March 2012 Volume 25, Number 2 The Abell Report What we think about, and what we’d like you to think about

Published as a community service by The Abell Foundation Uncapping the Pros and Cons of a Bottle Deposit Program Will a beverage-container deposit program reduce litter in Maryland? And at what cost? An examination of this issue—along with potential impacts on recycling rates, employment, beverage sales, and greenhouse gas emissions.

By the University of Maryland The Effect on Litter Reduction ABELL SALUTES: Environmental Finance Center, in Litter is a universal problem with partnership with the Center for negative impacts that reach far “Year-Up”: Teaching IT Integrative Environmental Research beyond the community of origin. It and ECONorthwest not only decreases the aesthetic appeal skills, opening doors, of communities, which depresses everage-container deposit pro - changing lives. business and local property values, grams currently exist in 10 but litter also travels via wind and Gary Barnes Sutton, an 18-year Bstates across the country and water to pollute critical waterways old African American and 2009 grad - are under consideration in several and ecosystems. Traditional stormwa - uate of Mergenthaler (high school) others. These programs add a refund - ter systems, which tend to result in was hustling pizzas at $3.00 an hour able deposit (generally 5 or 10 cents) high-velocity flows of rainwater, exac - plus tips and making maybe $15,000 to the purchase price of a beverage erbate the problem. As a result, local a year in the culture of the working container. When the consumer and state governments and communi - poor, when he connected with a pro - returns the beverage container for ties across the country continue to gram called Year Up; some 14 recycling, the deposit is returned. The invest in surveys, cleanups, and litter- months later he is making $15.00 an unique nature of disposable beverage reducing technologies in an attempt hour and $30,000 a year as an infor - containers provides the opportunity to reduce these negative impacts. mation technician working in the to use a market-based system to Litter also adversely affects white-collar corporate world (T. incentivize the proper handling and tourism, and it degrades the ecology Rowe Price, Domino Sugar, Morgan disposal of these items. of land and water systems. But litter is Stanley), with prospects of rising However, deposit programs costly to clean up. A 2009 Keep income and the wholly different life remain highly debated, with strong America Beautiful report estimated that accompanies. For Gary and hun - supporters and detractors. The goal of that the U.S. spends nearly $10.8 bil - dreds of other young men and the University of Maryland Environ - lion annually on litter cleanup and women struggling in an unforgiving mental Finance Center (EFC) project prevention alone, with state and local workplace where jobs of any kind are team is to provide an objective analy - governments picking up 11.5 percent hard to come by, Year Up is transfor - sis that informs the decision-making of the cost, or about $1.3 billion. mative--changing young people’s process within the state of Maryland Businesses reportedly pay the brunt of workplace skills, income, lifestyle and as it considers legislation in the litter cleanup—$9.1 billion, or about aspirations. Of his Year-Up experi - future. This executive summary sum - 80 percent of the total cost. 1 The ence, Gary says in wonderment, marizes the team’s key findings associ - City of Baltimore spends approxi - “What an eye opener!” ated with extended research. A copy mately $10 million per year on litter Year Up is a nonprofit organiza - of the full report is available from The cleanup, including litter pickup in continued on page 12 Abell Foundation at www.abell.org. business districts ($2.3 million) and continued from page 1 Estimated Lower Estimated Upper Total Material Source/Location Bound (9% Beverage Bound (24% Collected mechanical street sweeping ($3.8 mil - Containers) Beverage Containers) lion). 2 These services are critical to Maryland SHA (2010) 7 24,092 lbs of debris 2,168.2 lbs 5,782.1 lbs residents and businesses and to main - 11,162 units plastic 312.5 lbs (actual) Assateague Coast (2010) 8 taining a competitive hub for the 3,207 units glass 1,343.3 lbs (actual) 3 city’s $3 billion tourism industry. Baltimore Inner Harbor 16 tons of debris 2,880 lbs 7,680 lbs Although many attempts have (2006-2007) 9

been made to quantify the beverage- Baltimore Community 144 tons of debris 25,920 lbs 69,120 lbs container component of litter, esti - Cleanup (2011) 10 mates vary widely because the vari - Anacostia Bandalong Trap 6,000 lbs annually 540 lbs 1,440 lbs ability in methodology makes it diffi - (2010) 11 cult to ascertain a precise percentage. Potomac Spring Cleanup 228 tons of debris 41,040 lbs 109,440 lbs This report cites data from numerous (2011) 12 studies that indicate beverage contain - Patapsco Cleanup (2007) 13 71,272 lbs of debris 6,415 lbs 17,105 lbs ers make up between 4.4 percent and 21 percent of the litter stream Table 1: Litter collected at recent cleanup events in Maryland throughout the country. One of the most comprehensive bottles—and using a plastic PET bot - used, including Adopt-a-Highway surveys is from the Ocean Conservan - tle weight as a proxy, 6 we can calculate programs, paid litter pickup, compre - cy. In 2009, it reported that beverage how much of the total litter collected hensive litter-control programs, litter containers were among the top 10 of at recent cleanups can be attributed to fees or taxes, paid targeted advertising, marine debris collected, and were beverage containers alone. extended producer responsibility pro - recorded at more than 6,000 sites One of the most comprehensive grams, and, of course, beverage-con - around the world on a single day dur - and current data sets available for tainer deposit programs. ing the International Coastal Maryland comes from the 2011 In fact, a review of the available lit - Cleanup. In fact, 9 percent of the Potomac River Watershed Cleanup erature shows that beverage-container debris collected on that day were plas - sponsored by the Alice Ferguson deposit programs have proven to be tic beverage bottles (883,737 bottles), Foundation. The 23rd annual cleanup the most effective method for reduc - 4 percent were glass beverage bottles cleared 48.4 tons (193,600 individual ing litter. Beverage deposits, in (459,531 bottles), and 4 percent were containers) of recyclable aluminum, essence, create an incentive to dispose aluminum beverage cans (457,631 glass, and plastic bottles from the of a container properly instead of cans)—totaling 17 percent. 4 watershed at 613 sites located in leaving the container to pollute the Though data for Maryland are Maryland, Virginia, West Virginia, environment as trash. States that have fragmented and largely incomplete, a Pennsylvania, and the District of enacted deposit programs report sig - series of litter surveys and clean-ups Columbia. 14 This tonnage represents nificant reductions in beverage con - provides insight into the scope and about 21 percent of all waste collect - tainers in the litter stream. Hawaii, for composition of litter in the state. ed, marking the upper bound of the example, saw a 60 percent reduction Using the estimate suggested in pro - national range discussed above. in beverage containers as a percentage posed House Bill 839 5—that between So how can a state address this lit - of total litter between 2005 (the year 9 percent and 24 percent of Mary - ter problem? There are a number of the beverage deposit program was land’s litter (by weight) is made up of practices and programs that may be implemented) and 2008. 15 (This

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2 continued from page 2 State Beverage Container Litter Reduction Total Litter Reduction

trend reversed slightly in subsequent Iowa 76% 19 39% 20 years with 2010 data showing a 1.5 Maine 69-77% 21 34-64% 22 percent increase in beverage contain - Massachusetts N/A 30-35% 23 ers as a percentage of total litter.) 16 There is some literature that indicates Michigan 84% 24 41% 25 that other forms of litter are reduced New York 70-80% 26 30% 27 as a result of deposit programs as well Oregon 83% 28 47% 29 (see Table 2 below). 17 While this may be the case, the EFC’s research indi - Vermont 83% 30 35% 31 cates that litter-reduction benefits of Table 2: Litter reductions after implementation of a beverage-container deposit bill 32 deposit programs can only be quanti - fied to any degree of certainty with tively simple in concept, the revenue ated beverages sold in glass, plastic, or regard to beverage-container litter. flows and transaction costs associated aluminum containers typically with Table 2, below, shows self-reported with these programs can be complex. the exception of dairy products. 33,34 litter data to the U.S. Senate Com - Further, how these costs and revenue Figure 1, below, shows the flow of mittee on Environment and Public flows are accounted for will determine deposits (solid lines) and bottles (dot - Works in 2002 from seven states that the long-term sustainability of the ted lines) in a bottle-deposit program. have enacted bottle-deposit legisla - program and the responsibilities of First, consider a bottle that is pur - tion. These pre- and post-litter sur - each participant in the marketplace. chased and then redeemed. In most veys indicate a reduction in beverage- The deposit system: To encourage states, the process begins with the dis - container litter by a range of 69 per - proper disposal of beverage contain - tributor. The distributor ships bever - cent to 84 percent, with an overall lit - ers, a refundable deposit is placed on ages to retailers, and includes the ter reduction by 30 percent to 64 per - each container. In most cases, this is a deposit—5 cents, for example—in cent. 18 Although these data suggest a 5 cent charge, and although there is the price it charges the retailer. When correlation between deposit programs variation from one program to the a consumer buys the beverage, he or and overall litter reduction, this con - next, the fee is typically applied to a she is charged the retail price plus the clusion is based on studies conducted variety of carbonated and noncarbon - 5 cent deposit. The consumer takes between 1977 and 1987. To our knowledge no recent data have been collected to further substantiate this connection. In summary, the EFC’s findings indicate that litter is a significant and costly problem in the state of Mary - land, and that litter reduction would be a primary benefit of a beverage- container deposit program. Ultimate - ly, the impact on litter will be deter - mined by two factors: 1) the redemp - tion rate; and 2) the number of container types addressed by the deposit system.

General Mechanics of a Bottle Bill Though deposit programs are rela - Figure 1: The flow of deposits and containers in a typical deposit program

3 continued from page 3 ating the program. the 12 staff members to manage pro - Upfront costs: Upfront costs gram start-up activities would cost the empty bottle to a collection center include the capital costs to set up $3.6 million. 37 (oftentimes a retail establishment, but redemption centers, to purchase and Operating costs: As with almost not exclusively) to redeem the bottle install reverse vending machines, and any business enterprise, the primary and retrieve the 5 cent deposit. The to acquire all necessary equipment. costs associated with beverage-con - redemption center then ships the There are also upfront administrative tainer deposit programs are related to empty bottle to the distributor in costs, primarily associated with estab - program operation. For deposit pro - return for the 5 cent deposit. lishing the necessary capacity to run grams these costs tend to span three Now consider a bottle that is pur - the program. The extent to which areas: (1) the handling cost of collect - chased but not redeemed. In either these costs fall on the public or private ing and transporting redeemed bottles case, the distributor ships the bever - sector is dependent on the structure of to recycling centers, which have been age to the retailer and charges the 5 the program. reported to average 3.3 cents per con - cent deposit. The retailer sells the bev - tainer; 38 (2) processing costs, which erage to the consumer and charges the are the subsequent costs of recycling retail price plus the 5 cent deposit the materials; and (3) administrative amount. At this point, if the bottle is ▲ costs, which are the expenses associat - not redeemed, it either is thrown into ed with running the program, such as the trash and sent to a landfill (or administrative staff for bookkeeping incinerated), ends up as litter, or is Beverage container and information flow, enforcement recycled curbside. As a result, the dis - deposit programs have personnel to ensure compliance, and tributor now has an extra 5 cents, program staff to manage outreach, which he or she received when the proven to be the most education, and community engage - retailer was charged for the shipped effective method for ment efforts. beverage. The distributor either keeps reducing litter. According to a 2008 report, the the 5 cents, or in the case of most annual cost of operating 90 independ - existing programs, returns the ent, industry-run centers in Oregon unclaimed deposit to the state. ▼ was approximately $156,000 per site, Program costs: Even with an with an additional $27,000 in admin - effective redemption process, the istrative costs. 39 In the proposed deposit program is not without cost. Rhode Island program, annual oper - There is a transaction every time a Under the structure proposed in ating costs for each redemption center beverage container or deposit changes Maryland in 2007, Prince George’s were estimated at $165,000. 40 hands, and each of these transactions County reported that construction Montgomery County, in response comes with its own cost. The com - and operation of a redemption facili - to Maryland’s 2007 proposed legisla - bined average cost for retailers, ty at the Brown Station Road Landfill tion, suggested that it would cost an redemption centers, and recyclers is was approximately $5,000, with an estimated $300,000 for the county to an additional 4.1 cents, 35 which must additional $25,000 to staff it. 36 hire a contractor to facilitate redemp - be passed to the consumer; supported While these costs seem relatively low, tion-center processes. In addition, the through government revenue and/or extrapolating this to other local gov - county anticipated hiring fiscal assis - sales of scrap materials; or internal - ernments assumes appropriate facili - tants to handle reimbursements to ized by manufacturers, retailers, or ties exist to either add on to or repur - customers, which would cost approxi - distributors. Regardless of how the pose. By comparison, when consider - mately $150,000. 41 program is structured, there are also ing a deposit program of its own, Program revenue: Because of the upfront costs associated with estab - Rhode Island estimated that to lease popularity of bottled beverages in the lishing bottle-deposit programs, as the space for 50 centers, make any U.S., hundreds of millions of dollars well as the long-term expense of oper - necessary renovations, and employ flow through deposit programs every

4 continued from page 4 sumer’s deposit. RVM systems have higher unclaimed deposit revenue. lower operating costs than staffed, In most cases, these unclaimed year. Accounting for this revenue, and manual redemption centers; provide funds that revert to the state are structuring programs to ensure that the opportunity to reduce fraud added to the general fund or are used surplus revenue is invested appropri - through state-specific barcoding; treat to cover programmatic expenses. ately, is essential for maintaining sus - containers more gently, resulting in a Michigan, for example, diverts 75 tainable systems. higher-quality scrap end-product; and percent of unclaimed deposits to a Deposit revenue: The primary can relieve some of the burden that Cleanup and Redevelopment Fund, source of revenue in a beverage-con - falls on retailers and distributors. Per - which is spent on state environmental tainer deposit program is the deposit haps most importantly, RVMs are programs. Funds totaled $17.5 mil - itself, which in theory is enough of an highly convenient, making the lion in 2001, and more than $12 mil - incentive for every consumer to redemption process simpler. lion in 2010. 42 Having a specific return the empty bottle to a redemp - Revenue from unredeemed con - funding mechanism in place has tion center. In reality, however, large tainers can reach the tens of millions enabled the state to not only define portions of containers are never of dollars, ranging from $1.2 million how these dollars will be spent, but to redeemed. They either end up in in Maine to approximately $200 mil - also establish a nexus between what landfills, as litter, or finding an alter - lion in California. Obviously, the lev - activities these funds are collected nate route to a recycling center. In el of unredeemed deposits is directly from and the purpose they serve these cases, the unredeemed deposits associated with the number of bever - when reinvested in the community. become a source of revenue for ages purchased in the state; therefore, Although on the surface beverage- the community. large states like California will have container deposit programs seem to Redemption rates and unclaimed higher revenue levels. As stated previ - operate as revenue-generating tools, revenue: Across the 10 states with ously, this revenue is impacted by the there are a host of handling, admin - existing programs, the average redemption rate itself. Therefore, istrative, and programmatic costs at redemption rate is 76 percent, with a states that provide less incentive for play, as well as market forces, that low of 60 percent in Connecticut and container return and have lower often tip the balance sheets in the a high of 97 percent in Michigan. Not deposit levels will likely experience other direction. Closing a budget gap surprisingly, there is a strong correla - lower redemption rates and have should not be the driver for institut - tion between the value of the deposit Unclaimed Deposit and the redemption rate. Michigan State Deposit Amount Redemption Rate Revenue has the highest deposit at 10 cents, which results in its high redemption California 1 5 cents 84% $200 million rate. In the six months that followed Connecticut 5 cents 70% $23 million California’s 2007 increase of its refund Hawaii 2 (2009) 5 cents 79% $21.5 million values—5 cents for containers under 24 oz and 10 cents for containers over Iowa 5 cents 86% $23 million 24 oz—the redemption rate increased Massachusetts 5 cents 71% $39.2 million

6 percent from the same time period Maine 3 5 cents 90% $1.2 million in the previous year. Redemption rates are also impact - Michigan 10 cents 97% $12 million ed by the convenience of return New York 5 cents 67% $120 million processes and facilities, as well as the Oregon 4 5 cents 75% $16 million types of materials collected. Some redemption processes rely heavily on Vermont 5 5 cents 85% $2 million reverse vending machines (RVM), 1. 10 cents for bottles over 24 oz. 2. Plus 1 cent to 1.5 cents nonrefundable fee. 3. 15 cents for some wine bottles. automated devices that collect used 4. Reverts to distributors; Oregon Department of Environmental Quality estimate. 5. 15 cents for some liquor bottles. beverage containers and return a con - Table 3: Unclaimed deposit revenue in existing deposit program states

5 continued from page 5 still struggling to recover. However, more heavily than the litter-reduction collection and processing costs have benefit discussed above. ing such a program, nor should it be stayed relatively stable. As a result, the sole financing mechanism to sup - local governments are often required Recycling Rates and Local Recy - port the program. As redemption to subsidize curbside collection pro - cling Programs rates improve, unredeemed deposits grams through other revenue sources. States that have implemented shrink leaving a state with an Revenue generated by handling deposit programs have experienced expanded program and fewer funds fees: Several existing container deposit improved recycling rates, which bene - to run it. This is the paradox of rev - programs generate an additional fit both society as a whole and local enue generation. source of revenue to cover handling communities specifically. Currently, Revenue from the sale of scrap costs through a nonrefundable han - there are four ways that waste in materials: In the long term, the foun - dling fee. These fees, which generally Maryland is managed at permitted dation of sustainable, self-supporting range from 1 to 3 cents, are primarily solid-waste acceptance facilities. In beverage-container deposit programs assessed on beverages and help cover 2009, the Maryland Department of is the recycling process and the sale of the cost of handling the containers. 45 the Environment (MDE) collected scrap materials. Without the possibil - the following data: 46 ity of recycling, collected containers • Exportation: Collected refuse can ▲ would be disposed of in landfills—not be transported out of state for a desirable outcome. 43 Further, the recycling processing or landfill - price that recyclers can earn for scrap States that have ing—35.9 percent. 47 materials is directly associated with • Landfilling: Collected refuse can the price of virgin materials. As the enacted deposit be landfilled in one of Maryland’s price of virgin materials rises, the programs report 24 landfill facilities—27.2 percent. price that a recycler can earn also ris - • Incineration: Collected refuse can es. When the price for scrap materials significant reductions be incinerated at one of Mary - is sufficiently high, the revenue from in beverage land’s five incinerator landfill sites sales is sufficient to cover handling, (three are medical waste-specific, administrative, and transaction costs containers in the two are for municipal solid associated with running the deposit litter stream. waste)—17.3 percent. programs. When scrap values decline, • Recycle/Reuse: Collected recy - revenues decrease, therefore requiring ▼ clables can be sorted, bundled, and the establishment of handling fees. sold on the open recycling market The global recession that began in at one of Maryland’s recycling 2008 had a significant depressive facilities—19.6 percent. 48 effect on commodities’ prices, which Other Benefits and Drawbacks resulted in the collapse in the value of The EFC team also assessed other In addition to the environmental, recycled scrap materials. Prices for effects typically cited as support for or financial, and public-health impacts recycled commodities such as card - in opposition to beverage-container of landfill and incineration facilities, board, newsprint, paper, and film deposit programs. These include according to the MDE, the state will plastic dropped dramatically. And the impacts on recycling rates and local meet total landfill capacity in 34 years export market, principally China, recycling programs, jobs, beverage if waste continues at its current rate. 49 essentially closed in terms of buying sales, and greenhouse gas emissions. So although increasing the percentage certain commodities. 44 As states like The team also considered what is of waste shipped out of state could Maryland are pushing to expand called “the paradox of revenue genera - prove to be more economical, bottle- waste-diversion programs through the tion” through unclaimed deposits. deposit legislation may also be a way use of policies like deposit programs, Though many warrant further explo - to extend the life of current landfills. the price for recycled scrap materials is ration, none of these issues weighs A related issue worth mentioning

6 continued from page 6 Washington state (with funding from that beverage-container deposit pro - the City of Tacoma Environmental grams have any significant impact on is the impact of bottle-deposit pro - Services Division) also indicated job creation and the economy, and grams on local recycling efforts. savings to local governments in terms thus, job creation is not a sound Specifically, local recycling programs of reduced litter and waste- rationale for passing bottle-deposit may see a reduction in the number of collection costs. 53 legislation. In fact, the most efficient beverage containers collected curb - Reductions in collection and dis - programs employ technologies such as side. And because aluminum, in par - posal costs, however, do not address reverse vending machines, which ulti - ticular, represents one of the more the fluctuating value of recycled scrap mately reduce the labor needed to valuable scrap materials, local recy - materials. 54 Although a deposit pro - administer the program. That said, cling systems could see a reduction in gram could be expected to improve research does show that the recycling revenue. Therefore, though recycling litter-control efforts and recycling industry may experience significant rates and efficiencies will almost cer - rates, it is likely to come with a cost job growth in the future. Therefore, in tainly improve statewide, there is borne by local governments to operate so far as deposit programs contribute uncertainty as to whether this waste-management systems. Some to the expansion of recycling pro - improvement will come at a cost to current and proposed programs grams, they may have a positive local programs. impact on the economy in the future. Both the Maryland Association of ▲ According to the nonprofit organ - Counties and the Maryland Munici - ization Waste to Wealth, on a per-ton pal League have expressed their con - basis, sorting and processing recy - cern that a beverage-deposit program Because of the clables alone sustains 10 times more would pull the most valuable part of popularity of bottled jobs than landfilling or incineration. the recycling stream—aluminum— In addition, making new products out of local programs, and that the beverages in the U.S., from recycled scrap materials offers resulting loss of scrap value would hundreds of millions the largest economic pay-off in the force municipalities to subsidize recy - of dollars flow recycling loop. New recycling-based cling even more than they already do, manufacturers employ even more meaning an additional burden to the through deposit people and at higher wages than does local taxpayer served by curbside programs every year. sorting recyclables. Some recycling- and/or drop-off services. 50 Mont - based paper mills and plastic-product gomery County, for example, has manufacturers, for instance, employ indicated that the resale of recyclable ▼ on a per-ton basis 60 times more materials processed at the county’s workers than do landfills. 55,56 recycling center generated more than $3.3 million in revenue for the coun - attempt to address this. California Beverage Sales ty in 2006. 51 and Hawaii both use a portion of A major concern often expressed Massachusetts municipalities had unredeemed deposits to support local- in the debate over beverage-container similar concerns, but a survey con - level recycling programs, and in Min - deposit programs is whether these ducted by the state found reduced nesota, the proposed legislation rec - programs cause an increase in the collection costs to municipalities ommends that 90 percent of price of the included beverages. Earli - across the state totaled $1 million, unclaimed deposits go to a state envi - er this year, in response to Real Recy - primarily due to the removal of low- ronmental fund while the remaining cling Massachusetts’ claim that an value glass and plastics from the 10 percent be set aside to help support “expanded bottle bill would cost con - municipal recycling stream. Now county-level recycling programs. sumers almost $120 million per year nearly 200 cities and towns in the at a grocery store,” 57 the Massachu - state support expansion of the pro - Jobs setts Department of Environmental gram. 52 Another study conducted in There is little evidence to suggest Protection conducted a survey exam -

7 continued from page 7 The average handling cost in the 10 deposit programs negatively impacts states with deposit programs is 3.3 beverage sales, especially if the pro - ining beverage pricing, consumer cents per container. Keeping costs gram applies to multiple container choice, and redemption system per - low, however, must be balanced with and beverage types. formance in Massachusetts and the need to provide consumers with neighboring states. Its findings convenient access to redemption cen - Greenhouse Gases (GHG) showed no discernible difference in ters and opportunities. Maryland has made reducing price between beverages in deposit greenhouse gas emissions a critical states versus non-deposit states. The environmental priority. To that end, survey also found that there was no ▲ beverage-container deposit programs difference in consumer choice, are looked to as a possible integral demonstrating that despite the fact component of the state’s GHG reduc - that water drinks are included in the [Massachusetts tion strategy. Though there are some Maine program, product diversity Department of reductions in GHG emissions associ - still exceeded that of Massachusetts ated with deposit programs, for where these beverages are not includ - Environmental Maryland, they are relatively modest ed in the program. 58 Protection survey] and will almost certainly not be a Further, a University of Florida major contributor to the state’s GHG study by the Economic Analysis Pro - findings showed no program. That said, there are genuine gram found that the impact of a discernible difference GHG benefits associated with the deposit program on beverage con - in price between increased collection of beverage con - sumption is essentially zero. The tainers and potential for expanded study maintains that such a deposit is beverages in use of recycling scrap materials. low relative to the price of the bever - deposit states vs. Therefore, as the market for scrap age, and that consumers cannot easily materials increases in the future, the avoid a price increase by substituting non-deposit states. GHG impact of deposit programs one beverage for another, particularly will increase. when the majority of beverage con - ▼ tainers are covered under the deposit The Paradox of Revenue Generation program. 59 A California study also One of the more popular selling found no evidence of a decline in the points of deposit programs is the cre - sale of noncarbonated beverages after With the exception of Oregon, ation of revenue through unclaimed those drinks were added to the state’s which simply does not allow han - deposits. Deposit programs create deposit program in 2000. 60 dling costs, states have employed two market incentives that encourage the Handling costs appear to be one basic approaches to these costs: 1) appropriate disposal of empty bever - of the most contentious issues associ - cover them with unclaimed deposit age containers. When the deposit rate ated with beverage-deposit programs. revenue; or 2) assess a nonrefundable is set high enough (around 10 cents They are associated with collecting fee on each beverage sold. There are per container), redemption rates containers that are redeemed by con - administrative costs and barriers asso - increase to around 90 percent. This sumers, and these costs are the most ciated with each approach, and each means that the program is achieving significant of all the costs associated can be implemented in a variety of its primary goal of maximizing litter- with running a deposit program. ways thereby impacting different reduction rates. However, the lower Even the most effective and efficient stakeholder interests. Regardless of the deposit charged, the lower the systems incur operational costs, and how these costs are addressed, redemption rates—and thus, lower the ability to control handling costs, because the demand for beverages is reductions in litter and higher in particular, will impact the long- relatively inelastic, there is little evi - unclaimed deposit revenue. term sustainability of the program. dence that the costs associated with A deposit rate of 5 cents per bot -

8 continued from page 8 rate should be set at a level that maxi - grams are efficient and cost-effective. mizes this benefit. Empirical and sta - Programs that rely on reverse vending tle—the most common deposit tistical evidence suggest that a deposit machines rather than labor-intensive amount among existing deposit pro - level of 10 cents per container will redemption centers are more cost- grams—results in redemption rates of lead to redemption rates greater than effective (as measured by costs per around 75 percent. As a result, there 90 percent, thereby achieving the redeemed beverage container), have is a significant amount of revenue highest litter-reduction rates. Reduc - lower incidences of fraud, and pro - that goes unclaimed. This revenue is tions in GHG emissions can also be duce a higher-quality, more readily often used to address program costs expected to rise in parallel to redemp - used scrap end-product because the including handling fees and other lit - tion rates. machines tend to be gentler than ter-reduction and recycling programs. Do not rely on unclaimed deposit manual or curbside collection. In some cases, the revenue is used to revenue to support unrelated pro - Establish clear program goals and support other unrelated social and grams. States that rely on unclaimed requirements from the beginning. As environmental programs. This, of deposit revenue run the risk of reduc - with any other regulated environ - course, creates tension among com - ing the impact of deposit programs on ment, lack of clarity from the public peting community priorities. For litter-reduction rates or jeopardizing sector creates transaction costs within those that view the role of deposit programs that are supported by an industry sector, and will almost programs as a tool to reduce litter, deposit-program revenue. If Mary - certainly lead to program inefficien - unclaimed deposits can result in low - land implements a deposit program, it cies. Therefore, the state should clear - er litter-reduction rates (though it is should limit the use of unclaimed ly spell out responsibilities for collect - likely that many of the containers deposit revenue to covering container ing deposits, establish redemption that go unclaimed do not end up as handling and administrative costs, centers, define penalties for fraud, and litter). For those who are relying on supporting complementary litter- create program exemptions. In addi - unclaimed deposits to fund other reduction programs, and/or support - tion, the responsibility for administer - programs, more success in litter ing local recycling programs. It is ing the program should reside within reduction means less revenue. As a strongly recommend that the state not the agency with the greatest capacity result, these two motivations for use the revenue to support unrelated to reduce these transaction costs. In implementing beverage-deposit pro - funding needs. the state of Maryland, that would grams—litter reduction and revenue Implement the deposit on multi - most likely be the MDE. generation—are at odds. In other ple beverage types. The long-term Use the marketplace to reduce words, a community cannot reason - effectiveness of beverage-deposit pro - handling and administrative costs. If ably expect to maximize both litter grams at reducing litter rates relies on Maryland implements a deposit pro - reduction and revenue generation applying the deposit to as many dif - gram, the industry—either bottlers with a deposit program. ferent container types as possible. and distributors, or retailers—should Maryland should be as comprehen - absorb all handling and administra - Recommendations sive as possible regarding which bev - tive costs in lieu of a nonrefundable Should Maryland choose to move erage containers are included in a handling fee. Beverage-container in the direction of a deposit program, deposit program. deposit programs are by definition there are a number of characteristics Mandate convenience and effi - market-based tools designed to incen - and lessons learned from other states ciency into the system. The more tivize litter reduction and improve that would likely improve the convenient the system, the more like - recycling rates, correcting an existing potential for an efficient and effec - ly consumers will be to return bottles, failure in the beverage market to tive program. which in turn increases litter-reduc - properly account for the costs associ - Establish the most effective tion rates. Therefore, it is essential ated with litter and the improper dis - deposit rate. Given that the litter- that programs are designed and legis - posal of beverage containers. And as a reduction benefits of deposit pro - lated with convenience in mind. That market-based tool, deposit programs grams outweigh all others, the deposit said, it is also important that the pro - are extremely efficient and effective at

9 continued from page 9 are highly effective in this regard. It is Endnotes reasonable to assume that the same 1 MSW Consultants, “2009 National Visible achieving the desired community out - sort of market incentives would result Litter Survey and Litter Cost Study,” Keep come. By requiring the industry to America Beautiful, September 18, 2009, in the most efficient administration of www.kab.org/site/DocServer/Final_KAB_Rep absorb the costs of the program, the these programs. ort_9-18-09.pdf?docID=4561. costs are put into the marketplace, 2 2010 Annual Report: Baltimore City Office of Sustainability, www.baltimoresustainability.org/ incentivizing industry participants to Conclusion metrics/2010/Cleanliness-Goal-1.pdf. aggressively pursue reducing costs to The recommendations above are 3 Letter from “Visit Baltimore” Partners, May the greatest extent possible. based on an assessment of the success - 13, 2010, baltimore.org/media/happy-place/. Link unclaimed deposit revenue es and challenges of bottle-deposit 4 Trash Travels, International Coastal Cleanup, 2010 Report, act.oceanconservancy.org/ to program performance. In addition programs in a number of states. Ulti - images/2010ICCReportRelease_pressPho - to implementing a market approach mately, a review of the available litera - tos/2010_ICC_Report.pdf. to reducing costs, the state should 5 House Bill 839 was proposed by Delegate ture and discussions with managers in Peter Hammen, et al., during the 2007 session consider using the unclaimed deposit many of the bottle-deposit states led of the Maryland General Assembly. The bill revenue as an incentive to improve proposed the establishment of a container us to believe that a beverage-container deposit law that would collect a 5 cent (or program performance. Specifically, deposit program presents one way for more) deposit on specified beverage contain - the industry should be allowed to Maryland to attempt to address its lit - ers. The bill did not make it out of committee in the House, and no action was taken in the keep most, if not all, of the unclaimed ter-reduction goals. Ancillary benefits Senate. No similar bottle-deposit legislation deposit revenue if it meets particular has been proposed in Maryland since the ▲ 2007 session. A similar bill, “Recycling—Bars goals such as maintaining redemption and Restaurants—Beverage Containers,” was rates at a particular level. 61 In addi - proposed in 2010 and again introduced in Maryland in early 2011. More on this legisla - tion, the state should consider linking The impact of a tion, which was ultimately withdrawn, is the unclaimed deposit revenue to the available in Section 2 of the full report. 6 ultimate goal of the program: reduc - deposit program on A 16.9 oz PET bottle weighs 12.7 g. 7 “Maryland Thanks Pick Up America Volun - ing litter. The state should also inves - beverage consumption teers for Litter Removal and Education tigate using a “pay for success” type Efforts,” April 29, 2010, Maryland Depart - is essentially zero. ment of Transportation State Highway program that allows the industry to Administration, www.roads.maryland.gov/ keep unclaimed revenue if overall lit - pages/release.aspx?newsId=637. ter rates are significantly reduced. In ▼ 8 Ocean Conservancy, “Trash Travels: From Our Hands to The Sea, Around the Globe, addition to incentivizing the reduc - and Through Time,” International Coastal tion in program and handling costs, through increased recycling rates and Cleanup, 2010. 9 Waldron, Tom, “An Urban Trash Collage this would create a powerful market- decreased greenhouse gas emissions are Speaks Volumes,” Urbanite Baltimore, August based system for improving the envi - possible, though not guaranteed. As 1, 2007, www.urbanitebaltimore.com/balti - more/netscape-an-urban-trash-collage-speaks- ronment through reduced litter. discussed throughout this document, volumes/Content?oid=1247200. There is no question that there will deposit programs have distinct bene - 10 Vuoto, Loredana, “Mayor’s Spring Cleanup be industry opposition to the market fits and drawbacks that will require Generates Baltimore’s Green Pride,” Green - handsusa, May 5, 2011, approach recommended here. There careful consideration from the state to www.greenhandsusa.com/central/page:10346. is also no question that the industry is determine whether investing the 11 “Bandalong Litter Trap Case Study: Washing - ton, D.C.’s Anacostia River,” Stormwater Sys - best positioned to understand what resources and political capital to estab - tems, 2010, actions are necessary to reduce pro - lish a deposit program is worthwhile. www.dogriver.org/uploads/6/2/5/2/6252936/b gram costs and improve the effective - andalongcasestudy_anacostia.pdf. 12 “23rd Annual Potomac River Watershed ness of deposit programs. In fact, the Cleanup: 2011 Final Results,” Alice Ferguson very premise of beverage-container Funding for this report Foundation, 2011, potomaccleanup.org/trash_initiative/trash_cle deposit programs is that they use mar - was provided by The Abell anup.shtml. ket incentives to encourage appropri - Foundation and Waterfront 13 “2007 Stream Cleanup Stats,” The Patapsco ate disposal of beverage containers, Partnership of Baltimore. Valley Heritage Greenway, Inc., April 2007, www.google.com/url?sa=t&rct=j&q=patap - and by all accounts, these programs sco%20cleanup%2071%2C272&source=web

10 continued from page 10 for containers over 24 oz, and Maine and Ver - Report: 2010 (Calendar Year 2009 Data), mont’s 15 cent charge for some wine and/or Technical Services and Operations Program, &cd=3&ved=0CCwQFjAC&url=http%3A% liquor bottles. November 2010. 2F%2Fwww.patapscoheritagegreenway.org%2 34 It should be noted, however, that although a 5 48 These numbers are percentages of the Fenviron%2F2007%2520Cleanup%2520Sta - cent charge is more prevalent, a strong corre - 7,507,014 tons of waste accepted at Mary - tistics.xls&ei=CP7UToTJJ8X20gHvwJn2AQ lation has been shown to exist between the land’s permitted solid-waste facilities and then &usg=AFQjCNE4545eVT3wL1sR0qJ43jy5R value of the deposit and redemption rates. transported out of state, landfilled, incinerat - 2m7wA. Higher fees have been associated with higher ed, or recycled/reused in Maryland. 14 potomaccleanup.org/trash_initiative/ redemption rates, which can be expected to 49 Ibid. trash_ cleanup.shtml, last accessed November result in greater levels of litter reduction. 50 Personal communication with various mem - 30, 2011. 35 Container Recycling Institute, Letter to 15 bers of the Maryland Association of Counties Report to the 25th Legislature, State of Assembly Member DiNapoli, April 6, 2006, and the Maryland Municipal League legisla - Hawaii, 2009, prepared by: State of Hawaii, www.bottlebill.org/assets/pdfs/campaigns/new tive and government relations staff, November Department of Health, November 2008. york/2006-Rebuttals.pdf. 16, 17, and 21, 2011. 16 36 http://act.oceanconservancy.org/ Prince George’s County as cited in the 51 Montgomery County as cited in the Depart - images/2010ICCReportRelease_pressPho - Department of Legislative Services Fiscal and ment of Legislative Services Fiscal and Policy tos/2010_ICC_Report.pdf Policy Notes for HB 839 from the 2007 ses - Notes for HB 839 from the 2007 session, 17 www.bottlebill.org/about/mythfact.htm#src5 sion, mlis.state.md.us/2007RS/fnotes/ mlis.state.md.us/2007RS/fnotes/bil_0009/hb0 bil_0009/hb0839.pdf. 18 Full table was reported in the proceedings of 839.pdf. 37 the July 11, 2002 hearing before the Commit - DSM Environmental Services, Inc., Analysis 52 Personal communications with Greg Cooper, tee on Environment and Public Works of the of Beverage Container System Options to deputy division director at the Massachusetts U.S. Senate, www.access.gpo.gov/congress/ Increase Municipal Recycling in Rhode Island, Department of Environmental Protection, senate/pdf/107hrg/83716.pdf. prepared for Rhode Island Resource Recovery October 28, 2011. Operation, 2009. 19 Iowa Department of Transportation, Highway 53 38 Morris, Jeff, et al., Economic & Environmen - Division, Litter Survey, April 1980. Understanding Beverage Container Recycling, tal Benefits of a Deposit System for Beverage A Value Chain Assessment prepared for the 20 Ibid. Containers in the State of Washington, April Multi-Stakeholder Recovery Project,” Busi - 2005. 21 U.S. General Accounting Office, Report by nesses and Environmentalist Allied for Recy - the Comptroller General of the United States, cling, January 16, 2002, thecorr.org/Bear.pdf. 54 It should be noted that, while scrap prices hit State’s Experience With Beverage Container an historic low in 2008, they hit an historic 39 See full report: Container Recovery, Inc., Deposit Laws Shows Positive Benefits, high in 2010 for some materials. California’s 2008, “Appendix C: Presentation to the Ore - Beverage Container Recycling & Litter December 11, 1980, p. 9. gon Bottle Bill Task Force: The Industry 22 Reduction Program, Fact Sheet, CA Natural Ibid. Approach, May 13, 2008,” In Bottle Bill Task Resources Agency, Department of Resources, 23 Environmental Action Foundation, Bottle Force Final Report, October, p. 15. Recycling, & Recovery, Division of Recycling, Bills in the 1980’s: A Handbook for Effective 40 DSM Environmental Services, Inc., Analysis June 2011. Citizen Action, August 1987. of Beverage Container System Options to 55 www.ilsr.org/recycling/recyclingmeansbusi - 24 Michigan Department of Transportation, Increase Municipal Recycling in Rhode Island, ness.html, last accessed December 7, 2011. Maintenance Division, Michigan Roadside prepared for Rhode Island Resource Recovery 56 It should be noted that the organization’s web - Litter Composition Survey, Final Report, Operation, 2009. 41 site indicates that focusing on reusing materi - December 1979. Montgomery County as cited in the Depart - als generates even more jobs than recycling. 25 Ibid. ment of Legislative Services Fiscal and Policy Notes for HB 839 from the 2007 session, 57 www.realrecyclingmass.com 26 Final Report of the Temporary State Commis - mlis.state.md.us/2007RS/fnotes/bil_0009/hb0 58 www.mass.gov/dep/recycle/reduce/ sion on Returnable Beverage Containers, 839.pdf. bbsurv11.pdf March 27, 1985. 43 However, this is a more desirable outcome to 59 27 Dewey, Jim, et al., “Analysis of Florida Bever - Projection from Center for Management them becoming litter. age Container Deposit Refund System,” Analysis, School of Business and Public 44 March 15, 2011, Economic Analysis Program, Administration of Long Island University, Crittenden, Guy, “Market for recycled materi - als collapsing,” Solid Waste and Recycling, Bureau of Economic and Business Research, New York State Returnable Container Act: A University of Florida. Preliminary Study, 1984. November 11, 2008, www.solidwastemag.com/ 60 28 news/market-for-recycled-materials-collaps - Berck, P. and G. Goldman, 2003, California Oregon Department of Environmental Quality, ing/1000086432/?issue=11022008, last Beverage Container Recycling & Litter Oregon’s Bottle Bill: The 1982 Report, p. 26. accessed on December 8, 2011. Reduction Study: A Report to the California 29 Ibid. 45 www.bottlebill.org/about/whatis.htm State Legislature, DRRR-2011-025, Universi - 30 U.S. General Accounting Office, Report to ty of California at Berkeley, http://www.calre - 46 Maryland Department of the Environment, the Congress by the Comptroller General of cycle.ca.gov/Publications/default.asp?pubid=1 “Maryland Solid Waste Management and the United States, Potential Effects of a 389, p. 3. Diversion Report: 2010 (Calendar Year 2009 National Mandatory Deposit on Beverage 61 We recognize that there will be pressure to use Data), Technical Services and Operations Pro - Containers, December 7, 1977, p. 54. these monies to support other programs, gram, November 2010, http://www.mde.state. 31 Ibid. including local recycling programs. The deci - md.us/ xprograms/Land/SolidWaste/Permit - sion to address these needs will be political in 32 Full table was reported in the proceedings of tedFacilities/Documents/%2710%20mswm - nature, and therefore outside the scope of this the July 11, 2002 hearing before the Commit - dr.pdf. report. However, if it is necessary to subsidize tee on Environment and Public Works of the 47 In addition to exporting waste, the Maryland other programs, we suggest that the amount U.S. Senate, www.access.gpo.gov/congress/ Department of the Environment states that of revenue that stays with industry be high senate/pdf/107hrg/83716.pdf. 206,698 tons were imported in 2009. Mary - enough to act as an effective incentive to 33 Exceptions to the 5 cent fee level include land Department of the Environment, “Mary - achieve program goals. Michigan’s 10 cent fee, California’s 10 cent fee land Solid Waste Management and Diversion

11 ABELL SALUTES uation, earning a starting wage of their peers at CCBC in their courses: continued from page 1 $15.50 an hour; several are now earn - 77 percent of Year Up students passed ing $18 an hour. Introduction to Computers, com - tion that provides low-income high In August, 2010, with a $115,000 pared to 64 percent of CCBC stu - school graduates and GED recipients, grant from The Abell Foundation, dents; and 100 percent of Year Up ages 18 to 24, with a year of informa - Year Up opened an office in Baltimore students passed English 101 com - tion technology (IT) training, leading at 201 N. Charles St. Through a part - pared to 65 percent of CCBC stu - to technical careers with starting nership with the Community College dents. Eight Year Up students com - salaries of $30,000 or higher. During of Baltimore County, Year Up dual- pleted an online developmental edu - the first six months of the program, enrolled 24 low-income students in cation class (ENG 052) at the same participants are paid weekly stipends time they completed English 101, and attend classes focusing on IT enabling them to earn college credit. Help Desk and Desktop Support. Students complete their six-month During the second six months of the ▲ internships with local companies and program, students are placed in paid organizations, including The Johns apprenticeships with local partner Hopkins Hospital, Constellation companies to gain work experience in 80 percent of Energy, the Mayor’s Office of Infor - IT. In 2006, Year Up opened an graduates are mation Technology, Motor Vehicle office in the Washington, DC, area Administration, T. Rowe Price, and (the office is located in Arlington, employed or enrolled Morgan Stanley. VA), which has served more than 500 in college within four Of the 24 students from Year Up’s young adults. The site is posting first Baltimore class, 15 (or 63 per - impressive outcomes: months of graduation, cent) graduated from the class, com - 80 percent of graduates are earning an average of pleting all coursework and the six- employed or enrolled in college with - month internship. in four months of graduation, earning $15.00 an hour, or Bryant Dooley is an instructor and an average wage of $15 an hour, or $30,000 a year. teaches at Year Up in Baltimore. He $30,000 a year; adds to the profile of Year’s Up’s mis - More than 85 percent of Year Up’s ▼ sion: “We not only teach the technical corporate partners continue to renew skills it take to work as an information their commitment to future classes; a technologist; Our students are mov - 91 percent of corporate partners ing from one world, where low wages express satisfaction with apprentices. inform the way of life, to the corpo - With $112,000 in funding from August, 2010, and 22 more in 2011. rate world—where what we call ‘soft The Abell Foundation, 31 Baltimore Of the 46 students, 24 had prior col - skills’ count. How to meet people. City residents traveled to Year Up lege experience and 42 reside in Balti - Vocabulary. Bearing. How to plan and Washington, DC, to complete the six more City. All of the students are organize. Year Up doesn’t just teach a months of classroom work. They low-income (or come from house - marketable skill, it opens doors and completed their internships with Bal - holds earning less than $40,000 a teaches students how to move timore employers, including Johns year) and more than 80 percent are through them, and take their place on Hopkins Medicine, T. Rowe Price, African-American or Latino. the right side of it.” and Morgan Stanley. A total of 18 of Students attend classes in the Abell Foundation Salutes Year-Up the 31 students (or 58 percent) grad - morning at Year Up and are trans - for teaching students not just a skill to uated from the program. Of the stu - ported to take additional courses at work in the computer world, but one dents who graduated, 15 (or 83 per - CCBC in the afternoon, earning 13 that leads the student from one world cent) were employed and/or enrolled college credits for this coursework. to another. in college within four months of grad - The Year Up students have surpassed

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