September/October 1991
States are learning that recycling can’t work without reliable markets, so many are taking significant steps to develop recycling markets. A recent ReMA study shows what the states are doing.
State governments across the nation are recognizing the plain economic facts that recycling will fail in the absence of reliable markets and that the supply of recyclables and the demand for them must be balanced. Many states have responded to this challenge by drafting strategies and initiating programs to develop their recycling infrastructures, addressing the collection, processing, and consumption of scrap materials.
To find out what the states are doing to develop recycling markets, the Institute of Scrap Recycling Industries (ISRI) (Washington, D.C.) mailed a two-page market development questionnaire in August 1990 to 50 state officials responsible for recycling and market development activities in their states.
Market Development Study. Twenty-three states report that they have completed, are completing, or are undertaking a recycling market development study of various postconsumer and/or postindustrial materials. Materials studied include paper, glass, plastics, tires, household and automotive batteries, used oil, bimetal and steel cans, and compost. Many of these market development studies examine supply-and-demand characteristics on the state, regional, national, and even international level, and recommend public-policy options to enhance the state recycling infrastructure. Such studies, often done by private-sector consultants, may also gather information on recycling activities in neighboring states or regions, and can serve as the basis for drafting a market development strategic plan.
Market Development Advisory Group. Fourteen states have established or are in the process of forming a state market development advisory group, which usually consists of public, civic, environmental, and private-sector members. Advisory group members usually are appointed by the governor and report their public-policy recommendations to the governor's office.
Market Development Strategic Plan. Thirteen states report that they have established or are in the process of establishing a state recycling market development strategic plan. Such plans often evaluate the state's recycling infrastructure, outline the state's recycling goals, and recommend public policies and private initiatives to reach those goals. The plans can also help the state control changes in supply and demand as recycling markets grow, preventing one from outstripping the other. Strategic plans are usually undertaken with the active participation of the state market development advisory group, where it exists, and cover periods of 5 to 10 years.
California's strategic plan considers ways to encourage scrap consumption as well as increasing demand for recycled products. For example, the state will assist recyclers by giving loans, easing zoning requirements, providing technical assistance, helping with environmental reports, and offering siting help and reductions in business license fees. Product manufacturers can receive an investment tax credit on their equipment purchases--40 percent of the equipment's cost, up to $250,000--if they use scrap in their feedstock. On the demand side, California has implemented a recycled-product procurement program that requires state agencies to purchase a certain percentage of recycled-content products annually, starting with 10 percent in 1991 and increasing in subsequent years. The state also requires newspaper publishers to use newsprint that has at least 40-percent postconsumer scrap content. In addition, recycled paper must account for at least 25 percent of the paper used by all California printers, with that percentage increasing to 50 percent by 2000.
Financial Incentive Programs. Targeted financial assistance programs can help develop markets for specific materials. By offering financial incentives to scrap processors and consumers, states can expand their recycling infrastructures without having to establish and operate the businesses themselves.
Seventeen states report offering no financial incentives for recycling market development. The other 33 states, however, offer one or more financial options:
28 states offer recycling grants; only 12, however, make them available to the private sector. These grants serve as direct financing from the state to the recycler and do not require repayment.
11 states offer direct business loans, which may offer subsidized interest rates, extended loan terms, and/or more relaxed credit requirements.
10 states offer tax credits. Among the potential credits available is a deduction of the cost of equipment from state corporate business taxes.
4 states offer loan interest subsidies, in which the state pays several percentage points of the interest rate on a recycler's private-sector loan.
4 states offer a sales tax exemption, relieving equipment purchasers from obligations to pay sales tax on products that will be used for recycling.
4 states offer recycling bonds, with 2 out of the 4 offering them to the public sector. The bonds offer investors high interest rates and tax shelters, while providing needed capital to recyclers.
2 states offer loan guarantees. In this case, the recycler would take out a loan from a private-sector bank, and the state would provide a promissory guarantee to cover a percentage of the loan amount if the recycler defaulted. This minimizes risk for the bank and gives the recycler access to capital.
Market Development Directories. Twenty-five states have published a state market development directory that lists collectors, processors, and consumers, including addresses, phone numbers, materials handled, and contact persons. Directories are usually updated annually or biannually. Recyclers interested in being included in their state's directory should contact the state recycling office.
Market Development Staffs. Forty-one states report having two or fewer employees devoted to recycling market development activities, with 13 of these states--many in the central United States--employing none. Five states employ more dm two but less than five specialists, while the remaining four states---Minnesota, Maryland, New York, and California--report employing 5, 10, 12, and 22 professionals, respectively. These four states also have dedicated bureaucratic offices or boards charged with actively developing recycling markets. New York, for example, has a three-year-old, 14-person Office of Recycling Market Development, a unit of the Department of Economic Development. Most other states do not have a separate unit devoted exclusively to recycling market development, instead including their recycling personnel under an existing branch, such as waste management or environmental protection.
Recycled-Product Procurement Program. Thirty-six states report having a material procurement program that gives preference to recycled-content products. Paper and paper products are the most commonly procured recycled-content products, with many states offering a 5- to 10-percent price preference for recycled products. Other products and materials actively targeted for procurement include retreaded tires, recycled oil, plastic fencing, compost, and rubberized asphalt. Counties and municipalities can usually purchase recycled-content products and materials off state contracts.
Newspaper Minimum-Content Legislation/Voluntary Agreements. Eight states have enacted minimum-content legislation for newspapers, and another eight states report establishing voluntary agreements with publishers. The voluntary agreements emphasize an overall "recycled content" goal, while minimum-content laws usually specify a "postconsumer" minimum goal and an overall "recycled content" goal. Minimum-content goals are usually graduated over several years--for example, 20 percent by 1992, 30 percent by 1994, 40 percent by 1996, 50 percent by 1998, and 60 percent by 2000. The current trend seems to be toward voluntary agreements, as they usually give publishers more leeway by not requiring them to meet a minimum “postconsumer" level. Thus far, little minimum-content legislation has focused on other scrap materials.
Interagency Cooperation. Forty states indicate that they give "priority status" to recycling businesses, offering to coordinate the efforts of different agencies for such ventures and also help them meet agency requirements and avoid bureaucratic red tape. State interagency cooperation was reported available from 34 states for general economic development financing; 39 states offer technical assistance; 11 states provide a regulatory “fast track” for permitting and licensing; and 19 states offer export assistance.
"Buy Recycled" Campaigns. Thirteen states report sponsoring "Buy Recycled" promotional activities and media advertising campaigns, in which they inform consumers, businesses, and local governments of opportunities to buy recycled products. New York, for example, for the last two years has held a "Buy Recycled" trade show that features vendors of recycled products and focuses on purchasing agents from schools, state and local governments, and large corporations. The study also notes that 21 states are working directly with private-sector groups and/or associations to get them to buy recycled products.
Market development activities on the state level may be in their infancy, but they are proliferating and expanding quickly. States differ greatly in the amount of money, staff, and political support they are giving to such activities, but the ReMA survey shows that 46 states--an encouraging 92 percent--are pursuing some form of recycling market development. Thus far, 50 to 80 percent of the states are predominantly using financial incentives, procurement programs, and government-assistance offers as their initial building blocks to develop markets, the survey notes. These strategies--and others--will likely expand as more and more states pass recycling percentage goals and implement or expand public recycling programs. •
--Thomas A. Hemphill
States are learning that recycling can’t work without reliable markets, so many are taking significant steps to develop recycling markets. A recent ReMA study shows what the states are doing.