Turning Green Trash Into New Money

08/07/2008 05:12 am ET | Updated May 25, 2011
  • Roben Farzad Business Week

According to Business Week, innovative companies are sifting through the nation's trash and initiating a campaign to capitalize on the new found wealth of the recycling industry. Investors perceive the profit in waste recycling or the "cash in trash."

Recyclers can make vast profits from combing through ordinary rubbish, processing it, and then reselling it to other companies. And that leads to another, bigger thought: Trash is no longer just an environmental liability. It is becoming a financial asset. And it is everywhere. [...]The possibilities have venture capitalists and buyout firms scrambling to invest in a melange of quirky startups that might have provoked belly laughs from these same financiers five years ago. The broad category of "waste and recycling," which includes everything from materials recovery to sewage biotechnology, drew a record $622 million of investment in 2007, compared with $245 million a year earlier and just $20 million in 2001, according to Cleantech Group, a green investing consultancy.

Eric Prouty of Canaccord Adams, a Boston-based brokerage company, devotes his attention to 11 publicly traded companies.

Since its inception late in 2006, Prouty's six-stock Buy list has returned 180%, trouncing the Standard & Poor's (MHP) 500-stock index's 2% rise. His year-old "Best Ideas" list of eight stocks has shot up 150%, compared with the broad market's 6% gain. "Recycling," says Prouty, "might be the most overlooked beneficiary of the commodities boom."

Cellulosic ethanol startup Coskata is backed by three venture capital firms: Khosla Ventures, Advanced Technology Ventures and GreatPoint Ventures. The company seeks to derive $1-a-gallon ethanol from landfill waste, which is equivalent to the cost of ethanol made from Brazilian sugarcane. This "dump-to-pump" process uses botulism-related bacteria that consume the gas made by waste and in turn emit ethanol. Coskata produces 7.7 times the energy that corn-based ethanol yields. The company's new trash power technology is the ideal beginning for the recycled fuel industry.

According to Treehugger, Coskata's cellulosic ethanol bioreactor is a "breakthrough" for both its technology and environmental conservation. The process uses half of the water that is necessary to produce corn ethanol and reduces carbon dioxide emissions by 84%. In January, General Motors took a stake in Coskata, which helped to boost its environmental commitment.

GM is pinning its biofuel hopes on Coskata, a biofuel start-up bankrolled by the likes of VC heavyweight Vinod Khosla, which has devised a commercially viable process to bring cellulosic ethanol to market by 2011. Coskata's process relies on a 3-step syngas-to-ethanol process and patented microorganisms to produce ethanol from almost any carbon-based feedstock - garbage, plant waste, even old tires - for roughly half the cost of producing gasoline. [...]The start-up expects to have a commercial-scale plant with the capacity to manufacture 50-100 m gallons of ethanol per year going by 2011.

The ever-growing green movement offers relief to investors of the recycling industry.

The optimists point to a new factor they say will help the industry withstand the next commodities bust: the green movement. Global warming has finally pierced the American popular consciousness.

::Recycled fuel techniques from the Huffington Post.

::Trash power from the Huffington Post.

Vinod Khosla, founder of Khosla Ventures, discusses the need for cellulosic biofuels on the Huffington Post.

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