Will a MRF shortage limit EPR growth?

Five of the seven states that have passed EPR legislation for packaging have specifically set out, with varying goals, to increase their recycling access and collection rates. While well-intended, there is currently not enough material recovery facility (“MRF”) capacity for any increase in the collection of residential recycling, otherwise known as Single Stream Recycling (“SSR”). In fact, five of the six states covered in this article¹ do not have enough MRF nameplate capacity to sort the SSR they are already collecting. 

MRF capacity is pre-determined prior to construction by the designers and developers of a new MRF (the “nameplate capacity”). When operated at the nameplate capacity a MRF performs well and successfully recovers materials for recycling. Unfortunately, most MRFs in the US today are operated above their nameplate capacity; with some MRFs sorting up to 150% of their nameplate capacity as witnessed by members of Goldfinch during recent MRF visits. This “over-operation” leads to high landfill rates from missed materials, and a decreased value of recovered products due to high levels of contamination. For a true understanding of MRF capacity in EPR states it is therefore important to focus on the nameplate capacity, and not the current operating throughput of a MRF. 

Based on extensive research conducted by Goldfinch, Oregon is the only EPR state reported on in this article that has enough MRF nameplate capacity to sort all of its collected SSR. In the table below the current MRF capacity deficit is computed, as well as the future MRF capacity deficit should each EPR state studied below succeed in collecting all of the SSR available in the state.

The results are staggering. Estimates show that, outside of Oregon, Colorado is the only state with enough MRF capacity to sort over 50% of the SSR it collects today². Important to note, however, is that should Colorado succeed in its EPR policy to collect up to 58% of paper and plastic recycling by 2035 it will only be able to sort 24% of that collected SSR given the state’s current MRF nameplate capacity. 

Based on Goldfinch’s experience developing MRFs we routinely see that a new greenfield SSR MRF requires approximately $400 of capital investment per annual ton of nameplate capacity and approximately $60 per ton in operating cost. Understanding (i) the limited demand and the lack of long-term contracts from packaging companies, (ii) relatively short-term (3-7 years) SSR feedstock contracts on offer from municipalities, (iii) the high cost of disposal for non-recyclable material placed in collection bins, and (iv) no substantive recycling outlet for post-consumer plastic films, financial support is needed from EPR programs to get MRFs built.

Financial analysis conducted by Goldfinch shows that, in order to attract investors, $84.00³ per short ton of SSR will be needed to successfully develop, finance, build and operate a new MRF. However, this high rate per ton of SSR is not necessary for the lifetime of the MRF and can be reduced by up to 70% in year four of operation. 

Given the lacking MRF capacity presented above, the following annual EPR MRF subsidies, as calculated by Goldfinch, are needed to provide enough MRF nameplate capacity to sort the remaining current MRF capacity deficits and the forthcoming EPR policy deficits. 

As seen above, the financial needs of necessary waste management and recycling infrastructure are substantial. However, if approached in a deliberate, legislatively backed manner, the need for EPR subsidies can be dramatically reduced in the near term. Economic levers such as (i) EPR policy requiring fixed-price, long-term off-take contracts from packaging companies and (ii) long-term contracts from municipalities collecting SSR have the potential to eliminate the need for EPR subsidies entirely. 

Understanding the above, EPR policy must begin immediately implementing programs, and earmarking funds, to not only upgrade existing MRFs, but to build new MRFs. Currently, Maine is the only state that has addressed a plan to finance, build and operate new MRFs; with the caveat that this only occurs if there are remaining funds after expenditure on municipal reimbursements and administration. 

Remember, there is no recycling without MRFs, and there are no MRFs without stable financial markets supporting recycling efforts.

Footnotes:

1. California is not covered in this study as CA has numerous MSW MRFs which drastically alter its recovery landscape, and the metrics are not in alignment with the other seven states that have one or zero MSW MRFs. ↩︎
2. Please note: Colorado is only collecting 25% of packaging through SSR programs in the state today, and the numbers shown include the new Bruin Waste MRF in Grand Junction ↩︎
3. Multiple, educated, assumptions are made when modeling this subsidy suggestion including the assumption that demand for the recovered products exists at current market pricing as reported by RecyclingMarkets.net. ↩︎