Recycling continues to be the most cost-effective option for the vast majority of American cities. The economics are simple. Cities have two choices when it comes to disposal: recycle or landfill. While the value of recycling is generally reported as the amount that a city can be paid for its recyclables, the core economic value of recycling is actually the opportunity for a city to avoid costly landfill disposal fees.
New York City, the largest market in the United States, is an example of how advanced recycling infrastructure and strong local markets create long-term profits. New York has a long-term public-private partnership with Pratt Industries that converts all of its recycled paper locally into new paper products sold back into the local market. Via its contract with Pratt, New York is paid for every ton of paper its residents recycle, as opposed to a cost of over $100 per ton to send paper, or anything else, to a landfill.
Minneapolis offers another good example. Eureka Recycling and the city of Minneapolis invested in local community outreach focused on keeping their recycling stream clean of contamination, defined as non-recyclable material. The result is one of the lowest contamination rates of any municipal recycling program in the country. With a clean stream of valuable recyclables, Eureka consistently shares with Minneapolis the profits earned from the sale of their recyclables. In many other cities, unfortunately, about 15 percent of the material that arrives at the municipal recycling facility is considered contaminated.
Municipal recycling programs that keep contaminants out of the recycling stream via strong community outreach or enforcement realize lower costs and better revenue opportunities. Municipalities that recognize that recycling is part of the commodities industry, not the waste industry, generate value.
Along with the examples of Pratt Industries in New York and Eureka Recycling in Minneapolis, Lakeshore Recycling Systems in Chicago, Recology in San Francisco and Seattle, Rumpke in Ohio, First Star Recycling in Omaha and Balcones in Austin, Texas, among others, continue to provide their municipal and commercial customers robust recycling services. In addition, municipalities such as Pensacola, Florida, and Davenport, Iowa, that manage their own best-in-class recycling facilities consistently reduce landfill disposal costs and create local economic value for their constituents.
The value of recyclable commodities continues to fall into a wide range. The cost to process municipal recyclables at a recycling facility was on average $70 per ton last year. That means that for a recyclable commodity to have value, it must have a market that pays the recycling facility over $70 per ton. A sample of the commodities that are profitable to recycle include PET plastic (beverage containers), high-density polyethylene (HDPE) plastic (laundry and soap detergent bottles), rigid polypropylene (bottle caps, some yogurt containers), cardboard and aluminum.
In 2019, three innovations are driving the increased profit potential of recycling in America and the development of a circular economy. First, the introduction of robotics and artificial intelligence (AI). The future of the industry will be led by the facilities that produce the highest quality commodity bales.