IMO this whole debate is a little on the silly side. Banning bottled water for sale at public places limits the consumer from making a relatively healthy choice at the vending machine. You are forcing the consumer to make a less healthy beverage choice. How can you reconcile the effort to remove junk food from vending machines while simultaneously limiting beverage choices to unhealthy sodas or fruit-flavoured beverages? And the alternate choice will still contribute to the recycling dilemna.
If you are intersted in improving the recycling rate, then drop a recycling bin next to the vending machine. The more tonnage of recyclable bottles that end up in the bins, recycling facilities for these bottles will become more available and more cost effective. A plastic bottle recycler in southern Ontario recently stopped accepting them because not enough were being diverted to it to make it a cost-efficient endeavor. Modifying human behaviour to recycle is a long and difficult process. Our efforts should be geared to increasing recycling awareness.
Personally, I see the suggestion to ban the water bottle as a quick-and-easy feel-good item that will do little to impact the overall use of water bottles. Education really is the answer. I do think the idea of a deposit/refund policy would be a more effective approach to undertake. But again, such a policy requires initiative at the provincial level, not a piecemeal municipal approach.
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"A government that robs Peter to pay Paul can always depend on the support of Paul"
-George Bernard Shaw
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