Gardeners who compost and throw away paper are divesting of a valuable resource. The EPA's fact sheet on paper composing identifies several advantages of using paper for home composters. Paper absorbs free liquids in compost, which reduces odors and accelerates the breakdown of the paper. Paper is a source of carbon, the main ingredient in a good compost. Most paper has extremely low levels of chemical contaminants, and paper can reduce other contaminants during its own decomposition.
Gardeners and landscapers have another way to use paper that will eventually decompose the paper, called sheet mulching. Cardboard or newspaper is laid on the ground to produce a weed barrier, then covered with a thick carpet of mulch. No-till gardeners use sheet mulching extensively, because the paper eventually decomposes after having suppressed weeds and helps prevent moisture loss from evaporation. Each year, as the last layer of sheet mulch is broken down, gardeners add another layer, which is eaten by earthworms as it breaks down.
The EPA has published a resource conservation fact sheet on vermicomposting (making worm compost) that describes the benefits of raising earthworms. Earthworms excretions--called castings--are a high-quality fertilizer and soil conditioner. Some people like to raise the worms in bins, where this fertilizer can be collected for more direct application. Worm bins require damp bedding, the most common being shredded paper, which is eventually eaten and excreted by the worms. Shredded newspaper or shredded office paper make suitable worm bedding.
Larger livestock animals also require bedding, as do some household pets, like rats and gerbils. Newspaper is a cheap and plentiful source of animal bedding, and newspaper alone contributes about six percent to the mass of landfills, according to a paper entitled "Myths About Using Newspaper Bedding for LIvestock," published by the Ohio State University Extension Service. The same paper points out that newspaper is far more absorbent than conventional bedding like straw or peanut shells. In the past, the paper states, newspapers used heavy metals in their inks, but that is extremely rare now, so there is little danger to animals using newspaper as bedding. Newspaper decomposes rapidly when it is combined with moisture and animal manures.