Evening roundup

Another closing of the tabs:

• "This is troubling because the government is spending hundreds of millions of dollars in subsidy money to improve a recycling rate it can’t even measure." 
• Pattrick Smellie on state of play in NZ craft brewing. 
• I've a column on infrastructure funding and financing in the Local Government Business Forum newsletter.
• Michael Reddell on inflation forecasts and RBNZ monetary policy.
• More grid-scale solar coming in - Genesis to have 500 MW of new solar by 2026. 
• A follow-up on Tamaki redevelopment. It's a neat one. Started under National, completed under Labour, seemed to work...
• Ugh. If Semour here means that dairies would have an easy time getting a liquor licence, rather than even more restrictions on where vapes could be sold, that would be ok. But I don't think he means that.
• On the plus side, on-farm sequestration that stacks up will be included in the ETS. On the downside, another two-year delay on emission pricing for ag methane. 
• On the plus side, National would have better targeting of prescription drug subsidies. On the downside, they'd also have more political direction of which drugs get funded - a list of cancer drugs.
• ACT supports a Carbon Tax Refund - basically a carbon dividend. 
• Scott Wilson with some history of NZ's land transport funding system. A really excellent post, the first of a promised series. 

Morning roundup

The morning's worthies:

• Robert MacCulloch brings the prosecution's case against the RBNZ. A future better government will have some work to do in restoring Bank credibility. Firing the Board and Governor; resetting the Remit so it only cares about an inflation target; appointing a hawkish Governor who recognises that inflation is his job and climate change, as important as it is, is somebody else's job; and requiring that those on the Monetary Policy Committee have expertise in monetary policy rather than treating it as a conflict might be a start. 


• This has got to be the stupidest argument in favour of recycling. It begins with a grudging recognition that most recycling is pointless, before saying it might be a gateway drug to caring more about climate. The more plausible explanation for the survey results: people who get warm fuzzy feelings about environmental things in general are more likely both to recycle and to buy an EV. 


• The Government proposes a tax principles bill. I like that Minister Parker agrees that horizontal equity, vertical equity, administrative efficiency, and minimisation of tax-induced distortions are core tax principles. But he points to high EMTRs for some lower/middle income earners as evidence that the tax system isn't progressive. Progressivity is defined as the marginal tax rate being higher than the average. Those EMTRs will hit in over short ranges for some folks, and are bad, but they aren't really evidence against the tax system being progressive. And remember that some of our progressivity is delivered by transfers like Working for Families. 


• The Niskanen Centre explains how EV subsidies are generally a bad idea - you wind up providing a lot of cheap EVs to rich people who don't drive them very much. But if you could get the people who put on the most kilometres into an EV, that could be good. Now what would set that kind of incentive? Carbon charges in fuel. Cost adds up fastest for high-users. 


• A reader sent this through after my Newsroom piece on carbon forestry: the biodiversity within a pine forest.


• NZ has a lot of old people, but aged care facilities are shutting down. Why? Government banned immigration, so there are no nurses. 


• Good piece from Dileepa Fonseca. Everybody complains about costs in the construction sector, so why don't we let the folks who put up excellent cheap apartments in South Korea, Singapore and Japan build some here? I suspect we'd also want to have Japan's zoning and consenting system. And abolish the Overseas Investment Act.


• Season 6 of Kids in the Hall starts in May. Get your Amazon Prime subscription ready. 


• The unserious people oppose waste-to-energy plants, because the plants make it harder for them to push zero-consumption lifestyles. FFS any carbon dioxide coming out of them is in the ETS. 


• Craig Renney makes the case for a Parliamentary Costings Office. I like the idea in principle; would be a fair few difficulties to work out in practice. To begin with, which Parties get access, and how much of the Office's time? If it's just Parliamentary parties, you introduce a barrier to entry. If it's everybody, you get every nutjob setting up a Party and demanding a costing on their pet thing. If it's allocated by vote share in prior election, that also puts in a bias toward the status quo. I still like the idea of a costings unit that runs rolling reviews of existing spend between elections. 


• I'd missed this 2019 AEJ- Ec Policy piece. Sweden put in a high carbon tax; petrol use dropped a lot. NZ is part of the counterfactual synthetic Sweden used for comparison. The Swedish carbon tax is a lot higher than current ETS prices, but NZ ETS prices will rise. The regulators here seem to believe that prices won't ever affect transport emissions here. Sweden suggests otherwise.


• An urgent appeal that masking in classrooms be the default for winter.


• I really need to read this whole book. "Questioning the Entrepreneurial State", reviewed here.  There has been far too much naive enthusiasm for the Entrepreneurial State approach in the dumber parts of the Ministries. 

Mining the landfills

I've been following Sierra Energy's waste-to-energy tech for the past year; it's pretty interesting.

Mike Hart presented on it here in Wellington late last year; his presentation is below.

 

I liked this bit from his most recent newsletter (I find a subscription link here), on waste reduction:

Thirdly, if and when we reach the point where communities are using less and do not produce enough waste to power a FastOx gasifier, the gasifier can then be used to mine landfills. Landfills emit methane for 100 years and many of the landfills (open and closed) are not properly consented- they continue to leach into the ground and pollute the ground water year after year. Additionally, as the return on investment is commonly in just a few years, there is no economic loss once a community stops creating waste.

A couple of years ago, I'd suggested that we should view well-managed landfills as storage sites for future recycling. The future is coming. 

Glass Mountain

We always kept a sharp eye on the ditches when I was a kid riding in the back seat. Why? The glint of a beer bottle meant $0.10. Collect a dozen of them and you've got a $1.20. So Mom and Dad would have to keep a foot hovered over the brake just in case one of us saw a bottle - or even better, an abandoned case of empties. Then off to the Altamont Hotel to turn them in.

The Canadian system worked because all the bottles were standardised. There were two dominant brewers who used identical bottles. State-run liquor outlets combined with a bit of distribution through licensees like rural hotels meant a very limited number of distribution outlets: the trucks that dropped off the bottles could presumably pick up the empties for the run back to the distribution outlet.

I don't know whether the economics of the Canadian set up stacked up, but it was a system that could have made sense given the way the rest of it ran. In all cases, you have to weigh up the costs of picking bottles up, making sure none of them were chipped or damaged, cleaning them, and getting them back to the bottler, against the costs of making new bottles. If you don't like monetary calculations and prefer some kind of environmental accounting, there's carbon costs from picking up old bottles, from the hot water needed to clean the old ones, the cost of the water itself, and of the detergents that then go out into the sewers.

Radio New Zealand reported on a pile of broken glass bottles in an abandoned quarry down in Southland. It looks like Invercargill does not have a great sorting facility, so Auckland's glass recycler doesn't want the product.

The director of Invercargill's recycling contracter, Southland DisAbility Enterprises, Ian Beker says even if OI would take the glass in Southland, the cost of freighting it there is not economic. He told New Zealand Geographic that the best thing Southlanders could do is put their bottles into the general rubbish bound for the landfill.

This prompted some twitterings about how New Zealand needs to move to a deposit scheme like the one I grew up with in Canada. But that's really unlikely to be a good idea.

First, we have beautiful diversity in packaging styles. Tuatara won awards for its lizard-themed bottles. Some brewers use a standard bottle, but lots of the bigger ones have their own custom bottles. That means that a deposit scheme would have to sort the bottles before they could be returned to their homes. The costs would not be low. Different shapes and sizes would mean a harder job cleaning them all properly. Further, you'd have to store small-volume niche bottles until you'd accumulated enough to send back to the brewer.

Second, any brewer who wants to run his own deposit scheme can do so. Some of the craft brewers with more expensive glass did so in Christchurch, but I've lost track of the state of play on that one.

If it is more expensive to clean and reuse a bottle than to press new bottles, we waste resources in recycling them. And I can't see any plausible externality story around it. Landfill operators have to buy land in competitive markets; if old quarries were more valuable as something else, somebody else would have bought it instead. Councils typically charge for rubbish collection. If they have the marginal cost of rubbish collection wrong, that's a bigger issue than just glass bottles. But think about it more carefully: glass is about the safest, easiest thing in the world to put in a landfill. It doesn't leach or leak. Nothing dangerous. No smells and nothing to blow away in a stiff breeze to inconvenience neighbours. It won't emit methane while decomposing. It eventually will turn into coloured sand.

It would be very easy to waste a pile of resources by requiring Invercargill to upgrade its facilities, just because some folks don't like the idea of that there is an old quarry full of old glass.

There's no shortage of land in New Zealand that can be used for storing old glass. If there ever were, the price of it would bid up, the cost of dumping would increase, and things that today aren't worth recycling would be. When I lectured on environmental economics as part of my current policy issues course at Canterbury, I'd figured that if Christchurch went through a Kate Valley sized landfill every year instead of every thirty, and if they were built on prime dairy land instead of scrub wasteland, it would still only cost about $2 per person per year in land costs for landfill.

Bottom line:

• Landfills should charge tip fees that reflect the cost of building, maintaining and running them. There can be reason for undercharging to reduce littering, but the resulting mild subsidy to landfill will be general across all waste streams, not specific to glass, and glass is one of the less harmful things to have in landfills.
• If it is cheaper to dispose of a glass bottle in a landfill than it is to clean it and return it to the bottler, or to use it as feedstock in making new bottles, that typically means we would be wasting real resources if we forced it to be recycled. Since transport costs matter and since small centres can't afford expensive sorting facilities, it can make perfect sense for some places to recycle glass and others to use landfill.

Previously:

• Reader mailbag: Dunedin plastic mountains edition
• NZIER on recycling costs

Reader mailbag: Dunedin plastic mountains edition

In the inbox, from our Professor of Finance:

Oh the irony - the 'sustainability' of recycling

Ratepayers are going to be charged more to keep producing a 'good' that nobody apparently wants or needs! Now that's certainly a 'sustainable' policy…

The ODT article forwarded me by the good Professor Glenn Boyle notes:

As a stockpile of the city's plastic waste grows ever bigger, the Dunedin City Council is being warned it may have to increase rates if returns from recycling do not improve.

The amount Dunedin people recycle has increased by a third since a new service was introduced in 2011.

That increase, combined with the high New Zealand dollar and a four-month stay on sending some plastics to the main Chinese market following a crackdown on contaminants in recyclables that has put traders off selling to China, resulted in the council running the service at a loss last year.

...The situation has prompted council solid waste manager Ian Featherston to warn the council this week that although the exchange rate was falling and new markets for the materials were being sought, the reduced target of a $210,000 return this financial year might also be difficult to achieve.

In that case, the kerbside recycling targeted rate would need to be increased next year from $64 to $69, he said.

Mr Featherston said Dunedin people recycle about 30 tonnes of material a month.

The stockpile of plastics being held had now reached about 150 tonnes.

Recycling programmes can still make sense even if they run at a loss, but only if the costs of disposing of this kind of plastic via the recycling system is lower than the costs of disposing of it via landfill. If it costs $30/tonne to get rid of waste at the landfill and the net costs of a recycling programme are $20/tonne, we're still $10/tonne better off by having it.

When I'd run some ballpark numbers on Christchurch's system in 2009, it looked like we were paying at least twice as much to get rid of waste via recycling, on average, as we were paying for disposal at Kate Valley. Some recyclables are of high value and are worth sending through a recycling system, but most of it is not worth the cost.

The numbers in Christchurch have likely changed with our newer bin system that separates out composting waste; the Otago numbers too could vary. I'd be surprised if it made sense to be stockpiling plastics in hopes of shipping them to China, but it's not impossible.

Recycling nudges and shoves

Christchurch City Council nudges us to recycle. And we comply. How do they do it? We get three bins for collection. A large yellow bin into which we can deposit recyclable materials, a smaller red bin for general rubbish, and a smaller green bin for compostable materials. Because we generally have zero excess capacity in the red bin (one in diapers, one hopefully out of them in a month or so), we shunt lots of stuff to the other bins. If the capacity constraint were too binding, we'd contract for alternative service: private contractors also provide bins that, for a fee, are collected regularly for disposal. Under the prior regime, we also had a mild nudge: Council fully subsidized the collection of recyclable rubbish but charged $1 per bag for collection of waste destined for landfill. The net per tonne cost to council of disposing of recyclable waste was roughly twice as much as the net cost of landfill disposal: I'd reckoned it around $40 per tonne net for landfill and about $80 net for recyclables.

Under the new system, none of the disposal methods incur any marginal charge for households and the per tonne costs of all three forms of disposal roughly match at around $300 per tonne. The cost of landfill disposal has increased with the loss of offsetting revenue; the cost of disposing of recyclables has increased presumably with collapses in the value of recyclable materials and increased use of the big yellow bins. And total costs have to go up when running two trucks past each residence every week rather than just one.

Under the old system, I recycled because refraining from recycling was a public good: I would reduce costs to the council but increase costs to me by not using the small old recycling bins. Now, Council should be roughly indifferent which bin I use because their costs don't vary hugely across the three disposal methods. They get angry if you put rubbish in the compost or recyclable bins, but nobody worries much about having inspectors check that you're not sneaking tin cans into your landfill waste bin.

Not so in Cleveland. Says Wendy McElroy:

Citing the British model, Cleveland, Ohio, is taking a giant step toward a similar scheme of compulsory recycling. In 2011 some 25,000 households will be required to use recycling bins fitted with radio-frequency identification tags (RFIDs)—tiny computer chips that can remotely provide information such as the weight of the bin’s contents and that allow passing garbage trucks to verify their presence. If a household does not put its recycle bin out on the curb, an inspector could check its garbage for improperly discarded recyclables and fine the scofflaws $100. Moreover, if a bin is put out in a tardy manner or left out too long, the household could be fined. Cleveland plans to implement the system citywide within six years.

Extreme recycling programs are nothing new, even in American cities. In San Francisco recycling and composting are mandatory; trash is sorted into three different bins with compliance enforced through fines. New York City has a similar program.

And there's the shove.

Cleveland is particularly important, however, because of its size. Cash-starved local governments will be watching to see if an American city as big as Cleveland can use RFID bins to increase revenues. The revenues would flow from three basic sources: a trash-collection fee that could be increased, as in Alexandria; the imposition of fines; and the profit, if any, from selling recyclables. The last source should not be dismissed. Recycling programs are not generally cost-efficient, but much of the reason is that collections need to be cleaned and re-sorted at their destination.

If households can be forced to assume these labor-intensive tasks, then selling recyclables—especially such goods as aluminum cans—is more likely to be profitable. (Perversely, the demand for volume recycling may hit the poor the hardest; in the wake of recession, it is becoming increasingly common for people to hoard their aluminum cans in order to turn them in for cash.)

I tend to think subsidized recycling programmes are mostly nonsense: instead, charge households the cost of disposing of their waste with some small free allotment to discourage poor folks from using the nearest ditch as alternative. If it's profitable that any of the trash be collected for recycling, it'll get done by the private sector. Any recycling that's then done efficiently accounts for all of the costs of recycling, including the private costs of sorting and cleaning waste to make it suitable for recycling. But checking folks' landfill-destined waste for recyclables, fining them if they don't use their recycling bins, and mandating that they scrub out old cans before putting them in the recycle bins seems a form of forced labour.

I hope they at least allow folks to hire private contractors to take bins of unsorted waste for disposal.