Revisiting Recycling in late 2021

The two biggest macroeconomic worries in the US right now are burgeoning inflation and supply chain issues. A plausible narrative for both is that the rolling global COVID pandemic has disrupted our ability to efficiently move products to markets, while loose money policies have ignited inflation.

These both sound bad. But with markets, sometimes good or bad results depend on who you are. A disrupted supply chain for one business is an opportunity for another business. And high prices? Well, in recycling commodity markets for example, it’s the best market they’ve seen in the last ten years. 

Colored trash bins used to recycle paper, plastic and glass.

What does this mean? Recycled materials – in the big four categories of paper, metal, glass and plastic – all have secondary markets. The business goal of a recycling provider is to sort, package, and sell as cleanly as possible these four types of materials to the end user.

“Cardboard and paper prices are both on the rise. Plastic prices have skyrocketed compared to what they were, let’s say, five years ago,” Josephine Valencia, Deputy Director at the City of San Antonio Solid Waste Department, tells me. Her explanation points to the same macro trends we’re all worried about.

Valencia continues explaining high prices of recycled commodities, “In the past two years, and this is just my guess, it’s COVID-related supply shortages. There’s a shortage of just about everything these days. And I think that has really driven up the price of certain [recycled] commodities.”

So if you’re in the recycling business, these are the best of times.

If your personal subscription to the online newsletter “Resource Recycling” has recently lapsed, allow me to quote a few price changes for you. 

Baled steel cans have risen from $78 per ton last year to $250 per ton. 

Baled aluminum cans jumped from $0.45 a pound last year to $0.77 a pound last year. 

On the paper side, corrugated containers trade for $171 per ton, up from $60 per ton last year. Another paper product, sorted residential paper, sells for $117 per ton compared to $38 per ton a year ago.

As the band Chic used to sing back in 1979, These. Are. The. Good. Times.

If you were hoping to have a disco-era earworm stuck in your head for the rest of the day, dating back to the last time we saw high inflation, you’re welcome.

Good_Times
For Recyclers

When last I checked in with the recycling markets in 2019, a few trends were made clear to me. 

First, glass is infinitely recyclable but generally a money loser for recyclers unless it can be sorted by color and delivered to a nearby glass recycling operation. Second, paper and cardboard was in a multi-year decline because of the lack of demand for newsprint (RIP the newspaper industry!) and the awkward adjustment to a world in which ubiquitous Amazon cardboard didn’t fit traditional cardboard-sorting machines. Third, plastic prices were in freefall because China had begun refusing most deliveries. Fourth, metal was the only reliable money-maker.

But high prices in 2021 have swung recycling programs from losses two years ago back to a money maker. Things are a lot better now in San Antonio, for example, says Valencia. 

I’m going to simplify the math a bit, but here’s the basic deal in my city. We pay approximately $50 a ton to dump recycled bins with the city’s provider, which currently is the large waste processor Republic Services. Republic sorts and processes the stuff, and then sells it in the secondary commodities market, and agrees to share half the resulting revenue with the city. If the revenue from sales generates $120 per ton, the city makes $60, and can count a “profit” of $10 per ton. That’s approximately the economics – admittedly simplified – right now. 

In a bad year like 2019, the revenue share didn’t quite cover the upfront $50 cost to deliver, so the city had a “loss.” A bunch of other factors makes my explanation overly simple – they average out prices, contaminated commodities change the final revenue-sharing formula, losses can be carried forward – but Valencia endorsed my explanation as basically approximately true.

A factor which tempers the celebration of 2021 recycling profit is that – just like any business – the city’s costs are also affected by inflation. In the past year, the cost of purchasing new plastic household bins has increased from roughly $50 a barrel to $75 a barrel. Because they are made of plastic and plastic prices are way up. With a million barrels in circulation right now, that price increase affects the annual budget in a real way. And just as the price of new and used cars has increased, so too has the price of garbage trucks. In that past year, that’s gone up from $365 thousand per truck to $425 thousand per truck, says Valencia. Because of course trucks are made up of steel and plastic, all of which costs more now than last year.

“On the one side I can say, I’m excited as the city recycling revenues have gone up, so we’re making money. But on the other side, at the end of the day, we’re not sitting on a windfall because even though our revenues went up all our expenses went up as well,” continued Valencia.

Like any volatile financial market, hindsight is 20/20 and past performance is no guarantee of future results, included for recycled commodities. We don’t know what happens next.

By the way, the multi-generational fix that recycling experts would ideally have us do remains the same: Wean us off the big blue unsorted barrel of mixed commodity waste. We should all be sorting the multiple waste streams in our households into many different smaller homogenous-material barrels. Civilized countries (and by “civilized” I explicitly exclude here both the United States and the Republic of Texas) have figured out how to do this basic sorting at home. Everyone would recycle more stuff and make more money. 

A version of this post ran in the San Antonio Express News and Houston Chronicle.

Please see related posts

Recycling Markets were broken in 2019 – Part I

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Broken Recycling Markets Part IV – Best Household Practices

As recycling commodity markets have swooned the past few years and this former source of city revenue has now become a costs item, what’s a responsible household to do?

recycling_bin

The first response is that households can’t do this alone. Recycling involves a complex interconnected chain between raw material producer, manufacturer, transporter, retailer, consumer, and waste processor. Household consumer behavior is only one link in the chain. I’m addressing the household link in the chain here mostly because I figure I have more household consumers reading this column than I have of managers of packaging manufacturers and managers of retail operations.

So, what’s a guy and his big household recycling bin supposed to do? 

Until recycling processors change their engineering methods for efficiently separating materials, “less is (probably) more” when it comes to what we put in the recycling bin. Like, if you’re not sure, probably just leave it out. Even if you are sure, try to make sure you are sure, you know? We tend to suffer from a classic behavioral finance error, when it comes to our bins. That error is overconfidence, and putting things in “just in case” they can be recycled. That’s costly.

republic_services

Republic Services, the nation’s second-largest waste management company reports that 41 percent of households received a “failing grade” on knowing what is, or is not, recyclable.

Josephine Valencia, recycling manager at San Antonio’s Solid Waste Department, explained to me that when the city has surveyed people about what they think goes into the recycling bin, they find that people are vastly overly confident about the wrong things. We think we know what we can recycle, but we are frequently wrong.

Metal

With clean metal soup cans and aluminum beverage cans – these are unreservedly still good for the bin. More than that, they represent the single highest value commodity that you can put into your municipal bin. So, you’re making money for your city when you put those in there. 

But what about other metals? Tin foil? Small metal pieces? Metal mixed with plastic packaging? Chances are these aren’t at all recoverable by recycling processors. You’re just raising the cost of processing when you include these in your bin.

Plastic

Plastic single-use water bottles? Those actually are fine and have a market value. Milk jugs too, and even heavier plastic bottles. Practically all other plastics though are headed for the landfill. 

About two years ago San Antonio said we could gather our single-use plastic bags into bundles of 30-40 bags, in the shape of a soccer ball. I learned those are headed to the landfill as well, with plastic prices where they are now. That made me sad. Many large retailers will take back the plastic bags, but that extra layer of effort is, well, not something I currently do. I liked making the soccer balls, darnit!

recycling_plastic

Paper

Paper is more fraught than I expected.  It turns out most recycling processors were not built for the volume of small Amazon-style cardboard boxes we produce in 2019. Until that gets fixed at the processing plant, most of these are not getting efficiently recycled, to my chagrin. 

Mixed paper is hardly worth anything these days, and cities are currently paying processors to take it off their hands.  

Glass

And then there’s glass. This is a money loser for cities. It’s mentally difficult to landfill glass because it’s quite recyclable. And yet, the finance guy in me knows I’m just raising costs when I put glass in the bin. I’m torn. 

Mixed Packaging

Most all mixed-packaging, which increasingly fills our shopping carts, is not recyclable. Your favorite thin salty chips come in in that cylindrical can made up of paper but with a metal lining inside? Totally not recyclable.

The metal trays from your favorite fast food barbecue place are not recyclable.

Plastic toys are generally not recyclable.

Plasticware from your take-out restaurant is not recyclable.

Generally plastics that aren’t a water bottle, milk jug or cleaned plastic can’t be recycled.

Clothing is not recyclable. Bring it to Goodwill.

And for goodness’ sakes, diapers are not recyclable. That’s for the trash bin only.

“When in doubt, leave it out” is what the experts keep telling me. By putting iffy items into the recycling bin you are simply raising the cost of processing, which gets passed on to municipalities one way or another, which we ultimately cover in our taxes.

I’m a markets guy, so I tend to think that recycling doesn’t have a chance unless we align dollars and self-interest with best waste management practices. I’ve come to appreciate that this is 

1. Super-duper complicated and 

2. Sustainable financially and environmentally only if everyone in the waste production and management chain is working together. It’s so complicated that it’s far easier to come up with questions rather than solutions or answers. 

Big Questions for the Future

A few fundamental questions that learning about this raised for me:

Can households be trained better to recycle only the limited number of financially viable commodities like cans, tins, water bottles, and clean plastic jugs?

Can households some day be trained to actually separate their commodities into more valuable sorted bins, as is done in Europe and Japan?

Will consumers prioritize buying recyclable packaging materials in a way that will force manufacturers and retailers to respond to market demand?

Can manufacturers be incentivized to create more recycled and recyclable packaging, rather than mixing paper, plastic and metal in a way that can’t conceivably be recovered from household waste?

Can retailers be incentivized to serve as the feedback mechanism for channeling consumer preferences to food manufacturers?

Can recycling processers adjust their collecting and sorting processes in a cost-effective way to constantly-changing packaging?

Will municipal, state, and national government policies nudge – in a sustainable way – for more efficient recovery and reuse of materials?

The recycling market is in a period of transition caused by a market slump.

An optimistic view would be that technological and engineering changes, combined with household changes, can mitigate and even solve our problems in the future.

Energy and environment expert Rachel Meidl of Rice University’s Baker Institute says she doesn’t see the China ban or current commodity slumps “as a crippling force. I see it as an opportunity to prepare and strategize for the next generation of recycling and innovation. A long-term sustainable solution would be investing in R&D and scaling up infrastructure to recycle or recover” more commodities. 

That, combined with household behavior, would help over the medium and long run. I don’t know enough whether to be optimistic or pessimistic about the current crisis. I’m going to try to do better with my bin though, and leave the rest to the experts.

A version of this post ran in the San Antonio Express News and Houston Chronicle.

Please see related posts

Broken Recylcing Markets Part I – China Ban, market swoon

Broken Recycling Markets Part II – Commodity Markets slump

Broken Recycling Markets Part III – Hit on City Budgets

Organic Recycling – Green in Being Green

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Recycling Part III – Bottom Line For Cities

reuse_reduce_recycle

In the past decade most cities have benefitted financially from developing robust recycling programs, helping cities financially in two ways. First, by diverting tons of waste away from landfill, cities reduce their landfill costs. Second, by hiring recycling processors who can resell and share profits from the resale of secondary commodities like metal, paper, and plastic, cities have earned positive revenues from their programs.

A slump in commodity prices as well as other market factors, however, have fundamentally shifted this second factor in the municipal economics of recycling. A snapshot of San Antonio and Houston contracts illustrates the market change over just the past three years. 

Houston has seen a swift financial change in their recycling deal. 

Houston

Before 2016, Houston had enjoyed a contract with Waste Management in which the processor would not charge anything to haul recyclables, and would split the upside of revenues as it sold recovered materials into the secondary commodity markets. Recycling made money for Houston, with no financial downside.

houston_skyline
Houston skyline

At the end of that contract in 2016, however, Houston endured temporary contracts and exposure to faltering markets. Between 2016 and 2019, the city paid $92 per ton for hauling and processing, a cost per ton that ended up costing the city an average of $120,000 per month. Also, under temporary contracts, there was no predictability to what the program could cost. 

Houston’s new contract with Spanish processor FCC went into effect in March 2019, requiring the city to pay $87.05 per ton of recycled waste. Like most municipal contracts, Houston can share in the revenue that FCC generates through secondary sales, and use that revenue to offset the costs of hauling and processing. 

Says Sarah Mason, Division Manager of Recycling at Houston’s Solid Waste Management Department “We were aware that the commodities market was on the downside at the time we were working out the [present 2019] contract.” 

Given that exposure, Mason says, they negotiated a maximum net cost of $19 per ton, even if recovered commodity revenues remained weak. Houston has hit the $19 cap every month the contract has been in effect. This cost cap has cut recycling costs to about a third, or an average of $41,000 per month. Still, it’s a contract that reflects the new altered dynamics of the recycling market in 2019. A former revenue source has become a net cost to the city budget.

Meanwhile, a three hours’ drive west on I-10, San Antonio has a few years remaining on its contract, one negotiated in better times. 

San Antonio

Costs to haul and process recycled materials are just over $36 per ton through 2024, according to their contract with Republic Services, which by comparison with Houston seems quite low. An additional “contamination” fee for non-recycled waste that gets mixed in with the recyclables typically raises the costs by another $12.50 per ton. San Antonio’s experience is that contamination fee typically kicks in every month.

san_antonio
San Antonio skyline

In good years, prior to 2017, San Antonio expected secondary commodity revenues to more than offset its costs. The city enjoyed a 50/50 split on revenues above costs. If revenues brought in $72 per ton, the entire program would be paid for. 

Recovered revenues above $72 per ton ended up as a net revenue-generator for San Antonio. In addition, Republic agreed that if recoveries didn’t fully match costs, the city could roll over its net costs, with a promise of owing nothing if recoveries over the life of the contract proved insufficient. That’s how confident Republic must have been in its ability to make money from recovered paper, plastic, and metal, under the old contract, negotiated in the 2013/2014 period.

Financial data shared by Josephine Valencia of recycling manager of the Solid Waste Management Department of San Antonio show net revenues have on average been negative in 2018 and 2019. Net 2018 revenues from recycling averaged negative $2.60 per ton in 2018, and worsened to an average of negative $9.45 per ton, reflecting declining commodity markets. The average recycling costs would be over $60,000 per month in 2019, although Republic will eventually absorb those monthly losses if commodity markets do not recover. San Antonio’s contract lasts through 2024, but if present conditions persisted the city could expect that kind of cost would factor into any new negotiated contract.

In other words, future municipal recycling contacts – if commodity market conditions do not change – will lock in recycling as a loss-maker rather than revenue-generator for cities in the future. Valencia confirmed that Houston and San Antonio’s shift from monthly gain to monthly loss are probably happening nationwide, at least in cities that employ the popular “single bin” method of household recycling. 

Don’t forget landfill-cost comparison

The contracted costs from Houston and San Antonio simplify the total financial picture somewhat, because they do not reflect at least one big factor. Recycling lowers waste management costs overall by redirecting waste away from landfills. The City of San Antonio estimates 2018 and 2019 savings from reduced landfilling at approximately $1.5 million and $1 million respectively, according to Valencia, on a total waste management budget of $150 million. That’s not nothing, and provides a compelling reason to continue the programs, even as they do not produce the positive cash flows of the past.

A version of this post ran in the San Antonio Express News and Houston Chronicle

Please see related posts

Broken Recycling Markets Part I – The Plastic Ban and Commodity Swoon

Broken Recycling Markets Part II – Commodity Market Prices

Recycling Part IV – Best Household Practices

Organic Recycling – Green to Green

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Broken Recycling Markets – Part II Commodity Prices

Industrial recyclers of household products such as paper, plastics, metal and glass are having a terrible, horrible, no good, very bad year.

Typically they get paid by cities to haul and process recyclable waste. But they also earn money from selling valuable commodities they extract from this household waste to industrial users. These commodity markets are in a slump.

A China policy change announced in 2017 – called the “National Sword” – banned a number of types of recyclables from importation. Mixed, and otherwise difficult-to-recycle paper, plastics and metals which US recyclers previously shipped across the Pacific Ocean nearly ceased, by 2019 dropping to about 1% of their previous volume. Without an easy market to sell to, parts of the US commodity markets have been in price free-fall, a period of re-adjustment, or just broken.

The effect of this slump for secondary commodity market is both financial and environmental. 

Although much of the reporting on the China ban has focused on plastics, the biggest effect financially for the nation’s second largest recycler Republic Services has been on paper products, according to Peter Keller, Vice President of Recycling Markets for Republic.

Paper makes up 75% by volume of what Republic receives from household bins and traditionally sells to wholesalers.  Partly because of China’s changes and other factors, this market has tanked in the past two years.

republic_services

Recycled cardboard used to sell for $200 per ton but now goes for $30 per ton. In addition, households now recycle small cardboard boxes from Amazon, which many recyclers are ill equipped to process, compared to the flow of larger cardboard from retail stores just ten years ago. They recover less, and get paid less, for cardboard than in the past.

“Mixed paper,” a catch-all product that used to sell for $110 per ton in 2017 now costs negative $5 per ton. In other words, a recycler like Republic has to pay a wholesaler to take the tons off mixed paper they process off their hands. What used to be a source of profit is now a source of loss.

Interestingly, a third paper product used to be newsprint. With the national decline of the newspaper business, demand for newsprint has dried up. Your soon-to-be recycled newspaper – perhaps the paper you’re reading from now – now goes into the “mixed paper” stream, with limited-to-negative monetary value today.

I puzzled for a while over how to make a grim metaphor combining the challenges facing the newspaper industry, something about training your new puppy as the best secondary use of my newspaper columns, and overlaying that with the declining value of newsprint as a commodity. I couldn’t manage to make it funny though, so let’s move on.

Secondary metal continues to be a solid B+ student of an otherwise failing recycling class. Bundles of clean soup cans that contain steel command secondary prices like $120 per ton, down from $150 per ton a few years ago. Bundles of clean soda cans that contain aluminum command secondary prices like $1,050 per ton, down from $1,400 per ton in 2017. At these still-relatively high prices, even though soup and beverage cans do not make up the majority of your recycling bin, they can be a significant driver of the overall profitability of a recycling program.

puppy_training

Finally, there’s glass. For a long time now, glass has been the class trouble-maker of the four materials in a recycling bin. While glass is somewhat infinitely recyclable, producing new glass from scratch (well, sand) is generally cheaper than using recycled glass materials. 

From a commodity-markets perspective, it is puzzling then that the City of Houston reintroduced curbside glass recycling after a three-year hiatus, to some fanfare, in the beginning of 2019.

Glass that comes through a traditional curbside bin has a negative value of $10 per ton, according to Keller. 

Secondary glass is only financially viable as a recycled commodity when sorted carefully by color and somehow cheaply transported to a nearby glass manufacturer, if one exists. According to Keller, if the glass could be cleaned, color-sorted, and delivered to a manufacturer, it could fetch as much as $100/ton.  But getting to that result costs too much money. 

When glass comes in mixed from a household bin, by contrast, it’s not saleable for a profit, it costs a lot to move because of its weight, and it often contaminates other recycled materials. Think paper products with tiny glass shards. Now how much would you pay? So it’s a loss maker.

Sarah Mason, the Division Manager for Recycling at Houston’s Solid Waste Management Department, defended Houston’s decision to reintroduce glass to me, saying the City’s new recycling partner has custom-built its facility to handle glass more efficiently, hopefully reducing the contamination problem.

And then there’s plastics, which have garnered 95% of the headlines but which constitute about 7% of Republic’s revenue stream. 

Even after the China policy change, three types of plastic still have a viable wholesale commodity market, and these markets track the plastic number you’ll find marked on your household plastics. In brief, numbers 1, 2, and 5 still command decent prices as long as they can be separated and processed cleanly.  Plastic #1 – your basic single-use water bottle, can be sold for $250 per ton now, down from about $325 a few years ago. Plastic #5 – consisting of heavier plastics – has stayed steady at $150 per ton, while plastic #2 made up of milk jugs and detergent bottles is actually up slightly in some markets.

Other plastic numbers are virtually un-saleable at any price as a secondary commodity following China’s policy change, and will go to a landfill.

All of these prices should be understood as varying geographically as well as varying by purity. A recycling processor that can produce a homogenous ton of product will command high prices, while a mixed or contaminated product will sell for less, if it will sell at all.

Everyone I’ve spoken to in recent weeks expresses the hope that as technology and markets change, some of the broken parts of the recycling market can improve and heal. New and better sorting technology at the recycling processing plant can turn previous trash into viable secondary commodities, although it may take a combination of capital investments, time, and improved engineering to get there.

A version of this post ran in the San Antonio Express News and Houston Chronicle.

Please see related posts

Recycling Commodity Market Slump Part I – The China Ban

Recycling Commodity Market Slump Part III – The Price of Commodities (upcoming)

Recycling Commodity Market Part IV – What is a Household to do? (upcoming)

Organic Recycling in my city – My new obsession

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Broken Recycling Markets – Part I

bottles

For the past year my kids cluck disapprovingly whenever they see me drinking through a plastic straw and ask, “why do you hate turtles so much?” The connection, for those of you who don’t speak teen girl, is they are signaling to me their concern for unnecessary plastic waste, especially as it shows up dumped in our waterways and oceans, presumably hurting Tommy the Turtle (a fictional character I made up just now.)

Since plastic straws represent just 0.03% of American plastic waste that ends up in the ocean, according to a brief by Rachel Meidl of Rice University’s Baker institute for Public Policy, my kids’ concern is focused on the wrong thing. Because, you know, kids. 

On the other hand, there is a global financial and environment crisis going on in recyclables. In this column and a few to follow, I will describe what – beyond the plastic straw and Tommy the Turtle – we should know about that global crisis and its linkages to the complex financial markets of recycling. 

We tend to think of recycling as interesting to households who want to reduce carbon emissions and protest over-logging of the rainforest.

But another important way – maybe the more sophisticated way – of understanding recycling is to see it fundamentally as a commodities market. Professionals in the recycling industry operate their businesses in a sophisticated financial market for generating four physical commodities, which happen to be second-hand paper, metal, plastic and glass.

The old Chicago Mercantile Exchange

To the extent we think about commodities markets, we might conjure an image of aggressive guys in trading pits in the Chicago Mercantile Exchange shouting and signaling to each other as pork belly futures crash or soybeans soar, or maybe as quantitative traders at their computers bid up the price of West Texas Intermediate Crude following a drone attack on Saudi refineries. 

I’m less interested in a cartoon Tommy the Turtle than I am in the financial linkages between sophisticated commodities markets and the big municipal bin I set out on my curb once a week. 

The metal straw probably isn’t saving the planet. sksksksksksksksk

In speaking with experts in the past few weeks, I wanted to learn about how at the global and national level these commodity markets have evolved in recent years, and also at my household level what I’ve been missing when it comes to my bin. And also about the municipal contracts and programs that link my curbside bin to government revenue and then further link to global markets. In this column and a few to come, I’ll pass on what I’ve learned.

But first, the global market for recyclable commodities got a massive shock at the end of 2017, with the situation still evolving in September 2019.

China announced a new program called “National Sword” in 2017 in which it would not import 24 types of waste, including many mixed paper and plastic products, starting in March 2018. A further list of 16 more items, including many metals, will be banned from import by the end of 2019. This ban meant that a huge proportion of the recyclable commodity producers in the US and Europe suddenly lost their primary buyer. 

recyclable_bottles
Mountains of Plastic

The China bans allow for the importation of “clean” plastics and metals, but ceased the importation of what people in the industry call contaminated commodities, or mixed materials. 

Even after the 2017 policy change, China remained open to highly pure or homogenous paper, plastics and metals, but not the mixed, dirty and hard to handle stuff it had previously bought from the United States and Europe.

Underlying this China ban is a first key lesson of the economics of the recycling industry: Demand, and prices, are highly driven by the purity of the commodity. 

Purity in this market means the homogenous consistency of one type of resource. If a recycler can cleanly separate any second-hand material – whether it be plastic, metal, paper, or even glass – industrial buyers will pay a premium for that commodity’s purity. 

Mixed materials by contrast, whether blended with other materials types or contaminated by non-recyclables or worse, go for the lowest prices, if they will be bought at all. By 2019 the tons of scrap plastic imported to China fell to less than 1% of 2017 levels. 

Imports of plastic waste from the US and Europe to Indonesia, Malaysia, Philippines, Thailand, and Vietnam briefly quadrupled in 2018, as plastic exporters scrambled to find alternatives to the China market. But those alternative Southeast Asian markets have proven unable to handle the volumes coming from the US and Europe. Recyclers in the US are now awash in secondary dirty plastic, with no market-based outlet for their commodity. Much of that is headed for landfills.

The price of products like cardboard and what the industry calls “mixed paper” has also plummeted. 

Recycling experts draw a straight line between the 2017 China ban and a fundamentally altered US municipal recycling market, compared to just two or three years ago. While not the only cause, the ban provided a major shock to the system. 

Some headline effects: 

US cities that used to earn a profit on their recycling programs a few years ago now lose money every month. Some cities have either cut back part of their programs already, or are considering cutting back on their programs. All cities will be forced to reckon with a greatly altered financial consequence of having a recycling program, since what used to help the bottom line now loses money.

Far more waste in the US is headed for landfills or the incinerator compared to just two years ago. 

In a subsequent column I’ll describe the specific financial effects on Texas cities like Houston and San Antonio and other cities in Texas.

Later, I’ll also describe all the things I’ve been doing wrong with my own recycling bin, and maybe you have been as well. 

When we get it wrong, we contaminate or reduce the value of the natural stream of secondary commodities our households produce. Millions are at stake for our city’s budgets, and billions for the country.

A version of this post ran in the San Antonio Express News and Houston Chronicle.

Please see related posts

Recycling Part II – Commodity Market Price Drops (forthcoming)

Recycling Part III – Municipal Contract (forthcoming)

Recycling Part IV – Household Mistakes (forthcoming)

Tommy_the_turtle

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Organic Waste – My Kind of Green

Inigo_MontoyaWhen I think about environmental action, my mind goes to the words we commonly use – particularly “sustainable” and “green.” And like the Princess Bride’s Inigo Montoya, I do not think these words mean what traditional environmentalists think they mean.

Because of my particular definitions, I am oddly excited about my city’s organic compost plan. I’ll explain why in a moment, but first, those words.

To me, an environmental plan is “green” when we make money or save money – cool, paper, greenbacks. A “sustainable” environmental plan is one that continues because everyone sees it as in his or her own personal financial self-interest. A “sustainable” environmental action, therefore, is one not easy stopped by a political change or a slight shift in market prices. If people want to do the right thing environmentally and it’s also in their interest financially, then that action will sustainably continue.

Ok, so why do I get all tingly about my city’s green organic composting barrel that showed up at the end of my driveway a few months ago?

After a little bit of research I found out that a business managing organic waste can make money – in a green, sustainable way. As it turns out, my city, and indirectly taxpayers, can save money from organic composting. The final piece – the specific financial benefit for households – is only weakly established, in my opinion. San Antonio is working on this as well, but that’s probably the part that needs the most strengthening in the years to come.

Figuring out how a private business makes money is why I visited the headquarters of New Earth, the company that has the contract with the City of San Antonio to collect organic household waste.

New_EarthIn theory, I’m enamored of their business model. They get paid to take in raw waste, and they get paid to sell compost. Getting paid both coming and going!

Organic waste dumpers – like landscapers, tree-clearing developers, and now the City of San Antonio – pay New Earth for the privilege of dropping off organic trash, the first source of the company’s revenue. New Earth then applies its processes – the art and science of industrial-scale composting – to that waste over 1 to 3 months. At the end, they produce ground cover, mulch, and compost bags for sale to landscapers, developers, and gardeners.

Of course, I’ve simplified the attractiveness of New Earth’s business model.

Like any real business, profit is not as easy as it at first seems. New Earth takes considerable financial risks.

Here’s just a sample of why it’s risky: Handling trees and brush cleared from a new construction site is relatively easy – you run the trees through a chipper and you have a relatively uniform product at the end. However, properly filtering household organic waste – produced from hundreds of thousands of sometimes careless trash-tossers like you and me – is a far more risky and manual-labor intensive process. Clayton Leonard – until recently the President of New Earth – explained to me that New Earth had to double their workforce to handle the city contract. They also had to invest in a multi-million dollar piece of equipment to sort through the waste. Leonard climbed up with me onto one of their giant sorting machines.

compostWe watched the household waste pass through a conveyer belt while guys with rakes – some of their new hires – separated the non organic waste from the pile. Pro-tip: Neither your old iPhone case nor your plastic bags should go into organic waste. Not all households, I saw from the conveyer belt process, have gotten that memo.

I mention all this to say that it takes significant capital and labor costs to try to make money on a citywide organic waste contract. The key point for me, however, is that New Earth is being run in my version of a green, sustainable way – to make a profit.

At the same time, the City of San Antonio has their own green, sustainable, reasons – saving money. Here’s how.

When the city hauls and dumps regular trash, it pays an average of $24 per ton to local landfills for that privilege.

When the city hauls and dumps organic waste over to New Earth it pays $16.50 per ton. The city is incentivized therefore to redirect as much volume of trash as it can to organic waste. As New Earth’s Leonard told me, “In order for us to survive, we have to be cheaper than a landfill.”

going_greenAs the city fully rolls out the green barrel program – scheduled for completion in April 2017 – it hopes to get a lot of residents dumping their compostable waste into those barrels. The goal for the household organic waste program is 60,000 tons per year, according to Nick Galus, Assistant Director for the Solid Waste Management Department. At current prices, that would save an estimated $450,000 per year.

As a public entity, Galus notes, their goals are a combination of financial gains and sustainability, traditionally understood.

“Our goal is to capture the greatest amount of the waste. The cost isn’t the driving force. We’re trying to get to our goal in the most cost-conscious way,” he said.

Interestingly, San Antonio is the first major Texas city to roll out an organic recycling program city-wide. The fact that other Texas cities haven’t done the same – despite some financial incentive to do so – indicates that there are risks for a city as well. Any city, including San Antonio, has costs for rollout and household education. Other Texas cities have pursued strategies focused on yard waste, according to Galus, making it costly to switch over to a plan that also accommodates food waste.

The San Antonio goal is to have 60 percent of all waste hauled by the city be recycled, composted, or repurposed in some way by 2025. They’re at 33 percent as of 2016.

If San Antonio can show cost savings, the case becomes more compelling for other cities. If they can even figure out the household financial incentives, the whole process becomes my kind of green and sustainable.

 

A version of this post ran in the San Antonio Express News and Houston Chronicle.

 

 

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