Wednesday, January 19, 2011

Markets and the Environment

Cafe Hayek recommended a fascinating speech given by Harry Teasley. He used to be a Coca-Cola executive and he discusses the role of markets in producing agricultural and environmental efficiencies using multiple example from his time at Coke. I'll include just one of these stories. The rest are equally engaging and illustrative of the importance of looking at the entire system rather than just one part:
I was asked to present a paper on orange juice packaging, which I did.  As I began my presentation, a young woman from Maine immediately challenged me, as she thought that I was essentially an immoral brigand for packaging orange juice. She thought that the orange was a great example of a product which required no packaging, and that was the way it should be sold.

Upon closer examination, this is not the case. 
Fresh oranges are packaged in rather substantial corrugated containers for distribution to retail outlets.  But that is not the place to begin one’s analysis.      

Industrial juice processors squeeze oranges more efficiently than consumers’ because of the equipment they use to perform the task.  A consumer will, at a minimum, require about 20 percent more oranges than an industrial juice processor to yield the same amount of juice.

So, home squeezing of fresh oranges is less efficient of oranges and, therefore, less efficient of agricultural land, fertilizers, pesticides, herbicides, water resources, agricultural capital, and agricultural labor than packaged orange juice.

Fresh oranges generate almost 9 times more corrugated waste at retail than does the 12-oz. frozen concentrate alternative.   And, at the consumer level, fresh oranges generate over 60 times the poundage of waste as the 12-oz. frozen concentrate alternative.  The consumer waste is, of course, wet peels versus the small composite can.

When a consumer squeezes oranges, the wet peels are disposed of through the solid waste collection and disposal system, while a juice processor converts the peel to animal feed and also recovers orange oil and d’limonene, which are used for other products and processes.

The fresh orange alternative also weighs about 7.5 times as much as the 12-oz. frozen concentrate alternative, and requires about 6.5 times as many trucks to distribute equal quantities of orange juice to the consumer.  So, in addition to agricultural efficiencies, the 12-oz. frozen concentrated orange juice produced is more efficient of trucks, diesel fuel, and road systems.

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