2020 Tories call for tiny council tax rebates

The '2020' group of Conservatives has published a report examining resource efficiency issues and looking at ways waste policy might be amended to improve the quality of recyclates which might then be used as manufacturing inputs.

Most of the report is fairly underwhelming but there is an interesting proposal that Local Authorities should be allowed to offer residents council tax rebates to reward them for reducing contamination in the recyclate they put out.

This policy would be well targeted, as the best way to improve quality of material along the supply chain is to reduce the contaminants/non-target materials entering the recyclate stream in the first place. Unfortunately I am not convinced that this policy would work in practice, not least due to the inherent low value of recyclates collected from households.

There are around 23 million households in England, which put out around 10.5 million tonnes of material for recycling and composting. These materials could probably generate revenues in the region of £700m at current prices, which equates to around £30/household. Not much scope for cutting bills which are £100 per month on average in England. I doubt a 2.5% cut would have much of an influence on behaviour at all.

Chinese green fence lauded as great success: 0.1% of shipments rejected

Via Letsrecycle I see that the Chinese green fence policy has been doing a great job at keeping out all of those terrible low quality contaminated shipments of recyclate.

The article states that 3,508 tonnes of material imported into Hangzou province was seized for being overly contaminated. Out of a total of 6.54 million tonnes. That is 0.05% of total shipments: a vanishingly small amount.

Autumn Statement - what did waste get out of it?

Most in the sector will be rightly disappointed with yesterday's Autumn Statement, which contained no new announcements on landfill tax, or indeed much else of direct interest to the industry.

It did however paint a much rosier economic outlook for the UK, based on the latest OBR projections which now anticipate higher growth, lower unemployment and a faster reduction in the deficit.

When combined with our cynical Chancellor, this to me suggests some pre-election tax giveaways and a looser fiscal position for the UK, which, ceteris paribus, will necessitate a faster monetary tightening. Given the ongoing funk in the Eurozone, I would expect diverging interest rates to help drive up Sterling relative to the Euro.

This to me gives some reason for cheer for the waste industry and development of domestic infrastructure. The economic recovery should boost commercial waste arisings, while a stronger pound will make imports of plant and machinery (for use in domestic facilities) cheaper. And European gate fees will go up, eroding some of the competitive advantage for RDF exports at the margin.

The waste industry is a cyclical sector. Let's hope the UK's economic recovery is genuinely sustained.

Eunomia's 60% recycling limit claim not true

Eunomia has today published the latest version of its residual waste review. This has generated headlines on the basis that England's local authorities are going to build so much capacity that they will effectively place an upper limit on their recycling rates of 60%.

Eunomia makes this claim on the basis that England will build roughly 5 million more tonnes of capacity on top of the current 5.5 million tonnes, thereby only leaving only 15.5 million tonnes available for recycling. But this is of course a partial analysis which is only looking at residual LA waste (taking their figures at face value). England also generates much larger quantities of residual commercial waste which also needs to find a home.

Eunomia's report/media line talks about local authorities tying themselves down with the minimum tonnages which they are committing to the facilities in the pipeline. But minimum tonnages in residual waste contracts consist not only of Contract Waste from the Authority, but Substitute Waste from commercial sources as well.

In other words, as levels of local authority residual waste fall during the life of a contract, the shortfall is made up using commercial sources, i.e. more and more residual commercial waste is used during the life of the contract so that the plant can keep running while the authority remains incentivised to meet its recycling commitments elsewhere.

To say that England's authorities are therefore constraining their recycling rates to 60% is nonsense.

Food waste benefits UK supply chain by up to £1.5 billion

There has been much recent coverage in the trade press about ReFood's 2020 vision campaign (see e.g. here). According to reports food waste is costing the UK £17 billion per annum. An extraordinary sum and at face value seems to offer the potential for vast savings. But is it accurate, or does it suffer from the common problem of failing fully to incorporate the opportunity costs involved in eliminating food waste?

ReFood/WRAP figures suggest that households waste 4.2m tonnes of food and 4.3m tonnes are lost in the supply chain. So roughly a 50/50 split. This means that the supply chain alone is wasting £8.5 billion every year. Wow.

But of course there is a reason that waste exists and that actors within supply chains "over-order". It is to reduce the risk of lost sales caused by having insufficient stock available. This risk is asymmetric as the value of a lost sale will outweigh the costs of material inputs, and this creates an incentive to over-order to guarantee stock availability. The lower the proportion of material input costs in output value, the greater the incentive to over-order.

For our food supply chain, I presume that the £8.5 billion figure is actually final sales equivalent. Assuming that retailers have a margin of around 15% and that the incentive is to over-order up to the point where the additional stock would outweigh the value of an additional sale foregone, this would mean that the £8.5 billion of food waste actually has a value to the supply chain of circa £10 billion. In other words, eliminating the food waste would provide £8.5 billion of savings but at the same time would lead to £10 billion of losses - an aggregate loss of around £1.5 billion.

We can therefore deduce that the presence of this food waste actually benefits the UK supply chain by up to £1.5 billion every year (given current policies and technologies) and as such is a good thing.

(This is a v simplistic approach and in reality the optimisation problem would be based on p(lost sale), which is influenced by a range of factors, including technology, logistics, timing, demand, etc and costs to consider would include waste management costs as well as input costs, etc.)

[Separately, I would argue that the £8.75 billion wasted by householders is caused by the incentive of avoiding unforeseen additional trips to the supermarket. £8.75 billion is the equivalent of 700m hours (based on median hourly wages of £12.50), or just under half an hour per week per household. If eliminating this household food waste raised time spent on food shopping by over half an hour per week then householders would lose out and the net benefits to the economy would be negative.]

Returning to Defra's forecasts

Further to my previous post on this subject, I have subsequently realised that the updated waste arisings' forecasts published by Defra this month were in fact already out of date when Defra published them.

We now know that the 'revised February 2013' forecasts (published in October 2013) has been updated/superseded by this version, which has been produced to support the decision to remove central government support for Norfolk.

At first glance this seems slightly puzzling, as the forecasts for arisings in the new version are higher than the old numbers. Surely this (on it's own) would increase the case for supporting Norfolk? Apparently not.

My personal view remains that these forecasts are a bit on the low side, but at least they're moving in the right direction. My central forecast is towards the upper end of Defra's range, but at least they don't look completely out of kilter with one another.

WRAP once again ignores prices

I see via MRW that WRAP has published its latest report on consumer behaviour. In it we find the startling revelation that consumers may be willing to consider trade-in business models for their unwanted goods, i.e. they'd be happy if someone is willing to pay them for their old rubbish. And other similar insights.

The report seems bemused by the fact that people would be willing to consider some of these models (repair or rental also feature as alternatives to purchase) in theory but not in practice. To me this leads to the obvious questions, how much would people in reality be willing to pay for different (e.g. repair) models? Is this cheaper than buying new?

But this doesn't seem to be considered by the report. (I may have missed it whilst skimming.)

We know that people in the UK are expensive relative to stuff. This means that in the modern consumer world it is usually now cheaper to buy a replacement product than it is to hire someone to repair it. This is a good thing. It is a sign of progress and tells us that consumers are able to afford a huge range of luxuries denied to them in the past.

I have noted before that WRAP research often ignores the central role of prices in delivering market solutions. An extraordinary oversight.

I am reminded of Oscar Wilde's line that a cynic is "a man who knows the price of everything and the value of nothing". Although in this case WRAP knows the 'value' of everything and the price of nothing.

Maybe I'm just a cynic.