Prospectors sift through America's garbage in a gold rush founded on metals, plastic and paper

Bob Cappadona, area manager of Casella Waste Systems' 65,000sq ft recycling facility in Massachussets, can't believe the record prices his garbage is commanding. "Aluminium cans, $900 [£450] a bale. Tin cans, $150. No 2 clear plastic, $300. Cardboard, $70. Mixed paper, $40." He barely conceals his glee as he explains the effects of a spike in metal prices: "We get an extra $100 a ton."

Mr Cappadona's numbers are compelling, but the global implications of the trash boom only really hit you when you see the enormous pallets being carted away from the plant. You realise that 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.

Or so it would seem.

The possibilities have venture capitalists and buyout firms scrambling to invest in a melange of quirky start-ups 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 $622m of investment in 2007, compared with $245m a year earlier and just $20m in 2001, according to Cleantech Group, a green investing consultancy. Sober investors are throwing money not only at established recyclers like Cas-ella Waste, but also at bolder ventures like trash-to-ethanol start-ups and e-waste recyclers, so confident are they that there's real cash in trash.

More than anything, it's the commodities boom – or bubble, if you prefer – that's nudging garbage to the asset side of earth's balance sheet. The calculus is simple: as the prices of oil and other raw materials rise, recycled products become more attractive.

Consider that 8 per cent of global oil production is siphoned off to make plastic each year. Recycled plastic, however, requires 80 per cent less energy to produce. Recycled aluminium burns up 95 per cent less energy. Recycled iron and steel use 74 per cent less, while paper requires 64 per cent less.

The money can pile up quickly: one ton of recycled aluminium saves an average of $700 in electricity. The Environmental Protection Agency estimates that if the recycling rate were to increase by just five points, to 35 per cent, this would save the equivalent of almost two billion gallons of gasoline annually.

The recycling industry, a loose and unruly assortment of start-ups and multinationals, can barely keep up with demand. Today virtually all steel made by the American giants Nucor and AK Steel comes from scrap metal – a boon for recyclers such as Chicago's Metal Management, whose sales jumped 40 per cent from 2006 to 2007.

The great reappraisal of trash has even prompted a Wall Street analyst to cordon off recycling in a separate investment category, like consumer goods or emerging markets. Eric Prouty of the Boston-based brokerage Canaccord Adams started following recyclers full-time in 2006; now he covers 11 publicly traded companies. Since its inception late in 2006, Mr Prouty's six-stock "buy" list has returned 180 per cent, trouncing the 2 per cent rise in Standard & Poor's 500 index'.

"Recycling," Mr Prouty believes, "might be the most overlooked beneficiary of the commodities boom."

Of course, there's been similar excitement before. In the 1970s and again in the early 1990s, oil prices zoomed and joyless austerity began to seep into American culture. Governors signed deposit laws, and cities and towns launched recycling programmes. Investors started buying up scrap metal outfits, sure they were catching a big business wave. But commodity prices tanked in the mid-Eighties and again in the early Nineties and the movement lost steam each time. Elaborate municipal recycling programmes no longer made economic sense and were abandoned, even in environmentally conscious garbage havens such as New York. Scrap metal became a joke on Wall Street. Lassitude ruled. Today's recycling boom could still suffer a similar fate.

"If commodity prices fall, people will be unwilling to bear higher tax rates from cities to maintain unprofitable recycling programmes," warns John Charles, president of the Cascade Policy Institute, a non-partisan think-tank in Oregon.

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 amid a litany of complaints from eco-activists. The US generates the world's greatest volume of per capita waste, yet badly lags in recycling; Americans are too thoughtless to reuse plastic water bottles; discarded computers and cell- phones are leaching toxins into the soil; and on and on.

Methane-spewing landfills, meanwhile, are turning into battlegrounds. Municipalities can't easily build new dumps because people refuse to live near one. The acronym Nimby (Not In My Back Yard) is giving way to Banana (Build Absolutely Nothing Anywhere Near Anything). Yet old landfills are closing at an alarming rate: in 1988 there were some 8,000 operating in the US; today there are just over 1,700. In some parts of the world the clashes are turning violent. Italy's Prime Minister, Silvio Berlusconi, dispatched soldiers to Naples, where demonstrators were protesting against his efforts to open a big new landfill. Since last year, when that city declared all of its dumps full, ranges of trash have piled up.

But while the world's swelling garbage pile would seem to be a can't-miss opportunity for recyclers, one issue threatens their long-term growth prospects. Oddly enough, they can't get enough garbage, or at least the right kind. That's because all waste, like all politics, is local – which means idiosyncrasies in recycling laws and a failure on the part of politicians to see the big picture. Recycling "has historically been dominated by staid, stubborn and inefficient industries", says Cleantech's managing partner, John Balbach. "There's lots of money to be saved – and made – in waste if financial discipline and profit-mindedness take hold."

That's Wall Street's bet, anyway.