Good Intentions and Recycling Fraud

(Photo: Peter Kaminski)

A recent Freakonomics radio podcast focused on the unintended consequences of bounties. Here’s another great example: California’s recycling redemption program no doubt seemed like a great idea when it was initiated, but an L.A. Times article suggests the system is being gamed. Last year, it appears that nearly 100 percent of recyclable cans sold in California were returned, and 104 percent (!) of plastic containers:

Crafty entrepreneurs are driving semi-trailers full of cans from Nevada or Arizona, which don’t have deposit laws, across the border and transforming their cargo into truckfuls of nickels. In addition, recyclers inside the state are claiming redemptions for the same containers several times over, or for containers that never existed.

“Last summer, the state Department of Food and Agriculture counted all vehicles driving into the state with used beverage containers through 16 border stations,” writes Jessica Garrison.  “The three-month tally was 3,500, including 505 rental trucks filled to capacity with cans.”  There’s big money at stake: one fraud ring brought in $189,000 worth of cans.

(HT: Michael Teague)

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  1. CF says:

    Who else immediately thought of the Seinfeld episode?

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  2. Evan says:

    How is this fraud? The cans I buy in Ohio tell me they are worth money in California. If they want to call it fraud then I call it false advertising…

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    • Larry K says:

      Uhhhhh, They pay a deposit for each can that they purchase. You did not pay the deposit in OH.

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      • Mike B says:

        Then cans sold in non-deposit states should not be marked as redeemable for deposit. Anyway the problem is that non-deposit states are free riding on deposit states, not defrauding them. The purpose of these laws is to prevent litter and increase container recycling. BOTH of these goals are being met even when containers are trucked in from out of state, but residents in California are paying to keep AZ and NV clean.

        BTW one way to either establish or increase deposit rates while mitigating the free rider effect is to make your state’s deposit law contingent on neighboring states’ laws.

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    • Zack says:

      It’s fraud because here in California we pay a redemption fee when we purchase our plastic and aluminum containers. This is an incentive to return to the recycle center and return the material to get back the redemption fee. They’re not “worth” anything, they simply have taken a deposit and you have to return them to get your deposit back.

      The program isn’t supposed to lose money, so when outsiders come in with aluminum and plastic that had no deposit paid then it’s fraud because they never paid into the system.

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  3. Larry K says:

    Come on… Even Cramer and Newman predicted this would be the case 10+ years ago! Wonder how many tax $$ were squandered on this study?

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  4. Phil says:

    What is the actual cost of not recycling a can? If it’s more than 5 cents, then the people committing “fraud” are actually performing a valuable social service, by arranging to recycle cans that might otherwise not be recycled, for only 5 cents each.

    Of course, some of them might have been recycled in Arizona for free … and then there’s the environmental cost of the trip. But the trips probably cost more in California, where there are probably 5,000 cars making the trip separately instead of one truck.

    If the cost of not recycling is *less* than five cents, why not change the deposit to match the actual cost?

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    • James says:

      Problem is that much of the “cost” of not recycling bottles & cans is roadside trash, whicle another part of it is increased trash collection & disposal costs. There’s no good way (AFAIK) to pass these costs on to those responsible: that is, I have to look at the bottles & cans you toss out of your car window, and pay the same monthly trash collection fee even though I generally put out one can every 2-3 weeks vs the neighbors’ 2-3 cans.

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      • Scott says:

        Just food for discussion but the cost of road side littering in CA is $271 (they like to pick odd numbers I guess). So you mean a guaranteed $0.05 cents is enough to push someone over the edge of not littering compared to the chance of risking $271? Probably a great discussion for Freakonomics but judging by the amount of litter I see on the roadways as an avid runner and cyclist neither appear to be enough.

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      • James says:

        “…the cost of road side littering in CA is $271…”

        No, the cost is $271 times the estimated probability (roughly 0.0001% by my guess) of actually getting a ticket for littering, or well under a cent.

        To really judge the effectiveness, we’d need some comparison numbers, as for instance percentage of cans/bottles recycled in California vs some non-deposit state too far away to make shipping to California profitable.

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  5. Joe says:

    Does the state not turn around and sell the recycled material to industry? I do not know the specific numbers, but it seems like the state could still be making a profit in the end.

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  6. Des says:

    It sounds like the deposit program is just working a bit *too* well :) If its purpose was to increase recycling, it certainly did the job and then some.

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    • JAM says:

      It almost seems like all this regulation is kind of like the story of the Monkey’s Paw.

      People wish for something from government and are often surprised by the unintended results from their wish. Sometimes it can be downright nasty, like all the societal damage from the drug war.

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      • JAM says:

        In reply to Mike,

        Possibly, but even here we see an unintended consequence.

        Many times, collectors of aluminum, plastic, and bottles will rifle through people’s garbage cans in search of their bounty. However, because the trash itself has no value, often the trash may be left strewn about the ground around the garbage can. Or sometimes, lids are left off garbage cans and the wind winds up dispersing the garbage.

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    • pawnman says:

      Bingo. The intent of the law was to increase recycling. They have, in fact, increased recycling. They just didn’t do the cost analysis of what that extra recycling will take out of the state budget.

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  7. JenW says:

    Ok, so maybe California is losing out, but doesn’t this result in a net gain for the environment? More cans are being recycled, therefore there’s less waste overall.

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    • Scott says:

      How is this a net gain for the environment?

      Assuming recycling happens in Nevada, etc; isn’t it better to recycle those items locally as opposed to (needlessly) burning fossil fuels to bring them to a distant recycling center. Even though this story exploits this principal to the extreme, this is actually a commentary on how bottle bills are not good for the environment as a whole and typically result in a hidden tax. Every Monday a truck (that my taxes are already paying for) comes to my house (in CA) and picks up all kinds of recyclable materials including cans and bottles so how is it a net gain for the environment for me to separately drive those segregated items to a collection center?

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      • pawnman says:

        But WOULD they be recycled for free in NV/AZ, or would people just throw them away without the incentive to recycle them?

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  8. Eric M. Jones. says:

    You can scrap a car in California and it can never be returned to use legally. Then you haul it to Nevada where it is re-licensed. Then you can return it to California.

    Weird.

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