Members of about 160,000 Oahu households sort their discards for Honolulu’s curbside collection program: gray bins for landfill garbage, blue bins for recyclables and green bins for yard waste.

The city would save millions of dollars, though, if it nixed the blue bins full of glass, plastic and cardboard and instead incinerated the material at the waste-to-energy plant, H-POWER, according to a city audit of the Department of Environmental Services recycling branch.

At H-POWER, trash is burned and converted to electricity, which is then sold to Hawaii Electric Company.

The audit, conducted by the Office of the City Auditor, found that while recycling diverts trash from landfills, the cost to collect, sort and ship the material is increasing while the market value for recyclables is decreasing.

City and County of Honolulu

After the city collects recyclables, it is sorted at a facility in Kapolei and sold to companies in China or on the mainland. Recyclable material made up 35.6 percent of the 1.2 million tons of trash Oahu residents and businesses produced last year.

The city receives a portion of the profits, if there are profits.

In fiscal years 2015 and 2016, the city spent about $3 million per year to process recyclables, but made just $767,000 and $997,000 respectively.

By contrast, in FY 2016 the city made over $66 million burning trash at H-POWER.

“The city is incurring high costs and missing revenue opportunities that exist under the current recycling and waste-to energy H-POWER programs,” the audit concluded.

City and County of Honolulu

The global market for recycled waste has declined. The audit offered the example of China’s Operation Green Fence program, which reduced the amount of foreign recyclables the country takes in.

The cost of doing business in Hawaii adds to the high cost of processing recyclables. Even though Hawaii is closer to Asia than Los Angeles, it costs six times more to ship a container of recyclable material from Honolulu Harbor than sending the same container from LA, the audit said.

The audit also found that the city is losing money to Covanta, the company that runs H-POWER, because the Department of Environmental Services isn’t delivering enough waste to the facility. From 2013 to 2016, taxpayers shelled out over $6.2 million because the city fell short of its contract agreement to supply H-POWER with 800,000 tons of waste per year.

The city could avoid the shortfall if it starts sending recyclables to H-POWER in addition to the garbage already headed for the incinerator, the audit said. It also recommended the city change its H-POWER contract so it doesn’t owe the facility a specific amount of trash each year.

The department’s response to the audit said it “intends to avoid” contracts with waste guarantees in the future, but added that minimum tonnage guarantees are common practice in industry contracts.

A department spokesman did not respond to a request for comment Thursday.

Read the full audit, with comments from the Department of Environmental Services, below: