Container deposit scheme very likely a costly bad idea

Regrettably, there is now a bipartisan commitment in Queensland to what is very likely a costly bad policy, with the Opposition announcing its support for a container deposit scheme, otherwise known as a “cash for cans” scheme (see the Brisbane Times report). This is despite comprehensive and rigorous analysis from the Productivity Commission in its 2006 Waste Management Inquiry Report that should have killed off the policy idea for good. The Commission noted:

“Deposit-refund schemes are typically costly and can only be justified for products that have a high cost of illegal disposal. They are not warranted in the case of beverage containers.”

We will all have to pay more for drinks in cans and bottles than otherwise, perhaps 10 cents or so more, and we will have to take some action (e.g. transporting the bottles and cans to a collection point or reverse vending machine, or keeping track of the number of cans and bottles placed in kerbside recycling bins) to claim the money back (see the NSW Government’s overview of its scheme). So the scheme will result in labour and transport costs for Queenslanders and will involve costs associated with the administration of the scheme ($25 million the Opposition estimates), a scheme which appears unsupported by any cost-benefit analysis.

The scheme would not benefit the majority of the community, although it may benefit recycling businesses who would get a greater supply of recyclable material and some young people who may find they can earn some pocket money collecting cans and bottles. “Big Trev” Ruthenburg, member of the Government’s Container Deposit Scheme Advisory Group and GM of Scouts Australia, no doubt sees benefits for his young scouts.

It is claimed the scheme will create around 200 jobs. We all support job creation, but we are worse off as a community if the jobs are in inefficient activities. In this case, 200 people would most likely be more productively employed elsewhere.

There are kerbside recycling schemes run by councils, which the Productivity Commission has noted are more cost-effective at recovering recyclable materials than container deposit schemes. Rather than introducing a costly container deposit scheme, it may be more desirable and cost-effective to encourage people to put their cans and bottles in recycling bins. A cost-benefit analysis would compare alternative options.

The scheme appears motivated by a desire to have Queensland join other States, such as NSW and SA, in having a container deposit scheme. But harmonisation of policy across States is only sensible when it is good policy that is being harmonised, a point made by Deloitte Access Economics in a report prepared for the QCA in 2012.

The container deposit scheme is very likely bad policy and should be subjected to a rigorous, independent cost-benefit analysis, possibly by the Queensland Productivity Commission. I strongly doubt it would stack up.

Cans

“Cash for cans” scheme coming to Queensland, unless economists can stop it

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8 Responses to Container deposit scheme very likely a costly bad idea

  1. Glen says:

    Gene this is just bad policy. I don’t think these people have thought this through. Our family goes through 100 bottles or cans a week, we drink bottled water plus cans of other drinks. The fortnightly recycle bin is full every time it is picked up, the system currently works. Second this is just a tax on people consuming drinks outside the home, people who buy cans or bottles with lunch or anytime during the day could not be expected to carry these around the rest of the day, they will simply put them in the bin and then10 cents will be gone.

  2. Jay says:

    Inefficient definitely when I was a Kid and we had the 5C on bottle only, the new local store owner took about 4 months to realise we were collecting the bottles from the back of his shop and bringing them back in again. He eventually caught on had to start putting a X on the bottles to show he had already paid for them. Man it was funny but when lollies were half a cent each you got a lot of cobbers for 10c.

  3. I understand the economist’s dilemma here – the commingled recycling system we have already deals with this sort of stuff quite efficiently. But it doesn’t deal with the litter problem – so many plastic bottles make it into the rivers/beaches etc. That is a problem that putting a price on litter solves.

    In Germany, Austria and other continental European countries there have been successful deposit schemes for 25 years or more, of up to 40c per bottle (that’s about 60c in AUD$). There are vending machines that take bottles at the supermarkets, and even the beer cartons are like reusable milk crates that have a deposit price etc. I think the system is very good once retailers and customers adjust. And people become very cautious about smashing beer bottles and leaving them on the street etc.

    My view is a) any scheme should be national, and b) simply borrow the details of a successful scheme that functions elsewhere instead of trying to reinvent one.

    • Gene Tunny says:

      Thanks Cameron. Very interesting information about what happens overseas. It still seems like an expensive way to tackle the litter problem, though. I’d like to see a comparison with other policy options in a cost-benefit analysis/RIS.

  4. ngruen says:

    Next stop, banning plastic bags (sigh …)

    That will keep our attention away from actual environmental problems like climate change!

    Note also that we try to maximise the recycling of paper and prevent it going to landfill at the same time as praising carbon capture. I’m thinking wouldn’t burying paper (in such a way that it doesn’t decay producing greenhouse gases) be carbon capture? In fact, as we highlighted at the PC many years ago, taking into account the carbon absorbed in growing plantation trees, manufacturing virgin paper emits much less greenhouse gases than manufacturing recycled paper.

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