The United States Waste Rush

In 1848, James W. Marshall discovered a gold deposit at Sutter’s Mill in Coloma, California triggering a chain of events that would reinvigorate the American economy. The news of the discovery resulted in nearly 300,000 people migrating from all over the United States to California in search of gold in what would become known as the California Gold Rush.

The economic and societal impacts of the Gold Rush are still felt today. Several merchant trading and commercial markets were born establishing the foundation for many of the businesses and consumer products we use daily. Transportation-related infrastructure accelerated with the need for new roads, bridges, and railways. The agriculture industry grew rapidly to support the sudden increase in population and economic activity.

Today, a modern-day Gold Rush is occurring. However, this time it is being driven by a very unlikely commodity, waste. You read that correctly, trash is the new gold. Food waste, biosolids, peanut shells, livestock waste, fats, oils, greases, and wastewater sludge to name a few are all valuable commodities being transformed into lucrative products such as energy, biofuels, fertilizer, and hydrogen.

Trash and waste have been accessible for decades, so why the sudden sense of urgency to secure rights to waste streams? We are facing a waste epidemic.

The United States produces an estimated 250,000,000 tons of trash annually, not considering agricultural, construction or manufacturing waste. That is truly a staggering amount. Up until 2019, we pushed a large portion of this waste problem onto other nations, particularly China, by shipping thousands of containers full of recyclables to their doorstep. But China has called it quits, banning the import of most waste streams, including paper and plastic. Some of this waste will be diverted to other nations, but most nations lack the necessary infrastructure required to handle their own waste streams, let alone absorb ours. Couple that with approximately 15-20 years of landfill capacity remaining in the United States and it becomes apparent that we have no choice but to quickly find alternate solutions to our waste problem.

The good news? Waste to value technologies such as anaerobic digestion, gasification, pyrolysis, advanced recycling facilities, and bio-refining have significantly advanced allowing for waste streams to be cost-effectively transformed into valuable products with expanding commercial markets. As a result, the growth in waste-to-value related infrastructure projects is significant. The acceleration of the ESG movement paired with profound financial returns is driving increased interest from private equity. 5 years ago, there were a handful of projects being underwritten in this sector. Today, billions of dollars are being deployed to solve the growing waste problem, and it is not slowing down.

With unlevered returns ranging from 15-30%, it is no wonder more and more capital is pouring into infrastructure projects that reduce carbon intensity. There are new private equity firms and credit groups building their entire investment thesis around the sector fueled by the growing interest from limited partners seeking to deploy more conscious capital. Investors are learning how to blend altruism with financial returns, and the waste to value market will continue to grow as a result.

Ben Hubbard