The Patchwork Study

The National Center for Electronics Recycling

October 18, 2006

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Study Purpose

To analyze the economic and other effects of the state-by-state patchwork on industry, government and consumers

Conducted by the National Center for Electronics Recycling (NCER), a 501(c)3 organization headquartered in Davisville, West Virginia

Produced for the National Electronics Recycling Infrastructure Clearinghouse (NERIC) and published at www.ecyclingresource.org

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Patchwork Study Scope

Identify and quantify existing and potential effects of the current patchwork of state-level requirements

Analyze public and private sector experiences with mandatory programs in CA, ME, MD, WA

….BUT NOT analysis of: Inherent benefits or drawbacks of any mandatory approach Effect of jointly implemented/harmonized state systems Advocacy for or against any legislation

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Study Data Sources

The NCER interviewed principal public and private stakeholders involved in the administration and implementation of state electronics recycling programs, including: Several large industry stakeholders complying

with state program requirements Government officials interviewed during NCER

site visits to California and Maine Discussions with implementation officials in

Maryland and Washington State

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Study Methodology

1) We identified state-level costs incurred by public and private sector stakeholders

Administrative and Compliance Costs Materials Handling and Processing Costs

2) We then posed this question Which costs would also be incurred in a comprehensive

national program? (see next slide)

3) We then estimated patchwork costs State level costs that would *not* be incurred in a national

program are considered “dead weight”

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National Program Assumptions Used to Determine “Dead Weight” State Costs E-scrap collection would be done locally with

financing from a centralized Collection Incentive Payment (CIP) system or similar national-scale financing mechanism

There would be one coordinated administrative system to oversee financing, coordinate reporting, enforcement and other program requirements

E-scrap would be treated as an interstate commodity and would move across state lines without consideration of the state of origin

There would be one set of national program requirements on financing, information reporting, recordkeeping, etc.

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Categories of Cost Drivers

Direct Labor. For purposes of this study direct labor costs are assumed to be all employers’ personnel expenses dedicated to performing tasks attributable to that employer’s primary mission (e.g., recycling electronics, administering a government program, etc.)

General and Administrative (G&A) costs are any management, financial, and other expense for the general management and administration of the company or agency as a whole. G&A costs also include expenses typically provided by outside parties (legal and accounting services, monitoring and reporting services, printing materials, etc.)

Capital Investments are costs supporting the acquisition or development of property or other long-term asset (e.g., information systems, spare plant and equipment, etc.)

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Cost Driver #1: Policing and Excluding Out-of-State Wastes A legislative requirement for collectors in

California and Maine State governments also incur related costs in

issuing regulations, reviewing and processing claims (California)

Percentage of this cost considered “dead weight” (costs not incurred in a national program): 100%

Annual recurring dead weight cost: $10 million

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Cost Driver #2: Manufacturer and Retailer Compliance The patchwork has resulted in differing and redundant state

compliance requirements on industry, including: Retailer notification (California) “Do not sell” retailer requirements (Maine, Maryland,

Washington) Identification of in-scope products (Maine, Maryland,

Washington, California). Note that the scope of covered products is different in all four states.

Manufacturer registration requirements (all four states) Reporting requirements (all four states), including ARF reporting

in California Percentage of these cost considered “dead weight”: 50% Annual recurring dead weight cost: $3.6 million

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Cost Driver #3: Redundant System Administrations Major administrative duties required in various state programs:

Billing systems (e.g., ARF fees in California, consolidator fees in Maine) Producer registration systems (all) Returned brand counts (Maine, probably Washington) Orphan product determinations and calculations (Maine, probably

Washington) Enforcement, including identifying responsible producers and/or retailers (all) Public education (all) System governance/oversight (e.g., default Authority in Washington, CIWMB

in California, Maryland DEP, Maine DEP) Appellate procedures for challenges to administrative decisions Fund management, whether for all recycling funds (California, Maryland),

through consolidators (Maine), or a state-created authority (WA). Some states also use these funds to manage penalties against non-compliant companies.

Percentage of this cost considered “dead weight”: 20% Annual recurring dead weight cost: $2.5 million

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Cost Driver #4: Redundant State Program Development Engagements State-level study committees Thousands of meetings with state

officials/others to discuss, plan and debate the trajectory and details of state electronics recycling programs

Percentage of this cost considered “dead weight”: 100%

Annual recurring dead weight cost: $8.8 million

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Cost Driver X: Future State Programs Trajectory Uncertain Continuous evolution and increasing

complexity of state program requirements creates uncertainty for manufacturers, retailers, recyclers and local governments Inhibits effective planning across all stakeholders

Such policy uncertainty would be eliminated in a single national system

No conclusive data found to quantify this cost driver – therefore not included in study results

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Cost Driver Y: Potentially Higher Recycling Costs for State Programs Two types of economy of scale issues: Lack of economies of scale available in a national

system, primarily the lack of national-scale volumes of collected electronics that would support higher volume/lower cost automated systems, and

Market fragmentation resulting from state restrictions placed on the free flow of collected electronics outside their state boundaries (California, Washington)

No conclusive data found to quantify this cost driver – therefore not included in study results

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Patchwork Inequities (not quantified) These inequities could result in one set of

stakeholders incurring a disproportionate share of costs and others getting a free ride, but would not increase system costs overall

1) State Program Financing Overlap, Over-chargers and Free Riders

2) ARFs May Only be Required from Retailers with a State “Nexus”

3) Other State-Level Enforcement Challenges

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Patchwork Estimates – the Dead Weight

By Stakeholder

4 State Recurring Dead Weight(per year with Washington

State implementation)

One-Time and Annual Dead Weight Costs

per New State Program

Hypothetical 20 State

Recurring Dead Weight Costs (per

year)

Manufacturers $8,159,200$482,245 one-time

$2,039,800 per year $41,000,000

Retailers $3,237,586$1,639,875 one-time$809,397 per year $16,000,000

Collectors/recyclers $9,270,500 $2,317,625 per year $46,000,000

Government $4,380,000$813,750 one-time

$1,095,000 per year $22,000,000

TOTALS $25,047,286$2,935,870 one-time $6,261,822 per year $125,000,000

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Conclusions

The current 4-state patchwork wastes about $25 million annually that could otherwise be spent on collecting & recycling electronics

Costs are borne across stakeholders Current trajectory not good: more patchwork

dead weight coming to a state near you Each state going its own way About 1 new state mandate per year since 2003 If trajectory continues, more than $100 million in

dead weight per year by 2016

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Thank You

For more information go to the National Electronics Recycling Infrastructure Clearinghouse at www.ecyclingresource.org

Walter Alcorn for the NCER

walter@alcornconsulting.com