Defra consults on wood waste landfill bans

Defra has issued a call for evidence asking for stakeholders' views on whether there should be a ban on wood waste sent to landfill.

As an economist I am instinctively against bans as these generally do not lead to efficient/least cost outcomes. In the case of wood waste, Defra's own analysis suggests that the net benefits of introducing a ban would be negative, i.e. the costs of introducing a ban would outweigh the benefits. Given that the amount of wood waste sent to landfill is expected to fall to only around 300,000 tonnes by circa 2020, it seems that this isn't a big issue which needs heavy handed intervention.

Landfill tax is the big driver of behaviour here and is already doing the work of diverting this material to other management routes. As more alternative infrastructure comes on stream, we will see less wood waste going to landfill, without requiring a ban, which might be costly and difficult to enforce.

There will be some who argue that the greenhouse gas emissions from landfill mean that we must ensure that this material is all kept out of landfill, but I would argue that landfill taxes already take more than full account of the environmental disbenefits of landfill (see e.g. here). We do not therefore need additional policy measures to tackle this particular problem.

EEF calls for coherence in environmental policy

The EEF has published a report which examines the current state of environmental legislation and its impact on the UK's manufacturing sector. In particular, it draws attention to the fact the manufacturers potentially have to report their carbon emisisons under four different schemes (EU ETS, CRC, CCAs, and GHG reporting) incurring four sets of administrative costs.

Overall I feel that the report is generally pretty sensible. We do need to consider least cost approaches to meeting our environmental objectives and it makes no sense to do things at higher cost than we need to (as I suspect we are with energy policy).

Of particular interest for me though, were some of the figures tucked away in annex 2 (focus on waste) on page 14. Here we find survey results that tell us that almost half of UK manufacturers have applied lean manufacturing processes and a further quarter intend to do so in the next year. On top of that, we find that over 40% of companies surveyed claim to have redesigned products to better manage materials and reduce waste.

This tells me that there is a lot of resource efficiency going on in the UK economy. As I noted previously, the material requirement of the UK economy (including from imported materials) is falling. This EEF survey gives us further evidence that markets, prices and competition will drive resource efficiency far more effectively than government intervention.

EIC calls for more resource efficiency

The Environmental Industries Commission has published a new report calling for the government to do more to improve resource efficiency.

Aside from the fact that this call is based on Defra's £23 billion estimate of potential resource efficiency savings - an estimate with which I disagree - it assumes that resource efficiency is something which will not happen without some form of regulatory intervention.

Personally, I feel that resource efficiency is something for which there are existing incentives in place for economic agents to act. There is a business imperative to improve efficiency over time. This is the basis of much economic growth and something which is likely to happen in the absence of government intervention.

The ONS publishes environmental accounts for the UK, which include official estimates of the total material requirement for the UK economy.

TMR peaked back in 2001 and has fallen by almost a quarter since. Not exactly the stuff of nightmares. In fact, the UK's TMR in 2010 was almost 10% lower than it was way back in 1970.

And when you consider resource productivity, by measuring the amount of materials required per unit of GDP/economic output, we find even more extraordinary gains made by the UK economy.

According to the World Bank, the UK's gross national income increased over 17 times during the period 1970-2010. This means that in 2010 the UK economy was using material resources more than 18 times more efficiently than it was back in 1970 (=TMR/GNI).

These achievements have been driven by markets, growth and technical progress, which will continue to work well into the future. I am therefore less convinced than ever that we need more government intervention to drive resource efficiency.

How to deliver a circular economy

The Dame Ellen MacArthur Foundation is leading the charge on how to move the economy from a linear to a circular model. They cite case studies to demonstrate how a more circular approach can be a reality for businesses now and suggest that price signals alone may not be sufficient to deliver a transition to the new approach.

The underpinning rationale for why we need a circular economy is, of course, the old environmentalists' fallacy about resource scarcity: the classic fear that we are going to run out of stuff. But, as I have argued before, we have more stuff now than at any time in history, despite increasing pressures.

How can this be so? The stuff of nightmares never materialises because people consistently underestimate the capacity of technological progress, coupled with the price mechanism, to increase the supply of recoverable resources. Scarcity just isn't an issue.

That doesn't necessarily mean that a movement towards a circular economy would be a bad thing. If cost savings and environmental benefits can be found then it could still be the right thing to do.

I am personally unconvinced by the large unrealised savings which the report estimates could result from a shift to a circular economy. I haven't gone through the analysis in detail but suspect that they fail properly to account for the opportunity costs involved in implementing resource efficiency/circular economy measures (as previously argued here). Let us assume however that there are large benefits to be found. Moving to a circular economy would be a good thing to do.

So how best could we get there? The answer, as you would expect from an economist, is markets. Markets allocate resources more efficiently than central planners. The EMF worries that prices won't respond quickly enough to effect the transition which they think is necessary. But you can rest assured that markets and prices will do a better job than policy makers and bureaucrats.

The existence of the EMF's case studies for me show that we don't need intervention. On the contrary, where there are opportunties to make a profit from the circular economy then economic actors step in and exploit them. The report claims that the concept is economically viable and scalable. In that case, I reckon that the authors should go out and make a pile from actually doing a circular economy, rather than talking about it.

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.

HMT projects landfill tax revenues to reach £1.6 billion

The Treasury has published projections for landfill tax revenues through to 2015/16. They expect these to remain fairly flat for the next couple of years before rebounding strongly. This is presumably as they expect a strong post-recession rebound in output as the economy tries to catch up back to its long run trend rate of growth, and expect this to lead to an increase in total volumes of waste.

Notwithstanding the fact that any form of economic forecasting is essentially complete guesswork, I personally don't think we will see this strong rebound effect in output in the next few years. I think that through the boom we experienced an overallocation of resoures towards certain sectors, such as housing, and that the current correction will lead to a permanent loss of output. This is because I tend to think that the economy will follow a "random walk with drift" model, rather than a "trend growth" model.

The implications for the economy are that we are unlikely to witness a strong period of catch-up growth as we come out of the recession, and the implications for landfill tax revenues are that they probably won't reach the peaks predicted by the Treasury.

WRAP calls for longer lived clothes

WRAP has published new research into the environmental impacts of clothing and expressed concerns that people are purchasing too many items which are too short lived. They lament the fact that people's wardrobes contain garments which haven't been worn for at least a year and suggest that people should try to extend the lives of their clothing.

Their research tells them that consumers would be willing to explore new options for repair, buying pre-owned clothes, and other ways of extending their clothing lives. This same research though tells them that the main reason people stop wearing clothes is that they no longer fit. Presumably WRAP believes that these clothes should be altered, rather than replacements purchased.

This however runs into the modern resource conundrum: while resources are supposedly running out and are apparently incredibly expensive/valuable, in reality their relative prices are low (despite the biggest commodity boom in history), particularly when compared to labour. Clothes are cheap and so the average person can afford plenty of them.

WRAP estimates that the global carbon footprint of UK clothing consumption is 1.5 tonnes per household per year. Even if we make consumers pay these carbon costs, that would only amount to around £45/household/year (using government assumptions). This is around 2.5% of what WRAP suggests UK households spend on clothing. Not enough in my view to make much of a difference to consumption patterns, even if fully internalised.

WRAP seems to think that if consumers are given better information about the environmental footprint of their clothing, their consumption patterns could change. I am not convinced. WRAP's research may indicate that people aren't interested in fashion and updating their wardrobes constantly, but consumers' revealed preferences - from their actual consumption behaviour - tell us a different story.

It is likely that the costs of clothing as a proportion of consumer expenditure will remain small over time, which in turn means that we are unlikely to see a dramatic reduction in consumption. Unless WRAP advocates punitive taxes on clothes or wardrobe rationing, I think this is unlikely to change much and WRAP's focus should instead be on production processes (which to be fair are also examined in the report).