ALBERT

Description: The most significant environmental benefit of recycling or reusing a wide range of products and materials is typically the potential to displace primary material production; lack of displacement significantly reduces the environmental benefits of these activities. Because no consensus method to estimate displacement rate has emerged, environmental assessments have tended to assume that displacement occurs on a one-to-one basis. However, displaced production is a complex phenomenon governed primarily by market mechanisms, rather than physical relationships. This article advances the understanding of displacement by presenting a market-based framework describing the displacement relationship and a methodology for quantifying displacement rate based on partial equilibrium modeling. Using this methodology, a general symbolic equation for displacement rate after an increase in recycling is derived. The model highlights the market mechanisms that govern displaced production and identifies five price response parameters that affect displacement rate. Results suggest that one-to-one displacement occurs only under specific parameter restrictions that are unlikely in competitive commodity markets, but zero displacement is possible if secondary materials are poor substitutes for primary materials; displacement is likely to be reduced if secondary materials have inferior technical properties. The presented methodology can be generally applied to any system in which recycled or reused materials are substitutes or complements for primary materials. Implications for improving recycling and reuse efficacy and environmental assessment methodology are discussed, and suggestions are presented for expanding the displacement methodology in future research.

Description: Recycling materials from end-of-life products has the potential to create environmental benefit by displacing more harmful primary material production. However, displacement is governed by market forces and is not guaranteed; if full displacement does not occur, the environmental benefits of recycling are reduced or eliminated. Therefore, quantifying the true “displacement rate” caused by recycling is essential to accurately assess environmental benefits and make optimal environmental management decisions. Our 2016 article proposed a market-based methodology to estimate actual displacement rates following an increase in recycling or reuse. The current article demonstrates the operation, utility, and challenges of that methodology in the context of the U.S. aluminum industry. Sensitivity analyses reveal that displacement estimates are sensitive to uncertainty in price elasticities. Results suggest that 100% displacement is unlikely immediately following a sustained supply-driven increase in aluminum recycling and even less likely in the long term. However, zero and even negative displacement are possible. A variant of the model revealed that demand-driven increases in recycling are less likely than supply-driven changes to result in full displacement. However, model limitations exist and challenges arose in the estimation process, the effects of which are discussed. We suggest implications for environmental assessment, present lessons learned from applying the estimation methodology, and highlight the need for further research in the market dynamics of recycling.