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to create a situation wherein industrial materials users will substitute secondary materials for virgin materials to the extent this results in more efficient use of resources. This situation could be brought about by three types of activities: (1) actions to inhibit the use of virgin materials, (2) actions to create a demand for secondary materials, and/or (3) actions to create a supply of secondary materials of such quality and at such a price that they will appropriately satisfy the new demand.

Inhibitory mechanisms, aimed at restricting the consumption of virgin materials, would normally take the form of disincentives or regulatory actions. Actions to create demand or supply would normally require the provision of positive incentives. An analysis of each of the major options follows.

Inhibition of Virgin Materials Use. If the supplies of virgin materials available to industry were denied or restricted, the cost of the remaining available portion would rise as a consequence of continuing demand. In relation to secondary materials, then, virgin materials would become more expensive, and more secondary materials would be used. Similarly, if the costs of virgin materials were raised artificially (by taxation, by removal of depletion allowances, capital gains treatment, or other means), the same consequence would result.

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The desirability of major intervention into virgin materials use in order to increase recycling can be easily questioned on the grounds that a very large materials tonnage (5.8 billion tons) may have to be affected in order to increase a small portion (55 to 60 million tons).

Several "natural" events are likely to cause virgin materials to rise in cost without any form of government intervention. These events include: (1) tighter pollution control regulations and enforcement, resulting in higher pollution control costs; (2) increasing energy costs, which will affect virgin materials proportionately more because they are more energy intensive than secondary materials; (3) depletion of high quality domestic reserves and the need to exploit leaner ores or to import raw materials across greater distances; (4) potentially adverse foreign trade policies; and others. The timing and impact of these market corrections is difficult to predict but are expected to be significant.

"Artificial" intervention is possible through the institution of virgin materials taxes and/or the removal or modification of favorable tax treatment of virgin materials and energy substances, regulation of virgin materials that are available from Federal land, denial of markets to virgin materials through Federal procurement policies, changes in transportation costs through Federal regulation of rail and ocean freight rates, changes in Federally mandated labeling regulations, and, at the extreme, the institution of national materials standards that would limit the use of virgin materials in major materials to some percentile below that now common.

The costs, benefits, and probable effectiveness of each major action listed above are under analysis. Based on initial findings, EPA sees justification for more aggressive Federal procurement policies to limit the use of virgin materials in products (with all the implied consequences of such a leadership posture), actions to remove freight rate

disparities that appear to favor virgin materials, and removal of labeling regulations that discourage consumer purchasing of products that contain "waste" materials.

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Fiscal measures (e.g., taxes to discourage virgin use) could be addressed to the artificial economic benefits which now favor virgin materials use. Such measures, however, would have a variety of other impacts as well, which are being evaluated to determine whether or not fiscal measures to inhibit virgin materials uses are cost effective. In light of a series of natural events that will raise virgin materials costs especially rising energy costs-fiscal intervention may not appear either necessary or desirable.

Regulatory actions are viable alternatives for increasing resource recovery, but such actions, as related to virgin materials resource use, need further evaluation to determine their side effects, which may be adverse.

Demand Creation. EPA's investigations to date lead to the conclusion that positive economic incentives may be desirable in order to arrest the relative decline of materials recovery and to increase the proportion of total national materials needs satisfied from waste-based raw materials.

There is evidence that energy recovery from mixed municipal waste will become a very real option to both private and public sector waste management organizations without incentives of any sort and that limited materials recovery-steel, aluminum, and glass-will accompany such energy recovery activities.

The most efficient incentive for materials recovery would be one which results in the creation of new demand by industry for secondary materials, such as some form of tax incentive or subsidy payment to users of secondary materials. If an incentive results in a "demand pull" by industry, such demand will automatically result in changes in the way wastes are stored, collected, and processed. The key to increased recovery is the waste commodity buyer rather than the commodity supplier. Only if the buyer finds waste materials a more economical alternative than virgin materials will greater quantities be utilized. Incentives provided directly to the buyer are most likely to have the most dramtic effect on his actions.

Supply Creation. Incentives for demand creation are viewed as sufficient inducement to bring about resource recovery at an accelerated rate. Such incentives, if appropriately designed, should spur private and public investment in resource recovery plants and systems, to deliver to industry the types and quantities of secondary materials it will demand.

As incentives bring about demand by consumers for increased quantities of secondary materials, the demand will reverberate down the chain of suppliers and will bring about some changes in supply patterns. It is likely, for example, that increased "skimming" of accessible wastes (removal from wastes before discard) such as newspapers, corrugated boxes, and office papers would occur from municipal and commercial sources and that such recovery would take place at lower overall costs than technological sorting.

Most of the solid waste materials that would be demanded by industry now pass through the hands of municipal solid waste management organizations who collect waste in mixed forms. In order to sell all proportions of waste now collected, these organizations face two alternatives: to collect waste fractions separately or to process mixed wastes into separate fractions.

Both alternatives have drawbacks. Separate collection of different waste fractions, while once widely practiced, has virtually disappeared. Combined waste collection using the more efficient compactor truck has become standard in residential, institutional, and commercial waste collection practice. Reinstitution of separate collection will require changes in practices and equipment.

The processing option is capital intensive. The economics of processing require large plant sizes in order to take advantage of economics of scale. In order for the economics to be attractive, plant sizes of 1000 tons per day of input or higher are required. There are few communities with such high generation rates.

If demand incentives result in higher secondary materials prices, public and private waste management organizations would be able to justify processing of municipal wastes for recovery in lieu of processing for disposal. Higher prices for waste-based commodities will also permit the use of smaller capacity plants; the higher prices will compensate for the higher processing costs of small plants.

In smaller communities, where recovery by processing is not likely to be economical, provision of supplies by separate collections is a possibility. The separate collection option, which was once practiced extensively, will require technical, institutional, and social changes to become a part of today's society. At this point, enough knowledge has been gained to see that citizen enthusiasm for resource recovery (expressed in the institution of thousands of neighborhood recycling centers), holds the potential for new and innovative options for solid waste collection. Furthermore, the successful experience of Madison, Wisconsin, where city crews collect newspapers separated from other wastes by the citizenry, indicates that alternatives to large scale recovery plants do indeed exist.

Such approaches to supply creation are still being analyzed as part of EPA's resource recovery studies program.

Other Options. In addition to action programs that would impact directly on resource recovery, a number of related activities are also under consideration whose consequences would be to attack the broader problem of "excessive materials consumption" in the United States rather than one aspect of that problem, low resource recovery

rates.

Source reduction proposals are usually aimed at a particular product (beverage containers) or a class of products (packaging, appliances).

Source reduction options fall into four categories: (1) bans or other disincentives applied to a product or class of products; (2) performance standard setting that will result in longer-lived products, whereby more "use" or "service" is obtained from a given quantity of materials than is the case if rapid obsolescence is promoted; (3) substi

tution of production processes with low waste yields for waste-intensive processes, for instance, dry paper making in place of wet pulping; and (4) substitution of products with low-materials requirements for those with high materials requirements, for instance, electronic calculators for the more material-intensive mechanical calculators or substitution of electronic communications media for media that require paper.

EPA's investigation of source reduction concepts is currently aimed at packaging and other disposables, products which are particularly significant in their contribution to solid waste quantities and whose consumption has been growing rapidly. An EPA study is underway to examine alternate taxing and regulatory measures for reducing the quantities of packaging materials consumed.

Such measures might be successful in either (a) reducing consumption of packaging and other disposables, (b) stimulating designs of more recyclable packaging or products, or (c) providing funds for defraying the litter clean-up, collection and disposal costs presently associated with these materials. The secondary effects of these measures, such as economic dislocations and employment disruptions are also being examined.

Of the various major options available for increasing the rate of recovery, intensified Federal procurement of waste-based products and further exploration of positive demand incentives appear most desirable in the long term, accompanied by activities to bring into line the virgin and secondary materials freight rates. More information is needed about the necessity for and the effects, fairness, and workability of both source reduction and resource recovery incentive concepts before any such measures are implemented.

Demand creation would be achieved most efficiently by the direct route of rewarding the waste consumer for using secondary materials. Incentives for demand creation, if properly designed may bring about resource recovery at an accelerated rate and would probably spur private and public investment in resource recovery plants and systems to supply secondary materials. Certain changes in supply patterns may emerge which will result in some waste materials circumventing the recovery plants. "Skimming" of accessible wastes such as newspapers, corrugated boxes and office papers is such a change. For smaller communities where recovery by processing is not likely to be economical, provision of supplies by separate collection is a potential solution.

Actions aimed at removing certain artificial barriers are under serious consideration by EPA, especially Federal procurement policies to increase the use of secondary materials in products and actions to remove freight rate disparities that appear to favor virgin materials.

Taxes and regulation to reduce the consumption of certain product categories such as packaging to reduce the load on the solid waste stream are presently under investigation. Stimulation of more recyclable package designs and provision of funds for litter clean-up are secondary benefits of such actions.

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D. U.S.E.P.A., "Second Annual Report on Resource Recovery and Source Reduction," (March 1974), pp. vii-xiii:

RESOURCE CONSERVATION, ENVIRONMENTAL AND SOLID WASTE

MANAGEMENT ISSUES

Continuation of historical growth rates of production and consumption will maintain demands on raw material and energy supplies and will lead to the generation of increased quantities of solid waste.

There exist a number of areas of considerable uncertainty and risk regarding future resource supplies including: the extent of mineral discoveries and the costs of exploiting them; future growth rates of world market demands; and the impact of geopolitical events on international resource markets.

Future material supply efforts could place burdens on the physical environment including potential increases in levels of air and water pollution and potentially detrimental effects of large-scale surface mining and forest cutting operations.

Increased solid waste generation rates could involve higher waste management costs, greater land disposal requirements, and environmental risks attendant to waste collection, processing and disposal. The potential energy retrievable from post-consumer residential and commercial solid waste (equivalent to 400-500 thousand barrels of oil per day) could supply roughly 1 percent of the Nation's current energy demand. Materials recycled from post-consumer solid waste could provide 7 percent of the iron, 8 percent of the aluminum, 20 percent of the tin and 14 percent of the paper consumed annually in the United States. While these percentages represent the practical potential for resource recovery to provide new energy and material supplies, actual recovery levels will be constrained by technical economic and institutional factors.

Resource recovery and source reduction have the potential of achieving reductions in the cost of solid waste disposal. Source reduction would also effect waste collection cost savings.

Utilization of recycled materials rather than virgin materials generally results in reduced levels of atmospheric emissions, reduced effluent discharges to natural waters and reduced generation of industrial and mining wastes when all stages of material acquisition, processing and transportation are considered. In addition, recycling is typically much less energy intensive than virgin material production. Source reduction is believed to result in a reduction of the negative environmental impacts associated with the production of materials and products and the generation of wastes.

While resource recovery and source reduction offer potential for conservation of resources and improvement of environmental quality the mechanisms through which they could be accomplished should be evaluated from the standpoint of economic feasibility and efficiency.

The economics of resource recovery and source reduction may be expected to improve for several reasons; land disposal and incineration costs may be expected to rise as more environmentally sound practices are adopted; costs of production from virgin materials may be expected to increase due to pollution control and other costs; and

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