Wittbecker: Logic comes to solid waste and recycling economics

The impetus behind this drastic increase appears to be driven by a desire to stop the importation of radioactive waste from other states.

There’s an old adage that says” never let a good crisis go to waste” (no pun intended). This seems to be an example of long-overdue law driven by a problem with toxic waste. But we need to address our structural problem with the pricing of solid waste and why we struggle with recycling.

Solid waste is one of the few utilities that is largely not priced according to use at the consumer level. We pay for our electricity, natural gas and water/sewer based upon how much of these utilities we consume.

In most parts of the US, solid waste pricing is buried in real estate taxes or rental rates and most consumers have no clue what it costs them. Solid waste in most cases is priced at a flat rate and is not volume sensitive. There is no incentive to reduce solid waste, and this is one reason our recycling rates are so low.

The principal reason for this structure is that tipping fees have been cheap. It has historically been cheap to dig holes in the ground and allow solid waste haulers to fill them. It has also been highly profitable for this system to be perpetuated. If you look at the earnings for companies like Waste Management, their solid waste hauling and disposal income is the vast majority of their revenue and profits, in contrast to their recycling revenue and profits.

Michigan’s legislation has been targeted at stopping imported radioactive waste by applying the higher tipping fee to all waste. Some in the state have already objected, saying it should be narrowly confined to only the radioactive waste and not residential household waste. That change would miss an opportunity to structurally change the problem with solid waste diversion.

People don’t recycle because of several factors. One, there has been no disincentive to stop throwing recyclables into solid waste stream. Two, recycling has not been convenient due to a lack of investment.

Michigan’s attempt to raise solid waste tipping fees nearly by 14x could change this.

Raising tipping fees to waste haulers would force residential collection fees to be raised. That would come in the form of taxes or fees charges to consumers. It could take the form of a flat rate increase or new price structures that charge consumers based on the volume of solid waste they generate and dispose of. That would begin to incentivize consumers to recycle more.

Hand in hand with that change in mindset would be a required investment in more recycling infrastructure. Many communities offer parallel curbside recycling that is underused. However, more curbside is needed, particularly in multi-family environments. Increased tipping fees may provide the capital to make these investments to drive recycling.

It may also incentivize “waste haulers” to focus more on “recycling hauling” as they seek to avoid getting clipped by these new, higher tipping fees.

These increases in Michigan tipping fees are to be applauded if they pass. It is long overdue for solid waste to be treated like every other utility. Usage should drive cost.

When consumers understand their actual cost of anything, they make better choices. The right choice here is to divert recyclables from solid waste.

Editor’s note

_{This is an opinion column. The views in this article do not necessarily reflect those of SMU. We welcome you to share your thoughts as well at info@steelmarketupdate.com.}