Electronic Waste Recycling in California Gets a Big Cut

by Mike Easterbrook

Reverse Logistics Magazine, Edition 14

As we approach 2009, several California state electronic waste recycling bills are set to go into effect. Also, with the switch over from analog broadcasting to digital broadcasting, it is very possible that many CRT TV owners will retire their old TV and need an outlet for recycling the obsolete equipment. A national bill is looking like less of a possibility as more states adopt their own programs. The state programs are not uniform in the least, the bills are either modeled after an Advanced Recovery Fee (ARF) or they are an Extended Producer Responsibility (EPR) bill. An ARF system collects money from the consumer at the point of purchase, such as a retail outlet like Best Buy. The EPR model holds the manufacturers responsible for the recycling. For example, a state could charge manufacturers a certain rate for the amount of sales that were made in that particular state the previous year, but many different models of the EPR exist. It is the most common model. In fact, the ARF was initially only used in California. Pennsylvania and South Carolina will begin their ARF programs in early 2009, as seven other states launch an EPR program at the same time.

California was the first state to pass an electronic waste recycling bill in 2003, known as State Bill 20 and it was ratified the follow year in State Bill 50. So the common terminology for the program in California is the SB 20/50 program. As the nation is ready to embark on the adoption of many new e-waste recycling bills, radical changes are occurring in the California system.

The California Integrated Waste Management Board (CIWMB), one of six agencies under the umbrella of the California EPA and the agency that manages the SB20/50 program, has made recent changes to the pricing structure that is set to go into effect in late 2008.

When the SB 20/50 bill was passed, retailers began collecting $6, $8 or $10 depending on the size of the video display screen ($6 for 4-15 inches, $8 for 16-40 inches and $10 for over 40 inches). The state paid out .48 cents per pound to approved recyclers in the program for Covered Electronic Wastes (CEW) which included CRT TVs, CRT Monitors, LCD Monitors and TVs, Plasma TVs, laptops and any other Video Display Device (VDD) with a diagonal measurement of greater than 4 inches. Recyclers were required to reimburse collectors a recovery payment of .20/lb for the recovery of CEW.

However, the recovery payment soon became a way for recyclers to outbid one another and grab the attention of collectors. The recovery payment to collectors rose from .20/lb in 2005 to roughly .23-.25/lb., in 2006, the price rose again from .25/lb to roughly .28/lb, and in 2007, the price went up to .30-.32/lb, at the beginning of 2008 the price peaked at .35/lb to collectors. That left only .13/lb for recyclers. Minus roughly .03/lb. for logistics, .05/lb for operational and dismantling costs, .03/lb for supplies to collectors (Gaylord boxes, pallets and shrink wrap), .01-.02/lb. for disposal of CRT Glass, and .01/lb for wood console disposal, accepting CEW's from collectors was no longer lucrative or worthwhile for many recyclers.

Granted, the State program was set to cover the costs of recovering and recycling CEW's and allow for the recyclers to make their money on the residuals, but the residual value, a small amount of cooper, plastic, aluminum/tin and low grade circuit board could not always cover the costs of paying for the warehouse rent, office persons salary and commission, and the many other expenses involved in running a business. So those recyclers who shifted their focus away from refurbishing, asset recovery and other similar ventures, could expect to be in quite a predicament when they heard about the State payment reduction.

After three years of the program, the State is now lowering the rate to .43 per pound starting July 1st and .39 per pound after September 15th. The State's decision to lower the payment was based on the net cost reports that were submitted to the State by the collectors and recyclers. And after an audit by the Department of Finance, the State did find that it cost less than .48/lb for the recovery and recycling of CEWs. However, the favor has been perversely tilted in the direction of the collectors.

To make matters worse for recyclers, diesel prices are more than five dollars a gallon, the slowed economy is causing lethargy in business, the CRT market is diminishing, fraud is occurring in system, and recyclers have effectively beat the daylights out of each other with the price war (not all will agree on that point). When fraud occurs in the system, the recycler will have a portion of their claim rejected and it becomes the recyclers' responsibility to recover the money from the collectors who gave them fraudulent material. By the time the recycler finds out who has given them fraudulent material, roughly three to four months later, since the State reimbursement is backed up with claims processing, that fraudulent collector may very well have taken the money and ran, never to be found, and leaving the recycler to absorb the total loss.

The system currently has over 600 collectors and roughly 60 recyclers. A lot of these collectors became collectors over the last year, 2007. Therefore, to reduce the costs and ensure things are done with environmental integrity, many recyclers will probably begin doing their own collection, if they haven't already, including hosting more events, offering curbside pickups and going direct to businesses to offer free pick up and disposal of material. It will be interesting to see how the payment decrease will affect the SB 20/50 program in California as we move forward in the world, attempting to become more and more green. One can only hope that so called "bad actors," those committing fraud and other activities, will be weeded out, and kinks in the California system will be worked out. Hopefully, other states will take advantage of learning from California's experience and set programs into place that are nearly ideal for all parties involved.

Mike Easterbrook is the Environmental Compliance Director for ARC International Corporation. Mike manages the operational compliance and ISO 14001 EMS implementation for the Western United States ARC branches. ARC International is an ISO 14001 Certified Electronic Waste Recycler with 11 branches throughout the United States. Mike can be reached at mikee@arcic.com.