Contrary to popular belief, any danger that may be present from using red mulch comes from the material from which the mulch is made, not from the dye itself. The danger is not related to the red coloring in any way.
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Wood Mulch Contaminant
Red wood mulch made of recycled wood from industrial and construction sites may contain Chrominated Copper Arsenate (CCA). CCA, a chemical treatment banned from use in consumer products, has been found in recycled wood mulch due to improper testing and illegal recycling. CCA leaches arsenic, which is poisonous and potentially deadly to animals and humans, into soil and groundwater.
Red wood mulch is most commonly dyed with iron oxide, which the Hinkley Center for Solid and Hazardous Waste Management showed actually impedes the leaching of arsenic from CCA-treated wood into the soil. Iron oxide is not harmful to plants, pets or humans.
The United States Environmental Protection Agency has researched contaminant leaching from rubber mulch--the results were inconclusive, showing elevated (but within normal range) levels of certain contaminants, and normal levels of others. More research is needed. Again, the red color in particular has no adverse effect.
Red plastic mulch poses no particular harm to plants, animals or humans, but like rubber mulch and unlike wood, bark or other organic mulches, it does not fertilize or contribute organic material to the soil.
To avoid CCA, choose red mulches made from recycled wood certified by the Mulch and Soil Council (an industrial association that tests for CCA), virgin wood or non-wood products. If using red plastic or rubber mulch, consider the plant and human health issues and use organic fertilizer or compost as well.