“Yes on Question 2” by John Edward

John Edward teaches economics at Bentley and UMass Lowell. He’s a frequent contributor of columns on economic issues.

Question 2: A YES VOTE would expand the state’s beverage container deposit law to require deposits on containers for all non-alcoholic, non-carbonated drinks with certain exceptions, increases the handling fees, and makes other changes to the law.

Question 2 is about using the free market to reduce pollution. The evidence is clear – it will work.

Massachusetts has had a 5-cent bottle deposit on beer, soda, and mineral water for over thirty years. According to the Massachusetts Department of Environmental Protection, 80 percent of deposit bottles get recycled.

However, the 1982 bottle bill did not go far enough. Many beverage containers are not covered. Only 23 percent of non-deposit bottles are recycled.

There are about 3.5 billion bottles sold in Massachusetts every year. Question 2 would stop an estimated 665 million bottles from entering our waste stream.

The 1982 bottle bill also created unfair market conditions. Why should Jolt be subject to a bottle deposit and not Gatorade? Why should one water bottle not have a 5-cent deposit while another does because it has bubbles in it?

The “bottle lobby” has deposited millions of dollars in their campaign to defeat question 2. However, their faulty claims reveal how weak their case is.

Opponents of question 2 argue we do not need a bottle deposit because we have recycling. They claim 90 percent of households have access to recycling.

It turns out the real number is 64 percent. Over one-third of Massachusetts households do not have the option to recycle their bottles. For those that do, the 5-cent deposit gives them yet another incentive to avoid contributing to pollution. For people who consume from bottles away from home, the deposit offers a convenient alternative.

Opponents of question 2 argue that if people return their bottles for deposit, it will reduce the amount of revenue cities and towns generate from recycling. They omit mentioning that if people return their bottles for deposit, cities and towns will pay less for trash disposal or incineration. The City of Lowell spends about twice as much on trash removal as they generate in revenue from recycling.

The bottom line though, is not how much we recycle at the curb vs. how many bottles we return to the store. The real question is how to reduce waste. Question 2 does that.

Under Question 2, for those bottles that are “abandoned” (not returned for deposit), the unredeemed money goes into a fund for environmental cleanup. Cleaning up pollution is expensive, and the price goes up every year.

Five cents is the standard amount for states with deposit laws. Some states have a 10 or 15-cent deposit for certain types of bottles.

Question 2 includes a provision to adjust the deposit every five years, if necessary, for inflation. Any adjustment would be in whole cents. At the current rate of inflation, the deposit may go up by one cent in five or six years. At the current rate of inflation the deposit would double to a dime in thirty-five years.

The deposit should be adjusted for inflation, just like the sales tax and the gas tax. The legislature has not increased the deposit since 1982. If they had adjusted for inflation it would be 12 cents now. We have fallen way behind in accounting for the cost of cleaning up pollution. In addition, the incentive power of the deposit diminishes over time, as it gets smaller relative to the retail price of bottled drinks.

As pointed out by CommonWealth Magazine, Massachusetts generates 8 million tons of trash every year. We end up burying or burning most of the trash. We are running out of landfill space. We are leaving a mess for future generations.

It is basic Econ 101. The price of beverages is determined by demand and supply. Consumers and producers get together in the market. Both pursue their self-interest. The result is the market-clearing price.

Producers base supply on the costs of production. However, sometimes there are hidden costs. In some cases the production, packaging, and distribution of a product inflicts a penalty on people not involved in the market transaction. Beverages sold in bottles are one of those cases.

Economists call these costs negative externalities. With un-returned, un-recycled bottles, the negative externality is pollution. It is also a waste of resources. It is a market failure.

We do not need to throw away free-market economics. The best way to fix the problem is to embrace market forces. Economists call it internalizing the externalities.

By adding a deposit to bottles, we are reflecting the cost of pollution. One way or another, we will pay for pollution. The 5-cent deposit is a very modest increase to the cost of production, but a very real cost.

Some opponents of question 2 have referred to the bottle deposit as a tax. It is only a tax if they choose not to return the bottles.

If they want to call it a tax than it is a tax that reflects the price that our society, and our economy, pays for pollution. A tax that gives people an incentive to do the right thing. A tax that uses market forces to correct a market failure.

Vote Yes on Question 2.