Recycling: Does It Make Economic Sense?

My first money-making venture was collecting newspapers door-to-door. My friend, Drew, and I filled up his garage with used newspapers, loaded them up into my parents’ orange Ford van, and took them to the recycling center. The going rate for newspapers was $.03 an inch. One week, our payout hit a record $17. In retrospect, I think a lemonade stand would have been the better way to go. Nevertheless, this early business venture has led to a lifelong curiosity about the economics of recycling.

Hard times for Recyclers:

The economics for the recycling industry these days are not good. Approximately 30% of the recycling centers in California have closed since 2011, and the largest recycling company nationwide, Waste Management, has closed 20% of its plants in the past two years.

Until recent years, Waste Management shared the revenue from selling the recycled materials with the city or county that hired it. Recycling made participants feel good and was a profitable endeavor for a community, similar to socially responsible investing. Now, recycling companies like Waste Management have to charge municipalities.

The District of Columbia made $389,000 on its recycling program in 2011, but profits evaporated and the city had to pay $1.2 million last year to subsidize the program. In fact, almost every recycling facility in the country now operates at a loss. More than 2,000 municipalities nationwide are paying to dispose of their recyclables instead of the other way around. A combination of falling oil prices (a key determinant in the cost of producing new plastic), and weakened demand from China (the largest market for recycled materials) have sent prices for American recyclables plummeting. The price of a ton of sorted aluminum cans is down 28% and plastic bottles are down 44% over the past two years.

New plastic is cheaper to produce than recycled:

An example of the cost problem can be seen with the most common type of recycled plastic, polyethylene terephthalate (PET). Last year, The Wall Street Journal reported that newly-produced PET, which is used for soda and water bottles, now costs 7 cents less than the recycled variety. Sadly, the majority of the population is not willing to pay more for products using recycled materials.

Environmental advocates in California in the 1990s believed that the best way to increase participation in recycling programs was to make it easier. No one liked the messy, time-consuming process of sorting recyclables. So the recycling industry created material recovery facilities (MRFs) to do what consumers wouldn’t. By pushing to increase recycling rates with bigger and bigger bins—while demanding almost no sorting by consumers—the recycling stream has become increasingly polluted. This has also raised costs and decreased the value of the recycled materials.

Almost all materials could be recycled if cost were not an issue. Naturally, some materials make more sense to recycle than others. Cardboard is easy to recycle and there is still a good market for it (can you say eCommerce?). Plastic makes sense despite its current lack of profitability because it is the most damaging to the environment. However, it is hard to argue that glass should be recycled at all. It’s the heaviest of recyclables but has always been of marginal value as a commodity. A large share of it breaks and contaminates valuable bales of paper, plastic, and other materials.

Recycling glass may be the worst material for recyclers:

Today, more than a third of all glass sent to recycling facilities ends up in landfills as daily cover to bury the smell and trap gases. The rest of the glass has almost no value to recyclers and can often cost them to haul away.

So, is there a silver lining? Well, the good news is that it seems that cities and counties will continue recycling despite the lack of financial incentive. This is better than having plastic last forever in our landfills or, even worse, in our oceans. Also, we will have something to feel good about when oil prices rise (then recycling may be economically viable again). In the meantime, solar energy may be a more economcial way to show our concern about the environment?