State-mandated bottle redemption programs exist in 10 states in the US. Most require beverage distributors and retailers to charge a deposit fee on certain beverages that can be redeemed by consumers upon return of the empty beverage containers at a retailer or a participating redemption center. Despite the shared goals of decreasing pollution and waste, and increasing material recovery, these programs vary widely in design, implementation, and effectiveness. Aligning the incentives of all stakeholders is a major challenge. For a program to succeed, it must address the unique interests of distributors, retailers, regulators, and the public.
The Massachusetts Beverage Container Recovery Law was passed in 1982 and implemented in 1983. It mandated that containers of beer and malt beverages must be returnable with a minimum return value of $0.05. The cost to execute the Bottle Bill program is shared by consumers, distributors, and the state. Consumers pay the upfront deposit, which is refunded upon return of the container. Distributors pay handling fees to redemption centers and retailers, which were set at $0.0325 and $0.0225 per unit respectively as of July 5, 2013. The state also incurs costs related to managing and enforcing the program.
Since the initial legislation, attempts have been made to update the Bottle Bill. In 2010, Governor Deval Patrick proposed an expansion to include a 5¢ deposit on water, juice, energy drink, and sport drink containers. Although the expansion was projected to increase the number of bottles recycled annually from 600 million (40%) to 1.2 billion (80%), save municipalities between $4.2 and $6.9 million annually, and result in job gains, the legislation failed to pass. A 2014 referendum on whether to expand the bill to cover containers for some non-carbonated beverages was defeated, with more than 70 percent of voters voting against it in a battle that included heavy lobbying and financial support from the bill’s opponents, including the American Beverage Association and several grocery store chains, that argued the change would increase costs and red tape for the beverage industry.
In 2021, the Massachusetts bottle bill was the worst performing bill in the country, with a redemption rate of 38%. (Source: Container Recycling Institute, 2022)
The Oregon Bottle Bill, introduced in 1971, was the first bottle recycling bill to be adopted in the US. The bill was introduced to reduce litter along Oregon's beaches, highways, and public areas. It has been updated several times throughout its history.
A key development in the success of the Oregon Bottle Bill has been the coordination of stakeholders. In the early years of the bill, local distributors realized that to overcome the inequalities inherent in a system where distributors might end up paying out deposits on containers they did not sell, it was better for them to pool their resources. This happened in several municipal areas in the state, including Portland, where distributors formed Container Recycling Inc. (CRinc), and Eugene, where distributors formed Beverage Recyclers of Oregon (BROCO). These cooperatives eliminated inequalities in payouts by distributors and helped make the collection process more efficient and less costly for any one distributor. In addition, the cooperatives relieved the burden on retailers of sorting and storing containers belonging to different distributors.
In 2007, the Oregon Legislature passed an update to the bill that included water and flavored water containers and required all retailers to issue redemptions on containers of any beverages they sold. Another important element of the statewide system infrastructure was established on Jan. 1, 2009, when CRinc, BROCO, and almost all other distributor and distributor cooperatives in Oregon joined together to form the Oregon Beverage Recycling Cooperative, or OBRC.
In 2011 the legislature updated the bill to include all beverage containers except wine, liquor, milk, and milk substitutes and to set in place a process for raising the redemption rate to $0.10 per container, which was implemented in 2017. It also established a pilot program to assist the OBRC in developing a system of statewide redemption facilities, greatly reducing the burden on retailers and making the process of redemption easier for the public.
In 2022, Oregonians returned over two billion beverage containers through the program, with the Oregon Beverage and Recycling Cooperative (OBRC) overseeing the redemption program and paying out over $205 million to consumers and local nonprofits. This marked the highest redemption rate in the nation, rising from 80.6% to 88.5% in a single year. (Source: OBRC, 2022)
In addition to the direct financial return to consumers, the Bottle Bill program has facilitated significant fundraising for local nonprofits. In 2022 alone, over 5,000 Oregon nonprofits raised $5.1 million through the redemption of bottles and cans. The Oregon College Saving Plan also benefitted from this program, accumulating $1 million for higher education over the course of three years. (Source: OBRC, 2022)
The only reporting required by the bill is a count of the number of containers redeemed. This is monitored by the statewide redemption centers run by OBRC. By mid-2023, the program is expected to have 100 locations open across the state. (Source: OBRC, 2022)
The differences between the Massachusetts and Oregon bottle recovery plans illustrate the many challenges states face enacting redemption programs.
Accounting
A key element of many redemption programs is the accounting required to monitor the balance between initial payments and final redemptions of the deposits. In the case of Massachusetts, both distributors and retailers are required to maintain updated accounting of the sales and redemptions of each container they sell and collect.
Like Massachusetts, New York state requires retailers and distributors to report these accounts to the state Department of Revenue:
“Deposit initiators are required to establish an interest-bearing refund value account (bank account) for the sole purpose of refunding deposits. The Act requires all deposit initiators registered with the Department to remit 80 percent of any unclaimed bottle deposits on a quarterly basis. Along with the remittance, deposit initiators are required to keep track of all deposits collected and file quarterly reports with the Department detailing deposits, withdrawals, interest earned, and the quarterly ending balance of the bank account. The Department has the authority to penalize deposit initiators that fail to register with the Department or fail to file quarterly reports.” (Source: Office of the New york State Comptroller, 2017)
The Massachusetts Bottle Bill is paid for by the distributors, who must pay a portion of the deposit collected, plus an additional fee, to both the retailers and the redemption centers. This cost is determined by the state and requires additional accounting and reporting.
In Oregon, the distributors pay for the program without any reporting requirement to the state beyond the number of containers sold and returned for the purposes of tracking the yearly return rates.
Private vs. Centralized Redemption Centers
In Massachusetts, retailers and redemption centers, each run by private entities, manage the redemption process. Their cost of operations is paid for by the distributors, as mentioned above. As was the case in the early days of the Oregon program, Massachusetts retailers and redemption centers must take on additional work and expense to sort and store containers based on which distributor they came from.
Independently owned redemption facilities rely on the processing fees to offset their costs of operation, but these fees are often not enough to keep centers afloat. In Maine, more than 40 redemption centers have gone out of business since 2020 and more than half of New York state's centers have closed since 2008. (Source: Oregon Capital Chronicle, 8/18/2023)
In Oregon, OBRC has established centralized "BottleDrop" redemption centers that provide a convenient one-stop location for consumers to return all redeemable containers. These centers use reverse vending machines that accept containers and dispense vouchers that can be redeemed for cash or deposited directly into a consumer's BottleDrop account. This model has significantly eased the burden on retailers and helped the state achieve an impressive 88.5% redemption rate in 2022.
What the Oregon Bottle Bill story shows us is that aligning incentives of all stakeholders is critical.
Government: Regulation does what it does best when ensuring participation without overburdening participants. Enforcement of government mandates benefits the public good through a cleaner environment and reduced costs of waste processing.
Distributors: If all distributors are required to participate, then the problem of free riders is removed and the benefits of scale are can accrue to all parties.
Retailers: Retailers are often an important interface and locus for redemptions. With programs that require sorting, storage, accounting, and payout, they may be subjected to an outsized burden of operating the system, as has been the case in Massachusetts. When the redemption is handled by other parties or automated systems, retailers can reap the benefit of redemption credit programs when it comes to rewards. If credits can be issued for their store, there is more incentive for public to participate and shop with them.
Redemption Centers: The challenge of incentivizing private redemption operations has been a major hurdle to many state programs. The cost of running these critical nodes in any redemption system must be offset by the redemption value, which needs to stay current with the price of doing business. Any advantages of scale and network effects should be considered when designing the management of redemptions.
Public: The redemption value needs to be high enough and redemption needs to be easy enough for the public to get on board. This means not only do a majority of the public choose to participate, but if they don’t, then there is sufficient incentive and infrastructure for other members of the community to act on their behalf and perform the necessary collection and redemption to keep redemption rates high.
Extended Producer Responsibility (EPR) legislation
Peter Spendelow, who oversees the materials management program at the Oregon Department of Environmental Quality, offers perspective on the changing trends in material recovery:
“What triggered [the Plastic Pollution and Recycling Modernization Act - 2022] was China’s ban of recyclables; there were problems with our recycling system," Spendelow said. "What we wanted to do was improve the quality of our recycled material and create financial incentives to get better packaging. We wanted a uniform statewide program. Producers had no role in our system; it was all paid for by citizens and programs set up by local government and recycling collection providers, while producers get to walk away. We think [producers] should play a role in the life cycle of materials.”
The advantages of circular manufacturing are clearly evident in the successful bottle bill programs of Oregon and other states like Michigan. The value is in the quality of the materials recovered and this dynamic is informing much of the EPR legislation:
“Recovery of containers under the bottle bill is much higher than it is with curbside recycling," he said. "Significant [polyethylene terephthalate] and aluminum can loss occurs in local commingled recycling sorting facilities, but bottle bill [materials] are clean and high quality.” (Source: Recycling Today, May 01, 2023)
Are we ready for a National Bottle Bill?
Proposals for a national bottle bill have been discussed periodically since 2003. A nationwide program built on what has worked well in states like Oregon would offer many benefits in terms of reducing the need for virgin source materials and waste reduction. But the infrastructure needed to build out such a program would present many challenges. A program based on scaleable, repeatable local entities would be needed.
The success of Oregon’s Bottle Bill and the failure of the efforts in Massachusetts hinge on the simplification of the system. Distributors in Oregon working in cooperation obviated the need for complex accounting and reporting requirements. In effect, Oregon’s system enabled the tokenization of the containers for whoever bares them at the only 2 levels of the system: producer and consumer. They are, in effect, the sole party involved in the transfer of value, collecting the initial deposit upon distribution, and paying out deposits directly to the BottleDrop users in the form of credits.
Regulation exists as the initial mandate, much like a smart contract written in the operating code. Beyond the mandate, just like in blockchain transactions, there are no reporting requirements needed for the system to function. The cost of the program is borne entirely by the producers themselves and the consumers who choose not to recycle, with no government or taxpayer involvement.
A system like this is an ideal case for blockchain-based tokens. A blockchain-based payment system could effectively replace local payment networks, such as Oregon's BottleDrop program. A redemption valued in BTC in place of a BottleDrop type account balance would provide users with a universally valuable asset, facilitating the feasability of location independent redemption. It could also serve as a functional building block for other material recovery programs for higher-value products.
In the current landscape of material recovery, these lessons from the early history of state bottle bills are critical to understand as we build out the infrastructure to support the circular manufacturing of the future.