1. Discontinuous Responses to Recycling Laws and Plastic Water Bottle Deposits by W. Kip Viscusi Vanderbilt University Law School Joel Huber Fuqua School of Business Fuqua School of Business Jason Bell Fuqua School of Business Fuqua School of Business Caroline Cecot Vanderbilt University Law School

3. Outline of Presentation Why we care about recycling of plastic bottles. Why we care about recycling of plastic bottles. The consumer’s recycling decision. The consumer’s recycling decision. Sample characteristics and recycling laws. Sample characteristics and recycling laws. Determinants of the total recycling amount. Determinants of the total recycling amount. Determinants of curbside recycling and returning bottles for deposit. Determinants of curbside recycling and returning bottles for deposit. Conclusion: Both water bottle deposits and stringent recycling laws foster discontinuous jumps in recycling rates. People tend to not recycle at all or are diligent recyclers.. Conclusion: Both water bottle deposits and stringent recycling laws foster discontinuous jumps in recycling rates. People tend to not recycle at all or are diligent recyclers..

4. Why We Care about Recycling of Plastic Bottles 26 billion plastic water bottles used annually in the U.S. 26 billion plastic water bottles used annually in the U.S. Polyethylene terephthalate (PET) bottles typically. Polyethylene terephthalate (PET) bottles typically. About 1 million tons of PET water bottles are recycled or incinerated annually.. About 1 million tons of PET water bottles are recycled or incinerated annually..

6. Why We Care about Recycling of Plastic Bottles, cont’d Policy strategies: Policy strategies:  Bottles for deposit establish financial incentives.  Recycling laws generally reduce time costs and increase convenience of recycling. Policy issue – Do they work and to what extent? Policy issue – Do they work and to what extent? Behavioral issue – How do consumers respond to these efforts?. Behavioral issue – How do consumers respond to these efforts?.

7. The Consumer’s Recycling Decision: Structure Consumer decisions involve discrete options for a bottle – recycle it curbside, trash it, return for deposit, etc. Consumer decisions involve discrete options for a bottle – recycle it curbside, trash it, return for deposit, etc. Modal choices for each item disposed in each manner consist of a fixed time cost component and a unit cost per item reflecting time costs and bottle deposits. Modal choices for each item disposed in each manner consist of a fixed time cost component and a unit cost per item reflecting time costs and bottle deposits. Once choose first bottle to be disposed of in that mode, fixed costs are already incurred so that there is a tendency to gravitate to corner solutions, e.g., if it is desirable to recycle bottle n, then it is desirable to recycle bottle n+1.. Once choose first bottle to be disposed of in that mode, fixed costs are already incurred so that there is a tendency to gravitate to corner solutions, e.g., if it is desirable to recycle bottle n, then it is desirable to recycle bottle n+1..

8. The Consumer’s Recycling Decision: Empirical Predictions People will exhibit discrete modal choices in their recycling behavior. People will exhibit discrete modal choices in their recycling behavior. People will switch from little or no recycling to become diligent recyclers, with few intermediate recyclers. People will switch from little or no recycling to become diligent recyclers, with few intermediate recyclers. Environmentalists will tend to recycle more even without stringent laws or bottle deposits. Environmentalists will tend to recycle more even without stringent laws or bottle deposits. Recycling rates increase with the efficacy of the laws reducing time costs and increase with bottle deposits.. Recycling rates increase with the efficacy of the laws reducing time costs and increase with bottle deposits..

9. Sample Characteristics 2008 Web-based survey of 2,550 people who use bottled water. 2008 Web-based survey of 2,550 people who use bottled water. Nationally representative sample, Knowledge Networks panel. Nationally representative sample, Knowledge Networks panel. Unit of observation is individual household rather than aggregative data that is the norm in the literature.. Unit of observation is individual household rather than aggregative data that is the norm in the literature..

10. Sample Characteristics, cont’d “Out of every 10 plastic bottles, how many would you say that you recycled or returned for reuse?” “Out of every 10 plastic bottles, how many would you say that you recycled or returned for reuse?” Mean response is 6.0 for household recycling, which is consistent with curbside recycling studies but higher than GAO estimate that also includes 69% of water bottles consumed away from home.. Mean response is 6.0 for household recycling, which is consistent with curbside recycling studies but higher than GAO estimate that also includes 69% of water bottles consumed away from home..

11. Bottle Deposit Laws Bottle deposits are 5 cents per bottle except 10 cents in Michigan. Bottle deposits are 5 cents per bottle except 10 cents in Michigan. 28% of sample in states with non-water bottle deposits, reducing fixed costs of recycling but not unit costs. 28% of sample in states with non-water bottle deposits, reducing fixed costs of recycling but not unit costs. 14% of sample resides in 4 states (CA, HI, ME, OR) with deposit laws for plastic water bottles, bolstering economic incentive to recycle. 14% of sample resides in 4 states (CA, HI, ME, OR) with deposit laws for plastic water bottles, bolstering economic incentive to recycle. Survey responses on whether received payment for returning bottles are consistent with recycling law regimes.. Survey responses on whether received payment for returning bottles are consistent with recycling law regimes..

12. Recycling Laws The first detailed state by state inventory of provisions of recycling laws. The first detailed state by state inventory of provisions of recycling laws. Laws differ greatly in stringency, from symbolic efforts to those that require recycling. Laws differ greatly in stringency, from symbolic efforts to those that require recycling. Most stringent component of recycling law governs our characterization of the laws. Most stringent component of recycling law governs our characterization of the laws. Ordering of stringency of state laws: Ordering of stringency of state laws:  Require recycling or an opportunity to recycle.  Require regional waste management plans with recycling considerations.  Declare a recycling or waste management goal.  No recycling law..

13. Recycling Laws, cont’d Categorize as “effective recycling laws” those that require mandatory recycling, opportunities for recycling, or regional waste management plans with recycling considerations. These significantly bolster recycling relative to states without recycling laws. Categorize as “effective recycling laws” those that require mandatory recycling, opportunities for recycling, or regional waste management plans with recycling considerations. These significantly bolster recycling relative to states without recycling laws. Laws that simply specify recycling goals do not significantly affect recycling.. Laws that simply specify recycling goals do not significantly affect recycling..

14. Recycling Practices by Legal Regime Tables summarize the recycling regimes and the number in the sample in each regime. Tables summarize the recycling regimes and the number in the sample in each regime. Tables indicate the recycling patterns by regime and the individual distribution of recycling rates for each regime. Tables indicate the recycling patterns by regime and the individual distribution of recycling rates for each regime. Note the absence of clustering at 5 bottles out of 10, suggesting that respondents did not focus on salient intermediate numerical response.. Note the absence of clustering at 5 bottles out of 10, suggesting that respondents did not focus on salient intermediate numerical response..

15. Recycling Practices by State Recycling Legal Regime Group Mean number/10 bottles recycled Percent of respondents who curb recycle Percent of respondents who return for deposit or to recycling center Percent of respondents who return to recycling center Percent of respondents who return for deposit Bottles collected by bottler Full sample (N=2,250) 6.0046.320.717.73.81.3 No effective recycling law and no water bottle deposit law (N=564) 4.3831.617.915.13.40.2 Effective recycling law only (N=1,661) 6.1051.116.314.32.41.7 Both effective recycling law and water bottle deposit law (N=325) 8.3447.148.340.011.71.2

16. Percentage Distribution of Number Recycled out of 10 Bottles Number/10 bottles recycled Neither recycling law nor water bottle deposit law (%) Effective recycling law only (%) Effective recycling law and water bottle deposit law (%) (CA, HI, ME, OR) Percent of sample22.165.112.7 046.328.2 7.7 1 2.0 1.6 1.8 2 2.3 2.8 0.3 3 0.7 1.3 1.5 4 1.4 1.5 0.6 5 4.1 3.9 3.1 6 1.8 1.6 2.8 7 1.8 1.7 1.5 8 5.7 6.5 6.2 9 5.710.011.7 1028.440.962.8 Mean43.861.083.4

17. Determinants of Total Recycling Amount Regressions on total recycling amount are two-sided Tobit to reflect clustering at 0 and 10 responses. Regressions on total recycling amount are two-sided Tobit to reflect clustering at 0 and 10 responses. Also present ordered logit estimates for categories 0, 1-7, and 8-10 if respondents were indicating ordinal level of recycling not actual amounts.. Also present ordered logit estimates for categories 0, 1-7, and 8-10 if respondents were indicating ordinal level of recycling not actual amounts..

18. Regressions Predicting Number of Bottles Recycled out of 10 bottles Number out of 10 bottles Ordered coding (0, 1-7, 8-10) OLSTobitOrdered Logit State with deposit law0.6590**1.8896**0.3092* State with deposit law cover water bottles 1.2229*** 4.2815*** 0.7639*** State has mandatory recycling or provides an opportunity to recycle 1.6428*** 4.9227*** 0.8771*** State requires a recycling plan1.1263*** 3.5377*** 0.5939*** State requires a recycling goal -0.4303 -1.3529 -0.1736 Income/10,0000.0721*** 0.1516* 0.0331** Years of education0.1649***0.3934*** 0.1163*** Considers self environmentalist1.6254***5.1064*** 0.8462*** Environmental organization member 0.4601* 1.5388 0.4043**

19. Interaction Effects on Recycling Amount Higher income households are less responsive to water bottle deposits. Higher income households are less responsive to water bottle deposits. Environmentalists are less responsive to water bottle deposits.. Environmentalists are less responsive to water bottle deposits..

20. Use of Curbside Recycling and Other Recycling Modes Water bottle deposits should decrease the use of curbside recycling, affecting the composition of recycling. Water bottle deposits should decrease the use of curbside recycling, affecting the composition of recycling. There are likely to be substitution effects, but key issue is extent of the offset compared to the effect of recycling laws. There are likely to be substitution effects, but key issue is extent of the offset compared to the effect of recycling laws. Analyze both in terms of number of bottles returned as well as the different modes of recycling that are selected.. Analyze both in terms of number of bottles returned as well as the different modes of recycling that are selected..

21. Probit Regressions of Use of Curbside Recycling Use curbside recycling State with deposit law 0.0523 State with deposit law covering water bottles -0.1271** State has mandatory recycling or provides an opportunity to recycle 0.2331*** State requires a recycling plan 0.1398*** State requires a recycling goal-0.0588 Income/10,000 0.0158*** Considers self environmentalist 0.1261*** Missing variable considers self environmentalist -0.3144***

22. Probit Regressions of Recycling Behaviors Return to recycling center or for deposit Return for deposit Return to recycling center State with deposit law 0.0661** 0.0722***-0.0401 State with deposit law covering water bottles 0.2493***0.0761* 0.2608*** State has mandatory recycling or provides an opportunity to recycle -0.0662*** -0.0101*** -0.0427* State requires a recycling plan -0.0012 -0.0133** 0.0248 State requires a recycling goal -0.0299 --- -0.0108 Income/10,000 -0.0076***-0.0007 -0.0057** Years of education -0.0005 -0.0015*0.0013 Considers self environmentalist 0.0541*** 0.0010 0.0472*** Environmental organization member 0.0360 0.0045 0.0440*

23. Interaction Effects on Recycling Mode Being an environmentalist reduces the efficacy of water bottle deposits on returning bottles for deposit or returning bottles to a recycling center. Being an environmentalist reduces the efficacy of water bottle deposits on returning bottles for deposit or returning bottles to a recycling center. Higher income increases the effect of deposit laws on returning bottles for deposit but decreases returns to recycling centers, which is the main effect of water bottle deposit laws.. Higher income increases the effect of deposit laws on returning bottles for deposit but decreases returns to recycling centers, which is the main effect of water bottle deposit laws..

24. Conclusion Marginal effects of policies are key concerns. Marginal effects of policies are key concerns. Mandatory recycling effects are similar to planning laws, but both are more effective than goals. Mandatory recycling effects are similar to planning laws, but both are more effective than goals. Water bottle deposits boost recycling rates overall but diminish use of curbside recycling. Water bottle deposits boost recycling rates overall but diminish use of curbside recycling. Environmentalists recycle more without laws or incentives.. Environmentalists recycle more without laws or incentives..

25. Conclusion, cont’d Higher income groups also recycle more and are less motivated by financial inducement of deposits. Higher income groups also recycle more and are less motivated by financial inducement of deposits. Recycling behavior is starkly discontinuous, consistent with economic theory. People gravitate to either being non-recyclers or avid recyclers. Effective laws or deposit policies have a transformative effect.. Recycling behavior is starkly discontinuous, consistent with economic theory. People gravitate to either being non-recyclers or avid recyclers. Effective laws or deposit policies have a transformative effect..