A social benefit—cost analysis of mandatory deposits on beverage containers: A correction

Abstract

In a recent paper in this Journal [l], I conducted a benefit-cost analysis of mandatory deposits under the assumption, made for convenience, that there would be a 100% switch to refillable beverage containers. In my current work with Michigan’s experience [2], I have come to realize that the effects on the container mix are in fact much less dramatic and that the benefit-cost results are very sensitive to this mix. This note shows how the results of the earlier benefit-cost analysis are changed by the assumption that the mix of beverage containers is 50% refillable bottles and 50% aluminum cans. Column 1 of Table I reproduces the findings of the earlier study [ 1, Table V], with the money figures all raised by 90.6% to put them into 1981 dollars.’ These figures are discussed in the earlier paper; x is the mean willingness to pay (in 1981 dollars per year) of Michiganders for an environment that was expected to exhibit about 75% less beverage-container litter; and p is the mean consumer inconvenience cost of returning containers (in 1981 cents per returned container). The locus of values for E and p that provide net benefits of exactly zero is shown as the dashed line in Fig. 1.’ Three estimates need to be corrected to derive this same locus for a 50-50 bottle-can container mix. 1. The greater the use of aluminum cans in the beverage container mix, the smaller the container cost savings. Since the Michigan system already used roughly one fourth refillables before mandatory deposits, a switch to a 50% refillables system only provides about one third as much saving as a switch to lOO%.’ The exact cost saving expected from a 50-50 system (calculated with the estimates of [ 1, Table IQ is 2.03 cents per filling (198 1 prices). 2. That refillable containers cost more than cans to fill and distribute is well known. The additional filling and distribution costs of a mandatory deposit system are therefore smaller with a 50-50 system than a 100% refillables system. But not much smaller. Empty cans must still be assembled by the retailer and transported to the recycler. Even with 50% cans, production and distribution cost is raised 4.44 cents per filling.