Monday, January 12, 2009

Economic Incentives in Action with Ecoelce!

From time to time I enjoy watching the informational videos put out by the UNEP and I stumbled across this one a couple months ago:

http://www.unep.org/NewsCentre/videos/player.asp?w=640&h=480&f=shortfilms/2008-09-15_Endessa

(can't seem to find a way to post this straight to this blog, so you'll have to view it offsite)

Essentially, this video documents what I deem to be a very innovative community project occurring in Fortaleza, Brazil. This city of 3 million had a serious waste issue - generating 3,300 tonnes of waste every day, with much of it collecting on the streets and not being properly landfilled. That was until Professor Gradvohl of the Universidade de Fortaleza had an idea: along with this waste, Fortaleza's poor had great troubles paying their energy bills, so why not create a system to collect the waste in exchange for energy? He and his group essentially created a "garbage for energy" program called Ecoelce, opening collection centres around the city for residents to bring various types of recyclables. Each type of material had a credited value and the more the residents brought in, the higher reductions they would see on their energy bills (the energy utility company of the city obviously had a stake in the project). With a little work, many residents were seeing a lovely "$0" on their monthly statements (with any excess being carried forward to the next month)! Note that the recyclables themselves weren't being melted down for energy production (they were just being recycled like usual), but this increased recycling likely saves energy in the manufacturing sector, so it makes sense to pass these savings along to consumers as the incentive of the program.

Essentially, the moral here is an economic one. Before, the residents saw the waste as useless, and made no effort to clean it up, as the benefits that would come to the community from decreased curbside waste were outweighed by the individual cost of the effort required to do the clean-up. This, of course, hurt everyone by degrading the environmental quality of the community, but not enough for any single person to see clean-up as being in their best interests (tragedy of the commons). However, when this program put a price on the waste, residents immediately began bringing huge bags of the stuff to the centres so that their energy bills would decrease. While this certainly does not change the moral underpinnings of any of the citizens (i.e. it is a "first order change", and the citizens would likely return to their old ways if the economic incentive was ceased), it was nonetheless highly effective.

My question now is, could this program be implemented more widely than it currently is? What barriers would have to be overcome? And, if it *could* be implemented, since it is only a first-order change, *should* it be? I, for one, think it would be a useful thing to have in our community. It would certainly give us all more motivation to recycle (rather than the present situation of no motivation at all except that of guilt) and, for the poor among us, it could help have a significant increase in their amount of monthly disposable income. As well, pragmatically speaking, our planet cannot wait for us to invest the time needed to bring about second-order change, so every little bit helps!

However, the disconnect that exists in this province between the recycling industry and BC Hydro might cause a legislative headache for a project like this, and, as well, at the recent tour of the Metro Waste Recycling Depot for ENSC 301, the supervisor there stated that his operation is actually losing money on nearly all of the recyclable material they send out (and are relying on government subsidies), due to the falling commodity markets. So there may not actually be enough revenue generated to be able to offer this discount here. I also wonder if this recession has affected the Ecoelce program, as the video was posted in September, which means it was likely filmed before the proverbial sh*t hit the fan.

At any rate, the project is a neat economic experiment and is definitely worth further investigating for broader implementation!

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