The Next Big Wall Street Stock? It’s Trash. | WSJ The Economics Of

Summary

WM, North America's largest landfill operator, is capitalizing on climate investing by transitioning to sustainability-focused ventures. The company plans to invest $1.2 billion in landfill gas projects, leveraging tax credits and renewable energy demand to boost profits. Additionally, WM is upgrading recycling plants with AI-powered technology to increase efficiency and revenue, reflecting a broader shift in the waste management industry towards greener practices.

Takeaways

• 💰 Climate investing is booming, and the waste management industry is set to profit significantly.
• 🗑️ WM, North America's largest landfill operator, is known for collecting trash and managing landfills.
• 🌳 WM aims to have sustainability-focused ventures contribute 15% of its total profit by 2026, amounting to about $740 million annually.
• 💸 WM plans to invest $1.2 billion in converting landfill waste into fuel, leveraging the methane gas released during decomposition.
• 🌱 Landfill gas, previously burned off, is now collected and used for electricity and heating, making it economically viable due to federal tax breaks.
• 💡 WM operates 66 landfill gas plants and expects to receive $250 million in tax credits for installing gasworks at 18 of its landfills.
• 📈 The expansion will allow WM to produce eight times more gas, generating an additional $500 million in profit through 2026.
• 🔄 Natural gas from landfills currently accounts for less than 1% of the US natural gas supply, but the demand for renewable natural gas is growing.
• ♻️ WM is also investing in upgrading its recycling plants, with new technology expected to add $240 million to its bottom line over the next four years.
• 🤖 Automation in recycling plants, using AI-powered optical sorters, increases efficiency and the quality of recovered materials.
• 🚚 WM's smart truck technology helps improve recycling by capturing footage of recyclables and notifying customers of contamination issues.

Q & A

What is the surprising industry that is expected to profit from the boom of climate investing?

The surprising industry is garbage management, specifically the operations of North America's biggest landfill operator, WM.

What is WM best known for?

WM is best known for collecting trash and putting it in landfills.

What is WM's plan for sustainability-focused ventures starting in 2026?

WM plans for sustainability-focused ventures to reach 15% of its total profit, which is about $740 million a year.

How does WM plan to profit from government tax credits and the market for renewable energy and recycled materials?

WM plans to invest $1.2 billion into making fuel from rotting garbage, capturing methane from landfills, and utilizing federal tax breaks and incentives to make landfill gas economically viable.

What is the role of methane in WM's operations?

Methane, released from decomposing trash in landfills, is captured and used as a source of natural gas for power plants, heating, and cooking.

How many landfill gas plants does WM operate, and what is the economic viability of landfill gas?

WM operates 66 landfill gas plants. Landfill gas is more expensive to produce than gas drilled by energy companies, but it has become economically viable due to federal tax breaks and incentives.

What tax credits is WM expecting to receive for installing gasworks at its landfills?

WM expects to receive $250 million in tax credits for installing gasworks at 18 of its landfills, thanks to the climate, tax, and healthcare bill.

What is the expected impact of WM's expansion on its gas production and profit?

The expansion will allow WM to produce eight times more gas than it currently does and generate $500 million in additional profit through 2026, not counting the tax breaks.

What is the current contribution of natural gas from landfills to the US natural gas supply?

Currently, natural gas from landfills only accounts for less than 1% of the US natural gas supply.

What are WM's competitors doing in the renewable natural gas projects?

Republic Services is planning to open a total of 77 renewable energy projects and reported that about 88% of its landfills are covered in biogas collection systems.

How is WM investing in upgrading its recycling plants?

WM is making large investments in upgrading its recycling plants, including automating them with optical sorters powered by AI to increase recycling recovery rates and efficiency.

What is the role of optical sorters in WM's recycling plants?

Optical sorters in WM's recycling plants are used to automate the sorting process, increasing the speed and quality of sorted materials, and reducing labor intensity.

How do optical sorters impact the value of recyclables?

Optical sorters are able to increase the blended commodity value by about 15% per ton, and WM expects to recover 25% more reusable materials by 2025.

What is the purpose of WM's smart truck technology?

Smart trucks equipped with cameras help in capturing footage of recyclables for technicians to review, ensuring proper recycling and reducing contamination.

How does WM's smart truck technology affect the efficiency of recycling?

In regions where WM has implemented smart truck technology, residue has reduced by roughly 20%, improving the efficiency of recycling.