

62

Timber

80

35

80

80

80

80

Total

80

38

58

59

75

75

d.r. = discount rate

Willingness to pay studies can over-estimate benefits because people can over-state their willingness to pay when they do not believe that they will actually have to pay or they do not fully understand the payment mechanism. This is tackled to some extent through the inclusion of questions about willingness to spend time in addition to willingness to pay financially. However, there remains a degree of uncertainty regarding the size of these benefit estimates. This is also because there is uncertainty over whether the respondents assumed that their willingness to spend time related to the current quantity of material collected, or to an increased volume, for which there would be a requirement for additional time to be spent. The range of values used takes account of this uncertainty and the values are still sufficiently high to provide significant additional benefits of recycling. There would be value in further research into the willingness to pay values to better understand the assumptions being made by households.

Taking the full set of benefits into account, the results suggest that increasing rates of recycling in New Zealand is justified across all assumptions, for the majority of materials examined. Consistent with this, least cost instruments to achieve higher rates of recycling should be examined.