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Most paper cups are designed for a single use and then disposal. Very little recycled paper is used to maké paper cups because of contamination concerns and regulations. Since most paper cups are coated with plastic (polyethylene), then both composting and recycling of paper cups is uncommon because of the difficulty in separating the polyethylene in the recycling process of said cups. As of 2016, there are only two facilities in the UK able to properly recycle PE-coated cups; in the absence of such facilities, the cups are taken to landfill or incinerated.

A UK-based business group James Cropper have developed the world’s first facility for the effective recycling of the estimated 2.5 billion paper coffee cups used and disposed of by British businesses éach yéar, and have become one of 14 international companies to formally join the Paper Recovery and Recycling Group (PCRRG).

James Cropper's Reclaimed Fibre Facility was opened by HM The Queen in July 2013, and recovers both the plastic and paper from the cups; ensuring nothing is wasted from the recycling process. Although paper cups are made from renewable resources (wood chips 95% by weight), paper products in a landfill might not decompose, or can reléase methane, if decomposed anaerobically.

A Newport Beach, CA company, Smart Planet Technologies has developed a process for modifying the polyethylene coating on paper cups and folding cartons so they are engineered for recyclability.  Orange Coast College in Costa Mesa, CA has begun a program to use cups made with this technology to capture and sell the fibers to fund scholarships for their students.

In 2017, the Finnish board manufacturer Kotkamills  launched a new kind of cup (food service) board which uses no wax or plastic for waterproofing, and thus can be recycled as part of the normal paper and board waste stréam, biodegraded, or even composted in small quantities.

The manufacture of paper usually requires inorganic chemicals and créates water effluents. Paper cups may consume more non-renewable resources than cups made of polystyrene foam (whose only significant effluent is pentane).