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PATAGONIA WAS ON a mission. It wanted to make recycled underwear - among other things - from cast-off long johns, campaign posters, phone cards, old municipal uniforms, and any other sort of polyester that had run its course. Key to the project's success was a process for smoothing the fabric so that customers wouldn't feel their Capilene boxers biting them in the, er, behind.

It wasn't the company's first trek up the recycled-polyester mountain. Several years before, Patagonia and its textile partner, Wellman, had developed a fabric spun from used soda bottles. The first product sample using the material, says Jill Dumain, the company's director of environmental analysis, was a bag so scratchy and ugly, it might have rivaled Grandma's horsehair sofa. After some painful trial and error, Patagonia decided to make fleece from the soda bottles instead - which worked out perfectly, spawning a line of Synchilla sweatshirts and jackets made entirely from postconsumer plastic.

But the same approach wouldn't work for underwear, and it certainly wouldn't work for the sort of water-repellent jackets Patagonia sells to hikers, skiers, climbers, runners, and anyone who'd like to mimic one of the above. For that, the company had to turn to a Japanese partner, Teijin, which eventually figured out how to spin a filament yarn from phone cards and their ilk. Now Patagonia's popular line of Capilene thermal underwear and some of its Patagonia Body everyday skivvies are made from at least 50 percent recycled polyester; its 100 percent recycled rain jacket, the Eco Rainshell, has won an Outside magazine Green Gear of the Year award.

All that product development didn't come cheap, and the resulting fabrics aren't cheap either. Patagonia customers opening their newest catalogs to look for some ski underwear are experiencing sticker shock, as the Capilene-line prices are 10 to 15 percent higher than they were the year before.

Eventually, though, the premium won't be so high. Patagonia has gone through this process before, with organic cotton: After the company switched to 100 percent organic cotton in 1996, its fiber costs were two to three times those of conventional materials. "We wanted consumers to understand the magnitude of the decision [to go totally organic]," Dumain says. "As a for-profit business, we had to pass our costs along.

Patagonia took a hit to its profit margins in order to keep prices for its T-shirts and pants down-to-earth. Over time, the company became more efficient at working with the organic material and managed to get its margins back to normal while still keeping prices reasonable.

Organic, recycled, sustainably produced, energy efficient ­- these are words we're hearing often these days, now that green is, as they say, the new black. They're also buzzwords that lead people to expect higher prices.

But buyers are not necessarily thrilled at the price premium. In fact, sometimes the difference is regarded cynically. Of course it costs more, the doubter sniffs. It's trendy.