Some thoughts regarding recycling and the famous “de-couple” approach

The starting point for the following note was the last news regarding the prices of recycled materials. A meltdown of them is more or less a reality going together with the rapid decrease in raw materials prize (by the way Mr. Newman deserves to be proud about his prediction).

Stuart Foster, of Recoup UK, which advises on plastic recycling, said that mixed plastics had slumped from about £200 a tone to the point of worthlessness in only four weeks. He was confident, however, that the low value would be temporary as at least three mixed-plastic facilities will open next year, reducing the nation's dependence on Chinese demand.

Decrease of prices seems to be uniform in all kinds of recyclables. Although there are some predictions that this will not be a permanent situation, in any case the current market conditions create a heavy burden for recycling activities.

As Lewis Smith wrote at TIMES (6-11-2008) “Thousands of tones of rubbish collected from household recycling bins may have to be stored in warehouses and former military bases to save them from being dumped after a collapse in prices.

Collection companies and councils are running out of space to store paper, plastic bottles and steel cans because prices are so low that the materials cannot be shifted. Collections of mixed plastics, mixed paper and steel reached record levels in the summer but the “bottom fell out of the market” and they are now worthless. The plunge in prices was caused by a sudden fall in demand for recycled materials, especially from China, as manufacturers reduced their output in line with the global economic downturn.

Local authorities and collection companies are so concerned about the mountains of paper, plastic bottles and cans that they have to store that they have called for storage regulations to be eased.”

The threat of landfilling recycled materials is realized in some cases as in California. The California Integrated Waste Management Board (CIWMB) is pledging to work with California cities and counties, as well as the many recyclers, brokers, and processors who are trying to cope with the rapid decline in commodity prices for recycled paper, metals and plastic goods.

CIWMB staff are monitoring market trends and prices and examining regulatory and non-regulatory options to keep these materials from being disposed. The CIWMB will hold a special public meeting in Sacramento in early December to explore measures it can enact to ease the current situation. The Board will hear from brokers and others about possible short-term and long-term solutions.

"We're aware of the potential dilemma facing our state's recycling infrastructure," said Board Chair Margo Reid Brown. "We cannot undo the incredible progress our local cities and counties have done to reduce our waste in landfills. By working together, I'm confident we can develop short-term measures that will get us through these challenging times, while ensuring we remain true to our overall environmental goals."

Now let’s move to the famous “de-couple” approach. We are all familiar with the concept of de-coupling growth of economy from waste production. In practical terms, the de-couple approach says that we do not want to put economic growth in a risk but we must try to make it more sustainable.

The EU approach has gone further determining that in order to success on that approach we have to decouple the following:

· Economic growth from resource use (having more growth for less resource use or more products per resource units)
· Environmental impacts from resource use (having less impacts for more growth or less impacts per product units)

Obviously for both the previous requirements the use of recycling materials is a key- element.

But how this fundamental role of recycling can be fulfilled when the use of recycled materials is coupled with their prices?

How can we de-couple growth from resource use when we keep the use of recyclables coupled with the market conditions and market conditions (even temporarily) push to more resource use?

How can de-couple the environmental impacts from resource use when the market conditions will determine if the supply chain of a product will include recyclables or not?

Let’s think again about the market fluctuations and their economical, environmental and long-term impacts in our industry. Maybe we have to regulate recycling prices in order to promote the use of recyclables. Or maybe we have to forget de-couple as a concept.

In any case, this is the time to think about it in all levels. Any opinion is welcomed…

David Newman strikes back: financial meltdown and waste management

Dear Friends

When I wrote about the financial crisis last October 6th, I made some predictions about how the situation would unfold.
Sadly many of those predictions have already come true.

1. Credit will dry up forcing banks and then companies into liquidation as consumers stop spending.

2. Unemployment will rise fast as companies slow production and fire staff.

3. Economies based on exports of raw materials will suffer particularly as the prices of these fall.

This third prediction is one I am quite proud of as no-one much forsaw oil and food prices falling so fast, leading to economies like Russia, Argentina, and the arab oil economies to slash spending.

What now ?
Every cloud has a silver lining.

A) third world and developing economies are going to benefit from rapidly falling import costs- fuel, food and western technologies will all cost much less. Africa may enter a period of faster growth.

B) inflation is falling fast leading to a cut in interest rates, making it less expensive to finance loans, mortgages, investments.

C) useless and technologically obsolete industries will die. It's goodbye to GM, Chrysler and Ford as we know them. It may even be the beginning of the end for IBM, MS and god forbid Google, Yahoo etc., as newer, leaner companies enter their markets and with lower costs take away their business.

D) the very rich just got poorer. That's no bad thing. It closes the gap a little and ridimensions their arrogance. It opens international fora to developing countries like Brazil, India, southern Asia, which have their financial houses in order and can now raise a stronger voice in fora like the IMF, WB, WTO.

E) the future of the liberalised, globalised, free economy is history.
Politics is back in place as the just governor of international trade rules and financial market rules.

I haven't yet mentioned the effect of a new US President. Personally I am not as optimistic as some. He is as much servant as leader given the powers which elect a President; for sure the outcome gave us the best result but let us not be euphoric until we start to see him in action. COP 15 will be one of those occasions.

We have, as I said in October, two harsh years ahead and the data coming out show this to be probable. But as prices in shares, housing, property, commodities fall, so will the capacity of more people to buy them increase. A point will come within 2009 when we hit bottom. The rebound in 2010 could be very fast indeed.
Hold on for a bumpy ride !

Best,

David Newman