Navigating the Troubled Relationship Between Recycling and Economics

2025 lays bare the recycling industry’s economic woes

By Ushma Pandya

In a perfect world, recycling and the circular economy would deliver on the simple promise of trash becoming treasure over and over again. In our world, it’s a little more complex than that. 

Environmental action doesn’t run on altruism. Recycling’s ongoing efficacy depends on its status within the broader economic system. To work, there must be a genuine downstream demand for recycled material. To create that demand, the recycled material has to be clean and useful. Thus when demand and commodity values fall, it causes economic problems for recycling. 

Material recovery facilities (MRFs) and recycling plants depend on commodity markets to monetize the materials they sort. In other words, someone needs to be buying what they’re selling. That has become an increasingly pressing problem in light of a weakening market. Recent Q2 data released by the Northeast Recycling Council (NERC) showed an overall decline in commodity prices across recycling streams, with the average value of all commodities in single stream and dual stream falling between 5.7 and 7.1 percent within a single quarter. For an industry operating on thin margins, that’s cause for some concern.

The cleanliness conundrum

Declining commodity prices squeeze the revenues of MRFs and haulers. Waste Management and similar companies are reporting double-digit year-over-year drops in commodity values. Although these drops are happening across the board, some are falling faster than others. This autumn, fiber and metal bales managed to stabilize somewhat while post-consumer PET beverage bottles and jars lost over a cent within a single month. 

Among the biggest variables in recycling-as-commodity economics is cleanliness. Residuals—the industry term for non-marketable material, contaminants, and mixed waste—drag down the blended value per ton. When batch contamination is high, the cost of sorting and cleaning (or disposing of) this unwanted material rises too. That cost can threaten to overwhelm the value of the remaining recyclable material.

Higher-purity streams yield more saleable output. Dual-stream and source-separated collection tends to produce cleaner bales, which are more reliably sold into higher-value markets. Clean material reduces processing costs and helps recyclers meet spec for buyers. Quality standards around cleanliness must be continually met in order to support the financial sustainability of the entire recycling operation. Recycling, however beneficial to the planet, cannot operate at a loss, and the material has to be clean enough to sell.

Demanding times

However clean your recycling bale, it’s functionally worthless absent external demand from the end-market firms, processors, and manufacturers who use the materials as raw ingredients for new products. Paper and cardboard bales go back to paper mills and integrated packaging manufacturers. Construction material companies buy concrete, brick, and asphalt to sell as aggregate. Plastic bales are distributed among recycled goods and apparel companies like Patagonia, Green Toys, Allbirds, and Rothy's. 

But as the economy dips and swells, so does demand for these materials. When manufacturers don’t offer stable enough offtake, MRFs struggle to sell their output. Unsold material backlog piles up, forcing MRFs to offload at deep discounts or write off value as it is hauled off to the landfill.

Decreased demand can be attributed to a combination of factors. The construction material companies, for instance, may sell less thanks to the tariffs and macroeconomic slowdowns that affect the building industry. Material cost shakeups undercut the broader appetite for secondary materials. As demand goes, so goes recycling.

The economic-environmental ideal

The economics of recycling are always precariously balanced among factors like clean sorting and market demand. The Q2 2025 decline in commodity prices isn’t an outright emergency, but it does underscore that slackened demand amid high contamination presents serious systemic risk.

The ultimate goal should be to make recycling systems sufficiently clean and aligned with long-term demand. Achieving this would make these recycling systems into both essential environmental infrastructure and real economic assets. The global circular economy must be economically feasible. In other words, the circular economy will succeed at being good for the planet when it becomes a fully resilient value chain based on purity, scale, and certainty of demand.