World is Green

The use of the word ‘price’ in the title of this post is about “free markets and environmentalism” and also the use of the word price as a substitute of cost.

Bryan Caplan links to Micheal Munger who writes about the economics of recycling. As with free market economists, Munger tries to understand the need for recycling and the best way to recycle from the point of view of markets and prices and in the end, the value of recycling.

…does it make more sense for (a) a few workers, and specialized equipment, to separate waste streams, or for (b) all the rest of us, with far more valuable uses of our time, to spend time, gas, and effort separating “recyclable” materials and feeling good about ourselves by putting them in little separate slots in some expensive facility dedicated to this purpose?

Trick question! The answer is: Neither. It makes no sense for either the waste worker, or the homeowner, to separate waste streams, because the price system is telling us this is an inefficient and wasteful activity. If recycling were efficient, someone would pay you to do it. Disguising the costs by forcing citizens to do the labor, instead of paid government employees, changes nothing. It just reduces the explicit budget of the recycling program, and raises implicit taxes on the people.

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There is a simple test for determining whether something is a resource (something valuable) or just garbage (something you want to dispose of at the lowest possible cost, including costs to the environment). If someone will pay you for the item, it’s a resource. Or, if you can use the item to make something else people want, and do it at lower price or higher quality than you could without that item, then the item is also a resource. But if you have to pay someone to take the item away, or if other things made with that item cost more or have lower quality, then the item is garbage.

If yard waste were a resource, then trucks would drive up and down streets in your neighborhood, bidding up the price of your bagged grass clippings. That doesn’t happen. Ipso facto, yard waste is garbage. No amount of wishful thinking, or worship of nature as a goddess, can change this basic calculus.

It’s can be easy to say that price is not everything. But consider the information encapsulated in the price. The collection of rubbish, the sorting and categorization, transportation, recycling into something valuable that a market will buy and the opportunity cost of doing this against say creating something from scratch.

Munger gives the example of recycling glass bottles.

The difference between cullet (glass ground up by machines, using electricity) and sand (rocks ground up by nature) is clear: most cullet is full of additives, contaminants, and impurities. These contaminants are trapped in the cullet, inert and harmless. But if someone melts the cullet, an important step for making new glass, the contaminants can become toxic releases into the atmosphere, water, or soil. The impurities introduced by even small amounts of merged colors or types of glass in waste streams make mixed cullet nearly useless.

Sand, by contrast, is cheap and can be made into glass without extra steps, extra expense, or extra danger to the environment.

So why do we recycle glass? Why is it against the law, in many cities and counties, to dispose of glass as garbage? The fact that glass made from cullet is much more expensive than glass made from sand should be a hint that recycling uses more resources and more energy. (Emphasis in original)

According to the waste mantra, its reduce, reuse and then recycle. Economic incentives should be directed towards reduction than recycling. Jane Shaw’s introduction to the economics of recycling in EconLib has more.

A major deterrent to recycling is that the prices of local garbage disposal rarely reflect the actual cost of disposal. Most collection systems are controlled or owned by governments, which assess a flat sum for garbage collection, sometimes as part of municipal taxes. The trash collector picks up whatever waste people leave at the curb, and people are not rewarded for discarding only a small amount or penalized for discarding a lot. Thus, they have no incentive to reduce their waste. In contrast, privately owned systems, operating without municipal price regulation, would have to accurately price garbage disposal to stay profitable. Accurate pricing—that is, high prices for people who generate more waste—would encourage people to reduce their waste.

This was an interesting discussion of recycling and shows that economic principles will work  if applied correctly. Do check out both the articles.

James Murray at the Green Business News blog from IT Week (UK) provides an example of a mobile recycling company called Fonebak which is taking advantage of the new WEEE regulations to create a new business.

Under a scheme operated by mobile phone disposal specialist Fonebak and supported by leading mobile manufacturers, operators and retailers such as Vodafone, Orange, O2, Dixons, PC World and Virgin, firms can dispose of their unwanted mobile phones and attachments through a WEEE-compliant channel and get cash in return.

Firms signing up to the scheme receive either free post bags to send unwanted mobiles to Fonebak’s recycling facilities, or securely-sealed plastic boxes which they can fill with 40 to 50 phones ahead of collection.

According to Sarah Band of Fonebak the company then “sorts the phones, tests them, recycles the materials from those that don’t work and refurbishes those that are working, and remarkets them in Eastern Europe, Asia and Africa”.

This approach not only provides affordable mobile phones to developing world economies, but also generates revenue from the sale of both refurbished phones and the components and precious metals harvested from recycled handsets. “Plastics in phones are melted down and used in saucepans, traffic cones and buckets,” she explained. “While Gold, copper and the like is taken out and sold on commodity markets.”

We already know that “waste equals food”. Food equals money. In the meantime, we can make a difference to the environment and the community.

Jennifer Kho writes about the growing regulation in electronic waste and the opportunities present for companies all over the world in the supply chain.

Imagine a mountain of trash weighing as much an oil tanker. That’s how much electronic waste the world discards every hour, according to Greenpeace.

New environmental regulations that go into effect in China on March 1 aim to shrink that mountain of waste into a molehill. The Chinese effort is the latest attempt by governments aroudn the world to tackle the problem of growing electronic waste. But while makers of computers, cell phones, and other electronic gadgets might applaud that aim, many worry that they won’t be able to comply with the new laws in time.

The new laws are hitting the electronics industry hard. Companies like Dell, Hewlett-Packard, and NEC have all redesigned their products to comply with E.U. regulations, basically making Brussels the de facto arbiter on world standards.

But whatever their source, the new rules have forced changes in materials, designs, and processes, opening a mountain-sized opportunity for new players throughout their supply chains.

But no matter how much it costs companies to comply with the new regulations, it almost certainly will cost them more in fines, or worse outcomes, for ignoring them. Apple last year pulled its iSight web camera from Europe after it decided that it would be too expensive to meet RoHS specs; by December, Apple stopped selling the product in the U.S.

To be fair, the electronics industry is being asked to implement extremely complex changes in a short amount of time, says Elizabeth Grossman, author of the book High-Tech Trash. “I couldn’t think of another industry that operates on such a large scale internationally that is being asked to make these kinds of changes,” she says.

As in other areas related to sustainability the EU is leading the world in the management of waste.

Environmental Management news reports that the European Parliament has voted on two waste directives. The EU Waste Directive aims to set binding targets for waste prevention for the first time, while the ‘Thematic Strategy on the Prevention and Recycling of Waste’ focuses on the long-term EU waste strategy.

The report by British Conservative MP Caroline Jackson on the proposed waste directive calls for binding targets to stabilise waste production at anticipated 2008 levels by 2012. It also calls for greater reuse and recycling to reduce pressure on landfill sites.One of the measures strongly supported by the Jackson report is the ‘five step’ hierarchy of waste treatment, with prevention most desirable, followed by reuse, recycling, energy recovery (including incineration) and landfill as a last resort. It rejects the European Commission’s earlier proposal to reclassify incineration from “disposal” to “recovery” based on energy production.

The second report, from Johannes Blokland of the Independence and Democracy Group, seeks a ‘thematic strategy’ to deal with the problem.

His report calls for a total ban on all landfill waste by 2020 and asks the European Commission to propose ways of reducing waste and to develop measures to judge progress.

The Solve quarterly magazine from  CSIRO has many sustainability related articles (Feb 2007 edition). The theme is the intersection of technology, science, multi-disciplinary collaboration and partnerships to create a sustainable world.

Water and IT

The Water theme is continuing on Worldisgreen.com and this time the problem is of data.

The first step in solving the water problem is getting the data on how much water is available, how much is used now and what may be available in the future. In order to achieve this, information technology may be the answer.

A Water Resources Observation Network (WRON) was instigated by CSIRO’s Dr Rob Vertessy in response to the clear need for more accurate monitoring of Australia’s water resources.

He says billions of dollars of investment are needed in new water-supply infrastructure as the urban population grows and the long-term effects of climate change become more apparent. “But where do we start? Good water information is the key to answering these questions.”

The problems being solved revolve around defining data standards, developing security solutions, managing historical data, and even created web-robots to gather dam-level data from multiple web sources.

I can appreciate the need to develop data standards and the ability to transfer data among many different organizations. My current work has been delayed by many months due to the lack of consistent data standards and unavailability of open standards like XML.

Click the link below for the rest of the post.

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Amiya Kumar Sahu, founder of the National Solid Waste Association of India, a not-for-profit organisation operating in the field of waste disposal conveys this message of garbage means money.

The Mint reports (reg. required) that five organizations are bidding to manage New Delhi’s 7000 tonnes of waste it generates every day. Why?

Entrepreneurs are hoping that they can convert some of that into gold. Five companies are bidding to process 1,000 tonnes of the waste. According to the financial details provided by one bidder, the company will earn a revenue of Rs 21 crore in the first year on an initial investment of Rs50 crore.

One of the companies bidding for the Delhi project is Ramky Group, a Hyderabad-based company that has made its fortune by managing waste. It manages waste in seven cities, and plans to invest Rs400 crore in the business over the next few years, according to its managing director Ayodhya Rami Reddy. Ramky ended 2005-06 with Rs600 crore in revenue.

They have also been trying to understand how they can put their waste to productive use. The Delhi government, for instance, has asked IL&FS Ecosmart, a firm that offers environment management solutions, to study the feasibility of compost plants that will convert waste to fertlizer, and waste-to-energy projects.

“There is a sustainable business model in this (waste management),” says Mahesh Babu, the chief executive officer of IL&FS.

The Waste Management business inevitably will be a good business to be in. However, in the short term it will be hard to make money till systems are developed and more municipalities in India come forward to work with private companies.

As the Waste Hierarchy images above (courtesy of Zero Waste SA) shows there is a opportunity for waste management companies in the lower part of the hierarchy and in the area of waste transformation.

In the medium to long term this business provides a good opportunity to help the environment and make profits.

Waste is an issue in every product. In the Sustainability field, Waste creates many opportunties.

One, waste means that the product’s life can be extended. Second, waste means the product’s end-of-life has not been taken care in design, or recycling or other ways. Third, waste means a loss of valuable resources which can be extracted. Fourth, waste means inefficiency, which means opportunity and profits for people who can remove it.

Lets look at tyres. According to some reports, there are a billion tyres which are thrown away every year. Some 400 million of them are recycled or are used as fuel and the rest are sent to landfill.

There are major environmental impacts of used tyres. However, this is the visible part and the environmental impacts are present in the entire life cycle of the tyres.

Source: Australian Commonwealth Department of Environment

For tyres we can use the waste mantra.

First, used tyres can be re-used. Some can be re-used. However, check for safety guidelines. Second, their life can be extended by rethreading or retreading. This is a common method in developing countries where the life of the tyre is extended. It happens on a smaller scale in developed countries. Third, they can be recycled. Fourth, they can be used for a source of energy.

Rethreading is an activity which can have a good business opportunity.

The major business opportunity comes from recycling the tyres and extracting its various resources and using it as a energy source.

What does a tyre contain?

Source: WasteOnline and WorldisGreen.com Analysis

In the energy use mode,

Energy recovery is essentially an incineration process that converts the tyre either whole or pre-shredded into another energy source. The largest application in the UK at the present time is in the cement industry.

And in the Materials recovery mode,

Thermal treatment of waste tyres can also be used to recover the physical elements of the materials used in the structure of the tyre for reprocessing into other products. There are a number of technologies being developed including:
• Pyrolysis
• Advanced Molecular Agitation using microwaves
• Continuous Reductive Distillation

The output materials recovered from these thermal reductive processes have a number of applications. Carbon can be reprocessed and activated for use as a filtration medium. It can be refined and reused as carbon black in the manufacture of rubber and other uses. Steel can be reprocessed as scrap in the manufacture of new steel or processed into reinforcing in concrete products. The oil can be reprocessed as a fuel and the majority of the gases can be reused in the pyrolysis cycle as a fuel source.

The market potential is big. If you look at Pyrolysis the resultant materials have a good market potential.

Source: Australian Commonwealth Department of Environment

This industry has been present before but it is becoming more important for a couple of reasons. One, new legislation in the European Union which bans sending tyres to the landfill and second, the increasing concern for the environment.

Not unrelated to the ELV Directive is the Landfill Directive (1999/31/EC). This specifically lists tyres as a major waste stream, banned the landfilling of whole tyres from July 2003, and will exclude shredded tyres from July 2006. Therefore, by the summer of 2006 it will be necessary to have in place reuse and recovery systems capable of handling virtually all of the tyres within EU member states that become waste.

Apart from these, there are many other uses of tyres including, flooring, tennis courts, crash barriers at motor racing circuits, roof tiles, artificial reefs and coastal defences etc.

Tyres provide a great many opportunities for corporations however, the only major issue is that at the end the supply of used tyres is a fixed market.

Nick Aster at TriplePundit connects to a story on Recyclebank by Forbes.

Remembering the environmentalist mantra for waste - “Reduce, Reuse, Repair, Recycle, Refuse” recying is the 4th best alternative. Closed-loop manufacturing is far better in this scenario and changing people’s habits is the best.

RecycleBank works in the area of recylcing. It provides incentives to residents in Philadelphia, US to recycle their plastics, glass and other recyclables. It uses RFID tags to collect information.

RecycleBank tracks each household’s contribution by providing containers embedded with radio frequency identification tags that correspond to each household address. Scanners on sanitation trucks record the weights of each pickup in RecycleBank’s database. Each household gets an account number and can track their recycling points a la airline miles.

By providing a incentive it helps to encourage the idea of recycling. However, there is a problem.

The first one revolves around the idea of education. In the longer run, it makes sense to encourage recycling as a natural habit rather than incentivize it.

Second, Recycling only postpones the inevitable decline of products to waste. Recycling in that sense is not always the best option. In Cradle to Cradle, the authors provide an idea called “downcycling” where products, materials or flow of energy that is not useful in one process is transferred to another process which helps in reducing primary metals extraction, resource efficiency and sometimes energy efficiency.  These refer to the “reuse” and sometimes “repair” in the waste mantra.

Incentives to increase recycling is good to a limit - at sometime we need to create a closed-loop cycle. More recycling means, more waste. Also, there are debates around the efficiency (in terms of energy use etc) of recycling for all products.

The bigger goal should be to change the design of products in such a way that products and its materials are re-used. The infrastructure and systems which are being developed by RecycleBank have the possibility to mature into a system which can help manufactures to reclaim their products in their goal towards close-loop systems.

In what can be said the biggest acknowledgment of the dangers of Nuclear Energy, the EPA is considering regulations for nuclear waste for the next 1 million years.

The U.S. Environmental Protection Agency (EPA) is preparing to issue a regulation that will govern the disposal of power plant nuclear waste in the United States for the next 1 million years. “This will be the only rule that applies for such a long duration into the future,” said Elizabeth Cotsworth, the EPA director of radiation and indoor air, in an interview with National Public Radio. “Most EPA rules apply for the foreseeable future — five or six generations. This rule is for basically 25,000 generations.”

Opponents of the Yucca Mountain plan countered with a lawsuit, arguing that the 10,000-year regulation did not extend far enough into the future. The courts agreed, so the EPA extended the regulation to 1 million years—100 times longer than the period covered by the original regulation.

Increasing concerns about the acceleration of global warming have helped to renew interest in nuclear power generation—even among some environmentalists—a development that has also raised new concerns about the best way to dispose of nuclear waste that can remain toxic for 100,000 years or more.

Even as the US EPA is considering this, Westinghouse won a deal to estimated at USD 8 Billion to build China’s new nuclear plants. Just considering the need for a regulation like this puts the risk of nuclear energy far higher than anything else.

In a previous post, we looked at the recylcing of currency notes to make hand-made paper. With the environmental consciousness increasing in the world, hand-made paperfrom recycled bio-degradable material will be highly valued. If this paper is transformed into useful products like paper bags or photo frames value is added and it can be sold at a higher price.

If there is a customer demand for these products, then new businesses will form which will in turn create more avenues to process waste. Win-win for all and a new market is created.

However, one huge problem in handling waste is collecting waste from the source and supplying it to the manfacturer for processing and production of eco-friendly products.

This is where the business of returns kicks in.

According to the Wikipedia:

Reverse logistics is the logistics process of removing new or used products from their initial point in a supply chain, such as returns from consumers, over stocked inventory, or outdated merchandise and redistributing them using disposition management rules that will result in maximized value at the end of the items original useful life.

A reverse logistics operation is considerably different from forward logistics. It must establish convenient collection points to receive the used goods from the final customer or remove assets from the supply chain so that more efficient use of inventory / material overall can be achieved. It requires packaging and storage systems that will ensure that most of the value still remaining in the used good is not lost due to careless handling. It often requires the development of a transportation mode that is compatible with existing forward logistic system.

Source: RevLog

Forbes.com writes about the growing business in reverse logistics.

A growing number of companies are finding that there‘s money to be made by sending things back.

And that bottom line impact can be a huge one. In the U.S. alone, the cost is an annual $100 billion. So a growing number of companies have found ways to create a real business out of sending things back

Unyson takes over the management of returned, damaged or obsolete products for clients by entering each item into their customized Web-based communication and transportation networks. This allows for full visibility of return shipments in transit, as they are sent back to a distribution center or return center for disposal or reconstitution.

The business of returns starts when a customer, retailer, dealer or manufacturer finds something wrong with a product (outdated, spoiled, broken or flawed). This single fact should initiate a response that through appropriate automation takes care of blame, return transport, physical processing and eventual redistribution or recycling and finally compensation to the customer.

The whole idea of reverse logistics, or returns, can be painful, time consuming and costly for all involved–manufacturer, retailer and customer.

There has been great advances in the field of logistics or what can now be called forward logistics, similar thinking and technologies need to be incorporated into ‘reverse logistics’.

There are many challenges facing this idea.

Reverse logistics is, of necessity, an information technology-intensive business, says Steve Manning, vice president at Milpitas, Calif.-based electronics manufacturing services (EMS) provider Solectron and general manager of its Solectron Global Services unit. The reason? “It’s all about the data,” Manning says.

“There are a significant number of touch points [in the reverse supply chain] that add up to a lot of cost. By not properly addressing the touch points, companies can negatively impact profitability, customer satisfaction and brand image,” Corwin explains, “so companies are getting more sophisticated in their returns approach.”

…new environmental laws — such as the European Union’s Restriction of Hazardous Substances (RoHS) and Waste Electrical and Electronic Equipment (WEEE) directives — are forcing companies to plan how they will retake possession of goods from end users at the end of a product’s lifecycle.

“If I bring in a pallet of 48 comforters, I deal with all 48 at once, and the cost is spread over all the comforters,” Giovingo says, “but if a consumer brings a comforter back, all the same activity — the receiving, inspection and stock put away — now has to be performed for just one unit. You multiply that times a couple hundred or a couple thousand returns each day, and it really adds up.”

Apart from bringing in new challenges, it provides new opportunies to cut waste, increase brand image, understand trends and manage the supply chain better.

Update:

Reverse Logistics Association

“In other words, anytime money is taken from a company’s Warranty Reserve or Service Logistics budget, that is a Reverse Logistics operation” - Gailen Vick, President RLA