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More Recyling Matters

Sep 26, 2012 • Businesses, Environment, Labor, Regulation, Thinking Economically, Uncategorized • 98 Views    No Comments

Aluminum recycling is in the news because of a break-up. Together, Alcoa and Novelis (owned by HindalCo, an Indian firm) had been collecting and recycling cans–40 billion last year. But no more. Now, competing for used cans, each firm will do it alone.

Should business firms recycle aluminum? It depends.

Every 2 or 3 months, a recycled aluminum can might be recycled again. Used and empty, cans could be collected by someone who receives 55 cents a pound (approximately 25 cans) and takes them to a scrapyard that crushes, scrapes, and bales them (sort of like a hay bale, but made of cans). Melted and rolled at Alcoa or Novelis or another aluminum producer, the can becomes a part of an aluminum sheet. Next stop? The sheets are deposited at a can producer who prepares them for the beverage firm. Filled with beer or soda or juice, the can is sold and the cycle starts all over again.

Producing cans from recycled materials requires a lot less energy than making aluminum from scratch and municipalities that recycle can generate revenue. However, businesses might not benefit because using recycled aluminum is only marginally cheaper, the product is lower quality and a collection infrastructure is necessary. In addition with Novelis and Alcoa competing for scrap, price could go up.

That takes us to a question we have considered before at EconLife. Is it ethical for a profit-seeking business to be ethical? Believing that profits are the responsibility of the business firm, economist Milton Friedman (1912-2006) said that it is not appropriate for corporate management to pursue social responsibility. Agreeing, former Harvard president and Secretary of the Treasury Lawrence Summers cited Fannie Mae and Freddie Mac to display the cataclysmic results of combining doing good with seeking profits.

So, should businesses produce recycled aluminum? The answer seems to be sometimes.

Sources and Resources: This WSJ article does a very good job of conveying how aluminum recycling works. Combine it with this YouTube video and you will see what the business is all about. But, I suggest also looking at this cost benefit analysis.

This brief aluminum recycling video is interesting:

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