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Institute for Global Environmental Strategies Impact of East Asian Economic Integration over resource demands and 3R policy of end of life products

Yasuhiko Hotta, PhD I tit t f Gl b l E i t l St t i Institute for Global Environmental Strategies The 3rd International Conference on Waste Management and Technology, November 5-7th 2008, Tsinghua University, Beijing, China

Impact of East Asian Economic Integration over resource demands and 3R policy of end of life products Institute for Global Environmental Strategies (IGES)

• Founded in 1998 with supported from the Government of Japan,

S f

• Policy research institute working to promote SD in the Asia-Pacific region,

involved in a number of policy processes such as 3R Initiative and APFED,

• 7 Project Areas: Climate Policy, Biofuel, Forest Conservation, Fresh Water,

Waste and Resources, Capacity Development and Education, Business and Environment.

• 2 teams for inter-project collaboration: Policy and Governance Team and

Economic Analysis Team

• 60 full time researchers
• Headquarters: Hayama (south of Tokyo), 3 other domestic offices (Tokyo,

Y.Hotta, WMR IGES | http://www.iges.or.jp November 5-7 2008, Beijing, China 2

Headquarters: Hayama (south of Tokyo), 3 other domestic offices (Tokyo, Kobe, and Kitakyusyu), and 2 international offices (Bangkok and Beijing)

• More information at www.iges.or.jp

Impact of East Asian Economic Integration over resource demands and 3R policy of end of life products

Outline of the presentation

• 1. Internationalization of waste and recycling-related

issues

• 2. Limitation of nation-based recycling system
• 3. Modeling analysis of impact of regional economic

integration (2001 2020) integration (2001-2020) 4 Four strategic options

• 4. Four strategic options
• 5. Regional recycling mechanism as a strategic option

Y.Hotta, WMR IGES | http://www.iges.or.jp November 5-7 2008, Beijing, China 3

• 5. Regional recycling mechanism as a strategic option

Impact of East Asian Economic Integration over resource demands and 3R policy of end of life products 1-1. Internationalization of waste and recycling –related issues in Asia

Waste and recycling issues have been internationalized; they can no longer Waste and recycling issues have been internationalized; they can no longer be addressed by domestic measures alone

• A. Problems from economic integration
• Increased waste generation (quantity and complexity)
• Increased illegal waste trade, trade in recyclables, improper recycling
• Environmental damage from improper recycling and illegal and open

Environmental damage from improper recycling and illegal and open dumping – Especially air, water, & soil contamination E i ll t i d h d t t i l f t – Especially toxic and hard to manage materials from e-waste

• B. Opportunities from economic integration
• Opportunity for increased efficiency and specialization in recycling

pp y y p y g (increased efficiency of resource utilisation)

• Increasing needs for regional policy response

See more detailed argument in Hotta and Elder et al (2008) “Policy Considerations for Establishing an

Y.Hotta, WMR IGES | http://www.iges.or.jp November 5-7 2008, Beijing, China 4

See more detailed argument in Hotta and Elder et. al. (2008), Policy Considerations for Establishing an Environmentally-Sound Regional Material Flow in East Asia.” The Journal of Environment & Development., March 2008 4

• Increase in waste
• Increased volume of
• Waste-related

i t l i

Developing countries

1.Increased Waste

1-2. Internationalization of waste and recycling-related issues in Asia

• Increase in waste
• Change in quality and

type of waste production and consumption

• Change in lifestyle

Increase in resource environmental issues

• Improper recycling in

developing Asia

Waste Generation in Asia (especially in developing

Increase in resource demand in developing Asia International trade of

Internationalizati

• n of product

Rising

countries) 2.Illegal trade

Further economic integratio n recyclables and reusables (including illegal trade)

p life-cycle

Rising international price of resources Further international division of labor

g and improper treatment of reusables and recyclables

Lower domestic demand for recyclables Hollowing out （Especially materials and component industry） Outflow of recyclables and reusbales Damage to domestic recycling industry

3.Internationali zation of waste and

industry）

• Recycling-

related legislation

• Governmental

industry Accumulation of recyclables and Incentive to recover cost of collection and transportation Rising Disposal

recycling- related issues

Domestic issues mainly related to developing International issues Domestic issues mainly related to developed

• Governmental

support for recycling industry reusables through legislation p Disposal cost

Developed countries

Direction of influences among issues Group of issues related to developing countries related to developed countries

Source: Hotta, Elder et al. (2008)

Impact of East Asian Economic Integration over resource demands and 3R policy of end of life products

• 2. Policy implications of internationalization of waste and

recycling-related issues: a case of Japan

Under expected further economic integration of East Asia and Southeast Asia, the following issues will become more prominent than now; Further outflow of recyclable resources

• Further outflow of recyclable resources
• Further expansion of foreign market of secondhand

Further expansion of foreign market of secondhand goods

• Increasing demand for rare/precious recyclable resources

Y.Hotta, WMR IGES | http://www.iges.or.jp November 5-7 2008, Beijing, China 6

Impact of East Asian Economic Integration over resource demands and 3R policy of end of life products

2-1 Further outflow of recyclable resources

Outflow of Japan’s recyclable materials is basically a regional issue based on Outflow of Japan s recyclable materials is basically a regional issue based on structural change in East Asian Economy. More than 90% of the export of scrap plastic and scrap copper is to China and Hong Kong.

40 45 Export of Scrap Copper from Japan

Kong.

25 30 35 nd tons Others China 15 20 25 Ten thousan Taiwan Viet Nam Korea 5 10 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Y.Hotta, WMR IGES | http://www.iges.or.jp November 5-7 2008, Beijing, China 7

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Note: For Scrap Copper, the chart is based on HS Code (7404). Source: Calculated from Trade Statistics of Japan ( http://www.customs.go.jp/toukei/info/index.htm)

Impact of East Asian Economic Integration over resource demands and 3R policy of end of life products

Mixed low quality material which can not be recycled in economically feasible manner tend to be shipped to developing counties. Around 33 7% (7 71 million units) of total estimated discharge (22 87 million units) of used Around 33.7% (7.71 million units) of total estimated discharge (22.87 million units) of used four-types of home appliances from house and business facilities are shipped outside of Japan either as reuse purpose (around 26.0% of total estimated discharge) or for resource recovery (around 7.7% of total estimated discharge). y ( g )

4 home appliances

Used Products Coated wire from home appliances

4 home appliances

Plastics from home appliances

4 home appliances Coated wire

Used Products

pp Waste Plastics Unmixed Olefin-type Mixed Urethane-type Nuggets business Wire stripping business Mixture of plastics and copper

Resource recovery process

Plastic re Crush comp Processi RP Proces as blat f redu Mixed constru mater Recove Freo Plastics Copper Scrap dealers S lt /

Output of

ecycling and ress ing into PF ssing urnace cer with uction rials ery of

• n

Y.Hotta, WMR IGES | http://www.iges.or.jp November 5-7 2008, Beijing, China 8

Smelter/ Refinery Recycler Export

Output of recyclable resources

Resin material Export RDF Blast furnace Construction material

Source; Terazono et. al.(2004) P.53-54.

Impact of East Asian Economic Integration over resource demands and 3R policy of end of life products 2-2 Further expansion of foreign market of secondhand goods

For reuse purpose, 5.94 million units; around 26.0%

• f total estimated discharge has been shipped
• utside of Japan since the introduction of home

appliance recycling law. Through further economic integration, trade

• f

second hand goods in addition to new products will be increased. This can facilitate disguised trade without regional policy response to control trade of secondhand goods.

Y.Hotta, WMR IGES | http://www.iges.or.jp November 5-7 2008, Beijing, China 9

Impact of East Asian Economic Integration over resource demands and 3R policy of end of life products

2-3 Increasing demand for rare/precious recyclable resources

In the long trend, Japan’s manufacturing industry, especially material industry, has been

Changes in annual ratio of increase/decrease in number of businesses/ employees/ total shipments/ and total value added price in Japan’s industrial sector

g , p g y, p y y, decreased in number of businesses, employees, annual shipments, and total value added.

p p p

8 10 st Year 4 6 ge (%) from Las 2 2 1985 1988 1990 1993 1995 1998 2000 2003 atio(%) of Chang

• 6
• 4
• 2

Annual Ra

Y.Hotta, WMR IGES | http://www.iges.or.jp November 5-7 2008, Beijing, China 10

Number of businesses Nubmer of employees Total shipments of products Vale added price

Source; METI (2006), ‘Industrial Sector of Japan 2006’

Impact of East Asian Economic Integration over resource demands and 3R policy of end of life products 2-3 Increasing demand for rare/precious recyclable resources

In contrast, production of materials industry in developing Asia has been increasing in recent years.

5

(Gr (Graph) Product ) Production

• n of
• f

Crude S e Steel eel

3000

(Gr (Graph ph) Prod ) Product uction of Alum Alumin inum um (Production amount, 10 thousand ton) (Production amount, 0.1 billion ton)

3 4 J 2000 2500 3000 2 3 Japan China 1000 1500 2000 Japan China 1 500 2002 2003 2004 2005 2006 2010 2 2 2 3 2 4 2 5 2 6 2 1

Note; Production in 2010 of China is based on an estimate by Takeda (2006). See; Katsutoshi Takeda (2006), “Risk Management in Chinese B siness” Mits bishi Corp gscc asianb siness jp/ orkshop/2006/asi 15 03 pdf

Y.Hotta, WMR IGES | http://www.iges.or.jp November 5-7 2008, Beijing, China 11

Chinese Business”, Mitsubishi Corp www.gscc-asianbusiness.jp/workshop/2006/asi_15_03.pdf For crude steel production and aluminum production in China, the figures are based on JOGMEC(Japan Oil, Gas and Metals Corporation)’s database. http://www.jogmec.go.jp/mric_web/kogyojoho/2003-05/2003-05-01.pdf

Impact of East Asian Economic Integration over resource demands and 3R policy of end of life products

2-3 Increasing demand for rare/precious recyclable resources

• Longer trends shows decreasing demands of

comparatively low quality materials such as recyclable p y q y y resources in Japan.

• Ironically, this hollowing out of materials industry was

the major incentive for Kawasaki and Kita-kyushu to start Eco-towns project of developing recycling/environmental industry by utilizing the existing infrastructure of environmental management and legacy of environmental technology of heavy

Y.Hotta, WMR IGES | http://www.iges.or.jp November 5-7 2008, Beijing, China 12

industry.

Impact of East Asian Economic Integration over resource demands and 3R policy of end of life products

2-3 Increasing demand for rare/precious recyclable resources

New business for materials industry(“urban mining”, “eco-facturing”) y( g g )

• Higher rate of precious material content in used electronic and electric goods than ore.
• Cost recovery by providing waste processing/treatment services for toxic substances.
• If high-tech manufacturing industry remains in Japan, the domestic needs for rare metals

ti t i t (U b i i )

3.5 4 700 800

continue to exist.(Urban mining)

2 2.5 3 Trillion Y en 400 500 600 ,000 P eop le 0.5 1 1.5 T 100 200 300 1, 2000 2010 2020 Size of Market for Waste Management Services Size of Market for Resource Efficiency-related Business Employment in Waste Management Services Employment in Resource Efficiency-related Business

Y.Hotta, WMR IGES | http://www.iges.or.jp November 5-7 2008, Beijing, China 13

Employment in Resource Efficiency related Business

Note; Waste Management Services include; Source; estimate by MOEJ in 2003. The date is sited from MOEJ website. See http://www.env.go.jp/press/file_view.php?serial=4625&hou_id=4132

Strategic Policy Option for Sound Material Cycle Society in Asia 3 1 Example of Analysis of Impact of Prospective Regional Economic 3-1. Example of Analysis of Impact of Prospective Regional Economic Integration (2001-2020): Demand of metal materials (import and domestic)

Electronics sector's demand for imports Electronics sector's demand for domestic

700.0 800.0

450.0 500.0

(percentage change 2001-2020) product (percentage change 2001-2020)

400 0 500.0 600.0 Percent

300.0 350.0 400.0 percenta

100 0 200.0 300.0 400.0 tage change

100 0 150.0 200.0 250.0 age change

• 100.0

0.0 100.0 China Japan Korea Indonesia Thailand Viet Nam

0.0 50.0 100.0 China Japan Korea Indonesia Thailand Viet Nam Metals nec BL Metals nec MEI Metals nec DEI

Metals nec BL Metals nec MEI Metals nec DEI

• Huge increase in electronics industry's demand and trade of metals (also

WMR IGES | http://www.iges.or.jp OECD-UNEP Conference on Resource Efficiency, 23-25 April 2008, Paris 14

g y ( consumption of electronic goods) =>

• Huge increase in potentially hazardous e-waste

Strategic Policy Option for Sound Material Cycle Society in Asia 3-2. Analysis of Impact of Regional Economic Integration (2001-2020) 1. The above result is to get some indirect suggestions on how economic 1. The above result is to get some indirect suggestions on how economic integration drives increasing demands in potentially hazardous recyclables.

2. It assumes that metal demands in electronic sectors may drive more trade in mixed d i ll i k i l i l di f / l h and potentially risky materials including non-ferrous/rare metals such as e-waste. 3. Metal needs for electronics will increase much higher than needs for construction sector. 4. Thus, the result can conclude demand for imports of potentially hazardous l bl hi h i l d t l ill b i ifi tl i d i d l i A i recyclables which includes metals will be significantly increased in developing Asia. 5. However, domestic consumption of materials continues to increase. Thus, trade measure may not be enough for proper management of used products with hazardous substances.

WMR IGES | http://www.iges.or.jp OECD-UNEP Conference on Resource Efficiency, 23-25 April 2008, Paris 15

6. Modeling analysis does not directly reflect “resource availability” and “trade in recyclables”. Thus, reflecting these aspects would be a potential future task.

4-1 Four Strategic Options for Sound Material Cycle Society in Asia

Strategic option Characteristics Pros Cons

• A. Status-quo
• No significant effort

i 2005

• Requires no additional

ff t

• Environmental problems from

i t t ↑ since 2005.

• Waste trade is regulated,

but not well enforced

• No regional coordination

f it d effort improper management, etc.↑

• Effectiveness of domestic policy ↓
• Political pressure from non-OECD

to OECD countries↑ for capacity and infrastructure building

• Incentive for illegal trade ↑
• Outflow of materials from OECD

countries

B Basel ban

• Regional ban of export of
• Illegal trade ↓
• Difficult to enforce
• B. Basel ban

amendment

Regional ban of export of hazardous waste for recycling purpose from OECD to non-OECD countries Illegal trade ↓

• Political pressure from

non-OECD to OECD countries ↓

• Outflow of materials from

Difficult to enforce

• Efficient use of resources ↓
• No regulation for south-south trade
• Obstacle to companies efforts ↑
• Outflow of materials from

OECD countries ↓

• Consumption of virgin materials ↑
• Incentive for technology transfer↓
• Resource prices ↑

C Free trade of

• Reduction of trade barrier •Optimization of material
• Environmental problems↑
• C. Free trade of

waste and recyclables

• Reduction of trade barrier
• Market forces determines

environmental impacts from recycling and waste trade

• Optimization of material

supply↑

• Reduction of trade barrier
• Environmental problems↑
• Difficult to enforce regulations
• Political pressure↑
• Vulnerability of domestic recycling

h i t i h ↑ trade mechanism to price change↑

• D. Regional

recycling mechanism

• Stronger management of

trade in recyclables by introducing incentive

• National capacity↑
• Technology transfer↑
• CD of recyclers↑
• Transaction cost without central

authority in the region↑

• Needs for cost sharing

16

mechanism

mechanism

• Promotion of sound and

efficient trade under Basel framework CD of recyclers↑

• Improper recycling ↓
• Builds on existing policy

framework g mechanism↑

• Effectiveness without

enforcement?

4-2 Lessons from Japan’s experience

Policy Lessons

Eco-town (subsidized

• Needs constant, stable and large supply of recyclables. Eco-

Eco town (subsidized development of recycling industries)

, g pp y y towns constructed near large cities tend to be more successful.

• Needs materials industry as well as manufacturing industry.
• Successful in developing nation-wide role sharing for recycling as

ll t h i l d t h l i l it well as technical and technological capacity

• Back-up from product-specific recycling legislation is necessary.
• Location and transportation are very important for cost

effectiveness.

• To stabilize periodic supply distortions, networking of these

facilities can be one option.

EPR-based obligatory

• Does not directly contribute to prevention of pollution

EPR based obligatory recycling scheme

y p p

• Needs to identify producer and importers.
• Needs many supporting mechanisms
• Cost effective for increasing recycling capacity

Trade of secondary materials as loophole

• Trade of secondary materials as loophole
• Some kind of regional cooperation, other than EPR-based

recycling policy, are necessary to prevent loopholes.

• EPR from cost sharing to information sharing

g g

Certification scheme for good recyclers and traders

• Different type of certifications are possible: formal/obligatory

registration, quasi-formal and voluntary.

• Need to identify who pays cost

traders

y p y

• Burden may be higher for small recyclers; easier for larger ones
• Major cost may be transaction costs
• Needs information sharing mechanism

• 5. Regional recycling mechanism as a strategic option

Institutional d l t Infrastructure d l t Information and k l d development development knowledge development

Overall regional li ti Regional Recycling Mechanism policy option Regional Policy

• International burden

sharing for difficult to

• Networking of eco-

towns/eco-industrial

• Information sharing

between upstream and g manage materials

• International financial

support for domestic f / park through recycling port p downstream on valuables and hazardous substances in the products infrastructure/ information development in the products

• Certification for good

recyclers/traders

National Policy

• EPR-based obligatory

recycling mechanism

• Promote development
• f domestic recycling

capacity through eco-

• Statistical information
• Development of

inventory capacity through eco towns/eco industrial parks policy inventory

• MFA

18

Both regional and national policies are necessary, in Asia