When the first curbside recycling projects were launched in California during the 1970s, there was a lot of hand-wringing. Would people participate? Would they take the time to separate their paper from their bottles, tins and plastic? And once the goods had been collected, what would anyone do with the stuff?

Twenty years later, these doubts have long been dispelled. Not only do people ardently support recycling — thousands of towns have since voted to set up programs — but an entire recycling industry has developed. Thousands of companies now process millions of tons of goods into a dazzling array of products. And with that industry, a lively market for recyclables has come into being, with gluts and shortages and some dramatic price volatility.

Enter the Chicago Board of Trade. Last October the board opened the world's first exchange for recycled goods, on the belief that the move could cut the costs of trading such goods, as well as iron out some of the wilder price gyrations. Does that mean old newspapers, broken glass and plastic soda bottles have reached the status of corn, lumber and bond futures? Not quite. But board officials believe the project has much to offer the burgeoning recyclables market. As CBOTs Patrick Videll notes, "In the recent past, the market for recyclables has been a bit like the Wild West: a wild, unpredictable market lacking in generally accepted product standards or methods for settling disputes. And in all those areas, the board can offer help."

So, the board set up the first electronic bulletin board — accessed by computer — that enables buyers and sellers of trash to find one another. The system lists buy and sell offers for most of the major goods that have recyclable value, including paper (office paper, computer printout paper, newspaper), glass (broken bottles, furnace-ready "cullet") and plastic (soda bottles, milk jugs). These goods meant big business in the year before the exchange opened — roughly $5 billion — according to Edgar Miller of the National Recycling Coalition. Miller was instrumental in creating the exchange.

The bulletin board provides a central location for buyers and sellers to make deals with less hassle. For example, it allows someone buying old newsprint to make comparisons among offers throughout the country — the price of loose newspaper on offer in New York, say, versus that for baled paper in Michigan.

The exchange also sets up some of the industry's first-ever national standards for grading recyclable materials. Carol Browner, chief of the U.S. Environmental Protection Agency, which contributed funding to the effort, is convinced the innovation will make "buying and selling recyclables more competitive and efficient."

"It is rather like the standards that first emerged in the 19th century for grading grain," adds one CBOT economist. "We created those standards and the government later adopted them — they greatly enhanced trade in those commodities."

A number of local governments and nonprofits across the country have signed up, including Oswego County in New York and the Private Industry Council of Northern Cook County. For-profit companies have also shown interest, including such paper products makers as Weyerhaeuser and International Paper and such plastic processors as Johnson Controls in Milwaukee. Here in Illinois, supporters include Chicago-based Waste Management, the largest garbage hauler in the nation.

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The company welcomes the exchange, explains William Rodgers, a corporate vice president, as it does all other changes that could improve the efficiency of the recycling business. Waste Management's own experience measures how far the industry has come. The company now does $700 million worth of annual recycling business, even though it won its first curbside pickup contract only in 1987.

And Rodgers recalls the awkward days of the industry's infancy. Initially, there was not enough demand for recyclables. Paper was often a safe bet, though some cities ended up warehousing thousands of tons because they couldn't unload it. Finding a use for the glass, plastics and metal products was trickier. It was also sometimes difficult to get participation in programs. They were often complicated, requiring people to sort materials and stash them in separate receptacles.

Much has changed. Now recycling is commonplace: There are more than 7,000 municipalities nationwide running curbside programs, compared to about 1,000 as recently as 1988. The volume of materials recovered nationwide from the garbage stream has shot up from 14.5 million tons in 1980 to 45 million tons, according to the U.S. EPA.

In Illinois, there are now about 450 curbside programs, compared to less than a dozen 10 years ago, according to David Smith, a recycling specialist at the Department of Commerce and Community Affairs. The volume of materials recycled also has jumped. In 1993, the most recent data available, the state saw 27 percent of its waste stream recycled, compared to 17 percent a year earlier. Meanwhile, a state survey revealed that at least 5.3 million tons of garbage were recycled in Illinois that year.

"The big growth in recent years," says Ron Swager of DCCA, "is primarily because the market for recycled materials is so much better." Within Illinois, companies that process plastics have expanded their operations, sometimes with grants from the state, and paper processors have also added plants — a good example is Weyerhaeuser's new paper processing plant in Itasca.

Similar expansions of plant and capacity have taken place elsewhere in the country. For example, major paper companies have retooled their plants to accept recycled material, and have begun to build new plants to do so. By the end of the 1990s, the American Forest and Paper Association estimates that $10 billion will have been invested by the paper industry.

A similar story is told by the number of companies using plastics recycled from milk jugs and soda bottles, which has increased fourfold to 1400 since 1990. The companies churn out a host of materials from clothing to carpeting and insulation. But perhaps the most dramatic evidence of the newfound demand for recyclables comes from prices. Take the market for old newspapers. While just a few years ago, collectors could barely get rid of the stuff, in 1995 processors and end users were clamoring for it. Demand drove prices up to as much as $100 a ton paid by processors (compared to $10 a ton earlier) and as much as $200 a ton paid by end users before those prices tumbled again at the end of the year. The demand has also been reflected in the price of plastic. Last year some goods saw market values double and even triple over 1994 levels.

Figure 2. Percentage of garbage recycled in Illinois, 1990-1993            1990       1991       1992       1993 Source: Department of Commerce and Community Affairs

Along the way, development in recycling know-how has made the industry more viable. On the one front, collecting recyclables has become more costeffective. Chicago's Blue Bag program, which was launched in December, is a good example. Waste Management's Rodgers says that experience has taught recyclers "the simpler the better." The simpler the program, the higher the participation rate. Simplifying means eliminating the use of separate receptacles and using the same crews and trucks to pick up recyclables along with regular garbage.

The Chicago program allows householders to throw all of their recyclable materials into one bag. The "blue bag" is then collected by the city's regular garbage trucks. It's the largest program of its kind in the nation.

What lies ahead? Analysts expect the recycling industry to grow. And not only will technological and logistical improvements enhance the industry, there are also additional markets to tap. Illinois officials point to commercial and industrial recyclable waste that only recently has become the target of local laws (such as one in Peoria County) requiring greater recycling.

Meanwhile, there will be more deals to be made. And who knows? As the board's Videll and others hint, one day there may be futures contracts for garbage. If that happens, used paper, old plastic bottles and broken glass would take their place among the many other commodities that have helped to fuel the economy in Chicago and the state. *

Edward Field, who lives in Chicago, is a reporter in the Midwest bureau of The Economist. His previous article for Illinois Issues was about federal agriculture policy.

Illinois Issues February 1996 * 35