BEYOND 75% RECYCLING: TOWARD ZERO WASTE in CALIFORNIA White Paper

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FUTURE 500 WHITE PAPER

BEYOND 75% RECYCLING:

TOWARD ZERO WASTE IN CALIFORNIA

White Paper

June 2013

William K. Shireman

Danna Pfahl

Alok Disa

Future 500

Future 500 is fully responsible for content

Disclaimer: The statements and conclusions of this report are solely those of Future 500

TABLE OF CONTENTS

Acknowledgements 1 Introduction: Why the Study? 2 Table 1 – Sorted PET 3 Table 2 – Sorted HDPF 3 Table 3 – Sorted Mixed Plastics 3 Table 4 – Mixed Container Sort 3 Table 5 – Performance Testing Series 1 4 Table 6 – Performance Testing Series 2 4

SUMMARY OF FINDINGS, METHODOLOGY, AND SCOPE 5 OF THE BIOPLASTICS PROJECT

Summary of Findings 5 Summary of Technical Findings 5 Scope 5 Methodology 6 Sorting Trash 6 Stakeholder Engagement 6 Main Findings 7 Technical Findings 7 Feedback from Stakeholder Forum 8 Progress Towards Study Goals 9 The New Challenge: 75% Recycling 12

THE IMPLICATIONS, PART 1: 13 TOWARD 75% RECYCLING

Ten Implications for California as the State Seeks 75% Recycling 13 75% Recycling vs. Zero Waste: The Larger Context 17 California and the EPR Movement 17 The Recycling Movement 18 The Anti-Throwaway Movement 22 The Pro-Sustainability Movement 23 How to Game the System to Stop Zero Waste 24

THE IMPLICATIONS, PART 2: 26 TOWARD ZERO WASTE

The Economic Transition 26 Table 7 - Evolution of Beverage Container Mix 27 Toward a Zero Waste California 28 Table 8 - Brewing Industry Centralization 28 Table 9 - The Energy Productivity Explosion 29 Source Reduction and Resource Productivity: A Political Non Sequitur 31 Why the Citizens Always Win, Industry Eventually Loses – Yet the Problem 34 Remains Recommendations 35 The Role for Producers and Packagers 35 Recommendations to Opponents of EPR 37 Local Policy Options 37 State Policy Options 38 How to Engage, and Find Common Ground 40 Closing Introduction 41

ACKNOWLEDGEMENTS

First, our thanks to CalRecycle, and particularly to Jim Hill, Recycling Specialist in the Materials Management and Local Assistance Division; to Greg Voelm and Erik Wohlgemuth, who directed the work; to Mike Centers and Pellenc, who engineered the equipment and carried out the sorts; to lead research consultant Richard Gertman and Clay Reigel of Cascadia Consulting, who analyzed the data; to the PET and PLA sectors, who showed acute interest in the study; and to all of the stakeholders, for their interest in the findings. The statements and conclusions of this report are solely those of Future 500.

INTRODUCTION: WHY THE STUDY?

This White Paper grew out of Future 500’s Bioplastics Project, which was funded by a grant from CalRecycle in 2009. The project was designed to develop and test a system using optical sorting technology to sort Polylactic Acid or Polyactide (PLA) beverage containers from mixed recyclables and plastics, primarily polyethylene (PET). When the project began, there was concern that PLA or other bioplastics would take a significant share of the PET bottle market – and that both PET and PLA would contaminate one another. This project was originally designed to test whether that cross-contamination was a problem, and whether optical sorting systems could address it. CalRecycle will publish a technical report discussing the data findings and key outcomes from that project. The technical report is one of the deliverables submitted by Future 500 to satisfy the terms of the grant agreement.

This White Paper, on the other hand, is intended to provide a high-level policy frame for policymakers, industry and other stakeholders as California embarks on its ambitious plans to sharply reduce its solid waste footprint. The analysis in this White Paper is solely the opinion of Future 500 and is neither funded nor endorsed by CalRecycle.

The need for such a perspective was demonstrated by an analysis of the project’s findings within the context of materials recovery figures from across the state. First, the results of the project demonstrated that PLA contamination of PET is, at worst, a minor and unusual problem. This is true first because PLA’s market share is very small, compared to that of PET. Even if PLA’s market penetration grows to the point where contamination is a significant issue, limited tests suggest the potential for 97% to 99.85% to be removed from mixed recyclables through a properly calibrated optical sorting system (see Table 6, below).

More importantly, the study revealed a larger challenge while also hinting at opportunities to solve it. The larger challenge is that the market has changed: a wide variety of materials are entering the waste stream; consumers expect and often demand that they be recycled; producers insist that governments and ratepayers should pay to do so. From a broader perspective, then, the chief value of this study is to examine the impacts of this change in California, and ways to respond to it through technology and policy.

Cascadia Consulting, under the leadership of Richard Gertman and Clay Reigel, analyzed the data and produced the technical report on findings. The remainder of this introduction (through page 11) summarizes their technical findings and conclusions from the grant project, as well as observations from a stakeholder forum convened in October 2012. In this White Paper, I will

review these findings, and offer a set of perspectives, based in part on this research, and in part on a broader look at California’s recycling system.

TABLE 1: SORTED PET TABLE 2: SORTED HDPE

Material Pounds % of total Material Pounds % of total <2 inches (Shaker <2 inches 151.5 2.4% 66 1.2% screen) (Shaker screen) Light Paper Light Paper 30.3 0.5% 16 0.3% (Vacuum system) (Vacuum system) PET 5,780.1 91.4% HDPE 5,131 89.9% Metal and PLA 42.0 0.7% Metal and PLA 26 0.5% Other Plastics 202.7 3.2% Other Plastics 414 7.3% 98.1%1 99.0%

TABLE 3: SORTED MIXED PLASTICS TABLE 4: MIXED CONTAINER SORT

Material Pounds % of total Material Pounds % of total <2 inches (Shaker <2 inches 53 2.0% 5961 44.3% screen) (Shaker screen) Light Paper Light Paper 18 0.7% 550 4.1% (Vacuum system) (Vacuum system) PET & HDPE 1,092 41.3% All plastics 669 5.0% Other Plastics 767 28.9% Metal and PLA 650 4.8% Metal and PLA 13 0.5% Paper 3276 24.4% Trash 653 24.7% Trash 2258 16.8% 98.0% 99.3%

1 Totals may not equal 100% due to rounding as well as yield loss in the sorting process.

TABLE 5: PERFORMANCE TESTING SERIES 1

Results – Seeded PLA Seeded First Second Run material Material Run (% of total quantity) PLA+PE PLA (+) 24.0% in PLA component T (+) PLA+PET Sample 1 PET (+) 10.0% in PET component Paper (+) component Other (-) 66.0% in Other component Other (-) PLA (+) 67.7% in PLA component PLA bottles Sample 2 PET (+) N/A 11.1% in PET component Other (-) 21.2% in Other component HDPE PLA (+) 65.0% in PLA component (+) “Other” Sample 3 PP (+) 18.0% in PET component PET (+) component Other (-) 16.0% in Other component Other (-)

TABLE 6: PERFORMANCE TESTING SERIES 2

Results – Seeded PLA Seeded First Run Second Run material Material (% of total quantity) PLA (+) Sample 4 N/A 97.5% in PLA component Other (-) PET (+) “Other” PLA (+) 87.7% in PLA component PLA bottles Sample 5 only Other (-) component Other (-) 8.6% in PET component PLA (+) 88.7% in PLA component Sample 6 PET (+) N/A 2.5% in PET component Other (-) 8.8% in Other component PLA (+) Sample 7 N/A 99.6% in PLA component PLA Other (-) PET (+) “Other” PLA (+) 87.6% in PLA component bottles, Sample 8 cups, and Other (-) component Other (-) 12.4% in PET component clamshells PLA (+) 92.5% in PLA component Sample 9 PET (+) N/A 0.9% in PET component Other (-) 6.6% in Other

SUMMARY OF FINDINGS, METHODOLOGY, AND SCOPE OF THE BIOPLASTICS PROJECT

SUMMARY OF FINDINGS

Summary of Technical Findings

• Optical sorters are capable of removing contaminants from loads of sorted PET, to increase the quality and recyclability of marketed PET. • Optical sorters are capable of separating PLA bottles only, or PLA bottles, cups, and clamshells from all other mixed materials recovered at a MRF. The ability to recover uncontaminated PLA will allow it to be recycled when appropriate facilities are in place. • The optical sorting system is capable of separating plastic resins from each other to produce higher-value marketable materials from mixed plastics inadequately sorted at the MRF. • Optical sorting is capable of adding value to sorted materials by removing contaminants from materials to be marketed. • The Pellenc optical sorting system is capable of recovering high value recyclable plastics (especially PET and HDPE) from the mixed plastics stream as currently sorted for sale by the MRFs, potentially offering an additional revenue stream for recovery facilities. • Several regional intermediate processors may be the most cost-effective way to receive both mixed materials and sorted materials that would benefit from reprocessing, and process them through an optical sorting system.

SCOPE

This research project was designed to answer four primary questions:

QUESTION 1. Can the optical sorting system effectively separate PLA bottles from PET bottles, so that clean PET would continue to be available to PET recyclers?

QUESTION 2. Can the optical sorting system effectively separate PLA from other materials, so that PLA products could be recovered for recycling?

QUESTION 3. Can the optical sorting system effectively separate other (non-bottle) PLA products, especially cups and food service items, from a mixed plastics stream?

QUESTION 4. Can the optical sorting system effectively separate various other types of plastics from each other, from pre-sorted mixed plastics stream?

METHODOLOGY

Sorting Trials

Two sets of tests were conducted during the development of the optical sorting equipment. In the first set of tests, the optical sorter tests targeted five separate streams of materials from the MRF operations. Samples were obtained from each of the five streams after the materials had been sorted for market. None of these materials were baled. The optical sorter was tested on the following five streams:

1. Sorted PET: material from a MRF container line that had been positively sorted as PET from other containers was processed by the optical sorting machinery to remove any non- PET materials (especially PLA) that had mistakenly been included when the PET was sorted. 2. Sorted HDPE: material that had been positively sorted from other plastics as HDPE was run through the optical sorting machinery to recover PLA and PET that had been incorrectly sorted into the HDPE, and to remove paper and other plastics from the HDPE. 3. Sorted Mixed Plastics: materials sorted as mixed plastics (with resin codes 3-7) were run through the optical sorting machinery to recover any PET and HDPE that had been missed when the material was initially sorted, and to remove any loose paper. 4. Unsorted Mixed Containers: materials separated from fiber at the MRF, and transferred to be sorted on a container sort-line were run through the optical sorter to separate PET, PLA, and HDPE from mixed plastics and “Other” materials. 5. MRF Processing Residuals: materials that were not positively sorted from the mixed containers stream; the residuals from the MRF container sort-line were run through the optical sorting machinery to recover PET, PLA, and HDPE that had been missed in the first sort.

The second set of tests only evaluated the ability of the optical sorter to remove the PLA that was introduced into the samples from PET feedstocks. These tests did not test resorting of processed MRF materials.

Stakeholder Engagement

Stakeholder engagement was integral to the successful execution of the grant project. The project team emphasized Future 500’s unique approach to stakeholder engagement to ensure long-term buy-in around key projects and initiatives.

A comprehensive round of stakeholder interviews and meetings helped guide the PLA pilot, ultimately producing a more interesting set of results. Engagement with affected or interested stakeholders from across the recycling and materials recovery value chain bolstered the credibility of the findings by enhancing transparency. Ongoing stakeholder outreach during the course of the project culminated in a formal stakeholder forum, convened by Future 500, to broaden the discussion of technical and political aspects of the project beyond the project team.

MAIN FINDINGS FROM THE BIOPLASTICS SORTING PROJECT

Technical Findings

In the 2012 testing cycle, when PLA was present in the materials being sorted, the Pellenc optical sorting system was capable of identifying it and separating it from other material types.

Variables in the recovery rate are factors of:

• The loading of the system feed belts, • The number of sorts being performed each time the machine is run • The condition and amount of the material to be separated as a percent of the total amount of material being processed.

The primary variables in the quality of the materials sort are:

• Whether the sort attempts to split the incoming material into two or three components • What the incoming feedstock materials are composed of • How well they were initially processed • Space constraints at the processing facility, and • Cost of labor

The quality of the sorted materials can be increased by running the loads through the system more than once, or through a second sorting machine. For example, to minimize the amount of PLA in a load of PET, the entire load can be optically sorted which will likely remove more than 97% or 98% of the PLA in the load. But if the remaining 2%-3% of the PLA is too high a contamination rate for the PET reclaimers, then the sorted load of PET can be run again to eject 95% or more of the PLA that was missed in the first run.

While running materials more than once is not likely to happen at the MRFs because of issues relating to throughput, PET reclaimers currently have to re-sort the PET that they buy to ensure

that it meets their quality requirements. In doing so, the PET reclaimers are losing small amounts of PET into their residuals stream. Resorting could occur at an intermediate processing facility that would remove contaminants from the PET before it is shipped to the reclaimers, who would then be guaranteed of receiving almost pure PET (instead of 92% PET).

Feedback from Stakeholder Forum

On October 12, 2012, Future 500 convened a forum bringing together interested stakeholders for a day-long session in San Francisco. During this meeting Future 500 and others involved in the testing of the optical sorting system presented the work conducted to date. Following this presentation, stakeholders participated in an open-ended discussion of issues relating to the presence of bioplastics in the marketplace, and policy and infrastructure concerns on the role of optical sorting equipment in helping the state achieve a 75% recycling rate.

Input from this discussion shaped some of the perspectives throughout this document, and could ultimately inform public policy or private investment in the field.

Stakeholders’ concerns and comments included:

• Based on the results of the pilot, it is clear that optical sorting technology could help address the ever-changing packaging markets, including a re-introduction of significant numbers of bioplastic bottles. • Uncertainties in the market have driven some producers of PLA packaging to reorient strategy, away from the beverage sector. • Beverage companies and Consumer Packaged Goods Companies (like Coca-Cola, Pepsi and Heinz) are exploring using PEF (polyethylene furanoate) polyester resin in PET bottles. Other companies have tested and are considering the use of other resins in bottle manufacturing. Further study is needed to better understand the impacts of these new resins on the recyclability of the containers that use them, and whether reclaimers will be able to sort such bottles effectively. Optical sorting technology can help resolve some of those uncertainties. • It was pointed out that PLA can be especially problematic to PET reclaiming operations. Some optical sorters are known to eject some clear PET along with the clear PLA, and because the bottles look identical to the naked eye, hand sorting is not viable. Such inefficiencies must be addressed. • There is fairly widespread concern about the acceptable level of PLA contamination in the PET. It is clear from the optical sorting done at MRFs that there is an average of about 8% contamination in the current PET streams being shipped to market. • Beyond aggregate contamination levels, stakeholders are concerned about the composition of the contaminants. For certain processes and end uses, no amount of PLA contamination is acceptable.

• APR Guidelines were suggested as one policy option, but some expressed concern that such policies may serve to limit new entrants into marketplace. • Design for Recyclability guidelines, if they are to be effective, should be "material- specific" for the entire container, including the package, cap and label, to make sure the entire container is recyclable. • Some requested that the state consider implementing a new standard identifier, since PET and PLA bottles can look identical. • It was noted that we don't have enough data on the cost structure at MRFs to make projections on the cost effectiveness of re-processing MRF mixed plastics, PET and HDPE. MRF performance is highly variable due to the design of the facility and city contracts. MRFs have very limited space and typically do not have room for additional equipment. • It was noted that greater amounts of cleaner materials can be recovered if optical sorting is employed to reprocess partially sorted PET, HDPE and mixed plastics.

Progress Towards Study Goals

The four questions were answered by this research project.

QUESTION 1: Can optical sorting machinery effectively separate PLA bottles from PET bottles, to ensure that clean PET can continue to be recycled?

Discussion

The primary purpose of the Bioplastics Project was to determine if optical sorting could be expected to provide some certainty that, if PLA bottles were introduced into the marketplace in significant quantities, MRF operators would still be able to produce clean PET for recycling.

In the first phase of testing, samples of PET that had been recovered from the mixed container sort lines from ten MRFs around the state were reprocessed. On average, over 8% of the processed materials were found to not be PET and were removed from the samples.

Conclusion

The optical scanner was able to remove non-PET materials from “clean” PET bottles. Over 8% of the materials in loads that had been sorted by the MRFs as “clean” PET bottles were found to be other plastics. The optical sorting machinery was able to produce cleaner PET for recycling.

QUESTION 2: Can the optical sorting machinery effectively separate PLA from other materials, so that PLA products could be recovered for recycling?

Discussion

The results from Sample 7 showed that when the machinery is set to separate only PLA from “other” materials, it could achieve a 99.6 percent recovery rate. More favorable results were achieved when the incoming materials were sorted into two fractions rather than sorted into three fractions.

Conclusion

Based on limited test results, the optical system is capable of separating PLA bottles only, or a variety of PLA products (including bottles, cups, and clamshells) from all other mixed containers at a MRF. Separating PLA will allow it to be recovered for further processing into new PLA products, when dedicated facilities are in place. However, some stakeholders doubted whether this high recovery rate could be achieved consistently over time. This study did not attempt to measure the economic feasibility of consistently achieving a high separation rate.

QUESTION 3: Can the optical sorting machinery effectively separate non-bottle PLA products, especially cups and food service items, from a mixed plastics stream?

Discussion

The optical scanner was designed to record the number of items of each resin type scanned. The scanner records show almost no PLA passed under the scanner, indicating that the optical sorter did not fail to separate PLA. As a result, known quantities of PLA containers, cups and clamshells were added to the samples being tested.

The sorter successfully separated non-PET materials from PET and separated PET and HDPE from loads of mixed plastics.

Additionally, as seen in the test results for Sample 7, run in July 2012, the sorter properly separated over 99 percent of the 120 bottles, 61 cups, and 47 clamshells (total 228 pieces) from a mixed container stream, although additional trials with the same setting were not conducted.

Conclusion

The limited test results of sorting a mix of PLA products from mixed containers showed that the optical sorter can identify PLA when it is present in any of its product forms, and separate it from other products. The results from Sample 7 showed that when the machinery is set to separate only the PLA from “other” materials, there is the operational potential to achieve a 99.6% recovery rate. Again, the study did not attempt to measure the economic feasibility of consistently achieving this high separation rate.

QUESTION 4. Can the optical sorting system effectively separate various other types of plastics from each other, from a pre-sorted mixed plastics stream?

Discussion

The optical sorter was used to rerun the sorted mixed plastics that were left after the higher value PET and HDPE were removed in the container sort lines in standard MRF operations. Over 40 percent of the materials in these mixed plastics loads were PET and HDPE that had not been recovered by the MRF operation, and could be separated out using the optical system.

Conclusion

Recovery of this additional PET and HDPE from the mixed plastics stream may not increase the overall recycling rate in California since these materials are already being counted as recovered mixed plastics, and may well be considered high-grade in China, where most of our mixed plastics are currently being shipped. However, an important benefit to recovering them in California is that more materials may be used in manufacturing new products in the State if the materials are locally processed to a higher level of quality.

Reprocessing the mixed plastics stream through optical scanners can direct more materials to high-value markets, and provide additional revenue to MRF operators. It is possible that the additional revenue from the sale of the PET and HDPE will pay for the cost of this additional processing.

THE NEW CHALLENGE: 75% RECYCLING

Since the initiation of the grant project, California’s Legislature and Governor Brown have set an ambitious goal of 75 percent recycling, composting or source reduction of solid waste by 2020.

Instead of simply focusing on local diversion, the state Department of Resources Recycling and Recovery (CalRecycle) is to take a statewide approach to decreasing California’s reliance on landfills. CalRecycle is examining how extensions of existing efforts, as well as new strategies, can be combined to reach that policy goal.

To help develop the statewide strategy, CalRecycle developed a discussion document in May 2012 for stakeholder input. It summarized programs currently being implemented, as well as potential new approaches, organizing them into a series of “focus areas.”

CalRecycle’s recommendations will be presented as a report to the Legislature in January 2014. That report will reflect strategies already being implemented, as well as any that CalRecycle proposes to reach the statewide goal.

It is our intent that this White Paper contributes to the state’s understanding of options to approach the 75% goal. Once again, the opinions expressed here are solely those of Future 500 and are not endorsed by CalRecycle.

THE IMPLICATIONS, PART 1:

TOWARD 75% RECYCLING

This section provides our independent assessment of the bioplastics grant project, and the implications for California as the state moves toward 75% recycling. In a later section, we discuss the implications if the state were to step beyond that, and seek “zero waste.”

TEN IMPLICATIONS FOR CALIFORNIA AS THE STATE SEEKS 75% RECYCLING

As California has progressed beyond 50% recycling, local waste haulers and processors have encountered an increasing problem: contamination of paper, plastics, and other materials in mixed recycling systems. As we seek to define curbside as a one-size-fits-all solution to maximizing residential recycling, we increase the range of materials collected by curbside programs. This leads to contamination. The grant study confirms that California does face a contamination problem, though not the one the research team started out studying.

First, due to the limits to today’s curbside materials recovery facility (MRF) sorting approaches, as much as $25 million worth of polyethylene terephthalate (PET) and significant quantities of high-density polyethylene (HDPE) are passed through and end up as mixed plastic.2

In fact, in the Bioplastic Project’s tests, “mixed plastic” is mostly not mixed plastic at all. Over 40% of the mixed plastic is PET and HDPE. Only 30% is other plastic. The rest is mostly non- plastic trash.

Second, the PET loads that are gathered are about 92% clean – a good rate, given the challenge posed by single-stream curbside recycling – but still about 8% of PET is contaminated by other plastics and materials, according to the grant project sorting trials.

Third, this is particularly significant because demand for recycled PET (RPET) is strong and growing. California now has an infrastructure that can consume over 400 million pounds of RPET for domestic use. Commitments by both Nestle Waters and Pepsi to substantially increase

2 Murray, Mark and Teresa Bui. Mining the Other: Extracting Value from California’s Waste Stream. Report: Californians Against Waste, March 2013.

their use of RPET will place additional demands on the market. According to the Association of Postconsumer Plastic Recyclers (APR): “In 2012, even if no PET bales are exported, these reclamation assets will be short of material. Without additional collection efforts or new streams of material, the increased capacity will only serve to drive prices [of RPET] to unsustainable levels, as too many operations chase too few bottles.”

Fourth, innovative optical sorting can help solve both these problems – the pilot demonstrated that with these technologies we can capture more PET, clean up current PET, and also recover high levels of emerging materials, such as plastics with resin identification codes (RIC) 3 through 7. (RIC is the polymer code system developed by the Society of the Plastics Industry in 1988.) So, significantly, the interests of the advocates of polylactic acid (PLA), PET, and 3-7 plastics are closely aligned: all gain from a system that results in better sorted, cleaner material.

Fifth, there is little reason to fear PLA as a contaminant in the waste stream. Picking out and picking on PLA is a diversion from the real need and opportunity. PLA is best seen as representative of a broader set of emerging materials – mostly 3-7 plastics and composites, but others as well – which will likely continue to grow in volume and, potentially, market share. The Bioplastics Project has evolved into an examination of whether emerging materials can be effectively sorted, using PLA as an example.

Sixth, these emerging materials must be one focus for recovery, if California is to approach 75% rates overall.

Seventh, for that reason, the most important findings from the grant study relate to whether and how innovative optical sorting systems can help enable 75% recovery, as the components of the waste stream change and diversify.

Eighth, this is no panacea. There is a real promise for optical sorting. The mobile aspect is not economically viable at this time – bringing a mobile sorter to MRF’s is not presently cost- effective, though further development may change that. But regional sorting facilities that can reprocess plastics from MRFs in the region can be viable today. The facilities would be somewhat comparable to glass beneficiation plants, which currently take MRF-sorted glass and further process it into furnace-ready cullet. The cost-benefit for plastic and packaging beneficiation will vary by situation, and needs to be assessed site-by-site. But the state, and communities, would be well served to invest in further use of optical sorting technology, using a regional model that serves several MRFs.

Ninth, the success of PET is important to understand, because it can be emulated by other plastics and materials. That success didn’t just happen on its own. At least in California, it has been the result of a combination of market-sensitive recycling policies and a very constructive and purposeful industry response.

• Sales of California Redemption Value (CRV) PET packages have grown from 38 million lbs in 1988 to 586 million lbs today (1418% growth). • In 1988, PET represented 4% of CRV container sales, and today 41%. • In 1988, the PET recycling rate was just 4%. Today nearly 70% of CRV PET is recycled. • In 1990, the average cost of recycling PET was surveyed at $1107/ton. With a modest scrap value, the net cost of recycling each PET container was then over 4-cents per container. • As late as 1999, the net cost of recycling a PET container was still greater than one cent/container and higher than the cost of recycling glass. • Today, thanks in large part to the investments by resin producers, container manufacturers and the beverage industry via the Plastic Recycling Corporation of California, the 2012 cost of recycling was down to just $457/ton, which was below the average scrap price of $503/ton. This led CalRecycle to eliminate processing fees entirely for PET. • Even with the drop in scrap prices in 2012, the net recycling cost for PET in 2013 is projected to be less than $25/ton or about .0008 cents per container. • Adding to the California PET recycling success story: a combination of program incentives and private investment have increased ‘in-state’ processing of PET from virtually nothing 10 years ago to better than 50% today. • While PET collection has grown from 108 million lbs in 2000 to over 392 million lbs in 2011, California is expected to process better than 145 million lbs of PET in-state in 2012. • This recycled PET or ‘RPET’ now feeds a California thermoform packaging industry that has the ability to consume more than 400 million lbs of RPET annually.

Maintaining and expanding the PET recycling success story, and applying the lessons to other plastics and materials, is important to reaching 75%, not because of the volume it represents, but rather because of the model it represents.

The best news: the very policies and infrastructure investments that are needed to maintain and expand the PET recycling success story are the same policies and investments that ‘protect’ PET recycling from PLA or any other similar appearing packaging types.

Tenth, none of this means we should place all our bets on PET, mandate that everyone shift to this single resin, and run it all through single-stream curbside systems. Variety is good, for the economy and for sustainability. It is tempting to look for one-size-fits-all solutions to challenges. Recyclers – PET recyclers especially – might love a marketplace where there was no PLA or other material to compete with PET. Many interest groups, not just haulers, might prefer a system where all household recyclables are channeled through single-stream curbside programs, paid for entirely by taxpayers.

Those of us who favor refilling glass and plastic might prefer a system where bottles were in standard sizes and colors, and could readily be refilled without worrying about lawyers and other contaminants. But this kind of top-down approach is not sustainable.

Fortunately, California does not have such a system, nor should it, in our view. California has a diverse and changing waste stream, and a rich and evolving variety of recycling and waste reduction opportunities. It would be a mistake to try to “purify” the system by selecting one material, whether PET or PLA, or one system, whether single-stream curbside or something else. We need to accommodate variety, because in the medium and long term, it is good for the economy and the environment. Optical sorting is not a panacea, but it is part of the answer, and deserves additional investment.

Another part of the solution that deserves investment is not commingling trash or recyclables in the first place. The diversification of materials in the waste stream suggests that commingling itself may become less desirable as our primary diversion strategy. Forcing all discarded household and commercial materials through local flow-controlled monopolies may seem efficient, in a Soviet sort of way. But as we realize the costs and values embodied in what we throw away, we may be motivated to optimize them. A robust secondary materials market that attracts materials for recycling before they are commingled in the bin may be an important component of an affordable and sustainable system capable of diverting 75% or more of California’s waste from landfills.

75% RECYCLING VS. ZERO WASTE: THE LARGER CONTEXT

Should California move toward 75% recycling now, then take on the higher goal of zero waste when it achieves that interim goal? Or should the state leap forward, and seek zero waste first, picking up 75% recycling along the way?

It is tempting to move forward on policy and program decisions based on the technical findings of one study, and the ten implications for 75% recycling discussed above. However, our choices may be improved by stepping back to take a longer view. This can reveal possibilities and pitfalls we might miss without this context.

The status of California’s recycling system is a consequence of a much larger set of related movements. Moving from the more narrow and specific, to the more broad and general, they include:

California and the EPR Movement

California and the nation are more than ten years into a relatively specialized but persistent movement for “extended producer responsibility” or EPR legislation. EPR is a policy approach that shifts the cost of managing post-use products, either partially or fully, from local governments to the producers of those products. The purpose is to assign responsibility for end- of-life costs to the entities that design the products. This is intended to motivate them to reduce those costs, either by reducing the weight or toxicity of products, or increasing their value in secondary markets.

There are 63 state EPR laws in the U.S. All except one apply to products with hazardous components, such as batteries, electronics, devices with mercury, and household hazardous wastes, according to SAIC.3 EPR advocates have pressed for wider application of the concept for many years, but so far only one EPR law has passed in the U.S. for nonhazardous products, SAIC reports.

The next phase of U.S. EPR advocacy is likely to including packaging and printed paper, for reasons discussed below. Globally, there are more than 35 EPR systems that cover packages and printed paper. Most European countries, several Canadian provinces, and a few Asian countries have established these laws.

3 Evaluation of Extended Producer Responsibility for Consumer Packaging, Final Report to Grocery Manufacturers Association, prepared by SAIC, September, 2012, page ES-1. 17

None of the U.S. EPR systems apply to consumer packaging, however. One reason is that the U.S. already has a fairly robust recycling system for packaging. It is dominated by two systems that appear to compete with one another, but that are highly related politically: state beverage container deposit systems and local curbside recycling programs. In the marketplace, they seem to be unrelated systems chasing after the same materials. But politically, they are siblings born of the same squabbling parents.

California is not likely to be among the states where comprehensive packaging EPR is seriously proposed. The state already has a well-established beverage container recycling system, and a sophisticated law that encourages rigid plastic packages to be reused, reduced in weight, improved in efficiency, or recycled. Broader package recycling is more likely to happen through the expansion, modification, or enforcement of these programs.

Nonetheless, the politics of packaging EPR are already impacting California. Likely, there will be efforts to establish EPR-like systems for narrow categories of packages in the years ahead, partly to advance California’s new 75% diversion goal.

The Recycling Movement

The success of the recycling movement in the U.S. can be traced, at least in part, to two policy drivers: beverage container deposit laws, which we will call “Bottle Bills,” and anything that is not a deposit mandate, which we will call “Not-A-Bottle Bill” in this document.

The Bottle Bill is the popular name for measures that establish a minimum five-cent deposit on beverage cans and bottles. In 1970, Oregon became the first state to pass a deposit law on beer and soft drink bottles and cans. The Oregon bottle bill set loose a succession of campaigns in multiple states. Vermont, Michigan, Maine, Iowa, Connecticut, Delaware, Massachusetts, New York, Hawaii, and California passed their own versions of deposit laws – the latter state with a modified system aimed at reducing costs and supporting a broader set of recycling options.

At the time, deposit laws were opposed by a coalition of industry groups that, from the outside, seemed to be diametrically opposed to the measures. After the first set of deposit laws passed, the opponents gradually learned a relatively fail-safe system for defeating them. Today, it is exceedingly difficult to pass new state deposit legislation, in part because the opposition strategy is so effective, and in part because the proponents have failed to update the measures to keep pace with the changing political and economic marketplace.

One essential tactic for defeating bottle bills was and is to propose a credible alternative. That is why, for the past 40 years, recycling advocates have learned a sure-fire tactic to attract industry dollars to support their programs and organizations: position them as alternatives to a Bottle Bill. The substance of Not-A-Bottle-Bill has thus evolved over time, but all its variants share that one trait: they are different from, and decidedly counter to, a Bottle Bill.

One of the first versions of Not-A-Bottle-Bill was Keep America Beautiful, an organization formed in 1953 when a group of corporate and civic leaders met in New York City to discuss bringing the public and private sectors together to develop and promote a national cleanliness ethic, as an alternative to bans and deposits that were beginning to be proposed at the state and local level in response to rising litter rates. In 1960, KAB began working with the Ad Council to develop what would become ongoing public service announcement campaigns. It was this partnership that led to the production of the now famous “crying Indian” campaign – an iconic symbol of environmental responsibility and one of the more successful public service campaigns in US history. The most memorable part of the early KAB program, besides the crying Indian, was its slogan: “People start pollution. People can stop it.” The assertion is true, but it also carries a political message. The people they meant were consumers who possessed empty beverage containers after consuming them – not the people who designed or sold them. They wanted to make sure consumers understood: those empty containers are yours, not ours. You decide whether to litter, trash, or recycle them.

To give substance to Not-A-Bottle-Bill and help consumers meet their responsibilities, KAB developed model local programs, which they branded the Clean Community System (CCS). CCS program assistance and grants were offered to hundreds of community beautification, garden, service, and anti-litter organizations across the country.

Over time, however, KAB found that the volunteers and local officials in charge of the CCS programs needed more funding. Without it, the programs might not excel well enough to provide a buttress against “forced deposit laws” and other more punitive measures. As bottle bill campaigns grew more threatening, Not-A-Bottle-Bill evolved into a new form, called a Litter Tax.

Deposit opponents first successfully advanced a Litter Tax in 1971 in the state of Washington, to help narrowly defeat a proposed deposit law there. That provided the Not-A-Bottle-Bill advocates a beachhead – an alternative to the Oregon Bottle Bill, right next door in Washington. For years, they sparred with environmentalists over which system was better.

But the litter tax had one fatal flaw: it didn’t work very well. When residents crossed the border from Washington to Oregon, and noticed that 80% of the broken bottles and littered cans were gone, they tended to favor the deposit law.

That, coupled with opposition to a new tax by small business owners, convinced Not-A-Bottle- Bill proponents that they needed a new alternative to deposits. New York was just one of many places they successfully sought to advance curbside recycling. Curbside was the first truly substantive alternative to bottle bills. It was built on a fundamentally different premise: the KAB assertion that “People Start Pollution” – that consumers are responsible; that once they buy a product or package, title shifts to them, and they are responsible for what happens to it.

There is truth to this, especially with regards to litter. But are consumers really in a position to find a new home for the myriad products and packages they accumulate? Or do other actors, like government or corporations, need to step in and help?

Libertarians might contend that the answer to both questions is “no.” They might simply wait for the marketplace to notice the accumulation of garbage, and eventually come forward with free market recycling solutions.

But free market libertarians are more patient with the market than many politicians, corporations, or concerned citizens. The latter three usually press for solutions that happen in months or years, not generations. Politicians want votes next election, corporations want sales tomorrow, and citizens want solutions yesterday.

When consumers want solutions, they often look to two institutions: government or corporations. Usually, the public expects environmental standards to be met by corporations, adhering to laws and regulations established by government. But in a few areas, government steps in to establish monopolies, sometimes in private and other times in public hands. Traditionally, residential waste management is provided by local government, or by exclusive local franchisees.

Waste management has traditionally been a mass-oriented enterprise. The path to maximum profit has been to handle waste as a single stream – to gather commingled waste, and haul it to a dump or incinerator where it can be buried or burned. “Tipping fees” – fees charged for every ton of waste dumped – provide much of the revenue to haulers or landowners.

Early bottle bills were originally conceived as an alternative to this model. Proponents believed that bottles would be diverted from the waste stream and collected for refilling, not recycling. But refilling flourishes when bottling plants are local, and beverage producers had centralized too much for this to happen readily. The distances were just too great; if major producers opted for refillables, they would be handing an advantage to local competitors.

So with waste management firmly in control of local haulers beholden to local lawmakers, it made sense for deposit opponents to focus on harnessing this existing structure to deal with recycling. Waste had long been a local government function. This protected that legacy, and reinforced the philosophy that consumers, not producers, start pollution.

But once curbside recycling became the established system for dealing with all post-consumer household waste, demands emerged to add a continuing array of new products and packages to the curbside menu.

Early curbside programs focused on a three-bin system where consumers divided their recyclables into separate newsprint, metal/plastic, and glass bins. It was unwieldy to expand to a six-bin or greater system to accommodate the proliferation of materials to be collected.

To fit curbside recycling back into a mass-oriented waste collection model, communities gradually shifted from the three-bin approach to “single stream” curbside. Residents loaded all their recyclables into a single large blue plastic container. The mixed recyclables were loaded into trucks and carried to materials recovery facilities (MRFs), where the materials were sorted both mechanically and manually.

Thus the current form of Not-A-Bottle-Bill is single-stream curbside collection of mixed materials, to be sorted at local MRFs. Single-stream curbside systems plus MRFs enabled the volume of materials recycled to expand. Now cities could make recycling simple for customers: just dump all you paper, glass, plastics, and metals in the bin. We’ll take care of the rest.

But while volume increased, quality dropped significantly under single-stream systems. Glass in particular was problematic. Paper became mixed with broken glass and other materials, often ruining prospects for recycling. Glass too became mixed with metals and plastics, rendering it unacceptable for recycling, unless further processed by “beneficiation” plants. It could also be used to spin fiberglass insulation, however, so it still provided a substantial environmental gain. But scrap glass prices were often too low to pay the costs of collection.

As more products enter the waste stream, pressure has continued to build for curbside operators to accept it all. Curbside is looked upon, by residents and producers alike, as a one-size-fits-all panacea for dealing with all this diverse trash, without having to make any changes further up the line, where waste is designed, produced and purchased.

Meanwhile, each time consumers demand that a new product or package be recyclable, manufacturers are likely to launch efforts to convince curbside program directors to add it to what they accept. Eventually, as more dollars are required to accommodate new materials, it becomes difficult to pass these bucks on to local government. Only prosperous and “deep green” communities may be willing to pay for almost anything to be recycled at curbside.

Nationally, today’s recycling rates are not high enough to meet the demands of the nation’s manufacturers, or the environmental preferences of residents and consumers. Shortages of secondary aluminum, PET, glass, and many paper grades place U.S. manufacturers at a disadvantage against foreign competitors, who often have access to cheap raw materials extracted without strong environmental standards.

Local government is not likely to step in to fill the gap. If anything, they need to cut costs, by reducing services, such as by dropping glass and selected plastic and paper grades from their systems. Those that try to cut services generally face angry ratepayer opposition. They thus look for ways to keep comprehensive recycling services, but find someone else to pay the costs. Naturally, this turns their focus to industry.

EPR has evolved in response to these pressures. In the next few years, EPR proposals will be introduced in numerous states, until they are either adopted or replaced by better or more

forward-looking alternatives. Residents won’t stop pushing for more recycling. Government won’t stop looking for someone new to pay the cost. Producers face years of trench political warfare managing the pressure, pushing off the shift toward producer responsibility as long as possible.

For the past 40 years, the Bottle Bill has been, inadvertently, the chief policy driver for recycling in the U.S. Without it as an often-unseen source of political leverage – a bogie man that motivates opponents to get off the nickel – Not-A-Bottle-Bill would not have had a strong advocacy base, driving the establishment of curbside recycling systems, and pressing goals ever higher, from 25% to 50% to 75% and more.

For the next 40 years, EPR could serve a role similar to the Bottle Bill in years past. Technically, it too is Not-A-Bottle-Bill – it is strongly advocated by major beverage companies, who prefer it to the Bottle Bill. But it is the most serious and credible Bottle Bill alternative they have offered, and once institutionalized, it is bound to last for years. The movement for EPR on non-hazardous materials, like consumer packages, will likely build, until either it becomes well established for consumer packages and other non-hazardous materials, or producers develop a credible working “Not EPR” alternative, without imposing all the costs on the public.

How might an alternative to both bottle bills and EPR be found?

The Anti-Throwaway Movement

To understand how producers could find a credible alternative – whether to the Bottle Bill or EPR – it is valuable to step back. The recycling movement is part of a larger movement against the “Throwaway Society,” which in turn has morphed into the Sustainability Movement.

The anti-throwaway movement began in places like Berkeley, California, in the 1960s. The rallying cry of the Berkeley Ecology Center in 1970 was to “ban the can.” Hundreds of campuses across the country saw similar efforts.

Campaigns to ban cans took beverage companies by surprise. Throwaway cans enabled them to centralize their production operations, achieving economies of scale. They reduced demand for refillable glass bottles, until then the mainstay for bottlers and brewers. With cans, the industry could shut down small local bottling plants, and centralize in larger facilities further away. Costs were higher, but consolidation meant profits were higher still.

So the beverage industry fought the can ban movements, and few such laws passed. In fact, it was the failure of ban-the-can which led states like Oregon to follow up with bottle bills. If environmentalists could not ban cans, at least they could make them compete on a level playing field with bottles, where they both would be recovered.

Around this time, one maverick in the brewing industry came up with a simple idea that would help to make recycling work. Coors Brewing Company CEO Bill Coors arguably launched the modern recycling movement when he fought to shift his industry to a more recyclable can material, aluminum, and announced the nation’s first “cash for cans” system.

The reason Bill Coors came to propose cash-for-cans provides an important lesson in how industry can effectively respond to sustainability challenges. A local biologist had invited Coors for a walk in the hills around his brewery in Golden, Colorado. There she showed him the littered cans with his family’s name on them, and described the negative impacts they had on the tundra. Coors, an engineer, wondered how he could attract his cans back and recycle them. He wanted to “close the loop.”

Coors soon became an evangelist for a new cause: to shift his industry from bimetal cans with no recycling value, to aluminum cans that could be profitably recycled over and over. He proposed that the industry work together to adopt a voluntary “Closed Loop System” to get the containers back, by offering a bounty of a half-cent to one-cent a can.

It sounds innocuous, but the Coors proposal unleashed an industry firestorm. August Busch, head of the largest brewer, hired famed Wharton School systems scientist Dr. Russell L. Ackoff to “prove” that Americans would never recycle – it was against our nature, he concluded. Aluminum companies declined to establish a recycling system; they were benefiting from cheap subsidized energy at their plants in the south, and doubted a buyback program would work. But Coors charged ahead anyway, opening his own aluminum can manufacturing and recycling operations. When he launched the cash-for-cans system, his brewery was overwhelmed with the returns. Coors turned it into a business opportunity, establishing buyback centers in selected communities.

Soon, the aluminum companies and Anheuser-Busch took up the cause as well, and aluminum cans became the big first success story of the residential recycling movement.

The Pro-Sustainability Movement

Every social movement begins with an “anti” phase, where it rebels against the status quo based on a negative view of the past, then evolves gradually into a “pro” phase, where it offers a better alternative reflecting a positive vision of the future. In the 1960s and 1970s, anti-war activism evolved into the peace movement. Women’s liberation evolved into feminism. Campaigns against the throwaway society evolved into the sustainability movement.

When in its anti-throwaway phase, the green movement tends to be against capitalism, against consumption, against all things that seem to lead to bad results. Its instinct is to take a top-down approach, seeking to use government and the force of law to command-and-control the

marketplace to bring about an idealized result. It advocates simplistic solutions – bans and prohibitions meant to sweep the problem away.

But when the movement crosses over from the anti-throwaway to its pro-sustainability form, its adherents better understand the promise of the marketplace, and want to harness it. Some continue to focus on mechanistic command-and-control policies that seek to impose sustainability by law. Others begin to take a more organic, systemic approach, often finding that nature and the economy share certain principles in common – that both thrive in conditions of diversity, complexity, and creativity, and that centralized control, whether by government or business, can be anathema to this; see the writings of William McDonough, Paul Hawken, Amory Lovins, Tachi Kiuchi and others.4

Among recycling advocates, those who embrace the clearest vision of a sustainable society may be advocates of Zero Waste. The Zero Waste Movement is, in some ways, the front tier of what we usually call the recycling movement. Zero Waste supporters are not satisfied with achieving incremental gains in recycling rates. They challenge the very concept of waste, viewing the components of garbage as raw materials that ought to be continuously cycled through the economy, in a closed loop that favors local production over distant large-scale manufacturing.

To the Zero Waste movement, recycling is important, but overrated. Its supporters embrace the broader 3R hierarchy: Reduce, Reuse, Recycle.

Zero Waste supporters do not always agree on which specific policies will best put this hierarchy in place. In fact, their internal differences can be intense.

For example, some Zero Waste advocates support extended producer responsibility (EPR) for products and packages. They contend that by internalizing the costs of waste management, EPR will motivate producers to redesign their products and packages to reduce their lifecycle costs. Others vehemently oppose EPR, concerned that it will shift ownership and control of local waste resources from small reuse-oriented enterprises to distant global corporations, but fail to advance reduction or reuse. Worse, they believe the ultimate objective of producers is to reverse society’s commitment to recycling, and institute waste incineration under the mantle of “energy recovery.”

How to Game the System to Stop Zero Waste

The political dynamics of the recycling create opportunities for sophisticated vested interest groups to “game” the system, harnessing various advocates to support their interests, under the guise of advancing sustainability.

4 See, for example, Cradle to Cradle, by William McDonough and Michael Braungart; Ecology of Commerce, by Paul Hawken; Natural capitalism, by Paul Hawken, Amory Lovins and L. Hunter Lovins; and What We Learned in the Rainforest, by Tachi Kiuchi and Bill Shireman.

For example, conservatives, fearing government power, tend to idealize the big corporate institutions they believe keep government in check. Progressives, fearing big corporations, tend to idealize government power, as a counterforce to corporate tyranny. This provides an appealing opportunity for lobbyists. It is almost always cheaper, in the short run, to hire lobbyists to lock in the past via law or regulation, than to update business models or invest in the future. Legislative strategists can readily play the Republican and Democratic bases against each other, coaxing each to demonize the other, at just the right political moments. Neither knows what hit them. Gridlock results.

Consider how this cycle impacts solid waste and recycling policy. Philosophically, today’s culture demands a shift from a throwaway society toward a sustainable one. It demands that resources be reduced, reused, and recycled.

Technologically, today’s economy has the capacity to generate much more value, using much less energy and resources. Technology enables unprecedented source reduction, and increased reuse, minimizing the amounts left over that need to be recycled or thrown away.

Yet politically, the system is biased in favor of yesterday’s economic forces, not tomorrow’s. Public policy may officially favor a reduce-reuse-recycle economy, but it generally seeks to advance it by retrofitting a mass-oriented residential waste hauling system, one that was designed to handle trash, not resources. Producers contribute to this, by insisting that curbside systems take back whatever they produce, and find a way to recycle it. They insulate themselves from responsibility for what they design and sell. From their perspective, this frees them to focus on their business, and enables government to focus on its responsibility.

But in the end, government can’t sustain the added responsibility. It bears the cost, but not the benefit, of the new products and packages. It will ultimately find a way to shift that cost back to the producer.

This is how producers ultimately guarantee that waste costs will eventually be imposed on them, but with additional burdens they could have avoided. Along the way, mandates will emerge that assure that producer costs are much higher than they need to be, and that increase environmental costs as well. The worst fears of recycling advocates, waste haulers, cities, counties, and sustainability advocates will be prohibited by statute. Outcomes will be controlled; options will be limited; only costs will be shifted to producers.

That is why it is in the interest of producers to step ahead of the process.

THE IMPLICATIONS, PART 2:

TOWARD ZERO WASTE

Since 1990, California has embraced a succession of statewide waste diversion or recycling goals: a 25% goal by 1995, 50% by 2000, and now 75% by 2020. It’s easy to see where this is going. These goals are laudable – they continue to set the bar higher, driving innovation that has helped recycling surpass thresholds once thought unattainable by many.

Yet it is important to remember: recycling is an aspect of an emerging philosophy in which the very concept of waste is challenged. If we view 75% recycling as a mechanical or operational challenge, we may somehow attain the ever-higher diversion levels, but we could do so at a cost so high that it would violate the underlying purpose of the movement.

When environmentalists propose that we “reduce, reuse, and recycle,” industry groups often leap into the fray to propose recycling, fearing that the first two options are radical attempts to put them out of business. Sometimes, they are. But instead of pressing immediately for recycling, industry might be better served by proposing better ways to reduce and reuse resources.

The Economic Transition

The sustainability movement reflects a shift in the underlying economic system, from a largely industrial economy to one where information is now the principle driver to growth. The transition began first in the developed world, with California’s Silicon Valley leading the way, but has now touched even remote regions of developing nations.

In an industrial economy, most individuals prosper economically when human labor can be replaced by machines, which transform energy and raw materials into products. The result is increased material abundance – lots of products in lots of packages, providing people with an array of inexpensive conveniences they could not previously enjoy.

The bigger the industrial machines, and the faster they operate, the more resources can be churned into products. As a result, across the industrial economy, local enterprises tended to be usurped by national and even global ones. As the U.S. industrialized, small factories were replaced by big centralized ones, small farms by corporate farms, small governments by large metropolises.

In this setting, most people prosper economically by yielding some of their autonomy to large centralized institutions. Instead of providing for themselves by operating a farm or specializing 26

in a craft or skill, they or their spouse take a position in a factory assembly line or corporate office. They become a small part in a large whole. Their sense of self-reliance may be reduced, but they gain comfort because the big institution has the resources to provide some of the needs they otherwise might have met on their own. After a period of sometimes-violent transition, labor unions, retirement pensions, and health plans were part of the offerings of the industrial economy.

As an example, look to the industry that promotes the packages at issue in this study. In 1919, there were 1500 breweries and 1500 bottling plants across the U.S. Prohibition shut many of the breweries, but 756 reopened after the 21st Amendment was adopted in 1933. From there, even while overall production increased, the number of plants plummeted, to 578 breweries and 580 bottlers in 1940 to 380 and 392 in 1950, 171 and 229 in 1960, and 92 and 143 in 1970. As brewers and bottlers centralized, the shift to single-use throwaway containers accelerated, as shown in the table below.

Table 7 EVOLUTION OF BEVERAGE CONTAINER MIX

Return No-Return Metal Plastic Bottles % Bottles % Cans % Bottles % BEER 1947 86 3 11 – – 1960 53 10 37 – – 1970 26 22 53 – – 1980 12 32 56 – – 1990 5 25 60 – – 2000 2 37 50 – – 2010 0 38 52 0.3 SODA 1947 100 * * – – 1960 95 2 4 – – 1970 40 27 33 – – 1980 32 9 42 17 2000-12 Data not available Sources: Research Triangle Institute (RTI), National Soft Drink Association, Beverage Industry magazine, Container Recycling Institute, Beer Institute. *RTI estimates market shares of 0.1% to .7% for these years. (Totals may not equal 100% due to rounding or excluded package types.)

Toward a Zero Waste California

But there are limits to the benefits of industrial-era centralization. One such limit is the growing dependence on abundant energy and resources. A global economy dependent on a single form of fossil fuel energy is a vulnerable economy.

That vulnerability was laid bare in the 1970s. Oil suddenly became scarce, and its price exploded twice, as oil producing nations suddenly recognized their market leverage, and used it to gain both economic and political advantage. That staggered industries long reliant on ready supplies of cheap oil, and advantaged those that could adapt to the change.

It also offered a major shot in the arm for computers and microchips, which were just reaching readiness for the market. It was much less expensive to invest in smart machines and educated people than to pay for big rigid machines and interchangeable workers. The combination of expensive unreliable oil and cheap information dealt a one-two blow to the rigid centralized hierarchies of the industrial economy.

In the beverage sector, the Table 8 change took several forms. It BREWING INDUSTRY CENTRALIZATION enabled smaller-scale AND DECENTRALIZATION manufacturing to compete with Year Plants Firms mass manufacturers. It helped drive a diversification of 1919 1500 1500 brands, tastes, and market 1935 750 750 niches. As a result, beverage 1940 580 578 brands, categories, and plants 1945 461 457 reversed their numeric decline. 1950 392 380 The single flavor Coca-Cola 1955 271 231 morphed into now more than a 1960 229 171 dozen varieties; competing 1965 174 118 1970 143 92 drink categories proliferated, 1975 95 54 from Starbucks espresso to 1979 85 42 Monster energy drinks. 1980 * 82 Microbrews and specialty 1990 * 286 brands emerged, and the 2001 * 1400+ number of breweries grew from 2010 * 1,793 82 in 1980 to 286 in 1990, more Source: US Brewers Association Brewers Almanac, 1978; than 1,400 in 2001, and 1,793 in Brewers Association 2010. *Data not available for these years

Across the economy, much bigger and more fundamental changes were happening. Above all, the digital economy was born in the 1970s, and became the largest driver of U.S. economic growth by the mid-1980s.

Economically and environmentally, the digital economy drove explosive growth in energy and resource productivity – the amount of value the economy generated from each unit consumed. The effect was particularly pronounced in a few key technologies and subsectors, as the table below shows.

Table 9 THE ENERGY PRODUCTIVITY EXPLOSION Productivity What It What It Year The Innovation Gain Enabled Disabled PACKET- Circuit-switching 1960 SWITCHING in data 1000% Arpanet and PBX for data transmission and, later, voice Routers, LANs, ARPANET, faster and better 1969 predecessor of the 300% university Internet research 1974 ETHERNET 100,000% Internet Personal 1974 INTEL 8080 10,000% Mainframe MICROPROCESSOR Computer Computer ALTAIR 1975 PERSONAL 100,000% Apple II COMPUTER 1977 APPLE II 100% Internet and, IBM later, VOIP 1980s INTERNET Immeasurable World Wide Web Experts and Reference Desks 1993 WWW Immeasurable Email Post Office 1993 AOL EMAIL Immeasurable Commerce Brick-and-Mortar AMAZON AND E- 1995 Major Social Media BAY Print Media Free Long International Long 2000s SKYPE AND VOIP Major Distance and Distance Video Calls BLOGS, Transparency and 2000s FACEBOOK, Major Privacy and People Power TWITTER Institutional Power Source: Tachi Kiuchi and Bill Shireman, What We Learned in the Rainforest – Business Lessons from Nature, Barrett-Koehler, San Francisco, 2000.

Energy productivity gains for specific activities – some 1,000 per cent or more – led to overall gains in economic productivity. But more interesting than the quantitative gains are the qualitative impacts they had. Each major innovation created powerful new tools that could be used by people and institutions.

California leads the nation and much of the world in the technologies that drove these past gains. It is positioned to drive even more. The benefits could be dramatic, not just here but across the world. According to McKinsey Global Institute, a handful of resource productivity innovations could meet 30% of the world’s total resource needs in 2030.5 That could reduce projected global demand for oil from 103 million barrels a day to as little as 76 million, and cut carbon emissions half-way to the level many scientists believe is needed to minimize global climate change.

California-based companies like Cisco, Google, Hewlett Packard, Intel, and many others are beginning to see even greater potential. Their technologies, and others from the information and communications sector, are today’s equivalent to the industrial infrastructure that powered the last century’s economic growth.

In the process, “digital energy and resources” – those freed up by productivity leaps – could turn out to be the cheapest resources of all, and some of the companies above could displace Saudi Arabia as our primary source. If the past fifty years of economic and energy data hold, California could shift away from fossil fuel intensity at a rate of 3-5% a year, possibly more. At a 3% annual pace, that would drive down carbon intensity 75% by 2060; at a 5% annual pace, we could readily drive down overall California carbon emissions as much as 80%, without the need for complex and expensive commands, controls, or trading regimens.6

Major leaps in resource and energy productivity are both necessary and possible, but they are not assured. As globalization and technology connect and speed up the world, they create the potential for new breakdowns as well as new breakthroughs.

Moreover, efficiency alone will not automatically drive environmental sustainability. That is in part because efficiency happens inside an economy driven by the embedded subsidies that supported the industrial era and its dominant narrative – that physical consumption creates both economic value and personal fulfillment.

That is no longer reliably true. No one with any handheld technology can deny that, in the future, more value can be delivered with less consumption.

In a world where the fundamental resource – information – is both renewable and regenerative, it will be possible to satisfy many needs and wants with lower material and energy inputs.

5 McKinsey Global Institute, Growth and Renewal in the United States: Retooling America's Economic Engine, February 2011. 6 Future 500, Toward a New Agenda for America, November 2012.

Culturally, the sustainability movement reflects this shift from a consumption-based industrial economy, toward a more innovation oriented digital world. It asserts that there is more to life than material prosperity. Sustainability advocates point to three broad categories of prosperity: economic, social, and environmental, which together comprise the “triple bottom line.” They argue that none of these can long prosper at the expense of the others.

But they cannot be accommodated if we continue to externalize costs to the environment. Costs of pollution, waste, and consumption need to be embedded in the economy, or our decisions will undermine our long-term interests.

Most thoughtful people agree with this, whether they tend to think first of business or environmental interests. The question is: how can these externalities best be internalized? How do we mostly avoid imposing them in an expensive, inefficient, ineffective, or politically manipulated way?

Source Reduction and Resource Productivity: A Political Non Sequitur

Politically, the discussion above is regarded as a non-sequitur. What does resource productivity have to do with recycling? What does “internalizing externalities” have to do with achieving or surpassing 75% diversion at a reasonable cost? What is this talk of sustainability and a postconsumer society? We just want to recycle.

Of course, resource productivity is at the top of the 3R hierarchy. It is how we achieve source reduction. It reflects the highest aims of the sustainability movement.

Yet often it is overlooked, or even rejected, both by the citizens groups that demand change, and the industry groups that often resist change. The citizens groups overlook it because they focus first on obvious problems, and demand action specific to them. The industry groups overlook it because it doesn’t seem related to the tumult of the citizens groups, and even more because they don’t care much about the issue – they want to deal with the recycling issue, so they can get back to business. As a result, even after decades, they are unable to dispense with the recycling issue, so they pass it to the next generation of lobbyists – today through groups like Ameripen, a group that generally opposes EPR policy and seeks alternatives, and eerily parallels the role once played by KAB in opposing Bottle Bills. Most of Ameripen’s participants are unaware they are recycling the same old ideas once again, and that they are likely to pass them on to their successors when they retire, unless they change their approach.

Eventually, when either group finally gives lip service to source reduction, their approach is mechanistic, not systemic. They point to specific products or services that should be advanced or eliminated, and count how much waste they have prevented. They don’t focus on the signals that can extend across the economy, to drive source reduction in myriad small and large ways.

That slows the success of the movement, because while increased recycling rates will remain an important part of the solution, only source reduction has the capacity to meet our emerging cultural expectations, as well as the practical demands of approaching zero waste.

Mechanistically, there are declining marginal benefits to recycling. At a certain point, recycling requires so much energy and labor that it generates net waste. If we simply follow the mechanistic approach to achieve 25%, 50%, 75%, and finally 100% recycling, at some point we will end up wasting more than we save. That point varies by time, material, and circumstance, and is impossible to know exactly. But it is real. The law of entropy demands it.

So the point here is not to drive waste management to absolute zero. Zero waste is a philosophy, not a quantity. A post-throwaway philosophy regards waste as a false concept. Waste represents an externality – a cost imposed on society at large. It needs to be internalized, and owned.

That is one reason environmentalists advocate the “three R” and similar hierarchies: first reduce, then reuse, and finally recycle.

In the early phases of anti-throwaway activism, the focus is usually on reduction and reuse. But understandably, established economic interest groups object to the often simplistic first-out-of- the-gate proposals, so they seldom get very far. Instead, the political process redirects advocates toward responses that tend to keep vested interests in business, albeit with extra requirements added.

Thus the political hierarchy becomes not “reduce reuse recycle” but “recycle, recycle, recycle.” This results in important gains, but eventually reaches limits, because opportunities to reduce and reuse are missed along the way.

Over the past two or three generations, environmental activists in California and elsewhere have brought forward a succession of proposals to change the way we deal with waste. The proposals – in rough order of appearance – include:

● REDUCTION: Ban the can, ban plastic in various forms (bags, bottles, clamshells, resins), ban bottled water.

● REUSE: require refillables, establish deposits.

● RECYCLE: establish redemption values on various products, require that local governments plan and meet recycling targets, establish recycled content mandates, ban landfilling of various materials.

Industry often fears the first two objectives, which they see as threatening to their core businesses. So they reflexively shift attention to the third – recycling. If they can preserve a system that deals with waste through government programs that begin where a product’s life ends, then they don’t need to make any changes in the way they do business.

This denies the recycling movement from self-correcting from simplistic “ban the bane” proposals to more systemic approaches that internalize costs much further up the stream.

As a result of these two failures – one by industry and the other by citizen advocates – the political history of recycling is itself recycled repeatedly, every few years. The typical dynamic is something like this:

1. A new generation of concerned citizens grows alarmed at the extraordinary waste in the economy – something that is philosophically repugnant to them.

2. To take practical action to reduce the problem, they focus on a particularly galling example of this waste. The citizens organize to ban or severely restrict the targeted form of waste.

3. Industry advocates fail to validate the legitimate philosophical underpinning of the citizen’s movement. Instead, they react to the specific demand of the group – generally a cease-and-desist style demand, framed in the corporations-are-evil narrative of the progressive movement.

4. Industry ignores the problem as trivial and, in any event, not their fault or responsibility. Consumers, after all, willingly bought that stuff. They own it now – it’s their problem.

5. Citizens dig in on the targeted product or package, managing to pass restrictions at the local or state level, and create risks for more.

6. Industry continues to ignore the citizens, but wonders why they seem to be growing more angry and ideological.

7. Eventually, industry groups come forward with an alternative solution to a problem they recently believed was trivial. The alternative varies in name, but usually includes the following five components:

● Data Generation: It’s not really much of a problem, and your solution is pointless

● Marketing: If it’s a problem, it’s your responsibility – so get to work

● Public Education: Here is why you should be more responsible

● Government-Will-Do-It: The government will make it convenient for you

● Model Pilot: Here, let us spell it out for you: this is the one-size-fits-all best solution, implemented in one city with seed funding from us; now please ask government to take it forward in the other 34,999 cities.

8. After two or three years, the pilot loses steam, the energy behind alternatives wanes, and the citizens group begins to pass local or state legislation that targets the product that now has them seething with anger, determined to control.

9. Once the laws are passed, interest groups quickly grow dependent on them, and resist any efforts to change them. Over time the original proponents and opponents become complacent, and eventually retire.

10. Since the underlying waste-generating system is unaffected, a new generation of citizens band together to control another repugnant example of our throwaway economy.

11. A new generation of industry advocates ignores the uprising at first, refusing to engage, but gradually develops a voluntary alternative consisting of five elements: data, marketing, education, a pilot, and a plan to have government take care of it, everywhere.

Why the Citizens Always Win, Industry Eventually Loses – Yet the Problem Remains

Once citizens have grown motivated enough to target a problem product in the waste stream, the targeted industry generally makes a few errors that seem prudent in the short term, but undermine almost everyone’s interests in the long term.

First, they focus on the first demand the citizens group makes, thinking it to be the best they will ever be able to offer. They trivialize the group and its members’ concerns, hoping the activists will tire and go away.

Second, they fail to engage the group, allowing it to become ideologically committed to its first, underdeveloped idea. They contend that engaging with the “radicals” will reward their folly, and force industry to accept the first type of solution framed by the citizens. “Don’t sit down with them – you’ll just validate their crazy idea” is the rationale.

Third, they ignore the philosophical beliefs of the group – especially, their repugnance at “throwaway” mentality and the externalization of costs to “someone else.” As a result, they fail to consider how a philosophy of sustainability might be better met, in ways that may work for both sides.

Fourth, since it is easier to engage with allies than their perceived adversaries, they meet up and collectively recycle the same uninspired alternatives their predecessors did before them – data, marketing, education, a model pilot, and a government-paid silver-bullet solution, repackaged and revised for the circumstances.

Fifth, to avoid any internal discomfort, they settle on voluntary actions to reinforce or increase the responsibilities of government, building on outdated programs, pushing them beyond their limits.

Sixth, government eventually rebels, joining with the citizen groups to push the costs back to the target product or industry, while resisting any systemic changes.

The current study on optical sorting of municipal waste reflects this process. It is built on the premise that local government should be responsible for processing all this trash, perhaps with funding from the industries that produce it. But as this study suggests, optical sorting is not always cost-effective or environmentally beneficial. Politically, it would be convenient for producers to lobby for public funds that cities could use to buy more optical sorters and separate everything into neat piles. This would be, yet again, a short-term palliative. Optical sorting systems will improve, but neither they nor any other municipal program will prove to be the panacea that finally sweeps away controversies over specific products and packages.

RECOMMENDATIONS

The above discussion suggests that there are steps for government, corporations, and activists to take, to help break out of their generations-long policy trance, and advance solutions that work.

The Role for Producers and Packagers

California could meet and surpass a 75% recycling rate in at least three ways. First, it could increase funding of the current waste management system, enabling more products to be sorted until the targets are reached. Second, it could harness the capacity of its innovative businesses, especially in the digital sector, to drive down the rate of material consumption across the state (and beyond). Third, it could do a combination of these.

Industries opposed to product or package restrictions might advocate the first approach. But if they stop there, they will set a trap for themselves. Quickly, the costs of expanding this one-size- fits-all approach will exceed the capacity of government. New laws will be adopted that shift these costs to selected products and packages. The laws will vary by product, package, locality, and state.

Alternatively, industries that wish to avoid product-specific controls could look higher up in the 3R hierarchy: to source reduction and reuse. By doing so, they will discover opportunities to form alliances with the stakeholders they believe to be their adversaries. The steps industry groups they should consider include:

First, don’t focus on the specific demand made by the citizen groups. Instead, understand the deeper philosophical and systemic concerns.

Second, consider whether there are alternatives that may better advance the deeper concerns, and that also cost less money or provide a fairer framework for competition.

Third, engage the citizen groups, respecting their commitment and validating their deeper objectives, while resisting the temptation to refute, re-educate, or pacify them. Just listen, ask questions, and seek to understand.

Fourth, engage informally, over time, sharing genuine concerns and ideas, in an unofficial capacity. Seek opportunities to collaborate to solve bigger problems at a deeper level.

It is often said that those ignorant of history, or unable to learn from it, are doomed to repeat it. Today’s recycling battles are recycled versions of yesterday’s waste wars.

Recommendations to Opponents of EPR

California’s new 75% recycling goal happens against the backdrop of continued campaigns for EPR. It is likely that, to advance toward this goal, numerous EPR proposals will emerge in the state. The proposals will not likely encompass packaging as a whole, but they will likely target specific products, or materials like plastic.

This has raised concerns of companies that see EPR as a risk. A recent report prepared by consulting firm SAIC for the Grocery Manufacturers Association (GMA), the trade group representing consumer packaged goods companies, states that there are four arguments that advocates make for extended producer responsibility (EPR) legislation:

“1. EPR causes producers to change packaging design and selection, leading to increased recyclability (higher recycling rates) and/or less packaging use. (The one exception is California’s EPR law for carpeting, which has a primary goal of diverting those products from landfills.)

“2. EPR provides additional funds for recycling programs, resulting in higher recycling rates.

“3. EPR improves recycling program efficiency, leading to less cost, which provides a benefit to society.

“4. EPR results in a fairer system of waste management in which individual consumers pay the cost of their own consumption, rather than general taxpayers.”

The researchers then go on to assert that EPR achieves few if any of these aims. Unfortunately, however, the report fails to offer better alternatives to the objectives set forth by EPR advocates. Instead, it provides a set of options that drive recycling, but do little to meet the other objectives of EPR. The options include recycling rewards, pay-as-you-throw (PAYT) disposal pricing, disposal bans for selected products, mandatory collection of specified items, mandatory recycling service levels, and landfill surcharges, among others.

Except for pay-as-you-throw (PAYT), these policies mostly increase costs on government and taxpayers, not producers. This might at first seem to benefit GMA and its member companies. But it also sets a trap for them: as government costs rise, so does the political pressure to shift those costs to industry.

Where the SAIC study falls short is precisely where EPR tends to fall short. As SAIC writes, the policy alternatives they present “are not effective in causing producers to design for the environment, but neither is EPR” (emphasis added). Thus, the authors criticize EPR because it does not promote design-for-environment in packaging, but can offer no alternative.

This prompts environmentalists to do the opposite of what GMA wants. If they want to promote design-for-environment, they can either try to design a better EPR system, or do nothing. The result: they dig in to support EPR.

The industry opponents of EPR would be more successful if they met the following checklist of requirements for alternatives: First, acknowledge the legitimacy of the philosophical driver behind EPR: the concept of waste is increasingly obsolete. Second, acknowledge the need to internalize externalities like pollution and waste. The question is not whether to do so, but how. Third, demonstrate how the sector believes it will outperform EPR against the four criteria its proponents claim, or higher-level ones. The industry alternative cannot be yet another version of Not-A-Bottle-Bill. It cannot consist of marketing, data, pilot projects, and new costs for government. Instead, its focus should be on: 1. Reducing life cycle resource use 2. Encouraging source reduction first, then reuse, then recycling 3. Promoting the philosophy that all wastes are resources – the idea behind the Zero Waste movement Then, the opponents should collaborate on higher-level solutions, asking:

1. Which externalities need to be internalized, at what level? 2. Which can be internalized through voluntary commitments? 3. Which voluntary program(s) can we put into place? How can it/they be expanded? 4. Which externalities can only be internalized through legislation? How can the legislation be most effective?

If they took those steps, the industry opponents would find themselves in a much broader coalition that draws together an array of highly-motivated stakeholders advocating concepts like Zero Waste, the Circular Economy, Biomimicry, and others. Stakeholders from these communities have expressed five key objectives for any new sustainable package system which, if met by industry groups, could earn the support of genuine activist stakeholders. The five are: 1. Maintain and strengthen the existing recycling infrastructure. This does not mean strengthening a monopolistic mixed recycling infrastructure, but a robust decentralized marketplace that encourages reuse and recycling. 2. Don’t transfer ownership and control of materials that are already being successfully recycled. 3. Focus on generating increased recycling – don’t undermine existing recyclers. 4. Divert material before it enters a mixed recycling or mixed waste stream. 5. Internalize externalities – assign ownership of the costs. This does not mean transferring ownership of materials already being diverted from the waste stream, but assuring that producers/users/beneficiaries pay for the costs of waste, rather than having those costs imposed on the public at large.

The point is not to immediately rush to embrace all these principles. The point is that, in these principles, there is implied common ground that can bring all the parties closer to an approach most or all can support. How to Engage and Find Common Ground

Today’s approach by opponents to EPR is much like the beverage sector’s initial reaction to deposit advocates: solve the problem at government’s expense. But more than a generation ago, one maverick leader within the beverage sector took a more innovative approach. His initiative, called the Closed-Loop System, launched a new phase in the recycling movement.

The original Closed-Loop System was developed by Coors Brewing in the 1970s, under the leadership of then-CEO Bill Coors. Under that system, the company offered between a half-cent and one-cent per can as a bounty. With zero legislation and little infrastructure, they birthed the system of aluminum can recycling that remains the most successful in the packaging field.

The Coors initiative did not come from a closed-door strategy session with competitors. It emerged from casual discussions with conservationists in his home town of Golden, Colorado. Coors visited the paths in the hills around his brewery, and could see and feel first-hand the problems that upset the conservationists.

While the Closed Loop System was highly successful as a single-company initiative, Bill Coors believed that it could be even more effective in legislative form, or as a joint commitment of the industry. The idea was to simply set a minimal bounty of one or two cents per can, then let the marketplace drive returns. The legislative approach enabled the companies to pay higher prices, since their competitors would too. But no takeback mandates or state agencies would be needed.

Whether or not the Closed Loop approach might have value in today’s recycling debates is uncertain. Do not conclude that this is the system the authors here advocate. But Bill Coors had the right idea, from both a policy and process perspective. The best way to head off a set of policies you strongly oppose is to embrace the valid principles they seek to advance, through a better idea that avoids the costs of unnecessary mandates.

CLOSING INTRODUCTION

The Future 500 Bioplastics Project was intended to determine whether PLA is a contaminant in mixed recyclables, and whether optical sorting might provide a solution. The study demonstrated that, while PLA is not a contaminant, other materials are, and a system of auxiliary MRFs equipped with optical sorters could significantly reduce the problem, helping advance the state toward 75% recycling.

But the pilot also demonstrated that MRFs with optical sorters can be expensive, and are no panacea today. It will not be possible to approach zero waste with this approach as a centerpiece.

With that in mind, it is advisable for both industry and zero waste advocates to think higher on the 3R hierarchy, and consider ways to internalize externalities not to impose pain, but to drive innovation, and tap the potential of technology to help step further past the consumption-based throwaway economy.

The above discussion suggests steps that industry groups, EPR supporters and opponents, recycling advocates, and zero waste advocates can take to begin to break the multi-generation cycle that gridlocks them, and find ways forward that redefine wastes as resources that we first source-reduce, then reuse, and finally recycle, in ever increasing proportions.