INVESTING IN CLEAN ENERGY
Recycling Industry Offers
Recession-Proof Investing
By Rona Fried, Ph.D.
High oil prices, a volatile stock market
and a recession make this a tough
time to be an investor. Happily,
there’s a bright spot in the market: the
recycling industry.
Recycling offers investors a dependable
way to profit during a recession, according to
a report we released at Progressive Investor,
“Investing in Recycling.”
One of the analysts we interviewed for the
report, Eric Prouty from Canaccord Adams,
says it well: “Ever-escalating energy prices,
commodity price inflation and scarcity, and
global environmental concerns have coalesced into a ‘perfect storm’ for the industry.”
Many people aren't aware of the central
role the recycling industry plays these days.
It has become a backbone of our economy,
pulling in $236 billion in revenues last year
and employing over a million people. The
industry accounted for about 2 percent of the
U.S. gross domestic product in 2007.
Under pressure from emerging economies
like China and India, the world can no
longer satisfy demand for paper and steel
from virgin materials
alone. Recycling has
become an absolute
necessity for industrial
growth and stability.
We couldn't print a
newspaper, build a car
or ship a product in a
cardboard box without
recycled materials.
Rona Fried, Ph.D. Although we usual-
ly think of the benefits
of recycling as reducing waste and protecting
forests and habitats from mining and clear cutting, it is also a key solution for climate change.
Making new materials from old ones is a classic example of energy efficiency — it vastly
reduces the amount of energy (and resulting
emissions) required to support our economy.
When we make aluminum from scrap,
we use 96 percent less energy than when
we smelt the metal from ore. We use 74 percent less energy to make iron and steel from
scrap. Two-thirds of the steel produced
in the United States is now made from
recycled materials. Making paper from recycled stock requires 36 percent less energy
and far fewer chemicals. In 2005, 51 percent
of paper products came from recycled
sources. Plastic is the laggard. Although
reusing old plastic requires 80 percent less
energy, only 17 percent of new plastic is recycled. Nearly all plastics are derived from
petroleum, so $135 oil ought to drive a rapid
ramp-up of plastic recycling.
Recycled materials are a key feature in
green buildings. Countertops can be made
from recycled glass; flooring from recycled
glass, rubber and plastic; plumbing and
wiring from recycled copper; structural steel
from recycled scrap; insulation and carpeting
from recycled plastic.
The added benefit to investing in recycling
companies is access to mid- and large-cap companies that are much less volatile investments
than pure renewable energy companies.
The real action is in industrial recycling,
which has evolved far beyond municipal
waste-recycling practices. Over the past
decade businesses have come to rely on recycling to reduce the costs of energy, raw materials and waste stream processing. Rising
demand for raw materials means that recycling is a potential profit center, helping
companies to achieve competitive advantage and profitability.
Recycling isn’t new, of course. Americans
grew up with scrap yards that recycle car parts
and crush whole cars for smelting. As school
kids, we participated in paper drives, so we
know about paper recycling. But modern technology has created entirely new categories of
recyclable products. The proliferation of cell
phones, iPods and other small gadgets, which
often have a two-year life cycle, has made
electronics the fastest growing waste stream
worldwide. When the United States shifts to
digital-only television in 2009, as many as
100 million TVs may quickly become obsolete.
Unbelievably, about 70 percent of the
heavy metals and 40 percent of the lead in
United States landfills seep out of dumped
electronics, according to the EPA. And 80
percent of e-waste is shipped to Asia and
Africa, where it is simply dumped after the
metals are salvaged.
In the United States, 35 states have
banned electronics from landfills, setting the
ERIC GEVAERT/IS TOCKPHOTO.COM
Two-thirds of steel used in the United States now comes from recycled sources, saving
74 percent of the energy needed to convert it.
Correction
In the May/June issue, we reported on Global Research Technologies LLC. That report contained some inaccuracies. The company points
out that neither Patrick Grimes nor Hans Ziock
has been associated with GRT. The company was
founded by Gary Comer, Allen Wright, Klaus
Lackner and Wally Broecker. Wright is currently president and CEO of GRT. Previously he was
director of Research Operations at Biosphere 2
for Columbia University.
