Lighter Weight, Heavier Burden

Apr 23, 2020, 17:14 PM
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March/April 2020

By Megan Quinn

Extended producer responsibility laws for electronics need to better reflect changing markets and the more lightweight and complex scrap stream, recyclers say.

LIghter Weight, Heavier BurdenElectronics takeback events throughout New York state can attract a steady crowd. Often scheduled right after the holidays or just after the spring thaw, the takebacks invite residents to drop off old electronic devices like laptops and televisions in an effort to keep them out of the landfill. 

Takebacks are significant business for e-scrap recycler Sunnking (Brockport, N.Y.). About 50% of its volume comes from collection events and year-round municipal drop-off sites. At a particularly successful electronics takeback event, Sunnking can fill 18 tractor-trailer loads in three hours, says Vice President Adam Shine. The popularity of these events comes from Sunnking’s partnership with state politicians, who use their platforms and mailing budgets to get the word out to constituents, he says. “These politicians can send mailers to 30,000 homes or more. When people see it and see that it’s from their state assemblyman, a person they know and trust, they’re more likely to bring their electronics to the drop-off.” 

The public sees electronics takeback events as a convenient service, but electronics manufacturers and retailers are motivated to support them in New York and 24 other states because of extended producer responsibility laws, which stipulate that the original equipment manufacturers and electronics retailers must ensure their end-of-life consumer electronic products get recycled. 

Most U.S. EPR laws require electronics manufacturers to establish and finance programs to recycle end-of-life electronics like televisions and computers. The specifics are different in each state, but most of these laws require manufacturers to collect a certain weight of a specified set of end-of-life electronic products each year. The states leave it up to the manufacturers to hire processors, collectors, and others who will help them meet their EPR obligations. States set a weight requirement that’s typically a percentage of the total weight of the covered electronic products sold in that state based on market share. If Manufacturer X has 10% of the market share in that state, for example, it would be responsible for collecting 10% of the total weight of the covered electronics sold in the state that year.

In the state of New York, OEMs hire Sunnking and other companies to recycle qualifying electronics. The recyclers log the weight and type of the products they receive, and they report that information and the downstream disposition of the products to the OEMs.

Providing recycling services to help OEMs meet their EPR obligations has been integral to Sunnking’s business model since 2011, when New York adopted its electronics EPR law. Shine says EPR programs have always been a gamble for recyclers, however, because the changing electronics stream affects how much OEMs pay recyclers for their services—and how much value recyclers can get out of the products when they refurbish or recycle them.

Advocates say EPR laws encourage residents to recycle electronics instead of tossing them in the landfill, which helps keep hazardous materials including mercury and lead out of the environment. EPR laws also are meant to make manufacturers bear the cost of properly recycling electronics. Many electronic products are complex and contain hazardous components that need to be removed by hand. Those and other components might require special handling or have low or no scrap value. Thus, EPR laws create a greater economic incentive to recycle them.

Yet many recyclers say EPR funding formulas no longer match the realities of today’s electronics recycling market. Most EPR laws went into effect more than 10 years ago, when electronics were heavier and more homogenous. Today’s electronic scrap stream is more diverse, lighter weight, and even more complex, meaning recyclers need more labor, time, and money to get the same or less value out of the electronics the laws cover, says Craig Boswell, president of HOBI International (Dallas) and a member of ISRI’s EPR working group.

A weighty problem

The number and type of electronics sold each year has increased since the 1990s, but these devices are far smaller and lighter than ever before, according to a 2017 study from the Rochester Institute of Technology, Staples Sustainable Innovation Lab, and the Consumer Technology Association. The total weight of consumer electronics sold each year in the United States peaked in 2000; by 2015, the weight of these electronics had dipped to its lowest level since 1993, even though manufacturers were selling hundreds of millions more units each year, according to the study. Most of the change is “due to phasing out heavy products like cathode ray tube TVs and substitution with lightweight flat panel displays,” the report states, and many new products are now made with lighter materials such as aluminum or plastic instead of steel.

Lightweighting is a problem in EPR programs because most states measure success by weight. If OEMs can’t collect their required weight, they can be barred from selling their new electronics in that state, says Megan Tabb, director of sales and compliance for Synergy Electronics Recycling (Madison, N.C.). “A decrease in weight doesn’t mean fewer electronics are collected,” she says. “In most counties in North Carolina, where we do business, collection [weight] is going down because the main items that used to be recycled, CRT televisions, are slowly leaving the waste stream. LCD screens are more common and weigh a lot less.”

The glut of end-of-life CRTs in the early and mid-2000s is one reason so many states decided to adopt EPR laws, Boswell says. They are difficult to recycle because each one contains several pounds of leaded glass, which requires special handling for safety and to comply with U.S. Environmental Protection Agency regulations. Even when the glass is processed properly, its low value and shrinking demand make it hard to recycle into new products. EPR programs were meant to address these issues by getting OEMs to pay part of the processing costs, he says.

 “We’ve flushed the majority of [CRTs] out of the system, so the stream is shifting away from lead-containing CRTs and toward how we process LCDs and LED monitors. CRTs were very heavy. Now that those have flushed through the stream, is it fair to measure [performance] by weight as other electronics get lighter and lighter?” he asks.

The shift away from CRTs also affects how e-scrap recyclers do business, Shine adds. “Back in 2010, the market was very different,” he says. There were still several firms that wanted to buy CRTs, and Sunnking often sold these electronics to companies that did their own CRT glass processing to sell to smelters or other markets, he explains. “With CRTs, you could still get rid of those for less money, and there were even charities that would take them for free. Ultimately, [Sunnking] felt that if manufacturers could pay the cost to cover freight and packaging, and we got the CRTs to our door, we could make some money from that.” But CRT recycling challenges remain, he says. “We’re upside down on CRTs now. After labor and equipment costs, you can’t make money” because many end markets for CRTs have disappeared, but Sunnking and other recyclers are still on the hook to accept CRT devices and send them to the appropriate downstream processor. The money Sunnking makes in its EPR contracts often doesn’t cover what he pays to those processors or the cost of transporting the material, Shine says.

State EPR laws vary widely in terms of which electronics they consider “covered electronic devices,” meaning OEMs can count them in their recycling totals. Washington, for example, accepts computers, monitors, e-readers, tablets, TVs, and portable DVD players. New York covers the widest range of devices, including virtual reality headsets and processors, video game consoles, and 3D printers, according to the state’s Department of Environmental Conservation. The state that covers the fewest devices, Missouri, only includes laptops, desktop computers, and computer monitors. 

Laptops and other electronic products are on many state EPR lists because they’re so common in American households, and because of landfill bans associated with these products, not because of the intrinsic value of the commodities inside, says Amanda Tischer Buros, program compliance manager of Dynamic Lifecycle Innovations (Onalaska, Wis.). Recyclers with OEM contracts must recycle covered electronic devices regardless of how valuable each item or its parts and recyclable commodities might be. In the past few years, even the higher-value items contain less valuable material than before, she says. And as electronics become more complex and smaller, it takes more time and labor to dismantle them to recover recyclable or resalable material and remove and properly dispose of hazards, squeezing recyclers’ margins even further. “There’s been a lot of market volatility,” she says. “As weights decrease, there’s also a large loss in the intrinsic value of the commodities that make up the scrap stream. Precious metal content has been depleted. Circuit boards have less precious metal. We’re constantly trying to improve our processes and technology and figure out how we can process materials efficiently and effectively.”

Other factors contribute to EPR contracts looking less attractive to recyclers, such as products that come from consumer takeback programs that are lower in value or have a shrinking percentage of precious metals inside. In places where EPR laws allow contractors to repair or resell some of the electronics, some of the products are too old or damaged to be worth the effort, or there are too many types of products to sort through to determine their repair or resale value, recyclers say.

Course adjustments

Some states have responded to product lightweighting by adjusting EPR weight obligations. OEMs in Oregon, for example, were collectively last able to meet their weight goals in 2011, so the state started allowing OEMs to use “credits” in the form of pounds left over from previous years’ collections toward later years’ collection requirements. In 2018, Oregon’s EPR program, Oregon E-cycles, required OEMs to collect 21.77 million pounds, which was 77% of the weight it required of them in the previous year. OEMs in the state still fell short of that goal, bringing in just 20.25 million pounds, the program reports.

Oregon lowered its weight requirements again in 2019, to 17.25 million pounds, about 4.5 pounds per capita. The state did not have final numbers on whether OEMs met the obligation by early March, but it announced in January that it will ask OEMs to collect even less—just 13.75 million pounds, or 3.2 pounds per capita—in 2020.

New York and South Carolina are two other states that change their goals each year by averaging collection totals from the last three years. The adjusted numbers are supposed to strike a balance between encouraging OEMs to collect enough to keep electronics out of the waste stream, but not so much that the task is unattainable, Tabb says. However, the weight adjustments don’t get announced until later in the year, which can leave recyclers with extra material OEMs won’t pay for, she says.

“Honestly, I think South Carolina reduced its goal by too much,” she says. The state reduced its collection requirement in 2019, and Synergy and several other recyclers who process electronics for OEMs there “didn’t have their weight covered” at the end of the year. “Say the state sets a goal of 15 million pounds, for example, but recyclers process 17 million pounds. That’s 2 million pounds left over that manufacturers don’t have to pay for,” according to these contracts, she explains.

Recyclers in New York have run into a similar problem, Shine says. “The [weight requirements] are based on last year’s weight, but the reporting for last year isn’t due until March 1 … then in June or July they announce the goal” for the current year, he says.

Typically, manufacturers know they need to meet some kind of goal, so they continue paying for the electronics that Sunnking and other recyclers with whom they have EPR contracts are processing, “but they’re conservative with how much they buy” until the state releases the official program numbers, he says. When an OEM meets its quota, it stops paying. If Sunnking is still collecting electronics when the OEMs meet their goal, it ends up with excess material and doesn’t get paid for the processing costs, he says. “That makes it really hard to budget for the year.” Luckily, he says, it has been several years since Sunnking has experienced that issue.

Building a business on EPR

State EPR laws are typically written for the electronics manufacturers, not the recyclers who must actually process the materials, Boswell says, and each firm has to determine if it can operate profitably with the terms and conditions EPR processing contracts provide. “It’s your job to make sure the recovery value is more than what [OEMs] are paying you, or your costs are less,” he says. HOBI does not participate in EPR schemes because it sees more stability and value in business to business recycling, he adds.

EPR schemes appear attractive to some recyclers because OEMs can offer them a steady stream of material and guaranteed per-pound processing fees regardless of market conditions. “In our industry, it’s very supply-driven. Where can we find sources of supply for electronics? The consumer stream is a large supply source,” Boswell says. “The question is, can I participate in that market under the constraints of certain laws, and is it possible to sustain that long term?”

Recyclers hoping to lock in relationships with OEMs have also created steep price competition for the contracts, Boswell adds. “Early on, the price competition generated some bad behavior” where recyclers quoted extremely low service prices and cut corners to make their margins—then quickly went out of business, he says. 

Joe Clayton, vice president of business development for electronics recycler ARCOA (Waukegan, Ill.), says many OEMs would rather sign one or two large contracts with recyclers that can handle electronics recycling in multiple states instead of incurring the costs of undertaking the extensive due diligence required to hire multiple recyclers in each state. More than 50 OEMs, including Panasonic, Sharp, and Toshiba, do business with Electronic Manufacturers Recycling Management Co. (Minneapolis), or MRM, a consortium that oversees state EPR compliance on their behalf. Last year, MRM announced it had facilitated the recycling of 1 billion pounds of e-scrap through EPR programs. The consortium offers convenience for the OEMs, but it locks out smaller recyclers hoping to get a piece of the pie, Clayton says.

 Dynamic Lifecycle Innovations acts as both a recycler and an EPR management consultant throughout the United States, particularly in the Midwest. This dual role insulates them somewhat from market and material flow fluctuations, Tischer Buros says. “In many states, we are a physical processor,” she says, “but in all EPR states, we offer administrative services” to OEMs to help ensure they are managing the program and paperwork correctly.

Another way to pay

Some critics say state EPR programs need cost-structure adjustments so recyclers can get paid a fair price that reflects the changing scrap stream, the decrease in valuable materials, and added labor costs. OEMs usually do the bare minimum to meet the EPR requirements, Boswell says. “They are driven to find the lowest-cost solution within the parameters the law establishes,” he says.

Some states, such as Washington and New York, stipulate that consumers should not have to pay to recycle EPR-eligible electronics unless they dispose of them through “premium services” such as curbside or home pick-up. Shine says consumers end up paying for it anyway because manufacturers in those states “are tucking the cost into new products instead.”

Clayton agrees that EPR schemes often inflate the prices for new products because “manufacturers must cover their costs, but when manufacturers increase electronics prices, distributors and retailers mark up prices based on the new price manufacturers charge, and this can lead to hidden recycling fees that are not used for recycling,” he says. Ultimately, a consumer might be paying $20-$40 more for a television or laptop because of successive markups, he says.

Tischer Buros believes states with a shared cost structure more fairly distribute the responsibility and “make the programs better able to weather the market changes and be more stable.” She points to Wisconsin’s program, where “the consumer, collector, recycler, and manufacturer all share in the cost of recycling.” Collectors charge consumers about $20 per electronic device, but some collection points, such as municipal programs, might take the electronics for free, she says. “As a consumer, you’ve used the product, so you’re part of the shared responsibility,” she says. The collector then takes the electronics to the recycler, and the two parties negotiate costs based on the value of the items the collector needs recycled. By allowing each entity to negotiate prices, there’s more buy-in and thus each party is more interested in the EPR program’s success, she says. “Sometimes everything is priced per pound, sometimes it’s a commodity with a positive value that offsets other negative-value items in the mix. The payments all depend on the contract,” she says.

California has a slightly different funding system for collecting and recycling certain electronics called an advance recovery fee. Consumers pay the fee—about $5 to $7 per television or laptop, Clayton says—at the point of sale, and the retailer remits the fee back to the state, which uses the money to partially subsidize the collection and recycling of the covered electronic products.

Clayton says his job is to help companies with OEM contracts comply with each state’s specifications and tonnage collection requirements, but he believes that EPR schemes don’t reflect the free market and therefore don’t work well for consumers, recyclers, or manufacturers. ARFs are better than EPR schemes because consumers pay less in the long run for the cost of recycling, he says. You don’t have “multiple hands pulling off parts of the pie” through markups and other inflated costs, he says. As a believer in free-market economics, he would prefer that electronics follow the path of most other commercial recyclables, where demand for the product or its commodities drives collection and recycling, he says.

Future considerations

Half of the states in the United States have some type of EPR scheme, and Boswell says that is unlikely to change. “No EPR law is perfect, and I think even those that support EPR think there can be some improvements,” he says.

In February, ISRI’s EPR working group voted to sunset ISRI’s 2011 electronics EPR position, which advocated a competitive, market-based recycling system but allowed “in certain instances to hold producers financially responsible for costs associated with responsibly recycling certain products, such as used electronics equipment.” The position supported “ending producer responsibility and government-imposed fees as soon as practicable.” To replace the 2011 language, ISRI’s Board of Directors adopted an updated position that addresses EPR programs for all commodities, not just electronics. “ISRI does not support product stewardship policies that disrupt the current recycling infrastructure, such as extended producer responsibility programs that either target, include, or disrupt the recycling of materials or products that are being successfully recycled and consumed in existing markets,” it says. The position further states that ISRI would favor—“as a last resort”—temporary policies that aid markets only for difficult-to-recycle items. These temporary programs might include “manufacturer facilitated collection systems developed in cooperation with retailers or other entities,” and programs that “compensate municipalities [or] recyclers for costs associated with separate collection, transportation, and processing systems for difficult-to-recycle items.”

In addition to rethinking EPR policies’ effect on the market, future discussions about EPR laws will likely include revisiting covered product scopes and thinking more deeply about data security concerns, Tischer Buros says. “Data privacy is a big thing that has become more relevant in the last 10 years, and we haven’t seen that issue be covered in a lot of these laws,” she says. “Europe has tackled that from a consumer data perspective, and the United States is going to need to go on that journey in the next few years.” Shine agrees that there needs to be a better system for making sure personal data is safe throughout the takeback process. Recyclers say states also need policy changes that better reflect the newer devices finding their way into the recycling stream. “Devices are getting smaller, but there are more of them, so there’s an opportunity to expand what we do,” Shine says. “But there will have to be more fees associated with processing them, especially with respect to labor. So you’ll see a big shift in the next 10 years, and I think EPR laws will have to shift with them. Electronics are everything to us. They’re everywhere.”  

Megan Quinn is senior reporter/writer for Scrap.

How can state extended producer responsibility laws better support the recycling of end-of-life electronics? 

  • 2020
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