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Chapter 1 – Current Events | |The costs and benefits of recycling

The most dramatic events of mid-2009 are, of course, those connected with the global financial crisis and its disastrous effects on output and unemployment throughout the world. These events lie in the realm of macroeconomics and are covered in the ‘current event’ entries for Chapter 10 through to 15. In this entry we look at the economics of recycling which provide an excellent topical illustration of an important economic principle – the relative size of marginal costs and benefits.
Several States are considering extending the present range of recycling opportunities for households and the Productivity Commission has recently published a lengthy report on the issue. Here, using the analysis introduced in Chapter 1, we look at two aspects. First whether kerbside recycling is worth the effort, and second at the operation of container deposit legislation.
About 90% of Australian households have access to kerbside recycling collections. They can place their waste in one of two bins. One bin is for general waste, the other for recyclables – typically aluminium cans, glass bottles and containers, paper and cardboard. Many of us make use of the separate bins and some take the task very seriously by, for example, rinsing out bottles before placing them in the recycle bin. Once the material in recycling bins has been collected local authorities incur costs in sorting the material and passing it on to firms who turn it back into useful products – glass, paper and so on. Is all this effort on the part of households, local authorities and recycling manufacturers worthwhile?
In Chapter 1, you learned that the answer to this question involves weighing up the marginal costs and benefits of recycling. If the marginal benefits exceed the marginal costs then we should recycle, and vice versa.
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