Proper incentives and deposits – all we really need to clean up the environment

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The role of incentives in our lives is truly and tragically underestimated.  When money is dangled in front of people, batten down the hatches because you’ll have no idea what you can unleash. (Consider a series of polls on the website Buzzfeed. People were asked how far they would go for 5 million dollars. Two of the questions were: Would you accept the money knowing that it would take a life somewhere else in the world, and would you listen to nothing but country music for the rest of your life? 50 percent said they’d do the former, and only 47 percent the latter. Crazy, hey? Oh wait a minute, I wonder what they meant exactly by country music…)

Really, it’s true. Financial incentives in particular can lead to the most bizarre behaviour, especially over time, and the quality of incentives, or the direction they encourage behaviour in, can have incredibly huge consequences.

Recently we saw examples in the US shale world. Under incentive packages designed a decade ago when production growth or reserves growth metrics were deemed to be the best measure of success, we saw companies implement schemes that rewarded increases in these measures. We then saw companies go on suicidal growth paths that made zero sense externally –  how can a professional, hired to run a company, orchestrate a series of activities that endangered the whole organization? – yet they happened anyway, because those executives were incentivized for something else. Odd as it seems, they were incentivized to grow even if it harmed the organization as a whole. And that is exactly what they did, and it happens over and over again, everywhere.

So, what would happen if we used the power of that technique for pure good? One of the biggest environmental problems we face is the voracious appetite of 7 billion people for more and more and more resources. Some of these, like food, are renewable – as long as we maintain our farmland’s productive capability, we can continue growing food indefinitely. Others though, like precious metals extraction, cannot continue indefinitely. If they do, more and more landscape gets mulched every year in the process.

The ridiculous part is that we have plenty of most raw materials; the problem is that many of them go into the garbage when done. There is no proper incentive to recycle; it is cheaper to simply buy fresh supplies.

What if that wasn’t the case though? And what if it turned out that it could be ridiculously easy to create an incentive to make sure they were recycled?

Imagine if there was a $500 deposit to be paid on every new cell phone sold – $250 by the manufacturer, and $250 by the customer. Each would get their deposit back if and only if the cell phone, at the end of its useful life, was recycled in its entirety. Current estimates are that only 12.5% of electronic devices are recycled, with the rest going to landfills, including a lot of valuable metals.

Do you think we’d keep discarding cell phones and all the other electronic gadgets that are far cheaper to replace than repair? And not just electronic devices; why can’t we use the same principle for pretty much everything? Any TV, appliance, electronic device, anything with valuable metal content could have such deposit requirements. The level of deposit could be set to match the scarcity of the metal, or the environmental impact of mining the metal. If new supplies of key metals/minerals only available by building huge new mines, say for like certain rare earth elements, then why not make existing quantities fabulously valuable so that people are incented to recover them? Yes, maybe it’s hard to recover trace amounts of metals, but what if it was worth it to do so?

If we implemented schemes like this, we could limit the growth of these far-reaching supply chains, ones that require extensive new exploration, mining, processing facilities, and other environment-pounding developments, all without changing our lifestyles or trying to reinvent the world’s energy system in wildly implausible ways.

Good luck in isolation, and remember the immortal words of Maynard James Keenan: “You owe it to yourself to do something creative with every breath you take.” Or at least read about energy and get some laughs, pick up “The End of Fossil Fuel Insanity” available at Amazon.caIndigo.ca, or Amazon.com

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11 Comments

  1. John Chittick says:

    You’ve gone off the rails here. You seem to be tied up with Malthusian myth about scarcity. Free market pricing should determine resource allocation. Economic rents should determine (highest) land use. Property rights can protect against externalities such as pollution. Properly sited landfills (desert conditions with no chance of leachate transport for example) take up little space and have near infinite capacity. How can someone purporting to be pro energy production be anti-mining? Do I need to remind you that reclaimed oil sands sites are virtually indistinguishable from the wilderness from which they were mined. Rent seeking incentives along with green theocracy and central planning are failures wrongly attributed to the free market, not the way forward.

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    • Terry Etam says:

      I’m not anti-mining, just pro-using-what-we-already-have-first. I agree some or many mines get reclaimed excellently, but many do not.
      I don’t see this as a pro- or anti-market thing anyway. Look at soda/beer cans. Who could argue that the deposit mechanism doesn’t work to get them off the streets? Same principle just expanded, and can be expanded in a thousand ways. I fail to see how getting your deposit back by returning a cell phone to an authorized collector impinges on any free market activity.

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  2. The Phantom says:

    I have only one question: who pays for these incentives?

    Materials have a value which is determined by the market.

    Plastic all over Canada goes into land fills despite those idiotic blue boxes because the value of the collected, sorted and baled plastic is lower than the cost to ship it to the recycling factory.

    Similarly, glass is not worth recycling because the cost of brand new glass is lower than the collected glass. By the time impurities and so forth are accounted for, it is -much- cheaper.

    With electronics the problem is regulation. Canada and the USA do not reclaim electonics because of the pollution associated with the process. It gets done in third world countries where they dump the pollution right into the river or the ocean.

    So, you can artificially raise the cost of new material until recycled is cheaper, or you can admit that recycling of bulk materials is a waste of money and move on. Electronics might be worth a look, but only if regulations are also considered.

    Government is the wrong instrument to be trying to do this job with. Private enterprise will be the right one. If somebody comes up with a method of extracting saleable material out of landfills at a profit, they will drive around and do that to every landfill out there. Otherwise it will sit there and wait.

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    • Terry Etam says:

      WHat I proposed is zero cost for incentives. Th e point of the post is that incentivization works if done right. The $ is from a deposit, which gets returned like beer cans.
      People that say we simply should go build a new mine or whatever clearly aren’t involved in building anything these days. Approvals processes are making things nearly impossible, plus the wackos that show up to protest construction of anything. I work in oil/gas and building any infrastructure of any size is becoming more difficult by the day. So I am saying – use what have, wherever possible, and think of ways to make those channels work.

      Liked by 1 person

      • The Phantom says:

        Deposits aren’t zero-cost. They cost the buyer money that they would otherwise be using elsewhere, and they incur administrative and interest costs.

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      • Terry Etam says:

        That is true. I stand corrected, not zero cost.

        Liked by 1 person

      • The Phantom says:

        Terry, my answer was perhaps more “crisp” than what I intended. Someone was shouting at me to go do something while I was typing.

        Like other commenters here and at Small Dead Animals, my main concern is the utter incompetence and corruption of Canadian government. As with most things they do, any sort of incentive system they might come up with would be a dog’s breakfast of rent seeking, payoffs and bags fulla money changing hands behind closed doors. Look at the windmills and Ontario Hydro.

        Liked by 1 person

      • Terry Etam says:

        No worries! Trust me I share your distrust and disgust with the Cdn government. I am saddened to think of what our country will look like when they are done with it. The things I am proposing would never be implemented by a gov’t so blinded by green idiocy and run by the likes of an airhead and Gerald Butts. I’m just trying to plant seeds in people’s heads so that the general population might start thinking this way.
        Nothing i write is written as advice to Trudeau, he is useless. I mistrusted him from the day he gave that campy eulogy to his dad. Ever since, I’ve thought that he is only interested in going down in history as some sort of legendary visionary leader. He is utterly delusional and incompetent, but we must find ways to work around him and his crew.

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  3. Carter Duchesney says:

    Honest question. How recyclable are electronics? What is the recovery rate and how expensive would it be to get the the useful stuff out or is this just a pipe dream?

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    • Terry Etam says:

      Hi, totally valid question and answer is I don’t know. I suspect it would be not either or, but a continuum – some elements would be much harder/more expensive than others. I’m not saying we could get them all, but every incremental bit would be good. And maybe if there were plans like this in place, manufacturers could design things differently to help with recoveries. Or, maybe it’s just a pipe dream.
      People jumped on this idea, thinking I’m pushing Big Government or something. Nothing could be further from the case. My entire point, which perhaps I should make more clear some day, is that building ANYTHING is nearly impossible these days-mines, pipelines, even drilling oil/gas wells and tying them in (which I am involved with). I’m looking for solutions that don’t fight these realities – I don’t agree with why they’re happening, but I think the world is saved by people that get shit done. Period. If we want to maintain our lifestyle, and 6.5 billion people want to join us (and I say welcome), then we have to find ways to make this work.

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  1. […] Incentives are grossly underrated. They can lead to the weirdest, dumbest behaviour, but can also bring out the best. If the world was incentivized to value scarcity properly, maybe we’d stop pursuing wildly implausible energy schemes that are nothing more than political Trojan horses. Read on… […]

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