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.

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subsequently realised that the updated waste arisings' forecasts published by Defra this month were in fact already out of date when Defra published them.

We now know that the 'revised February 2013' forecasts (published in October 2013) has been updated/superseded by this version, which has been produced to support the decision to remove central government support for Norfolk.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

ADEPT warns on infrastructure

I see via Lets Recycle that ADEPT is warning that Defra shouldn't have cut waste infrastructure credits at some local authority projects.

Coincidentally I am sure, ADEPT's current President also happens to be strategic advisor to Cheshire West and Chester which was of course one of the projects to have its funding removed.

My personal view is that if ONS projections for population growth are correct, then it is likely that this factor will dominate a continuing fall in arisings per head in forthcoming years (second half of this decade) leading to a (relatively small) rise in total household arisings by 2020.

The crucial factor though will be whether we are able to deliver the PPP/PFI projects which are yet to be built. Progress is painfully slow in closing remaining projects and ADEPT is right to flag up that if the pace doesn't quicken then there really is a possibility that we could miss the targets.

Should one size EU policy fit all?

Further to yesterday's post, it occurs to me that in the area of global climate change policy we recognise that poorer developing countries have lower per capita greenhouse gas impacts and so should be allowed to develop without binding carbon constraints, while at the same time developed countries with higher per capita emissions should cut back stringently.

In the case of EU waste policy however, we find that the poorer Eastern European States have lower environmental impacts from their waste management systems but must have high cost Northern European-style systems imposed on them straight away (perhaps before they can afford them?).

Would it not be fairer to allow the Eastern States only to introduce recycling and recovery infrastructure as their waste generation increases, while at the same time placing stronger waste reduction requirements on northern Member States?

Romanian municipal waste performance better than Germany

Via @Defrawaste I see that Eurostat has published the latest EU figures for municipal waste management.

Poor old Romania (as well as other Eastern Member States) often gets singled out for its poor performance as it landfills 99% of its municipal waste. Terrible, I'm sure we'd all agree. But another, often overlooked factor, is that waste generation per person is much lower there than in some of the richer Member States with more sophisticated approaches to waste management.

In fact, if we were to include the avoided production emissions from lower waste generation in Romania we would find that net emissions from its municipal waste would be lower than for Germany, which only sends 1% of its municipal waste to landfill. (I have cheekily used Defra emission assumptions for the UK when checking these figures, which would lead to the assumption that Romanian landfills are managed in accordance with Landfill Directive requirements for capping/gas management which may or may not be accurate.)

As anyone au fait with the waste hierarchy knows this is because the environmental gains from waste minimisation dwarf any emission savings from switching between different forms of waste management once that waste has been generated. The sector awaits Defra's National Waste Prevention Plan due in December with interest.

Agency publishes guide for local authorities exporting waste

I see that the Environment Agency has published a guide for local authorities which may be the source of exported waste. It suggests that the export of poor quality materials is threatening UK suppliers' competitiveness in international commodity markets, and also states that the UK could become a more marginal supplier to China as its demand for commodities increases. A key point raised in the document is that 'quality is essential to maintain markets'.

Quality is of course important, but so is price and there is a trade-off between the two. Meeting the right specification at the right price is actually the key to maintaining the UK's competitiveness in international recyclate markets. Ignoring prices will only serve to miss a vital aspect of this dynamic.

My fear is that the ever increasing policy drive to improve quality at any price will only serve to drive up costs to waste producers across the economy. This will in turn reduce their ability to generate positive economic returns elsewhere and ultimately will make us all worse off.

On the go recycling: is it such a good idea?

Via @Recycle4Wales, I see that grants are being offered in Wales to increase recycling on the go facilities. Sounds reasonable enough in theory but is it actually a good idea in practice?

My understanding from local authority recycling officers is that they are nervous of recycling on the go activities/facilities as these tend to contain much higher levels of contaminants than household collections. If these two recyclate streams are then mixed together it can have a detrimental impact to the overall recycling performance of the authority.

In this way, we may once again have a policy which on the face of it looks quite attractive and sensible but which may in reality be counterproductive.

Does energy from waste cannibalise recycling?

In waste policy circles, anti-incinerator campaigners sometimes claim that building new energy from waste facilities will cannibalise future recycling efforts. The principal argument being that, once constructed, such facilities need to be fed material which would otherwise be recycled by local authorities for their full (contractual) lifetime.

The UK still landfills over 40 million tonnes of material each year. A decent proportion of this will be recyclable, but certainly not all, which will require the development of new alternative treatment capacity. It is a fact that not all waste can be recycled economically and effectively so we will need solutions for that which can not.

So, would the development of a new energy from waste facility bind an authority into a situation where it was unable to raise its recycling rate because it must instead feed its waste plant?

The short answer is no. Mandated separate collections transform the economics of recycling by moving a significant proportion of recycling's costs into a fixed sunk element and leaving recycling with low marginal costs. Once material has been collected for recycling, the potential revenues (even at low commodity prices) will make recycling the more attractive option relative to paying the gate fee at an efw plant. We can see that this is the case by comparing the lower gate fees at MRFs (median of £9/t in 2012, ranging from -£66 to £73) with those at efw (median of £64-£82/t in 2012, ranging from £32 to £101).

The economics therefore make it extremely unlikely that an operator would divert material from recycling towards efw. But do their contracts mandate them to do so?

Again, I think we find that the answer is no. Every authority has a recycling contract (whether with a private contractor or an in-house entity). These contracts are deliberately structured so as to incentivise higher recycling performance. It is only the residual waste left over which is then covered by the (usually) separate contract for residual waste treatment.

Up until 2009 (I think) residual waste contracts were indeed structured so that the authority provided a 'guaranteed minimum tonnage' on a 'put or pay' basis. I.e. the authority would guarantee to pay the gate fee for its minimum capacity even under circumstances where it could not provide that level of material. We can therefore see that there was the possibility of efw cannibalising recycling under circumstances where MRF gate fees were positive. In this case, material below the minimum tonnage sent for recycling could incur a double gate fee at both the efw and at the MRF.  For much of the recent boom in recyclate revenues, however, as well as currently at some facilities, we have had negative gate fees at MRFs which shows that this scenario is by no means certain.

Since then however, newer residual waste contracts no longer contain guaranteed tonnages but instead merely provide the contractor with exclusivity over an authority's residual waste. The contractor must then make up any shortfall using third party waste.

So, in reality we find that new energy from waste facilities will not tend to cannibalise local authorities' recycling efforts, either in theory or in practice. But this message doesn't seem to hit home with the campaigners who continue to peddle mistruths.

Risk transfer - who benefits the most?

I was at the RWM exhibition last week, which apparently again attracted record visitor numbers. These large-scale events give the opportunity to hear some leading industry figures give their views on the big issues of the day, and while these are often banal you can find the occasional nugget of interesting information.

Wednesday's panel debate in the leaders' theatre was a case in point. Much of the discussion centred on concerns about access to finance coupled with falling material prices, both topics which I have covered before. What was interesting for me though was the disagreement between the participants regarding the exact nature of the risk transfer between the public and private sectors. Generally the operators/contractors felt (unsurprisingly) that the private sector had taken on too much risk in their municipal contracts, while an advisor was of the opposite view and suggested that local authorities had retained too much risk.

So, who is right?

In an ideal world different risks would be appropriately shared according to the principle of which party is better able to manage that risk. When discussing residual waste projects we might group the risks into: inputs; process; and outputs.

When it comes to input (feedstock/volume) risk we might think that authorities would be able to better manage that as they are the ones directing householders through collections. But contractors tend to take a view which they build into their assumptions. They then rely on being able to substitute commercial waste for municipal waste to be able to make up for any shortfall. (It is of course a shortfall we want as this would indicate that residual municipal waste has been minimised and is below expectations.)

Where there may be a potential antagonism is where authorities demand (rightly) priority access to a facility when volumes are high but do not give the contractor the freedom (perhaps through non-compete clauses for commercial waste) to be able to make up for a shortfall when volumes are low. In this way we may find that the contractor ends up being unable to manage their exposure to volume risk appropriately.

When it comes to process/technology risk, this is undoubtedly something which it seems to me should rest with the contractor. Some disagreement may however arise concerning the differing risk profiles of the construction and operational phases of a facility. The construction (and commissioning) phase is high risk and fraught with potential technical problems. The operational phase however tends to be relatively straightforward and lower risk.

Early PFI contracts saw some big gains to contractors who were able to refinance on favourable terms and make relatively large returns once projects were into the operational phase. This was seen by the public sector as unfair profiting at their expense. The contractors would probably argue that the rewards they gained were commensurate with the risks they took, but this is certainly a controversial area. It is also an area where the rules on refinancing were subsequently tightened so that any potential upside to the private sector is now effectively capped.

This has therefore now become another area where contractors feel that they are exposed to large potential downside losses while their upside is capped, i.e. the risk transfer has now swung in favour of the public sector.

The other area of risk is on outputs/offtake. This is again an area where the contractor is going to have to take a view and hope that they are able to manage resulting price volatility over the life of the contract. We may find increasingly that some contractors (perhaps more applicable for recycling contracts) have overestimated potential offtake revenues and run into trouble.

From the above, I find it difficult to conclude that local authorities are retaining too much risk and instead would agree with contractors who suggest that they offer good value for money to their local authority customers. This may not always have been the case and those who managed to secure favourable terms in the early days of PPP/PFI agreements may have done well out of them. But right now being a waste management contractor is a difficult place to be with both volumes and prices falling. These are conditions which could place severe pressure on some industry participants.

Global MSW to double by 2025

Edie news reports that the Worldwatch Institute is predicting (with horror) that MSW will double by 2025.

I must confess that I haven't read the original report, but from the article I am unable to conclude whether this is terrible or not.

Waste is not produced as an end in itself. Like other forms of pollution, it is a by-product of useful economic activity. If the benefits of that economic activity outweigh the costs, including those of managing the associated waste appropriately, then on balance the state of the world has improved.

I cannot infer from the article whether the benefits of higher economic output outweigh the costs of higher MSW generation.

World Bank MSW report

The World Bank recently published an update to its 1999 report "What a waste", which is a review of (urban) municipal solid waste (MSW) practices across the world: http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTURBANDEVELOPMENT/0,,contentMDK:23172887~pagePK:210058~piPK:210062~theSitePK:337178,00.html

At first glance, the version of the waste hierarchy used in the report differs slightly from that enshrined in EU legislation in that incineration with energy generation is included in the disposal category, thereby failing to recognise the environmental benefits of energy recovery in a modern efw facility, and anaerobic digestion is for some reason paired with compost in the recovery category just below recycling.

The definition of MSW used in the report seems to be wider than that commonly used in the UK/Europe (it includes some elements of construction and demolition waste). At first glance it was unclear to me whether these elements are included only if collected by municipalities, or more widely if they are of similar composition to municipal collected waste.

It is always difficult to know how accurate the data are in these types of reports and a lot of work has clearly gone into collating all the information. A quick review of the UK data shows that it is a few years out of date. Unless they have used a different definition of MSW, they seem to have taken 2005 figures. (I didn't immediately spot any reference to whether this is meant to be a 2005 snapshot; as far as I can tell, it is meant to be 'current'.) In the report therefore it suggests that circa 35m tonnes of MSW is/was produced of which 64% was landfilled with only 26% recycled + composted. The picture has of course changed dramatically in the past seven years.

It would be interesting to know how they arrived at their estimate of UK MSW generation in 2025 being over 40m tonnes. I think most in the industry would suspect that this is very optimistic (or pessimistic, depending on your viewpoint).