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Urban Jungle – This Week: Recycling

Dr Eric Lai – SCMP | Updated on Oct 31, 2008

Paper exporters are reported to be cutting their intake of recycled paper and drastically reducing the price they pay to collectors. This has spelled trouble for those in the various tiers of the paper recycling sector. From the scavengers to the companies that collect from the scavengers and elsewhere, to the large factories that reprocess the paper, all have been affected by the downturn in the world economy.

Things are also not rosy in plastics recycling, with a fall in demand leading to a drop in the price paid for recovered plastic. And companies that collect unwanted electronic items for reuse and recycling have been closing down due to plummeting prices for metals such as steel and copper. The bleak economic outlook has forced many companies to suspend their recycling operations. Without government subsides many of these recycling companies simply cannot afford to stay in business.

The General Association of Recycling Business plans to stage a slow-drive protest on Monday specifically targeted at the paper-recycling exporters. It is inevitable that in the short- to medium-term, as the world struggles with the financial crisis, many businesses will be badly affected. Exporters of paper probably have no choice but to cut prices, but I think the government should learn from this fiasco and should have an established vision for the growth of green industries such as recycling. These industries only have a small share of the market and therefore are first to be affected by free-market forces.

Some 90 per cent of paper pulp comes from virgin wood sources, with only 16 per cent of this from trees specifically grown for paper production. It is estimated that if the world recycled 50 per cent of its waste paper, we would save an area of forest the size of Greece each year.

Supporters of paper recycling say using one tonne of recycled paper rather than new paper would save up to 4,000 kWh of electricity, which is roughly what an average Hong Kong household would use in a year. Opponents of the industry highlight that, energywise, recycling paper is far from perfect – that the process of recycling paper uses more energy than processing virgin-wood pulp. Most wood-processing plants are located far from urban areas and many use hydroelectric generating plants, saving on long-term costs, whereas recycled-paper plants are usually near urban areas and use the local energy grid, which most likely burn fossil fuels.

The area where recycling paper evens the ecological score is municipal landfills. About 35 per cent of the space in municipal dumps is occupied by waste-paper products. Recycling one tonne of paper saves about three cubic metres of landfill. And much of this waste paper is incinerated to save space and minimise the production, by the natural decomposition process, of methane, a very potent greenhouse gas. So not only does recycling paper save on scarce land but it saves on greenhouse gases. Overall, paper recycling decreases air pollution by 75 per cent and water pollution by 35 per cent compared with paper made from virgin pulp, a big win for the environment.

It is interesting to note that at a recent conference of the Waste & Resources Action Programme, an organisation in Britain aimed at recycling and reducing waste, it was said: “It is going to be the lower-quality end of the spectrum that will be squeezed out in an economic downturn, and the commercial drivers may prove stronger than the legislative ones.”

Highlighting the volatility of the recycling industry, it has been shown that prices for recovered recyclable material are determined by the prices of the virgin material. Companies attempt to buy recovered material to replace virgin material when virgin prices are high. In the case of plastics, it is crude-oil prices which determine how much companies buy.

Recovery of materials being ultimately tied to the cost of raw materials is not how a truly efficient market should operate.

The outlook for the recycling industry is determined by four factors: raw material prices; the global economic impact on demand; the Chinese economy and the growth of its various industries that use recycled products; and regulation. I don’t have much hope that a free-market economy will be driven by anything as sound as ecological considerations: it’s all about profit. The recycling industry is so small and fragile but so important that I think the government needs to continue to spend resources in the area to stimulate its growth. The free market lacks long-term vision for the environment and it is during such times that the government, with a far-sighted vision, can use its authority to rein in the free market when it is self-destructive.

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