Investing in Megatrends

The world is scrambling now that China is refusing to be a trash dumping ground

Key Points
  • For decades, China was the world's largest importer of waste but that's changing after Beijing banned 24 types of scraps from entering its borders starting January.
  • The ban was hailed as a big win for global green efforts by environmentalists, who said it would not only clean up China, but also force other countries to better manage their own trash.
  • More than three months into the ban, waste exporters such as the U.S., Europe and Japan are still scrambling for an alternative to China, experts told CNBC.

For decades, was the world's largest importer of waste — a status that many countries took for granted, going by the reaction to Beijing's surprise decision to stop taking in 24 types of scraps starting 2018.

More than three months into the ban, waste exporters are still scrambling for an alternative to China, experts told CNBC.

A woman stands amid a huge pile of used plastic bottles at a plastics recycling mill in Wuhan, China.
Getty Images

Different ideas have been thrown out: The European Union said it's mulling a tax on plastics usage, the U.K. was looking to divert some of its trash to Southeast Asia, and the U.S. asked China to lift its ban, according to media reports. But none of those suggestions are long-term solutions to the new global order in waste management, experts said.

The U.S., the U.K., the EU and were among those that exported most of their waste to China.

For those four refuse exporters, "China's ban on importing waste means cutting down their main channel to dispose [that] waste, which has brought them unexpected problems in a short time," said Neil Wang, greater China president for consultancy Frost and Sullivan.

"They haven't come up with some effective solutions in a short term. Major waste exporters are still trying to struggle a way out," he added.

Dumping ground no more

China was the dumping ground for more than half of the world's trash before the ban and, at its peak, was importing almost 9 million metric tons of plastic scrap a year, according to Greenpeace.

The country started importing waste in the 1980s to fuel a growing manufacturing sector. It grew a whole waste processing and recycling industry, but improper handling of trash and a lack of effective supervision turned the country into a major polluter.

China, now the second-largest economy in the world, has been doubling down on efforts to clean up its air, water and land. Under President Xi Jinping, the country has shuttered tens of thousands of factories that contributed pollution, pushed for greater use of renewable energy and became a green finance giant.

The country still has a long way to go, however, as a study released in March by The University of Chicago found that air pollution levels across China still exceed global standards set by the World Health Organization.

This regulation will send shockwaves around the world, and force many countries to tackle the 'out of sight, out of mind' attitude we've developed towards waste.
Liu Hua
Greenpeace East Asia plastics campaigner

Still, the move to ban 24 types of imported waste, announced last July and implemented in January 2018, was hailed by environmentalists as a big win for global green efforts. China's ban, they said, would not only clean up the country, but also force other countries to better manage their own trash.

"This regulation will send shockwaves around the world, and force many countries to tackle the 'out of sight, out of mind' attitude we've developed towards waste," Greenpeace East Asia plastics campaigner Liu Hua said in December before the ban came into effect, calling Beijing's move "a wake up call to the world."

That could also prove to be a wake up call for investors to get in on the recycling business in developed economies.

The US disagrees with China's ban

In blocking what it now considers trash from entering its borders, China has also kept out "scrap commodities" — previously processed materials used again by manufacturers, noted the Washington-based Institute of Scrap Recycling Industries.

The materials are considered to be more environmentally friendly and energy-saving to use, the ISRI said. The lack of supply of such scrap could lead to Chinese factories using materials that're more harmful to the environment, said Robin Wiener, president of ISRI.

Chinese tourists wear masks as protection from the pollution outside the Forbidden City during a day of high pollution in Beijing, China.
Getty Images

The ban, she told CNBC is "disrupting the flow of valuable, energy-saving scrap commodities that are needed by Chinese manufacturers."

"The result is not only the potential for recyclable materials in the United States being diverted to landfills, but Chinese manufacturers using more virgin materials — that expend energy and greenhouse gas emissions in their production process — in place of the scrap they used to use that was beneficial for the environment," she added.

Still, there have been instances where Chinese custom officials were inconsistent in carrying out the ban, Wiener noted.

The U.S., which the ISRI said exported $5.6 billion worth of scrap to China in 2016, asked China last month to "immediately halt" its ban. The world's top economy argued that Beijing's approach may have the opposite effect of what's intended as scrap materials may end up being disposed at landfills.

China's not backing down

China, in acknowledging the concerns raised by the U.S., said it will "further adjust categories of waste imports" but has no intention to roll back the ban, according to a report by Chinese state-run Global Times.

The country's imports of solid waste, which include plastics, paper and metal, fell by 54 percent in the first quarter of 2018 following the January ban, according to Chinese customs data.

In the same period, several Southeast Asian countries such as Vietnam, Malaysia and Thailand reported spikes in waste imports — an indication that trash was diverted there. Experts, however, said they didn't think these countries can fill all the void left by China.

China is now the world's largest issuer of 'green' bonds

Southeast Asia has faced problems from air pollution due to forest burning, so "the last thing it wants is to add to the problems by importing waste," said Lawrence Loh, an associate professor at the National University of Singapore. "Thus, while there is potential for absorbing the waste imports, the lobbying pressures may pull back the import expansion."

"In the long term, the problem has to be solved at source. North America and Western Europe must take clear and conscious efforts to reduce waste," Loh added. "Rather than looking for the next place to dump waste, advanced countries should bear the responsibility of cutting on waste generation through sustainable practices."