Container Recycling Institute Warns of Further Job Loses and Facility Closures : Report: California Beverage Container Recycling Payments Not Keeping Up with Market

Certified beverage container redemption centres in California lost $20 million in 2015 due to inadequate state payments received, according to a new report from the non-profit Container Recycling Institute (CRI),

The authors of the report, ‘Integrity of California’s Beverage Container Deposit System Threatened by Processing Payment Shortfalls’, the problem is exacerbated by an outdated compensation method used by CalRecycle (California Department of Resources Recycling and Recovery) per state law.

The report analysed the reasons for the payment shortfalls and offered some possible solutions. In particular the CRI recommended the revision of the state statute to allow for adjustments in the timeframes CalRecycle uses to account for changes in scrap material values and thus determine payments to the centres.

Overall, the authors found that California operates a successful beverage container deposit return program, with certified centres handling nearly 90% of the 18 billion bottles and cans recycled annually in the state.

Under the program, CalRecycle pays a per ton “processing payments” to supplement the revenues that redemption centres earn from the scrap values for PET (plastic), glass and aluminium, enabling the centres to cover their operating costs and ensure a reasonable profit.

However, according to the CRI with a four year trend of rapidly declining scrap prices for these commodities, the state payment shortfalls have forced the closure of at least 269 redemption centres so far this year, leaving around 1800 centres still operating.

The report said that this threatens the state’s beverage recycling infrastructure and, contrary to the California Beverage Container Recycling and Litter Reduction Program, reduces consumers’ ability to easily access sites (typically required within a half-mile radius of a supermarket) to recover beverage Container Refund Values (CRVs).

The CRI explained that the state payment formula currently uses 12 month averages from the previous year, with a minimum three-month lag time, and doesn’t account for real-time changes in scrap value prices. For example, CalRecycle’s PET processing payments for July-September 2015 were said to be based on the average price from April 1, 2014-March 31, 2015.

However, the actual scrap value for the July-September 2015 period was said to have been $100 lower than the value calculated under the back-dated formula.

This formula was found to take a particularly heavy toll on the smallest redemption centres, many of which

are located in rural areas.

“When it comes to falling scrap prices, these small redemption centres are the proverbial ‘canaries in the coal mine,” commented CRI president Susan Collins

According to Collins, data shows that the average recycling costs at the smallest centres can run twice as high on a per-ton basis as at the largest centres due to economies of scale, leaving the smaller sites operating at a loss and even more prone to closure.

The report further noted while CalRecycle recently announced an increase in processing payments, they still will leave a shortfall for centres.

Recommendations

To address the issues, CRI recommended re-evaluating the processing payment calculation method, perhaps by tying payments more closely to recycling centres’ real-time revenues. The institute also proposed a tiered payment mechanism to distribute the program’s resources more equitably and help smaller centres remain open.

Collins added that California’s beverage container deposit return program “creates a boon to the state’s economy, directly employing at least 3,000 people, generating $8 million to $9 million annually in state tax revenues, and channeling a million tons of premium-quality scrap material away from landfills and into the products of U.S. manufacturers.”

“If the current downward commodity pricing trend continues without structural adjustments to the state’s processing payment formula, recycling centres’ cumulative net losses will inevitably force more of them out of business. Additional closures will mean not only more job losses and lost recycling opportunities, but a real loss to the people of California, to the sustainable economy and to the environment,” she concluded.

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