Bonus Post — A Bottle Is a Bottle
Connecticut designed a perfect recycling incentive. It forgot to specify who got to respond.
This case came to BFR through James McDonough, a reader in Connecticut who recognized the pattern unfolding in his own backyard — and took the time to bring it here. That is precisely the kind of observation this newsletter exists to surface. Thank you, James.
The Problem Was Already in the Design
Connecticut enacted its bottle deposit law in 1978. For the next four decades it functioned as intended: a modest $0.05 incentive to return cans and bottles, reliably moving roughly half the state’s eligible containers back through the system. Not spectacular, but functional.
By the early 2020s, the rate had slipped. Redemptions fell below 50%. The containers that consumers “should” have been returning were ending up in landfills. The environmental goal was underperforming.
In June 2021, the Connecticut legislature passed SB 1037. The solution was direct: double the deposit. On January 1, 2024, Connecticut’s bottle deposit went from $0.05 to $0.10 per container. The bill also expanded eligible containers — hard seltzers, hard ciders, juices, coffees, and energy drinks now qualified.
The logic was sound. Oregon had raised its deposit to $0.10 in 2017 and seen returns increase by more than 15 percentage points. Higher stakes meant stronger incentives. The math appeared sound.
Connecticut’s neighbors are different. Massachusetts charges $0.05. New York charges $0.05. Rhode Island has no deposit. New Jersey has no deposit.
Connecticut had, without intending to, created a guaranteed $0.05 to $0.10 profit margin on every bottle brought across its border from four neighboring states. That signal reached anyone within driving distance.
It Worked
The results were immediate. By the end of 2025 — two years after the new rate took effect — Connecticut’s statewide redemption rate had risen from 44% to 97%.
That is not a rounding error. That is a transformation. Connecticut went from returning fewer than half its eligible containers to returning virtually all of them. From an environmental standpoint, the policy was a striking success. The legislature had wanted higher redemption rates. It got them.
The state had also received something it did not ask for.
It Worked for Everyone
Connecticut’s Department of Revenue Services tracks wholesaler-level redemption data. By 2025, its figures told a story the architects of SB 1037 had not anticipated.
Twelve percent of all Connecticut wholesalers paid out more in redemptions than they collected in deposits during 2025. Not occasionally. For the year. Across that 12 percent, total losses for 2025 came to $11.3 million — a figure drawn directly from state DRS data. Star Distributors, based in West Haven, had lost more than $2 million since January 2024 alone.
The mechanics are direct. Connecticut requires each deposit initiator — the first distributor to sell a beverage container in-state — to collect the 10¢ deposit and hold it in a dedicated account. That distributor then pays out 10¢ for every eligible container redeemed at stores it supplies, regardless of where the container was originally purchased. An out-of-state bottle costs the distributor 10¢ it never collected. There is no state reimbursement mechanism. The state’s share comes from the unclaimed float — bottles sold but never returned. When out-of-state bottles arrive in volume, the float collapses and the loss falls entirely on the distributor.
In border areas, the situation was more extreme. Certain distributors were redeeming more bottles than they had ever sold. More containers came back than went out. The only explanation is that bottles purchased elsewhere were entering the Connecticut return system.
This is not a mystery. Beginning in October 2024, CT Public Radio was documenting it directly: residents from Massachusetts, New York, Rhode Island, and New Jersey were crossing the state line with bags, carloads, and eventually truckloads of containers to collect $0.10 apiece. The differential had created an arbitrage market. On a thousand bottles, the profit was $50 to $100. On a truckload, it was a business.
No one in this story was cheating. The people crossing the border were responding to a price signal Connecticut created and broadcast to everyone within driving distance. The commercial operators running truckloads were entrepreneurs. The state had built the market. They served it.
The Cascade of Corrections
Connecticut’s response followed a familiar arc.
In 2024, the legislature made it illegal to knowingly redeem out-of-state bottles. The fine was $50.
The behavior continued.
In February 2026, the legislature passed an emergency bill (SB 299). First offense: $500. Third and subsequent offenses: $2,000 fine and up to one year in prison. Local police were authorized to pursue out-of-state violators. Redemption centers were required to obtain state licenses and track bulk drop-offs.
The behavior continued.
In May 2026, the legislature escalated beyond misdemeanor territory. Anyone redeeming more than 5,000 out-of-state containers now faces a Class B misdemeanor. Commercial-scale operators — 40,000 or more annually — face a felony: up to five years in prison. The Connecticut State Police were deployed on overtime to specifically target out-of-state redeemers crossing the border.
The fine went from $50 to $750 to a misdemeanor to a felony in two years. Each escalation acknowledged that the prior one was insufficient. Each one tried to bolt on the guardrail that should have been in the original design.
Along the way, one proposal was raised and set aside: reduce the deposit back to $0.05. It would have closed the arbitrage entirely — no differential, no profit, no truckloads. The legislature rejected it in favor of criminal charges. The fix that would have removed the design flaw was on the table. The legislature chose enforcement instead.
There is a secondary story buried in the data. Connecticut’s bottle deposit system was also a revenue mechanism. Under the original structure, unredeemed bottles — containers sold but not returned — generated forfeiture revenue that flowed to the state’s general fund. When the redemption rate was 44%, that forfeiture revenue was substantial. By 2025, with the rate at 97%, it had nearly disappeared. The state had optimized so completely for recycling that it had inadvertently eliminated a financial cushion it relied on.
Two things happened simultaneously: the state was losing forfeiture revenue it had counted on, and Connecticut wholesalers were absorbing $11.3 million in net losses they could not recover. These are two distinct financial harms: the wholesalers paid out more in redemptions than they collected in deposits; the state lost the forfeiture revenue from unredeemed containers it had long counted on. The reward worked. Everything around it bent.
The Designers Built a Rate
The Connecticut bottle deposit case is not a story about greed or bad actors. There are no villains here.
The legislature identified a real problem: declining redemption rates, environmental impact, containers ending up in landfills rather than recycling streams. It chose a reasonable solution: raise the price signal, expand eligible containers, follow the Oregon precedent. The logic was defensible.
What the designers did not build was a boundary. The $0.10 reward applied to any bottle, brought by anyone, regardless of where it was purchased or who paid the original deposit. The incentive was geographic in its effects but not in its design. A bottle is a bottle. The system could not ask where it came from.
Compare this to the Northern Ireland Renewable Heat Incentive (NI RHI), which ran from 2012 to 2016 — a scheme covered in Post 7. That scheme paid businesses to burn renewable fuel to generate heat. The payment rate was set above the cost of fuel. There was no cap on installations, no ceiling on hours of operation. The reward was open-ended. The behavior that followed — burning fuel 24 hours a day, building sheds with no purpose other than containing the boilers — was a rational response to an incentive without a limit. The designers had built a rate. They had not built a ceiling.
Connecticut’s gap was spatial. Northern Ireland’s was temporal. In both cases, the missing guardrail was not an oversight born of ignorance. It was a design assumption that proved wrong. Connecticut assumed that the people redeeming bottles would be the people who had paid the original deposit. That assumption was embedded in the logic of the system but never enforced by the mechanics of it.
Every correction since has tried to retrofit the missing assumption into a system that was not built to carry it. Fines require enforcement at every transaction. Prison sentences require prosecution. State troopers on overtime watching border crossings are an expensive, imperfect substitute for a design feature that would have been cheap at the outset.
The fix to a missing boundary is a boundary. The alternative is perpetual enforcement of the boundary you did not build.
What the Cases Have in Common
This case fits a pattern that runs through most incentive failures. The goal is correct. The reward is directionally right. The behavior it produces is rational. The problem is a gap in the architecture — a constraint that was assumed but not built.
Wells Fargo’s declared strategy was customer relationships (Post 6). The incentive rewarded accounts opened. The gap was between the metric and the goal.
Connecticut’s declared goal was higher recycling rates. The incentive rewarded containers returned. The gap was between who was meant to respond and who the incentive actually reached.
The reward cannot enforce what the design does not specify. Every behavior that followed — the arbitrageurs, the truckloads, the $11.3 million in losses — was a faithful execution of the reward as written. The people collecting the deposits were not violating the spirit of the law. They were following the letter of the incentive.
That is the point. When the incentive does not say who, everyone is who.
In your organization, across the incentive systems you’re responsible for — compensation structures, performance metrics, bonuses, targets — what assumptions are embedded in the design that the mechanics do not actually enforce? What boundary exists in the intent but not in the architecture?
Ask yourself: what behavior in your organization are you pricing at the wrong level? Not the wrong intent — the wrong price. Connecticut raised the deposit from five cents to ten and return rates jumped fifty points. The behavior was already there. The price wasn't high enough to produce it. Before diagnosing a culture problem, it's worth checking whether it's a pricing problem.
If you’re working through an incentive design challenge in your organization — or trying to understand why a policy or strategy that looked right on paper isn’t producing the results you expected — I work with leadership teams on exactly these problems. You can reach me at wayne@waynerepich.com.
Behavior Follows Rewards. The pattern shows up wherever people are measured and rewarded.
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—Wayne
Last time: College athletes fought for decades for the right to profit from their name and likeness — and when the rules changed, the system delivered exactly what the new incentives rewarded.
Next: In 2012, eight Olympic athletes were disqualified. Not for cheating. For losing.
In development — a corporation whose internal ranking system made employees compete against each other instead of the competition; a pro sports league that rewarded losing for four decades. More on the way.
Sources
Eichhorst, Angela. “Why is CT’s bottle redemption rate up for debate again in 2026?” CT Mirror, April 13, 2026. https://ctmirror.org/2026/04/13/ct-bottle-redemption-deposit/
CT Mirror. “CT moves to crack down on bottle redemption fraud.” February 26, 2026. https://ctmirror.org/2026/02/26/ct-lawmakers-move-to-crack-down-on-bottle-redemption-fraud/
CT Mirror. “CT bill tackles bottle deposit redemption fraud. But is it happening?” July 21, 2025. https://ctmirror.org/2025/07/21/ct-bottle-deposit-bill-redemption-fraud/
CT Public Radio. “After CT boosts its bottle deposit to 10 cents, out-of-state residents hustle to take advantage.” October 30, 2024. https://www.ctpublic.org/news/2024-10-30/bottle-return-fraud-connecticut
Whiting, Brandon. “E-Can-Omics: The impact of raised deposits.” Inside Investigator, September 29, 2024 (updated April 29, 2025). https://insideinvestigator.org/e-can-omics-the-impact-of-raised-deposits/
Western Mass News. “Fines increase, crossing into Connecticut for bottle & can returns.” March 2, 2026. https://www.westernmassnews.com/2026/03/02/fines-increase-crossing-into-connecticut-bottle-can-returns/
Connecticut General Assembly. Public Act 21-58 (SB 1037), signed June 2021. https://www.cga.ct.gov/2021/ACT/PA/PDF/2021PA-00058-R00SB-01037-PA.PDF
Connecticut General Assembly. Research Report 2024-R-0055: Out-of-state container redemption made illegal. https://www.cga.ct.gov/2024/rpt/pdf/2024-R-0055.pdf
Eichhorst, Angela. “CT bottle bill, updated with felonies for fraud, passes.” CT Mirror, May 7, 2026. https://ctmirror.org/2026/05/07/ct-bottle-bill-felonies-fraud-passes/
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