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Lecture #7 - Waste Disposal and Recycling


Economics of Waste Disposal


1. Waste disposal - collection, transport, processing, recycling and disposal of wastes

  • Waste disposal companies are usually owned or controlled by the local governments
  • Waste disposal can create environmental problems
    • Rats and vermin are attracted to the area
    • May contaminate ground water
      • Engineers came up with ways to reduce ground water contamination
    • Emits greenhouse gases
  • Household size and income increase wastes, while fewer pick-ups and fee increases decrease amount of waste produced.
    • Most localities use flat fee pickup, which provide no incentives for reducing wastes.
    • P* = 0, because the households do not pay for the last unit of waste.
  • Economic efficiency requires marginal pricing.
    • The price paid by households should equal the Marginal Cost (MC) of disposal.
    • Portland, Oregon uses block pricing, which provides incentives to decrease wastes.
      • There is a flat fee for the first garbage can, and additional fees for additional cans.
      • Recycled items are picked up for free.
        • Increases recycling effort.
        • Recycling increases the disposal company’s costs, but increases the life of the landfill.
        • Recycling changes the composition of garbage.
          • Landfill may become more toxic.
          • Less paper, aluminum cans, glass bottles, and plastics
      • People may do more illegal dumping to avoid paying more money for block pricing
  • Solid waste disposal costs are rising, because landfill capacity is decreasing and regulatory requirements are increasing
    • Some states have taxes for hard to dispose items
      • Tires, oil, and refrigerators
      • Some people illegally dump these items to avoid the tax.
  • Economics
    • Market for waste disposal is a derived demand
    • Consumers demand products that indirectly create waste
    • Suppliers of the services take the waste
      • They may recycle some of it
      • Waste is burned
      • Most is buried at land fills
    • Below is markets
      • Consumer product market is to the left
      • Waste market is to the right
    • If waste company charges a fixed rate, then consumers really do not see a market price for their waste
      • They create Q bar of waste for the waste
      • The supply of the service is vertical, because the company offers a fixed service for all residences
        • Waste may be viewed as a public good

Economics of Waste Disposal

  • Let the companies charge residences by amount of waste
    • Consumers see a price for their waste
    • Higher price can cause consumers to recycle more
      • Lowers amount of waste
    • Firms may recycle more too
    • Note - may encourage some people to illegally dump their waste
  • Let consumers' income increase
    • Consumers increase their demand for consumer products
    • Indirectly, the consumers create more waste for their products
      • Market price and quantities for waste services increase

How higher consumer income increases waste disposal market

2. Land fills create greenhouse gases like carbon dioxide and methane

  • Methane and carbon dioxide are created from the decomposition of organic waste
    • Gases create odor problems
    • Kills surface vegetation
    • Some landfills are experimenting with green technologies
      • Collect the methane gas and burn it to create electricity
      • Electric generators, boilers (i.e. furnace), and turbines are expensive capital upgrades
        • Wastes are burned in boilers or furnaces
        • The heat energy converts water into steam
        • The steam drives the turbines
        • The turbines turn the generators, producing electricity

3. Some countries do not have the land to bury garbage

  • Some countries like Japan incinerate their wastes
    • Land is scarce and valuable
    • Incineration facilities burn the wastes at high temperatures
      • Requires less land than landfills
      • Creates greenhouse gases like carbon dioxide
      • Produces heat and/or electricity



1. Markets for recycled commodities

  • Assume markets are competitive recycled commodities sold by recycling centers to firms that convert materials into new products.
    • Recycling center - collects recycled materials
      • Could have high costs
        • Local government may own facility
          • A private company may own the facility
          • Government usually subsidizes the center
        • Recycling occurs in cycles throughout human history
          • Occurs when materials become very scarce
          • During times of war
            • War production diverts resources away from consumers
          • Countries like Japan that do not have abundant natural resources
          • Precious metals have always been recycled
      • Has to collect, sort, clean, and process the recycled materials
        • Has high costs to ship to collect materials from households.
        • Plastic containers, bottles, and paper tend to be light weight and bulky
  • Example - firms supply a product to the market
    • They use both virgin materials and recycled materials
      • Assume the recycled materials have a higher cost
      • Therefore, the supply function is higher than the virgin materials supply function
    • Vertically summing over the prices, the total supply function is ST
      • ST includes both supply functions with virgin and recycled materials

Market with two supply functions - virgin materials and recycled materials

  • A large urban area has a high population density
    • Strong demand may exist for product
  • Thus, the market price is P* and market quantity is Q*
    • The firms use Q*r recycled materials
    • Most likely the recycled materials are spread uniformly across the products
  • Note - a successful recycling program depends on the consumers
    • This can help reduce sorting and collection costs.

Supply and Demand for a market using recycled materials

  • A rural area has a low population density
    • Less people mean less demand for products
  • The market price is P' and Q' which is less than the urban demand function
    • The market price and quantity are lower
    • A competitive market in a rural market may not be able to use recycled materials
    • Market price is not high enough to support such an activity

A Rural Market that uses recycled materials

  • What if a market is dominated by a monopoly?
    • The virgin and recycled supply functions have been removed to ease viewing pleasure
    • The competitive market price, P*, and quantity, Q*, are there for comparison
    • Assume a strong demand exists for monopolist's profits like the urban case.
  • What is the conclusion?
    • A monopolist charges a higher market price, Pm, supplies less products to the market, Qm, and earns economic profits.
      • Economic profits are represented by the green rectangle
    • However, the monopolist uses less recycled materials
    • Ironically, it earns economics profits that could help offset the cost of recycling
  • A competitive market has to use recycled materials because they supply more so they need more inputs

Market with a monopoly that uses recycled materials

  • Note - the monopolist's only goal is to maximize profits
  • Many large companies have multiple goals
    • Large corporations are investing in green technologies and recycling programs
    • Why?
      • Public image - it looks good for the company
      • It may preempt the government from passing stricter laws and regulations

2. Methods for society to increase use of recycled products

  1. Government or the public installs the infrastructure for recycling
    • An entity install collection centers at various points
    • And/or households have a trash can and separate bins for recyclable materials
      • Separate bins for paper, glass, plastic
      • Disposal companies collect the waste and recycled materials
        • Process materials and sell them to the companies to be used again to make products
    • Requires the public to be aware and help in recycling
  2. Government forces stores and companies to charge a deposit
    • Consumers get the deposit back when the containers are returned.
    • Example - State of Michigan has a deposit of $0.10 on every can or bottle
      • Puts a value on the item
      • Most people locate these items and return them for the deposit.
      • Some people try to bring in cans and bottles from outside the state to return for deposit too.
    • Example - Car batteries
  3. Government bans the waste
    • Some states prohibit the disposal of old batteries, tires and garden waste
    • Consumers have to return these items to collection centers    
    • May encourage illegal dumping
  4. Government mandates (requires) manufacturing to include a minimum percentage of recycled materials.
    • Industry claims it imposes a lot of cost
    • They have to collect documents showing how much recycled material went where
  5. Government is a large consumer of products and services
    • They can use their buying power to buy products with recycled materials
  6. Government imposes recycling labels on products
    • Environmentally conscious consumers can check labels and buy products that use recycled materials

3. Many precious metals have always been recycled, especially the valuable ones like gold, silver, and platinum.

(i) Gold - been around since the dawn of civilization

  • Uses for gold
    1. Jewelry and the arts
      • Gold is not affected by air, moisture and most corrosive reagents
      • Dentist use gold to cap or plate teeth
    2. Food additives
      • Many believed that gold is so rare and beautiful that it could only be healthy.
      • High quality pure metallic gold is tasteless
      • Some gold leaf is used in alcoholic drinks like Goldschläger, Gold Strike, and Goldwasser.
    3. Industrial uses
      • Gold is highly conductive to electricity
      • Used in electronics industry
      • Used to connect the computer chips to the pins in their packages
    4. Coinage
      • Widely used in the world for money
      • During 20th century, all governments abandoned gold for fiat (i.e. paper) money.
      • Governments create money to help finance social programs or pay for the military.
        • A gold standard prevent government to rapidly increase the money supply
    5. Investment
      • Investors hold onto gold to protect them against inflation or economic disruptions.
  • Most gold extracted during civilization is still in circulation in one form or another.
    • 75% of all gold ever produced has been extracted since 1910
  • Gold extraction
    • Most gold mines, the gold is not visible to the naked eye
    • Usually at least 3 g per 1000 kg
      • or 3 parts per million
  • Production
    • Since the 1880s, South Africa has been the producer for the world’s gold supply
    • South Africa
      • About 50% of all gold ever produced came from South Africa.
      • In 1970, South Africa produced about 1,000 tonnes.
      • By 2007 production was just 272 tonnes.
        • South Africa depleted the easiest deposits first
      • In 2007 China produced 276 tonnes, over taking South Africa.
  • India is the world’s largest consumer of gold, as Indians buy about 25 per cent of the world’s gold.
  • In 2005 the World Gold Council estimated total global gold supply to be 3,859 tonnes and demand to be 3,754 tonnes, giving a surplus of 105 tonnes

(ii) Silver

  • Silver has long been valued as a precious metal
  • Applications
    • Ornaments
    • Jewelry
    • High-value tableware and utensils
      • Hence the term silverware
      • Sterling silver (standard silver) - an alloy of 92.5% silver with 7.5% copper
      • Used in jewelry and silverware
    • Currency coins
    • Electronics - used in electrical contacts and conductors,
    • Mirrors
    • Catalysis of chemical reactions.
    • Photographic film
    • Dental fillings - alloyed with mercury, tin and other metals for fillings
  • New Application
    • Silver is a broad-spectrum anti-microbial agent
      • Silver went out of fashion with the development of modern antibiotics
        • Researchers have a renewed interest in silver again
      • Silver inhibits the growth of bacteria and fungi.    
        • Reduces the risk of bacterial and fungal infection.
  • Peru is the world's top producer of silver, and Mexico closely follows behind

(iii) Platinum

  • Platinum is used in:
    • Jewelry
    • Laboratory equipment
    • Electrical contacts and electrodes
    • Platinum resistance thermometers
    • Dentistry equipment
    • Catalytic converters - a device on a car exhaust that helps lower pollution
  • Platinum is more precious than gold or silver.
  • In 2006, 239 tonnes of platinum were sold
    • 130 tonnes for catalytic converters
    • 49 tonnes for jewelry
    • 13.3 tonnes for electronics
    • 11.2 tonnes for the chemical industry as a catalyst.
    • The remaining 35.5 tonnes were used in electrodes, anticancer drugs, oxygen sensors, spark plugs and turbine engines.
  • Platinum looks like silver, but does not tarnish
    • Silver will tarnish

Hazardous Waste


1. Hazardous wastes - substances that pose a major safety problem for humans and the environment

  • Hazardous wastes have the following characteristics:
    • Carcinogenic - causes cancer
    • Ignitable (i.e., flammable)
      • Some substances may spontaneous ignite
    • Oxidant - causes strong chemical reactions
      • Oxidant is derived from oxygen
    • Corrosive - like strong acids and alkaline
      • Eat through storage containers
    • Toxic
    • Radioactive
    • Explosive
  • Hazardous wastes were discarded and dumped in land fills
    • Usually they contaminate the soil and water
    • Some hazardous wastes can still be dumped in landfills, if they are converted to a solid and are stable
  • EPA has strict guidelines for creating, storing, and disposing of hazardous wastes
    • Companies have to keep detailed records in the United States.
    • Many industries create hazardous wastes
      • Petroleum wastes
      • Chemical industry
      • Dry cleaners
      • Hospitals
      • Car and truck repair shops
  • States are becoming more stringent on what people can through away
    • Lead-acid batteries, i.e. car batteries
    • Mercury-containing wastes
    • Rechargeable batteries
    • Cathode ray tubes (CRTs) from older computer monitors and televisions
    • Cell phones and computers
      • The lithium ion batteries
    • Refrigerant containing appliances such as a refrigerator, air conditioner or dehumidifier.
  • Reducing hazardous wastes
    1. Recycling
    2. Portland cement
      • Depending how the cement will be used, some wastes can be mixed in
    3. Neutralization
      • Acids are neutralized with alkalines to form salts
      • Alkalines are neutralized with acids to from salts
    4. Incineration - burn the wastes at high temperatures
      • Burn used oil and flammable solvents
    5. Pyrolysis - burn the substances with oxygen
      • Breaks down chemicals into simple substances
      • Used for organic substances like pesticides, etc.
    6. Special landfills
      • Some wastes can be stored in salt domes, old mines, etc.
      • As long as they are geographically stable

2. Radioactive wastes - waste that emit radiation

  • Radioactive wastes poses new problems
    • Extremely harmful to humans and life forms in large concentrations
  • Some wastes can be around for hundreds of thousands of years
    • Plutonium-239 - produced from “spent” fuel at nuclear power plants
      • Remains hazardous to humans and other living beings for hundreds of thousands of years.
      • Can be used in nuclear weapons
    • Iodine-131 has a short half-life of 8 days
      • After a month, it is no longer radioactive
  • Sources of radioactive wastes
    • Spent nuclear fuel from nuclear power plants
    • Processing from producing nuclear weapons
    • Medical industry - uses radiation for some cancer treatments, etc.
    • Coal power plants
      • The ash from burnt coal contains radioactive substances
      • Residues from the petroleum and natural gas companies
        • Radon and radium can coat the inside of pipes
  • Yucca Mountain Nuclear Waste Repository
    • A place to store nuclear wastes
    • Located in the Yucca Mountain, Nevada
      • Adjacent to the place where the U.S. government tests its nuclear weapons.
      • Site is geographically stable
    • The federal government bored a 5-mile long U-shaped tunnel into the mountain.
    • Political opposition and lawsuits have delayed the opening of this facility for decades.
      • The U.S. military and nuclear electric power plants are stockpiling nuclear waste at their facilities
      • As of 2008, the government has spent approximately $9 billion into this project.



1. Brownfields - are abandoned or unused industrial properties

  • The term brownfield was invented in 1992
  • Land is contaminated with either pollution or a hazardous waste.
  • Brownfields include
    1. Gas stations
      • Gasoline and diesel fuel leak, contaminating the soil
    2. Dry Cleaners
      • Use strong solvents to clean clothes
      • Probably in old days, dry cleaners inappropriately dump used chemicals
    3. Factories
      • Used dangerous chemicals which then were intentionally or accidentally disposed of on the property.
  • Many put a low value on brownfields
  • Market for two lands
    • One land has strong demand such as a land in a residential neighborhood
    • Other land is a brownfield
    • Assuming the supply functions are the same, different demand functions cause land prices to differ
      • Lower demand causes lower market price

Brownfield Land versus Residential Land

  • Brownfields may cost too much money to clean up
    • May have future liabilities from a lawsuit
      • Some may claim the land made them sick and they sue
    • Clean up is heavily regulated by the Environmental Protection Agency and the state's equivalent
    • Some states provide incentives to clean up property
      • New Jersey exempts property taxes for 10 years
      • New Jersey has the highest property taxes in the nation
    • Brownfields may sit unused for decades
  • Many U.S. cities had factories located near the center of the city
    • These cities may clean up and reuse the brownfields
    • Some cities turned them into parks, part of a highway, malls, and residential properties.
    • Usually prohibited use for agricultural land
  • Some owners do not want to try to clean up brownfields
    • They may unbury a surprise
      • Before 1960s, not unusual to bury drums and tanks of toxic wastes
      • Sometimes railroad cars were buried too.
      • Then clean up costs increase substantially with new discovery
  • How are sites cleaned up
    • Remove the storage tanks, bins, and railroad cars.
    • Use various microbes in soils and groundwater
      • Microbes convert the wastes into safer products, etc.
    • Use oxidants - chemicals that contain oxygen that help speed up decomposition
    • phytoremediation - uses deep-rooted plants to soak up metals from the soils
      • As plants mature, they are removed as hazardous wastes 

2. Superfund site - An industrial land that is severely contaminated by hazardous wastes or very high concentrations of pollution

  • Federal Law that gives broad authority to the government to clean up superfund sites
    • Does not include brownfields
  • Environmental Protection Agency locates responsible parties
    • If parties cannot be found, then the EPA cleans up the site
      • Superfund is poorly funded, so EPA cleans up few sites
      • EPA tries to find responsible parties
    • Who is responsible?
      1. The current owner
      2. The owner of the site at the time the wastes were disposed
      3. A person who arranged for the disposal of a hazardous substance, pollutant or contaminant
      4. A person who transported a hazardous substance, pollutant or contaminant to a site
    • EPA orders the responsible party to clean up the site
      • If they refuse, then the EPA can impose a fine up to $25,000 per day
  • As of December 2008, the United States has 1,255 super fund sites

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