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Is the Deposit-Refund System for Lead Batteries in Delhi and the National Working Paper, No 68–12 Is the Deposit Refund System for Lead Batteries in Delhi and the National Capital Region Effective? Yamini Gupt Published by the South Asian Network for Development and Environmental Economics (SANDEE) PO Box 8975, EPC 1056, Kathmandu, Nepal. Tel: 977-1-5003222 Fax: 977-1-5003299 SANDEE research reports are the output of research projects supported by the South Asian Network for Development and Environmental Economics. The reports have been peer reviewed and edited. A summary of the findings of SANDEE reports are also available as SANDEE Policy Briefs. National Library of Nepal Catalogue Service: Yamini Gupt Is the Deposit Refund System for Lead Batteries in Delhi and the National Capital Region Effective? (SANDEE Working Papers, ISSN 1893-1891; WP 68–12) ISBN: 978- 9937-8521-7-3 Key words: lead battery recycling deposit refund systems extended producer responsibility green tax SANDEE Working Paper No. 68–12 Is the Deposit Refund System for Lead Batteries in Delhi and the National Capital Region Effective? Yamini Gupt University of Delhi South Campus New Delhi, India April 2012 South Asian Network for Development and Environmental Economics (SANDEE) PO Box 8975, EPC 1056, Kathmandu, Nepal SANDEE Working Paper No. 68–12 The South Asian Network for Development and Environmental Economics The South Asian Network for Development and Environmental Economics (SANDEE) is a regional network that brings together analysts from different countries in South Asia to address environment-development problems. SANDEE’s activities include research support, training, and information dissemination. Please see www.sandeeonline.org for further information about SANDEE. SANDEE is financially supported by the International Development Research Center (IDRC), The Swedish International Development Cooperation Agency (SIDA), the World Bank and the Norwegian Agency for Development Cooperation (NORAD). The opinions expressed in this paper are the author’s and do not necessarily represent those of SANDEE’s donors. The Working Paper series is based on research funded by SANDEE and supported with technical assistance from network members, SANDEE staff and advisors. Advisor M.N. Murty Technical Editor Priya Shyamsundar English Editor Carmen Wickramagamage Comments should be sent to Yamini Gupt, University of Delhi South Campus New Delhi, India Email: [email protected] Contents 1. Introduction 1 2. The Deposit Refund Scheme and Battery Recycling in the NCR 2 3. Study Area and Data 3 4. Methodology 4 4.1 Examining Consumer and Retailer Decision Making 4 4.2 Incentives Faced by the Un-organized and Organized Battery Recycling Sectors 5 5. Results and Discussion 5 5.1 Consumers and the DRS 5 5.2 Retailers’ Decision to Comply 6 5.3 The Unorganized Battery Recycling Sector 6 5.4 The Organized Battery Recycling Sector 7 5.5 Cost of Complying with BMHR (2001) 8 6. Policy Options for Safe Disposal of Used Batteries 9 7. Conclusion and Policy Recommendation 9 8. Acknowledgement 10 References 11 List of Tables Table 1: Summary Statistics of Variables in the Retailer Study 12 Table 2: Logistic Regression of Independent Variable ‘comply’ – Compliance with BMHR by Selling Used Batteries only to Manufacturer 12 Table 3: Illustrative Costs of Setting up a Smelting Unit in the Organized Sector in NCR 13 Table 4: Financial Details of Chloride Metals Ltd. 13 Table 5: Compliance Cost 14 Table 6: Policy Options and Recommendations 15 List of Figures Figure 1: Price Trend of Lead at London Metal Exchange (Jan 2005 to Dec 2010) 16 Figure 2: Recycling Pathway of Organized Smelters 17 Figure 3: Recycling Pathway of Un-organized Smelters 18 Figure 4: Structure of Lead Acid Battery Recycling Industry in Delhi 19 Figure 5: Locations of the Retailers Surveyed 20 Appendices: Survey Instruments Appendix I: Questionnaire for Consumers 21 Appendix II: Questionnaire for Retailers 22 Abstract Lead acid batteries generate hazardous waste in the form of lead, with serious environmental and health implications. These batteries are recyclable and the present Deposit Refund System for recycling operating in Delhi provides a discount to consumers when they purchase a new battery and return used batteries to retailers. The retailers in turn determine whether the batteries will be recycled in an environment-friendly or unfriendly manner by selling them to manufacturers or informal sector scrap dealers, who then sell them to un-registered smelters. This study finds that that the economic instrument that brings used batteries into the recycling system works exceptionally well. However, organized lead recycling is undertaken only in a limited manner. Rather, retailers prefer to sell used batteries to the informal sector because they obtain higher prices, and incur lower storage costs and taxes. Current rules prevent scrap dealers from selling batteries to regulated smelters. Relaxing these rules would reduce raw material shortfalls currently experienced by the sector and bring more batteries into the formal recycling market. In addition, an alternate policy instrument to consider is a green tax on batteries coupled with a partial or complete refund when the manufacturer ensures environment-friendly recycling. Key Words: lead battery, recycling, deposit refund systems, extended producer responsibility, green tax 6 South Asian Network for Development and Environmental Economics Is the Deposit Refund System for Lead Batteries in Delhi and the National Capital Region Effective? Is the Deposit Refund System for Lead Batteries in Delhi and the National Capital Region Effective? 1. Introduction About 80% of the lead produced worldwide is used in the manufacture of automotive lead acid batteries (Kreusch et al., 2007). India is one of the fastest growing markets for passenger cars and the world’s second largest manufacturer of two wheelers. It holds the distinction of being the largest manufacturer of motorcycles and the fifth largest manufacturer of commercial vehicles. Thus, the demand and use of lead in India is expected to significantly expand in the coming years. The industry manufacturing lead-acid batteries (automotive as well as other) in India is currently growing at a rate of over 20% per annum (EIL, 2009), and is heavily dependent on lead, which constitutes 50% of the operational cost of producing a battery (Das, 2009). Lead acid batteries have a life of three to four years. This contributes to an almost un-noticed but serious environmental problem of hazardous waste.1 Lead is a highly toxic metal and is considered one of the 17 most dangerous chemicals in terms of the threat it poses to human beings and the environment by the US Environmental Protection Agency (Wu et al., 2004). Lead can cause behavioral problems and learning disabilities and can be fatal to children who inhale or ingest it. Lead poisoning can lead to impaired physical growth, kidney damage, retardation, and in extreme cases even death. Birth defects like cardiovascular defects, oral clefts and musculoskeletal anomalies diagnosed in newborns are also associated with lead exposure (Vinceti et al. 2001). Furthermore, lead can also be toxic to plants, diminishing their productivity or biomass, and eliminating some species (Singh, et al., 1997; Xiong, 1997; Patra et al., 2004). Globally, recycled lead is an important source of lead, which offers both a solution and challenges to the health hazards posed by this mineral. Demand for lead is met from both primary and secondary sources. Primary sources constitute lead ores extracted from mines, whereas secondary sources of lead are smelters who recycle lead from lead scrap. The scrap mainly comprises of used lead-acid batteries, old lead pipes and cables. Lead acid batteries are among the most recyclable products in the world with a reported collection and recovery rate of 96% in the US during 2004 to 2008 (Battery Council International, 2009) and 85% in Western Europe (Bied-Charreton, 1993). Used lead acid batteries (all types) with an average 10.5 kg of lead (Smith, 1999) serve as a source of raw material required for battery manufacturing. High rates of recycling are achieved in the countries where there is legislation governing the collection and recycling of lead-acid batteries. In poorer economies such as Egypt and India, very high rates of recycling are found but not reported because a large quantity of lead is recycled informally (Roberts, 2003). The informal sector in lead recycling can be extremely hazardous, particularly for workers. Lead recycling is often supported through a well-functioning Deposit Refund System (DRS) in the market for batteries (branded and generic). In this system, people can get a discount on the purchase of a new battery if they return the used one to the retailer. Peter Bohm (1981) describes this as an arrangement between consumers and producers where a refund is provided even without taking a deposit. While a DRS has existed in the Indian battery markets for a long time, in 2001 the Indian Government put in place a set of rules to regulate the recycled lead market. These rules stipulate where and how lead is supposed to be recycled and have supported the development of a market for recycled lead through a DRS for batteries. Since a legal framework for using recycled lead batteries has been in place in India for over ten years, it is important to assess how effective the regulations have been in terms of recycling and disposal of lead-acid batteries. Thus, the objectives of this study are to: a) understand the strengths and weaknesses of the current DRS in order to 1 Lead acid batteries are classified as a hazardous waste under the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal. 1 ensure better recycling of lead-acid batteries; and b) identify policy instruments that could complement the existing system. We do this by studying the roles of and incentives faced by major stakeholders in both the organized and unorganized battery recycling sectors.
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