1. Trends and the Implications of Industry Changes: China, the Changing Waste Stream and Lifecycle Thinking
WRRA
June 2018

2. China
One country’s impact on an industry
Global economy. Over the past 20 years, China has become the primary market for recyclables from across the globe. By 2017, over 30% of recyclables from the US were exported to China.
A match made in heaven. As their economy grew, they shipped finished goods and products and we filled the containers with recycled material to ship back to China.
Development of infrastructure. 100’s of labor intensive mills with little environmental controls.
China’s economic growth has slowed. Exports make up less of their GDP as their middle class grows.
As President Xi has consolidated power, he is using policy/economic levers to improve their environment.

3. 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.”
Xi Jinping
19th Party Congress
October 18, 2017
WATER
SOIL
AIR
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
©2018 ISRI, Inc.
Source: Ministry of Environmental Protection of the People’s Republic of China 3

4. How do China’s policies impact recycling in the U.S.?
China consumed 28.5 M tons of paper in (50% of all paper recycled in the world)
13.2 millions tons per year of recyclables are now being diverted from China to other markets.
Mixed Paper and Mixed Plastics banned % contamination limit on all other recyclables enforced at the port
On May 3rd all recyclable imports from the U.S. into China were suspended. Starting to ship again.
Reduced overall demand, supply surplus, increased quality requirements =
increased processing cost and low commodity values for paper

5. Top Ten U.S. Exports..
Recyclables are the largest U.S export item by volume
Washington State is impacted by trade interruptions with its investment in the recycling industry, agriculture and paper/forest products

6. Following the Path of Our Commodities
Destination of our fiber recyclables 2017 vs 2018
2017
WM is 7th largest exporter of all goods (by volume from the U.S.
27% of our fiber went into China in 2017
5% in Q1 2018
0 tons in May 2018
Q1 2018
Alternative markets to move material were developed: India, SE Asia, and domestic mills are all being used by WM export group.
China has been largest importer of recyclables in the world for many years. The policies implemented by the Chinese Government have implications to all countries with recycling programs.  The European Union has historically exported over 95% of its plastic to China, and the US and the EU have been the largest importers of paper grades into China.  
China has been the single largest consumer of recyclable materials generated in North America. Prior to 2017, one-third of all scrap material collected in the U.S. was shipped overseas, with the largest majority of this material going to China. In 2016, the US exported $5.6 billion in scrap commodities to China (Institute for Scrap Recycling Industries).

7. Paper and Plastic to China in 2017-2018

8. Timeline – the story
2013: Operation Green Fence (2013) – Focus on quality (plastic)
2017:
National Sword – Effort to eliminate illegal waste smuggling
Bans - Announced bans of 24 materials, including mixed paper and mixed plastics
Contamination limit - Announced 0.5% contamination limit
Suspended licenses - Chinese government began limiting licenses to close down mills in China.
2018:
January 2018 – Bans in effect
March 2018 – 0.5% contamination limit in effect
March Operation BLUE SKY. Chinese Customs to inspect all loads at point of entry into China. In effect through 2018.
May 2018 – Suspended all inspections for US imports. Since the inspections are required, all exports to China stopped – regardless of quality, stressing markets across the globe.
June 2018 – China allowing shipments with inspections, and some ships on the water for non-banned materials

9. Recyclers are “on the edge” every day.
Current export situation: June 2018
Very little material is moving into China:
The Chinese government is enforcing its bans and 0.5% contamination limit
Indications are that China will continue to constrict imports
WM continues to move commodities, although at lower prices and to a broad variety of customers across the globe:
PET and HDPE have domestic markets and are fairly stable.
#3-7 plastics does not generally have markets, although some #5 (PP) has moved
Metals markets are stable
Paper is moving to domestic mills, India, Bangladesh, Malaysia, and South Korea, however there markets are maxed out. Vietnam closed ports briefly, in an indication of potential future limits
Global shipping logistics and cost are fast becoming a new limitation without China as a backhaul. Shipping containers are not available and costs have skyrocketed.
Current oversupply without China exceeds current global market demand. Pricing is so low, that recyclers in some areas pay for Mixed Paper if they can move it.
Recyclers are “on the edge” every day.

10. What recycling looks like in 2018
What hasn’t changed:
People still want to recycle & “do the right thing”
States & local government have established recycling bans, goals & mandates
“The Right Thing” must be reframed – not all materials can be recycled
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.
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:
China is enforcing a 0.5% contamination rate and complete ban of mixed paper
Operating costs have increased
Diversion has led the way to aspirational recycling

11. Single Stream Contamination
Recycling Residue Trend
Every ton of material we receive includes ~450lbs of contaminates; our customers expect <10 lbs
Single Stream residue rates ~22% due in part to cleaning outbound material to the new standards
Page 11

12. Typical Single Stream Composition
Blended Value down 48% YoY (through April 2018)
April 2018
Blended Material value ~$40/ton 5/1/2018  ($37.84)/ton or -48.2% from 2017 to 2018 creating a challenging economic environment for MRFs and their customers.

13. Value of recyclables sold at MRFs
Only 35% of Single Stream Materials have positive value today
April 2018
Materials with positive commodity value (35%)
All negative value (65%) We pay to move
Plastics represents ~5% inbound stream
OCC curbside growth up 20% from e-commerce
Page 13

14. What does this mean for recycling?
Today’s market reality has changed the rules for all of us for the short term. We need to think and work collaboratively about the short and long term interests of our industry.
Success is requiring significant labor and capital investments in processing technology.
Processing costs have increased while prices have decreased - The value of MRF tons is 50% less than a year ago – while costs are an average of 15% higher as MRFs slow down processing and add labor.
Market development and domestic recycling opportunities will be a key area of focus for However, paper markets take years to develop – relief is not expected until 2019.
The rules have changed. We need a paradigm shift that looks to demand as the qualifier for recycling, not what we collect.
Technology. As we work to clean up our recycling programs, investments in technology will continue to be important.
Sustainable programs. Many customers are being posed with serious choices for their programs: increased costs or decreasing materials. This will vary by community, and our goal is to provide as consistent of a service as possible:
It all starts with demand! Without strong markets, our programs will struggle.
We are working with customers to improve the quality at the curb, and to diversify end markets.

15. In 2018, we are focusing on what we can control
Ban of all Mixed Paper and Mixed Plastics
The Ministry of Environmental Protection of the People’s Republic of China (MEP) informed the World Trade Organization (WTO) on July 18th of its intention to ban the import of 24 recyclable commodities, including “unsorted mixed paper” and “mixed plastics” effective January 1, 2018.
Suspension of all New License Approvals
The Chinese Ministry of the Environment (MEP) began limiting the flow of material last May by restricting the issuance of required import licenses to mills. We expect ongoing volatility in the approval of import licenses in 2018.
Reduction of Contamination Threshold to 0.5%
On January 11, 2018, China finalized its contamination standard limiting contamination for any material imported into the country to less than 0.5%.
Focusing on quality – which is the only thing we can control/affect.
Contamination reduction is the only lever that recyclers have to mitigate the impacts of China’s new policies

16. Unique challenges for curbside recyclers
Supply is inelastic. MRFs are expected to recycle curbside materials regardless of end markets
Consumers expect whatever they put into their carts to be recycled.
Consumers expect “free” recycling.
Recycling needs a paradigm shift!

17. Paradigm Shift: From Weight to Environmental Burden
Is our goal to recycle more tons?
Or reduce environmental impact? o
The goal is to reduce environmental impacts.
Recycling is one way to achieve the goal.
Reduction is a better way to achieve the goal.
Which bring us to our discussion today around whether it is time for a paradigm shift.
For decades, we've used recycling as a proxy for environmental good, and have focused on recycling more tons in order to reach weight based recycling goals.
Based on EPA’s work on SMM, we are asking if it’s time to evolve and think differently, and to focus goals that consider lifecycle thinking to look at broader environmental benefits rather than arbitrary end-of-life weight-based goals that take the focus away from the real reason why we reduce, reuse and recycle in the first place.

18. Evolution of Packaging
The next two slides tell an important story. When I looked at them together the first time, I had an “aha” moment.
This first graph highlights the changes in different types of packaging materials used between 1990 to 2013.
The materials on the left in red are those declining in prevalence – paper, metal and glass.
The materials on the right are increasing in prevalence. These are all plastic, except for cardboard.

19. What we recycle now
Now, look at this chart that shows how much of each material we are actually recycling today. Most of what we are currently recycling is the stuff that we are using less of….
Other than cardboard, we are using more of the things with the lowest recycling rates (and the things that weight less).
No wonder we are having a hard time growing recycling!

20. Recyclables are Packaging: Peaked in 2000
Courtesy: SPC
This slide is from the Sustainable Packaging Coalition.
As you can see, packaging generation peaked in the year 2000, and has been declining since. We pay attention to this since most material in curbside recycling programs is packaging. Even with the rebound following the economic downturn, Per capita packaging generation has fallen from 0.27 tons per person annually in 2000 to less than 0.24 tons in 2013, having trended downward steadily since 2009 and roughly equivalent to 1983 levels.
Packaging will continue to become more efficient, which is encouraging, however it makes it harder to increase our recycling rate. We are sort of swimming upstream as changes to the waste stream and global recycling conditions make it harder to improve our recycling rates.
Per capita packaging generation has fallen from 0.27 tons per person annually in 2000 to less than 0.24 tons in 2013
Per capita packaging is roughly equivalent to 1983 levels.

21. The Changing Waste Stream
E-Commerce: More smaller cardboard in residential curbside recycling programs
Changes in Packaging: Non-recyclable packaging replaces recyclable packaging
Lightweighting: Increases processing cost, reduces MRF revenue. Contributes to stagnant recycling rate

22. Units Matter: Curbside-collected residential recycling composition trends (by weight and volume)8%
increase in weight
37%
increase in volume
This slide is intended to illustrate how the curbside recycling mix has changed over time by weight (left) and volume (right). In short, it has become less dense and more voluminous. Major drivers for density changes include: less paper overall in the recycling stream; less newspapers and more cardboard and mixed waste paper; more plastics overall in the recycling.
The 2 bars on the left show an overall increase in weight of about 8% from 2000 to During the same period as shown in the 2 bars on the right, the volume of this same mix of materials increased by 37%. The density of curbside recycling is estimated to have gone down by about 21%.
Contaminants are not shown but in 2000 the contamination rate was 4% and in 2010 it was 6%. In 2000 the major contaminant was described as garbage and non-conforming paper, metal, plastic, and glass made up 30% of contamination. In 2010 non-conforming plastic made up 25% of contamination alone. Not only has plastic increased in the recoverable portion of residential curbside recycling but also as a major contaminant, suggesting the volume of the contamination portion is increasing as well.
Take aways:
A weight-based recycling rate does not tell the whole story. We may be capturing more recyclables than we think!
Volume and density are important – have implications on goal setting, collection (i.e. cart sizes), processing, rates.

23. but always lower than retail
E-Commerce challenge
but always lower than retail
20-60%
Estimated OCC recovery rate from households vary wildly 3%
containers per year
Demand for
corrugated
growing
RETAIL:
A significant source of clean OCC is in long term structural decline.
25 %
of all shopping malls are expected to close by 2022.
E-COMMERCE:
$428 B
and growing
12-14%
per year.

24. The State of Recycling Goals
States, cities and corporations have developed aspirational diversion goals: 50%, 75%, 100%
Weight-based recycling has been our measure of material management performance
Cities added more materials and convenient programs to help achieve their goals.
Let’s start by looking back to the early years of recycling, when the amount of material that we recycled was the metric that we had to measure the success of perhaps one our most visible environmental programs. We knew recycling was good. And if recycling was good, then recycling more must be a better. Right?
We’ve been so focused on recycling everything for so long it has become the proxy for the environmental. – in some cases forgetting why we recycle in the first place. Have we lost sight of what the real goal is, which is to improve the outcomes?
As we’ve learned more about lifecycle analysis, and the concepts of sustainable materials we’ve started to ask different questions:
- How do we achieve the best environmental benefits?
- How do we prioritize our efforts?
- How do we measure our success?
- What should our goals be?
Do we have the right goals?

25. The Evolution of an Industry
Many of the materials that have been added to recycling programs have increased recycling processing costs, or are hard (impossible) to market
As the waste stream has changed, it has become more complex and contamination has increased
Achieving weight based goals will become even more difficult and expensive with China’s new policies on material bans.
We have more data in 2018 to help define environmental outcomes.
These questions force us to think about changes in our industry and in society.
We live differently and we purchase differently. More on the go lifestyles means that we purchase products to meet this lifestyle
Products and packaging have evolved. They always have and always will…. But we now find that many of the new packaging is not recyclable, even though it may have net environmental benefits. Unfortunately, we don’t always have a good way to measure this net impact….
As the waste stream becomes more complex, contamination has increased, which increases the cost of recycling
China’s pending materials ban combine with low energy prices in the U.S. may force us to make new decisions based on markets and cost. With a renewed focus on quality as materials compete for end markets, education and processing costs may increase recycling cost in a period of volatile markets..

26. Supporting Lifecycle Thinking Goals
Many of these new materials cannot be recycled but may have broader positive environmental attributes not currently captured.
The non recyclable pouch is a better environmental decision than either the recyclable plastic container or the metal can.

27. Weight based recovery measurement
Tons
This slide represents the recovery of 1 ton of each of the materials in the graph. As the folks in Oregon point out, it’s not very useful….. But it’s pretty much what we see now when we talk about weight-based recycling goals. We’re just counting tons. Since goals are based on weight we are completely ignoring the fact that recovering different materials have different benefits.
Think about it. Why do we recover materials for recycling? Recycling reduces the upstream energy and pollution caused by mining virgin materials to make products. However, the varying environmental benefits of recovering each of these materials are not addressed in any of our existing goals.
So, what are the environmental outcomes of recycling the materials in this chart?

28. GHG Impact of One Ton of Recycled Material
MTCO2e
As you can see there are huge differences! Information like this can help us target the materials that reap the biggest environmental benefits.

29. Material Specific Recovery Goals
25% recovery by 2025
25% reduction by 2020
25% recovery by 2020
Using lifecycle analysis of the actual materials in their waste stream, Oregon created outcome based material recovery goals that target specific materials based on environmental impact.
This slide is an example of the goals that Oregon has established for carpet, food and plastics based on science.
The goals were created after looking at GHG emission reduction potential and other environmental attributes.
Where does the cost of recovery efforts enter this picture? Setting recovery goals based on environmental attributes doesn’t consider economics. Some say that is a shortcoming with LCA, but I think they are two very separate discussion.
Each material type will need a unique analysis - which is a key point to this effort.

30. Prioritizing recycling for best environmental results
80% of GHG reduction benefit from 27% diversion through Residential & Commercial SS Recycling
Basically, we found that the 80/20 rule applies to our industry.
80% of GHG reduction benefit from recycling the right 27% of the waste stream: the paper, cans and bottles that make up most residential and commercial recycling programs. (Spectrum basis of 214M tons, not all EPA 2013 MSW tons)
Recycling, followed by LFG Capture & Use makes up the bulk of the potential GHG emissions reductions
Collection GHG impact negligible even with separate collection of organics & recycling using all diesel trucks
Scenarios build upon each other
80% GHG benefit from aggressive LFG capture & use + recycling 26% of MSW
More processing = high incremental cost for low incremental GHG reduction

31. Summary
Tension is increasing around the pressure to recycle more in spite of the global market constrictions. The changing waste stream magnifies this challenges as non- recyclable packaging replaces traditional recyclables.
Recycling markets are expected to be challenging through 2018.
We are seeing a paradigm shift in how we think about how we manage materials, shifting efforts towards reducing broader environmental impacts.
Lifecycle thinking and data allows for a prioritization of programs for the best overall environmental results.
The goal is to reduce environmental impacts.
Recycling is one way to achieve the goal.
Reduction is a better way to achieve the goal.
It’s time to think differently about how we set goals for materials management
We have data to be strategic - maximizing broader environmental benefits by focusing on individual material types
Lifecycle thinking lets us prioritizing programs for the best overall environmental results.
We can still use tons….. Per capita reduction is measured by tons.
That’s it. Thanks so much. I’m happy to answer your questions.

32. Thank you!