Cost Benefit Analysis of Aseptic Carton Recycling in

Cost Benefit Analysis of Aseptic Carton Recycling in Bandung, Indonesia Marc-Antoine Dunais Nicholas School of the Environment Duke University

Background • In low-income Asian countries, a majority of MSW is inadequately processed • Results in environmental problems affects the health of humans and animals causes economic and welfare losses

Background • Bandung is Indonesia’s third largest city: 6 million habitants, 3% annual population growth rate, 8000 m 3 of waste generated each day Burnt (toxic fumes) Processed to landfills Recycled Dumped (causes flooding, coastal pollution)

Aseptic cartons Allow liquid food to be safely stored at room temperature without preservatives Consist of: • paperboard (75%) • plastic (20%) • aluminum (5%)

Aseptic cartons • Packaging structure more complex than plastic bottles or magazines • Recovery of all packaging components is challenging • Only 1% of cartons recycled in Indonesia Lack of information on the recycling potential of these products Lack of efforts so far by the private recycling sector to recycle them

Scope & objectives Explore costs and benefits of recycling aseptic cartons at BBPK, a recycling plant in Bandung Objectives: • Determine cost of recycling cartons • Assess 3 scenarios for carton recycling at BBPK through Cost Benefit Analysis (CBA) • Provide a set of recommendations to BBPK

Methodology 1 Collect data on economic costs and benefits of recycling aseptic carton material at BBPK 2 Carry out CBA to determine the economic values of aseptic carton recycling 3 Apply sensitivity analysis to the CBA

About BBPK • Center for Pulp and Paper: parastatal body • Focus on pulp, paper and environmental issues • Activities: research, equipment calibration, certification, consulting… and recycling • Supported by Tetra Pak to initiate aseptic carton recycling in Bandung

Methodology (scenarios) Scenario 1 Scenario 2 Baseline/Business as BBPK pays for the usual purchase of waste cartons in Bandung Scenario 3 BBPK pays for the purchase of discarded cartons and sells polyfoil in addition to pulp BBPK continues to receive financial support from Tetra Pak Long-term scenario Potential scenario for BBPK starting in 2010

Results Scenario 1 Scenario 2 Baseline/Business as BBPK pays for the usual purchase of waste cartons in Bandung - Negative cash flow (NPV = - USD 58, 618) - 50% increase in the amount of aseptic cartons recycled per year creates a positive NPV Scenario 3 BBPK pays for the purchase of discarded cartons and sells polyfoil in addition to pulp - Substantial negative cash - Negative cash flow (NPV = - USD 426, 790) (NPV= - USD 70, 997) - Sensitivity analysis for Quantity of Aseptic Cartons and Purchasing Price of Aseptic Cartons shows positive cash flow

Discussion • Challenging for BBPK to achieve positive cash flow, even with Tetra Pak subsidy • By increasing recycling capacity, BBPK can reduce cash flow gap • Full extent of BBPK’s negative cash flow requires further study

Recommendations 1. Increase recycling capacity, as there is enough raw materials to allow increased recycling rate 2. Sell pulp at a premium price to a niche market 3. Reduce Tetra Pak subsidy *progressively*

Conclusions • Increase BBPK recycling capacity to reach more buyers who buy bulk; sell pulp to niche market with price premium • A slow-down in recycling will undermine market for collection and purchase of discarded cartons • BBPK will falter if subsidy is not sustained in the medium term

Thank you!