06 May 2016

The unsustainable incentive to recycle aluminum

Rosanna writes:*

Recycling aluminum is universally perceived as more sustainable than using raw materials in production. Virgin aluminum is created from bauxite ore. To name one large environmental advantage of recycling aluminum, ridiculous amounts of energy are needed in order to extract bauxite ore from the ground, as only 3-5% of the bauxite ore contains aluminum. Research has shown that recycling aluminum requires on average 5% of the energy needed when manufacturing aluminum from bauxite ore [pdf]

However, it is often forgotten that the recycling process also involves ‘hidden’ environmental costs that are not included in the price. These negative externalities do not necessarily, if at all, make the recycling process less sustainable than producing virgin aluminum from bauxite, but they should not be neglected. For example, contaminated aluminum waste produces heavy chemical pollution during remelting. Additionally, recycling aluminum requires heavy machines and ovens which are often powered by fossil fuels.

Another issue that causes these hidden costs is that aluminum recycling is largely done by privately owned companies, which have making profit as their main objective. Thus, companies are incentivized to recycle aluminum for financial reasons rather than sustainability reasons. One might say that this is not necessarily a problem, because the reason as to why companies recycle is not relevant as long as recycling occurs. However, it appears that this profit incentive stagnates possible improvements because companies do not bear the environmental costs and thus have little incentive to improve sustainably. I will give a simple example below.

Suppose there is a company in Germany (company A) that collects glass bottles from public containers. Often, glass bottles have a cap made out of aluminum, and therefore the glass bottles must be separated from the aluminum caps as both have a different recycling procedure. The company, however, only recycles glass, and thus has a supply of recyclable aluminum which they want to sell to another company that does have the necessary recycling technologies. Now, the logical way would be to sell the waste directly to that other company. However, the waste is sold to yet another company (B) that does not recycle either, but merely stores the waste and sells it to a company (C) that does recycle. On top of this, company B is situated in the Netherlands and company C in Poland. This means that now, instead of transporting the waste from Germany to Poland directly, the waste goes from Germany (A) to the Netherlands (B), after which the unaltered material is transported to Poland through Germany.

In this example, an extra process (storage) is added to the life cycle, which is not only useless and inefficient, but also increases the total environmental costs of the process. The main problem here is the rise in transportation emissions, since there is much more transportation needed. Similar situations frequently take place in reality. Companies seek for opportunities to get involved in a process in order to gain from it financially, without considering the possible negative externalities. Meanwhile, the sustainable character of recycling is completely disregarded. In other words, they act out of their self-interest rather than out of the public interest.

Bottom Line Although recycling aluminum is more sustainable than producing aluminum from raw materials, there is still much room for improvement with regards to the environmental costs. This can make aluminum recycling even more sustainable. However, this improvement seems to be stagnated by companies’ main goal to make profit.

* Please comment on these posts from my environmental economics students, to help them with unclear analysis, alternative perspectives, better data, etc.

1 comment:

  1. Hi Rosanna, I agree with the message in the conclusion that there is still much room for improvement with regards for the environmental costs of recycling aluminum. However, I doubt to what extent the argument: that companies don’t have an incentive to improve these technologies, reflect reality.

    First, since I think there are some (maybe exceptional) companies that really do care about the environment (Apple/Steve Jobs, Target) but more important, most companies rely heavily on the public image.

    Second, what makes me wonder about the argument is what you exactly mean with „financial reasons”, do these companies get subsidies or are the costs for recycling just cheaper in general?
    As far as I know, it is the latter, since it is cheaper to make products using recycled materials.
    However, companies always remain „profit-maximizers” and keep seeking for alternative ways to reduce costs.

    Therefore, combining all of these aspects, whereas society is becoming increasingly aware of sustainability, companies care about their public image, and companies seek for the least costly way, there are incentives to improve technology that will ultimately reduce the environmental costs for recycling as well.

    Overall, I agree with you that we have to be cautious about whether recycling is worth doing on environmental grounds and this needs to be publicly discussed in order to encourage improvement. In general, I think one of the bigger barriers to more efficient recycling is that most products were not designed with recycling in mind. To solve this problem requires a complete rethinking of industrial processes, maybe that needs some focus too!

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