Monthly Archives: February 2010

Moving towards economies of scale for recycling

This just in from the Portlander, emphasis mine:

Recology Oregon Recovery Inc. have signed an estimated $38 million, seven-year contract that will signal considerable changes for the northwest Portland facility that takes in trash and recyclables from commercial waste haulers, businesses and residents.

Following a thorough evaluation by an interagency evaluation team, Metro determined that Recology had the best and most competitive proposal to manage Metro Central. The decision to award the contract to Recology was based primarily on its guarantee to double the rate of materials recycled, the company’s robust sustainability plan which includes reducing its carbon footprint, and improved opportunities for employees at the station – – all without significant increases in operation costs.

While residents who have their garbage and recycling picked up at the curb will not see any immediate changes, and Metro expects little to no impact on disposal rates, modifications will be made to improve services at the station to allow Recology to double the current rate of recycling from 17 percent to 34 percent by the end of the first year of operations, and to 40 percent by the end of the contract in 2017. Stepping up the recovery of cardboard, wood and metal will make up much of that increase. Recology also plans to accept new materials at Metro Central, including asphalt roofing and clean drywall.

If one was to do an immediate case analysis from this statement, it looks like Recology is diversifying its product offering and increasing its share of reusable recyclable materials such as wood and metal. Process innovation and growth in business is the indicator of economies of scale by spreading more of the unit cost across more output.

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Should we harvest the organs of death row inmates?

From Free Market Mojo:

I should probably say I am against capital punishment, but this certainly softens my objections with it.  I wish the video had some data stating just exactly how many death row inmates wished to give up their organs, but I suppose it is worth the trouble even if one decides to do it.

Waste products aftermarket: partIII – e-waste in the developing world

The UN  released  a report today detailing the dangers of e-waste in the developing world. (here) This issue isn’t new, but it is good that the UN is starting to realize how important it is to start dealing with this.   Not many of us know where our digital trash goes, but it mostly goes to the developing world.  The issue with this is that because of the valuable components within the waste, many of the poorest have taken the initiative, at the risk of their health, to disassemble the waste in order to obtain these valuable components and sell them.  Some grim details include:

Most of the recycling of electronic waste in developing countries such as China and India is done by inefficient and unregulated backyard operators. The environmentally harmful practice of heating electronic circuit boards over coal-fired grills to leach out gold is widespread in both countries.

The laborious task of doing this is often menial, tedious and most importantly, hazardous to one’s health, making it incredibly dangerous. But when weighing the option between eating and not, some will step up to take the risk and rummage through our e-waste for a few valuable components.

This issue was first brought to light after watching this incredible documentary called Manufacturing Landscapes. It has vivid images of the lifestyle that some Chinese have in taking part to profit from this, and it will either leave you shocked, fascinated or just downright disgusted.

A more deeper  look into the e-waste problem was documented by PBS’s Frontline.  The piece was entitled “Your Digital Trash.” It looks at some of the broad ramifications of e-waste that isn’t entirely environmental.  The most interesting part of this program was towards the end.  It dealt with an enterprising  social entrepreneur from India who built a business by investing in capital machinery that made the separation of parts for e-waste much more productive and less-hazardous to workers.  He hired workers at competitive wages to disassemble and collect the valuable materials from e-waste, all while ensuring a safe work environment.  Those valuable materials, most notably gold, would be then melted down in jewelery and sold on the street for a profit.  Right now the business is only small-scale, but there is potential, especially if India fashions a new law to ban digital dumps.

Before leading into the last segment of the program, the report focuses on a dealer who fills up empty container ships on the way back from the United States after delivering imports, and because the e-waste is loaded at little to no cost, sells them to digital dumps where they are taken apart irresponsibly. His quote certainly resonates when asked about environmental damage:

“I can only say one thing, if you want to do it environmentally, you have to pay. They have to invest in machinery, labor, everything. It isn’t worth it to pay so much money.”

I point this out because this is the real crux of the issue. Our e-waste is being sent to the developing world because residents who have a low-marginal product of labor are willing to take the risk and low pay in order to get the very small amount of value out of this waste. It shows how necessary legislation is needed in order to circumvent this, and jump start the proper investment where our Indian entrepreneur doesn’t need to fashion the valuable metals into jewelery, but is able to sell recycled waste on an open market. If it is possible to do this at Total Reclaim in Oregon, where labor costs are high and able to be sustainable through government support, imagine the type of value the developing world could get by investing in an industry dealing with e-waste responsibly. It will take some time before commodity prices will get to the point when it is profitable to invest in this type of business, but for now, legal intervention is the best way to jump start this industry so that it can innovate and build economies of scale and become a fixture of the industrial ecological web.

I want to believe him…

From Krugman:

Oil prices did spike to triple-digit levels in early 2008, then drop sharply. But think about the fact that right now, with the world economy still seriously depressed, oil is at $80 a barrel. This suggests to me that high oil prices are largely caused by fundamentals.

And it also suggests that resource constraints will be an issue if and when we do get a full recovery.

I want to believe him but why then… From MR:

This graph doesn’t bode well for my “rising commodity prices in the future theory.” However, Tyler Cowen would back me up as he had written about it in his previous post. (here) Rising incomes lead to a rising demand for these resources that will soon outpace the economies of scale and innovation that has depressed commodity prices so much over the years. Oil is obviously the leading indicator of this…we use it so much, it is quite precious, easy substitutes are not easily available, and our demand for it is highly inelastic.  While food or other organic materials will help keep the overall index down, I believe metals, especially heavy metals, should be next on the list.  They exhibit the same traits as oil however demand for them isn’t as high right now.  When incomes in the developing world rise to a point where they are able to build resource intensive buildings and demand high tech products and infrastructure, I can assure you they will exhibit the same traits that oil is experiencing now.

Lisa simpson was wrong about intelligence and happiness

Remember this?

It was from a Simpson’s episode when Homer has a surgery that removes a crayon from his cranium that inadvertently maximizes Homer’s brain activity a la Flowers for Algernon.

Now, take a look at this graph from the Economix blog:

Looks like Homer should have been happier after removing the crayon.

Toxic Garbage Island!

Titled as if it was a campy B-movie flick, this story unfortunately happens to be scarier. Found this video which is quite incredible. It details the issue of the growing great pacific garbage patch. First part of a three part series. Will update as they come along!

Having trouble embedding it, so…here is the link: http://www.vbs.tv/watch/toxic/toxic-garbage-island-1-of-3

HT: Isis the Scientist

Recession shows how recycling shouldn’t be run

This post stood out to me on FreeMarketMojo, linking to an article in the San Fransisco Chronicle about a $4 million dollar budget hole (40% of the total budget deficit)  that the city of Berkeley must endure thanks to their poorly run recycling program.  A combination of misplaced incentives and recessionary forces helped lower the amount of actual waste that consumers could be charged.   Commodities are usually what help recycling programs keep afloat.

The economics of recycling has always been subsidized by commodities’ resale values. But those also collapsed over the past year. Paper went from being worth $187 a ton in July 2008 to $46 a ton in January 2009 and $116 a ton in December 2009. Aluminum went from $1,908 a ton to $679 to $1,200, Clough said.

I want to point this out because it shows how important commodity prices are to the viability of recycling enterprises. While commodity prices during this recession had been depressed significantly enough to deflate their budget cushion, spreading the risk of volatile prices, especially for more valuable commodities, could help reduce budget woes.

Because Berkeley provides its own service, it lacks funds to buy many technologies required to recycle even more products, like certain plastics or concrete.

Surely Berkley will want to look into increasing the rate of waste that is taken to their recycling centers in order to increase the amount that could be processed and sold. Providing proper incentives will help, unlike what Berkley is currently doing. But finding money to invest in other product offerings, like recycling plastic or concrete, or even e-waste, can hedge against depressed prices and provide economies of scale, especially if services were expanded state wide.

I just want to make these comments as they help point out how important a large scale operation is, and how sustainably high commodity prices can help make recycling programs economically viable.