Washington: It's All in the Packaging

Tom Tomaszek, president of North American Plastics Recycling Corp., has a promising new product: a plastic packaging film made from recycled material. This innovation could be cause for celebration: American ingenuity at work to turn the proverbial sow's ear into silk. But Tomaszek offered a telltale warning about his product in Plastics News. "We really need preferential [legislative] treatment to keep this alive," he lamented. Tomaszek thinks Congess should require plastics companies to use recycled content in their products.

You see, recycled plastic costs up to 20 percent more than "virgin" plastic but doesn't really perform any better. And consumers, notwithstanding professions of green ardor, apparently are frugal with their dollars. A 1991 Roper survey found that more than two-thirds of those queried said they'd pay at most a 5-percent premium for goods with recycled content. Still fewer consumers ever actually pay even the small premium they say they're willing to for "green" goods.

So that puts people like Tomaszek in a quandary. He can't succeed in the marketplace—unless he can figure out how to get his costs down or convince consumers to "buy recycled" and pay more. At least, those used to be the options facing an entrepreneur. But no longer. Not in a policy environment that has made everything fair game for legislation.

Some business lobbyists, erstwhile foes of much environmental regulation, are now vocal proponents of new "environmental" packaging and solid-waste legislation. They see such laws as opportunities to gain market share, secure profits, and shift cost burdens onto competitors—all cloaked, of course, in green rhetoric.

Congressional proposals to reauthorize the Resource Conservation and Recovery Act (RCRA)—first passed in 1976 to regulate hazardous- and solid-waste disposal—would put federal legislators in the business of dictating packaging technology and disposal requirements for packages. Although ostensibly intended to protect the environment, these regulations are simply an attempt to promote the use of recycled material in just about every item on supermarket shelves—despite the fact that recycling does not necessarily save any resources. According to the Congressional Budget Office, the packaging provisions of the proposed regulations would reduce by less than 1 percent the municipal solid waste entering disposal facilities. That's barely 1 million tons of waste out of 200 million tons generated annually. Still, some business lobbyists, cautiously teaming up with environmental interest groups, want these regulations.

The main Senate RCRA proposal, sponsored by Sen. Max Baucus (D–Mont.), details specific national recycling rates for paper, rigid plastics (like plastic soda bottles), aluminum, steel, and glass. If the rates are not met, the bill would require manufacturers to take back, reuse, or recycle their own packages. The most notable House proposal, sponsored by Rep. Al Swift (D–Wash.), would require manufacturers to include recycled materials in their products and packages, make recyclable or reusable packages, or otherwise reduce by up to 20 percent waste associated with a given package.

For advocates of "green" consumerism, these proposals may seem like a good idea. In fact, however, the proposed RCRA legislation would take us one giant step toward a national, centrally planned raw-materials policy. RCRA regulations target packaging, which is not pollution, and put lawmakers in charge of determining what materials manufacturers should use and in what proportions, without regard to relative costs.

Environmental interest groups depict these regulations as the new battleground between industry and the forces of environmental progress. And they may even believe their own rhetoric. But the regulations really are motivated by old-fashioned "rent seeking"—businesses using the political process to achieve a competitive advantage.

Take waste haulers. Some of the big private haulers initially saw a potential bonanza in state regulations mandating curbside recycling programs. But the bonanza turned bust. Costs to operate these programs exceeded expectations, largely because gluts of recyclables made the scrap value of those materials plummet.

Thus, for example, Recycle America receives from the city of Seattle just over $50 per ton for recyclables it collects from local households, but collecting one item—mixed wastepaper—costs the company over $110 per ton. Selling the wastepaper brings only $4 to $20 per ton—nowhere near enough to cover costs that exceed the contract fee.

As a remedy, some waste haulers started endorsing the notion that federal legislators should "create markets" for recyclables—mandate their use and artificially push up their scrap value—or make someone else, such as packaging manufacturers, pay for their collection. Presto! No more big losses. And what a great scheme: All this could be done under the mantle of do-good environmentalism.

According to Charlotte Frola of the Solid Waste Association of North America, the legislation benefits big waste haulers in other ways as well. The proposed regulations do little to encourage development of waste-disposal capacity. Indeed, Frola says, the legislation may even reduce the chances for new disposal capacity and thereby artificially raise the price of existing landfill sites owned by the big waste haulers. The legislation would be "a boon for these companies—and they understand this. They've been first in line to support it."

But look who else has been championing some of these legislative schemes. Some glass companies, which have been losing market share to the plastics industry for two decades, like the idea of mandatory recycled content. Why? Because much of the industry, for economic reasons, already uses over 25-percent recycled content in glass products. By contrast, their major competitors in the plastics industry will have a tough time meeting content requirements.

And the battles don't stop here. Brandt Manufacturing Systems, which makes colored coating for clear glass bottles, is pushing for outright bans on colored glass. In fact, the firm's action plan calls for development of "national and international government contacts at all levels for interest in legislation of one-color glass." This would make recycling easier, since no one need worry about getting brown and green glass mixed in with clear glass, a perennial problem for recyclers. A ban on colored glass would also do wonders for the glass-coating business.

Other would-be entrepreneurs in eco-products have appealed for legislation to secure their place in the market as well. An official with EnviroPlastics, which processes recycled plastic, opined, "We need a bill with [recycling-content] standards high enough to create a demand for our product and the business environment in which we can succeed."

Similarly, ConservaTree, which makes paper from "postconsumer" wastepaper (the stuff recovered from residential and commercial trash bins) wants to restrict use of the term recycled content to products that use postconsumer waste. This may sounds like no big deal, but little regulatory details can have big consequences. The restriction could mean that all those paper makers that now use manufacturing scrap would not meet recycled-content requirements—and might not be able to compete for juicy paper-supply contracts that require recycled content.

Not everyone likes all these proposed packaging restrictions. Some product and packaging manufacturers see all this legislation for what it is: an attempt at political micromanagement of economic activity. And many fully understand that RCRA proposals would mean higher costs with few, if any, real environmental gains. The problem is, few are willing to say this, at least not publicly, for fear of appearing gray in a green world.

In fact, almost no one in industry has systematically opposed RCRA proposals. Instead, potential losers in this legislative battle appeal for exemptions. Don't do this to my product, they tell Congress, because consumers will suffer, innovation will lag, food will rot, and so on. Or they play the numbers game, pushing for slightly lower recycling rates, rates they can "live with."

Thus, for example, manufacturers of plastic wrap appealed to Swift's House committee for an exemption from the recycling requirements. And the National Food Processors Association argued for an exemption for food packaging. Meanwhile, some paper-industry lobbyists wrangled to get a lower recycling rate written into the Baucus provisions.

Industry lobbyists offer two main reasons for not fighting the legislation directly. First, they fear that opposing RCRA, with its emphasis on recycling, is akin to opposing apple pie and motherhood. And that, they believe, is bad for business. Second, having lost previous regulatory battles, some now calculate that capitulation to the agenda set by a handful of environmental interest groups is the only way to survive at all—"to be a player," as one beer lobbyist put it.

The lobbyist may be right. James Payne, author of The Culture of Spending, found that more than 90 percent of congressional testimony comes from supporters of proposed legislation. The RCRA hearing process confirms this pattern. Baucus's staff pulled together a group of industry representatives, environmentalists, and local-government lobbyists before the mark-up of his Senate bill. One attendee described it as a "cheerleading" session.

In this context, industry convictions that some packaging regulations are inevitable become a self-fulfilling prophecy. Potential opponents of RCRA packaging regulations remain silent or content to tinker at the margins of restrictive proposals. Meanwhile, industry beneficiaries of recycling mandates are hard at work in Congress, pushing for policies that will help secure their fortunes.

Lynn Scarlett is the Reason Foundation's vice president for research.