Do regulations help e-waste recycling and remanufacturing? It’s complicated

At the turn of the new century, the iPhone was still several years away, “the tube” still referred to an actual television component, and no state cared enough about what happened to abandoned electronics to pass laws governing their life after death.

Today, nearly as many American adults – roughly half – own tablet computers as they did cell phones in 2000, contributing to a staggering 28 consumer electronics found in the average household, according to statistics from the U.S. EPA. Consumer buying habits and the rapid obsolescence of computers, phones and televisions have unsurprisingly made so-called “e-waste” the fastest-growing waste in the world. The U.S. alone generated more than 3 million tons of it in 2013.

The debate over the fate of e-waste has sparked fierce bouts of lobbying by environmental and industry groups that have led to recycle/reuse mandates around the world. In the U.S., for example, half its states have so-called take-back laws on the books, most of which hold manufacturers responsible for the collection and proper recovery of a minimum share of their goods.

Amid growing environmental concerns, this legislation appears to be tackling the e-waste problem head-on: By holding manufacturers to minimum take-back standards, fewer televisions and cell phones wind up in the landfill. In practice, it’s far from that simple.

Research I’ve conducted in collaboration with co-authors at universities in the U.S. and Europe (see citations below for more details) shows these regulations often take a simplistic approach to the players in the product’s life cycle by focusing almost exclusively on manufacturers. Doing so ignores a rapidly growing network of competing, independent remanufacturers and recyclers. The dynamics of this competition, combined with these regulations, ultimately can work against goals of landfill diversion and product reuse.

Because our research explores companies’ future actions, we can’t rely on statistical and survey data as so many other studies do. Here, we’ve used mathematical models often employed in the field of economics. The following highlights of our findings could have major implications for unregulated companies facing new legislation – or those operating under regulations that could tighten further:

The market alone isn’t enough

Early attempts to push manufacturers to collect abandoned electronics faced a simple uphill battle: Extending producer responsibility comes with a cost, one that companies likely won’t want to pay unless bound by law. But changes in electronics manufacturing – particularly for smartphones and televisions – have turned the tables.

In recent years, harmful components such as lead and mercury have been phased out as very valuable materials such as gold, silver and palladium have made their way in. Collection and recycling, once a burden, is now a potential payday for manufacturers and independent recyclers. A ton of cell phones, for example, turns up 40 times as much gold as a ton of dirt in a mine.

Faced with the prospect of valuable e-waste, electronics producers have advocated for letting the market do its work without recycling mandates. To the contrary, we find that introducing collection targets successfully reduces landfill waste and environmental impact, making for a needed nudge in a minimally competitive market.

Competition changes the game

Electronics producers today aren’t the only ones seeing the value in discarded e-waste, and our research shows the growing presence of unregulated, independent recyclers can weaken, if not undermine, the goal of take-back laws. Heavier competition for discarded products, we find, can lead manufacturers to increase acquisition prices as they work to hit their own collection targets. Third-party recyclers, in turn, back away, allowing more e-waste to reach the landfill.

A similar scenario plays out in the multibillion-dollar market for refurbished, or remanufactured, products, whose players range from titans such as Apple and Nokia to small, third-party competitors such as Gazelle or NextWorth. In this market, our research finds that requiring manufacturers to recycle and/or reuse a larger percentage of its products can backfire with competition at play.

In this case, manufacturers are more likely to simply cut back on new-product manufacturing to meet regulatory requirements. While this keeps them in step with regulators, it means fewer opportunities for third-party remanufacturers and a lower overall level of reuse.

Regulations have a “sweet spot”

These analyses of complex dynamics in the recycling and remanufacturing market aren’t often the key drivers of decision making in legislative halls in the U.S. and around the world. Instead, fierce lobbying from industry and environmental groups has helped form a patchwork of regulations. The problem? The key to stemming the rising tide of e-waste at home and abroad is somewhere between a market-driven and heavily regulated approach.

For the e-waste recycling market, the best solution in some cases can be to loosen stringent targets on manufacturers in order to weaken competition between manufacturers and independent recyclers. And in the remanufacturing industry, regulations mandating product reuse could cause serious damage by causing manufacturers to throttle back on new products.

In an industry so complex, and with so much at stake, sometimes less, indeed, is more.

Sources:

Esenduran, G., E. Kemahlıoglu-Ziya, and J.M. Swaminathan, 2016, "Impact of Take-Back Regulation on Remanufacturing," accepted at Production and Operations Management.

Esenduran, G., A. Atasu, and L.N. Van Wassenhove, 2016, "Valuable E-Waste: Implications for Extended Producer Responsibility.” under revision.