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[greenyes] Starbucks and barriers to recycled paper use


In response to your question, here are some thoughts.

Recycled paper must compete on price with virgin paper in order to gain and grow its market share. To the extent that the price of virgin paper is subsidized, recycled fiber will be less competitive. Similarly, if recycled fiber requires extra processing steps, the article is suggesting that these extra steps drive up the relative cost of recycled fiber, hurting it in the marketplace.

Virgin paper does receive significant subsidies at both the federal and state levels. These include tax breaks for timber extraction and reforestation, property tax reductions, and increasingly tax credits for the production of energy used in virgin paper production from biomass inputs (i.e., wood byproducts). In addition, federal policy has tended to sell timber from federal lands at less than even the cost of overseeing those sales. Significant subsidies have come through federal provision of timber access roads. Virgin paper production uses huge amounts of water as well, and in many localities this water is essentially free to users even though the source of that water is often degraded in the process.

The argument that recycled paper requires more steps than virgin paper seems less strong. True, there are some additional processing steps. However, many steps from the early stages of virgin production -- such as harvesting and transporting timber, pulping, and even to some degree bleaching, are avoided. Past studies have suggested that paper recycling has a production cycle less intensive in energy and water use than virgin paper, and that generate fewer emissions.

The economic break-even for recycling depends not only on the price of virgin materials, but also on the cost of alternative disposal practices -- something the article does not discuss. If something costs you $60/ton to put in a landfill, even paying somebody $50 to recycle it would be cheaper. Paper is a substantial fraction of the waste stream, and subsidies to non-recycling disposal markets will also harm its ability to displace virgin paper in many end-uses. Both landfilling and waste-to-energy plants receive tax subsidies not available to recyclers, and are also becoming eligible for energy production tax credits.

While any single one of these subsidies probably doesn't skew the markets against recycled paper irreversibly, the combination can be expected to generate quite significant additional barriers to market entry for recycling.

Whether the Starbucks move is important or not depends on where it goes from here. The fact that they are going through some of the large initial hurdles: consumer safety, technical processes, consumer acceptance -- is quite significant. Their successes will make is much less difficult for others to follow. Hopefully, as 10% recycled is proved they will be able to increase this level over time. Continued pressure from the recycling community, and from groups such as NRDC, will no doubt help.

-Doug Koplow

Doug Koplow
Earth Track, Inc.
2067 Massachusetts Avenue - 4th Floor
Cambridge, MA 02140
Tel: 617/661-4700
Fax: 617/354-0463

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>>> "Dan De Grassi" <dpw180@no.address> 11/17/04 02:14PM >>>
Can someone explain these statements...?
"The combination of government subsidies for logging and the additional
procedures to turn what is essentially trash into usable paper products
combine to make recycled paper more expensive than virgin paper. Adding
to the cost is the need for coffee cups to be stronger to withstand the
hot liquids."

-----Original Message-----
From: Gilbert, James [mailto:JGILBERT@no.address]
Sent: Wednesday, November 17, 2004 10:37 AM
Subject: [jtrnet] Starbucks

From today's NY Times:
Starbucks Will Use Cups With 10% Recycled Paper


Published: November 17, 2004

Starting next year, Starbucks will add something new to its cups of
coffee: recycled paper.

Hoping to win over customers who care about the environment, Starbucks,
the Seattle coffee company, plans to announce today that it will start
stocking its stores with cups made with 10 percent recycled material.

The company said it was the first time that a national food chain had
incorporated recycled material into packaging that comes into direct
contact with food or beverages.

Starbucks, which uses an estimated 1.5 billion cups annually, currently
puts recycled paper into its cardboard cup sleeves, napkins and
cardboard carriers. But attempts to address the cup problem have vexed
the company for years. Starbucks plans to test the cups early in 2005
and to have them in all its stores by the end of the year.

Despite the small fraction of recycled content in the new cups,
Starbucks said the move would have considerable environmental effect,
saving approximately five million pounds of virgin tree fiber a year.

Environmentalists applauded Starbucks' move, but said that the company
should do even more if it was serious about being a green company.

"It's a helpful start, but 10 percent recycled content is minuscule,"
said Dr. Allen Hershkowitz, a senior scientist at the Natural Resources
Defense Council. Starbucks said it was using only 10 percent recycled
material partly because the material costs more.

The higher cost is one reason that other food companies have not
switched to recycled cups.

It was not immediately clear if Starbucks would bear the added recycling
costs or pass them along to its customers.

Although permission was not required, Starbucks and its pulp
manufacturer, the Mississippi River Corporation, decided to seek Food
and Drug Administration approval for the new cup material, which is made
from paper that had previous consumer uses. In September, Mississippi
River and Starbucks received approval under the agency's two-year-old
food contact notification program.

"I think they wanted the peace of mind to know that someone else outside
the company was assuring them of the safety of the material since it's
coming into contact with food," said Dr. Paul Honigfort, a consumer
safety officer in the F.D.A.'s food contact division. Tanya Richardson,
process manager at Mississippi River's pulp plant in Natchez, Miss.,
estimates that had Starbucks not bothered to get F.D.A. approval, the
cup development process would have taken only three months instead of
the more than two years that was needed.

The combination of government subsidies for logging and the additional
procedures to turn what is essentially trash into usable paper products
combine to make recycled paper more expensive than virgin paper. Adding
to the cost is the need for coffee cups to be stronger to withstand the
hot liquids.

James L. Donald, who has been designated to succeed Orin C. Smith as
chief executive in March 2005, said, "We spent two and a half years
working on this because it's part of a commitment we've always had to
reduce our environmental footprint."

Some other food companies have made their own efforts. McDonald's uses
recycled material in its napkins, tray liners, meal boxes and its
carryout trays and bags. The company says it is the largest user of
recycled paper in the food service industry, buying $100 million worth
of material. Two years ago, Coca-Cola started using 10 percent recycled
plastic for its bottles.

Starbucks in recent years has become a target of a variety of advocacy
groups who accuse the company of failing to live up to its goals of
social responsibility. Craig Minola, an environmental scientist at the
Organic Consumers Association, faulted Starbucks for plastering its
stores with Fair Trade signs and brochures, but only offering one brand
of Fair Trade coffee and rarely serving it to customers. The Fair Trade
program seeks to ensure a higher crop price for growers in developing

"We've had people go into Starbucks stores and ask for Fair Trade coffee
and the employees tell them they'd have to brew it," Mr. Minola said.
"You can get it, but you have to be pretty persistent."

Starbucks replies that it has other programs that do things like promote
conservation in coffee-growing countries. "We do more than just Fair
Trade," said Ben Packard, Starbuck's director of environmental affairs.

Jim Gilbert
Empire State Development
Environmental Services Unit
400 Andrews Street, Suite 710
Rochester, NY 14604
Fax 585.325.6505

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