1. Pennsylvania Recycling Markets Updates Greater Lehigh Valley Chamber of Commerce Energy & Environment Outlook & Expo     September 21, Homewood Suites Center Valley, PA Wayne Bowen, Senior Program Manager Pennsylvania Recycling Markets Center

2. Impact of China’s Recycled Commodity Import Restrictions
What is it?
Who is it impacting?
Impact to PA

3. U.S. and PA Recycling Snapshot (source ISRI 2017, PA DEP 2014)
130 M + tons recycled annually (972 lbs per U.S. citizen)
Million Short Tons Recycled (source IRSI , PA DEP -2014)
U.S. PA
Iron & Steel 74
1.3
Paper 52
2.7
Aluminum, Copper, Lead 8
1.5
Plastics
3.5
.097
Electronics 5
.015
Global Scrap Exports – 160M Tons
U.S. Exports – 41M Tons to 155 countries
With 30% U.S. scrap destined for export, the health of the US recycling industry is directly tied to the health of the global economy.

4. ©2018 ISRI, Inc.

5. The Global Scrap Market (source ISRI)
972 M Tons
Total Global Consumption of Recyclables
218 M Tons
Total Global TRADE of All Recyclables
51M Tons
China’s Total IMPORTS from the World

6. Why China is so Important to the Global Recycling Industry?
Slide courtesy of ISRI
©2018 ISRI, Inc.

7. Impact of China on the U.S. Recycling Industry
31% of all US scrap commodity exports – worth $5.6 billion – shipped to China in 2017.
Recovered fiber: China is by far our most important market
Plastics: China 67% of exports (although declining y-o-y)
Slide courtesy of ISRI
©2018 ISRI, Inc.

8. China’s Environmental Challenge, Leading to an Evolving Scrap Policy/Regulation What is Happening? China is facing a Severe Environmental Crisis 60% of groundwater unfit for human consumption … 19% of arable land contaminated with heavy metals … only 84 out of 338 prefecture-level or higher cities attained the national standard for air quality … Rising social pressure: pollution related social incidents leading cause of social instability Result of many factors, including: - Decades of putting economic growth above the environment - Lack of enforcement of existing environmental laws - Lack of centralized control - Staggering increase in urbanization million new cars on the road in the last decade

9. Reduce carbon intensity
China’s Environmental Challenge
“The modernization that we pursue is one characterized by harmonious co-existence between man and nature…We will launch initiatives to make the party and government offices do better when it comes to conservation, and develop eco-friendly families, schools, communities and transport services.”
WATER
SOIL
AIR
Xi Jinping
19th Party Congress
October 18, 2017
Reduce carbon intensity
40-45% below 2005 by 2020
Improve quality of >70% of seven key river basins and the amount of foul water in urban areas not to exceed 10% by 2020
Make 90% of farmland safe, return 13k km2 of polluted land to forest and grassland, and self-sustainability in recycling by 2020
Slide courtesy of ISRI
Source: Ministry of Environmental Protection of the People’s Republic of China
©2018 ISRI, Inc.

10. Moves by China to “Control” Imports
2004: AQSIQ Export & Import Licensing Requirements Introduced
2016/7: Green Fence & National Sword initiated to focus on quality
April 2017: President Xi-led government reform taskforce approved expanding catalogue of prohibited solid waste materials allowed for import.
July 2017:
WTO Notification G/TBT/N/CHN/1211 (“the ban”)
WTO Notification G/TBT/N/CHN/1211 (identification standard)
Revised GB Standards Proposed (0.3% “carried waste” standard)
“Implementation Plan to Enhance Solid Waste Import Management System by Prohibiting the Entry of Foreign Waste”
Jan : Ban on 24 categories of materials, including post-consumer plastics and mixed-paper
March 1, 2018: Carried Waste Standard went into effect

11. While Within China …
July 2017: Country-wide inspection/enforcement actions
Environmental inspections found 65% of 1,700+ enterprises non-compliant.
Permits revoked, not issued or with smaller quotas; Smaller or lost orders
Enterprises closing (e.g., lost customers)
Restrictions on quotas within import licenses
March-Dec 2018: “Blue Sky” 2018
General Administration of Customs focused on “combating smuggling “foreign garbage” in the forms such as false declaration and concealing as well as transporting by sea or land where there are no customs”

12. 1 2 3 China’s Multi-Prong Strategy
“…comprehensively prohibiting entry of foreign waste, and perfecting the solid waste import management system…so as to vigorously develop a circular economy, truly improve environmental quality, and protect the safety of the national’s natural environment and the people’s health.”
Reform and Implementation Plan to Enhance Solid Waste Import Management System
July 27, 2017 1
Prohibit import of “solid waste with major environmental hazards &
intense public reaction by the end of 2017”
Mixed paper, post-consumer plastics
Halt imports that can be replaced with domestic resources by end of 2019
Rumors nonferrous metals next to be banned, especially insulated wire & motors
Raise thresholds for importation
0.5% “carried waste” threshold for most imports 2 3
©2018 ISRI, Inc.

13. 4 5 6 China’s Multi-Prong Strategy
“…comprehensively prohibiting entry of foreign waste, and perfecting the solid waste import management system…so as to vigorously develop a circular economy, truly improve environmental quality, and protect the safety of the national’s natural environment and the people’s health.”
Reform and Implementation Plan to Enhance Solid Waste Import Management System
July 27, 2017 4
Greater customs enforcement to reduce smuggling/illegal wastes
100% inspection
Refine laws, regulations & related systems
Reductions in import licenses and quotas
Increase domestic recycling
Strategic assets 5 6
©2018 ISRI, Inc.

14. Biggest Challenges MRF Stockpiling Divert to landfill
Meeting strict quality standards
Unclear definition of “carried waste”
Inspection inconsistencies
Pre-shipment vs Ports of Entry
One port vs another
One official vs another
Market competition
China’s scrap eventually to compete in other markets
MRF Stockpiling
Divert to landfill
Finding new markets
©2018 ISRI, Inc.

15. Looking Ahead – What’s next
More environmental compliance inspections on Chinese enterprises
Low numbers of approved imports
Potential ban on additional paper, plastics and nonferrous metals
©2018 ISRI, Inc.

16. Looking Forward
Market growth opportunities in Southeast Asia (Vietnam, Malaysia, Thailand, Indonesia), India, Mexico, Canada and the Netherlands
Demand growth in the United States
Slide courtesy of ISRI

17. Impact to PA • Depressed Commodity Pricing – Less Program Revenue • No Markets for Mixed Paper, 3-7 Plastics • Regions and Programs Served by Single Stream MRF’s: Reduction # of Items Accepted Raising Tip Fees Need to Re-educate Public MRF’s Disposing of Unmarketable Bales • Not As Severe Impact to Source Separated Programs

18. Allentown’s Contract for Single Stream Recycling – Shared Risk
Allentown contracts for curbside collection.
Allentown transports the recyclable materials from curbside collection to TotalRecycle / J.P. Mascaro & Sons, a Materials Recovery Facility (MRF).
The MRF separates, bales and markets the materials.
The contract is market driven and adjusted monthly.
$$ When Total Value of Blended Materials > Processing Costs,
Allentown receives the per ton Rebate value.
$$ When Total Value of Blended Material < Processing Costs,
Allentown pays the per ton charge.

19. Allentown’s Mixed Recycling Stream – Single Stream Commodity Pricing September 2018

20. Other Considerations
Allentown is mandated by law to recycle. Act 101 of 1988
Current cost to landfill material is $55.60.
Act 101 Section 904 Performance Grants.
Approximately $265,000 annually.
Budgeting for the future.

22. Waste Management Recycling Overview
WM CORe: Urban Solution to Food Waste
WM’s Recycling/Composting Tonnages
Material
Tonnage
Paper/OCC
8,925,573
Mixed Organics
2,694,334
Glass
766,038
C&D/Wood
100,982
Total all materials:
Material
Tonnage
Metals
525,473
Plastics
416,160
E-waste/Other
117,618
Fly Ash
1,177,618
14,723,193
37 compost sites, 4 CORe, facilities, 3 chipping operations
WM is a net reducer of GHG emissions

23. Snapshot: What recycling looks like in September of 2018
We changed our focus to recycle right over the last few years to reduce confusion.
Educated residents & businesses about the importance of recycling to raise diversion rates: recycle often.
Single Stream recycling was simple & convenient. The focus was on increasing volume & participation.
What hasn’t changed:
People still want to recycle & “do the right thing”
States & local government have established recycling bans, goals & mandates
1 in 4 items placed in a recycling cart is not recyclable!
0.5%
% Contamination enforced by China
>25%
Avg. contamination % in our MRFs
What has changed:
Markets for Mixed Paper and Mixed Plastics are limited
Quality requirements are strict
Operating costs have increased
Recycling to provide feedstock for new products has devolved to aspirational, “feel good” recycling.
The “Right Thing” must be reframed – not all materials can be recycled
Next, let switch gears and take a minute to look at our collection programs.
Contamination rates in our recycling programs are very high. We have some urban areas where contamination can be 50%. On average, our inbound contamination is 25%. It’s tough to get to 0.5% from 25%. I hear this from all recyclers right now. We have a couple of places that are doing a great job – but that’s because they’ve consistently worked hard at education, and have spent $$ on it.
With China’s new policies and the global over supply of recyclables, quality requirements are strict, which has increased processing costs.
Our MRFs were designed to handle NEWSPAPER , mixed paper, some cardboard, and cans and bottles. NOT deli trays, yogurt cups, or clam shells.
While the waste stream has become more complex, we’ve sent the message to customers that we want everything. Well – unfortunately, we are getting everything.
Although our customers want to recycle and “do the right thing”, we need to help them understand that recycling isn’t about their own sense of “feeling good”. Recycling provides feedstock for new products. The “Right Thing” must be reframed – not all materials can be recycled
_________________________________________________________
We hear a lot of stone-throwing about single stream recycling. But remember WHY we have it: Our customers wanted more recycling. Since 2/3 of the cost of systems is in the collection, single stream is much more cost effective. Also – it is convenient. Our customers love it and study after study shows that we get 40% more material with SS programs. Moving away from SS is not likely now for two completely different reasons: 1) safety. They are much safer for our drivers and 2) labor. With dual stream programs we’d need MORE drivers and can you imagine having to hire more drivers in this labor market to pick up bins at the curb. It simply is not realistic or in the best interest of our employees.

24. Single Stream Contamination
Recycling Residue Trend
Every ton of material we receive includes ~450 lbs of contaminates; our customers expect <10 lbs
Single Stream residue rates ~24% due in part to cleaning outbound material to the new standards
We’ve tracked residue at our facilities for years, but now we are having to sort it much better, so we are really seeing the amount of contamination in our inbound loads.
This is material that shouldn’t have been in the carts in the first place, and we are now having to pull it out much better in order to sell our product.
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25. What went wrong?
These all add to the cost and ADD the environmental burden of recycling.

26. It’s time to re-write the recycling playbook
It is time to rethink/reset recycling programs.
Which materials offer the best bang for the buck?
As the cost of recycling increases, should we be looking more closely at the benefits of waste reduction?
Environmental benefits are our goal
While markets for paper will improve, it may take another 1-2 years for mill demand to adjust. In the meantime, cities and companies across the globe will be posed with hard decisions about their programs.
I get a list every week of program changes in cities across the country…. Every week dozens of cities are increasing rates, changing services or dropping materials.
How to we mitigate the impacts of our current market reality? How do we sustain our programs as cost increase?
Is it time to rethink/reset recycling programs?
Can we think differently about what and how we recycle? Which materials offer the best bang for the buck?
As the cost of recycling increases, should we be looking more closely at the benefits of waste reduction?
I would argue that this is the time to consider all of these, remembering that Environmental benefits are our goal. Recycling is just one tool in the toolbo..
WHY do we recycle and WHAT should we recycle?

27. How did we get here?
Reduce and reuse were ignored. In most places we don’t even measure it!
Collection was prioritized over markets
Cost and consumer convenience took precedence over quality control
Recycling elicits positive emotions so “inconvenient” science was ignored
Landfill avoidance played a key role for effective messaging. Pretty soon it was the only message. Unfortunately, it was the wrong message!
Because we measured in tons collected, we rewarded bad behavior
Wishful recycling
How did we get to this?
Reduce and reuse were ignored. In most places we don’t even measure it!
Collection was prioritized over markets
Cost and consumer convenience took precedence over quality control
Recycling elicits positive emotions so “inconvenient” science was ignored
Landfill avoidance played a key role for effective messaging. Pretty soon it was the only message. Unfortunately, it was the wrong message!
Because we measured in tons collected, we rewarded bad behavior
Wishful recycling
“We drank to avoid our problems. Eventually, drinking became our problem”
Equivalent:
We tried to get folks to recycle everything now that is the problem!
It is time to rethink and reset our programs to secure their health for the future. Lifecycle thinking can help guide us on this path.