Multi-Market Impacts of Market-Based Recycling Initiatives

In 1995 the average tipping fee in the state of New York was $70/ton, with some landfills charging as high as $100.¹ In New Jersey, fees reached prices as high as $165/ton.² With budget crises occurring at all levels of government, economists, environmental scientists, policy-makers, and others are scrambling to find alternatives to waste disposal. Recycling as a solution has risen to the forefront, most likely because it both saves landfill space and may use fewer resources than virgin material processing. At every level of government, policies are being set that encourage recycling. Unfortunately, some of these programs may be resulting in unintended and undesirable side effects. To understand these effects, a broader view of the many factors involved in materials use, waste generation, and disposal is necessary. Within this paper, the broader view is considered, including a discussion of the externalities that exist in the markets affected by waste and an analysis of the effects on all alternatives to recycling, including composting and reuse. Through use of mathematical optimization, this paper shows that a recycling subsidy, or the more complicated tax/subsidy scheme, does not necessarily provide greater environmental benefits compared with disposal taxes.