downcycle

:  to recycle (something) in such a way that the resulting product is of a lower value than the original item :  to create an object of lesser value from (a discarded object of higher value) Other companies that claim to recycle carpet actually “downcycle” it, taking used carpet, chopping it up, and reusing it in lower-grade products such as carpet backing. — Hunter L. Lovins and Amory B. Lovins, Forum for Applied Research and Public Policy, 22 Dec. 2000 — compare upcycle