The Abell Reportsmartgrowth.umd.edu/assets/efc/efc_deposit_program_summary.pdf · The Abell Report is published quarterly by The Abell Foundation 111 S. Calvert Street, 23rd Floor,

March 2012Volume 25, Number 2

What we think about, and what we’d like you to think about

Published as a community service by The Abell Foundation

The Abell Report

By the University of Maryland Environmental Finance Center, inpartnership with the Center for Integrative Environmental Researchand ECONorthwest

Beverage-container deposit pro-grams currently exist in 10states across the country and

are under consideration in severalothers. These programs add a refund-able deposit (generally 5 or 10 cents)to the purchase price of a beveragecontainer. When the consumerreturns the beverage container forrecycling, the deposit is returned. Theunique nature of disposable beveragecontainers provides the opportunityto use a market-based system toincentivize the proper handling anddisposal of these items.

However, deposit programsremain highly debated, with strongsupporters and detractors. The goal ofthe University of Maryland Environ-mental Finance Center (EFC) projectteam is to provide an objective analy-sis that informs the decision-makingprocess within the state of Marylandas it considers legislation in thefuture. This executive summary sum-marizes the team’s key findings associ-ated with extended research. A copyof the full report is available from TheAbell Foundation at www.abell.org.

The Effect on Litter ReductionLitter is a universal problem with

negative impacts that reach farbeyond the community of origin. Itnot only decreases the aesthetic appealof communities, which depressesbusiness and local property values,but litter also travels via wind andwater to pollute critical waterwaysand ecosystems. Traditional stormwa-ter systems, which tend to result inhigh-velocity flows of rainwater, exac-erbate the problem. As a result, localand state governments and communi-ties across the country continue toinvest in surveys, cleanups, and litter-reducing technologies in an attemptto reduce these negative impacts.

Litter also adversely affectstourism, and it degrades the ecologyof land and water systems. But litter iscostly to clean up. A 2009 KeepAmerica Beautiful report estimatedthat the U.S. spends nearly $10.8 bil-lion annually on litter cleanup andprevention alone, with state and localgovernments picking up 11.5 percentof the cost, or about $1.3 billion.Businesses reportedly pay the brunt oflitter cleanup—$9.1 billion, or about80 percent of the total cost.1 TheCity of Baltimore spends approxi-mately $10 million per year on littercleanup, including litter pickup inbusiness districts ($2.3 million) and

Gary Barnes Sutton, an 18-yearold African American and 2009 grad-uate of Mergenthaler (high school)was hustling pizzas at $3.00 an hourplus tips and making maybe $15,000a year in the culture of the workingpoor, when he connected with a pro-gram called Year Up; some 14months later he is making $15.00 anhour and $30,000 a year as an infor-mation technician working in thewhite-collar corporate world (T.Rowe Price, Domino Sugar, MorganStanley), with prospects of risingincome and the wholly different lifethat accompanies. For Gary and hun-dreds of other young men andwomen struggling in an unforgivingworkplace where jobs of any kind arehard to come by, Year Up is transfor-mative--changing young people’sworkplace skills, income, lifestyle andaspirations. Of his Year-Up experi-ence, Gary says in wonderment,“What an eye opener!”

Year Up is a nonprofit organiza-

continued on page 12

ABELL SALUTES:“Year-Up”: Teaching ITskills, opening doors,changing lives.

Uncapping the Pros and Cons of a Bottle Deposit ProgramWill a beverage-container deposit program reduce litter in Maryland? And at what cost? An examination of thisissue—along with potential impacts on recycling rates, employment, beverage sales, and greenhouse gas emissions.

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mechanical street sweeping ($3.8 mil-lion).2 These services are critical toresidents and businesses and to main-taining a competitive hub for thecity’s $3 billion tourism industry.3

Although many attempts havebeen made to quantify the beverage-container component of litter, esti-mates vary widely because the vari-ability in methodology makes it diffi-cult to ascertain a precise percentage.This report cites data from numerousstudies that indicate beverage contain-ers make up between 4.4 percent and21 percent of the litter streamthroughout the country.

One of the most comprehensivesurveys is from the Ocean Conservan-cy. In 2009, it reported that beveragecontainers were among the top 10 ofmarine debris collected, and wererecorded at more than 6,000 sitesaround the world on a single day dur-ing the International CoastalCleanup. In fact, 9 percent of thedebris collected on that day were plas-tic beverage bottles (883,737 bottles),4 percent were glass beverage bottles(459,531 bottles), and 4 percent werealuminum beverage cans (457,631cans)—totaling 17 percent.4

Though data for Maryland arefragmented and largely incomplete, aseries of litter surveys and clean-upsprovides insight into the scope andcomposition of litter in the state.Using the estimate suggested in pro-posed House Bill 8395—that between9 percent and 24 percent of Mary-land’s litter (by weight) is made up of

bottles—and using a plastic PET bot-tle weight as a proxy,6 we can calculatehow much of the total litter collectedat recent cleanups can be attributed tobeverage containers alone.

One of the most comprehensiveand current data sets available forMaryland comes from the 2011Potomac River Watershed Cleanupsponsored by the Alice FergusonFoundation. The 23rd annual cleanupcleared 48.4 tons (193,600 individualcontainers) of recyclable aluminum,glass, and plastic bottles from thewatershed at 613 sites located inMaryland, Virginia, West Virginia,Pennsylvania, and the District ofColumbia.14 This tonnage representsabout 21 percent of all waste collect-ed, marking the upper bound of thenational range discussed above.

So how can a state address this lit-ter problem? There are a number ofpractices and programs that may be

used, including Adopt-a-Highwayprograms, paid litter pickup, compre-hensive litter-control programs, litterfees or taxes, paid targeted advertising,extended producer responsibility pro-grams, and, of course, beverage-con-tainer deposit programs.

In fact, a review of the available lit-erature shows that beverage-containerdeposit programs have proven to bethe most effective method for reduc-ing litter. Beverage deposits, inessence, create an incentive to disposeof a container properly instead ofleaving the container to pollute theenvironment as trash. States that haveenacted deposit programs report sig-nificant reductions in beverage con-tainers in the litter stream. Hawaii, forexample, saw a 60 percent reductionin beverage containers as a percentageof total litter between 2005 (the yearthe beverage deposit program wasimplemented) and 2008.15 (This

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The Abell Report is published quarterly by The Abell Foundation111 S. Calvert Street, 23rd Floor, Baltimore, Maryland 21202-6174 • (410) 547-1300 • Fax (410) 539-6579

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Source/LocationTotal Material Collected

Estimated LowerBound (9% Beverage

Containers)

Estimated UpperBound (24%

Beverage Containers)

Maryland SHA (2010)7 24,092 lbs of debris 2,168.2 lbs 5,782.1 lbs

Assateague Coast (2010)811,162 units plastic3,207 units glass

312.5 lbs (actual)1,343.3 lbs (actual)

Baltimore Inner Harbor(2006-2007)9

16 tons of debris 2,880 lbs 7,680 lbs

Baltimore CommunityCleanup (2011)10


Anacostia Bandalong Trap(2010)11

6,000 lbs annually 540 lbs 1,440 lbs

Potomac Spring Cleanup(2011)12


Patapsco Cleanup (2007)13 71,272 lbs of debris 6,415 lbs 17,105 lbs

Table 1: Litter collected at recent cleanup events in Maryland

trend reversed slightly in subsequentyears with 2010 data showing a 1.5percent increase in beverage contain-ers as a percentage of total litter.)16

There is some literature that indicatesthat other forms of litter are reducedas a result of deposit programs as well(see Table 2 below).17 While this maybe the case, the EFC’s research indi-cates that litter-reduction benefits ofdeposit programs can only be quanti-fied to any degree of certainty withregard to beverage-container litter.

Table 2, below, shows self-reportedlitter data to the U.S. Senate Com-mittee on Environment and PublicWorks in 2002 from seven states thathave enacted bottle-deposit legisla-tion. These pre- and post-litter sur-veys indicate a reduction in beverage-container litter by a range of 69 per-cent to 84 percent, with an overall lit-ter reduction by 30 percent to 64 per-cent.18 Although these data suggest acorrelation between deposit programsand overall litter reduction, this con-clusion is based on studies conductedbetween 1977 and 1987. To ourknowledge no recent data have beencollected to further substantiate thisconnection.

In summary, the EFC’s findingsindicate that litter is a significant andcostly problem in the state of Mary-land, and that litter reduction wouldbe a primary benefit of a beverage-container deposit program. Ultimate-ly, the impact on litter will be deter-mined by two factors: 1) the redemp-tion rate; and 2) the number of container types addressed by thedeposit system.

General Mechanics of a Bottle BillThough deposit programs are rela-

tively simple in concept, the revenueflows and transaction costs associatedwith these programs can be complex.Further, how these costs and revenueflows are accounted for will determinethe long-term sustainability of theprogram and the responsibilities ofeach participant in the marketplace.

The deposit system: To encourageproper disposal of beverage contain-ers, a refundable deposit is placed oneach container. In most cases, this is a5 cent charge, and although there isvariation from one program to thenext, the fee is typically applied to avariety of carbonated and noncarbon-

ated beverages sold in glass, plastic, oraluminum containers typically withthe exception of dairy products.33,34

Figure 1, below, shows the flow ofdeposits (solid lines) and bottles (dot-ted lines) in a bottle-deposit program.First, consider a bottle that is pur-chased and then redeemed. In moststates, the process begins with the dis-tributor. The distributor ships bever-ages to retailers, and includes thedeposit—5 cents, for example—inthe price it charges the retailer. Whena consumer buys the beverage, he orshe is charged the retail price plus the5 cent deposit. The consumer takes

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continued from page 2State Beverage Container Litter Reduction Total Litter Reduction

Iowa 76%19 39%20

Maine 69-77%21 34-64%22

Massachusetts N/A 30-35%23

Michigan 84%24 41%25

New York 70-80%26 30%27

Oregon 83%28 47%29

Vermont 83%30 35%31

Table 2: Litter reductions after implementation of a beverage-container deposit bill32

Figure 1: The flow of deposits and containers in a typical deposit program

the empty bottle to a collection center(oftentimes a retail establishment, butnot exclusively) to redeem the bottleand retrieve the 5 cent deposit. Theredemption center then ships theempty bottle to the distributor inreturn for the 5 cent deposit.

Now consider a bottle that is pur-chased but not redeemed. In eithercase, the distributor ships the bever-age to the retailer and charges the 5cent deposit. The retailer sells the bev-erage to the consumer and charges theretail price plus the 5 cent depositamount. At this point, if the bottle isnot redeemed, it either is thrown intothe trash and sent to a landfill (orincinerated), ends up as litter, or isrecycled curbside. As a result, the dis-tributor now has an extra 5 cents,which he or she received when theretailer was charged for the shippedbeverage. The distributor either keepsthe 5 cents, or in the case of mostexisting programs, returns theunclaimed deposit to the state.

Program costs: Even with aneffective redemption process, thedeposit program is not without cost.There is a transaction every time abeverage container or deposit changeshands, and each of these transactionscomes with its own cost. The com-bined average cost for retailers,redemption centers, and recyclers isan additional 4.1 cents,35 which mustbe passed to the consumer; supportedthrough government revenue and/orsales of scrap materials; or internal-ized by manufacturers, retailers, ordistributors. Regardless of how theprogram is structured, there are alsoupfront costs associated with estab-lishing bottle-deposit programs, aswell as the long-term expense of oper-

ating the program. Upfront costs: Upfront costs

include the capital costs to set upredemption centers, to purchase andinstall reverse vending machines, andto acquire all necessary equipment.There are also upfront administrativecosts, primarily associated with estab-lishing the necessary capacity to runthe program. The extent to whichthese costs fall on the public or privatesector is dependent on the structure ofthe program.

Under the structure proposed inMaryland in 2007, Prince George’sCounty reported that constructionand operation of a redemption facili-ty at the Brown Station Road Landfillwas approximately $5,000, with anadditional $25,000 to staff it.36

While these costs seem relatively low,extrapolating this to other local gov-ernments assumes appropriate facili-ties exist to either add on to or repur-pose. By comparison, when consider-ing a deposit program of its own,Rhode Island estimated that to leasethe space for 50 centers, make anynecessary renovations, and employ

the 12 staff members to manage pro-gram start-up activities would cost$3.6 million.37

Operating costs: As with almostany business enterprise, the primarycosts associated with beverage-con-tainer deposit programs are related toprogram operation. For deposit pro-grams these costs tend to span threeareas: (1) the handling cost of collect-ing and transporting redeemed bottlesto recycling centers, which have beenreported to average 3.3 cents per con-tainer;38 (2) processing costs, whichare the subsequent costs of recyclingthe materials; and (3) administrativecosts, which are the expenses associat-ed with running the program, such asadministrative staff for bookkeepingand information flow, enforcementpersonnel to ensure compliance, andprogram staff to manage outreach,education, and community engage-ment efforts.

According to a 2008 report, theannual cost of operating 90 independ-ent, industry-run centers in Oregonwas approximately $156,000 per site,with an additional $27,000 in admin-istrative costs.39 In the proposedRhode Island program, annual oper-ating costs for each redemption centerwere estimated at $165,000.40

Montgomery County, in responseto Maryland’s 2007 proposed legisla-tion, suggested that it would cost anestimated $300,000 for the county tohire a contractor to facilitate redemp-tion-center processes. In addition, thecounty anticipated hiring fiscal assis-tants to handle reimbursements tocustomers, which would cost approxi-mately $150,000.41

Program revenue: Because of thepopularity of bottled beverages in theU.S., hundreds of millions of dollarsflow through deposit programs every

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Beverage containerdeposit programs haveproven to be the mosteffective method forreducing litter.

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year. Accounting for this revenue, andstructuring programs to ensure thatsurplus revenue is invested appropri-ately, is essential for maintaining sus-tainable systems.

Deposit revenue: The primarysource of revenue in a beverage-con-tainer deposit program is the deposititself, which in theory is enough of anincentive for every consumer toreturn the empty bottle to a redemp-tion center. In reality, however, largeportions of containers are neverredeemed. They either end up inlandfills, as litter, or finding an alter-nate route to a recycling center. Inthese cases, the unredeemed depositsbecome a source of revenue for the community.

Redemption rates and unclaimedrevenue: Across the 10 states withexisting programs, the averageredemption rate is 76 percent, with alow of 60 percent in Connecticut anda high of 97 percent in Michigan. Notsurprisingly, there is a strong correla-tion between the value of the depositand the redemption rate. Michiganhas the highest deposit at 10 cents,which results in its high redemptionrate. In the six months that followedCalifornia’s 2007 increase of its refundvalues—5 cents for containers under24 oz and 10 cents for containers over24 oz—the redemption rate increased6 percent from the same time periodin the previous year.

Redemption rates are also impact-ed by the convenience of returnprocesses and facilities, as well as thetypes of materials collected. Someredemption processes rely heavily onreverse vending machines (RVM),automated devices that collect usedbeverage containers and return a con-

sumer’s deposit. RVM systems havelower operating costs than staffed,manual redemption centers; providethe opportunity to reduce fraudthrough state-specific barcoding; treatcontainers more gently, resulting in ahigher-quality scrap end-product; andcan relieve some of the burden thatfalls on retailers and distributors. Per-haps most importantly, RVMs arehighly convenient, making theredemption process simpler.

Revenue from unredeemed con-tainers can reach the tens of millionsof dollars, ranging from $1.2 millionin Maine to approximately $200 mil-lion in California. Obviously, the lev-el of unredeemed deposits is directlyassociated with the number of bever-ages purchased in the state; therefore,large states like California will havehigher revenue levels. As stated previ-ously, this revenue is impacted by theredemption rate itself. Therefore,states that provide less incentive forcontainer return and have lowerdeposit levels will likely experiencelower redemption rates and have

higher unclaimed deposit revenue. In most cases, these unclaimed

funds that revert to the state areadded to the general fund or are usedto cover programmatic expenses.Michigan, for example, diverts 75percent of unclaimed deposits to aCleanup and Redevelopment Fund,which is spent on state environmentalprograms. Funds totaled $17.5 mil-lion in 2001, and more than $12 mil-lion in 2010.42 Having a specificfunding mechanism in place hasenabled the state to not only definehow these dollars will be spent, but toalso establish a nexus between whatactivities these funds are collectedfrom and the purpose they servewhen reinvested in the community.

Although on the surface beverage-container deposit programs seem tooperate as revenue-generating tools,there are a host of handling, admin-istrative, and programmatic costs atplay, as well as market forces, thatoften tip the balance sheets in theother direction. Closing a budget gapshould not be the driver for institut-


State Deposit Amount Redemption RateUnclaimed Deposit

Revenue

California1 5 cents 84% $200 million

Connecticut 5 cents 70% $23 million

Hawaii2 (2009) 5 cents 79% $21.5 million

Iowa 5 cents 86% $23 million

Massachusetts 5 cents 71% $39.2 million

Maine3 5 cents 90% $1.2 million

Michigan 10 cents 97% $12 million

New York 5 cents 67% $120 million

Oregon4 5 cents 75% $16 million

Vermont5 5 cents 85% $2 million

1. 10 cents for bottles over 24 oz. 2. Plus 1 cent to 1.5 cents nonrefundable fee. 3. 15 cents for some wine bottles. 4. Reverts to distributors; Oregon Department of Environmental Quality estimate. 5. 15 cents for some liquor bottles.

Table 3: Unclaimed deposit revenue in existing deposit program states

ing such a program, nor should it bethe sole financing mechanism to sup-port the program. As redemptionrates improve, unredeemed depositsshrink leaving a state with anexpanded program and fewer fundsto run it. This is the paradox of rev-enue generation.

Revenue from the sale of scrapmaterials: In the long term, the foun-dation of sustainable, self-supportingbeverage-container deposit programsis the recycling process and the sale ofscrap materials. Without the possibil-ity of recycling, collected containerswould be disposed of in landfills—nota desirable outcome.43 Further, theprice that recyclers can earn for scrapmaterials is directly associated withthe price of virgin materials. As theprice of virgin materials rises, theprice that a recycler can earn also ris-es. When the price for scrap materialsis sufficiently high, the revenue fromsales is sufficient to cover handling,administrative, and transaction costsassociated with running the depositprograms. When scrap values decline,revenues decrease, therefore requiringthe establishment of handling fees.

The global recession that began in2008 had a significant depressiveeffect on commodities’ prices, whichresulted in the collapse in the value ofrecycled scrap materials. Prices forrecycled commodities such as card-board, newsprint, paper, and filmplastic dropped dramatically. And theexport market, principally China,essentially closed in terms of buyingcertain commodities.44 As states likeMaryland are pushing to expandwaste-diversion programs through theuse of policies like deposit programs,the price for recycled scrap materials is

still struggling to recover. However,collection and processing costs havestayed relatively stable. As a result,local governments are often requiredto subsidize curbside collection pro-grams through other revenue sources.

Revenue generated by handlingfees: Several existing container depositprograms generate an additionalsource of revenue to cover handlingcosts through a nonrefundable han-dling fee. These fees, which generallyrange from 1 to 3 cents, are primarilyassessed on beverages and help coverthe cost of handling the containers.45

Other Benefits and Drawbacks The EFC team also assessed other

effects typically cited as support for orin opposition to beverage-containerdeposit programs. These includeimpacts on recycling rates and localrecycling programs, jobs, beveragesales, and greenhouse gas emissions.The team also considered what iscalled “the paradox of revenue genera-tion” through unclaimed deposits.Though many warrant further explo-ration, none of these issues weighs

more heavily than the litter-reductionbenefit discussed above.

Recycling Rates and Local Recy-cling Programs

States that have implementeddeposit programs have experiencedimproved recycling rates, which bene-fit both society as a whole and localcommunities specifically. Currently,there are four ways that waste inMaryland is managed at permittedsolid-waste acceptance facilities. In2009, the Maryland Department ofthe Environment (MDE) collectedthe following data:46

• Exportation: Collected refuse canbe transported out of state forrecycling processing or landfill-ing—35.9 percent.47

• Landfilling: Collected refuse canbe landfilled in one of Maryland’s24 landfill facilities—27.2 percent.

• Incineration: Collected refuse canbe incinerated at one of Mary-land’s five incinerator landfill sites(three are medical waste-specific,two are for municipal solidwaste)—17.3 percent.

• Recycle/Reuse: Collected recy-clables can be sorted, bundled, andsold on the open recycling marketat one of Maryland’s recyclingfacilities—19.6 percent.48

In addition to the environmental,financial, and public-health impactsof landfill and incineration facilities,according to the MDE, the state willmeet total landfill capacity in 34 yearsif waste continues at its current rate.49

So although increasing the percentageof waste shipped out of state couldprove to be more economical, bottle-deposit legislation may also be a wayto extend the life of current landfills.

A related issue worth mentioning

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States that haveenacted deposit programs report

significant reductionsin beverage

containers in the litter stream.

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is the impact of bottle-deposit pro-grams on local recycling efforts.Specifically, local recycling programsmay see a reduction in the number ofbeverage containers collected curb-side. And because aluminum, in par-ticular, represents one of the morevaluable scrap materials, local recy-cling systems could see a reduction inrevenue. Therefore, though recyclingrates and efficiencies will almost cer-tainly improve statewide, there isuncertainty as to whether thisimprovement will come at a cost tolocal programs.

Both the Maryland Association ofCounties and the Maryland Munici-pal League have expressed their con-cern that a beverage-deposit programwould pull the most valuable part ofthe recycling stream—aluminum—out of local programs, and that theresulting loss of scrap value wouldforce municipalities to subsidize recy-cling even more than they already do,meaning an additional burden to thelocal taxpayer served by curbsideand/or drop-off services.50 Mont-gomery County, for example, hasindicated that the resale of recyclablematerials processed at the county’srecycling center generated more than$3.3 million in revenue for the coun-ty in 2006.51

Massachusetts municipalities hadsimilar concerns, but a survey con-ducted by the state found reducedcollection costs to municipalitiesacross the state totaled $1 million,primarily due to the removal of low-value glass and plastics from themunicipal recycling stream. Nownearly 200 cities and towns in thestate support expansion of the pro-gram.52 Another study conducted in

Washington state (with funding fromthe City of Tacoma EnvironmentalServices Division) also indicated savings to local governments in termsof reduced litter and waste-collection costs.53

Reductions in collection and dis-posal costs, however, do not addressthe fluctuating value of recycled scrapmaterials.54 Although a deposit pro-gram could be expected to improvelitter-control efforts and recyclingrates, it is likely to come with a costborne by local governments to operatewaste-management systems. Somecurrent and proposed programs

attempt to address this. Californiaand Hawaii both use a portion ofunredeemed deposits to support local-level recycling programs, and in Min-nesota, the proposed legislation rec-ommends that 90 percent ofunclaimed deposits go to a state envi-ronmental fund while the remaining10 percent be set aside to help supportcounty-level recycling programs.

Jobs There is little evidence to suggest

that beverage-container deposit pro-grams have any significant impact onjob creation and the economy, andthus, job creation is not a soundrationale for passing bottle-depositlegislation. In fact, the most efficientprograms employ technologies such asreverse vending machines, which ulti-mately reduce the labor needed toadminister the program. That said,research does show that the recyclingindustry may experience significantjob growth in the future. Therefore, inso far as deposit programs contributeto the expansion of recycling pro-grams, they may have a positiveimpact on the economy in the future.

According to the nonprofit organ-ization Waste to Wealth, on a per-tonbasis, sorting and processing recy-clables alone sustains 10 times morejobs than landfilling or incineration.In addition, making new productsfrom recycled scrap materials offersthe largest economic pay-off in therecycling loop. New recycling-basedmanufacturers employ even morepeople and at higher wages than doessorting recyclables. Some recycling-based paper mills and plastic-productmanufacturers, for instance, employon a per-ton basis 60 times moreworkers than do landfills.55,56

Beverage SalesA major concern often expressed

in the debate over beverage-containerdeposit programs is whether theseprograms cause an increase in theprice of the included beverages. Earli-er this year, in response to Real Recy-cling Massachusetts’ claim that an“expanded bottle bill would cost con-sumers almost $120 million per yearat a grocery store,”57 the Massachu-setts Department of EnvironmentalProtection conducted a survey exam-

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Because of the popularity of bottledbeverages in the U.S.,hundreds of millions

of dollars flowthrough deposit

programs every year.

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ining beverage pricing, consumerchoice, and redemption system per-formance in Massachusetts andneighboring states. Its findingsshowed no discernible difference inprice between beverages in depositstates versus non-deposit states. Thesurvey also found that there was nodifference in consumer choice,demonstrating that despite the factthat water drinks are included in theMaine program, product diversitystill exceeded that of Massachusettswhere these beverages are not includ-ed in the program.58

Further, a University of Floridastudy by the Economic Analysis Pro-gram found that the impact of adeposit program on beverage con-sumption is essentially zero. Thestudy maintains that such a deposit islow relative to the price of the bever-age, and that consumers cannot easilyavoid a price increase by substitutingone beverage for another, particularlywhen the majority of beverage con-tainers are covered under the depositprogram.59 A California study alsofound no evidence of a decline in thesale of noncarbonated beverages afterthose drinks were added to the state’sdeposit program in 2000.60

Handling costs appear to be oneof the most contentious issues associ-ated with beverage-deposit programs.They are associated with collectingcontainers that are redeemed by con-sumers, and these costs are the mostsignificant of all the costs associatedwith running a deposit program.Even the most effective and efficientsystems incur operational costs, andthe ability to control handling costs,in particular, will impact the long-term sustainability of the program.

The average handling cost in the 10states with deposit programs is 3.3cents per container. Keeping costslow, however, must be balanced withthe need to provide consumers withconvenient access to redemption cen-ters and opportunities.

With the exception of Oregon,which simply does not allow han-dling costs, states have employed twobasic approaches to these costs: 1)cover them with unclaimed depositrevenue; or 2) assess a nonrefundablefee on each beverage sold. There areadministrative costs and barriers asso-ciated with each approach, and eachcan be implemented in a variety ofways thereby impacting differentstakeholder interests. Regardless ofhow these costs are addressed,because the demand for beverages isrelatively inelastic, there is little evi-dence that the costs associated with

deposit programs negatively impactsbeverage sales, especially if the pro-gram applies to multiple containerand beverage types.

Greenhouse Gases (GHG)Maryland has made reducing

greenhouse gas emissions a criticalenvironmental priority. To that end,beverage-container deposit programsare looked to as a possible integralcomponent of the state’s GHG reduc-tion strategy. Though there are somereductions in GHG emissions associ-ated with deposit programs, forMaryland, they are relatively modestand will almost certainly not be amajor contributor to the state’s GHGprogram. That said, there are genuineGHG benefits associated with theincreased collection of beverage con-tainers and potential for expandeduse of recycling scrap materials.Therefore, as the market for scrapmaterials increases in the future, theGHG impact of deposit programswill increase.

The Paradox of Revenue GenerationOne of the more popular selling

points of deposit programs is the cre-ation of revenue through unclaimeddeposits. Deposit programs createmarket incentives that encourage theappropriate disposal of empty bever-age containers. When the deposit rateis set high enough (around 10 centsper container), redemption ratesincrease to around 90 percent. Thismeans that the program is achievingits primary goal of maximizing litter-reduction rates. However, the lowerthe deposit charged, the lower theredemption rates—and thus, lowerreductions in litter and higherunclaimed deposit revenue.

A deposit rate of 5 cents per bot-


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[MassachusettsDepartment of Environmental

Protection survey]findings showed nodiscernible differencein price between beverages in

deposit states vs. non-deposit states.

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tle—the most common depositamount among existing deposit pro-grams—results in redemption rates ofaround 75 percent. As a result, thereis a significant amount of revenuethat goes unclaimed. This revenue isoften used to address program costsincluding handling fees and other lit-ter-reduction and recycling programs.In some cases, the revenue is used tosupport other unrelated social andenvironmental programs. This, ofcourse, creates tension among com-peting community priorities. Forthose that view the role of depositprograms as a tool to reduce litter,unclaimed deposits can result in low-er litter-reduction rates (though it islikely that many of the containersthat go unclaimed do not end up aslitter). For those who are relying onunclaimed deposits to fund otherprograms, more success in litterreduction means less revenue. As aresult, these two motivations forimplementing beverage-deposit pro-grams—litter reduction and revenuegeneration—are at odds. In otherwords, a community cannot reason-ably expect to maximize both litterreduction and revenue generationwith a deposit program.

Recommendations Should Maryland choose to move

in the direction of a deposit program,there are a number of characteristicsand lessons learned from other statesthat would likely improve the potential for an efficient and effec-tive program.

Establish the most effectivedeposit rate. Given that the litter-reduction benefits of deposit pro-grams outweigh all others, the deposit

rate should be set at a level that maxi-mizes this benefit. Empirical and sta-tistical evidence suggest that a depositlevel of 10 cents per container willlead to redemption rates greater than90 percent, thereby achieving thehighest litter-reduction rates. Reduc-tions in GHG emissions can also beexpected to rise in parallel to redemp-tion rates.

Do not rely on unclaimed depositrevenue to support unrelated pro-grams. States that rely on unclaimeddeposit revenue run the risk of reduc-ing the impact of deposit programs onlitter-reduction rates or jeopardizingprograms that are supported bydeposit-program revenue. If Mary-land implements a deposit program, itshould limit the use of unclaimeddeposit revenue to covering containerhandling and administrative costs,supporting complementary litter-reduction programs, and/or support-ing local recycling programs. It isstrongly recommend that the state notuse the revenue to support unrelatedfunding needs.

Implement the deposit on multi-ple beverage types. The long-termeffectiveness of beverage-deposit pro-grams at reducing litter rates relies onapplying the deposit to as many dif-ferent container types as possible.Maryland should be as comprehen-sive as possible regarding which bev-erage containers are included in adeposit program.

Mandate convenience and effi-ciency into the system. The moreconvenient the system, the more like-ly consumers will be to return bottles,which in turn increases litter-reduc-tion rates. Therefore, it is essentialthat programs are designed and legis-lated with convenience in mind. Thatsaid, it is also important that the pro-

grams are efficient and cost-effective.Programs that rely on reverse vendingmachines rather than labor-intensiveredemption centers are more cost-effective (as measured by costs perredeemed beverage container), havelower incidences of fraud, and pro-duce a higher-quality, more readilyused scrap end-product because themachines tend to be gentler thanmanual or curbside collection.

Establish clear program goals andrequirements from the beginning. Aswith any other regulated environ-ment, lack of clarity from the publicsector creates transaction costs withinan industry sector, and will almostcertainly lead to program inefficien-cies. Therefore, the state should clear-ly spell out responsibilities for collect-ing deposits, establish redemptioncenters, define penalties for fraud, andcreate program exemptions. In addi-tion, the responsibility for administer-ing the program should reside withinthe agency with the greatest capacityto reduce these transaction costs. Inthe state of Maryland, that wouldmost likely be the MDE.

Use the marketplace to reducehandling and administrative costs. IfMaryland implements a deposit pro-gram, the industry—either bottlersand distributors, or retailers—shouldabsorb all handling and administra-tive costs in lieu of a nonrefundablehandling fee. Beverage-containerdeposit programs are by definitionmarket-based tools designed to incen-tivize litter reduction and improverecycling rates, correcting an existingfailure in the beverage market toproperly account for the costs associ-ated with litter and the improper dis-posal of beverage containers. And as amarket-based tool, deposit programsare extremely efficient and effective at

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achieving the desired community out-come. By requiring the industry toabsorb the costs of the program, thecosts are put into the marketplace,incentivizing industry participants toaggressively pursue reducing costs tothe greatest extent possible.

Link unclaimed deposit revenueto program performance. In additionto implementing a market approachto reducing costs, the state shouldconsider using the unclaimed depositrevenue as an incentive to improveprogram performance. Specifically,the industry should be allowed tokeep most, if not all, of the unclaimeddeposit revenue if it meets particulargoals such as maintaining redemptionrates at a particular level.61 In addi-tion, the state should consider linkingthe unclaimed deposit revenue to theultimate goal of the program: reduc-ing litter. The state should also inves-tigate using a “pay for success” typeprogram that allows the industry tokeep unclaimed revenue if overall lit-ter rates are significantly reduced. Inaddition to incentivizing the reduc-tion in program and handling costs,this would create a powerful market-based system for improving the envi-ronment through reduced litter.

There is no question that there willbe industry opposition to the marketapproach recommended here. Thereis also no question that the industry isbest positioned to understand whatactions are necessary to reduce pro-gram costs and improve the effective-ness of deposit programs. In fact, thevery premise of beverage-containerdeposit programs is that they use mar-ket incentives to encourage appropri-ate disposal of beverage containers,and by all accounts, these programs

are highly effective in this regard. It isreasonable to assume that the samesort of market incentives would resultin the most efficient administration ofthese programs.

ConclusionThe recommendations above are

based on an assessment of the success-es and challenges of bottle-depositprograms in a number of states. Ulti-mately, a review of the available litera-ture and discussions with managers inmany of the bottle-deposit states ledus to believe that a beverage-containerdeposit program presents one way forMaryland to attempt to address its lit-ter-reduction goals. Ancillary benefits

through increased recycling rates anddecreased greenhouse gas emissions arepossible, though not guaranteed. Asdiscussed throughout this document,deposit programs have distinct bene-fits and drawbacks that will requirecareful consideration from the state todetermine whether investing theresources and political capital to estab-lish a deposit program is worthwhile.

Endnotes

1 MSW Consultants, “2009 National VisibleLitter Survey and Litter Cost Study,” KeepAmerica Beautiful, September 18, 2009,www.kab.org/site/DocServer/Final_KAB_Report_9-18-09.pdf?docID=4561.

2 2010 Annual Report: Baltimore City Office ofSustainability, www.baltimoresustainability.org/metrics/2010/Cleanliness-Goal-1.pdf.

3 Letter from “Visit Baltimore” Partners, May13, 2010, baltimore.org/media/happy-place/.

4 Trash Travels, International Coastal Cleanup,2010 Report, act.oceanconservancy.org/images/2010ICCReportRelease_pressPho-tos/2010_ICC_Report.pdf.

5 House Bill 839 was proposed by DelegatePeter Hammen, et al., during the 2007 sessionof the Maryland General Assembly. The billproposed the establishment of a containerdeposit law that would collect a 5 cent (ormore) deposit on specified beverage contain-ers. The bill did not make it out of committeein the House, and no action was taken in theSenate. No similar bottle-deposit legislationhas been proposed in Maryland since the2007 session. A similar bill, “Recycling—Barsand Restaurants—Beverage Containers,” wasproposed in 2010 and again introduced inMaryland in early 2011. More on this legisla-tion, which was ultimately withdrawn, isavailable in Section 2 of the full report.

6 A 16.9 oz PET bottle weighs 12.7 g.7 “Maryland Thanks Pick Up America Volun-teers for Litter Removal and EducationEfforts,” April 29, 2010, Maryland Depart-ment of Transportation State HighwayAdministration, www.roads.maryland.gov/pages/release.aspx?newsId=637.

8 Ocean Conservancy, “Trash Travels: FromOur Hands to The Sea, Around the Globe,and Through Time,” International CoastalCleanup, 2010.

9 Waldron, Tom, “An Urban Trash CollageSpeaks Volumes,” Urbanite Baltimore, August1, 2007, www.urbanitebaltimore.com/balti-more/netscape-an-urban-trash-collage-speaks-volumes/Content?oid=1247200.

10Vuoto, Loredana, “Mayor’s Spring CleanupGenerates Baltimore’s Green Pride,” Green-handsusa, May 5, 2011,www.greenhandsusa.com/central/page:10346.

11“Bandalong Litter Trap Case Study: Washing-ton, D.C.’s Anacostia River,” Stormwater Sys-tems, 2010,www.dogriver.org/uploads/6/2/5/2/6252936/bandalongcasestudy_anacostia.pdf.

12“23rd Annual Potomac River WatershedCleanup: 2011 Final Results,” Alice FergusonFoundation, 2011,potomaccleanup.org/trash_initiative/trash_cleanup.shtml.

13“2007 Stream Cleanup Stats,” The PatapscoValley Heritage Greenway, Inc., April 2007,www.google.com/url?sa=t&rct=j&q=patap-sco%20cleanup%2071%2C272&source=web


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The impact of adeposit program on

beverage consumptionis essentially zero.

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Funding for this report was provided by The AbellFoundation and WaterfrontPartnership of Baltimore.

&cd=3&ved=0CCwQFjAC&url=http%3A%2F%2Fwww.patapscoheritagegreenway.org%2Fenviron%2F2007%2520Cleanup%2520Sta-tistics.xls&ei=CP7UToTJJ8X20gHvwJn2AQ&usg=AFQjCNE4545eVT3wL1sR0qJ43jy5R2m7wA.

14potomaccleanup.org/trash_initiative/trash_ cleanup.shtml, last accessed November30, 2011.

15Report to the 25th Legislature, State ofHawaii, 2009, prepared by: State of Hawaii,Department of Health, November 2008.

16http://act.oceanconservancy.org/images/2010ICCReportRelease_pressPho-tos/2010_ICC_Report.pdf

17www.bottlebill.org/about/mythfact.htm#src5 18Full table was reported in the proceedings ofthe July 11, 2002 hearing before the Commit-tee on Environment and Public Works of theU.S. Senate, www.access.gpo.gov/congress/senate/pdf/107hrg/83716.pdf.

19Iowa Department of Transportation, HighwayDivision, Litter Survey, April 1980.

20Ibid.21U.S. General Accounting Office, Report bythe Comptroller General of the United States,State’s Experience With Beverage ContainerDeposit Laws Shows Positive Benefits,December 11, 1980, p. 9.

22Ibid.23Environmental Action Foundation, BottleBills in the 1980’s: A Handbook for EffectiveCitizen Action, August 1987.

24Michigan Department of Transportation,Maintenance Division, Michigan RoadsideLitter Composition Survey, Final Report,December 1979.

25Ibid.26Final Report of the Temporary State Commis-sion on Returnable Beverage Containers,March 27, 1985.

27Projection from Center for ManagementAnalysis, School of Business and PublicAdministration of Long Island University,New York State Returnable Container Act: APreliminary Study, 1984.

28Oregon Department of Environmental Quality,Oregon’s Bottle Bill: The 1982 Report, p. 26.

29Ibid.30U.S. General Accounting Office, Report tothe Congress by the Comptroller General ofthe United States, Potential Effects of aNational Mandatory Deposit on BeverageContainers, December 7, 1977, p. 54.

31Ibid.32Full table was reported in the proceedings ofthe July 11, 2002 hearing before the Commit-tee on Environment and Public Works of theU.S. Senate, www.access.gpo.gov/congress/senate/pdf/107hrg/83716.pdf.

33Exceptions to the 5 cent fee level includeMichigan’s 10 cent fee, California’s 10 cent fee

for containers over 24 oz, and Maine and Ver-mont’s 15 cent charge for some wine and/orliquor bottles.

34It should be noted, however, that although a 5cent charge is more prevalent, a strong corre-lation has been shown to exist between thevalue of the deposit and redemption rates.Higher fees have been associated with higherredemption rates, which can be expected toresult in greater levels of litter reduction.

35Container Recycling Institute, Letter toAssembly Member DiNapoli, April 6, 2006,www.bottlebill.org/assets/pdfs/campaigns/newyork/2006-Rebuttals.pdf.

36Prince George’s County as cited in theDepartment of Legislative Services Fiscal andPolicy Notes for HB 839 from the 2007 ses-sion, mlis.state.md.us/2007RS/fnotes/bil_0009/hb0839.pdf.

37DSM Environmental Services, Inc., Analysisof Beverage Container System Options toIncrease Municipal Recycling in Rhode Island,prepared for Rhode Island Resource RecoveryOperation, 2009.

38Understanding Beverage Container Recycling,A Value Chain Assessment prepared for theMulti-Stakeholder Recovery Project,” Busi-nesses and Environmentalist Allied for Recy-cling, January 16, 2002, thecorr.org/Bear.pdf.

39See full report: Container Recovery, Inc.,2008, “Appendix C: Presentation to the Ore-gon Bottle Bill Task Force: The IndustryApproach, May 13, 2008,” In Bottle Bill TaskForce Final Report, October, p. 15.

40DSM Environmental Services, Inc., Analysisof Beverage Container System Options toIncrease Municipal Recycling in Rhode Island,prepared for Rhode Island Resource RecoveryOperation, 2009.

41Montgomery County as cited in the Depart-ment of Legislative Services Fiscal and PolicyNotes for HB 839 from the 2007 session,mlis.state.md.us/2007RS/fnotes/bil_0009/hb0839.pdf.

43However, this is a more desirable outcome tothem becoming litter.

44Crittenden, Guy, “Market for recycled materi-als collapsing,” Solid Waste and Recycling,November 11, 2008, www.solidwastemag.com/news/market-for-recycled-materials-collaps-ing/1000086432/?issue=11022008, lastaccessed on December 8, 2011.

45www.bottlebill.org/about/whatis.htm46Maryland Department of the Environment,“Maryland Solid Waste Management andDiversion Report: 2010 (Calendar Year 2009Data), Technical Services and Operations Pro-gram, November 2010, http://www.mde.state.md.us/ xprograms/Land/SolidWaste/Permit-tedFacilities/Documents/%2710%20mswm-dr.pdf.

47In addition to exporting waste, the MarylandDepartment of the Environment states that206,698 tons were imported in 2009. Mary-land Department of the Environment, “Mary-land Solid Waste Management and Diversion

Report: 2010 (Calendar Year 2009 Data),Technical Services and Operations Program,November 2010.

48These numbers are percentages of the7,507,014 tons of waste accepted at Mary-land’s permitted solid-waste facilities and thentransported out of state, landfilled, incinerat-ed, or recycled/reused in Maryland.

49Ibid.50Personal communication with various mem-bers of the Maryland Association of Countiesand the Maryland Municipal League legisla-tive and government relations staff, November16, 17, and 21, 2011.

51Montgomery County as cited in the Depart-ment of Legislative Services Fiscal and PolicyNotes for HB 839 from the 2007 session,mlis.state.md.us/2007RS/fnotes/bil_0009/hb0839.pdf.

52Personal communications with Greg Cooper,deputy division director at the MassachusettsDepartment of Environmental Protection,October 28, 2011.

53Morris, Jeff, et al., Economic & Environmen-tal Benefits of a Deposit System for BeverageContainers in the State of Washington, April2005.

54It should be noted that, while scrap prices hitan historic low in 2008, they hit an historichigh in 2010 for some materials. California’sBeverage Container Recycling & LitterReduction Program, Fact Sheet, CA NaturalResources Agency, Department of Resources,Recycling, & Recovery, Division of Recycling,June 2011.

55www.ilsr.org/recycling/recyclingmeansbusi-ness.html, last accessed December 7, 2011.

56It should be noted that the organization’s web-site indicates that focusing on reusing materi-als generates even more jobs than recycling.

57www.realrecyclingmass.com 58www.mass.gov/dep/recycle/reduce/bbsurv11.pdf

59Dewey, Jim, et al., “Analysis of Florida Bever-age Container Deposit Refund System,”March 15, 2011, Economic Analysis Program,Bureau of Economic and Business Research,University of Florida.

60Berck, P. and G. Goldman, 2003, CaliforniaBeverage Container Recycling & LitterReduction Study: A Report to the CaliforniaState Legislature, DRRR-2011-025, Universi-ty of California at Berkeley, http://www.calre-cycle.ca.gov/Publications/default.asp?pubid=1389, p. 3.

61We recognize that there will be pressure to usethese monies to support other programs,including local recycling programs. The deci-sion to address these needs will be political innature, and therefore outside the scope of thisreport. However, if it is necessary to subsidizeother programs, we suggest that the amountof revenue that stays with industry be highenough to act as an effective incentive toachieve program goals.

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tion that provides low-income highschool graduates and GED recipients,ages 18 to 24, with a year of informa-tion technology (IT) training, leadingto technical careers with startingsalaries of $30,000 or higher. Duringthe first six months of the program,participants are paid weekly stipendsand attend classes focusing on ITHelp Desk and Desktop Support.During the second six months of theprogram, students are placed in paidapprenticeships with local partnercompanies to gain work experience inIT. In 2006, Year Up opened anoffice in the Washington, DC, area(the office is located in Arlington,VA), which has served more than 500young adults. The site is postingimpressive outcomes:

80 percent of graduates areemployed or enrolled in college with-in four months of graduation, earningan average wage of $15 an hour, or$30,000 a year;

More than 85 percent of Year Up’scorporate partners continue to renewtheir commitment to future classes; a91 percent of corporate partnersexpress satisfaction with apprentices.

With $112,000 in funding fromThe Abell Foundation, 31 BaltimoreCity residents traveled to Year UpWashington, DC, to complete the sixmonths of classroom work. Theycompleted their internships with Bal-timore employers, including JohnsHopkins Medicine, T. Rowe Price,and Morgan Stanley. A total of 18 ofthe 31 students (or 58 percent) grad-uated from the program. Of the stu-dents who graduated, 15 (or 83 per-cent) were employed and/or enrolledin college within four months of grad-

uation, earning a starting wage of$15.50 an hour; several are now earn-ing $18 an hour.

In August, 2010, with a $115,000grant from The Abell Foundation,Year Up opened an office in Baltimoreat 201 N. Charles St. Through a part-nership with the Community Collegeof Baltimore County, Year Up dual-enrolled 24 low-income students in

August, 2010, and 22 more in 2011.Of the 46 students, 24 had prior col-lege experience and 42 reside in Balti-more City. All of the students arelow-income (or come from house-holds earning less than $40,000 ayear) and more than 80 percent areAfrican-American or Latino.

Students attend classes in themorning at Year Up and are trans-ported to take additional courses atCCBC in the afternoon, earning 13college credits for this coursework.The Year Up students have surpassed

their peers at CCBC in their courses:77 percent of Year Up students passedIntroduction to Computers, com-pared to 64 percent of CCBC stu-dents; and 100 percent of Year Upstudents passed English 101 com-pared to 65 percent of CCBC stu-dents. Eight Year Up students com-pleted an online developmental edu-cation class (ENG 052) at the sametime they completed English 101,enabling them to earn college credit.

Students complete their six-monthinternships with local companies andorganizations, including The JohnsHopkins Hospital, ConstellationEnergy, the Mayor’s Office of Infor-mation Technology, Motor VehicleAdministration, T. Rowe Price, andMorgan Stanley.

Of the 24 students from Year Up’sfirst Baltimore class, 15 (or 63 per-cent) graduated from the class, com-pleting all coursework and the six-month internship.

Bryant Dooley is an instructor andteaches at Year Up in Baltimore. Headds to the profile of Year’s Up’s mis-sion: “We not only teach the technicalskills it take to work as an informationtechnologist; Our students are mov-ing from one world, where low wagesinform the way of life, to the corpo-rate world—where what we call ‘softskills’ count. How to meet people.Vocabulary. Bearing. How to plan andorganize. Year Up doesn’t just teach amarketable skill, it opens doors andteaches students how to movethrough them, and take their place onthe right side of it.”

Abell Foundation Salutes Year-Upfor teaching students not just a skill towork in the computer world, but onethat leads the student from one worldto another.

ABELL SALUTEScontinued from page 1

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80 percent of graduates are

employed or enrolledin college within fourmonths of graduation,earning an average of$15.00 an hour, or$30,000 a year.

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