MRF CoP - do we need it?

My previous post suggested that economic theory doesn't necessarily support the case for a mandatory MRF code of practice (CoP). While I believe that this is the case, and would maintain that - contrary to Defra's stated belief - current market signals do work (just not necessarily in domestic reprocessors' favour), I might still support the introduction of a CoP in practical terms.

My reason being that we have an obligation to meet European legislative requirements, in that we must demonstrate that a co-mingled approach to recycling can meet Waste Framework Directive objectives. In this context, the introduction of a mandatory code may be a necessary evil.

Is the CoP really necessary to guarantee high quality recycling? I don't think so, but I do think it may be necessary to placate a noisy domestic reprocessing sector, and also to offset the objections of an equally vocal wider set of campaigners for "real recycling".

I also think that the end result will be to push costs from (both domestic and overseas) reprocessors on to waste producers (local authorities and householders). Where these costs were previously borne by overseas reprocessors, the net effect will be negative for the UK economy.

Whether the implementation of a mandatory CoP will be sufficient to offset other macro-economic issues affecting the domestic reprocessing sector remains doubtful to me.

Same tired old arguments from CPI

I was at an APSRG event yesterday afternoon which looked at the potential role of bioenergy in the UK's future energy mix.

Most of the discussion centred around the sustainability or otherwise of using whole trees (as opposed to residues) as a potential biomass feedstock. There was however also some mention of the potential role of energy from waste.

A representative of the Confederation of Paper Industries (CPI) got up and had a familiar tired old rant against the waste sector. The CPI has in the past spoken up at Westminster events and moaned about the supposed poor quality of materials from co-mingled collections which their Members have to deal with. I have previously argued that the real problem here is actually that the CPI's Members are struggling with high domestic energy costs which makes them uncompetitive with overseas reprocessors (who are able to pay a higher price for UK material). It's a price issue and not a quality one.

Yesterday the CPI tried to lever the usual quality rant into an argument about an apparent unconstrained energy from waste boom which is supposedly going to cannibalise recycling efforts and steal potential feedstock from CPI Members. What a load of balls. Leaving aside the reality that the UK has very low levels of installed energy from waste capacity and is also struggling in the current financing environment to develop any more beyond the current round of facilities (underpinned by local authority contracts), it is nonsense to suggest that material collected for recycling could end up in energy from waste facilities.

Material collected for recycling will command a positive value in the market. Even at low price levels this will be an unassailable advantage when competing against energy from waste facilities which charge a gate fee to receive material. The relative economics mean that efw will not be able to steal potential feedstock from paper mills once it has been collected for recycling.

The UK paper industry's real competitors are not the waste industry but are based overseas and have a lower cost base meaning they are able to pay a higher price for material of equivalent quality than the CPI's Members. This is the message which needs to be heard by policy makers. The current arguments are an attempt to gain a hidden subsidy to prop up an uncompetitive industry.

CBI calls for industrial strategy

I see the CBI is calling for the government to introduce a stronger industrial policy. This is an area which is receiving increasing policy attention following the supposed breakdown of the market-based approach.

Regular readers will not be surprised to learn that I disagree with attempts at industrial strategy. I suspect that any strategy which was ultimately implemented by government would be based on quickly outdated assumptions and lead to an inefficient allocation of resources.

If the CBI wants to rebalance the UK economy away from consumption and towards investment (as stated in the report), then it should ask government to introduce incentives to encourage private savings and investment. It should not ask for sector-specific interventions, which for me are more likely to distort activity and crowd out fresh private sector innovation and investment. 

The CBI is calling for a strategy to help support incumbents, which is of course the CBI’s remit, but is not efficient or conducive to long term growth

A job is better than no job

On Monday evening I was at the launch of SITA's new report examining the potential creation of social value in the waste and resources industry. I haven't yet had a chance to read the report fully so will save that for another post.

At the event Caroline Jackson, the former MEP who was Rapporteur for the revised Waste Framework Directive, raised concerns that the sort of jobs being created at the low end of the industry (i.e. work on picking lines at recycling facilities) were essentially demeaning and that the unemployed should instead be given a 'hand up' (she was of course light on detail as to how this could be achieved).

I was pleasantly surprised by the robust response from Colin Crooks of the London Community Resource Network. He essentially made the extremely valid point that a job is better than no job. He has apparently worked with people in some of the most deprived and hard to reach communities in the UK and felt that they would be crying out for any kind of work which could help them reintegrate into society.

This reminded me of the sort of argument that used to be made by Paul Krugman when he was an economist (and not just a polemicist) when he pointed out that poor working conditions in the developing world may appear abhorrent compared to Western practices, but provided the workers with an important escape route from the far harsher conditions of rural poverty. I agree.

This topic is also becoming relevant in the ongoing debate about recylcate exports. There are increasing calls, both in the UK and at European level, for restrictions to be placed on recyclate exports (supposedly to protect European resources, I suspect though that that the same people would be against China restricting trade in rare earths). At a basic level, this is nonsense as the gains from trade benefit both the importing and exporting economies. Forcing European recyclate exporters to instead find domestic destinations for their material will only serve to raise costs to waste producers across the economy. (And would lead to less recycling overall if there is insufficient EU capacity to deal with all the material.)

The proponents of restrictions sometimes use examples of lower environmental and employment standards in the developing world as an unfair source of competitive advantage for overseas manufacturers and reprocessors. This  may seem reasonable at first glance, but (as above) the imposition of Western-style employment standards would perversely have the effect of reducing employment in those poorer economies and leave workers worse off by condemning them to a life of grinding rural poverty.

As workers in developing countries become richer, they will demand better working conditions and higher welfare standards. This may prove to be too slow a process for some commentators, but better times for the poor would take even longer to arrive if artificially high standards were imposed too soon.