Curbside recycling feels the global commodity squeeze

For years as Americans embraced recycling, their efforts were subsidized by the green cash the recycled plastic, paper and aluminum generated for local programs. But now the recycling industry is scrambling due to an economic slowdown in China, a global drop in oil prices, and a sustained decline in demand for commodities like plastic and aluminum.

For example, oil is essential for manufacturing plastic, but with the collapse of crude prices it's now cheaper for companies to use virgin plastic rather than using substitute materials generated by recycling.

David Steiner, president and CEO of Waste Management (WM), the nation's largest solid waste company, has described the situation as a "crisis." He told CBS MoneyWatch that "the recycling industry has been hit with a double whammy." Processing costs are up, while the price the solid waste giant can get for the commodities from recycling has been depressed for a while.

"When you're not covering your cost of capital -- which is where we're at -- that's a losing proposition," said Steiner. "And the issue looms large for the long-term sustainability of recycling and ultimately, the environment."

Steiner said now with the economics of recycling upended, the company has had to close six of its 50 recycling facilities around the country.

Industry experts say local governments that have relied on the money earned from selling materials to recyclers might have to impose a fee on consumers to keep curbside collections economically viable. Another possibility would be for local communities to enter into contracts with their recyclers that would share the risks in a commodities market that can be volatile.

According to Chris Doherty with the National Waste and Recycling Association, recycling has really caught on in the U.S. over the last 20 years. "In the 1990s, we had 500 towns doing it. Now you're talking about 10,000 communities," he said.

Doherty insisted that the value of recycling can't be measured merely in the prices paid for the materials it yields. It also has to include the energy conservation and the reduction in pollution recycling makes possible.

"Take an aluminum can made of recycled material -- you're talking about using 95 percent less energy," Doherty said.

The U.S. Environmental Protection Agency has reported that Americans generate 254 million tons of trash a year and recycle 87 million tons, about 34 percent, with the rest going to landfills or getting incinerated.

Historically, it has been hard to put a dollar value on the pollution prevention and energy conservation that recycling helps achieve. Eric Goldstein, senior attorney with the Natural Resources Defense Council, told CBS MoneyWatch one way to ensure declining oil and commodity prices don't undermine recycling and its goals is to impose a carbon tax.

"With the dip in oil prices, now is the perfect time to advance the carbon tax when it would have the least adverse impact on consumers while helping to provide further incentives for recycling," said Goldstein.

Despite the up and downs of the commodity markets that are part of every business cycle, Goldstein said the long-term trends continue to favor recycling.