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Literally Throwing Money Away

Green: Money and Sustainability Working Together Part 2 of 10: Municipal Solid Waste (MSW)

tl;dr: Americans produce more trash than ever and have no idea why this is horrible

I think about trash on an almost daily basis. Besides garbage collectors and Oscar the Grouch, there aren't many other people in the world who think about Municipal Solid Waste as much as I do. Trash collection is something that is often taken for granted, which is interesting because it literally impacts every single person on the planet. Because the cost of waste management is frequently hidden in property taxes, people just don't think about just how much trash is created, how much is spent on disposing of it, and how much space is available to deal with it.

As you can see, Americans are producing record levels of trash, on both total tonnage and per capita generation. What is particularly frustrating about this is that almost every single person in this country has been exposed to the benefits of recycling and lowering our waste. Yet, the march to taking more and more trash to the curb continues unabated. Where is all of this trash going? Well, a lot of it is still going to landfills. Even with all of the alternatives that exist, currently about 50% of all MSW goes to landills.

There were over 7,600 landfills in the 80s, but most of them are closed now because they are full. Today we are at 1,250 landfills and relatively unalarmed at how fast we are filling up what is left. According to SWEEP (Solid Waste Environmental Excellence Protocol), the US will reach maximum capacity of all of its existing landfill resources by 2035. SWEEP predicts that northeast US states will use up all of their available landfill space first with the western states having more room to store their trash. Don't gloat, westerners, because all this means is that cities in the east will be sending their trash to your landfills. So the extra time that you had disappears pretty quickly. Eastern US residents, the cost to send all your trash to the empty landfills out west is going to get more and more expensive as well. Although the urgency of this situation varies by geography, the reality is that this will have a financial impact on all Americans.

If you want an example of what this looks, look no further than NYC. If you live in New York, your trash used to go the the Fresh Kills landfill in Staten Island. It used to be the largest landfill in the world, and it had to close in 2001. Since then, NYC has been forced to send its trash to other states, which costs a lot of money. How much money, you ask? Try $429 million per year to send trash from the five boroughs to landfills in Pennsylvania, Ohio, West Virginia, and as far away as South Carolina. That's right, NYC trash gets hauled by railcar to the Lee County landfill in Bishopville, SC. That distance is 657 miles away, or 10 hours on I-95. This process takes thousands of trucks, trains, cranes, barges, and employees to operate 24/7 slinging Big Apple trash all along the east coast of the US. NYC officials, realizing that this is an expensive and complicated endeavor, set a goal in 2016 of sending zero waste to landfills by 2030. How are things going? Well, as of this post, 65% of all trash picked up is still going to landfills. Some of you might be saying, "Well, that's New York, that's an outlier of what happens!" How about this, then: Durham, NC (where I live) sends its trash to a landfill in Sampson County, which is 92 miles away. While Durham doesn't spend $429 million per year, an ABC11 News report back in 2020 estimated $10 million being spent on just diesel fuel alone to send Durham trash to the closest place willing to sign a contract with the city.

Trash is big business. The largest player in the MSW world is WasteManagement (NYSE: WM), and the founder of the company (H. Wayne Huizenga) became so wealthy that he could afford to buy the Miami Dolphins, the Florida Marlins, AND the Florida Panthers. Today, the company is the 203rd largest company in the US with revenues of $19.69 billion in 2022. That seems like a lot, but that is just a fraction of the $200 billion spent every year on solid waste management and disposal of trash. Landfill operators are getting in on the action as well, with the charge for dumping a ton of waste now at $53 per ton. In the 80's that charge was $8 per ton, or $23 adjusted for inflation. One of the reasons why the price has increased so dramatically is because of limited capacity. We talked last week about the building block of all economic work is scarcity. Well, it pops up again this week and will continue to do so in the future as well! Remember all those landfills closing? This means the remaining ones get to charge more. Sure there is a lot of empty land out there, but do you want a landfill in your backyard? Because no one is thrilled to have a garbage dump nearby, we see locations being secured that disproportionately harm marginalized communities. This is a bit of a vicious cycle, because landfill sites are selected in areas with lower property values. Driving low property values even lower with the addition of a landfill hardly seems fair. So, we end up spending more money than we need to for facilities that make life even harder for folks who already have it pretty tough. It sounds horrible, but truthfully, most people silently approve of these practices by ignoring what is going on. If only there were a better way of doing things...

The good news is that we can be making smart decisions right now. Recycling, composting, and energy recovery are all beneficial practices that serve two purposes. The first purpose is reducing carbon emissions and lengthening the life span of landfills. The second purpose is to save money. Although this seems fairly simple and obvious, start-up costs for large scale projects are significant. Let's look at landfill gas (LFG) energy recovery projects as an example. LFG energy recovery means taking the methane that is created and converting that into various uses, ranging from electricity to syngas for transportation. The typical capital cost of a 3-Megawatt engine project with a 15-year lifespan is about $6 million. The only way that a facility like this pays for itself and becomes profitable is if the municipality pays for the entire cost upfront and avoids finance charges. Most municipalities hate doing this however, and prefer a 20% down payment/80% financed structure instead. Let's use the analogy of buying a car. Technically you might be able to afford paying for it all at once, but that involves disrupting some pretty important things in your life. So you finance a large part of it, because paying more over a period of time is more convenient in your life. Town and cities think the same way, too.

While financing may be great, this doesn't factor in two important points that make projects like LFG energy recovery more appealing now. The first factor is Renewable Energy Credits (REC). An REC is electricity that is purchased that originates from a renewable source (like solar, wind, geothermal, biomass, and yes, LFG). RECs are becoming an increasingly preferred manner for municipalities to become "carbon neutral" and most of these credits are being offered by private utility companies when they could be offered by the municipalities themselves. LFG facility development is also being encouraged by the recently passed Inflation Reduction Act (IRA) that extends the Investment Tax Credit (ITC) through 2025 for LFG projects. It appears that up to $369 billion is available over the next ten years for this kind of work.

The second factor is that rising interest rates make the cost of borrowing much more expensive, and financing might not be as smart as just biting the bullet and paying for it upfront. A $6 million 10-year note at 3.5% interest would cost $1.1 million in interest payments. Some of you might be aware that the Fed has been rapidly raising interest rates, so if the cost of borrowing went to 5.5%, suddenly the municipality has to pay $1.8 million instead. It doesn't seem likely that we are going to enter deflationary conditions any time soon, so higher borrowing costs are all but certain.

Regardless of how it is paid for, what is clear is that when it comes to garbage, we are literally thowing money away. We waste it on an individual, household, community, municipal, regional, state, federal, and global basis. Sometimes correcting a situation like this would involve tremendous sacrifice or austerity measures. For this example, all we have to do is to stop chasing bad ideas with good money. Some city officials might claim they have no other choice but to continue with their wasteful, inefficient and expensive practices. Bluntly, the real eason why is that they don't want to take the time to consider what the current options are. It's easier to just claim "Well, that's they way we've been doing it, and it seems to work because people aren't complaining." People aren't complaining because as long as the trash gets picked up, that is really all that they care about. Well, we spend $200 billion each year on trash collection, delivery, and landfills, and we don't have to. Do you care now?

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