Encouraging Recycling Using Tradeable Credits

Abstract

Many cities in the United States have found that after collecting, sorting and bundling recyclable materials, no market exists for these goods. Rather than recovering the costs incurred in collecting recyclable materials, sanitation departments either receive little for these materials, or in some cases must bear an additional cost to have the materials taken away. To address this situation, policy analysts are considering ways to stimulate markets for recyclable and recycled products. One option proposed recently in the U.S. Congress is the development of a tradeable credits program for recycled material. Similar to the air quality emissions tradeable permits program, the government would require U.S. firms to use an established amount of recyclable material in production, or purchase "recycling credits" from a firm that has exceeded recycling levels. This paper analyzes the tradeable credits program, its advantages and disadvantages, and details many difficult issues of implementation. This paper argues that such a program would provide a necessary stimulus for the development of a healthy market in recyclable and recycled products.