Jason Barton

Professional Information and Energy News

External Costs to be Paid by Consumers and Producers rather than Governments or Taxpayers

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Interesting. The people in Maine have gone some way towards internalizing externalities–the costs associated with a good that are paid by neither producers nor consumers, but by involuntary third parties. The world’s largest modular carpet manufacturer, Interface, and their CEO and founder, Ray Anderson, have taken similar steps, but on their own, rather than mandated by government, to reclaim their carpets, recycling the materials and reusing them within their own factories. As an intelligent business man and also someone who cares about the environment, Anderson saw this as a win-win situation, gathering materials at low cost when going to deliver new products to buyers, and converting what would otherwise be waste into new inputs.

This process, what they’ve here called Extended Producer Responsibility (ERP), has been called ‘cradle to cradle’ thinking, and is, hopefully, gaining favor. It mimics ecological systems in which there is no such thing as waste, only materials and energy constantly cycling through a closed system.  William McDonough & Michael Braungart wrote a book that has been a sort of seminal text on the subject. They argue, as do many economists, that our present industrial system is doomed for failure in the way we think of inputs and outputs, with little regard for where those inputs are coming from, and where they go when we’re finished with them.

For instance, landfills are an expensive, unhealthy use for land. Taxpayers bear the costs. Now, at least in Maine, producers will bear more of those costs, presumably passing them on to the consumers, forcing all of us to rethink supply chains and how we treat waste. The plan has much potential.

A trick is to make this a market-driven process, rather that one hindered by excessive government bureaucracy. Then again, policies that ensure costs are paid by consumers and producers, rather than by taxpayers (who may not even be using the products) and governments, this seems to me to be sound conservative politics.

Governments oblige manufacturers to take back used goods for disposal

Mar 31st 2010 | NEW YORK | From The Economist print edition

FOR seasoned shoppers, “buyer’s remorse” is a familiar feeling. “Seller’s remorse” may also become common soon, as ever more governments order manufacturers to assume the cost of disposing of their products after consumers are done with them. Until recently, most laws on “extended producer responsibility” (EPR) or “product stewardship” applied only to specific types of goods, such as car tyres or electronics. But in late March Maine, following the lead of several Canadian provinces, became the first American state to enact a blanket EPR law, which could in principle cover any product.

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Governments also hope that EPR laws will encourage firms to rethink the way they make products, designing them for longevity and recyclability rather than for the landfill.

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This worries businesses, few of which are eager to pick up the bill for waste disposal. Some business associations, such as the California Chamber of Commerce, have denounced EPR bills as “job killers”. They point out that the increased costs are ultimately borne by consumers. But that does not worry supporters of EPR, who argue that the price of a product should reflect its full “life-cycle” costs, including disposal, rather than simply leaving taxpayers to make up the difference. Moreover, unless manufacturers are forced to bear the costs, they will have no incentive to make their wares easy to dispose of.

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Not all companies are mourning, however. Some manufacturers and retailers have voluntarily rolled out collection programmes in states that do not require them. Hewlett-Packard, a technology firm, claims to design its products with ease of recycling in mind—cradle-to-cradle, as the jargon has it. Staples, which sells office supplies, and Home Depot, a home-improvement retailer, both offer national take-back programmes in their stores for such items as computer monitors, compact fluorescent light bulbs and batteries. Such programmes may enhance customer loyalty, particularly among environmentally conscious consumers.

Read the entire article here.