The Economics of Recycling


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RecycleWe all want a clean environment; just how clean is often a matter for debate. Do you know of anyone who occasionally slips some recyclable office paper into regular trash bins instead of making the extra effort to place it into one marked for recycling? Or someone who tosses a glass jar into the regular trash because he or she doesn't want to wash it out for the recycling bin? Or people who leave a little juice in the bottom of a plastic jug and put it back in the refrigerator so they don't have to clean it and place it in a special bin?

Some of us feel inclined to shake a finger at an offender and remind them of their duty to Mother Earth. In so doing, we presume that our views are moral norms, and we may overlook issues of cost that help to explain why people don't always recycle. Not surprisingly, the approach based on scolding is often ineffective. Many people ignore the lectures and respond, instead, to financial incentives weighing the additional effort or cost of recycling against the perceived benefits (weighing present benefits more heavily than future benefits).

Government can change incentive structures to ensure that citizens will act as proper stewards of our scarce land resources. A local government might respond to a problem of overflowing landfills by charging more (by volume) to remove garbage to a landfill, thereby increasing the cost of producing "regular" trash. Local recycling companies might increase amounts paid for recyclable goods, providing an incentive for citizens to exercise more care when disposing of trash. How strongly these incentives are promoted is largely dependent upon the relative scarcity of land resources.


You will be asked to indicate why Japan's recycling efforts (rates) are surpassing that of the US. Then you will predict how consumers, repair services and appliance makers respond when government changes incentives for recycling.Then given new incentives, predict what happens to supply and demand for a good and resulting impact on equilibrium quantities. You will do this by analyzing the effectiveness of Japan's appliance recycling law enacted in April 2001.Finally you will be asked to develop strategies for reducing the amount of waste disposal at landfills.


In Japan, recycling rates are much higher than those of the United States: approximately 50% of solid wastes are recycled in Japan, compared to about 30% in the United States. Only about 16% of waste in Japan is sent to landfills, compared to about 60-70% in the United States. Chart 1 and Chart 2 indicate that Japan is outpacing the United States in recycling efforts. Although comparisons between particular categories are approximate (aluminum cans - Japan vs. aluminum - US), the overall trends are evident. Why are the Japanese more aggressive in recycling waste materials?

Recycling Rates in Japan

Chart 1: Recycling rates in Japan from 1986-1999. Source: Japan Information Network 

Recycling Rates in the United States

Chart 2: Recycling rates in the United States, estimated for 2000. Source: Characterization of Municipal Solid Waste in the United States: 1998 Update. United States Environmental Protection Agency, Washington.

While it's certainly true that many Japanese feel an affinity for nature and a sense of stewardship regarding the environment, geography provides a key to explaining the difference in behavior between Japanese and US citizens. The total land area of Japan is 144,000 square miles, while in the United States there are 3,618,770 square miles for a population twice as large as Japan's. (See Chart 3.) On average, relatively more land in the United States means lower costs for landfills and lower costs for waste disposal.

Comparison of Population Density

Chart 3: Comparison of Population Density, 1997. Source: Japan Information Network

In the following lesson you will take a look at a case regarding disposal of large appliances. On April 1, 2001 a law went into effect in Japan that requires owners of appliances such as washing machines, televisions, air conditioners and refrigerators to pay about $60 to have their used goods taken away and recycled. The law is intended to promote the recycling of useful parts and reduce the amount of unwanted household appliances in local landfills. Consumers pay a fee to retailers to take their old appliance when they buy a new model, or they may take their appliance directly to the disposal facility and pay a fee to have it recycled.

The issue, in this case, is who bears the cost of recycling. When producers are "billed first" for the cost of recycling, the incentives encourage them to make an investment in plant and equipment enabling them to build appliances that are easier to recycle. Costs of production increase and the supply curve for this industry shifts upward and to the left. On the other hand, when consumers are billed first, the incentives encourage consumers to purchase durable goods less frequently and to rely less frequently on illegal dumping aimed at avoidance of the disposal fee. The demand curve for appliances then shifts downward and to the left. In either case, the result is fewer new appliances sold and fewer appliances dumped in landfills. Decisions about the disposal of waste need not be judged in moral terms. In the eyes of an economists; decisions are simply responses to incentives. (Although stern lectures from ardent environmentalists can act as a disincentive in some cases.)

  1. Review Charts 1, 2, & 3. Indicate probable reasons why there are differences in disposal costs between the United States and Japan.
  2. You are to review the legislation in Japan that requires all consumers to pay a fee for recycling large appliances:
    • Visit "Japan Fact Sheet " to learn more about waste disposal and recycling in Japan.
    • Household Appliance Recycling Law: All owners of discarded refrigerators, televisions, air conditioners and washing machines shall pay up to ¥7,600 to have their used goods taken away and recycled. "Retailers are obligated to collect and transport the discarded appliances (consumers must pay the costs involved), and the manufacturer is obligated to recycle the materials." (Source: Japan Access, "Japan Fact Sheet ")
  3. Now consider landfills in your area. Are there some that accept large appliances but charge a fee for disposal? Conduct research to determine costs of disposal among landfills in the United States.
    • "Google"
      Type in the name of your city followed by large appliance disposal, for a list of sites. Be careful to read sites with information pertaining to your search.
    •  "How Landfills Work"
      In this edition of How Stuff Works, we will examine how a landfill is made, what happens to the trash in landfills, what problems are associated with a landfill and how these problems are solved.
    • "U.S. Environmental Protection Agency"
      Use this website to research local landfills and waste programs.
  4. Write a paragraph to indicate how you would respond to the Household Appliance Recycling Law if you are a
    • consumer.
    • appliance repairman.
    • producer of new appliances.
    • politician.
    • landowner who lives near a landfill.
  5. Indicate, by drawing supply and demand curves, the change in the market for new appliances once the legislation was enacted.
  6. Propose alternatives for reducing the amount of appliances in landfills.
  7. Enter your choice in the following survey and compare it to the choices made by other students who have completed this lesson.

    Take Survey

  8. Appliance Market Line Dance. (Really!)
    • Wait for further instructions from your teacher.