How Does Recycling Impact The Economy Of The United States?
The Environmental Protection Agency (EPA) found in its 2020 Recycling Economic Information Report (REI) that recycling remains a key part of the American economy. It found that recycling accounted for 681,000 jobs, $37.8 billion in wages and $5.5 billion in revenue. However, there has been an increasing question on the economic sustainability of recycling in the US due to the lack of domestic demand for recycled materials. This has increased municipality expenditure on recycling, which competes with other areas of local expenses such as education and healthcare. Though the environmental impact of recycling remains significant, the economic costs have disincentive its continuous practice.
The change in view toward recycling largely stemmed from the major policy change in China in 2017. China had previously been the main importer of US recyclables until its implementation of Operation National Sword which cut imports by about 99%. The main issue highlighted was that US recyclables were contaminated and hence rendered unusable. The US then shifted exports to Southeast Asian countries, but the issue of pollution was simply diverted, having led to ‘contaminated water, crop death and respiratory illness’ .
The global market for recyclables hence weakened considerably, taking a toll on municipalities. Not only was there a fall in demand for recyclables, the cost of collecting and cleaning these recyclables simultaneously increased. Stamford, CT had previously been making 95,000 in recyclables but now pays 700,000 to have them removed. In Franklin, NH, the municipality pays $125 per ton to recycle but only $68 to incinerate. These high costs have led to over 70 municipalities ending curbside recycling.
This change in 2017 highlighted the main issue in recycling in the US: the domestic market. The insufficient investment in recycling within the US has led to a disproportionate dependence on the external market. Moreover, the system of single-stream recycling, where all recyclables are mixed together and then subsequently sorted, means that about a quarter of materials are contaminated.
Zooming into Plastic
One market that has untapped potential due to these inherent issues in recycling is the market for plastics. Plastics is one of the most consumed materials in the US – plastic generation was at 35.7 million tons in 2018 and accounted for 12.2% of municipal solid waste. Despite this, contamination of plastic due to single stream recycling means that 6 times more plastic waste is incinerated than recycled.
Of all plastic types, only certain PET (#1) and HDPE (#2) plastic bottles are ones that can be recycled, according to Greenpeace. However, only 29% of PET bottles are collected, and 21% of this is made into new, recycled materials. Major products with #3 to #7 plastics are labelled recyclable, further hindering plastic recycling efforts.
Such labelling practices, in turn, also have an effect on consumer mindset. Informative and trustworthy labelling is necessary for consumers to best engage in recycling practices. McKinsey reported that top-performing cities have recycling rates up to 20% higher than less successful cities. A main difference is the ‘pay-as-you-throw’ programs that increase costs of disposal in landfill waste streams compared to recycling streams. These are often accompanied by clarity in labelling and more standardized recycling policies that make it clearer for consumers when it comes to segregation of their waste.
The McKinsey report also suggested looking into advanced recycling, which would promote waste-to-energy processes that have found success in Germany and Japan. This remains an unpopular option in the US due to lower landfill costs and lower energy prices. McKinsey also reported on the uncertainty in Return on Invested Capital (ROIC) due to ‘limited operating capacity’ in the US.
However, this might be the perfect time to invest in plastics as an energy alternative. The lack of investments in clean energy is a contributing factor to the uncertainty in energy prices, and the slow transition likely means that high prices for fossil fuels will persist, according to the head of the International Energy Agency. Though initial costs in investing in such technology is necessary, such risk might be worth the expenditure given the projected rise in costs associated with fossil fuels as a source of energy.
Another way to increase domestic demand for recyclables would be to require a percentage of recycled content for purchasing by institutions and cities, according to Nilda Mesa, at Columbia’s Earth Institute’s Center for Sustainable Urban Development. This would create a greater incentive to invest as well in facilities that process recycled materials while sustaining the demand that would keep the market afloat.
Overall, there is a clear economic case to invest in a domestic market for recycling. Despite the high costs associated with such investments, the volatility in the market for fossil, the growing consumption of raw materials and the rising costs associated with climate change should serve as sufficient long-term incentives.