The economics of recycling: navigating commodity markets and finding financial stability

Recycling in today’s economic landscape presents significant challenges for municipalities and private operators. Fluctuating global commodity markets, rising contamination rates, and increasing program costs have made recycling efforts financially complex.

This article explores the economic realities behind recycling, the influence of global commodity markets on program viability, and strategies for achieving long-term sustainability. Raftelis provides expert guidance, from cost-of-service analysis to grant funding opportunities, helping municipalities ensure both economic and environmental success.

Shifting commodity markets and their impact

For years, the U.S. and other countries relied on global demand—particularly from China—to process recyclables like paper, plastics, and metals. In 2018, China’s National Sword policy banned the import of contaminated recyclables, disrupting this reliance and forcing municipalities to find alternative solutions. As a result, some found it more cost-effective to landfill recyclables than to process them, underscoring the volatility of international markets.

The table below shows how recycling commodity prices (price/ton) in the southwest market (Los Angeles) have fluctuated over time due to major global events such as China’s policy change and the COVID-19 pandemic:

Despite some recovery, market fluctuations continue to challenge recycling programs, especially for lower-value commodities. To ensure long-term stability, municipalities must invest in domestic recycling infrastructure. While the initial investment is high, it reduces reliance on international markets, lowers transportation costs, creates local jobs, and provides greater control over material processing. Raftelis has been instrumental in helping jurisdictions develop financial plans and feasibility studies to build resilient recycling systems.

The economics of recycling: cost factors

Recycling is vital for sustainability but presents financial challenges, particularly after China’s National Sword policy. Raftelis helps municipalities manage these costs through cost-of-service and financial planning studies, where we examine:

Collection and Transportation: Specialized vehicles and labor increase costs, especially in large or spread-out areas.

Sorting and Processing: Single-stream recycling eases participation but raises sorting expenses for facilities, requiring more technology and labor.

Contamination: High contamination rates drive up costs by increasing sorting efforts or causing batches to be rejected.

Market Fluctuations: Volatile commodity prices can make recycling programs financially unsustainable, particularly during downturns.

Strategies for economic viability

Municipalities need to implement innovative strategies to maintain the financial health of their recycling programs. Raftelis can assist with the following approaches:

Compliance with Regulatory Mandates: Expertise in helping municipalities comply with local, state, and federal waste management regulations, such as SB 1383 and other initiatives. We offer guidance on developing programs that meet legal requirements while optimizing recycling efforts.

Public-Private Partnerships (PPP): Structuring public-private partnerships to improve recycling infrastructure and operations. By identifying private sector partners, negotiating terms, and ensuring accountability, Raftelis helps municipalities secure resources, technology, and operational support.

Strategic Planning: Long-term recycling and waste management strategies that align with sustainability goals. This includes conducting feasibility studies, waste diversion analyses, and creating comprehensive recycling program roadmaps to enhance operational efficiency.

Grant Writing and Funding Acquisition: Identifying and securing federal grant funding from the Inflation Reduction Act (IRA) and the Bipartisan Infrastructure Law, such as the Solid Waste Infrastructure for Recycling (SWIFR) program.

Community Engagement and Education Campaigns: Designing and implementing community outreach programs aimed at increasing public awareness about recycling, reducing contamination, and encouraging better waste management practices.

Leveraging SWIFR and the Inflation Reduction Act (IRA) for recycling

Federal funding opportunities, such as the Solid Waste Infrastructure for Recycling (SWIFR), administered by the EPA, offer critical financial support for municipalities that are upgrading their recycling systems. SWIFR provides annual grants, while additional federal resources for sustainable waste management are being made available through the Inflation Reduction Act and the Bipartisan Infrastructure Law.

Municipalities aiming to modernize their recycling facilities or adopt new sorting technologies should explore these funding resources. Raftelis assists with the grant application process, from eligibility assessments to financial planning and implementation. By leveraging federal funds, municipalities can create sustainable recycling programs that are both financially and environmentally resilient.

The path forward: building sustainable and economically viable recycling programs

Recycling is key to environmental sustainability, but its financial viability depends on effectively managing market volatility, rising operational costs, and contamination. By investing in local infrastructure, forming public-private partnerships, and utilizing federal funding programs like SWIFR and the IRA, municipalities can create recycling programs that are both economically sustainable and environmentally beneficial.

Raftelis is committed to helping municipalities achieve this balance. With expertise in cost-of-service analysis, grant funding assistance, community outreach, and strategic planning, we help ensure a community’s long-term success in their recycling and waste management programs. Let us help your community build a financially sustainable future in recycling while meeting its environmental goals. For more information, reach out to [email protected]