Container deposit schemes work – and that's what matters

Why are the beverage giants fighting tooth-and-nail to stop the spread of container deposit schemes – arrangements that are proven to cut down on litter and increase recycling rates?

Container deposit laws seem like a no-brainer. A government enacts a law that allows people to get 10c per item when they return an empty soft drink or other bottle to authorised collection centres. The big drinks manufacturers get to look like they are doing something to encourage recycling and discourage litter – a problem to which they make a significant contribution.

Surely the soft drink giants would support these schemes? Wrong.

This month, Coca-Cola Amatil successfully argued that the Northern Territory's container deposit legislation breached a federal law, the Mutual Recognition Act. The company argued the scheme acted to 'prohibit' sales in the Territory. (This battle is not over, with the NT government set to challenge the ruling.)

Why are the soft drink giants so opposed? Let's look at the economics to be clear about why Coca-Cola Amatil and the beverage industry so vehemently oppose this proposal.

The NT Government implemented its container deposit legislation in January 2012. Since then, the recycling rate for beverage containers reportedly doubled to 33 per cent.

South Australia has had a similar, highly successful container deposit scheme since 1977. SA has the highest rates of recycling of such containers in Australia.

In short, these schemes work.

Coca-Cola, along with other beverage manufacturers and industry lobby groups, claims container deposit schemes are not 'efficient'. Industry claims the schemes are inefficient because they don't deal with other types of waste. The argument is that because some containers are recycled now, without the legislation, the schemes punish people who are already doing the right thing.

What nonsense. The real reason Coca-Cola opposes container deposit schemes is because the company knows that if it puts up the retail price of its drinks a little bit, demand will go down a little bit.

One of the main reasons sweet, fizzy drinks are so popular is because they are so cheap.

In 2011, Coca-Cola Amatil reported revenue of $4.8 billion from 564 million 'unit cases'. This equals approximately 3.2 billion litres or 5.3 billion 600ml bottles.

Any change in demand, however minor, has a significant impact once a business operates at this scale.

Arguments about efficiency are just a convenient way for these companies to look like they're actually concerned about wider economic issues.

They're not. This is entirely about the direct impact on revenue and profit for beverage manufacturers.

No policy is perfect. All policies result in costs and benefits for different sections of society.

When it comes to the environment, the financial costs of action may often outweigh the financial benefits because the environmental damage, especially incremental damage, can be difficult to put in a budget.

In fact, uncertainty about the cost of environmental damage is highlighted by the Productivity Commission's report into waste in Australia.

Because it is difficult to measure, the argument is always going to be stacked against the environment.

Rather than tailor a public policy to suit the bottom line of a massive multinational soft drink company, let's think about what we want as a society, then cost the options.

Do we want a clean environment? Is it really a big deal if we pay 10c extra for drinks bought in disposable containers, especially when we can return the bottle and get our 10c back?

The economics of healthcare come into play here too. Many of the drinks sold in disposable containers are leading more and more Australians to rely on our public health system. Shouldn't this cost be considered alongside Coca-Cola's bottom line?

We've already plucked the low hanging fruit with kerbside collection and recycling. To get further improvements in waste reduction, we need to look to other methods that reduce the amount of waste entering landfill and our environment.

Container deposit schemes have been shown to be effective and popular.

If Coca-Cola's legal actions demonstrate anything, they demonstrates the need for a national container deposit scheme.

It's time to start talking about effective ways to reduce waste. If the beverage giants can suggest an alternative that is as effective as container deposit schemes, I'm all ears.

Tristan Knowles is an economist with the Australian Conservation Foundation