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However, comparing the market cost of recyclable material with the cost of new raw materials ignores economic externalities—the costs that are currently not counted by the market. Creating a new piece of plastic, for instance, may cause more pollution and be less sustainable than recycling a similar piece of plastic, but these factors will not be counted in market cost. A life cycle assessment can be used to determine the levels of externalities and decide whether the recycling may be worthwhile despite unfavorable market costs. Alternatively, legal means (such as a carbon tax) can be used to bring externalities into the market, so that the market cost of the material becomes close to the true cost.

The recycling of waste electrical and electronic equipment in India and China generates a significant amount of pollution. Informal recycling in an underground economy of these countries has generated an environmental and health disaster. High levels of lead (Pb), polybrominated diphenylethers (PBDEs), polychlorinated dioxins and furans, as well as polybrominated dioxins and furans (PCDD/Fs and PBDD/Fs) concentrated in the air, bottom ash, dust, soil, water and sediments in areas surrounding recycling sites. Critics also argue that while recycling may create jobs, they are often jobs with low wages and terrible working conditions. These jobs are sometimes considered to be make-work jobs that don't produce as much as the cost of wages to pay for those jobs. In areas without many environmental regulations and/or worker protections, jobs involved in recycling such as ship breaking can result in deplorable conditions for both workers and the surrounding communities.

Other studies have shown that recycling in itself is inefficient to perform the “decoupling” of economic development from the depletion of non-renewable raw materials that is necessary for sustainable development. The international transportation or recycle material flows through "...different trade networks of the three countries result in different flows, decay rates, and potential recycling returns." As global consumption of a natural resources grows, its depletion is inevitable. The best recycling can do is to delay, complete closure of material loops to achieve 100 percent recycling of nonrenewables is impossible as micro-trace materials dissipate into the environment causing severe damage to the planets ecosystems. Historically, this was identified as the metabolic rift by Karl Marx, who identified the unequal exchange rate between energy and nutrients flowing from rural areas to feed urban cities that create effluent wastes degrading the planets ecological capital, such as loss in soil nutrient production. Energy conservation also leads to what is known as Jevon's paradox, where improvements in energy efficiency lowers the cost of production and leads to a rebound effect where rates of consumption and economic growth increases.

Although many government programs are concentrated on recycling at home, a large portion of waste is generated by industry. The focus of many recycling programs done by industry is the cost-effectiveness of recycling. The ubiquitous nature of cardboard packaging makes cardboard a commonly recycled waste product by companies that deal heavily in packaged goods, like retail stores, warehouses, and distributors of goods. Other industries deal in niche or specialized products, depending on the nature of the waste materials that are present.

Although many government programs are concentrated on recycling at home, a large portion of waste is generated by industry. The focus of many recycling programs done by industry is the cost-effectiveness of recycling. The ubiquitous nature of cardboard packaging makes cardboard a commonly recycled waste product by companies that deal heavily in packaged goods, like retail stores, warehouses, and distributors of goods. Other industries deal in niche or specialized products, depending on the nature of the waste materials that are present.

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