Archive for month: November, 2020

Written by Calvin Lakhan, Ph.D, Co-Investigator: “The Waste Wiki” – Faculty of Environmental Studies at York University

For much of this past week, I have been asked by a range of stakeholders and media outlets to provide my thoughts on Ontario’s proposed Blue Box transition plan. Generally speaking, the headlines surrounding the province’s announcement have been positive: “Ontario is developing a stronger, more effective Blue Box Program”, and that the proposed changes will be “Good for the environment, good for the economy, encourage investment, job creation and spur innovation in the recycling and resource recovery sector”.

Before I offer my opinion, let us first touch on what changes are being made to the Blue Box program, and what the perceived benefits are supposed to be:

What is being proposed:

• Standardize and increase the list of materials accepted in the Blue Box, including paper and plastic cups, wraps, foils, trays, bags, and other single use items such as stir sticks, straws, cutlery and plates.
• Transition the costs of the program away from municipal taxpayers by making the producers of products and packaging fully responsible for costs, resulting in an estimated savings of $135 million annually for municipalities.
• Expand blue box services to more communities, such as smaller, rural and remote communities, including those under 5,000 people.
• Set the highest diversion targets in North America for the various categories of waste producers are expected to recycle such as paper, glass, beverage containers and rigid and flexible plastic, encouraging innovation such as better product design and the use of new technologies for better environmental outcomes.
• Expand the steward obligation to include three additional IC&I sectors (long term care/retirement homes, elementary/secondary schools, and private multi-residential buildings)
• Provide bin “twinning” in all public spaces (increasing density of both garbage and recycling collection points in public spaces and other high foot traffic areas)

What are the (purported) benefits:

• The transition to 100% producer responsibility will reduce municipal costs by approximately $135 million dollars annually
• Municipalities will pass this savings on to households, in the form of reduced property taxes or levy-rates.
• Standardizing the list of materials accepted in the Blue Box makes it easier for Ontarians to understand “what goes in the bin”
• Expanding the list of materials accepted in the Blue Box makes it easier for Ontarians to participate “Put it in the bin, and we will figure it out”
• Increasing service coverage to ensure that smaller communities, particularly in the provinces rural and northern areas, are able to receive Blue Box collection
• A producer lead system is believed to have better control at containing costs, realizing operational efficiencies, and designing more sustainable packaging
• A producer lead system will be able to invest in sorting/processing infrastructure and develop robust end markets for difficult to recycle light weight and composite materials
• Investments in recycling infrastructure will lead to job creation and spur the development of new secondary industries.

For all intents and purposes, the province has doubled down on their approach to try and recycle “everything” and “everywhere” – after all, more recycling can’t be a bad thing, can it? This is the question that I find myself grappling with as I consider the scope and potential impact of these changes – telling people that recycling can actually be a bad thing has made me a relatively unpopular figure in Canada’s waste world.

While I have written on this subject extensively in the past, I think the easiest way to start this conversation is: “How much are willing to spend to recycle something?”. Now, the answer to this will depend on the material in question, perceived risks to the environment, available infrastructure and the attitudes/opinions/awareness of the person answering the question, but the purpose behind the question is to gauge at what point is it no longer beneficial (economically or environmentally) to recycle a product? In an ideal world, we would want to recycle everything, but our reality (particularly in Ontario), is that we operate in a resource constrained system. There is an opportunity cost to every decision that we make – a dollar spent on one activity, is one less dollar spent on something else. Which is what makes the government’s announcement so perplexing…. The costs of operating our existing Blue Box program have grown exponentially in the past decade, as waste management infrastructure has become increasingly incompatible with the types of packages that are being used today. This is actually one of the primary concerns expressed by municipalities in Ontario – our households want to recycle and put everything in the Blue Bin, but much of these materials are either not recyclable, or are virtually worthless as a commodity.

I have personally been part of conversations advising municipalities about what does and does not belong in the Blue Bin – overwhelmingly, the sentiment was that many composite and light-weight materials shouldn’t be collected, and the challenge was educating households (and city councils) that some things are better off not being recycled -a daunting task given Canadians love affair with recycling)

Catalyst for change

So, what has changed? Why do we suddenly want to expand the list of materials accepted in the program, including materials we know cannot be readily recycled in our current system? The answer as it turns out, is who pays the bill. In the transition to full producer responsibility, packaging producers (often referred to as stewards in Canada), will be financially and physically responsible for end of life packaging waste. The transition to 100% EPR has been a long time coming, but the decision to expand the list of approved materials and include three additional IC&I (Industrial, Commercial, and Institutional) sectors came as a surprise to many. The province has repeatedly said that the costs associated with these changes are relatively minor ($15 million dollars in their original estimates) – however, when faced with push back on these estimates and questions were raised regarding the methodology used to calculate them, the province acquiesced and revised their estimates to $115 million dollars (please see attached regarding the university’s cost model critique that served as the basis for the revised numbers). This is in addition to the $135 million that producers will now have to pay because of the transition to 100% EPR.

Regardless of these cost increases, the sentiment shared by many advocates of the transition plan is that if a producer makes it, they should pay for it. Even if it cannot be recycled now, then producers will have to find ways to develop the necessary infrastructure and end markets to make their packaging recyclable in the future. It is these investments in the recycling system that will not only lead to increased diversion but spur economic growth in the sector. This is a very easy message to get behind and sell to the public – multi-billion dollar CPG companies have shirked their responsibilities for too long, and they must pick up the tab for keeping packaging waste out of landfill. But let us dig a little deeper into the implications behind transitioning the costs to producers, as well as what it means to expand the scope and scale of the Blue Box program.

Right off the bat, we know that the minimum bill that producers will face is $250 million dollars annually, as estimated by the MOECP. But this paints an incomplete picture of the broader situation – We must consider the costs of developing the collection and sorting infrastructure to effectively capture new materials (something that has yet to be modeled). If Ontarians are now able include plastic cutlery, foil trays, wrap and bags etc. in their Blue Box, our waste management system will require a massive overhaul.

As of today, most of the items listed above are treated as contamination, screened out at material recycling facilities, and ultimately landfilled. Municipalities don’t want to collect these materials due to the difficulty (and cost) associated with recycling. End markets do not want them either as they have little to no value, and limited end use applications. If anything, the presence of these materials in the recycling system increases the costs of managing all other materials – something that the university has attempted to explain using the endogeneity hypothesis: “the “endogeneity hypothesis” refers to a situation where the cost of one material is dependent on the presence of other materials being managed in the system.  As a crude example, a hypothetical material mix of just newsprint and cardboard may take minutes to sort one tonne, but a mix of newsprint, cardboard and film would take substantially longer to process the same amount. There is a collinearity in the impact on costs that materials have on one another that are virtually impossible to predict.

While there have been no formal attempts to model the marginal costs associated with infrastructural investment, it is a fair assumption to say that it will not be $0 – the $250 million dollar estimate made by the MOECP fails to capture the financial impact of developing, operating and maintaining new infrastructure. These are costs that will not be absorbed by industry, as (in my opinion) costs will be transferred to consumers and ultimately manifest in the form of higher prices for packaged goods. While many have vehemently disagreed with this assertion, arguing that EPR will save households money as a result of a decrease in municipal taxes, the math says otherwise.

Impact to industry and households

In a previous post, I mentioned that York University had conducted a study examining the impact of the Blue Box transition plan on packaging prices (and subsequent effect on households). This study found that depending on locality, the increase in “basket of goods” prices resulting from the proposed legislation would range between 6% and 12% (a number that has been criticized by transition advocates). However, even if we are to set aside assumptions surrounding the direct, indirect and induced effects resulting from the proposed legislation; and assume that municipalities reduce property taxes/levies in direct proportion to the $135 million dollars resulting from the transition to 100% EPR; we are still adding (at minimum) an additional $115 million dollars in annual program costs as a result of service expansion. If we begin to add in the costs associated with building additional infrastructure, end market development, P&E and administrative expenses, it quickly becomes apparent that producers will be on the hook for hundreds of millions of dollars over and above what they pay today. Even if people disagree with whether these costs will be downloaded onto the consumer, costs internalized by industry can result in numerous unintended and unwelcome outcomes. Perhaps it is best to think of the issue as reducing investment in the province by $115 million dollars – can these costs be readily borne by industry, and if not, what will the outcomes be? (job loss, operational contraction etc.).

These proposed changes would be much more palatable if it resulted in superior environmental, economic, and social outcomes for Ontarians. However, the benefits of trying to recycle many of the materials that are being added to the Blue Box are highly questionable. In addition to the technical difficulties associated with trying to recycle these materials, the costs to do so are enormous. To make matters worse, the carbon savings resulting from recycling are nominal relative to the benefits of high impact materials like aluminum, OCC/OBB etc. As a result, producers are going to be paying a huge bill for the Blue Box, but to what end?

What are we trying to achieve?

Returning to the topic of opportunity cost, the primary issue is trying to determine what we want to achieve with the Blue Box. Based on what the province has put forward under the transition plan, it appears as though Ontario’s goal is to recycle more, expanding the list of accepted materials and setting the highest material specific diversion targets in North America. The Blue Box transition plan is trying to eliminate the barriers to recycling, making it simpler, easier to understand, accessible and convenient to all households. But there in lies the problem – despite Ontario’s fixation on recycling, it is not, nor has it ever been, the preferred end of life scenario. It seems a touch ironic that the Blue Box transition was announced during waste reduction week. We continue to conflate recycling with sustainability, reinforcing the narrative to households that recycling is our primary goal.

In many ways, the proposed legislation can do more harm than good – even if we are to set aside the costs of operating the system – what is it are we asking Ontarians to do? Based on the government’s announcement, we are making it as easy as possible for households to participate. While this can certainly encourage participation, it can also lead to complacency and confusion. Households (as much as possible) need to understand that not all recycling is created equal, and that waste reduction, reuse and composting are additional strategies that may be more appropriate depending on the waste in question. Our goal should not be to trying to maximize the quantity of material being put in the bin – it should be about achieving the best environmental outcome at the lowest possible cost. What good is it to have households put plastic wrap and foil trays in the Blue Bin, only for it to get tossed as residue, or downcycled at an exorbitant cost.

Proponents of a “recycling first” approach will make an argument that recycling will help maximize the full use value of a material, and ultimately help keep these materials out of landfills and our environment. I don’t disagree – however, I do think that we need to remember “what did I have to give up doing it?”.  Over the past 10 years, Ontario has spent almost 3 billion dollars on the gross costs operating the Blue Box program. During this same period, recycling rates have stalled and are trending downwards, year over year increases in operating costs are in the double digits and changes in the packaging mix have rendered existing infrastructure dated and incompatible. Was this money well spent? Could it have been better utilized on other sustainability initiatives? Could we have used that money to invest in end of life technologies that do not rely on recycling to divert material? Despite my criticism of the program, I do not have an answer for this. In hindsight, the province could have done things differently, but nobody could have predicted package light weighting, the Chinese sword and collapses in commodity prices etc. Considering these unexpected challenges, Ontario should be commended for what it has accomplished with the Blue Box. However, now is the time that we should be moving away from our reliance on recycling, not  doubling down on it.

Moving forward

When reviewing the proposed changes to the Blue Box program, I am reminded of the quote “Insanity is doing the same thing over and over again and expecting different results”.

For almost 20 years, we have seen the growth, maturation and success of the Blue Box, as well as the more recent challenges that have called into question its long-term viability. The current narrative surrounding Blue Box legislation is that the transition to 100% EPR producer run system will somehow be able to overcome these issues. According to the government, the Blue Box transition will usher in an era of reduced taxes, more sustainable packaging choices, new processing technology, increased accessibility, and improved diversion. Based on research done to date and experiences from other jurisdictions, it is questionable as to whether any of these things will happen.

What I find truly perplexing is the insistence that packaging producers will somehow be able to operate the system more effectively than municipalities and find solutions to the problems that plague our existing system. How exactly will producers be able to sort, process and market materials that currently have no end markets (film, multi-resin plastic, coated fiber etc.)? How will producers be able to effectively provide service to rural and northern municipalities under 5000 residents? How do we expand the steward obligation to include certain IC&I sectors, when we do not know how much waste is being generated and who is managing it? If municipalities have historically struggled to address these issues, why would producers be able to?

Handing producers the keys to the system and saying, “You figure it out”, is absolving the province of the responsibility to develop legislation that is effective, economic and equitable. It will also negatively effect Ontarians, as they will be the ones left having to pay the tab for any costs borne by industry. There are literally hundreds of millions of dollars at stake annually, so it is prudent that we make informed and reasoned decisions.

It has taken Ontario the better part of a decade to adopt a 100% EPR model for packaging waste, and now the province wants to introduce a slew of additional changes, without fully understanding the potential impacts. This was aptly highlighted when the MOECP revised their estimates surrounding the cost of the proposed changes, as they were an order of magnitude off (factor of 10). As we move forward with the new legislation, I think it is critical that the province approach any proposed change with caution, evaluating the full range of impacts to all affected stakeholders.

At a more general level though, I think it is time we re-evaluate the role of recycling in both our society and in promoting sustainability. For the better part of 30 years, we have been inundated with the message to recycle – it has been a fixture in many of our lives, and my earliest memories as a budding environmentalist was putting kraft paper in the Blue Bins in elementary school. The act of recycling makes us feels good, because we think it does good (for the environment and the economy). But that does not mean that we can’t be doing better. I do not want people to misconstrue this post or my opinion as being anti-recycling or anti-EPR – I think both can play a significant role in helping achieve our diversion and carbon abatement goals. What I do want to emphasize is that recycling will not always yield the best outcome – it is merely one tool in our tool box, and the decision to recycle something will depend on a multitude of factors that are site and situation specific. Waste reduction, reuse, composting, energy from waste and even landfilling may be preferred to recycling depending on the circumstance.

In my opinion, the Blue Box transition plan is a new coat of paint on a dated strategy – while it does move the province towards a 100% producer responsibility model, it is premised on a prescriptive “recycling first” approach. It is time for the province to start thinking “outside of the Blue Box” and identify new end of life strategies to help Ontario achieve its sustainability goals in the long run.

________________________

About the Author

Calvin Lakhan, Ph.D, is currently co-investigator of the “Waste Wiki” project at York University (with Dr. Mark Winfield), a research project devoted to advancing understanding of waste management research and policy in Canada. He holds a Ph.D from the University of Waterloo/Wilfrid Laurier University joint Geography program, and degrees in economics (BA) and environmental economics (MEs) from York University. His research interests and expertise center around evaluating the efficacy of municipal recycling initiatives and identifying determinants of consumer recycling behavior.