Terrie Lloyd writes: "Over the last couple of years, and particularly due to improved awareness of the negative health and environmental effects of pollution, global commercial interest in "clean tech" and "green tech" has been increasing. We believe the turning point for environmentally-sensitive technology becoming a viable business field would have been the recent establishment of carbon-trading organizations and emerging government legislation around the world to force companies to acknowledge their pollutin' ways. We now have the beginnings of a commercial foundation upon which a whole new industry will be formed.No where is the hope to make millions by creating new ways to extract energy from garbage, reuse resources instead of manufacturing/mining fresh ones, or make dangerous by-products safe again, bigger than in Japan. But the fact is that while there is a burgeoning interest in such technologies, old habits die hard and green/clean businesses usually require a lot of supply infrastructure -- either for the sourcing of the trash or alternative inputs needed, and a motivated distribution network that receives and delivers to the consumers the energy/derivative outputs. Thus, in Japan at least, apart from government and big corporate fundings of trial programs, the real opportunities to make money out of such solutions are still premature. Instead, where most "green" initiative money is being made right now is not in sexy world-altering solutions, but in the rather more mundane activity of re-distributing trash. One of the biggest partnerships in trash re-distribution is between Japan and China. Over the last 4-5 years, China has been buying ship loads of recyclable steel, plastics, paper, TV tubes, circuit boards, and just about anything else that can broken down, digested, or leached for profit.Prices have soared and trash has become valuable. The demand is such that in our neighborhood in Tokyo, on recycling day, before the local government garbage trucks can get to our valuable bundled newspapers and boxed PET bottles at the appointed time of 09:00am, a privately owned truck zips by a couple of hours earlier and hauls the waste away for transshipping in Chiba or Kawasaki. Elsewhere in Tokyo, manhole covers, road-side barriers, stainless steel park fittings, and other public construction materials have been going missing at a prodigious rate.But the recession may be about to lay the recycling business low, returning the ownership of issues such as how to dispose of paper and other recyclables to the traditional caretakers -- our non-commercially minded metropolitan garbage authorities.According to a recent Nikkei Business article, in the last 4-6 weeks there have been veritable mountains of PET bottles, paper, plastics, steel, and other recyclables gathering at waste-processing plants around Japan's major cities, due to the fact that the demand for such materials from China has suddenly dried up. Industry players are saying that the falling demand for such waste is directly related to the reduced demand globally for Chinese products. In particular, the demand for recyclable plastics and paper/cardboard has almost ceased.PET bottles are a case in point. Until several months ago, there was a high demand for this particular type of plastic, because it can be recycled into soft fibers suitable for making plush toys and apparel. 70% of all PET bottles were purchased by Chinese firms, who typically paid around JPY30 per kilo. Now, despite the quality of the Japanese sorted waste and definite cost advantage over using raw materials from chemicals firms, the price for PET bottles has fallen to just JPY3/kilo, and industry players say that from year-end 2008, there may be no demand for PET bottles from China at all.If the recession lasts for 2-3 years, as it appears it may,will the contraction in waste demand from China damage the current players in the Japanese recycling market? Not necessarily.While there is no doubt that the main driver behind the existing Japan--China trash trade has been almost purely a cost-reduction exercise, there is another impetus that is starting to appear -- that of government regulation here in Japan. Back in 2005, new rules requiring the recycling of automobiles meant that not only did the Chinese demand for recycled steel push up demand, but also the supply side was put in place by willing sellers here. The result has been thousands of shiploads of crushed vehicles selling to China for as much as JPY70,000/ton of steel content as recently as July.Now, admittedly by last month even recycled steel had fallen dramatically in volume and price -- with one ton now fetching JPY10,000/ton or less. However, since the suppliers here in Japan have a motivation to keep providing the steel, even if it sells for almost zero yen, it looks like this area of trade will continue.Such is the power of a new law.So it was with interest that we read this week that the government is likely to introduce compulsory recycling of cell phone handsets and possibly digital cameras, so as to facilitate the recovery of rare metals. METI and the Environment Ministry say that from next year they will likely require the collection of disabled phones when customers purchase a new one. The new collection rules will be backed up with fines and public naming and shaming of companies not carrying them out.Now, recovering precious metals from electronic products is nothing new, and in fact has become a very lucrative business for some. One of the leaders in the field is Furuya Metal, which is a JASDAQ-listed company. Furuya is still relatively small, at around 250 people, but it has a proprietary in-house process for recovering the element Ruthenium from old hard disk drives from traded-in and out-of-lease PCs. The company recovers a surprisingly large quantity of Ruthenium -- about 28 tons a year, which isequal to the worldwide annual production of the element through conventional mining. Ruthenium is used as a catalyst in the manufacturing of silicon, as well as various other areas of electronics.Still, even with a lock on the technology and raw source material, there is little demand and so the company is suffering as a result. Furuya's share price has slumped from a July figure of around JPY20,000/share to just JPY5,200/share last month. The shares have recovered a bit since then and are now trading at around JPY9,000.What can revitalize the recycling industry? As much as we don't like government getting involved in commerce, sometimes it can be useful, particularly if there are strategic issues at stake. In the case of Ruthenium supply, this exceedingly rare metal is sourced mainly from Russia, and is extremely important for the Japanese hard disk and photo-voltaics industries.Thus, we believe that the government might want to consider introducing licenses for certain recycling sectors -- picking those that align with national interest -- such as Ruthenium for the nation's hard disk industry. Yes, this approach will give certain companies trading in the field already unfair commercial advantages, but if they are like Furuya, then their technology already qualifies them to be part of a small elite group of chosen suppliers. Licencing them will force everyone else to do business with them, and sosuch companies are more likely to withstand the downturn.For those recyclables sectors that are not so immediately strategic, but which will damage Japan's environmental efforts if the sector collapses, the government should look at subsidizing the domestic storage and re-processing of these materials -- by way of tax rebates linked to the ratio of recyclables used versus raw materials. Such a program could be timed to tail off once the Chinese market recovers. In the meantime, these subsidies not only would keep an increasingly efficient waste collection network aliveand well, it would also reduce the nation's reliance on politically reactive suppliers -- such as China (Indium), Russia (Ruthenium), and Peru (Zinc)."------------ Japan Inc is worth every penny! --------------J@pan Inc is Japan's only publicly sold English-language business magazine. 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