Welsh plan unveiled

The Welsh Government has unveiled its 'Collections, infrastructure and markets sector plan', which sets out its vision for waste and recycling in Wales: http://wales.gov.uk/topics/environmentcountryside/epq/waste_recycling/publication/cimsectorplan/?lang=en&status=closed.


Aside from the usual rhetoric about one planet living and living within the Earth's capacity, whatever that might be (now or in the future), there seems to be a focus in this report on developing Welsh markets for recyclate and supporting a Welsh reprocessing sector. This may sound laudable, but will only actually benefit Wales if the additional economic resources, which are devoted to reprocessing under such a scenario, would not have been better employed elsewhere in the economy.

It isn't apparent to me that Wales has a particularly strong comparative advantage in reprocessing and Welsh Government attempts to 'serve local markets' through the development of 'appropriate specifications' seem only likely to push up costs for Welsh waste producers.

The evidence we have is that MRF economics are driven by throughput as opposed to material quality, i.e. when recyclate prices are high, MRFs send material through more quickly, and slow this down (perhaps by putting up gate fees) when prices are lower. This tells us that the costs of additional processing to raise quality (by lowering contamination levels) are in fact greater than any price premium which might be gained by higher quality material. Imposing arbitrary standards on recyclers will therefore raise their costs by more than any additional revenues they might be able to make by selling their material on world markets. These additional costs will be passed on to waste producers.

Perhaps the Welsh Government thinks this is a good thing. After all, they want Wales to live within its ecological limits and raising waste costs could be part of their strategy (although this was not the central message from the accompanying WRAP analysis). Certainly using this hidden subsidy to prop up a Welsh reprocessing sector does seem to be part of their strategy. It is one though which is wrong-headed from an economic perspective as it effectively amounts to a form of protectionism which reduces gains from trade and thereby makes the Welsh worse off.

The report recognises that economies of scale mean that it may not be appropriate for all of Wales's recyclate to be reprocessed within Wales's boundaries and it may therefore make sense for it to travel across the border into England. But why don't they extend that logic to further afield?