Rising disposal costs and increased national concern with ecology have resulted in several Congressional proposals for subsidization of recycling. The repot examines the justifications for government action and develops a framework for analysis of the paper industry and the impact of specific subsidies on the recycling decision. Pro forma balance sheet and income statement data for new virgin and secondary linerboard, corrugating medium, and folding boxboard mills show differential returns directly related to recycling rates, with secondary fiber increasingly competitive moving from linerboard to medium to boxboard. A summary of strategic, structural, and social influences highlights their importance relative to the financial impact of any of the six subsidies examined. A benefit/cost analysis indicates that general use of any of the subsidies studied is not economically justified because of high costs per incremental ton recycled. However, support of new capital investment in specific localities may be desirable, as is continued research sponsorship to take advantage of the steep slope of the recycling learning curve.