1

A Study of Potential Effects of Market Forces on the Management 

of Hazardous Secondary Materials Intended for Recycling 

EPA Office of Solid Waste 

Initial Drafts Prepared and Submitted for EPA Review By: 

ICF International 

9300 Lee Highway 

Fairfax, VA, 22031 

November 21, 2006
2

Executive Summary 

Recycling of hazardous waste supports a variety of environmental goals, including 

reduced generation of waste and reduced use of virgin materials and landfill space. 

Proposed revisions to EPA’s definition of solid waste identify certain recyclable 

hazardous secondary material as not being subject to regulation as hazardous waste, thus 

removing some of the regulatory burdens for managing those materials. A potential 

concern with these revisions, however, is that the economic forces that shape firm 

recycling behavior might differ from those that shape manufacturing decisions. Through 

a closer look at how market forces can affect materials management for various types of 

recycling, this paper aims to help EPA evaluate these proposed regulatory changes. 

Despite the societal-level benefits of hazardous waste recycling, an examination of 

current damage cases and public comments on EPA’s proposed revisions of the definition 

of hazardous waste reveal cases where hazardous waste recycling has not achieved the 

beneficial outcomes mentioned above. The objective of the paper is to use economic 

theory to examine and attempt to explain the market forces that may contribute to both 

sub-optimal and optimal outcomes from hazardous waste recycling. 

From a societal point of view, an optimal amount of an economic activity is the amount 

which maximizes the net benefits (private and social benefits minus private and social 

costs). At this point, the marginal benefits of the activity (the benefits associated with the 

last unit of the activity) equal the marginal costs of it (the costs associated with providing 

that last unit). Any deviation from this point leads to a sub-optimal outcome where too 

little or too much of the activity is occurring from a societal point of view. For the case 

of hazardous waste recycling, a situation of too little recycling would result in 

inefficiencies, in that an increased rate of recycling (due, for example, to EPA’s proposed 

changes) could realize additional net benefits. 

The focus of this paper, however, is on situations where sub-optimal outcomes result 

from too much of an activity. For hazardous waste recycling, this situation occurs when 

firms are accumulating too much waste without actually recycling it, or are operating 

their recycling operation in a way that imposes excessive costs on society (such as excess 

pollution or mishandling of waste). Thus, while hazardous waste recycling is not an 

inherently damaging activity, damages can result from it if recycling is practiced in a way 

that generates excessive social costs. A move from a sub-optimal to an optimal amount 

of recycling may thus involve two different sets of activities. First would be a reduction 

in waste mismanagement that result from hazardous waste recycling, which would 

increase the social benefits and lower the social costs of recycling operations (e.g., reduce 

leakages, spills). Second would be cessation of activities that occur under the guise of 

recycling but have little or no benefits and large costs, such as “sham recycling.” 

In this paper, we present economic models to provide information on how economic 

forces could influence different kinds of hazardous waste recycling. These economic 

models are based on three distinct kinds of hazardous waste recycling that occur at 

commercial and industrial firms. The models discussed in this paper include one for 
3

businesses that are primarily waste handlers, and two for industrial firms that 

manufacture a primary product and generate hazardous waste as a byproduct: 

• Commercial Recycling The primary business of these firms is handling 

hazardous waste and producing secondary materials. Wastes are accepted for 

recycling from offsite industrial sources (usually for a fee), and may be returned 

to the same generator or to another company and/or different industry. 

 

• Industrial Intra-company Recycling These firms generate hazardous waste as a 

byproduct in their main production process and, with the objective of reducing 

their waste management costs, recycle the waste for sale or for their own reuse in 

production. 

• Industrial Inter-Company Recycling These firms use or recycle hazardous 

waste obtained from other firms with the objective of reducing the cost of their 

production inputs. 

In the paper, we discuss these models of recycling in terms of the associated revenues and 

costs (both direct and indirect). Based on information from the models, we define 

characteristics of hazardous waste recycling that are hypothesized to contribute to suboptimal outcomes. We then use economic theory to provide information on how these 

characteristics might influence recycling at different kinds of firms. These characteristics 

are 

• The value of the recycled product; 

• Price volatility of recycling output or inputs; and 

• The net worth of the firm. 

Based on these characteristics, we identify certain economic conditions that could be seen 

as increasing the likelihood of waste mismanagement occurring during hazardous waste 

recycling activities. These conditions are 

• A low market value for the recycled product; 

• Unstable prices for the recycled product or any inputs to recycling; and 

• Firms with low net worth. 

One similarity of the characteristics and conditions described above is that they are at 

least to some degree observable or could be observable given availability of data. In 

addition to these observable characteristics, we present additional factors that could 

contribute to sub-optimal recycling. These additional factors arise due to economic 

conditions known as market failure, and differ from the above characteristics in that they 

are not readily observable from firm or market data. These market failures are 

• Imperfect information; and 

• Externalities. 
4

The first source of market failure, imperfect information, suggests that some firms may 

enter into the hazardous waste recycling market with incorrect information on the true 

costs or revenues involved. The second source of market failure, externalities, occur 

when the true societal costs that result from a hazardous waste recycling operation are not 

borne by the firm, encouraging the firm to produce more recycled product than it would if 

it had to pay the full social costs of its operation. Identifying these sources of market 

failure can point to potential solutions to the problems it causes. Similarly, knowing how 

the hazardous waste recycling market is affected by externalities can point the way 

toward policies that “internalize” them, and lead to reduced damages. 
5

Table of Contents 

1. Introduction................................................................................................................ 8 

1.1. Regulatory Framework for Hazardous Waste Recycling ................................. 10 

1.1.1. Full Regulation ......................................................................................... 12

1.1.2. Exemptions................................................................................................ 12

1.1.3. Special Standards...................................................................................... 13

1.2. Snapshot of the Current State of Hazardous Materials Recycling.................... 13 

1.3. Models of Hazardous Waste Recycling............................................................ 14 

1.4. Outline of the Theoretical Analysis .................................................................. 16 

2. Theoretical Analysis ................................................................................................ 17 

2.1. Commercial Hazardous Waste Recycling ........................................................ 17 

2.1.1. Revenue Structure of Commercial Recyclers............................................ 18

2.1.2. Direct Costs of Commercial Recyclers..................................................... 19

2.1.3. Indirect Costs of Commercial Recyclers................................................... 19

2.1.4. Model of Commercial Recyclers............................................................... 21

2.2. Industrial Intra-company Recycling ................................................................. 23 

2.2.1. Revenue Structure of Industrial Intra-company Recycling....................... 24

2.2.2. Direct Costs of Industrial Intra-company Recycling................................ 25

2.2.3. Indirect Costs of Intra-company Recycling .............................................. 26

2.2.4. Model of Intra-Company Recycling.......................................................... 27

2.3. Industrial Inter-company Recycling ................................................................. 29 

2.3.1. Revenue Structure for Industrial Inter-company Recyclers...................... 30

2.3.2. Direct Costs for Industrial Inter-company Recycling............................... 30

2.3.3. Indirect Costs of Inter-company Recycling............................................... 31

2.3.4. Model of Industrial Inter-company Recycling .......................................... 32

2.4. Market Failures ................................................................................................. 34 

2.4.1. Imperfect Information ............................................................................... 35

2.4.2. Externalities .............................................................................................. 39

3. Discussion and Conclusion...................................................................................... 42 

3.1. Discussion of Observable Firm and Market Characteristics............................. 42 

3.2. Empirical Evidence for Observable Firm and Market Characteristics ............. 43 

3.2.1. Value of the Recycled Product....................................................................... 44

3.2.2. Stability of Prices........................................................................................... 46

3.2.3. Net Worth of the Firm.................................................................................... 48

3.3. Discussion of Unobservable Firm and Market Characteristics..................... 48 

3.4. Conclusion .................................................................................................... 49 

Appendix I – Literature Review ....................................................................................... 50 

Appendix II – Empirical Analysis .................................................................................... 54 

References......................................................................................................................... 90 
6

List of Exhibits 

Exhibit 1-1: Hazardous Waste Managed in 2003 ............................................................. 14 

Exhibit 1-2: Hazardous Waste Recycled, 2003 ................................................................ 14 

Exhibit 2-1: Diagram of Commercial Recycling.............................................................. 18 

Exhibit 2-2: Model of Commercial Recyclers.................................................................. 23 

Exhibit 2-3: Diagram of Industrial Intra-company Recycling.......................................... 24 

Exhibit 2-4: Model of Industrial Intra-company Recyclers.............................................. 29 

Exhibit 2-5: Industrial, Inter-company Recycling ............................................................ 30 

Exhibit 2-6: Model of Inter-company Recycling.............................................................. 34 

Exhibit 2-7: Imperfect Information for Commercial Recyclers ....................................... 36 

Exhibit 2-8: Uncertainty in the Demand for Recycled Products ...................................... 39 

Exhibit 2-9: Negative Externalities in the Hazardous Waste Recycling Market.............. 41 

Exhibit 3-1: Type of Recycling for Five Selected Hazardous Wastes.............................. 44 

Exhibit 3-2: Product Value and Acceptance Fees............................................................. 46 

Exhibit 3-3: Price Volatility – Mean and Standard Deviation.......................................... 47 

Exhibit 3-4: Multiple Use ................................................................................................. 48 

Exhibit A-1: Average Cost of Hazardous Waste Management ........................................ 56 

Exhibit A-2: Waste Handling Method and Geographic Distribution for 71 Facilities 

Handling Lead-Acid Batteries (2003)....................................................................... 58 

Exhibit A-3: Waste Management Methods for Lead-Acid Batteries at 29 Facilities (2003)

................................................................................................................................... 58 

Exhibit A-4: Recycling of Lead-Acid Batteries – Flow of Hazardous Waste, by Industry 

(2003)........................................................................................................................ 59 

Exhibit A-5: Distribution of Facilities Recycling Lead-Acid Batteries, by Industry (2003)

................................................................................................................................... 60 

Exhibit A-6: Characteristics of Industries in Which Some Facilities are Engaged in 

Recycling Lead-Acid Batteries................................................................................. 61 

Exhibit A-7: Primary and Secondary Production of Lead, 1970-2002............................. 61 

Exhibit A-8: Lead Recovered from Scrap Processed, 2002-2003 .................................... 62 

Exhibit A-9: Annual Price of Lead, 1970-2002................................................................ 62 

Exhibit A-10: Summary Statistics for the Annual Price of Lead ($/ton).......................... 63 

Exhibit A-11: Booms and Slumps in the Commodity Prices ........................................... 63 

Exhibit A-12: Consumption of Lead by Product (in metric tons), 2002-2003 ................. 64 

Exhibit A-13: Waste Handling Method and Geographic Distribution for 73 Facilities 

Handling Brass Dust (2003)...................................................................................... 65 

Exhibit A-14: Waste Management Methods for Brass Dust at 43 Facilities (2003) ........ 66 

Exhibit A-15: Recycling of Brass Dust - Flow of Hazardous Waste, by Industry (2003) 66 

Exhibit A-16: Distribution of Facilities Recycling Brass Dust, by Industry (2003) ........ 67 

Exhibit A-17: Characteristics of Industries in Which Some Facilities are Engaged in 

Recycling Brass Dust................................................................................................ 68 

Exhibit A-18: Primary and Secondary Production of Zinc, 1970-2002 ........................... 69 

Exhibit A-19: Annual Price of Zinc, 1970-2005 .............................................................. 69 

Exhibit A-20: Summary Statistics for the Annual Price of Zinc ...................................... 70 

Exhibit A-21: Price Index of Zinc Compared to Price Index of Iron and Steel,............... 71 
7

Exhibit A-22: Spent Pickle Liquor – Industry Management (2004)................................. 73 

Exhibit A-23: Iron and Steel Production, 1970 – 2002 .................................................... 74 

Exhibit A-24: Waste Handling Method and Geographic Distribution for 34 Facilities 

Handling Spent Pickle Liquor (2003)....................................................................... 75 

Exhibit A-25: Waste Management Methods for Spent Pickle Liquor at 34 Facilities 

(2003)........................................................................................................................ 76 

Exhibit A-26: Waste Handling Method and Geographic Distribution for 426 Facilities 

Handling Solvents (2003) ......................................................................................... 78 

Exhibit A-27: Waste Management Methods for Solvents at 426 Facilities (2003).......... 79 

Exhibit A-28: Recycling of Solvent - Flow of Hazardous Waste, by Industry (2003)..... 80 

Exhibit A-29: Distribution of Facilities Recycling Solvents, by Industry........................ 81 

Exhibit A-30: Characteristics of Industries in Which Some Facilities are Engaged in 

Recycling Solvents.................................................................................................... 82 

Exhibit A-31: Demand of Virgin Trichloroethylene, Methyl Ethyl Ketone, and 

Perchloroethylene (1996 – 2002).............................................................................. 82 

Exhibit A-32: Price of Virgin Trichloroethylene, Methyl Ethyl Ketone, and 

Perchloroethylene (1996 – 2002).............................................................................. 83 

Exhibit A-33: Summary Statistics for the Annual Price of Virgin Trichloroethylene, 

Methyl Ethyl Ketone and Perchloroethylene (1996 – 2002) .................................... 83 

Exhibit A-34: Price for Virgin and Reclaimed Trichloroethylene, Methyl Ethyl Ketone 

and Perchloroethylene (1997)................................................................................... 84 

Exhibit A-35: Estimated Price for Reclaimed Trichloroethylene, Methyl Ethyl Ketone 

and Perchloroethylene (2001)................................................................................... 84 

Exhibit A-36: Number of Drums Reconditioned Annually.............................................. 85 

Exhibit A-37: Total Number of Industrial Container and Drum Cleaning (ICDC) 

Facilities.................................................................................................................... 86 

Exhibit A-38: Characteristics of the Markets for Recycled Materials.............................. 88 
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1. Introduction 

In October 2003, EPA proposed revisions to the definition of solid waste (68 FR 61558). 

These proposed revisions identify certain recyclable hazardous secondary materials as not 

being subject to regulation as hazardous wastes. Part of the rationale for this approach is 

that some types of recycling are considered more akin to manufacturing than waste 

management and therefore less in need of regulation. [“In EPA’s view, a recycler will 

value secondary materials that provide an important contribution to his process or product 

and will manage them in a manner consistent with a valuable feedstock material (i.e., will 

manage them to minimize their loss)”; 68 FR 61583]. 

As pointed out by some commenters to the proposed rule, the economic forces shaping 

firm recycling behavior might be different than those at play in manufacturing processes 

using virgin materials. For example, the inherent value of hazardous material is often 

very low compared to virgin materials used in manufacturing, resulting in a different set 

of economic incentives. Additionally, different economic incentives between hazardous 

waste recycling and manufacturing may arise due to differences in these two business 

models. As opposed to manufacturing, where the cost of inputs is greater than zero and 

revenue is generated from the sale of the output, some models of hazardous waste 

recycling involve generating revenue from inputs (acceptance of hazardous waste) in 

addition to the sale of outputs. Recyclers of hazardous wastes may thus respond 

differently than traditional manufacturers to economic forces and incentives. An 

increased understanding of these unique aspects of hazardous waste recycling can help to 

guide rulemaking designed to influence this activity as practiced by firms. 

Recycling of hazardous waste supports a variety of environmental goals, including 

reduced generation of waste and reduced use of virgin materials and landfill space. 

Proposed revisions to EPA’s definition of solid waste identify certain recyclable 

hazardous secondary material as not being subject to regulation as hazardous waste, thus 

removing some of the regulatory burdens for managing those materials. A potential 

concern with these revisions, however, is that the economic forces that shape firm 

recycling behavior might differ from those that shape manufacturing decisions. Through 

a closer look at how market forces can affect materials management for various types of 

recycling, this paper aims to help EPA evaluate these proposed regulatory changes. 

Despite the societal-level benefits of hazardous waste recycling, an examination of 

current damage cases and public comments on EPA’s proposed revisions of the definition 

of hazardous waste reveal cases where hazardous waste recycling has not achieved the 

beneficial outcomes mentioned above. The objective of the paper is to use economic 

theory to examine and attempt to explain the market forces that may contribute to both 

sub-optimal and optimal outcomes from hazardous waste recycling. 

From a societal point of view, an optimal amount of an economic activity is the amount 

which maximizes the net benefits (private and social benefits minus private and social 

costs). At this point, the marginal benefits of the activity (the benefits associated with the 

last unit of the activity) equal the marginal costs of it (the costs associated with providing 
9

that last unit). Any deviation from this point leads to a sub-optimal outcome where too 

little or too much of the activity is occurring from a societal point of view. For the case 

of hazardous waste recycling, a situation of too little recycling would result in 

inefficiencies, in that an increased rate of recycling (due, for example, to EPA’s proposed 

changes) could realize additional net benefits. 

The focus of this paper, however, is on situations where sub-optimal outcomes result 

from too much of an activity. For hazardous waste recycling, this situation occurs when 

firms are accumulating too much waste without actually recycling it, or are operating 

their recycling operation in a way that imposes excessive costs on society (such as excess 

pollution or mishandling of waste). Thus, while hazardous waste recycling is not an 

inherently damaging activity, damages can result from it if recycling is practiced in a way 

that generates excessive social costs. A move from a sub-optimal to an optimal amount 

of recycling may thus involve two different sets of activities. First would be a reduction 

in waste mismanagement that result from hazardous waste recycling, which would 

increase the social benefits and lower the social costs of recycling operations (e.g., reduce 

leakages, spills). Second would be cessation of activities that occur under the guise of 

recycling but have little or no benefits and large costs, such as “sham recycling.” 

Using comments to EPA’s proposed rule revisions discussed above, we define 

characteristics of hazardous waste recycling that are hypothesized to contribute to suboptimal outcomes and use economic theory to provide information on how these 

characteristics might influence different recycling models. These characteristics are 

• The value of the recycled product; 

• Price volatility of recycling output or inputs; and 

• The net worth of the firm. 

In this paper, we present economic models of hazardous waste recycling to provide 

information on how economic theory might support or refute the hypothesized influence 

of these characteristics on hazardous waste recycling. Utilizing economic theory, these 

characteristics identify certain economic conditions that could be seen as increasing the 

likelihood of waste mismanagement resulting from hazardous waste recycling. These 

conditions are 

• A low market value for the recycled product; 

• Unstable prices for the recycled product or any inputs to recycling; and 

• Firms with low net worth. 

One similarity of the characteristics and conditions described above is that they are at 

least to some degree observable or could be observable given availability of data. In 

addition to these observable characteristics, we present additional factors that could 

contribute to sub-optimal recycling. These additional factors arise due to economic 

conditions known as market failure, and differ from the above characteristics in that they 

are not readily observable from firm or market data. These market failures are 
10

• Imperfect information; and 

• Externalities. 

For simplicity, throughout this paper we use the term “hazardous waste” to denote both 

hazardous secondary materials that are regulated as hazardous wastes and materials that 

have been specifically excluded or exempt from regulations as hazardous wastes when 

they are recycled. This paper is not intended to be an exhaustive, quantitative, waste-bywaste analysis. Rather, the paper is intended to provide some insights into the forces that 

drive firms’ hazardous waste recycling decisions and, to support the findings, to the 

extent possible, with the market data on a few selected hazardous wastes. 

The remainder of this introductory section presents background information on the major 

regulations that influence recycling activity and a brief snapshot of the current state of 

hazardous waste recycling. We then briefly introduce the models of recycling activity 

used in this paper and discuss some variations on the types of recycling presented in the 

models. 

1.1. Regulatory Framework for Hazardous Waste Recycling 

Facilities engaged in hazardous waste recycling are required by federal statutes and 

regulations to ensure that they protect human health and the environment. The primary 

statute governing these activities is the Resource Conservation and Recovery Act 

(RCRA), which is implemented at the federal level by EPA. RCRA is only one of 

several regulatory programs in place to protect the environment. The RCRA regulations 

work closely with other environmental statutes, such as the following: 

• Comprehensive Environmental Response, Compensation and Liability Act 

(CERCLA); 

• Hazardous Materials Transportation Uniform Safety Act (HMTUSA); 

• Clean Air Act (CAA); 

• Clean Water Act (CWA); 

• Emergency Planning and Community Right-to-Know Act (EPCRA); 

• Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA); 

• Marine Protection, Research, and Sanctuaries Act (MPRSA); 

• Occupational Safety and Health Act (OSHA); 

• Safe Drinking Water Act (SDWA); and 

• Toxic Substances Control Act (TSCA). 

Though other statues and regulatory bodies may control recycling activities, this paper 

focuses on RCRA because compliance with RCRA typically entails the highest 

regulatory burden on recycling activities. Background on CERCLA is also provided 

because that regulatory regime is tied closely to RCRA. 

The Resource Conservation and Recovery Act (RCRA) was enacted in 1976 to address 

the huge volumes of municipal and industrial solid waste generated nationwide. The 

hazardous waste management program, Subtitle C, is intended to ensure that hazardous 
11

waste is managed safely from the moment it is generated to the moment it is finally 

disposed. Although much of the material that is recycled is not considered hazardous 

waste, this discussion focuses on requirements under RCRA Subtitle C because these 

requirements are the ones most likely to impose a regulatory burden on recycling 

activities. Facilities that are involved in the recycling process may be subject to RCRA 

Subtitle C if the materials they recycle are considered to be hazardous waste. 

The definition of solid waste under RCRA, which serves as the starting point for the 

hazardous waste management system, reflects EPA’s effort to minimize generation and 

land disposal of hazardous waste. Materials that are recycled are a special subset of the 

solid waste universe. When recycled, some materials may qualify for an exclusion from 

the definition of solid waste and either fall out of RCRA regulation or become subject to 

less stringent regulatory controls. In consultation with the appropriate regulatory agency 

the generator of a recyclable solid waste must determine if it is subject to reduced 

requirements or full regulation.

A material is deemed to have been recycled if it is used, reused, or reclaimed 

(§261.1(c)(7)). These three terms have specific regulatory definitions. A material is 

reclaimed if it is processed to recover a usable product or if it is regenerated (e.g., 

regeneration of spent solvents) (§261.1(c)(4)). A material is used or reused if it is either 

employed as an ingredient in an industrial process to make a product (e.g., distillation 

bottoms from one process used as feedstock in another process) or if it is employed as an 

effective substitute for a commercial product (e.g., spent pickle liquor used as a sludge 

conditioner in wastewater treatment) (§261.1(c)(5)). 

The RCRA regulatory regime contains provisions to reduce the regulatory burden on 

recycling activities and thereby increase recycling. Though waste recycling and recovery 

are major components of RCRA’s goals, they must be implemented consistently with 

proper hazardous waste management. 

As a result, RCRA contains provisions to ensure safe hazardous waste recycling and to 

facilitate the management of commonly recycled waste streams. Reuse, recycling, and 

reclamation should be viewed as ways of managing hazardous wastes which, if properly 

conducted, can avoid environmental hazards, protect scarce natural resources, and reduce 

the nation’s reliance on virgin materials and energy. Promoting reuse and recovery is 

certainly one of the goals of RCRA; however, this goal does not take precedence over 

assuring the proper management of hazardous waste. EPA has tried, to the extent 

possible, to develop hazardous waste management regulations that foster environmentally 

sound recycling and conservation of resources while at the same time providing adequate 

protection of human health and the environment. 

How a material is regulated under RCRA (i.e., whether or not it is a solid and potentially 

a hazardous waste) when it is recycled depends on what type of material it is, and what 

type of recycling is occurring. If the recycled material is not a solid waste, then it is not a 

hazardous waste and is not subject to RCRA Subtitle C requirements. However, if the 
12

material qualifies as a solid and hazardous waste, it is subject to RCRA Subtitle C 

jurisdiction. 

Many hazardous wastes can be recycled safely and effectively. To encourage recycling 

while protecting human health and the environment, EPA has tried to tailor the level of 

regulation to reflect the actual hazard of the recycling activity. In this approach to 

regulation, recycling standards range from full regulation to specialized standards to 

exemptions from regulation. Handlers of hazardous waste slated for recycling must 

determine, in consultation with the appropriate regulatory agency, what type of regulation 

they fall under based on the recycling activity being conducted and the type of material 

being managed. Different types of regulation for recycled hazardous wastes are 

described below.1

 

1.1.1. Full Regulation 

Most recycled hazardous wastes are subject to full hazardous waste regulation. This 

means that handlers of these recyclable materials (i.e., persons who generate, transport, or 

store prior to recycling) are subject to the same regulations as handlers who are managing 

hazardous wastes prior to disposal. While management of the hazardous wastes prior to 

recycling is subject to regulation, the recycling process itself is exempt from RCRA 

(except for some air emissions standards). For example, if a facility receives hazardous 

spent solvents from another facility for redistillation (heating a mixture to separate it into 

several pure components), the recycling units themselves are not subject to RCRA design 

and operating standards for hazardous waste units. However, the owners and operators of 

the recycling facility must follow all applicable Subtitle C requirements (including the 

requirement to obtain a permit) for container or tank storage areas used to store such 

wastes prior to recycling. 

1.1.2. Exemptions 

Not all hazardous wastes pose the same degree of hazard when recycled. EPA believes 

wastes that may be recycled in a protective manner, or that are addressed under other 

environmental regulations, warrant exemptions from RCRA Subtitle C. Consequently, 

handlers of these materials are not subject to any hazardous waste regulations. These 

exempt recyclable hazardous wastes are: 

• Industrial ethyl alcohol 

• Scrap metal 

• Waste-derived fuels from refining processes 

• Unrefined waste-derived fuels and oils from petroleum refineries. 

 

1

 Information for this section is taken primarily from the EPA RCRA Orientation Manual, January 2003, 

EPA530-R-02-016 
13

1.1.3. Special Standards 

While RCRA specifically exempts some wastes when recycled, some recycling processes 

may still pose enough of a hazard to warrant some degree of regulation. However, due to 

the nature of the recycling process itself or the nature of the materials being recycled, 

these processes may require a specialized set of standards. These processes are: 

• Use constituting disposal 

• Precious metals reclamation 

• Spent lead-acid battery reclamation 

• Burning for energy recovery. 

For example, persons who generate, transport, regenerate, collect, and store spent leadacid batteries prior to reclamation, but do not perform the actual reclamation, are not 

subject to hazardous waste regulation. EPA established those provisions to encourage the 

recycling of these batteries. However, owners and operators of facilities that store spent 

batteries before reclamation, other than spent batteries that are regenerated (processed to 

remove contaminants and restore the product to a useable condition), are subject to 

regulation in a manner similar to hazardous waste Treatment, Storage and Disposal 

Facilities (TSDFs). 

 

The Comprehensive Environmental Response, Compensation, and Liability Act 

(CERCLA), or Superfund, is closely tied to RCRA: both are designed to protect human 

health and the environment from the dangers of hazardous waste. Though these 

programs are similar, they do have different regulatory focuses: RCRA regulates how 

wastes should be managed to avoid potential threats to human health and the 

environment; CERCLA focuses on actual releases, or substantial threats of a release in 

the environment of a hazardous substance, pollutant, or contaminant, that present an 

imminent and substantial threat to human health. CERCLA, which was enacted by 

Congress in 1980, created a tax on the chemical and petroleum industries and provided 

broad Federal authority to respond directly to releases or threatened releases of hazardous 

substances that may endanger public health or the environment. Over a five-year period, 

$1.6 billion was collected and deposited in a trust fund for cleaning up abandoned or 

uncontrolled hazardous waste sites. Recyclers are likely to be subject to CERCLA 

provisions for reporting releases of hazardous chemicals, emergency preparedness and 

response, and financial assurance. In addition, should recycling activities result in 

releases of hazardous materials, facilities may be liable for cleanup under CERCLA. 

1.2. Snapshot of the Current State of Hazardous Materials Recycling 

According to EPA’s 2003 Hazardous Waste Biennial Report, more than 42 million tons 

of wastes were managed in 2003 by 569 facilities, of which 399 (or approximately 70 

percent) managed hazardous wastes onsite. In terms of quantity of waste managed, over 

80 percent is managed onsite. Of the total waste managed, only about 11 percent is 

recycled, mainly at offsite facilities. The rest is deposited in landfills or treated. 
14

Exhibit 1-1: Hazardous Waste Managed in 2003 

Hazardous Waste Managed 

 Onsite Offsite Total 

Hazardous Waste Managed

 Quantity (in million tons) 34.9 7.2 42.1 

 As a Percentage of Total Waste Managed 82.8% 17.2% 100% 

Hazardous Waste Recycled 

 Quantity (in million tons) 1.1 3.4 4.5 

 As a Percentage of Total Waste Recycled 24.8% 75.2% 100% 

 As a Percentage of Total Waste Managed 2.7% 8.1% 10.8% 

Source: BRS 2003. 

Note: Offsite recyclers may include recyclers who use recyclable materials, either produced by themselves 

or outside firms, as an input to their production process. 

In terms of quantity of hazardous wastes recycled, energy recovery is a dominant waste 

management practice for both onsite and offsite recyclers. The focus of this paper, 

however, is on recycling practices other than energy recovery. 

Exhibit 1-2: Hazardous Waste Recycled, 2003 

Hazardous Waste Recycled (million tons) Recycling Type Onsite Offsite Total 

Energy Recovery 0.45 (40%) 1.01 (30%) 1.46 (32%) 

Metals Recovery 0.20 (18%) 0.95 (28%) 1.15 (26%) 

Fuel Blending 0.16 (14%) 0.76 (22%) 0.92 (20%) 

Other Recovery 0.23 (21%) 0.50 (15%) 0.73 (16%) 

Solvents Recovery 0.07 (7%) 0.19 (5%) 0.26 (6%) 

Total 1.12 3.41 4.53 

Notes: Values in parenthesis indicate quantity recovered through a given recycling method as a percentage 

of the total hazardous waste recycled. 

Totals may not add due to rounding. 

Offsite recyclers may include recyclers who use recyclable materials, either produced by themselves or 

outside firms, as an input to their production process. 

Source: BRS 2003. 

1.3. Models of Hazardous Waste Recycling 

As discussed in further detail below, firms face decisions about how to handle the 

hazardous waste they generate, and about the mix of inputs they use in production. 

While a host of factors might affect these decisions, this paper assumes that firms’ 

actions are aimed at realizing the highest possible profit. Despite this focus on profit 

maximization, it is important to realize that this does not mean that firms will always 

choose the cheapest option. Production and waste management decisions entail both 

direct and indirect costs, and firms are assumed to weigh the full range of costs in their 

decision-making. In terms of waste management, recycling and disposal are competing 

options. In addition to differences in their direct costs, the indirect costs will vary as 

well, especially in relation to the resulting liability issues. Similar differences between 
15

direct and indirect costs would occur in relation to the use of production inputs. These 

issues are explored in further detail in this paper. 

Recycling of hazardous waste occurs both onsite at industrial manufacturing plants and 

offsite at commercial waste management facilities. In this paper, “industrial facilities” 

are defined as firms whose primary business is manufacturing of a product, and 

“commercial facilities” are firms whose primary business is management of wastes 

generated by industrial firms. There are three distinct models of hazardous waste 

recycling that occur at these firms; all are included in this study: 

• Commercial Recycling The first model is commercial recycling, which happens 

only at commercial waste management facilities. The primary product of these 

firms is recycled material. Wastes are received for recycling from offsite 

industrial sources, and may be returned to the same generator or to another 

company, which may or may not be in the same industry. 

 

• Industrial Intra-company Recycling The first type of hazardous waste recycling 

at industrial firms (and the second model of recycling considered in this paper) is 

called industrial intra-company recycling. This model involves the recycling of 

hazardous waste by the industrial firm itself as part of the firm’s waste 

management, with the objective of reducing its waste management costs. In some 

instances intra-company recycling may involve offsite exchange of the recyclable 

or recycled materials with offsite facilities owned by the same company. 

 

• Industrial Inter-Company Recycling The second type of hazardous waste 

recycling at industrial firms (and the third model of recycling considered in this 

paper) is industrial inter-company recycling. This model involves the recycling of 

hazardous waste from one company as an input to another firm’s production 

process. 

Recycling under all three of these models is driven by a host of economic factors. These 

factors influence the costs and benefits to be gained from hazardous waste recycling and 

will have an effect on the amount of recycling done by a firm. Examples of these factors 

include the value of the waste that goes into the recycling process, the value of the 

recycled products, the various costs (both direct and indirect) of managing and processing 

recyclable material into a recycled product, and the costs of managing any resulting 

waste. Some important components of these costs are the transportation and transaction 

costs that firms incur in their production and waste management operations. In this 

paper, we discuss the influence of these economic factors on the three models of 

hazardous waste recycling. 

Within these three models of recycling, there are variations on how recycling can be 

done, in terms of the flow of materials and the relationship between commercial and 

industrial firms. For example, recycling can occur as either an open-loop or a closedloop process. In an open-loop process, the material is recycled and made into a different 

product, possibly to be used in a different industry or at least by a different firm. Closed-
16

loop recycling refers to a recycling process in which the recycled material is made into 

the same product again or fed back into the same process. A variation of closed-loop 

recycling is practiced by Gage Industries. In this recycling model, Gage owns solvents 

that it rents to the automobile industry for use. Gage then takes back the used solvent and 

recycles (or reclaims) it for further use. Since Gage actually owns the solvent, as 

opposed to being a commercial recycler that is recycling solvents owned by other firms, 

they have a built-in incentive to handle it with care; any spillage or leakage means that 

they will have less of the solvent to rent out. Under another alternative to traditional 

recycling operations, called a tolling arrangement, an industrial firm agrees to supply a 

certain amount of waste to a commercial firm, which in turn agrees to send back a certain 

amount of recycled materials for a given price. One potential advantage of tolling 

arrangements is that they protect recyclers from sudden fluctuations in materials prices. 

1.4. Outline of the Theoretical Analysis 

The theoretical analysis of the hazardous waste recycling market is presented in section 

two of the paper, and is broken down into the three models of hazardous waste recycling 

discussed above. Following a general introduction to each of the three types of recycling, 

the main drivers of recycling are presented in terms of the revenue and cost structures of 

the participating firms. For the cost structure of the firms, the discussion is divided into 

sections on the direct and indirect costs. Section two of the paper then concludes with a 

discussion of various types of market failures, i.e., situations where competitive markets 

do not function properly leading to undesirable outcomes from the perspective of both the 

affected firms and society as a whole. Section three then summarizes the major findings 

from the paper and presents concluding remarks. 

As part of the development of the theoretical models of hazardous waste recycling, a 

literature review was conducted to determine the current state of information on 

hazardous waste recycling in both the economic and non-economic literature. Insights 

from this literature are included in this paper, and a summary of the literature review is 

included in Appendix I. Finally, Appendix II presents an empirical analysis of five 

selected hazardous materials being recycled and links the empirical analysis with the 

theoretical analysis presented earlier. The five materials analyzed are lead-acid batteries, 

brass dust, spent pickle liquor, solvents, and drums.
17 

2. Theoretical Analysis 

This section of the paper develops a theoretical model of the hazardous waste recycling 

market. First, three models of hazardous waste recycling are presented and discussed 

within the context of profit-maximizing decisions made by commercial and industrial 

firms. For each of the three models, we discuss the recycling process’s revenue and cost 

structure, including both direct and indirect costs. This discussion is followed by a 

formal presentation of a model for each type of recycling. Lastly, we discuss different 

kinds of market failure. This discussion includes a theoretical explanation for why the 

hazardous waste recycling market may produce sub-optimal outcomes, with marginal 

costs that exceed the activity’s marginal benefits. These sub-optimal outcomes can 

result either from the acceptance of an excess of waste (not all of which is recycled) or 

from mismanagement during the recycling process. 

2.1. Commercial Hazardous Waste Recycling 

 

Commercial recyclers are firms whose primary business is accepting hazardous waste, 

recycling it, and selling the output to outside entities. A diagram of the recycling process 

for commercial recyclers is shown in Exhibit 2-1. The output of this process is a final 

product, which is then sold to an outside entity, and waste which is usually either 

hazardous or contains hazardous constituents. This waste must be managed and disposed 

of by the commercial firm. In the following sections, the revenue and cost structures of 

commercial recyclers are discussed in further detail. 
18 

Exhibit 2-1: Diagram of Commercial Recycling

 

2.1.1. Revenue Structure of Commercial Recyclers 

The primary revenue for commercial firms is from the sale of their recycled product. 

Commercial firms may also generate revenue by charging a fee for accepting hazardous 

waste. Depending on market conditions, commercial firms will either buy hazardous 

waste or receive a fee to accept it. This acceptance fee’s relative importance in the firm’s 

overall revenues primarily depends on the price the commercial firm receives for its 

recycled product. Other factors that may affect the importance of the acceptance fee 

include the strength and stability of the market. Depending on these factors, the 

acceptance fee may play a negligible role in the firm’s revenue structure, and the firm 

might even be willing to pay to accept recyclable material. If, however, the firm cannot 

charge a sufficiently high price for the recycled material, or it faces a weak or unstable 

market for its recycled product, the acceptance fee may be an important component of the 

firm’s overall revenue. This kind of scenario could encourage firms to continually accept 

waste when they cannot realistically process or sell it. The influence of the different 

components of the commercial recycler’s revenue on the firm’s operation will be 

discussed in further detail below. 

In cases where generators pay commercial recyclers to accept hazardous waste, landfill 

disposal fees are one factor that influences the acceptance fees received by commercial 

recyclers. Since commercial recyclers are competing with landfills, and with each other, 

to obtain waste from generators, the acceptance fees would need to be relatively similar 

to landfill disposal fees to attract waste from industrial firms. Cost data collected by the 

Environmental Technology Council indicate that landfill tipping fees for treatment and 

landfilling of hazardous waste were, on average, $140 per ton for treated bulk and soil, 

and between $100 and $200 per 55-gallon drum for treated drummed wastes from 2002 

to 2004. Thus, we would expect that the acceptance fees ranged, on average, between 

Recyclable 

Material 

Recycling 

Process 

Recycled 

Product 

Waste 

(disposal)

Generator Recycler 
19 

$100 and $200 per ton or 55-gallon drum in the same period. (See Appendix II for more 

information.) 

2.1.2. Direct Costs of Commercial Recyclers 

The direct costs faced by commercial recyclers are the costs they face for recycling the 

hazardous waste they receive from waste generators. These direct costs can be broken 

down into capital and operating costs. Capital costs represent investments in equipment 

and facilities needed for recycling of hazardous waste and managing the resulting wastes. 

Operating costs cover labor, utilities, materials and the waste treatment and disposal 

process. These costs can vary according to the characteristics of the hazardous waste 

being recycled. Recycling some waste materials might require a complex and capitalintensive process. Recycling of other waste materials might have low capital 

requirements, but have high operating costs in terms of the labor, utilities or materials 

needed to manage and process them. Firms would be expected to weigh direct costs 

against expected revenues when determining whether to enter the market for a particular 

recycled material. 

Another component of direct costs that might influence the operation of commercial 

firms is transportation costs. These costs would most likely occur for commercial 

recycling firms in the sale of their recycled output, and also in the management and 

disposal of waste from the recycling process. Transportation costs could also be incurred 

to obtain of hazardous wastes as an input to their recycling process, although these costs 

are generally borne by the hazardous waste generator. 

Additional factors that influence the direct costs of recycling at commercial firms are the 

size of a commercial firm and the amount of hazardous waste it can recycle. As with 

most industries, recycling is subject to economies of scale, meaning that as the amount of 

recycled material the firm is producing increases, the cost of recycling decreases on a 

per-unit basis. A general expectation would be that, other things being equal, an increase 

in firm size or the amount of hazardous material recycled would lower the per-unit cost 

of recycling hazardous materials (McLaren and Yu, 1997). For commercial recyclers, 

attempting to achieve economies of scale could be an incentive for them to expand their 

operations. A real-world example is found in the solvents recycling market, where 

Safety-Kleen, the largest US commercial solvents recycler, has increased economies of 

scale by expanding its network of solvent collection centers. (See Appendix II for more 

information.) 

2.1.3. Indirect Costs of Commercial Recyclers 

In addition to the direct costs discussed above, commercial recyclers incur indirect costs 

for functions like administration and reporting. These would include the costs of 

obtaining a RCRA permit and keeping it current. For smaller firms, these costs could be 

large enough to serve as a barrier to entry into the commercial recycling market. Along 

with other administrative costs associated with operating a commercial recycling 
20 

business, these indirect costs would need to be considered by commercial firms in their 

decisions on whether to enter or exit the market, and on their level of production. 

The largest and most complex category of indirect costs is liability costs associated with 

the handling of hazardous waste. In the case of an accident or environmental damage 

caused by the mishandling of waste, commercial firms would be liable for these damages. 

40 CFR 264.147 requires owners and operators to “have and maintain liability coverage 

for sudden accidental occurrences in the amount of at least $1 million per occurrence 

with an annual aggregate of at least $2 million, exclusive of legal defense costs.” They 

are also required to provide financial assurance for facility closure (40 CFR 264.143) and 

post-closure care (40 CFR 264.143). It is expected that the firm would take these various 

costs into consideration in their decision to enter into the recycling market, or to remain 

in it if there were a change in regulatory requirements that would substantially increase 

these costs. Since firms are liable for damages up to their net worth, it would be expected 

that firms with a greater net worth would have more incentive to operate in a careful 

matter and guard against potential liabilities than smaller firms that could escape large 

liability risks by declaring bankruptcy (Alberini and Frost, 1999). 

 

A commercial firm’s treatment of liability issues may influence the amount of business it 

can get. If hazardous waste is mishandled by a commercial firm, the generator of that 

waste can be held liable for the damages (Rosenbaum, 1990). Many waste generators 

that are looking to transact with a commercial recycler consider the potential liability risk 

of a commercial firm before sending waste to them. Commercial firms with a history of 

RCRA violations or a history of health and safety accidents might need to charge a lower 

acceptance fee in order to obtain business than firms with stronger reputations. Waste 

generators that are concerned only about costs might be willing to send waste to 

commercial firms that have a greater liability risk but have lower fees, whereas waste 

generators that are more careful or cautious in relation to liability issues might be willing 

to send waste only to commercial firms with a low liability risk or that have insured 

against their risks. 

Transaction costs are another economic factor that can influence the indirect costs of 

recycling for commercial firms. Transaction costs are the costs that a firm incurs as a 

result of dealing with other economic agents. Since commercial firms do not generate the 

waste they use for recycling, they face transaction costs in obtaining hazardous waste and 

also for the sale of their recycled output. These costs again can be viewed as part of the 

firm’s operating costs, and would be considered by the firm in making its operating 

decisions. The effect of transaction costs would be to raise the cost of recycling for 

commercial firms in comparison to industrial firms that might use their own waste as 

inputs for a recycling process. 

In the next section, we graphically illustrate commercial recyclers’ behavior using cost 

curves. Cost curves are a standard economic tool for analyzing and graphically 

illustrating firm’s behavior. We use the same tool later in the paper to analyze and 

illustrate industrial recyclers. 

 
21 

2.1.4. Model of Commercial Recyclers 

This section incorporates the discussion of the costs and revenues of commercial 

recyclers presented above into a formal model for recycling by commercial facilities. 

Commercial recyclers’ primary product is recycled material derived from the hazardous 

waste they receive from other firms. In this model, commercial recyclers receive a fee 

(R) for accepting hazardous waste (Qhw) from waste generators.2 The commercial 

recycler then processes this material and sells the recycled product (Qr) at the prevailing 

market price (Pr). In the production of the recycled materials, the commercial recycler 

incurs various direct and indirect costs (C). Since commercial recyclers have two 

potential sources of revenue, their total revenue (TR) is the sum of the revenue they 

receive for accepting hazardous waste and the revenue they receive for selling the 

recycled product (TR = (R*Qhw )+ (Pr*Qr)).3

 In determining their output decisions, 

profit-maximizing firms will look at the revenue from producing one more unit of output, 

which is their marginal revenue (MR), relative to the cost of producing that unit, which is 

their marginal cost (MC). 

Commercial recyclers are assumed to be “price takers” with respect to their outputs, 

meaning that they sell their output at the price determined in the market by the 

intersection of demand and the aggregate supply of all of the producers of recycled 

hazardous materials. The actions of the individual commercial recycling firm do not 

influence this market price, and the firm must use this price to determine its appropriate 

level of output.4 The commercial recyclers can also be assumed to be “fee takers,” in that 

they are competing with other offsite disposal options and other recyclers for getting 

hazardous waste from generators. 

It is assumed that the actions of the commercial recycling firm do not affect landfill 

disposal fees, and it again must set its acceptance fee based on the prevailing market 

forces regarding hazardous waste disposal. Since the commercial recycler is both a price 

taker and a fee taker, the firm’s marginal revenue is equal to the price of recycled 

materials it produces plus the acceptance fee for the waste it receives (MR = Pr+R). 

Under the standard microeconomic model of a competitive market, a firm will enter the 

market as long as the market price is high enough to cover its average total costs 

(ATC=TC/Qhw). For commercial recyclers, however, it is not only the price of the 

recycled product that affects their entry/exit decision. Rather, commercial recyclers will 

 

2

 It is also possible that the commercial recycler might need to pay to obtain waste from a generator, instead 

of getting paid for it. This situation could be represented in Exhibit 2-2 by showing the MR (Pr+R) line as 

below the price (Pr) line instead of above it. 3

 An implicit assumption in this model is that one unit of hazardous waste (Qhw) will produce one unit of 

the recycled product (Qr). This is a simplifying assumption since it is likely that one unit of Qhw would 

produce less than one unit of Qr, after impurities in Qhw have been removed. 4

 Data available in the EPA’s 2003 RCRA Hazardous Waste Biennial Report on the quantity of hazardous 

materials recycled by type and quantity and the number of recycling facilities indicate that annual average 

amount of waste processed by an individual commercial recycler is 0.02 million tons. Compared to the 

total waste recycled by both commercial and industrial recyclers totaling 4.5 million tons, the amount 

recycled by individual recyclers is too small for them to influence the market. 
22 

enter the recycling market as long as the price of recycled materials plus the fee they 

receive for accepting hazardous waste is greater than the cost of producing the recycled 

good. They will then accept hazardous waste and produce recycled materials as long as 

their ATC is less than the price of recycled goods plus the acceptance fee (ATC<(R+Pr)). 

The costs faced by the commercial recycler to produce different amounts of recycled 

goods can be shown graphically. Plotting the firm’s average cost for the production of 

different units of recycled materials will yield the firm’s average total (ATC) cost curve.5

 

Another important curve that can be shown is the firm’s marginal cost (MC) curve, which 

represents the cost of the last unit produced, or the change in total cost divided by the 

change in quantity for each additional unit. This MC curve is upward sloping, and the 

portion of the MC curve that is above the ATC curve represents the firm’s supply curve 

for recycled materials. A profit-maximizing commercial recycler will produce recycled 

materials up to the point where its marginal costs of production equals its marginal 

revenue (MC=MR). This will be the profit-maximizing output for the commercial 

recycler since any additional unit would cost them more than the revenue they would be 

able to receive for it. This situation is illustrated below in Exhibit 2-2.6

 

 

5

 The firm’s average cost curve is initially downward sloping, indicating that costs are decreasing with each 

additional unit produced. As more units are produced, the curve begins to slope upward, indicating that the 

average costs are increasing for each unit being produced. 6

 In the figures presented in this paper, the marginal revenue of the firm (Pr+R for commercial recyclers or 

Pr for industrial recyclers) intersects with the firm’s cost curves at the lowest point of ATC. This represents 

the minimum value at which MR would need to be for the firm to enter the market. The firm will choose to 

enter the market and produce recycled materials as long as MR intersects with MC at any point equal to or 

above this point (where MC and ATC cross, or the minimum point of ATC). 
23 

Exhibit 2-2: Model of Commercial Recyclers 

 

As shown in Exhibit 2-2, the successful operation of the commercial recycling firm 

depends on its ability to produce output at a cost no greater than the combined price of 

the recycled materials it produces plus the acceptance fee for receiving the hazardous 

waste. Exhibit 2-2 depicts a situation, for instance, where the price of the recycled 

materials (Pr) is below the firm’s cost curves, and the firm is dependent on the acceptance 

fee to operate a profitable business. Fluctuations in the firm’s revenue stream or its costs 

can thus affect its operation. If the price of recycled material goes down, for example, 

due to decreases in the price of virgin materials, the marginal revenue of the firm could 

fall below the firm’s ATC curve. This results in a situation where the firm would not be 

able to recover its cost by accepting and recycling hazardous waste. In the long run, this 

would typically mean that the firm would shut down and exit the market. 

 

2.2. Industrial Intra-company Recycling 

The primary business of industrial firms is manufacturing a product and recycling 

hazardous wastes is a secondary activity. Industrial firms can be involved in hazardous 

waste recycling in two different ways, resulting in two different models. The first of 

these models, termed intra-company recycling, involves hazardous waste recycling by 

firms as part of their waste management strategy. A diagram of how industrial intracompany recycling works is shown in Exhibit 2-3. The firm receives raw materials, 

Pr+R 

= MR 

Qr

Pr

ATC 

MC 

Price 

Quantity of hazardous 

 material recycled 

ATC– Average total cost of producing recycled materials 

MC– Marginal cost of producing recycled materials 

R – Acceptance fee for hazardous waste 

MR – Marginal revenue of the firm 

Pr – Market price of recycled materials 

Qr – Quantity of recycled materials produced by firm 
24 

which it puts through a manufacturing process. The output of that process is the firm’s 

product, and hazardous waste is a byproduct. The firm has three main alternatives for 

managing its hazardous waste: ship it off for disposal, send it to a commercial recycler, 

or recycle the waste themselves (at an onsite or offsite location). In intra-company 

recycling, the company utilizes hazardous waste generated during production and runs it 

through a recycling process. The result is a recycled product that the firm can either feed 

back into its production process (thus substituting for the use of virgin materials), or sell 

to other firms. A byproduct of this recycling process is waste for disposal. 

Exhibit 2-3: Diagram of Industrial Intra-company Recycling 

2.2.1. Revenue Structure of Industrial Intra-company Recycling 

The primary source of income for industrial firms is from the sale of the products they 

manufacture. Though recycling its hazardous waste may result in revenues for the firm, 

this is viewed as a secondary source of income and would not significantly influence the 

production decisions of the firm. Since intra-company recycling enters into the firm’s 

process in its waste management decisions, the revenues generated from this process can 

be viewed as something that serves to offset waste management costs. As shown above 

in the diagram, the firm could also choose to use the recycled product it generates in its 

own production process. The choice of whether to sell the recycled product or use it in 

its own production process would be assumed to be based on profit-maximizing 

Recyclable 

Material 

Raw 

Material 

Product 

Waste 

(disposal)

Manufacturing 

Process 

Recycling 

Process 

Recycled 

Product 

Recycler 

Sell to 

other 

firms 
25 

objectives, with the recycled product going to the use that generated the largest amount of 

cost savings for the firm. 

2.2.2. Direct Costs of Industrial Intra-company Recycling 

The categories of direct costs faced by intra-company recyclers are similar to those 

discussed above for commercial recyclers. The main categories of direct costs are capital 

costs (equipment and facilities) and operating costs (labor, utilities, materials, waste 

treatment and disposal, etc.). Capital costs must be incurred to participate in recycling, 

while operating costs can vary with the amount of production or changes to the recycling 

process. Since intra-company recycling is one of the firm’s waste management choices, 

the firm would be expected to weigh the direct costs of various waste management 

options when determining whether to engage in intra-company recycling. 

The main difference between intra-company recycling and the other waste management 

choices of the firm is that recycling is undertaken by the firm itself, while other waste 

management options involve the firm shipping the waste to another entity. This 

difference influences the composition of the direct costs faced by the firm for waste 

management. Waste management options undertaken by another entity would involve 

primarily operating costs, such as transportation of waste and payment of disposal fees or 

possible acceptance fees to commercial recyclers. By comparison, recycling would likely 

entail significant capital costs, but then might involve lower operating costs than offsite 

waste management options. The large capital requirements could serve as a barrier 

against firms engaging in intra-company recycling (Technology Resource Inc., 1988). 

Transportation costs could influence waste management choices at industrial firms, and 

they may vary greatly depending on the location of the firm relative to landfills and 

commercial recyclers that could potentially accept the industrial firm’s waste (Alberini 

and Bartholomew, 1999). For firms that had convenient disposal or offsite recycling 

choices located nearby, transportation costs would likely not be a significant factor in 

determining the firm’s waste management choices. On the other hand, industrial firms 

far from disposal sites or commercial facilities might face substantial transportation costs 

that could serve as an incentive for them to set up an onsite recycling operation. 

As with commercial firms, economies of scale would also be expected to play an 

important role in the decisions of industrial intra-company recyclers. Economies of scale 

can influence waste management decision since larger firms that produce more hazardous 

waste may face lower per-unit costs for recycling than smaller firms (Technical 

Resource, Inc., 1988; McLaren and Yu, 1997). We would therefore expect to find a 

higher level of intra-company recycling at larger firms, with smaller firms substituting 

away from recycling to other waste management options. Other things equal, an increase 

in firm size or the amount of hazardous material recycled would lower the per-unit cost 

of recycling hazardous materials and thus would be expected to increase the amount of 

recycling. Evidence that a firm’s size influences its waste management choices is seen in 

the steel industry, where smaller steel mills may not be generating enough spent pickle 

liquor to make it cost-efficient for them to recycle it onsite, given that regenerating plants 
26 

require high start-up costs and are designed to run continuously. (For more information, 

see Appendix II.) 

Another cost factor that might influence the waste management decisions of industrial 

firms is the cost associated with producing heterogeneous goods (Harrington et al. 1999; 

Bailey et al. 2002). Since the primary business of these firms does not involve producing 

goods from recycled hazardous material (rather, hazardous material is generated as a 

byproduct), recycling hazardous waste can be viewed as a secondary line of business. In 

other words, beyond the direct and indirect costs associated with recycling hazardous 

waste onsite, the industrial firm faces additional costs in terms of diverting their scarce 

resources (e.g., labor force or managerial attention) from their primary operation. This 

diversion of resources involves opportunity costs, since those resources could be devoted 

to the production of the firm’s primary product instead of to the recycling operation 

(Technical Resource, Inc., 1988). This diversion of resources would raise the firm’s cost 

for the option of recycling onsite, and we would expect that firms would consider this 

cost when deciding whether or not to engage in intra-company recycling. In the steel 

industry, for example, finished steel products and regenerated pickle liquor are not 

distributed to the same consumers, so a steel company with a regeneration plant would 

likely need to develop two supply channels. This need to divert resources from its main 

operation (i.e., making steel) may discourage a steel company from operating a 

regeneration plant onsite. A steel company may find it more profitable to concentrate on 

making steel, while outsourcing K062-regeneration. (See Appendix II for more 

information.) 

2.2.3. Indirect Costs of Intra-company Recycling 

As with commercial recyclers, industrial intra-company recyclers also face indirect costs 

that influence their recycling decisions. In terms of how these indirect costs influence 

recycling by these firms, it is important to understand how indirect costs influence waste 

management choices more generally. Similarly to commercial recyclers, the largest area 

of indirect costs are liability issues. A complicating factor of liability costs is that, unlike 

other categories of costs associated with waste management, liability costs are long-term 

and uncertain (Alberini and Frost, 1999). It is thought that industrial firms will factor 

potential liability costs into their waste management choices, and invest in proper waste 

management up to the point where they reduce their potential liability costs to a level 

they find acceptable. The greater the net worth of the firm, the more it potentially has to 

lose from liabilities associated with improper handling of its waste (Alberini and Frost, 

1999). The firm thus has more incentive to engage in careful waste management and to 

protect itself against potential liabilities. 

 

Secondary liability issues are another area in which liability influences industrial firms. 

As discussed above, an industrial firm could be held accountable for mishandling of its 

waste by another entity such as a commercial recycler (Rosenbaum, 1990). Industrial 

firms that have a high level of concern about potential liabilities would likely consider 

these secondary liability issues in their waste management choices. These secondary 

liability issues could increase the attractive of onsite waste management choices such as 
27 

intra-company recycling. If the industrial firm engages in onsite waste management, it 

reduces its exposure to secondary liabilities associated with other entities handling its 

hazardous waste. 

Additional indirect costs to be considered for the firm’s waste management options 

include transaction costs of dealing with other economic agents, such as disposal site or 

commercial facilities. Transaction costs would raise the costs to the firm of waste 

management involving another entity, and could serve as an incentive to engage in 

recycling. By recycling, industrial firms would reduce the transaction costs associated 

with waste management, but they could incur additional transaction costs if they sold 

their recycled product to outside entities instead of reusing it in their own production 

process. 

2.2.4. Model of Intra-Company Recycling 

In this section, a formal model is developed for industrial intra-company recycling. A 

representative industrial firm is in the business of producing good Qp, and a byproduct of 

this production process is hazardous waste material Qhw. It has three options for 

managing Qhw, each with a different associated cost: 

1) Dispose of the hazardous waste in a landfill and pay disposal fee (D), which 

includes the direct costs of management as well as indirect (regulatory, liability, 

etc.) costs. 

2) Pay a fee (R) to, or accept a fee from, commercial recyclers to recycle Qhw.

3) Recycle Qhw itself, which can be done at some cost (C). The recycled product 

(Qr) can then either be used as an input in the production of Qp or be sold at the 

prevailing market price Pr. The price the firm receive for selling the recycled 

product offsets its total recycling costs (TC = (C*Qhw)–(Pr*Qr)). 

Under the assumption that the firm’s waste management decisions are driven by profitmaximizing motives, the firm will choose the option that minimizes its waste 

management costs, or the minimum of D, R and C–Pr. If there is no existing stable 

market for the recycled good, Pr can be assumed to be zero and the firm will choose 

among D, R or C. Even with a zero value for the recycled good, the firm may still choose 

to recycle if C is the least costly option due to the decreased indirect costs (i.e. regulatory 

and liability costs) involved in disposing of hazardous waste (D). In the long run, it is 

assumed that the industrial firm can switch freely between these waste management 

options since if it did not possess the infrastructure needed to recycle onsite, it could 

invest in new capital or equipment to do so. In the short run, it is assumed that the 

industrial firm could choose between the different offsite waste management options 

(disposal or sending to commercial recycler) and would base this decision primarily on 

the relative costs of the different offsite disposal options. 
28 

In examining the firm’s decision of whether or not to recycle hazardous waste itself, 

Exhibit 2-4 shows per-unit costs for two different waste management options by the firm 

for its hazardous waste. First, the per-unit cost of external waste management methods 

(such as shipping waste to a landfill or a commercial recycler) is shown by the line CE. 

To simplify the graph, these two external waste management options are shown by this 

one line since, for reasons discussed above, an industrial firm’s cost for each of these 

options would be similar. The cost an industrial firm faces for external waste 

management is constant for the firm and determined by the market. The set of cost 

curves (ATC and MC) represent the firm’s cost for managing its hazardous waste 

internally through intra-company recycling. Two different factors work to offset the 

firm’s recycling costs. First the recycled product would either be sold, resulting in 

revenues for the firm, or used as an input in the firm’s production, resulting in reduced 

input costs. Second, engaging in intra-company recycling would enable the firm to avoid 

costs associated with disposal or shipping waste to a commercial recycler. For the 

situation in Exhibit 2-4, the firm would choose to engage external waste management for 

low quantities of waste (less than QE) since that is the least cost option. For quantities of 

waste above QE, the firm would choose to engage in intra-company recycling since the 

per-unit costs are lower than the costs of the waste management options involving 

disposal or shipping to commercial recyclers. The exhibit demonstrates the importance 

of economies of scale for recycling, since the firm needs to produce more than a certain 

quantity of waste in order for industrial intra-company recycling to be the most costeffective choice. 
29 

Exhibit 2-4: Model of Industrial Intra-company Recyclers 

2.3. Industrial Inter-company Recycling 

The second kind of recycling at industrial firms is known as industrial inter-company 

recycling. In this model, firms use recycled materials, either produced by themselves or 

outside firms, as an input to their production process. The recycled materials are used as 

a cost-saving substitute for virgin materials. A diagram of the recycling process as 

practiced in industrial inter-company recycling is shown in Exhibit 2-5. The industrial 

firm engages in a manufacturing process, and faces a choice of inputs to that process. 

The firm can either use virgin or recycled materials for production. To use recycled 

materials, the firm would first accept recyclable hazardous waste from another firm.7

 

The firm would then either use this material directly or put it through a recycling process 

to produce the needed inputs for its primary production process. The outputs of this 

recycling process are recycled materials (for use in production), and waste (which must 

be disposed). The recycled materials would then be used in a manufacturing process, 

 

7

 Commodity brokers can be involved in transactions of hazardous waste. Brokers may be involved only to 

the extent that they facilitate the transaction, but do not handle hazardous waste themselves in any manner. 

In some cases, however, brokers do handle hazardous waste (for example, store it until they find a buyer). 

In those cases, if hazardous wastes are stored longer than ten days, brokers do need to have a RCRA 

permits. 

ATC 

MC 

QE

Unit Cost 

Quantity of hazardous 

waste recycled 

ATC– Average total cost of recycling waste internally 

MC– Marginal cost of recycling waste internally 

CE – Per-unit cost of external waste management 

QE – Quantity of hazardous waste recycled

CE
30 

which generates the firm’s product. This manufacturing process results in additional 

waste for disposal. 

Exhibit 2-5: Industrial, Inter-company Recycling 

2.3.1. Revenue Structure for Industrial Inter-company Recyclers 

As discussed above, the primary revenue source for industrial firms is their product. 

Inter-company recycling enters into the firm’s decision-making process in the 

determination of the mix of inputs to use for its manufacturing process. Inter-company 

recycling is thus not something that would generate revenue for the firm, rather it is 

something that would influence its production costs. The choice of whether or not to 

engage in inter-company recycling is best viewed as how it would influence the potential 

costs faced by the firm for its manufacturing process. 

2.3.2. Direct Costs for Industrial Inter-company Recycling 

The direct costs for industrial inter-company recycling are primarily capital and operating 

costs as defined above for the previous two models. Industrial firms choose among 

various production inputs based on their relative costs, assuming profit-maximizing 

motives by the firm. If the firm needed to set up its own recycling operation (as opposed 

to obtaining recycled material from another firm) inter-company recycling might involve 

significant capital costs for the firm. In relation to operating costs, using virgin materials 

would generally be more expensive than using recycled materials, resulting in lower total 

operating costs for using recycled materials. The decision of an industrial firm of 

whether to engage in inter-company recycling involves this tradeoff between capital and 

operating costs and the differences in cost between using virgin and recycled materials. 

If the cost savings from using recycled rather than virgin materials are small, the firm 

might not find it cost-effective to invest in equipment needed to engage in inter-company 

Recyclable 

Material 

Recycling 

Process 

Product 

Waste 

(disposal)

Manufacturing 

Process 

Raw 

Material 

Waste 

(disposal)

Generator Recycler 
31 

recycling. On the other hand, a large divergence between the prices of virgin and 

recycled inputs would increase the attractiveness of inter-company recycling to the firm. 

As discussed with the previous two models, there are additional factors that influence the 

direct costs of inter-company recycling. One of these factors is transportation costs. The 

industrial firm would incur transportation costs in acquiring its production inputs, and 

this could affect its choice among different mixes of inputs. If there were a significant 

difference in the transportation costs the firm would incur between obtaining virgin 

materials and recyclable material for use in production, this could be a factor that plays 

into the firm’s input choices. Firms engaging in inter-company recycling would also face 

increased transportation costs for disposal of the waste from the recycling process. 

Transportation costs could serve as a disincentive for engaging in inter-company 

recycling if they were sufficiently high to reduce the cost savings involved in intercompany recycling. 

The size of a firm is an important factor in the cost-effectiveness of engaging in intercompany recycling. We expect that economies of scale would be important for firms in 

their production input decisions. For example, given the significant capital expenditures 

involved in inter-company recycling, it is likely that these expenditures are more costeffective for a larger firm that is using a greater quantity of recycled materials as inputs 

than for a smaller firm. As with industrial intra-company recycling, a general expectation 

is that the amount of inter-company recycling would increase with the size of the firm. 

Lastly, as with intra-company recyclers, the cost of producing heterogeneous goods 

might also be a factor that affects the industrial firm’s choice of production inputs 

(Harrington et al. 1999; Bailey et al. 2002). Similarly to industrial firms engaging in 

intra-company recycling, inter-company recycling usually involves adding a secondary 

production process to the firm’s operation. The cost savings that an industrial firm might 

achieve from engaging in inter-company recycling would need to be balanced by the 

costs that would be incurred from the diversion of resources and management attention 

away from the firm’s primary production to this secondary line of production. In making 

profit-maximizing decisions regarding the choice of production inputs, the firm would be 

expected to weigh these costs, to the extent that they could be known, against the savings 

that would be realized by recycling onsite to provide production inputs. 

2.3.3. Indirect Costs of Inter-company Recycling 

Similarly to the other types of recycling, there are also indirect costs associated with 

industrial inter-company recycling. To the extent that firms could know and predict these 

costs, they would be factored into the firm’s decisions regarding inputs to production. As 

with the other two models of recycling, the main indirect cost of inter-company recycling 

involves liability issues. The industrial firm would face potential liabilities from 

accepting hazardous waste, storing it, and recycling it onsite. Additional liabilities could 

result from the management of the waste from the recycling process. As discussed 

above, there is a positive correlation between the net worth of a firm and the amount it 

stands to lose due to liability issues. Insurance is one possible means by which the firm 
32 

could protect itself against liabilities, but insurance would not be expected to cover acts 

of negligence. The amount of care an industrial firm would place in its recycling process 

would likely be positively correlated with the size of the firm, since larger firms face 

greater potential liabilities from their recycling operations (Alberini and Frost, 1999). 

These liability issues would raise the cost of recycling, and could discourage firms from 

engaging in inter-company recycling if they viewed the liability costs as being 

prohibitively high. 

Transaction costs are an additional factor of indirect costs for inter-company recycling. 

The influence of transaction costs on inter-company recycling could be expected to be 

less than for the other two recycling models since inter-company firms must already deal 

with other economic agents to obtain their production inputs. Transaction costs could 

come into play for inter-company recyclers, however, given that switching to using 

recyclable materials as inputs instead of virgin materials would involve the transaction 

costs of dealing with additional firms. Inter-company recyclers might also face 

transaction costs from dealing with an outside agent for disposing of waste generated 

during the recycling process. The amount of these transaction costs would likely be 

related to the degree to which waste from the recycling process can be managed along 

with the waste from the firm’s production process. If the waste from the recycling 

process involves transacting with a separate firm, these additional transaction costs could 

prove to be a significant factor in the firm’s choice of whether to engage in intercompany recycling. 

2.3.4. Model of Industrial Inter-company Recycling 

This section presents a formal model of industrial inter-company recycling in relation to 

the firm’s production decisions for its primary manufacturing process. Inter-company 

recyclers are in the business of producing a primary product Q, which is sold on the 

market at the prevailing price P. The firm’s production costs are modeled below in 

Exhibit 2-6. The firm faces a variety of decisions in the production of Q, one of which is 

the mix of inputs used in production. The firm has a choice of either using virgin 

materials for the production of Q or replacing virgin materials with recycled materials.8

 

Depending on the material and the production process, recycled materials could be 

obtained from a recycler and used directly, or recyclable materials could be obtained 

from a generator and put through a recycling process by the firm for further use in 

production. The firm’s choice of using virgin or recycled materials as inputs to 

production will depend on the relative costs of each kind of input. The exhibit below 

depicts a situation where the cost of using virgin materials is higher than the cost of using 

recycled materials. The production process using virgin materials is represented by the 

average total cost curve (ATCv) and the marginal cost curve (MCv). When using virgin 

 

8

 It is important to note the simplifying assumptions in the situation presented in this model. The actual 

input choices of a firm would likely be a mix of both virgin and recycled material, and not exclusively one 

or the other. For example, it is possible that recycled materials may be lower quality for production, and 

that some virgin materials would need to be used as production inputs alongside recycled materials. The 

firm interested in using recycled materials could substitute them for some quantity of virgin materials, but 

there would still be some virgin materials expected to be used in their production process. 
33 

materials as inputs, the firm will produce Qv units of output, which are sold at the market 

price P. 

For the situation depicted in the exhibit, the firm could reduce its costs by using recycled 

materials as inputs. These materials would either be obtained from a generator and used 

directly in production or put through a recycling process by the firm (with waste 

generated as a byproduct) and then used in production of Q. Since this is a lower-cost 

option for the firm, using recycled materials would shift its average total cost and 

marginal cost curves down to ATCr and MCr. At these new lower cost curves, the firm 

would be able to produce a greater quantity of their product, represented by Qr, which can 

be sold at the market price P. 
34 

Exhibit 2-6: Model of Inter-company Recycling 

 

2.4. Market Failures 

According to economic principles, the market for recycled materials from hazardous 

waste would, ideally, result in the production of the socially optimal amount of recycled 

materials. This amount would be reached according to the intersection of what producers 

are willing to supply to the market and what consumers are demanding. The suppliers of 

recycled materials (commercial and industrial firms) adjust their production of recycled 

materials based on price signals received from the market. Problems arise, however, 

when markets do not operate properly and fail to provide these appropriate signals to 

producers and consumers. For recycling, the result is production of an amount of 

recycled material that differs from what the market would indicate as socially optimal, 

with either too much or too little recycled materials being produced (van den Berg and 

Janssen, 2005). There are several different ways in which market failure could enter into 

the hazardous waste recycling market. This section introduces some of these issues and 

illustrates how they could result in sub-optimal outcomes. 

ATCv

MCv

P=

MR

Qv Qr

Price 

Quantity of primary 

product 

ATCr

MCr

ATCr – Average total cost of production using recyclable materials 

ATCv – Average total cost of production using virgin materials 

MCr – Marginal cost of production using recyclable materials 

MCv – Marginal cost of production using virgin materials 

MR – Marginal revenue of the firm 

P – Market price of primary product 

Qr – Quantity of product when recycled materials are used as inputs 

Qv – Quantity of product when virgin materials are used as inputs 
35 

2.4.1. Imperfect Information 

One source of market failure in hazardous waste recycling occurs when firms have 

imperfect information on either the costs or revenues associated with producing recycled 

materials from hazardous waste. On the cost side, commercial and industrial recyclers 

may have imperfect information on to the costs of producing recycled materials. 

Imperfect information could arise from a variety of factors. One example is that firms 

that accept waste from an outside source for recycling may be misinformed as to the 

composition or characteristics of the waste they receive. If, for example, the waste it 

receives requires more processing than it was expecting, the recycling costs of the firm 

would be higher (McLaren and Yu, 1997). Costs could also be higher than expected if 

the firm did not properly educate itself on the processes involved in recycling hazardous 

waste in a safe and compliant manner before entering into the business. The complex 

regulatory framework associated with hazardous waste recycling could also play a role in 

firms having imperfect information on their potential costs for recycling hazardous waste. 

On the revenue side, commercial and industrial recyclers may have imperfect information 

on the demand for their products. If the demand for their final product is more elastic 

(i.e., more price sensitive) than the recyclers have expected, for example due to the 

availability of substitutes, any attempt to pass the costs onto consumers will result in 

lower total revenues than they have anticipated. 

Imperfect information would influence firms differently in the short and long run. 

Starting with the case of commercial recyclers, imperfect information would prevent the 

firm from correctly interpreting the full costs associated with recycling hazardous 

material in a proper manner. If the commercial recyclers underestimated the costs 

associated with recycling, they would erroneously enter the market and would have an 

incentive to produce too much recycled materials even when the market should have 

given them different signals. This situation is shown in Exhibit 2-7 below. The original 

market conditions are shown where Qr units of recycled materials are produced by the 

commercial recycler by operating on their perceived cost curves (ATC1 and MC1), which 

would fall below the actual costs of producing the recycled materials in a responsible 

manner (ATC2 and MC2). If, for reasons such as increasing regulation, the commercial 

recycler were forced to operate on the cost curves that reflect the true costs of recycling 

in a responsible manner (ATC2 and MC2), they would make different production 

decisions in the short and long run than if they were operating on their perceived cost 

curves (ATC1 and MC1). In relation to long–run decisions, the firm would not have 

entered the market if it had acted on the basis of the true cost curves (ATC2 and MC2), 

since there is no point at which their average total costs (ATC) are below their marginal 

revenue for producing recycled materials (ATC2>MR=P). 

Since the firm cannot leave the industry in the short run, operating at the higher set of 

cost curves will force the firm to either shut down or operate at a loss. As discussed 

above, the choice among these activities would be determined by the firm’s ability to 

cover its variable costs in the short run. If producing recycled materials still generates 

revenue above the firm’s average variable costs, it will continue to operate in the short 

run to reduce losses, and then close down in the long run. The firm may have an 
36 

incentive in the short run to reduce costs in whatever way it can to lower its cost curves 

and thus its financial losses. One strategy for reducing these losses could be to continue 

to accept hazardous materials and the revenue stream associated with that activity, while 

cutting costs by engaging in improper waste management. The incentives for these 

activities would be particularly high if the fee the firm receives for accepting hazardous 

waste is high compared to the price it receives for the sale of its output. The firm may 

view mismanagement of waste as attractive if it believes it can avoid the true costs 

involved with properly handling or disposing of the materials. 

Exhibit 2-7: Imperfect Information for Commercial Recyclers 

 

It is important to note that imperfect information not only influences the firms that are in 

the hazardous waste recycling market, but it also influences which firms choose to enter 

the market in the first place. Misperceptions about the costs, or the potential damages, of 

hazardous waste recycling would create a bias as to the type of firms that enter the 

market. This would result in more firms entering the market that are misinformed about 

the true costs involved with hazardous waste recycling. This phenomenon, known as 

adverse selection, is a commonly identified source of market failure (Boardman et al. 

1996). 

ATC1

MC1

P=

MR 

Qr

MC2

ATC2

Price 

Quantity of hazardous 

material recycled 

ATC1 – Firm’s perceived average total cost of producing recycled materials 

ATC2 – True average total cost of producing recycled materials 

MC1 – Firm’s perceived marginal cost of producing recycled materials 

MC2 – True marginal cost of producing recycled materials 

Qr – Quantity of recycled material produced with firm’s perceived costs 
37 

In addition to firms that enter the market with erroneous information about the costs of 

recycling, there could also be a segment of the market characterized by the firms that 

entered intending to ensure their costs are low by ignoring adequate standards of care and 

potential liability costs. The size of the fee for accepting waste in relation to the revenue 

for selling recycled output would likely be an important factor in prevalence of this 

activity. If the acceptance fee is the dominant revenue source for commercial recyclers, 

they could have more incentive to focus on accepting hazardous waste and less incentive 

to focus on actually producing recycled output in a compliant manner. To the extent that 

these firms ignore liability costs and safe production practices, they would be able to set 

their acceptance fees lower than firms operating in a compliant manner, resulting in more 

hazardous waste flowing to these firms and more potential mismanagement of wastes. 

Imperfect information can also influence industrial firms in their decisions to recycle 

hazardous waste onsite. A similar situation as shown in Exhibit 2-7 above could occur 

with industrial recyclers (either intra-company or inter-company) if their perceived costs 

for recycling hazardous waste were lower than the true costs. The industrial firms, 

however, face a different situation than commercial firms due to being able to substitute 

away from producing recycled materials onsite if the costs become prohibitively high for 

them to do so. The industrial firms may thus have less incentive to mismanage their 

waste, and may also be less inclined to do so due to the liability issues discussed above. 

Industrial recyclers also do not have incentives to store or stockpile their waste since they 

do not receive any revenue from accepting waste. It would thus be expected that 

imperfect information on the costs of recycling hazardous waste would encourage 

industrial intra-company recyclers to substitute away from onsite recycling to other waste 

management options, and would encourage industrial inter-company recyclers to 

substitute away from onsite recycling to increased use of virgin materials in production. 

Even if recyclers, either commercial or industrial, were well informed about the true costs 

of running the recycling business before entering the market, they may find themselves in 

the situations depicted above if they had imperfect information about the price elasticity 

of demand for their final product, and thus their ability to cope with increases in 

production costs. Price elasticity of demand indicates how responsive demand for a 

product is to a change in its own price. The more responsive demand is (i.e., more 

elastic), the greater will be a change in demand in response to a given change in the price. 

Goods with close substitutes and low transaction costs associated with switching between 

substitutes have a more elastic demand.9

 When faced with an increase in production 

costs, recyclers may decide to pass some or all the incremental costs onto their customers. 

The effect that this action will have on their total revenues will depend on the price 

elasticity of demand for their product. Exhibit 2-8 illustrates this point for commercial 

recyclers. The original market conditions are depicted where the commercial recycler 

produces Q units of recycled goods at the market price of P. If the commercial recycler 

perceives the market demand curve to be relatively inelastic (DP), he will expect to pass a 

large share of any increase in his production costs onto his consumers and still operate 

 

9

 Other factors that influence the price elasticity of demand are the degree of necessity for consuming the 

good, the time period allowed for the price to adjust, and consumption patterns (e.g., peak demand vs. offpeak demand). 
38 

profitably. The increase in the production costs are illustrated by the upward shift in the 

commercial recycler’s cost curves (MC’ and ATC’) and by the upward shift in the market 

supply curve (S’). The true demand (DT), however, is fairly elastic. The increase in the 

price of recycled goods will lead to a larger decrease in the quantity demanded than the 

commercial recycler has anticipated. With the market price of P’, the commercial 

recycler will continue to operation in the short run only if he can cover his variable costs, 

otherwise he will shut down. In the long run, we would expect the commercial recycler 

to exit the market (since P’< ATC’). 

If faced with increasing operating costs and elastic demand for their final product, profitmaximizing industrial recyclers would shift to a different waste management option. 

Industrial intra-company recyclers may substitute away from recycling to other waste 

management options, while industrial inter-company recyclers may substitute away from 

recycling to increased use of virgin materials in the production (assuming that the forces 

driving the costs of recycling hazardous wastes have smaller or no effect on the use of 

virgin materials). 
39 

Exhibit 2-8: Uncertainty in the Demand for Recycled Products 

2.4.2. Externalities 

Externalities are common sources of market failure, which occur when the welfare of one 

agent (such as a firm or household) is affected by some other agent without permission or 

compensation. Externalities can either be positive, where the action adds to the agent’s 

welfare, or negative, where the action detracts from it. Negative externalities often exist 

for pollution and other environmentally degrading activities undertaken by individuals 

and firms, and they occur when the costs of the environmentally degrading action to 

society is not reflected in the private costs faced by the agents undertaking the activity 

(Kolstad, 2000). 

PE 

P’

P 

 Q’ Q Q 

S’

S 

ATC’

ATC 

MC 

MC’

Firm Market Price 

Quantity of 

hazardous 

material 

recycled 

ATC– Firm’s average total cost of producing recycled materials 

ATC’ – Firm’s average total cost of producing recycled materials after the increase in 

 the production costs 

MC– Firm’s marginal cost of producing recycled materials 

MC’– Firm’s marginal cost of producing recycled materials after the increase in 

 the production costs 

DP – Perceived market demand curve for recycled materials (relatively inelastic) 

DT – True market demand curve for recycled materials (relatively elastic) 

S – Market supply curve 

S’

 – Market supply curve after the increase in the production costs 

P – Market price of recycled material 

P’

 – Market price of recycled material after the increase in the production costs 

PE– Expected market price of recycled material after the increase in the production costs 

Q – Quantity of recycled material produced 

Q’– Quantity of recycled material produced after the increase in the production costs 

DT

DP
40 

The potential influence of negative externalities on the hazardous waste recycling market 

is illustrated in Exhibit 2-9 below. The graph on the left represents a typical firm (either 

industrial or commercial), and the graph on the right shows the market supply and 

demand curves for recycled materials.10 The market supply curve represents the 

summation of the supply curves of all the individual firms that supply recycled materials. 

As discussed above, the supply curves of these firms are determined by their marginal 

costs for producing various units of recycled materials. Marginal costs are based on the 

direct and indirect costs of the firm. The production costs of a firm that considers only its 

private costs are shown as the lower set of cost curves, ATCP and MCP. Alternately, the 

production costs of a firm that considers social as well as private costs are shown as the 

higher set of cost curves on the graph, ATCS and MCS. Two different market supply 

curves result from the choices of firms. The lower market supply curve, denoted as SP, 

represents the supply of hazardous materials as determined by the private costs of the 

individual firms. The higher market supply curve, denoted as SS, represents the market 

supply when firms also consider the social costs of their business. As discussed earlier, 

the firm is considered to be a price taker, and equates its marginal cost with its marginal 

revenue, or the price of its output. The prevailing market price for recycled materials, 

and thus the resulting quantity produced, is determined from the intersection of the 

market demand curve (DM) and the market supply curves. 

A negative externality occurs in the hazardous waste recycling market when the social 

costs associated with producing the recycled materials (e.g. environmental damage, 

human health risks) are not being accounted for by the firms in their production decisions 

(Gottinger, 1991a). Since firms are operating in a competitive environment, considering 

only their private costs is often the only rational profit-maximizing response for firms. 

Any move by a firm that increases its costs relative to the competition will put them at a 

disadvantage, so firms cannot be expected to consider social costs if they are not forced 

to do so. For the firms, considering only their private costs means operating on the lower 

set of cost curves on the graph to the left. The result of firms not accounting for the 

social costs when determining the level of output is that a larger amount of recycled 

material is produced than is socially optimal in terms of the damage resulting from 

recycling activities. If firms consider only their private costs, then QP units of recycled 

materials are produced at a market price of PP with external costs of the firm being 

shifted to society. 

If firms instead accounted for the social costs of their production decisions, the result 

would be a reduction in the amount of recycled materials that are supplied by firms, and 

also a higher price for them (since they would be produced in a more compliant manner). 

This new price and quantity of recycled materials would be set where the new social cost 

supply curve (SS) intersects the market demand curve. The result would be that QS units 

of recycled hazardous materials would be supplied at a price of PS. Exhibit 2-9 illustrates 

 

10 The graph of the firm in Exhibit 2-9 could represent either a commercial or industrial facility. For the 

sake of simplifying the graph, the marginal revenue for the firm is shown as equal to the price of the 

recycled materials, as opposed to the price plus the acceptance fee as it would be for a commercial firm. 

This simplification does not affect the relevant analytical points to be gained from the graph. 
41 

the situation where the firm will exit the market at the new price PS since the market price 

will not cover its recycling costs (PS<ATCS). The difference between the two price 

amounts (PS – PP) represents the per-unit amount of the negative externality that is 

imposed on society by recyclers of hazardous waste failing to account for the external 

social costs of their activities when making their production decisions. 

Exhibit 2-9: Negative Externalities in the Hazardous Waste Recycling Market 

PS 

PP 

 Qp QS Qp

SS SP

ATCS

ATCP

MCP

MCS

Firm Market Price 

Quantity of 

hazardous 

material 

recycled 

ATCP – Firm’s perceived average total cost of producing recycled materials 

ATCS – True (social) average total cost of producing recycled materials 

MCP – Firm’s perceived marginal cost of producing recycled materials 

MCS – True (social) marginal cost of producing recycled materials 

DM – Market demand curve for recycled materials 

SP – Market supply curve as determined by the firm’s private costs only 

SS – Market supply curve as determined by the true (social) costs 

PP – Price of recycled material as determined by private supply curve 

PS – Price of recycled material as determined by true (social) supply curve 

QP – Quantity of recycled material produced with private supply curve 

QS – Quantity of recycled material produced with true (social) supply curve 

DM
42 

3. Discussion and Conclusion 

Increased understanding of the economic forces that influence hazardous waste recycling 

can contribute to our knowledge of how firms will factor recycling into their production 

and waste management decisions. These issues were explored through economic models 

of hazardous waste recycling as practiced by commercial, industrial intra-company, and 

industrial inter-company recyclers. This paper also suggested key characteristics that 

were hypothesized to influence hazardous waste recycling behavior. We divided these 

characteristics into those that are potentially observable from data on a firm or the market 

for recycled products, and those that are by nature unobservable. In conclusion, we 

revisit these characteristics and summarize what has been learned about these 

characteristics through the economic modeling of different kinds of hazardous waste 

recycling. 

3.1. Discussion of Observable Firm and Market Characteristics 

In this section, we discuss how characteristics potentially observable through firm and 

market data could influence firm recycling behavior. These characteristics are the value 

of the recycled product, the stability of prices and the net worth of the firm. 

• Value of the recycled product: The value of the recycled product is an important 

determinant of a firm’s revenue structure, and is hypothesized to influence 

hazardous waste recycling behavior. For all three models of hazardous waste 

recycling, we would expect a recycling market with a high value product to have 

a higher likelihood of optimal recycling outcomes than a recycling market with a 

low-value product. With a high value recycled product, firms are likely to 

exercise greater care in handling recyclable hazardous waste, since spillage or 

leakage of waste represents a loss of input material and thus results in lower 

revenues from selling the final product. In cases where recycling firms receive an 

acceptance fee for taking in recyclable hazardous waste, such as the case with 

some commercial recyclers, the acceptance fee becomes a much more prevalent 

factor in the firm’s revenue structure when the recycled product has a low value. 

In such cases, firms may have an incentive to accept a greater quantity of 

recyclable waste than they could properly manage. For intra-industrial firms, the 

value of the product would serve as a strong incentive for proper management of 

the recycled material. A similar argument holds for inter-company recyclers that 

are using a recycled product or hazardous waste generated from an outside source 

as an input to their production. If the recycled product has a high value, we would 

expect that the industrial inter-company recyclers would exercise greater care in 

their recycling process and the handling of the recycled product. 

• Stability of prices: Stability of prices in both the inputs and outputs of hazardous 

waste recycling is another characteristic that is hypothesized to influence 

hazardous waste recycling as practiced by the three different models. When 

prices are stable, firms can more easily adjust their production in response to the 

price signals they receive from the market. They are thus less subject to sudden 
43 

upsets to their revenues or costs which could force them to operate at a short or 

long-term loss. For firms that are recycling to produce a marketable output (i.e., 

commercial and industrial intra-company firms), stable prices for the recycled 

good help the firm to know that it can expect a return from recycling that justifies 

it entering the market and can recover the investment costs. Commercial firms, 

for example, use tolling agreements to protect themselves from price instability. 

For industrial inter-company firms (and in some cases intra-company firms), 

stable prices help the firm to judge whether the expense of setting up a recycling 

operation to generate a product for use as a substitute input in the production of 

their final output is justified. 

• Net worth of the firm: Liability issues are the major contributor to indirect costs 

of commercial and industrial firms. Liability issues affect firms differently due to 

many factors. One of these factors, the net worth of the firm, is hypothesized to 

be an important indicator of whether hazardous waste recycling would be 

expected to produce optimal or sub-optimal outcomes. For commercial and both 

kinds of industrial firms, liability issues would be expected to have greater 

prominence for firms that have a higher net worth and have an established history 

in the industry. If a firm has the potential to take a large loss due to liability 

issues, it would be expected to protect itself against this risk through careful and 

compliant practices and possibly through insuring against liability risks. Apart 

from protection against liability risks, commercial firms may operate in a careful 

manner in order to attract business. Due to secondary liability issues, industrial 

firms may examine the liability history of commercial firms and prefer to send 

waste to those that have a good record of complying with the environmental and 

safety regulations. Firms that have a higher net worth have more to lose from 

liability issues and thus have a greater incentive to invest in careful waste 

management practices. These firms thus would be expected to be more likely to 

practice recycling in an environmentally safe manner and also to insure against 

possible liability risks. While many factors contribute to optimal hazardous waste 

recycling outcomes, having a high net worth is one potential indicator of this 

result for firms. 

3.2. Empirical Evidence for Observable Firm and Market Characteristics 

In order to provide further information and support of the ideas expressed in this 

theoretical analysis, we conducted an in-depth empirical analysis of five selected, 

commonly recycled hazardous wastes. The original goal of the empirical analysis was to 

test the various hypotheses that are presented in the theoretical analysis. However, 

limitations on the availability and quality of data prevented us from conducting these 

empirical tests. The empirical analysis of the five hazardous wastes was instead used to 

provide information on the characteristics of markets for these materials that increase our 

understanding of how market forces shape behavior for the different recycling models 

laid out in this paper. In this section, we use information on the characteristics of these 

markets to show how it supports or refutes the conclusions drawn above on the 
44 

potentially observable characteristics of firms. Further detail on the empirical analysis of 

the five hazardous wastes is provided in Appendix II. 

The analysis in this section was done using information on recycling markets for five 

selected hazardous waste materials, four of which are regulated by EPA as hazardous 

waste.11 These materials were selected by EPA to illustrate market conditions for 

different hazardous waste recycling models. Although all of these materials have 

significant rates of recycling, they are neither representative of all hazardous wastes nor 

should the recyclers of these wastes be considered representative of the recycling models 

with which they are associated. Information on environmental damage cases associated 

with recycling activities involving the selected hazardous waste materials was collected 

as part of a separate EPA report titled “An Assessment of Environmental Problems 

Associated with Recycling of Hazardous Secondary Materials” (EPA, 2006).12

In Exhibit 3-1 below, the five hazardous wastes are characterized by recycling model. 

Three of the materials are characterized by a commercial recycling model, and two each 

have characteristics of the two different industrial recycling models. Since spent pickle 

liquor occurs both at commercial and industrial firms, this material is listed under two 

different recycling models. We then use information from the empirical analysis of the 

five hazardous waste materials to provide further evidence on the characteristics that we 

hypothesize have an influence on hazardous waste recycling behavior. 

Exhibit 3-1: Type of Recycling for Five Selected Hazardous Wastes 

Type of Recycler Material 

Commercial recycler Spent Pickle Liquor 

Spent Solvents 

Used Empty Drums 

Industrial intra-company recycler Spent Pickle Liquor 

Industrial inter-company recycler Used Lead-Acid Batteries 

Brass Dust 

3.2.1. Value of the Recycled Product 

The value of the recycled product is hypothesized to influence hazardous waste recycling 

behavior, with a high-value product being one potential indicator of a recycling market 

which produces optimal outcomes. In contrast, a low-value product is a characteristic 

that could possibly increase the likelihood of sham recycling, where firms engage in 

recycling primarily to receive the acceptance fees for waste and do not have a genuine 

interest in recycling the waste. Characteristics of the recycling markets for the five 

selected hazardous waste materials are presented below in Exhibit 3-2, including a proxy 

measure for the acceptance fee for the waste and the market values for the virgin and/or 

recycled product. A comparison of the proxy acceptance fee and the value of the product 

 

11 “RCRA empty” drums are not regulated by EPA as hazardous waste. 

12 Conducted as part of EPA’s effort to revise the current “definition of solid waste” under RCRA, the 

study’s goal was to identify and characterize as many cases of environmental damage as possible that have 

attributed to some type of hazardous material recycling activity and have occurred after 1982. 
45 

provides an indication of markets for which the value of the product could be low as 

compared to the acceptance fee a recycler would receive for accepting waste. In the used 

lead-acid battery and brass dust recycling markets, the value of the final recycled product 

is likely significantly higher than the acceptance fees. Thus, the recycled products in 

these markets could be considered high value, and the acceptance fees for waste would 

not be a dominant revenue source for the recyclers in these markets.13 

For spent solvents, however, comparison of the proxy acceptance fee and the product 

value suggests that spent solvents could possibly be considered a low-value product, with 

recyclers generating their primary revenue from the acceptance fees. While this 

difference in acceptance fees and product value could be an indicator of sub-optimal 

recycling outcomes from solvents, other empirical evidence refutes the notion that 

recycled solvents are a low-value product. One way to determine if a product has value 

is if it displaces another valuable product. Based on communications with solvent 

recyclers, there is a legitimate market for recycled solvents (such as auto repair shops), 

which is an indication of the value of the product, given that recycled solvents are 

displacing virgin solvents for some uses. Additionally, there could be other reasons why 

a comparison of the acceptance fee and the product value would not be an accurate 

representation of a recycled product having a high or low value. If, for example, the 

solvent recycling process had high costs and several drums of spent solvent were needed 

to produce one drum of regenerated solvent, the recycler would need to charge a high 

acceptance fee just to cover its costs. The divergence between the acceptance fee and the 

value of the recycled product is then just an indicator of high recycling costs and not of a 

low-value recycled product. Additionally, it should be noted that the proxy acceptance 

fee shown for solvents may overestimate the real acceptance rate due to the fact that 

spent solvents have an alternative use to recycling (use as substitute fuels). In times of 

high oil prices, spent solvents which can be used as substitute fuels would likely have a 

significantly lower acceptance fee than the one presented in the exhibit, and recyclers 

may even be willing to pay to accept them. 

 

13 We use landfill disposal fees as a proxy for acceptance fees. 
46 

Exhibit 3-2: Product Value and Acceptance Fees 

Material Used LeadAcid 

Batteries 

Brass Dust Spent Pickle 

Liquor Spent Solvents Used Empty Drums 

Proxy 

Acceptance 

Fee (2002)1

$160/ton $160/ton $114/drum $114/drum NA 

Recycled 

Product Lead Zinc Pickle Liquor Regenerated 

Solvents 

Reconditioned 

Drums 

Dominant 

Consumers Battery 

Manufacturers Zinc Mills Steel Mills

Auto-repair 

shops, dry 

cleaners

Manufacturers of 

low to mid value 

goods

Product 

Value (2002) $953/ton2

 $845/ton3 NA $35/drum4 $805

Note: All values are in constant dollars. NA – information not available. 

1) Based on the Environmental Technology Council survey data. The proxy acceptance fee is a landfill disposal fee. 

2) Market price for lead from the US Geological Survey.

3) Market price for zinc from the US Geological Survey.

4) Estimated price for regenerated solvents, calculated as the weighted average of estimated prices for 

trichloroethylene, methyl ethyl ketone and perchloroethylene. The weighted price of virgin solvents is $54/drum. 

5) Estimated price for a 55-gallon steel drum based on industry communication. 

3.2.2. Stability of Prices 

The stability of prices is hypothesized to influence recycling behavior, with stable prices 

for recycled products being one possible indicator of markets that produce optimal 

recycling outcomes. With volatile prices, recyclers may face times of reduced profits, or 

even times where they must operate at a loss. As discussed above, this could serve as an 

incentive for various kinds of waste mismanagement designed to help firms cut recycling 

costs. Various factors contribute to price volatility. We would expect that materials 

predominantly traded on the global market (such as metals) would have higher volatility 

as a result of changes in exchange rates, trade policies and regulations, and country 

specific economic conditions. 

The 2006 EPA study shows that out of the damage cases found involving recyclers of 

solvents, batteries and drums, the most common cause of damage was mismanagement of 

recyclables and/or residuals. We have found evidence that volatile prices may have 

provided an incentive to recyclers of lead-acid batteries and some solvents to engage in 

waste mismanagement. 

We used historical price information (where available) and producer price indices14 for 

selected products to construct volatility indices. The results are presented in Exhibit 3-3. 

Findings suggest that prices for lead, zinc and solvents are more volatile compared to 

general measures of volatility, where general measures are defined as average volatility 

of a basket of related goods (metal and metal products for lead and zinc, and chemicals 

and allied products for solvents). We would thus expect price volatility to be a 

 

14 The producer price index (PPI) measures the average change over time in the selling prices received by 

domestic producers for their output. Source: US Bureau of Labor Statistics. 
47 

significant causal factor for damaging behavior for these markets. With prices being 

relatively unstable, we could conclude that it is likely that some firms may enter these 

markets in order to make a quick profit in times when there is an upward spike in product 

prices. 

Exhibit 3-3: Price Volatility – Mean and Standard Deviation 

Materials 1970-2002 1980-2002 1996 - 2002 

Lead1 14% (13%) 14% (14%) 5% (3%) 

Refined lead NA 10% (8%) 6% (5%) 

 

Zinc1 15% (12%) 15% (10%) 14% (10%) 

Refined zinc, slab, dust NA 13% (8%) 11% (7%) 

 

Barrels, drums, and pails NA 3% (3%) 1% (1%) 

 

Basic organic chemicals NA 5% (4%) 3% (4%) 

Trichloroethylene2 NA NA 2% (0.5%) 

Methyl Ethyl Ketone2 NA NA 9% (7%) 

Perchloroethylene2 NA NA 7% (7%) 

 

Metals and metal products 5% (6%) 3% (3%) 2% (1%) 

Chemicals and allied 

products 

5% (7%) 3% (4%) 1% (2%) 

All commodities 5% (5%) 3% (3%) 2% (2%) 

1) Volatility index based on market prices available from the US Geological Survey.

2) Volatility index based on market prices from The Innovation Group, available in “Chemical Profiles” at 

http://www.the-innovation-group.com/welcome.htm. 

Notes: 

1) Volatility index is defined as mean of the absolute values of the annual percent change in price. 

2) Unless otherwise noted, volatility index constructed using data on the producer price index from the US Bureau of 

Labor Statistics. Available at http://www.bls.gov/ppi/. 

3) Time intervals were selected to make the data from different data sources comparable. For example, price 

information for trichloroethylene was only available for the period 1996-2002. 

4) NA – not available. 

Recycling facilities, however, can mitigate, to some extent, the effects from volatile 

prices. For the lead-acid battery and spent pickle liquor markets, tolling agreements are 

common, which to some extent protect the recyclers from fluctuations in the price of the 

final product. The agreements also are likely to have a clause allowing the recycler to 

adjust the price if the cost of electricity and/or fuel increases, thus providing some 

protection from increases in production costs. Some hazardous wastes also may have 

multiple commercial uses which serve as an additional buffer from price volatility of the 

primary product. Firms that handle wastes with multiple uses have less incentive to 

stockpile waste since the waste can be diverted to another use if decreases in the price for 

the recycled product make recycling unprofitable. As shown in Exhibit 3-4, we found 

evidence of multiple uses, mitigating the effects of price volatility in four of the recycling 

markets. As discussed above, spent solvents may be used as secondary fuels instead of 

recycled in periods of high oil prices. For emptied drums, scrapping used drums for 

metal is an alternative use to reconditioning them. If the price of reconditioned drums 
48 

falls, recyclers can sell them for scrap as opposed to stockpiling them until the market 

recovers. A similar situation exists for spent pickle liquor, which can be used in 

wastewater treatment if low demand for steel causes a drop in its price. Although leadacid batteries are currently the only significant use for lead, tolling agreements serve as 

protection for battery recyclers. 

Exhibit 3-4: Multiple Use 

Material Used LeadAcid Batteries Brass Dust Spent Pickle 

Liquor Spent Solvents Used Empty Drums 

Is there 

other 

commercial 

use? 

Yes, although 

very small NA Yes, water treatments plants

Yes, fuel 

substitution Yes, scrap steel

3.2.3. Net Worth of the Firm 

The net worth of the firm was hypothesized to be an indicator of optimal recycling 

outcomes, with low net worth firms having less incentive to engage in careful waste 

management. Although we were unable to collect data on this issue in the empirical 

analysis, we did find some evidence supporting this hypothesis in our communications 

with industries in the recycling markets for the five selected materials. In the steel 

industry, for example, secondary liability issues were mentioned as a concern by firms in 

terms of sending spent pickle liquor to commercial firms for regeneration. 

Representatives at two large steel firms mitigated the potential secondary liability risk by 

periodically doing site visits to the commercial recyclers to ensure that their wastes are 

being handled in a compliant manner. Since, due to the value and the volume of the 

products sold, these steel mills are likely to have a higher net worth than the commercial 

facilities recycling their spent pickle liquor, they are concerned about secondary liability. 

Namely, should a commercial recycler be required to pay for damage it caused by 

mishandling spent pickle liquor, it will be able to pay only the amount up to its net worth 

(i.e., the amount that can be generated by selling off its assets). However, if the damage 

is significantly higher than what the commercial recycler is able to pay, then it is possible 

that the steel mills may be required to cover the difference. 

3.3. Discussion of Unobservable Firm and Market Characteristics 

In addition to those characteristics of firms and recycling markets that would be 

potentially observable, this paper also discussed kinds of market failure that could 

contribute to sub-optimal hazardous waste recycling outcomes. While the sources of 

market failure discussed in the paper are important, they do not necessarily correlate 

directly to observable characteristics of the firm or market. 

• Imperfect information: One source of market failure in hazardous waste recycling 

by commercial and both kinds of industrial firms is imperfect information. If 

firms lack complete and accurate information about the market for hazardous 

waste recycling, they may make different decisions regarding their entry into the 

market or level of production than if they had better information. This can lead to 
49 

the phenomenon of adverse selection, where more firms that are misinformed on 

the market choose to enter it than firms that are well informed. Firms can have 

imperfect information on both the costs and revenues of hazardous waste 

recycling. On the cost side, firms can be misinformed about the true costs of 

operating a recycling operation in a safe and compliant manner. This could result 

in firms that operate in a less safe or less compliant manner or that have to exit the 

market, since the true costs of recycling would not allow the firm to operate at a 

profit. On the revenue side, commercial firms and industrial intra-company 

recyclers may have incomplete information about the market prices of recycled 

goods due to lack of market data or unstable prices. Imperfect information on 

revenues could thus also contribute to sub-optimal recycling outcomes since it 

could serve as an incentive for firms to try and cut recycling costs by operating in 

a less safe manner or as an incentive for them to have to exit the market. 

• Externalities: Another common source of market failure identified in the paper is 

externalities, which result when firms only take responsibility for their private 

costs, and do not account for social costs resulting from their actions. These 

social costs are treated as external to the firm and are thus passed on to society. 

Pollution resulting from hazardous waste recycling constitutes an externality if the 

firm does not pay for the damages caused by the pollution. The decision by a 

firm to pass some of the costs of its actions onto society rather than internalizing 

them is a potential cause of sub-optimal outcomes for hazardous waste recycling. 

This kind of externalities could either result from ignorance on the part of firms of 

the external damage they are causing, or from deliberate attempts on the part of 

firms to lower their costs. The result of externalities in the hazardous waste 

recycling market is a larger amount of recycled materials being produced at a 

lower price than would result if firms internalized the full costs of their recycling 

operations. 

3.4. Conclusion 

Recycling of hazardous waste offers many potential benefits to firms and more generally 

to society through reducing waste and the use of virgin materials and landfill space. This 

paper used economic theory to examine cases when these benefits fail to be realized and 

hazardous waste recycling results in costs to society that outweigh its benefits. Economic 

modeling of recycling as practiced by three different types of firms provided information 

on how hazardous waste recycling can result in sub-optimal outcomes, and it also enabled 

us to identify potentially observable characteristics of firms and markets that are possible 

indicators of hazardous waste recycling that could generate sub-optimal outcomes. 

Different kinds of market failures were also discussed in terms of how they can 

contribute to environmentally destructive behavior. Identifying these sources of market 

failure can point to potential solutions for the different issues. 
50 

Appendix I – Literature Review

Initial searches and reviews of the literature found relatively few articles of interest with a 

focus on the economics of hazardous waste recycling from the perspective of firm 

decision-making. While there are many studies in the economics literature relating to 

recycling, these almost exclusively relate to recycling of non-hazardous waste by 

households. Existing literature on hazardous waste recycling is mostly focused on 

economic analysis of different policies to improve hazardous waste management. While 

these articles provided some useful information about the general market forces that may 

influence hazardous waste recycling, literature in areas outside economics proved to have 

the most specific information about the economics of hazardous waste recycling from a 

firm-level perspective. 

Although most of the literature that discussed firm-level recycling decisions was focused 

on specific industries, a small number of studies discussed these issues in more general 

terms. One study, for instance, examined the barriers against the recycling of hazardous 

waste in Canada (Technology Resource, Inc., 1988). Through a survey of firms, the 

study found that economic issues were the most common barriers against hazardous 

waste recycling. The economic factors that presented the biggest challenges to recycling 

were the existence of lower-cost disposal options, the high investment risk for recycling 

with low payback potential, and small or nonexistent markets for recycled materials. The 

study also pointed to a number of factors suggesting that firm size may be a crucial 

determinant of hazardous waste recycling activity, since larger firms have potential 

advantages in terms of being able to absorb new capital costs and in being able to process 

a larger volume of hazardous waste (i.e., economies of scale). The study noted that 

market incentives would be needed to encourage a higher rate of hazardous waste 

recycling. Incentives should serve to decrease the uncertainty around hazardous waste 

recycling and increase the rate at which firms receive revenues for their recycled output. 

Additional roles for incentives would be to provide information to firms to aid in the 

reduction of capital expenditures, and to increase the demand and marketability of 

recycled materials. While this study provided a detailed analysis of the economics of 

hazardous waste recycling, the age of the study and its focus on Canada may limit its 

relevance to the current state of hazardous waste recycling in the United States. 

Another group of studies used economic modeling to characterize the waste management 

decisions of a representative industrial firm. A common finding of these studies was that, 

while other factors may play into waste management decisions, profit maximization is the 

primary framework from which firms make waste management decisions (Gottinger, 

1991b; McLaren and Yu, 1997; Alberini and Frost, 1999; Dijkgraaf and Vollebergh, 

2003). These studies modeled the waste management decisions of firms as a choice of 

the least-cost option among different disposal choices. The costs of the various disposal 

options were modeled as a function of the characteristics of the waste, the firm, the 

disposal option, and the existing regulatory framework. In making decisions regarding 

hazardous waste management, studies generally found that firms tend to balance the 

short-term, certain costs associated with waste management (e.g., transportation, 
51 

disposal) with the long-term uncertain costs such as liability (Gottinger, 1991b; Alberini 

and Bartholomew, 1999). 

In understanding the firm-level factors that influence hazardous waste management 

decisions, it is useful to think of the different categories of costs that play into these 

decisions. As suggested by Fleet (1993), these costs can be broken down into four main 

categories, which are thought to vary widely by firm, depending on firm size and aspects 

of the regulatory climate. These categories include direct costs, which are the main costs 

associated with production and waste management. A second category is indirect costs, 

which include regulatory compliance costs (such as monitoring, manifesting and 

reporting requirements) and costs associated with liability and future risks. Both direct 

costs and the indirect costs mentioned above can be considered internal costs to the firm. 

Fleet (1993) stressed that firms should also include other categories of indirect costs in 

their waste management decisions, such as internal and external indirect costs that are 

intangible to the firm. One group of these intangible costs is the social cost of waste 

management choices. A second group of these intangible costs is costs to the firm, such 

as public perception of the firm’s environmental performance. Literature on the 

economics of hazardous waste recycling is discussed below in relation to these different 

cost components. 

Information on the direct costs of hazardous waste recycling was found from a number of 

articles discussing recycling within specific industries. Several of these articles 

compared the direct costs of hazardous waste recycling to the costs of conventional 

disposal options. For the industries represented in these articles, a general consensus was 

that the direct costs of recycling hazardous waste were comparable to the costs of 

disposal. One study, for example, compared the cost of three different disposal methods 

for fluorescent lamps used in industrial areas (Tansel et al. 1998). In terms of disposal 

options, it was found that splitting the waste stream into hazardous and non-hazardous 

waste was a less economical choice than treating the whole waste stream as hazardous 

waste. A comparison of the direct costs of disposal versus recycling found the costs to be 

similar ($0.93-$1.19 per lamp for recycling and $0.83-$1.21 for disposal as hazardous 

waste). Another study found the direct costs of landfill disposal for F006 wastewater 

treatment sludges from the plating industry in bulk to be the same ($250-$300 per ton) as 

recycling these materials (Rosenbaum, 1990). This study noted that, while these costs are 

currently the same, disposal costs will likely rise much faster than recycling costs due the 

reliance of disposal on dwindling landfill space. Another study came up with very 

favorable results in comparing the costs of disposal and treatment by offsite recyclers for 

hydraulic fluids. This study estimated annual disposal costs and recycling costs for used 

hydraulic fluid from the Naval Air Station in North Island, CA, and found the disposal 

costs ($5,232) to be almost twice as high as the recycling costs ($2,766). This study 

cautioned, however, that costs should be considered on a case-by-case basis due to 

possible variability in disposal and recycling costs (Joint Service P2 Technical Library, 

2003). 

Another important consideration in the comparison of the direct costs of disposal and 

recycling options are the benefits associated with the recovered materials. While the 
52 

study of fluorescent lamps found disposal and recycling costs were roughly equal, this 

study stressed that recycling had the added benefit of the recovery and resale of glass, 

aluminum, mercury and powder (Tansel et al. 1998). A study of used consumer 

electronic products also highlighted the importance of the material obtained from 

recycling in the economic attractiveness of recycling to a firm. In comparing the 

recycling of cell phones and computers, the authors noted that the existence of viable 

markets for the recovered materials could be what makes recycling an economically 

viable option for the firm (Bhuie et al. 2004). The importance of the recovered materials 

was also stressed in the study of wastewater sludges, which noted that the average ton of 

F006 sludge contains over $200 of recoverable metals and was an economic benefit that 

could be shared between the generator of the waste and the recycler (Rosenbaum, 1990). 

Besides the influence of direct costs on hazardous waste management decisions, some 

studies stressed the importance of internal indirect costs on the economics of waste 

management options. Several studies discussed how hazardous waste recycling 

decreases costs by cutting the indirect costs associated with waste management. A study 

of recycling metal-bearing hazardous waste found that, while the recycling was not a 

favorable alternative in terms of direct costs, the reduced regulatory responsibility 

associated with recycling could make it an economically feasible alternative 

(Ramachandran, 1993). Although the direct costs of recycling hydraulic fluid were 

already attractive compared to disposal, the study on this issue noted that the less 

stringent regulations associated with recycling were an additional economic incentive 

(Joint Service P2 Technical Library, 2003). The study of wastewater sludge noted that 

recycling of hazardous waste cut down on future liability since the waste is converted 

into usable products and does not stockpile in the waste stream. This removal of waste 

from the regulatory framework removes the future costs that would be needed for 

monitoring disposed hazardous wastes (Rosenbaum, 1990). 

Studies of the economics of hazardous waste recycling also stressed that other external 

indirect costs are important to consider in waste management decisions. As discussed 

above, one category of these intangible costs is the social costs associated with hazardous 

waste management. These costs include potential environmental benefits and potential 

avoided costs from the extraction of virgin materials and using up additional landfill 

space (Fleet, 1993; Sigman, 1999). In examining the economics of recycling personal 

computers, one study concluded that computer recycling was not economically feasible 

through comparisons of direct costs alone, but that it could likely be feasible if the 

environmental benefits associated with recycling could be included in the cost analysis 

(Bhuie, 2004). 

Another category of intangible costs that could influence firm waste management 

decisions is “green image” costs, or the potential influence of the perceived 

environmental performance of a company on their revenues. While this is a difficult cost 

to quantify, some studies identified this as an important factor that could influence a 

firm’s waste management decisions. Both Fleet (1993) and Rosenbaum (1990) stress that 

these costs could be significant and influence waste management decisions if dollar terms 

could be applied to them. Needleman (1994) also noted that positive public perceptions 
53 

around recycling could influence firms to recycle hazardous waste, even if the recycling 

process ended up causing more environmental harm than other disposal options. 
54 

Appendix II – Empirical Analysis 

The main objective of this section is to describe and characterize the recycling markets 

for five selected hazardous wastes: lead-acid batteries, brass dust, spent pickle liquor, 

solvents and empty drums. Using publicly available data and information obtained from 

interviews with trade associations and industry members, the recycling markets for the 

five materials are discussed in terms of ideas and concepts expressed in the theoretical 

section. For each of the five selected hazardous wastes, this section provides some 

background information on waste management options, waste flows, generation and 

recycling rates, number and characteristics of recycling entities, and the financial data for 

the recycling of the wastes. Due to data limitations, this section does not present any 

empirical tests of the hypotheses laid out in the theoretical section. 

Several criteria were used for selecting the wastes, including data availability, recycling 

rates, and characteristics of the recycling markets. The selected five materials are not 

necessarily representative of all hazardous wastes. Therefore, the conclusions reached in 

this paper are not necessarily valid for hazardous wastes, industries and markets other 

than those analyzed here. 

A.1 Data Sources 

The discussion presented in the empirical section is based on the information from two 

main sources: 

 

1. Industry (e.g., trade groups and manufacturers), and 

2. The 2003 EPA Biennial Reporting System (BRS). 

Information from relevant industry sources was obtained via a telephone interview. 

Industry provided information on the size of the hazardous waste market (in term of the 

number of recyclers or the amount recycled) and the characteristics of the market. The 

information was provided voluntarily and was not required to be submitted. The 

information provided has not been independently verified by EPA. 

The BRS contains data on the generation, management, and minimization of hazardous 

waste. These data are provided to EPA by hazardous waste generators and treatment, 

storage, and disposal facilities, as required under 40 CFR 262.41 and 264.75. This 

provides detailed data on the generation of hazardous waste from large quantity 

generators and data on waste management practices from treatment, storage, and disposal 

facilities. Data on hazardous waste activities is reported for odd number years (beginning 

with 1989) to EPA. The BRS data are required to be submitted. In addition, EPA has 

provided guidance on the forms used to submit these data and how those forms should be 

completed. Failure to submit this information, and the submission of inaccurate or 

incomplete information, is punishable by fines or imprisonment. 

The information from the BRS is likely to be more accurate and complete that the 

industry information. The mandatory nature of the data collection process and EPA 
55 

guidance are likely to result in a higher quality of information than the industry data. 

Due to the different data sources and information collection methods for the industry data 

and the BRS, these data may not completely agree. The industry data, however, are 

included in this paper because they provide an industry perspective on the specific 

hazardous waste recycling markets. 

 

A.2. Recycling Markets 

A.2.1. Tipping Fees 

In the Pollution Prevention Act of 1990, the US Congress established a national waste 

management policy stating that: 

• Pollution should be prevented or reduced at the source whenever feasible; 

• Pollution that cannot be prevented should be recycled in an environmentally safe 

manner whenever feasible; 

• Pollution that cannot be prevented or recycled should be treated in an 

environmentally safe manner whenever feasible; and 

• Disposal or other releases into the environment should be employed only as a last 

resort and should be conducted in an environmentally safe manner.15 

The established national waste management hierarchy induces hazardous waste 

generators to treat landfill disposal as the option of last resort. 

This section presents average tipping fees for two waste management options: (1) reuse 

through fuel substitution, and (2) disposal. The average fees are based on the survey data 

collected by the Environmental Technology Council (ETC). 

A waste management option available to facilities that generate hazardous waste with 

high BTU value is fuel substitution, where hazardous waste is used as a substitute for 

fossil fuels in boilers and industrial furnaces. The ETC data indicate that the average 

tipping fee for a 55-gallon drum of liquids was, on average, close to $110 per drum in 

2004. There is some evidence that, due to high fuel prices in 2005, recyclers are 

currently either not charging acceptance fees or are even paying generators for hazardous 

waste that can be used as substitute fuel.16 

 

Hazardous waste generators are encouraged to use disposal as the waste management 

option of last resort. Before being disposed, some hazardous wastes must be treated to 

meet the land-disposal restrictions contained in 40 CFR 268. Based on the ETC data, 

treatment activities account, on average, for 30 to 50 percent of the landfill costs for 

hazardous wastes. For example, in 2004, the landfill fees for landfilling drummed waste 

without treatment were $99 per 55-gallon drum, while the fees for treatment of drummed 

waste followed by landfilling were $173 per 55-gallon drum. 

 

15 Habicht, H. Memorandum: EPA Definition of Pollution Prevention. US EPA, May 28, 1992, available at 

http://www.epa.gov/ttn/nsr/gen/memo-u.html. 

16 Based on a telephone conversation with Scott Slesinger, of ETC, conducted in January 2006. 
56 

Exhibit A-1 presents average tipping fees paid by hazardous waste generators in the 

period 2002-2004 for the two waste management options. The ETC does not present 

tipping fees by hazardous waste. The fees may vary greatly depending on the 

characteristics of wastes, including the BTU value, halogen content, and compatibility 

with other waste. For example, in 2004, landfill tipping fees for treated drummed waste 

ranged from $104 to $261 per 55-gallon drum, with the average fee of $173 per 55-gallon 

drum. 

Exhibit A-1: Average Cost of Hazardous Waste Management 

2002 2003 2004 

Fuels 

 Drummed Liquids ($/drum) - $108 $106 

 Drummed Solids ($/drum) - $200 $207 

Commercial Landfill 

 Debris ($/ton) $199 $206 $191 

 Bulk with Treatment ($/ton) $162 $133 $131 

 Bulk without Treatment ($/ton) $83 $76 $89 

 Drummed with Treatment ($/drum) $114 $174 $173 

 Drummed without Treatment ($/drum) $105 $100 $99 

 Soil Treated and Landfilled ($/ton) $139 $134 $133 

 Soil direct to Landfill ($/ton) $70 $71 $69 

Note: Transportation costs not included. All fees are in 2003 dollars. 

Source: Environmental Technology Council (ETC), available at http://www.etc.org/costsurvey8.cfm. 

Average costs are based on a survey of ETC members. 

The data presented in Exhibit A-1 suggest that the landfill tipping fees for treatment and 

landfilling of hazardous waste were, on average, $140 per ton for treated bulk and soil, 

and between $100 and $200 per 55-gallon drum for treated drummed wastes in the period 

2002 to 2004. We would expect that, on average, the landfill disposal fees for lead-acid 

batteries, brass dust, spent pickle liquor and solvents were in those ranges in the period 

2002 to 2004. 

As explained in Section 2 of the paper, the acceptance fees charged by commercial 

recyclers are expected to be closely related to landfill disposal fees, since commercial 

recyclers are competing with landfills, and with each other, to obtain waste from 

generators. We therefore use the landfill disposal fees as a proxy for acceptance fees in 

the sections below to ascertain whether the acceptance fees or the revenues generated 

from the sale of recycled hazardous materials is the dominant revenue stream for 

commercial recyclers. 

A.2.2. Lead-Acid Batteries 

The discussion presented in this section is based on information from two main sources: 

1. The Battery Council International (BCI), a trade association of lead-acid 

battery manufacturers in North America, and 

2. The 2003 EPA Biennial Reporting System (BRS). 
57 

BCI Data 

The information presented in this section was provided by BCI during a telephone 

interview conducted in November, 2005. This information has not been independently 

verified by EPA. 

The process of recycling a lead-acid battery involves breaking the battery, draining out 

the acid, separating out the metal, and running the metallic material through a smelting 

process to melt it and separate the lead from other materials. Lead-acid batteries are a 

unique industry in that virtually all (99.5 percent) lead batteries are recycled. There are 

about 15 secondary smelters that obtain used batteries, recover the lead in them using 

secondary smelting, and sell the lead back to battery companies. Vertical integration is 

present in the industry, where some battery manufacturers own secondary smelters. 

Tolling agreements are common in the industry, which involve fixed prices for accepting 

the lead by recyclers, recycling the lead, and delivering the recycled lead to the battery 

manufacturers. Such contractual arrangements help shield the recyclers from price 

volatility. Because the cost of lead accounts for a significant portion of the production of 

lead-acid batteries17 and because recycling lead is less costly than producing lead from 

ore, the battery manufacturers have a big incentive in seeing that battery lead is 

recovered. The recycling of lead-acid batteries is facilitated by the simple distribution 

chain between manufacturers and smelters. 

 

BRS and Other Publicly Available Data

The BRS does not explicitly track lead-acid batteries. Facilities handling lead-acid 

batteries were identified using both waste codes and form codes from BRS. The BRS 

contains form codes, one of which is “W309 - Batteries, battery parts, cores, casings 

(lead-acid or other types).” Because this form code can include some batteries that do not 

contain lead, waste codes were also used. Waste code D008, which indicates that the 

waste exhibits the characteristic of toxicity for lead, was also used to identify facilities 

handling lead-acid batteries. We assumed that all waste lead-acid batteries would carry 

this waste code. Wastes that carried both form code W309 and waste code D008 were 

assumed to be lead-acid batteries. Exhibit A-2 lists the number of facilities handling 

wastes carrying this combination of form and waste code by waste handling method. 

 

The BRS data contained information on a total of 71 unique facilities that handled leadacid batteries, of which 29 were actively involved in some type of waste management and 

42 were solely engaged in waste transfer (i.e., transport and/or temporal storage). Of the 

29 waste management facilities, seven facilities were engaged in waste transferring in 

addition to waste management. Recycling was conducted at 14 facilities. Only one of 

those facilities, a battery manufacturer, was an intra-industry recycler (i.e., the entity both 

generated and recycled waste). The highest concentration of recycling facilities was in 

the southern and western regions of the US, with the South, South Central, West, and 

Midwest regions comprising 85 percent of the total number of facilities engaged in 

recycling. 

 

17 BCI indicated that the cost of lead accounts for close to half of the wholesale price of a battery. 
58 

Exhibit A-2: Waste Handling Method and Geographic Distribution for 71 Facilities 

Handling Lead-Acid Batteries (2003) 

Recycling Disposal Energy 

Recovery 

Transfer Treatment Total 

Northeast 1 - - 5 3 9 

Mid-Atlantic 1 1 - 4 - 6 

South 3 2 1 7 1 14 

Midwest 3 - - 14 2 19 

South Central 3 1 - 11 1 16 

West Central - 2 - 1 1 4 

West 3 1 - 7 2 13 

Total 14 7 1 49 10 711

1) The total facility count is less than the column summation because some facilities engage in more than 

one type of waste handling activity. 

Source: ICF Analysis, 2003 BRS. 

Exhibit A-3 presents data on the amount of lead-acid batteries managed by method. Over 

165,000 tons of lead-acid batteries were managed by facilities in 2003, of which 141,000 

tons were recycled (or 85 percent of the total waste managed). The BRS data indicate 

that a single entity dominated the recycling market with over 100,000 tons of lead-acid 

batteries recycled (or over 70 percent of the total lead-acid batteries recycled). 

Exhibit A-3: Waste Management Methods for Lead-Acid Batteries at 29 Facilities 

(2003) 

 Amount Managed 

 Recycling Disposal Energy 

Recovery 

Treatment Total 

Total (tons) 141,032 13 2 24,110 165,157 

Total (percent) 85 <1 <1 15 100 

Average per Facility (tons) 10,074 2 2 2,411 5,695 

Note: 55 tons of lead-acid batteries were transferred in 2003. Because activities related to transportation of 

waste are not considered waste management, information on the amount transported in 2003 is not included 

in the Exhibit. 

Source: ICF Analysis, 2003 BRS. 

Exhibit A-4 provides information on the flow of hazardous waste for lead-acid batteries. 

The first set of columns presents the NAICS codes for the generators of lead-acid 

batteries that went to recycling facilities, and the second set of columns presents the 

NAICS codes for the recycling facilities. The exhibit shows that battery manufacturers 

(NAICS code 335911) generated nine percent of the waste recycled by secondary 

smelters (NAICS code 331492) in 2003. 
59 

Exhibit A-4: Recycling of Lead-Acid Batteries – Flow of Hazardous Waste, by 

Industry (2003) 

Generators NAICS Percent 

of Waste 

Supplied1

Recycling Facilities NAICS

Storage Battery Manufacturing 335911 9 

Recyclable Material Merchant 

Wholesalers 42393 7 

Secondary Smelting, Refining and 

Alloying of Nonferrous Metal (except 

Copper and Aluminum) 

331492 4 

Secondary Smelting, 

Refining and Alloying 

of Nonferrous Metal 

(except Copper and 

Aluminum) 

331492 

Primary Battery Manufacturing 335912 87 

Storage Battery Manufacturing 335911 12 

Secondary Smelting, 

Refining, and Alloying 

of Copper 

331423 

Secondary Smelting, Refining, and 

Alloying of Nonferrous Metal (except 

Copper and Aluminum) 

331492 7 All Other Plastic 

Product Manufacturing 326199 

Hazardous Waste Treatment and 

Disposal 562211 61 

National Security 92811 21 

Space Research and Technology 92711 18 

Recyclable Material 

Merchant Wholesalers 42393 

Battery Manufacturing 335911 100 Battery Manufacturing 335911 

Other Chemical and Allied Products 

Merchant Wholesalers 42469 54 

Audio and Video Equipment 

Manufacturing 33431 8 

Deep Sea Passenger Transportation 483112 4 

Other Business 

Service Centers 

(including Copy 

Shops) 

561439 

1) Waste supplied by generators in each industry as a percentage of the total waste recycled. 

Note: The exhibit presents only the top three industries (in terms of the amount of waste supplied) for 

which NAICS codes were available. For example, secondary smelters (NAICS code 331492) recycled 

133,321 tons of lead-acid batteries in 2003, of which 11,438 tons, or nine percent, were supplied by storage 

battery manufacturers (NAICS code 335911). Close to 80 percent of waste was supplied by industries for 

which data on the generators’ NAICS codes are not available in the BRS database. 

Source: ICF Analysis, 2003 BRS. 

Exhibit A-5 presents additional information on the firms that were involved in recycling 

lead-acid batteries. The most common category was from the “Secondary Smelting, 

Refining and Alloying of Nonferrous Metal” industry, with a total of nine firms (NAICS 

code 331492). Firms in this industry recycled 95 percent of the total lead-acid batteries 

recycled in 2003, with the average recycling rate per firm of close to 15,000 tons. The 

second highest amount of waste recycled (close to 4,500 tons, or three percent of the 

total) was recycled by a firm in the “Secondary Smelting, Refining, and Alloying of 

Copper” industry (NAICS code 331423). 

The information on the flow of lead-acid battery recycling materials presented in Exhibit 

A-4 and the information on the amount of hazardous waste recycled by industry 

presented in Exhibit A-5 indicate that most lead-acid battery recyclers are inter-industry 

recyclers that receive their waste from firms in industries other than the one in which they 
60 

operate. The theoretical model on industrial inter-company recycling (presented in 

Section 2.3) may best describe market behavior of these entities. 

Exhibit A-5: Distribution of Facilities Recycling Lead-Acid Batteries, by Industry 

(2003)

Industry NAICS Total 

Amount 

Recycled 

(tons) 

Amount 

Recycled as 

a 

Percentage 

of the Total 

Number of 

Facilities 

Average 

Amount 

Recycled per 

Facility 

(tons) 

Secondary Smelting, Refining 

and Alloying of Nonferrous 

Metal (except Copper and 

Aluminum) 

331492 133,321 95 9 14,813 

Secondary Smelting, 

Refining, and Alloying of 

Copper 

331423 4,491 3 1 4,491 

All Other Plastic Product 

Manufacturing 326199 3,192 2 1 3,192 

Recyclable Material 

Merchant Wholesalers 42393 13 <1 1 13 

Storage Battery 

Manufacturing 335911 12 <1 1 12 

Other Business Service 

Centers (including Copy 

Shops) 

561439 3 <1 1 3 

Total 141,032 100 14 10,074 

Note: Totals may not add due to rounding. 

Source: ICF Analysis, 2003 BRS. 

Exhibit A-6 presents revenue data for each industry that performs battery recycling. The 

revenue data in Exhibit A-6 includes all revenue for the industry, including revenue not 

related to battery recycling. For the majority of firms in these industries, recycling is not 

their primary business. Because revenue data were available for entire industries, and not 

for individual facilities that perform battery recycling, the data in Exhibit A-6 includes 

facilities that are not engaged in recycling. 
61 

Exhibit A-6: Characteristics of Industries in Which Some Facilities are Engaged in 

Recycling Lead-Acid Batteries 

Industry NAICS Total 

Number of 

Companies

Percent of 

Facilities 

Conducting 

Recycling1

Total 

Industry 

Revenue 

(millions) 

Average 

Revenue 

per Facility 

(millions) 

Secondary Smelting, Refining and 

Alloying of Nonferrous Metal 

(except Copper and Aluminum) 

331492 211 4 $2,796 $13.3 

Secondary Smelting, Refining, and 

Alloying of Copper 331423 30 3 $611 $20.4 

All Other Plastic Product 

Manufacturing 326199 6,701 <1 $72,894 $10.9 

Recyclable Material Merchant 

Wholesalers 42393 7,145 <1 $28,207 $3.9 

Storage Battery Manufacturing 335911 97 1 $3,415 $35.2 

Other Business Service Centers 

(including Copy Shops) 561439 5,852 1 $6,414 $1.1 

1) The percentage is calculated using the total number of recyclers presented in Exhibit A-5. 

Source: ICF Analysis, Census 2002, 2003 BRS. 

Exhibit A-7 presents information on the level of primary and secondary production of 

lead. The graph shows an increasing trend in secondary production and decreasing trend 

in primary production. 

Exhibit A-7: Primary and Secondary Production of Lead, 1970-2002 

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

Million tons

Primary

production

Secondary

production

Notes: Primary production – the amount of refined lead produced in the U.S. 

Secondary production – the amount of old lead scrap (scrap including, but not limited to, metal articles that 

have been discarded after serving a useful purpose). 

Source: ICF Analysis, United States Geological Survey. 

Exhibit A-8 provides information on the amount of lead recovered from scrap. As shown 

in the table, battery lead comprised the vast majority (about 95 percent) of lead generated 
62 

from secondary production in 2002 and 2003. This translates to about 75 percent of total 

lead produced by both primary and secondary production methods. 

Exhibit A-8: Lead Recovered from Scrap Processed, 2002-2003 

Lead Recovered from: 2002 2003 

Total New Scrap 42,800 40,900 

Old Scrap 

 Battery Lead 1,010,000 1,060,000 

 Other 59,500 48,970 

Total Old Scrap 1,070,000 1,110,000 

Grand Total 1,120,000 1,150,000 

 

Battery Lead as a 

Percentage of Total Old 

Scrap Production 

94.4% 95.5% 

Notes: Metric tons, unless otherwise noted. 

Source: ICF Analysis, United States Geological Survey. 

Exhibit A-9 presents information on the price of lead over time, with summary statistics 

presented in Exhibit A-10. The price of lead has declined in real terms over the past 30 

years. The average annual price in that period was $1,303 per ton, with a standard 

deviation of $453 per ton (or 35 percent of the average annual price). 

 

Exhibit A-9: Annual Price of Lead, 1970-2002 

$-

$500

$1,000

$1,500

$2,000

$2,500

$3,000

19701972197419761978198019821984198619881990199219941996199820002002

Unit value (2003$/ton)

 Source: United States Geological Survey. 
63 

Exhibit A-10: Summary Statistics for the Annual Price of Lead ($/ton) 

 1970-2002 1970-1989 1990-2002 

Minimum $698 $698 $862 

Maximum $2,845 $2,845 $1,379 

Mean $1,303 $1,465 $1,053 

Median $1,225 $1,428 $996 

Standard Deviation $453 $513 $136 

 Note: All values are in 2003 dollars. 

 Source: United States Geological Survey. 

In their 2002 study “Booms and Slumps in World Commodity Prices,” Cashin, P. et al. 

analyzed the monthly data for the period 1957:1 to 1999:8 for 36 primary commodities, 

including lead. Their analysis of the historical price of lead shows that: 

• Price slumps are slightly longer in duration than price booms, with slumps 

lasting on average 28 months and booms lasting on average 26 months18; 

• The average percentage change in the price of lead during slumps is -47.3 

percent, while the average percentage change in the price of lead during 

booms is 40.8 percent; and 

• The probability of a slump (boom) ending is independent of the time spent 

in the slump (boom). 

Exhibit A-11 summarizes the results of the Cashin et al. (2002) study. The results 

indicate that the price of lead has shorter price cycles than all other metals analyzed in the 

study. Shorter price cycles may make it harder for lead recycles to forecast demand. The 

average percentage change in the price of lead during a slump (boom) is very close to the 

average percentage change for all 36 commodities. The magnitude of a drop in the price 

of lead (in percentage terms) during a slump, however, tends to be higher than for most 

other metals the authors analyzed. 

Exhibit A-11: Booms and Slumps in the Commodity Prices 

Slumps Booms 

Commodity Duration 

(months) 

Average 

Percent 

Change in 

Price 

Is there 

Duration 

Dependence? 

Duration 

(months) 

Average 

Percent 

Change 

in Price 

Is there 

Duration 

Dependence? 

Lead 27.8 -47.3 No 25.7 40.8 No 

Aluminum 34.8 -33.3 No 22.5 29.3 No 

Copper 34.4 -48.7 No 31.7 46.1 No 

Gold 48.6 -35.0 No 29.0 32.9 No 

Nickel 43.0 -42.7 No 31.3 39.3 No 

Zinc 31.8 -41.2 No 24.1 43.2 No 

Average for 36 

Commodities 39.0 -46.0 No 29.0 42.0 No 

Note: The null hypothesis tested by the authors was that the probability of exiting a slump (boom) 

 is independent of the length of time spent in that phase. 

Source: Cashin, P. et al. (2002). 

 

18 A boom (slump) is defined as a period of generally rising (falling) prices. 
64 

Exhibit A-12 presents information on the consumption of lead broken down by various 

products. As shown in the table, storage batteries accounted for the majority of the 

consumption of lead (over 80 percent) in both years. 

 

Exhibit A-12: Consumption of Lead by Product (in metric tons), 2002-2003 

Uses 2002 2003 

Storage Batteries 1,190,000 1,170,000 

Miscellaneous Uses 71,400 71,620 

Ammunitions, Shot and 

Bullets 57,600 48,800 

Other Oxides (Including Pain, 

Glass and Ceramics Products) 51,900 35,700 

Other Metal Products 34,800 31,700 

Sheet Lead 25,600 24,200 

Solder 6,450 6,310 

Pipes, Traps, Other Extruded 

Products 2,250 1,670 

Total 1,440,000 1,390,000 

 

Consumption of Lead in 

Storage Batteries as a Percent 

of Total Consumption 

82.6% 84.2% 

Source: ICF Analysis, United States Geological Survey. 

Conclusions 

The following conclusions can be drawn from this empirical analysis: 

• Most lead-acid battery recyclers are inter-industry recyclers that receive their 

waste from firms in industries other than the one in which they operate. 

• A high recycling rate of lead from lead-acid batteries and its use in battery 

manufacturing indicate that recycled lead is freely substituted for lead 

produced from virgin materials. 

• Because recycled lead tends to be less expensive than lead produced from 

virgin materials, the battery manufacturers have a financial incentive to use 

recycled lead. 

• The price of lead has shorter price cycles compared to the price of aluminum, 

copper, gold, nickel and zinc. Shorter price cycles may make it harder for 

lead recycles to forecast demand. 

• The average percentage change in the price of lead during a slump (boom) is 

very close to the average percentage change for primary commodities. The 

magnitude of a drop in the price of lead (in percentage terms) during a slump, 

however, tends to be higher than for most other metals. 
65 

A.2.3. Brass Dust 

The discussion in this section is primarily based on the 2003 BRS data. Some brass dust 

may not be regulated as a solid waste under RCRA under the exclusion for scrap metal 

when it is reclaimed [40 CFR 261.4(a)(13)], and would not be reported to the BRS. 

Thus, the BRS may underreport the amount of brass dust that is recycled. The data 

sources used for this paper did not contain information on the amount of brass dust that is 

recycled but not reported to the BRS. 

Brass dust recyclers were identified using the following BRS form codes: (1) “W504 - 

Other sludges from wastewater treatment or air pollution control;” (2) “W505 - Metal 

bearing sludges (including plating sludge) not containing cyanides;” and (3) “W519 - 

Other inorganic sludges.” Because the BRS does not explicitly track brass dust, the 

number of brass dust recyclers and the amount of brass dust recycled presented in this 

study may be under- or over-estimated. 

Exhibit A-13 presents the number of facilities that handled (i.e., managed and/or 

transported) brass dust in 2003, broken down by number of facilities conducting each 

waste handling method and geographic region. The BRS data contained information on a 

total of 73 unique facilities that handled brass dust, of which 43 were actively involved in 

some type of waste management and 30 were solely engaged in waste transfer (i.e., 

transport and/or temporal storage). Of the 43 waste management facilities, 12 facilities 

were engaged in waste transferring in addition to waste management. 

Exhibit A-13: Waste Handling Method and Geographic Distribution for 73 

Facilities Handling Brass Dust (2003) 

Recycling Disposal Energy 

Recovery 

Transfer Treatment Total 

Northeast 2 1 - 6 2 11 

Mid-Atlantic 2 - - 3 4 9 

South - 2 2 8 3 15 

Midwest 1 - 1 16 7 25 

South Central 1 1 1 5 6 14 

West Central - 1 - - 2 3 

West 1 3 - 4 3 11 

Total 7 8 4 42 27 731

1) The total facility count is less than the column summation because some facilities engage in more than 

one type of waste handling activity. 

Source: ICF Analysis, 2003 BRS. 

Exhibit A-14 presents data on the amount of hazardous waste managed by method for 

facilities managing brass dust. A total of 28,233 tons of brass dust was managed by 43 

facilities in 2003, with facilities managing 657 tons of waste on average. Treatment was 

the most common waste management method in 2003, with 26,500 tons of brass dust 

treated (or 94 percent of the total brass dust managed). Significantly smaller amount 

(slightly over 500 tons or 2 percent of the total brass dust managed) was recycled in 

2003. The average amount recycled per facility was 76 tons. 
66 

Exhibit A-14: Waste Management Methods for Brass Dust at 43 Facilities (2003) 

 Amount Managed 

 Recycling Disposal Energy 

Recovery 

Treatment Total 

Total (tons) 534 1,145 66 26,488 28,233 

Total (percent) 2 4 <1 94 100 

Average per Facility 

(tons) 76 143 17 981 657 

Note: 926 tons of brass duct were transferred in 2003. Because activities related to transportation of waste 

are not considered waste management, information on the amount transported in 2003 is not included in the 

Exhibit. 

Source: ICF Analysis, 2003 BRS. 

Exhibit A-15 provides information on the flow of hazardous waste for brass dust. The 

first set of columns presents the NAICS codes for the generators of waste that went to 

recycling facilities, and the second set of columns presents the NAICS codes for the 

recycling facilities. 

Exhibit A-15: Recycling of Brass Dust - Flow of Hazardous Waste, by Industry 

(2003) 

Generators NAICS 

Percent of 

Waste 

Supplied1

Recycling Facilities NAICS 

Storage Battery Manufacturing 335911 92 

Primary Battery 

Manufacturing 335912 8 

Secondary Smelting, 

Refining, and Alloying 

of Copper 

331423 

Storage Battery Manufacturing 335911 99 

Vitreous China, Fine 

Earthenware, and Other 

Pottery Product Manufacturing 

327112 1 

Secondary Smelting, 

Refining, and Alloying 

of Nonferrous Metal 

(except Copper and 

Aluminum) 

331492 

Other Pressed and Blown 

Glass and Glassware 

Manufacturing 

327212 94 

Nonferrous Metal 

(except Aluminum) 

Smelting and Refining 

33141 

Jewelry (except Costume) 

Manufacturing 339911 100 Testing Laboratories 54138 

Bare Printed Circuit Board 

Manufacturing 334412 3 Hazardous Waste Treatment and Disposal 562211 

1) Waste supplied by generators in each industry as a percentage of the total waste recycled. 

Notes: The exhibit presents only the industries for which the NAICS codes are available in the BRS 

database. For example, the nonferrous metal smelting and refining facility (NAICS code 33141) recycled 9 

tons of brass dust in 2003, of which 8.5 tons, or 94 percent, were supplied by facilities in the pressed and 

blown glass and glassware manufacturing industry (NAICS code 327212). The BRS database does not 

contain information on the NAICS codes for the generators who supplied the remaining waste. 

The BRS database does not contain information on the industries that supplied waste to the recycling 

facility in the primary smelting and refining of nonferrous metal industry (NAICS code 331419). For that 

reason, the recycling facility with NAICS code 331419 is not shown in the above exhibit. 

Source: ICF Analysis, 2003 BRS. 
67 

Exhibit A-16 presents additional information on the firms that were involved in recycling 

brass dust in 2003. The most common category was “Secondary Smelters,” with a total 

of three firms (NAICS codes 331492 and 331423). There was only one commercial 

recycler managing brass dust in 2003 (NAICS code 562211). The amount managed by 

that facility was relatively small (six tons). Such a small amount managed could indicate 

that the commercial recycler may be recycling materials other than brass dust. 

The information on the flow of brass dust materials presented in Exhibit A-15 and the 

information on the amount of hazardous waste recycled by industry presented in Exhibit 

A-16 indicate that most brass dust recyclers are inter-industry recyclers that receive their 

waste from firms in industries other than the one in which they operate. The theoretical 

model on industrial inter-company recycling (presented in Section 2.3) may best describe 

market behavior of these entities. 

Exhibit A-16: Distribution of Facilities Recycling Brass Dust, by Industry (2003) 

Industry NAICS Total 

Amount 

Recycled 

(tons) 

Amount 

Recycled 

as a 

Percentage 

of the 

Total 

Number of 

Facilities

Average 

Amount 

Recycled per 

Facility 

(tons) 

Secondary Smelting, 

Refining, and Alloying of 

Copper 

331423 384 72 1 384 

Secondary Smelting, 

Refining, and Alloying of 

Nonferrous Metal (except 

Copper and Aluminum) 

331492 127 24 2 64 

Nonferrous Metal (except 

Aluminum) Smelting and 

Refining 

33141 9 2 1 9 

Testing Laboratories 54138 7 1 1 7 

Hazardous Waste Treatment 

and Disposal 562211 6 1 1 6 

Primary Smelting and 

Refining of Nonferrous 

Metal (except Copper and 

Aluminum) 

331419 1 <1 1 1 

Total 534 100 7 76 

 Source: ICF Analysis, 2003 BRS. 

In terms of average annual amount recycled, brass dust recycling activity is dominated by 

three secondary smelting plants. Based on the 2003 BRS figure, these three secondary 

smelting plants appear to have over 96 percent of the recycled brass dust market, with the 

market share of the top plant being over 72 percent. All other things being equal, we 

would expect the price of a product to be higher in a market dominated by a few firms 

than in a market with a large number of firms. Given the average annual amount 
68 

recycled, it is highly unlikely that the hazardous waste treatment and disposal facility 

(NAICS code 562211) is exclusively engaged in recycling brass dust. 

 

Exhibit A-17 presents data on all facilities managing brass dust in a specific industry, 

including both facilities engaged in recycling and those that are not. The majority of the 

firms were not involved in recycling as their primary business. For the one firm in the 

hazardous waste treatment and disposal industry (NAICS code 562211) recycling is 

assumed to be its primary business. 

Exhibit A-17: Characteristics of Industries in Which Some Facilities are Engaged in 

Recycling Brass Dust 

Industry NAICS Total 

Number of 

Companies

Percent of 

Facilities 

Conducting 

Recycling1

Total 

Revenue 

(million) 

Average 

Revenue 

per 

Facility 

Secondary Smelting, Refining, 

and Alloying of Copper 331423 30 3 $611 $20.4 

Secondary Smelting, Refining, 

and Alloying of Nonferrous 

Metal (except Copper and 

Aluminum) 

331492 211 1 $2,796 $13.3 

Nonferrous Metal (except 

Aluminum) Smelting and 

Refining 

33141 11 9 $2,615 $237.7 

Testing Laboratories 54138 5,948 <1 $8,794 $1.5 

Hazardous Waste Treatment 

and Disposal 562211 696 <1 $3,466 $5.0 

Primary Smelting and Refining 

of Nonferrous Metal (except 

Copper and Aluminum) 

331419 153 1 $2,246 $14.7 

1) The percentage is calculated using the total number of recyclers in each industry presented in Exhibit 

A-16. 

Source: ICF Analysis, Census 2002. 

Exhibit A-18 shows trends of primary and secondary production of zinc over time. 

Roughly two thirds of the zinc supply is produced from ore (primary production), and the 

remaining third is produced from scrap and residues including brass dust (secondary 

production). The majority of zinc used in the US is imported. In 2002, for example, 0.3 

million tons of zinc were produced domestically, while almost 0.9 million tons were 

imported. 
69 

Exhibit A-18: Primary and Secondary Production of Zinc, 1970-2002 

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

Million tons

 Primary

production

Secondary

production

 Source: ICF Analysis, United States Geological Survey. 

Exhibit A-19 shows the annual price of zinc from 1970 to 2005, with summary statistics 

presented in Exhibit A-20. The price has exhibited a decreasing trend in real terms over 

the past 35 years. The average annual price in that period was close to $1,657 per ton, 

with a standard deviation of $513 per ton (or about 31 percent of the average annual 

price). 

Exhibit A-19: Annual Price of Zinc, 1970-2005 

$-

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

197019721974197619781980198219841986198819901992199419961998200020022004

Unit Value (2003$/ton)

 Source: United States Geological Survey. 
70 

Exhibit A-20: Summary Statistics for the Annual Price of Zinc 

 1970-2005 1970-1989 1990-2005 

Minimum $827 $1,368 $827 

Maximum $2,867 $2,867 $2,243 

Mean $1,657 $1,933 $1,311 

Median $1,565 $1,833 $1,266 

Standard Deviation $513 $461 $343 

 Note: All values are in 2003 dollars. 

 Source: United States Geological Survey. 

As discussed in the theoretical section of the paper, one of the factors that affects the 

acceptance fee is the availability of other disposal options in the area. If generators were 

indifferent between sending their waste to a landfill versus a recycler, we would expect 

the acceptance fee to be somewhere between $100/ton and $150/ton in the period 2002-

2004, the period for which the landfill tipping-fee data are available (see Exhibit A-1). 

Given the high price of zinc, however, commercial recyclers may set the acceptance fee 

significantly lower than the landfill tipping fee to induce brass-dust generators to choose 

recycling over disposal. Thus, we would expect that the dominant revenue source for 

commercial brass dust recyclers is the revenue generated from the sale of zinc rather than 

the revenue generated from acceptance fees.19 

The data on the commodity prices presented in Exhibit A-21 show that slumps in the 

price of zinc are, on average, eight months longer than booms in the price of zinc (32 and 

24 months, respectively). This means that any period of a relatively high zinc price is 

followed by a longer period of a relatively low zinc price. The price of zinc has shorter 

price cycles than all other metals presented in Exhibit A-21, except lead. The average 

percentage change in the price of zinc is -41.2 percent during slumps and 43.2 percent 

during booms. The average change in the price of zinc during a slump (boom) is close to 

the average price change across 36 primary commodities (measured in percentage terms). 

The probability of a slump (boom) ending in the world zinc market is independent of the 

time spent in the slump. 

Roughly three quarters of the supply of zinc is used in the iron and steel industry, with 

the rest being used in the rubber, chemical, paint, and agricultural industries. We would 

therefore expect that a main driving force behind the price of zinc is the supply and 

demand of iron and steel. Exhibit A-21 shows that the price of zinc has fluctuated 

historically with the price of iron and steel. The correlation coefficient for the price of 

the two materials is 0.75, indicating that the price of zinc is strongly influenced by the 

price of iron and steel. 

 

19 Although this is an important point, we should note that, based on the BRS data, commercial recyclers 

recycle a very small amount of brass dust. 
71 

Exhibit A-21: Price Index of Zinc Compared to Price Index of Iron and Steel, 

1970-2002 

0

20

40

60

80

100

120

140

160

180

200

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

Unit Value Index (1970=100)

Iron &

Steel

Scrap

Zinc

 Source: United States Geological Survey. 

Conclusions 

 The following conclusions can be drawn from this empirical analysis: 

• Most brass dust recyclers are inter-industry recyclers that receive their waste 

from firms in industries other than the one in which they operate. Only about 

one percent of the total amount of brass dust recycled in 2003 was recycled by 

commercial recyclers. 

• Roughly three quarters of the supply of zinc is used in the steel and iron 

industry. 

• A low recycling rate of brass dust indicates that recycled zinc is not freely 

substituted for zinc produced from virgin materials. 

• There is asymmetry in the duration of zinc price slumps and booms, with 

slumps lasting, on average, eight months longer. 

• The average change in the price of zinc during a slump (boom) is very close to 

the average price change across 36 primary commodities (measured in 

percentage terms). 

 

A.2.4. Spent Pickle Liquor 

Pickle liquor is an acid solution used to clean and condition steel in various steelmaking 

processes. Through re-use in the steel pickling process, the metals content in the 

solution builds up causing the solution to lose its desired chemical properties (i.e., to 

become “spent”). Thus, spent pickle liquor needs to be processed (i.e., regenerated) 

before it can be used again in steelmaking processes. Spent pickle liquor is considered 

hazardous waste (K062) by EPA and regulated under RCRA. 

The discussion presented in this section is based on information from two main sources: 

1. US Steel and Mittal Steel, US steel manufacturers, and 
72 

2. The 2003 EPA BRS. 

US Steel and Mittal Steel Data

Unless otherwise noted, the information presented in this section was provided by US 

Steel and Mittal Steel during a telephone interview conducted in November, 2005. The 

information provided has not been independently verified by EPA. 

Waste Management Options. There are three main options for spent pickle liquor. These 

options are disposal, reuse, and recycling, which is commonly referred to as regeneration. 

• Disposal. Before the enactment of RCRA, it was a common industry practice 

to dispose of spent pickle liquor into lagoons. After RCRA labeled the 

material as a hazardous waste, deep-well injection became the most prevalent 

waste management option. Disposal is a common management method for 

spent pickle liquor largely due to cost and regulatory issues. It is often the 

cheapest option and also the simplest option for companies that are concerned 

about the regulatory issues around reusing it. It is thought, though, that cost 

does not totally drive these issues, as some companies would likely be willing 

to incur higher costs to recycle due to wanting to be perceived as 

environmentally sensitive. Based on the most recent industry data, 19 percent 

of generated spent pickle liquor was disposed of. 

• Direct Use. Spent pickle liquor is used as a substitute for certain chemicals, 

with one example being use as a chemical additive at wastewater treatment 

plants. Some reusable products also result from the regeneration process. 

Based on the most recent industry data, 18 percent of generated spent pickle 

liquor is used in wastewater treatment plants. 

• Regeneration. Prompted to some degree by environmental concerns, there has 

been a move to regeneration of spent pickle liquor within the steel industry.20 

In the early 1980s, approximately two percent (or 28 million gallons) of spent 

pickle liquor was recycled.21 Regeneration is currently the most widely used 

waste management option, with over 60 percent of waste (or 114 million 

gallons) regenerated (AISI, 2005). The regeneration process is carried out 

both by commercial and intra-industry recyclers. 

 

20 In the process of regeneration, the water is cooked off and the iron is precipitated out. Fresh acid is then 

added to it so that it can be reused for pickling. 

21 Ferrante, J.G. and Sage, S.H. Spent Pickle Liquor in the Steel Industry: Finding the Path to P2. Pollution 

Prevention Review, Spring 1999. 
73 

Exhibit A-22: Spent Pickle Liquor – Industry Management (2004) 

Total Generated Total 

Regenerated 

Direct Use 

WWTP 

Chemical 

Use as Product 

Ingredient 

Deep Well 

Injection 

186,403,516 113,667,701 34,081,116 15,422,220 35,232,479 

Note: All values are expressed in gallons. 

Source: American Iron and Steel Institute, Memorandum to EPA, 2005. 

Recycling Market. The steel industry is both a producer of spent pickle liquor and a main 

consumer of regenerated pickle liquor. Steel companies vary in whether they do 

regeneration onsite or offsite, with larger steel companies traditionally having 

regenerating facilities on one of their sites. Currently, there are no more than ten K062-

regenerating facilities operating in the US. 

K062-regeneration has relatively large capital cost requirements. The capital costs for 

building a spent acid regeneration plant can be as much as $30 million. High start-up 

costs indicate that economies of scale are needed to recover the investment. It is 

therefore a common practice for a regeneration plant to serve more than one steel mill, 

whether it is commercially owned or operated by a steel company. For the same reasons, 

the most economical way for a small steel company to regenerate its spent pickle liquor is 

to send it offsite. 

 

The need to gain economies of scale by regenerating a greater quantity of spent pickle 

liquor than used in its own production implies that regeneration would likely need to be 

treated as a separate production process within a steel company. For example, because 

the consumers of finished steel products and regenerated pickle liquor are not the same, a 

steel company with a regeneration plant would likely need to develop two supply 

channels. This need to divert resources from its main operation (i.e., making steel) may 

discourage a steel company from operating a generation plant onsite. A steel company 

may find it more profitable to concentrate on making steel and outsource K062-

regeneration. 

Multi-year tolling arrangements are common in the industry. Such contracts benefit steel 

mills to the extent that they offer some protection from price fluctuations and a guarantee 

of a stable supply of fresh acid solution. Such contracts, however, give the industry less 

flexibility in switching between waste management options when, due to market 

conditions, other waste management methods become more economically favorable. For 

example, market conditions in the chemical industry may drive down the price of virgin 

pickle liquor, a byproduct of that industry, making it more cost effective for steel mills to 

use virgin acid solution instead of regenerated pickle liquor.22 

The production of steel and regeneration of spent pickle liquor are both energy-intensive 

processes. Energy is a significant cost factor in the regeneration process since 

regeneration plants are designed to run continuously. Multi-year tolling arrangements 

 

22 The price per ton of virgin pickle liquor may not be directly comparable to the price per ton of 

regenerated solution, since, due to their different acidity levels, different quantities are needed to pickle a 

ton of steel. 
74 

usually have a provision that allows for adjustments in electricity prices. With a multiyear tolling arrangement in place, a generator (i.e., steel mill) pays a regenerating facility 

for pickle liquor, the cost associated with the regeneration of spent pickle liquor, and 

transportation costs. Whether the generator pays commercial and inter-industry recyclers 

to take their spent pickle liquor or gets paid for it depends, in addition to market 

conditions, on transportation costs. Generators must usually pay if they are located far 

away from commercial and inter-industry recyclers. 

Generators of spent pickle liquor also may send it to facilities for direct reuse. 

Depending on market conditions, entities using spent pickle liquor as a direct input (e.g., 

wastewater treatment plants) may pay the generators for the wastes. 

Because spent pickle liquor is considered hazardous waste, environmental and health and 

safety regulations must be observed during its management. As a way of minimizing 

potential future liability, steel producers visit commercial recyclers that handle their spent 

pickle liquor on a regular basis to ensure they are handling the wastes properly. 

The production level of the steel industry is the main driver of the market conditions for 

pickle liquor. Exhibit A-23 shows that the domestic annual production of iron and steel 

decreased significantly in the 70s, from 83 million tons in 1970 to 62 million tons in 

1980. In the period 1981 to 2002, the production levels varied between 40 and 50 million 

tons per year. The average annual production in that period was about 47 million tons, 

with a standard deviation of 5.7 million tons (or twelve percent of the average annual 

production in that period). 

 

Exhibit A-23: Iron and Steel Production, 1970 – 2002 

0

10

20

30

40

50

60

70

80

90

100

19701972197419761978198019821984198619881990199219941996199820002002

Million tons

 Source: United States Geological Survey. 

BRS and Other Publicly Available Data

The discussion in this section is based on the 2003 BRS data. Facilities handling spent 

pickle liquor were identified using both form codes and waste codes from BRS. The 

following BRS form codes were used in the selection: (1) “W101 - Very dilute aqueous 
75 

waste containing more than 99% water (land disposal restriction defined wastewater that 

is not exempt under NPDES or POTW discharge);” (2) “W103 - Spent concentrated acid 

(5% or more);” (3) “W105 - Acidic aqueous wastes less than 5% acid (diluted but pH 

<2);” (4) “W110 - Caustic aqueous waste without cyanides (pH >12.5);” and (5) “W113 - 

Other aqueous waste or wastewaters (fluid but not sludge).” In addition, waste code 

K062, which indicates that the waste exhibits the characteristic of toxicity for spent 

pickle liquor, was also used to identify facilities handling spent pickle liquor. We 

assumed that all waste spent pickle liquor would carry this waste code.

Exhibit A-24 presents the number of facilities that handled (i.e., managed and/or 

transported) spent pickle liquor in 2003, broken down by waste handling method and 

geographic region. The BRS data contained information on a total of 34 unique facilities 

that handled spent pickle liquor, all of which were actively involved in some type of 

waste management. Of the 34 waste management facilities, 10 facilities were engaged in 

waste transferring in addition to waste management. 

Exhibit A-24: Waste Handling Method and Geographic Distribution for 34 

Facilities Handling Spent Pickle Liquor (2003) 

Recycling Disposal Energy 

Recovery 

Transfer Treatment Total 

Northeast - 1 - 2 2 5 

Mid-Atlantic - - - 2 5 7 

South - 3 - 1 2 6 

Midwest - 3 - 4 5 12 

South Central - 1 1 1 3 6 

West Central - - - - - - 

West - - - - 2 2 

Total - 8 1 10 19 341

1) The total facility count is less than the column summation because some facilities engage in more than 

one type of waste handling activity. 

Source: ICF Analysis, 2003 BRS. 

Exhibit A-25 presents data on the amount of hazardous waste managed by method for 

facilities managing spent pickle liquor. A total of 281,733 tons of spent pickle liquor was 

managed by 34 facilities in 2003, with facilities managing 8,287 tons of waste on 

average. The vast majority of spent pickle liquor (233,433 tons or 83 percent) was 

disposed. A significantly smaller amount (slightly over 48,301 tons or 17 percent of the 

total waste managed) was treated in 2003. 

The BRS data indicate that no recycling of spent pickle liquor was conducted in 2003. 

The industry data, however, indicated that a significant amount of recycling is being 

conducted. One potential reason for underreporting of spent pickle liquor recycling in the 

BRS could be that this waste is commonly reported as another applicable waste code in 

the BRS, as this waste is typically corrosive and contains metals. Facilities reporting 

spent pickle liquor to BRS may be using the code for wastes that are corrosive (D002) or 

one of the codes for wastes that are considered toxic due to the presence of metals. 
76 

Exhibit A-25: Waste Management Methods for Spent Pickle Liquor at 34 Facilities 

(2003) 

 Amount Managed 

 Recycling Disposal Energy 

Recovery 

Treatment Total 

Total (tons) - 233,433 39 48,301 281,773 

Total (percent) - 83 <1 17 100 

Average per Facility 

(tons) - 29,179 39 2,542 8,287 

Note: 154 tons of spent pickle liquor were transferred in 2003. Because activities related to transportation 

of waste are not considered waste management, information on the amount transported in 2003 is not 

included in the Exhibit. 

Source: ICF Analysis, 2003 BRS. 

Conclusions 

 The following conclusions can be drawn from this empirical analysis: 

• Industry data indicate that most spent pickle liquor recyclers are commercial 

recyclers, as individual steel mills may not produce enough spent pickle liquor 

on a continuing basis to operate a recycling unit efficiently. 

• High start-up costs indicate that economies of scale are needed to recover the 

investment. These characteristics imply that regeneration would likely need 

to be treated as a separate production process within a steel company. 

• Like lead-acid battery recyclers, the main supplier of spent pickle liquor and 

the main consumer of the recycled spent pickle liquor are in the same 

industry, which simplifies the supply chain. 

• Industry data indicate that, in 2004, about 60 percent of spent pickle liquor 

was regenerated and used in the steel industry. 

• Because spent pickle liquor is considered a hazardous waste, environmental 

and safety concerns are high. As a way of minimizing potential future 

liability, steel producers visit commercial recyclers that handle their spent 

pickle liquor on a regular basis to ensure they are handling the wastes 

properly. Although such visits would increase the current operating costs of 

steel mills, they could help reduce their future liability risks. 

• The iron and steel production has been relatively stable in the period 1980-

2002, which would imply, all other things equal, that the demand for pickle 

liquor in that period was relatively stable as well. 

A.2.5. Solvents 

This study is primarily interested in industrial solvents used in dry cleaning of fabrics, 

and cleaning and degreasing of metal. As solvents are reused in industrial processes, they 

lose their cleaning/degreasing properties (i.e., become spent). Some spent solvents are 

considered hazardous waste by EPA and regulated under RCRA. 

The discussion presented in this section is based on information from two main sources: 

1. Safety-Kleen, a US commercial recycler of industrial solvents, and 
77 

2. The 2003 EPA BRS. 

Safety-Kleen Data 

Unless otherwise noted, the discussion in this section is based on the information 

provided by Safety-Kleen during a telephone interview conducted in November, 2005. 

The information provided has not been independently verified by EPA. 

Safety-Kleen is the largest US commercial recycler of spent solvents. It operates more 

than 200 service and recycling centers throughout the North America.23 The company 

recycles about 21 million gallons of solvents per year, with the majority being mineral 

spirits. Its primary customers are auto repair shops and other small business that use 

solvents. 

A small part of Safety-Kleen’s business is done through tolling agreements, likely 

because such arrangements are impractical for small quantities of solvents it collect from 

its main customer base. Its dominant business strategy is to collect spent solvents from 

its customers and supply them with regenerated solvents. Its wide geographic presence 

of collection and recycling centers enables Safety-Kleen to gain from economies of scale 

while minimizing transportation costs. 

Solvent recycling involves capital and operating costs which may deter some small 

generators form recycling onsite. For example, in addition to a RCRA permit, an onsite 

recycler would need to have a trained person to oversee recycling process and make sure 

that regulations are being followed. 

Commercial recyclers mostly get paid to accept spent solvents from their customers 

(unless the virgin solvent is very valuable, in which case the recycler may pay for spent 

solvent). The acceptance fee is dynamic and can change quickly. These fluctuations 

would likely be harder for smaller, more specialized companies to handle. The 

acceptance fee also is correlated with fuel costs where spent solvents are commonly 

being used as fuel substitution. The price for recycled solvents, although relatively 

stable, has been eroding over time most likely due to over-capacity in the industry and 

downsizing related to waste and waste handling in the late 1990’s. Market prices for 

recycled solvents have a regional component, since demand and transportation costs vary. 

The price for recycled solvents is not always lower than the price of virgin solvents. 

BRS and Other Publicly Available Data

The discussion in this section is primarily based on the 2003 BRS data. Solvent recyclers 

were identified using both the form codes and the waste codes from BRS. The following 

BRS form codes were used: (1) “W202 - Concentrated halogenated (e.g., chlorinated) 

solvent;” (2) “W203 - Concentrated non-halogenated (e.g., non-chlorinated) solvent ;”(3) 

“W204 - Concentrated halogenated/ non-halogenated solvent mixture; and (4) “W219 - 

 

23 Hoovers, available at http://www.hoovers.com/safety-kleen-systems,-inc./--ID__11287--/free-cofactsheet.xhtml. 
78 

Other organic liquid.” The following BRS waste codes were used: (1) F001 – Carbon 

Tetrachloride, Methylene Chloride, Trichloroethane, Perchloroethylene 

(Tetrachloroethylene), and Trichloroethylene; (2) F002 – Chlorobenzene, ODichlorobenzene, Methylene Chloride, Trichloroethane, Perchloroethylene 

(Tetrachloroethylene), Trichloroethylene, Trichlorofluoromethane, and 

Trichlorotrifluoroethane; and (3) F005 – Benzene, Carbon Disulfide, 2-Ethoxyethanol, 

Isobutanol, Methyl Ethyl Ketone, Pyridine, and Toluene. Wastes that carried any 

combination of the above listed form codes and waste codes were assumed to be solvents.

Exhibit A-26 presents the number of facilities that handled (i.e., managed and/or 

transported) solvents in 2003, broken down by waste handling method and geographic 

region. The BRS data contained information on a total of 426 unique facilities that 

handled solvents, all of which were actively involved in some type of waste management. 

Of the 426 waste management facilities, 235 facilities were engaged in waste transferring 

in addition to waste management. The BRS data indicate that 153 entities were engaged 

in recycling of spent solvents in 2003. Of the 153 entities, 27 were commercial recyclers 

(3-digit NAICS code 562).24

Exhibit A-26: Waste Handling Method and Geographic Distribution for 426 

Facilities Handling Solvents (2003) 

Recycling Disposal Energy 

Recovery 

Transfer Treatment Total 

Northeast 25 2 6 19 7 59 

Mid-Atlantic 20 1 10 20 9 60 

South 32 - 16 46 12 106 

Midwest 36 - 25 46 14 121 

South Central 12 4 15 63 17 111 

West Central 11 1 4 19 4 39 

West 17 1 7 22 7 54 

Total 153 9 83 235 70 4261

1) The total facility count is less than the column summation because some facilities engage in more than 

one type of waste handling activity. 

Source: ICF Analysis, 2003 BRS. 

Exhibit A-27 presents data on the amount of hazardous waste managed by method for 

facilities managing solvents. A total of 1,033,615 tons of solvents was managed by 426 

facilities in 2003, with facilities managing 2,426 tons of waste on average. The vast 

majority of solvents (694,170 tons or 67 percent) was used as a substitute for fossil fuels 

in boilers and industrial furnaces. This practice is especially common in chemical and 

cement industries. Significantly smaller amount (slightly over 107,000 tons or 10 percent 

of the total waste managed) was recycled in 2003. The average amount recycled per 

facility was 700 tons. 

 

24 SRI Consulting estimated that there were 32 commercial recycling companies at the end of 1997 (SRI 

Consulting, 1998). 
79 

Exhibit A-27: Waste Management Methods for Solvents at 426 Facilities (2003) 

 Amount Managed 

 Recycling1 Disposal Energy 

Recovery 

Treatment Total 

Total (tons) 107,465 19,894 694,170 212,086 1,033,615 

Total (percent) 10 2 67 21 100 

Average per Facility 

(tons) 702 2,210 8,363 3,030 2,426 

1) Solvents recycling may include some or all of the following activities: phase separation, batch 

distillation, thin film evaporation and fractional distillation (SRI Consulting, 1998). 

Note: 174,672 tons of solvents were transferred in 2003. Because activities related to transportation of 

waste are not considered waste management, information on the amount transported in 2003 is not included 

in the Exhibit. 

Source: ICF Analysis, 2003 BRS. 

Exhibit A-28 provides information on the flow of hazardous waste for solvents. The first 

set of columns presents the NAICS codes for the generators of waste that went to 

recycling facilities, and the second set of columns presents the NAICS codes for the 

recycling facilities. 
80 

Exhibit A-28: Recycling of Solvent - Flow of Hazardous Waste, by Industry (2003)

Generators NAICS

Percent of 

Waste 

Supplied1

Recycling Facilities NAICS

Pharmaceutical and Medicine 

Manufacturing 32541 27 

Pharmaceutical Preparation 

Manufacturing 325412 21 

Medicinal and Botanical 

Manufacturing 325411 7 

Hazardous Waste 

Treatment and Disposal 562211 

Metal Coating, Engraving 

(except Jewelry and 

Silverware), and Allied 

Services to Manufacturers 

332812 2 

Rolling and Drawing of 

Purchased Steel 33122 1 

Fabric Coating Mills 31332 1 

Materials Recovery 

Facility 56292 

Paint and Coating 

Manufacturing 32551 100 Paint and Coatings Manufacturing 32551 

Paint and Coating 

Manufacturing 32551 67 

Metal Coating, Engraving 

(except Jewelry and 

Silverware), and Allied 

Services to Manufacturers 

332812 17 

Adhesive Manufacturing 32552 6 

Other Chemical and 

Allied Products Merchant 

Wholesalers 

424692

Laminated Plastics Plate, Sheet 

(except Packaging), and Shape 

Manufacturing 

32613 100 

Laminated Plastics Plate, 

Sheet (except Packaging), 

and Shape Manufacturing 

32613 

1) Waste supplied by generators in each industry as a percentage of the total waste recycled. 

2) The NAICS code recorded in the BRS database was not valid (NAICS code 42269). After checking the 

company’s name and activities, we determined that the appropriate NAICS code was 42469. 

Note: The exhibit presents only the top three industries (in terms of the amount of waste supplied) for 

which NAICS codes were available. For example, the hazardous waste treatment and disposal facilities 

(NAICS code 562211) recycled 33,504 tons of solvents in 2003, of which 9,209 tons, or 27 percent, were 

supplied by facilities in the pharmaceutical and medicine manufacturing industry (NAICS code 32541). 

Close to 20 percent of waste was supplied by industries for which data on the generators’ NAICS codes are 

not available in the BRS database. 

Source: ICF Analysis, 2003 BRS. 

There are three main types of commercial recycling arrangements. They are: toll 

recycling, speculative recycling and commercial waste brokers. In a toll recycling 

arrangement, a recycler collects spent solvents from a generator, recycles them and 

returns regenerated solvents to the generator. With speculative recycling arrangements, a 

recycler collects spent solvents from generators, recycles them and sells them on the 

market as regenerated solvents. If the value of a virgin solvent is high, a recycler 

engaged in speculative recycling is likely to pay the generator for the spent solvent. 

Wastes also can be handled by commercial waste brokers. A broker facilitates trade 
81 

between generators and recyclers and/or facilities which use waste as a feedstock. In 

some cases, brokers may warehouse spent solvents until they find a buyer.25

Exhibit A-29: Distribution of Facilities Recycling Solvents, by Industry 

(Top Five Industries; 2003) 

Industry NAICS Total 

Amount 

Recycled 

(tons) 

Amount 

Recycled as 

a Percentage 

of the Total 

Number of 

Facilities 

Average 

Amount 

Recycled per 

Facility 

(tons) 

Hazardous Waste Treatment 

and Disposal 562211 33,504 31 24 1,396 

Materials Recovery Facility 56292 21,498 20 2 10,749 

Paint and Coatings 

Manufacturing 32551 12,150 11 15 810 

Other Chemical and Allied 

Products Merchant 

Wholesalers 

42269 10,844 10 1 10,844 

Laminated Plastics Plate, 

Sheet (except Packaging), 

and Shape Manufacturing 

32613 4,791 4 3 1,597 

Source: ICF Analysis, 2003 BRS. 

The BRS data indicate that 107,465 tons of solvents were recycled in 2003, of which 53 

percent was recycled by commercial recyclers.26 The commercial recycling market was 

dominated by two facilities in 2003; one recycled close to 11,000 tons and the other 

recycled over 9,000 tons of solvents. The data presented in Exhibit A-28 and Exhibit A29 indicate that at least 15 percent of the total amount of solvents recycled in 2003 was 

recycled by intra-company recyclers (NAICS codes 32551 and 32613).

Exhibit A-30 presents revenue data for each industry that performs solvents recycling. 

The revenue data in Exhibit A-30 includes all revenue for the industry, including revenue 

not related to solvents recycling. Because revenue data were available for entire 

industries, and not for individual facilities that perform solvents recycling, the data in 

Exhibit A-30 includes facilities that are not engaged in recycling. 

 

25 Michigan Department of Environmental Quality. 1998. “Considerations in Selecting a Commercial (Offsite) Solvent Recycling Service.” Fact Sheet. 26 In addition to the commercial recyclers presents in Exhibit A-29 (NAICS codes 562211 and 56292), the 

BRS data indicate that additional 1,660 tons of solvents (or two percent of the total amount recycled in 

2003) were recycled by commercial recyclers with the NAICS code 56221. 
82 

Exhibit A-30: Characteristics of Industries in Which Some Facilities are Engaged in 

Recycling Solvents 

Industry NAICS Total 

Number of 

Companies

Percent of 

Facilities 

Conducting 

Recycling1

Total 

Industry 

Revenue 

(millions) 

Average 

Revenue 

per Facility 

(millions) 

Hazardous Waste Treatment and 

Disposal 562211 696 3 $3,466 $5.0 

Materials Recovery Facility 56292 838 <1 $1,835 $2.2 

Paint and Coatings Manufacturing 32551 1,409 1 $19,257 $13.7 

Other Chemical and Allied Products 

Merchant Wholesalers 42269 11,117 <1 $88,065 $7.9 

Laminated Plastics Plate, Sheet 

(except Packaging), and Shape 

Manufacturing 

32613 294 1 $2,314 $7.9 

1) The percentage is calculated using the total number of recyclers presented in Exhibit A-29. 

Source: ICF Analysis, Census 2002, 2003 BRS. 

The exhibits below illustrate demand and prices for production of virgin 

trichloroethylene, methyl ethyl ketone, and perchloroethylene for the period 1996 to 

2002.27,28 

Exhibit A-31: Demand of Virgin Trichloroethylene, Methyl Ethyl Ketone, and 

Perchloroethylene (1996 – 2002) 

0.05

0.07

0.09

0.11

0.13

0.15

0.17

0.19

0.21

Demand (in million tons)

Trichloroethylene 0.06 0.07 0.08 0.08 0.09 0.09

Methyl Ethyl Ketone 0.18 0.20 0.20 0.20 0.19 0.19

Perchloroethylene 0.14 0.14 0.16 0.16 0.15 0.15

1996 1997 1998 1999 2000 2001 2002

Notes: (1) Demand equals production plus imports minus exports. (2) Empty cells indicate years 

 for which data were not available. (3) Data were converted from pounds to tons. 

Source: The Innovation Group, available in “Chemical Profiles” at http://www.the-innovation-

 group.com/welcome.htm. 

 

27 Comparable data for recycled solvents were not publicly available from the same source. 

28 Uses: Trichloroethylene - hydrofluorocarbon intermediate (67%); metal degreasing (30%);miscellaneous 

(3%). Methyl ethyl ketone - coatings solvent (55%); adhesives (14%); chemical intermediates (7%); lube oil 

de-waxing (6%); magnetic tapes (5%); printing inks (4%); miscellaneous (9%). Perchloroethylene - 

chemical precursor (65%); dry cleaning (15%); metal cleaning and vapor degreasing (10%); miscellaneous 

(10%) (Source: The Innovation Group). 
83 

The price of trichloroethylene decreased in real terms in the period from 1996 to 2001 (in 

nominal terms, the price was constant). The price of perchloroethylene also decreased (in 

real terms) over the same period. There was, however, a one-year spike in the price in 

1997. The price of methyl ethyl ketone was the most volatile of the three solvents.29 

Caution should be exercise when drawing conclusion based on these data as they are 

available only for a short period of time and thus may not be representative of the 

historical prices.

Exhibit A-32: Price of Virgin Trichloroethylene, Methyl Ethyl Ketone, and 

Perchloroethylene (1996 – 2002) 

$100

$150

$200

$250

$300

$350

Price (2003$/ton)

Trichloroethylene $333 $327 $323 $319 $313 $306 

Methyl Ethyl Ketone $212 $194 $184 $221 $226 $203 

Perchloroethylene $164 $186 $159 $157 $154 $150 

1996 1997 1998 1999 2000 2001 2002

Note: Data for methyl ethyl ketone for 1996 were not available. Data for trichloroethylene and 

 perchloroethylene for 2002 were not available. 

Source: The Innovation Group, available in “Chemical Profiles” at http://www.the-innovation-

 group.com/welcome.htm. 

Exhibit A-33: Summary Statistics for the Annual Price of Virgin Trichloroethylene, 

Methyl Ethyl Ketone and Perchloroethylene (1996 – 2002) 

Annual Price (2003$/ton) 

Trichloroethylene Methyl Ethyl 

Ketone 

Perchloroethylene

Minimum $306 $184 $150 

Maximum $333 $226 $186 

Mean $320 $207 $162 

Median $321 $207 $158 

Standard Deviation $10 $16 $13 

Note: All Values are in 2003 dollars. Source: ICF Analysis, The Innovation Group. 

Exhibit A-34 presents the prices for virgin and reclaimed trichloroethylene, methyl ethyl 

ketone, and perchloroethylene in 1997. The data indicate that, on average, reclaimed 

solvents were 30 to 65 percent less expensive than virgin solvents in that year. We 

 

29 We defined volatility as the standard deviation of the annual percent changes. 
84 

combine these data with the information presented in Exhibit A-32 to estimate the price 

of reclaimed solvents for one of the years for which we have a proxy for the acceptance 

fee. The calculations, presented in Exhibit A-35, are based on a simplifying assumption 

that the difference between the price of a reclaimed and virgin solvent (in percentage 

terms) stayed constant. 

Exhibit A-34: Price for Virgin and Reclaimed Trichloroethylene, Methyl Ethyl 

Ketone and Perchloroethylene (1997) 

Price in $/gallon 

Reclaimed Virgin 

Price of Reclaimed Solvent as a 

Percentage of Price of Virgin 

Solvent

Trichloroethylene 4.00 – 5.44 7.93 50% - 69% 

Methyl Ethyl Ketone 2.10 3.09 68% 

Perchloroethylene 2.69 – 4.71 7.40 36% - 64% 

 Source: SRI Consulting, 1998. 

Exhibit A-35: Estimated Price for Reclaimed Trichloroethylene, Methyl Ethyl 

Ketone and Perchloroethylene (2001) 

Formula Trichloroethylene Methyl Ethyl 

Ketone 

Perchloroethylene 

Price of Virgin Solvent in 

2001 ($/ton) A $306 $226 $150 

Price of Reclaimed Solvent 

as a Percentage of Price of 

Virgin Solvent 

B 69% 68% 64% 

Derived Price of Reclaimed 

Solvent in 2001 ($/ton) C = A*B $211 $154 $96 

Derived Price of Reclaimed 

Solvent in 2001 ($/gallon) 

D = 

C/[1/(density/ 

120)* 

2,200] 

$1.17 $0.47 $0.59 

Derived Price of Reclaimed 

Solvent in 2001 ($/drum) D * 55 $64 $26 $32 

Note: Density of trichloroethylene = 1,460 Kg/m3; density of methyl ethyl ketone = 805 Kg/m3; density of 

perchloroethylene = 1,622 Kg/m3

. 

We estimate that the price of reclaimed trichloroethylene was $64 per a 55-gallon drum 

in 2001. That amount is significantly lower than the proxy acceptance fee of about 

112$/drum.30 The difference between the price of regenerated solvents and the 

acceptance fee is even more pronounced for the other two solvents. These results 

indicate that some commercial recyclers may have generated more revenue from the 

acceptance fees than from the sale of regenerated solvents in 2001. 

 

30 As explained in Section 3.2.1, we use the landfill disposal fees as a proxy for acceptance fees. We 

hypothesize that the landfill disposal fee for “drummed with treatment waste” in 2002, the earliest year for 

which we have data, approximates the acceptance fee for a 55-gallon of spent trichloroethylene in 2001. 
85 

Conclusions 

The following conclusions can be drawn from this empirical analysis: 

• Over 50 percent of the total amount of solvents recycled in 2003 was recycled 

by commercial recyclers. At least 15 percent of the total amount of solvents 

recycled in the same year was recycled by intra-company recyclers. 

• The commercial recycling market is dominated (in terms of the amount 

recycled) by a single recycling firm. 

• Some commercial recyclers may generate more revenue from the acceptance 

fees than from the sale of reclaimed solvents. 

A.2.6. Drums 

The discussion presented in this section is based primarily on the information received 

during a telephone interview with a representative from the Reusable Industrial 

Packaging Association (RIPA), conducted in November, 2005. Based on availability, 

data from other sources were used to support or verify the information received from the 

RIPA. 

Drums are used for transporting chemical products, and can be made out of steel or 

plastic. The main product in the drum industry is the 55-gallon drum. There are roughly 

40 million steel drums manufactured every year and roughly the same amount that are 

reconditioned for reuse. 

Exhibit A-36: Number of Drums Reconditioned Annually

Container Type 

Number of Drums 

Reconditioned (in millions) 

Steel Drums 31.2 

Plastic Drums 8.3 

IBCs 0.5 

Total 40.0 

 Note: IBC - intermediate bulk containers. 

 Source: EPA, Preliminary Data Summary for Industrial Container and 

 Drum Cleaning Industry, June 2002. 

Waste Management Options. Two main waste management options for handling used 

empty drums are reconditioning and scrapping. 

 

• Reconditioning. The drum reconditioning industry is dominated by commercial 

reconditioners who handle only “RCRA empty” drums. To be considered 

“RCRA empty,” a used drum needs to have less than one inch of product 

remaining in it. Drums meeting this standard are outside of RCRA jurisdiction, 

i.e., they are not considered hazardous waste by EPA. Drums that are not “RCRA 

empty” are returned to the generator. One factor that determines whether it is cost 

effective to recondition a drum is its condition. Damaged drums that cannot be 

reconditioned to a specific standard are sold to a scrap yard. 
86 

• Scrap. Used steel drums may be scrapped for metal rather than reconditioned. 

Drums that are damaged are more likely to be scrapped. Thinner drums are more 

likely to get damaged and thus less likely to be reconditioned. The trend in the 

drum manufacturing industry has been to reduce the thickness of drums. The 

characteristics of new drums thus affect to some extent the rate at which drums 

are scrapped. Even when drums are scrapped, a reconditioning facility will wash 

it before selling it to a scrap yard.

Recycling Market. Drum reconditioning involves significant capital costs, as there is 

very specialized equipment used to clean out drums. Most drum reconditioning is done 

by commercial facilities whose primary business is industrial container and drum 

cleaning (i.e., rather than manufacturing of drums or products transported in drums). 

More than half of the container and drum cleaning facilities also engage in transportation 

equipment cleaning. EPA estimates that there are close to 300 industrial container and 

drum cleaning facilities. 

Exhibit A-37: Total Number of Industrial Container and Drum Cleaning (ICDC) 

Facilities 

Type of ICDC Facilities Number of Facilities Small Business 

Non TEC Facilities 118 60%1

TEC Facilities 173 30%2

Total 291 42%3

1) The Reusable Industrial Packaging Association (RIPA) estimate; size cutoff unknown. 

2) EPA estimate with a threshold of less than 5 million in annual revenue. 

3) Weighted average. 

Note: TEC - transportation equipment cleaning. 

Source: EPA, Preliminary Data Summary for Industrial Container and Drum Cleaning Industry, 

 June 2002. 

There are about 75 companies that are part of the RIPA. These companies have about 

120 plants in total. These firms primarily operate by accepting drums, reconditioning 

them, and then selling reconditioned drums on the market. Tolling agreements are less 

common in this industry. There has been very little entry or exit in the drum 

reconditioning market, and most of the companies in the industry have been in operation 

for several generations. The average reconditioning plant processes about 1,500 to 3,000 

drums per day. There are some economies of scale in the industry, as it would be hard to 

recover costs by reconditioning a small amount of drums. The 3,000 drums per day per 

facility is likely to be the maximum capacity. At any greater production, the supply of 

reconditioned drums would likely exceed the demand. This limitation may indicate that 

most drum reconditioning facilities operate locally. 

Larger drum reconditioning facilities are likely to have the equipment (i.e., at least one 

truck and a few trailers) to offer storage and transportation services to their customers. 

For instance, a drum reconditioner may leave an empty trailer at a customer’s 

manufacturing site to be used for storing empty drums. Once the trailer is full, the 

reconditioner will haul the empty drums to its reconditioning facility. 
87 

There is a potential liability cost associated with putting a drum on the market that does 

not meet required safety specifications. Each reconditioned drum must be certified by the 

reconditioner and thus can be tracked back to him should it fail the Department of 

Transportation safety test. The failure to meet the test carries a financial penalty. Thus, 

the reconditioning facilities have an incentive to maintain high quality standards. 

Reconditioned drums are about 20 percent less expensive than new ones. To some 

extent, the difference in price may be explained by the perceived risk of contamination. 

Specifically, some manufacturers may not use reconditioned drums at all or may not use 

them for high value products for the fear that there may be waste residue that could 

contaminate their product. Therefore, reconditioned drums are most often used for lower 

value products. 

A main factor that determines recycling and reconditioning rates is the price of steel. 

When the price of steel is high, less new steel drums are demanded as consumers shift to 

less costly options (e.g., plastic drums). Less new drums produced means that there are 

fewer drums available for reconditioning. The price of steel also determines whether 

drum reconditioners pay or get paid to accept drums. When the price of steel is high, 

used drums are more scarce and reconditioners usually pay a small amount to accept 

them. There is a tipping point in the price of scrap steel at which it is more cost effective 

for a drum reconditioner to pay for a used drum, wash it, and then scrap it rather than 

recondition it and sell it on the market. 

Conclusions 

The following conclusions can be drawn from this empirical analysis: 

• Based on the profile of the RIPA members, the drum reconditioning market is 

likely dominated by commercial recyclers, with daily capacity of 1,500 to 3,000 

drums. 

• Reconditioners are expected to deal only with “RCRA empty” drums and are thus 

not regulated under RCRA. Lower regulatory constraints would imply lower 

operating costs. 

• Based on the RIPA information, there has been very little entry or exit in the drum 

reconditioning market. The relatively constant number of recyclers, all other 

things equal, would imply that the market is stable. 

• Drum-reconditioning rate is affected by the price of steel. There is a tipping point 

in the price of scrap steel at which it is more cost effective for a recycling facility 

to sell drums to a scrap yard than to recondition them. 

• Reconditioned drums are, on average, 20 percent less expensive than new ones 

and are mostly used for lower value goods. 
88 

A.3. Summary 

Exhibit A-38 summarizes recycling market characteristics for the five hazardous wastes. 

Exhibit A-38: Characteristics of the Markets for Recycled Materials 

Variables Implications 

Used LeadAcid 

Batteries 

Brass Dust Spent Pickle 

Liquor 

Spent 

Solvents 

Empty 

Used 

Drums 

Effect on Price 

Are generator 

and consumer 

in the same 

industry? 

If yes, it may be easier 

for recyclers to forecast 

demand. 

Yes Yes Yes Not 

necessarily 

Not 

necessarily 

Are consumers 

heterogeneous 

(in terms of 

NAICS)? 

If yes: 

- Potentially lower 

volatility in total 

demand 

- Potentially higher 

marketing costs. 

No No No No Yes 

Are tolling 

agreements 

dominant? 

If yes, recyclers are at 

least to some extent 

protected from price 

fluctuations. 

Yes NA Yes No No 

Is there no 

clear 

substitute? 

If yes, recyclers have 

more market power, 

recycled materials have 

a higher price, and there 

is less price volatility. 

No, virgin 

lead No, zinc No, virgin 

pickle liquor 

No, virgin 

solvents 

No, new 

steel drums 

or plastic 

drums (for 

some goods) 

Is the 

substitute more 

expensive? 

If yes, it may reduce 

volatility introduced by 

substitutes, and the 

recycled product has a 

clear market niche for 

lower-valued uses. 

Yes Yes Varies Varies Yes 

Effect on Costs

Are recycling 

facilities 

mainly 

commercial? 

If yes, capital costs or 

potential liability may 

be perceived to be too 

high by potential 

industrial recyclers. 

No No Yes Yes Yes 

Is the market 

dominated by a 

few large 

recycling 

facilities? 

If yes, smaller facilities 

may need to be 

innovative to stay in the 

market or gain market 

share (i.e., larger 

facilities may have 

advantage through 

economies of scale). 

The BRS data 

indicate that a 

single facility 

dominates the 

market 

Yes Likely Yes No 
89 

Variables Implications 

Used LeadAcid 

Batteries 

Brass Dust Spent Pickle 

Liquor 

Spent 

Solvents 

Empty 

Used 

Drums 

Does the 

material fall 

under RCRA 

jurisdiction? 

If yes, 

- recycling may be 

discouraged by the 

regulatory complexities 

involved 

- there are liability 

implications. 

Yes 

Some brass 

dust may not 

be regulated 

as a solid 

waste under 

RCRA under 

the exclusion 

for scrap 

metal 

Yes Yes 

No, emptied 

drums are 

supposed to 

be “RCRA 

empty” 

Note: NA – information not available. 
90 

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