By Işıl Alev, Atalay Atasu, Özlem Ergun, Luyi Gui, Natalie Huang and L. Beril Toktay
Last month municipal leaders from across New York told lawmakers during a special hearing that the state's 2010 electronic waste recycling law is flawed.
The law requires electronics manufacturers to fund and manage take-back programs for collecting and recycling e-waste in the state. E-waste laws like this are critically important for keeping millions of pounds of discarded electronics out of landfills and getting them into the hands of responsible recyclers.
However, New York's municipalities say they're bearing the brunt of the costs due to loopholes in the law. In particular, the law allows electronics manufacturers to meet the free-recycling requirement with mail-back programs. Such programs are likely to collect newer, smaller electronics, but larger items, such as old televisions and computer monitors, are primarily being dropped at municipal recycling centers, according to county officials. These large items, which often contain cathode ray tubes (CRTs), are expensive to recycle, because there's no market for their components. According to officials, Westchester County alone expects to pay $1.2 million for e-waste removal in 2016.
This is Bigger than New York
New York isn't the only state struggling to make e-waste regulations work effectively. More than 20 states now have what are called Extended Producer Responsibility (EPR) laws for e-waste in an effort to shift some of the end-of-life burden of electronics to the manufacturers. But many of the laws need refinement to close the gap between how they were intended to function and how they actually work in practice.
The success or failure of EPR regulations has wider implications than just the electronics industry. Reducing end-of-life products to their raw materials and returning them to manufacturers for inclusion in new products is the fundamental concept behind the so-called "circular economy," which has the potential to reduce waste and environmental impacts while overcoming resource-constrained limits to economic growth. Companies are only beginning to experiment with circular-economy business models, and the fates of early EPR regulations in electronics, carpets, packaging, paint and pharmaceuticals will likely have significant influence on future circular economy initiatives.
Over the past several years, we've written several papers that unpack how program implementation choices determine economic and environmental outcomes of EPR policies. In particular, two papers for the Journal of Industrial Ecology (JIE) analyze the achievements and shortcomings of distinctly different state-mandated e-waste take-back programs. One looks at the Washington E-Waste Recycling Law, a centrally coordinated system in which the state government dictates specific operational choices for implementation. The other examines the 2007 Minnesota Electronics Recycling Act, which we consider as a market-based program. It allows implementation flexibilities for manufacturers to attain compliance in competitive markets.
3 Priorities for Fixing Market-Based E-Waste Programs
The Washington and Minnesota regulations both have resulted in relatively high e-waste recovery rates. But a close investigation suggests that both face a number of implementation challenges, which we explain in detail in the two JIE articles. It's our belief that market-based programs, like Minnesota's, resonate better with the U.S. business culture and are more likely to be passed by lawmakers. Furthermore, we believe the challenges in Minnesota's system are not a result of its market-based approach; rather, they are the outcomes of certain operational flexibility provisions that aim to increase efficiencies. We've identified three areas in which a focus on operational choices could substantially improve the results of market-based EPR programs.
1. Diminish Incentives for Selective Collection and Recycling
Minnesota municipalities are dealing with the same cost burdens as New York's. The Minnesota Act allows manufacturers the option to select what types of devices they want to recycle to meet their obligations. Not surprisingly, this creates an incentive to select the easiest to recycle devices with the most residual value, and local governments are in the unenviable position of being the fallback option for the difficult and costly devices, such as CRT televisions. Understanding the economics and looking ahead to possible stakeholder interactions like this is imperative for designing effective EPR legislation.
2. Level the Playing Field for Stakeholders
The Minnesota Act provides manufacturers with numerous flexibilities that are not afforded to collectors and recyclers in the state. This puts collectors and recyclers at a disadvantage in what is already a highly competitive, low-margin business. The arrangement is likely responsible for the impressive cost-efficiency of Minnesota's system, however, providing subsidies or differentiated compensation mechanisms for collectors and recyclers would improve the overall system by creating more stability in the market, which could increase margins, encourage more local investment in recycling technology, and reduce the incentive to export e-waste to developing countries.
3. Reward Effective Eco-Designs
Neither the Minnesota nor the Washington program incentivizes manufacturers to make design improvements in toxicity or recyclability. Both systems set manufacturer recycling obligations based on the total weight of sales. Thus, manufacturers are rewarded for designing smaller, lighter products, but not for designing products that are less toxic, or easier to disassemble and reuse. Future EPR legislation would do well to subsidize better design choices and individualize manufacturer obligations based on recycling costs, which is also known as Individual Producer Responsibility (IPR). There are, of course, additional complexities and costs associated with IPR, but recent theoretical advances suggest it's feasible with a careful, studied approach.
In summary, effective EPR programs can have unintended economic and environmental outcomes unless policy goals are carefully translated into operational program choices and stakeholder interactions are modeled with a detailed understanding of economic drivers. However, we believe existing and future regulations can be tweaked to achieve the desired results.
Işıl Alev is Assistant Professor of Operations Management at the Carroll School of Management at Boston College.
Atalay Atasu is Associate Professor of Operations Management at the Scheller College of Business at the Georgia Institute of Technology. He also is a senior editor of the sustainable operations and industry studies and public policy departments for Production and Operations Management.
Özlem Ergun is Associate Professor of Mechanical and Industrial Engineering at Northeastern University's College of Engineering. She's also a co-founder of the Georgia Tech Humanitarian Logistics Center.
Luyi Gui is Assistant Professor of Operations and Decisions Technologies at the Paul Merage School of Business at the University of California, Irvine.
Natalie Huang is a Ph.D. candidate in Operations Management at the Scheller College of Business at the Georgia Institute of Technology.
L. Beril Toktay is Professor of Operations Management and Brady Family Chair at the Scheller College of Business at the Georgia Institute of Technology. She also is the faculty director of the Ray C. Anderson Center for Sustainable Business and the area editor for environment, energy and sustainability at Operations Research.