March/April 2012
Canadian electronics recyclers face eight different provinces’ e-scrap laws, though some harmonization efforts are underway. The provincial programs tend to play a much larger role in deciding who can collect and process electronics—and how much material each company will handle—than the programs in most U.S. states.
By Amanda Smith-Teutsch
There’s no way to know how long Canadians have been recycling their electronics, but Alberta enacted what was reportedly North America’s first law on the subject in 2004. In 2010, five provincial programs reported collecting a combined total of more than 70,000 mt of used and discarded electronics. The number of programs now stands at eight, and the country should have plenty of material to keep them busy: Canadians spent $11.5 billion on consumer electronics in 2010, according to market research firm NPD Group (Port Washington, N.Y.).
Governance of solid waste and recycling issues resides in the provinces in Canada, just like it resides in the U.S. states, giving both countries a patchwork of laws that can have electronics manufacturers, collectors, and processors scratching their heads—or pulling out their hair—trying to meet the requirements of each. That might be where the similarities end, however, because the provincial governments play a much larger role in deciding how e-scrap recycling will work in their respective domains than the states do in theirs. Recyclers see both opportunity and limitations in such a system.
Province by Province
Four Canadian provinces are working toward harmonization of their e-scrap recycling systems to make it easier for electronics manufacturers and retailers and end-of-life electronics collectors, refurbishers, and recyclers to operate in multiple provinces. In each of these harmonizing provinces—British Columbia, Saskatchewan, Nova Scotia, and Prince Edward Island—electronics manufacturers and retailers created a nongovernmental organization that manages the electronics stewardship program. (Nova Scotia and PEI share one program, Atlantic Canada Electronics Stewardship, based in Truro, Nova Scotia.) The program sets electronics handling fees, or EHFs, tied to the sale of certain new electronic products and uses the revenue from the fees to cover the cost of collecting, transporting, and recycling the covered used electronic products. The fees range from less than a dollar for computer peripherals up to CN$40, which ACES charges for large televisions or similar display devices. The maximum fee in other provinces ranges from CN$23 to about CN$32. Some provinces specify the consumer pays the fee; others charge the importer, manufacturer, or retailer, but those entities can pass the charge on to the consumer, typically as a separate fee. Some provinces ban certain electronics from the landfill; others do not.
Notably, these programs control the flow of the regulated end-of-life electronics in the province. Only companies or entities they authorize can collect, transport, or process these electronics, and each program disburses the collected materials—and the fee dollars—to approved recyclers according to specified criteria or formulas. This approach to managing end-of-life electronics is likely to become more prevalent across Canada: Manitoba’s system changed in 2011 to a similar format, and New Brunswick and Newfoundland and Labrador are likely to join the ACES program. In Alberta, the Alberta Recycling Management Authority (Edmonton, Alberta), a quasi-governmental entity that also handles the province’s tires and paint, takes in covered end-of-life electronics at municipal collection sites. Like the abovementioned programs, it disburses the material to approved processors.
Ontario’s program, Ontario Electronic Stew-ardship (Toronto), is a hybrid. It also imposes an EHF, and in part it operates like the harmonizing provinces: It approves companies to collect and process the end-of-life electronics, allocates the material to processors through an annual bidding system, and disburses the fee dollars accordingly on a per-pound basis. Collectors can choose to participate in that system—or they can opt out and compete for material on the free market. The province’s approved e-scrap processors can buy end-of-life electronics from anyone who collects them, competing on price, delivery terms, relationship, and so forth, just as they compete for material in other scrap markets. (The processors also can collect their own e-scrap.) The processors still receive OES fee dollars in return for processing the material, but their profits will depend on how much they had to spend to acquire the scrap.
With this free-market approach, “Ontario is the proverbial Wild West” of electronic scrap right now, says Rudy Westerneng, owner and “recychologist” of GreenGo Recycling Depot (Barrie, Ontario), which collects e-scrap and nonferrous metals. His revenue is now based on his company’s ability to acquire and sell used electronics—to buy low and sell high. The system “has successfully commoditized electronic waste,” he says. “Whoever hustles gets the deal; it’s not just the standard collection rate. … There’s enough incentive that [collection companies] like mine are aggressively pursuing the [electronic scrap], and processors are aggressively pursuing companies like mine.” In fact, GreenGo might be the first e-scrap collector in the province to purchase e-scrap from consumers and businesses. It offers a standard per-pound rate to those who come in off the street with material (i.e., peddlers); larger operations that pre-sort their e-scrap and bring in higher-value material get better prices. Westerneng estimates that one-third to one-half of all electronics recycled in the province go through the OES system, with collectors who have chosen the free-market approach handling the remainder.
This system works, Westerneng says, because the EHF is a sufficient incentive for collectors and processors to handle even material that has a low commodity value. The current fee levels are “almost perfect” to create profit margins of 5 to 15 percent for his company “while maintaining a good, steady flow of business,” he says. “I hope the processors are achieving the same thing.” He notes, however, that OES is considering more changes, among them lowering the EHF by as much as 30 percent.
Québec’s electronics recycling system is still under development, but it’s likely to look more like a U.S. state law. In all but one of the states that regulate electronics recycling, the state places the recycling burden entirely on the product manufacturers using what’s called the extended producer responsibility model. Generally, these laws require electronics manufacturers to submit to the state an electronics plan, implement that plan, and ensure the recycling of a specified volume of the regulated end-of-life electronics. The states do not provide funding for recycling, nor do they approve collection or processing facilities, though some require the manufacturers to use processors that hold third-party certifications such as R2/RIOS™. (Unlike the other U.S. states, California imposes an advanced recovery fee on the sale of certain electronic products, and processors can apply to receive those funds if they meet state requirements.)
Comparing U.S. and Canadian Approaches
ISRI supports the extended producer responsibility approach—or other financing vehicles—to support the recycling of residential/household electronics in the short term, “until the recycling stream can support itself,” says Eric Harris, ISRI’s associate counsel and director of government and international affairs. In other words, looking at the market value of the commodities that come out of electronic scrap and the costs of properly collecting materials, processing them, and handling the potentially hazardous substances they contain, electronic scrap recyclers find it difficult to make a profit without other revenue sources. As Westerneng wrote in a July 2011 post on the GreenGo blog (www.greengosolutions.com), “in approximately 90 percent of consumer electronics, the intrinsic recoverable commodity value does not cover the recycling process.” From an economic perspective, “consumer electronics are simply not worth recycling without an incentive (or subsidy).” That doesn’t mean such recycling is a bad idea, he adds, as the alternative—landfilling—is worse. In the United States, particularly in states without electronics recycling laws that assign responsibility for recycling to manufacturers, recyclers typically charge a fee to companies or individuals who bring in low-value, difficult materials (such as cathode-ray tube display devices) for recycling. Changes in product design, processing methods, or commodity markets could eventually make electronics processing profitable on its own.
One key difference in the two countries’ approaches is who bears the cost, says Steve Skurnac, president of Sims Recycling Solutions, Americas (West Chicago, Ill.), Canada’s largest e-scrap processor and one of the few electronics recyclers that operate in both countries. In most U.S. states with e-scrap laws, “manufacturers themselves are responsible for the costs of recycling, creating programs, or ensuring targets are met—and in some cases, all of the above.” In contrast, in most of the Canadian provinces that have e-scrap laws, the consumer bears those costs by paying the EHF. You can also look at it as a matter of hidden versus visible costs, says Wallace MacKay, vice president of corporate development, sales, and marketing for Global Electric Electronic Processing (Barrie, Ontario), which also operates in both countries. In Canada, “most programs are funded by visible fees—the consumer purchases a product, and the fee is shown as an extra item on the invoice or receipt—rather than a hidden fee, which is shown as part of the price of a computer,” he says. Original equipment manufacturers “generally prefer visible fees. When they are marketing their products, they can advertise one price … across all provinces,” with the consumer paying the EHF at the register.
The greater control exerted by the provincial programs has its pros and cons as well, these recyclers say. In some provinces, the program sets “all of the conditions for all participants … and the costs of the program [that are] charged to the manufacturers. Then the government handles making payments to recyclers, and goes so far as to audit and approve the recyclers in the programs,” Skurnac says. This approach creates incentives that might encourage more collection of materials or the use of processing techniques that result in greater materials recovery or more cost-effective processing techniques, depending on how a province has structured its material allocation and payment system. By only allocating materials to processors who meet the province’s standards, “it weeds out sham recyclers,” Skurnac says.
Further, provincial collection points only accept the electronic products that the province’s law covers, meaning processors know what they’ll be getting. In the United States, “it is trickier, as people send truckloads of material that might include [items] not covered by legislation, and we have to work with our collection partners to make sure we don’t have items like blenders and microwaves coming in the door,” Skurnac says. The commodity streams from small appliances such as those contain little value, but at least one province, British Columbia, will cover them in the next phase of its program’s expansion. That means participating recyclers will be required to accept them, and nearly everything else that has a plug or batteries, as part of the electronics stream.
What Skurnac likes less about the provincial programs is the flow control—the program’s distribution of recyclables to processors. In several provinces, the approved processors bid to get the collected material, and the program administrator decides what proportion each will receive. The Saskatchewan Waste Electronic Equipment Program (Regina, Saskatch-ewan), for example, states on its website that it allocates material to approved processors according to four principles: facility location, processing capacity, material recovery, and processing cost. With a material-allocation structure such as this, “there is really no way to improve your position,” Skurnac says. “As a company considering investment in equipment and hiring, you don’t know how much you are going to get. … It becomes a bit of a chicken-and-egg scenario [for] how much investment I’ll make.” On the other hand, companies that win a bid can replace that uncertainty with a guaranteed stream of material to process, and a guaranteed stream of revenue from the program, for that year, Skurnac says.
The Canadian Association of Recycling Industries (Ajax, Ontario) takes issue with the flow-control aspect of these programs as well. “It’s anti-competitive and very difficult for smaller recyclers to break in,” says CARI Executive Director Len Shaw. Competition inspires businesses to innovate, Shaw says. He points to the development of shredder downstream separation equipment as an example. “After the shredder, there are several technologies … all aimed at maximum recovery. It was not the automobile industry that developed these technologies. It was the recycling industry, left alone to compete, to improve and innovate, and to make things better.”
Andrew Rubin of FCM Recycling (Lavaltrie, Québec), which recycles electronics in several provinces, calls the provincial programs more “socialist” than “capitalist” in design. You bid once in every pre-determined term, and you’re allocated a proportion of the material the province collects that year. Nearly all companies that meet the program’s criteria will get a piece of the action, he says, but “if you don’t win the bid, it can be hard to make ends meet until the next bid.” On the other hand, if you win the bid, the programs provide a degree of economic security, he says. They don’t guarantee a specific volume of material, but knowing your company will get a proportion of the collected electronic scrap is valuable when deciding whether to invest in new facilities.
Government involvement in the United States is markedly lighter. In most cases, state laws “tell manufacturers to collect material based [on] historical sales, market share, or arbitrary weights. There are few quotas. The manufacturers are forced to submit plans and report on collections, and none of the states gets involved” in the collection process, Skurnac says. “You have to collect and recycle, and the state generally leaves it to you to sort it out on your own.” Nor does the state audit or approve recyclers.
Although that laissez-faire approach means a recycler can improve its market position, there are no guarantees of revenue or materials, Skurnac says. And half of the states have no mandates or incentives for consumers to recycle electronics at all. “Within individual states, it is sometimes hard to collect enough material to operate profitably, and there are not huge incentives for investment. But there are incentives to build the right collection networks and relationships, and it is possible to build a good business” in the United States, Skurnac says. “For us, a bigger problem in the U.S., as a recycler, is making sure we are getting enough weight collected to make it [cost-effective] for us. If we are not getting enough weight, [recycling] can become very expensive on a per-pound basis.”
These processors note that both state and provincial e-recycling programs often focus on products with high transportation and processing costs and low commodity value—CRT televisions and monitors and other display devices. “When states start new collection programs, 80 to 90 percent of the collected material is old TVs that people have saved in the garage or basement for years,” Skurnac says. “These items are bulky [and] difficult to physically handle, and TVs are the most expensive items to recycle. In some cases, manual disassembly is the only option, and there isn’t a good market for the leaded glass in CRTs. Typically there is value in items such as copper, computer housings, and circuitboards, but we have to pay to have glass recycled properly. This is the least attractive revenue stream for most recyclers.” MacKay points out that provincial programs make handling such material more attractive from a financial standpoint. “The funding model is more sustainable,” he says. Without the consistent material stream, “we couldn’t be assured of driving volumes to make our plants sustainable,” especially when GEEP’s experience has been that 60 percent of the material such programs collect is display devices, “and the commodities that come out of that are minimal.”
From Rubin’s perspective, in the United States, “you lay your money on the table and hope you can bring the volume in,” but you can cherry-pick the more valuable material and refuse or charge for low-value products. When you participate in the Canadian provincial programs, however, you can’t do that. “You get what you get.” A few hundred tons of material could be primarily CRTs, with little value, with only the EHF dollars offsetting the costs of processing them.
With FCM’s newest facility in British Columbia, Rubin says he has similar concerns about the commodity value of the material that province will collect when the next phase of its electronics recycling program begins. “We deconstructed the material and looked at what came out,” Rubin says. “Is it the richest material? No. But it’s the same plastics, the same metals that we’re already treating, and it can be recycled.” He adds that recyclers must be “extremely diligent” with this stream, which could contain additional hazards. For example, some smoke detectors contain a radioactive source.
Provincial Harmonization
In 2009, three of the industry-led stewardship organizations—ACES, SWEEP, and the Electronics Stewardship Association of British Columbia (Burnaby, British Columbia)—formed a virtual harmonization office to seek cross-jurisdictional approaches to program management and avoid duplication of effort. Its biggest accomplishment to date, which also had the support of OES and Alberta Recycling, might be the development of the Recycler Qualification Program those programs use to ensure electronics processors and downstream vendors operate in a responsible and ethical manner. Companies that apply for the RQP must undergo document audits and on-site audits of their environmental, health and safety, and material-handling systems, and their downstream vendors also must undergo audits, before the Recycler Qualification Office, which manages the RQP, approves them. The office is currently reassessing the 26 primary recyclers the provincial stewardship programs use, says Sean De Vries, RQO director. Approved companies can apply to participate in any of the harmonized provinces’ e-scrap recycling programs. The RQO also manages the provinces’ Electronics Reuse and Refurbishing Program, which does a similar assessment of refurbishers.
The harmonization office also has created a common process across participating provinces to define regulated electronic products and manage various phases of their life cycle, a methodology for setting and re-examining the electronics handling fees, and a methodology for reporting on key indicators by which the provincial programs can benchmark their performance, as well as a report card of those indicators, says Jay Illingworth, director of harmonization. “We believe that all provinces can benefit from these harmonized approaches,” Illingworth says. “Will all provincial programs look and feel exactly the same? No. We are not looking at a cookie-cutter approach. Programs can and will differ for local operational or regulatory requirements. But if the core components and governance are harmonized, we can drive efficiencies.” Collections requirements and other aspects of the provincial programs that differ also have been streamlined.
This year, the ongoing harmonization work is moving to a new national nonprofit funded and led by electronics manufacturers and retailers, the Electronic Products Recycling Association, Illingworth says. Those companies are “chartered with national responsibility for improving the efficiency of the e-waste reclamation and recycling process.”
For recyclers, harmonization means they don’t have to adapt their business practices from province to province, making it easier for them to operate across provincial lines. “Harmonization has made a big difference for us,” MacKay says. “We audit, we process under one primary standard for all legislative programs” that are harmonized. “From a compliance standpoint, it becomes much easier.” Sims Recycling Solutions also appreciates the harmonization, Skurnac says. Rubin says his company is excited about the opportunities harmonization will create for FCM to expand across provinces.
What’s missing from all of the Canadian electronics recycling stewardship programs, CARI’s Shaw says, is the recyclers’ perspective. Each one is designed and run by the product manufacturers and retailers. The result, he says, is “they don’t focus on fixing the product. They need to focus on Design for Recycling™.” Instead of spending money building collection programs, Shaw says, electronics manufacturers would be better suited to developing technologies to make their products safer and easier to recycle. “Instead, they throw some money into the pot and are doing things they know nothing about”—running recycling programs.
Amanda Smith-Teutsch is a writer based in Girard, Ohio.
Streamlining in the States?
The United States’ approach to electronics recycling laws is similar to Canada’s approach in one respect: Each state and province has its own laws and requirements. Though four Canadian provinces are making an effort to harmonize their programs to make it easier for processors to operate across provincial boundaries, no such effort is underway in the United States.
“There are 23 or so states with extended producer responsibility for electronics, and there are 23 different laws,” says Robert Erie, CEO of E-World Recyclers and E-World Online (Vista, Calif.). “One state might be similar to its neighbors, but not exactly [the same].” The variations among the states include how they determine the volume of products each manufacturer must recycle, when the reporting year begins, when the fiscal year begins, and how they want the material collected, he says. “It seems to me very fractured,” says Wallace MacKay, vice president of corporate development, sales, and marketing for Global Electric Electronic Processing (Barrie, Ontario), which operates in both countries. To help manufacturers navigate this maze of regulation, Erie’s company launched the Manufacturer’s Interstate Takeback System, a Web-based database and tracking program manufacturers can use to track who is collecting and processing their material, the volume they’re recycling, and where they’re recycling it.
“I think it is very difficult for anyone to navigate a patchwork of 26 or 27 different laws,” says Eric Harris, ISRI’s associate counsel and director of government and international affairs. A streamlining of these laws, similar to the harmonization effort in Canada, might be beneficial for recyclers, he and Erie say. Steve Skurnac, president of Sims Recycling Solutions, Americas (West Chicago, Ill.), doesn’t expect to see that happen in the United States any time soon, however, in part because the EPR approach most states have taken gives electronics manufacturers more leeway to decide how they will arrange for their products’ collection and processing.
As in Canada, the states must undertake any kind of harmonization effort voluntarily, Harris says. “I would say a good state model is competitive, flexible, and puts together the right kind of recycling and collection structures to handle the material and keep it out of a landfill.” Individual states should be free to set up their own systems to drive volume and ensure financial support, however, he says.
Despite the challenge of meeting each state law’s requirements, electronics processors say the existence of an electronics recycling law can determine their investment and expansion plans. For FCM Recycling (Lavaltrie, Québec), for example, such laws make it easier to collect enough material to ensure profitability, says the company’s Andrew Rubin. If FCM opens a facility in the United States, it will most likely be in a New England state with an EPR law, he says.