<< Previous Page | Page 3 of 17 | Next Page >>

3. PRIVATE FINANCIAL COSTS

3.1 Introduction

Since 1995/6, the Department of the Environment, Transport and the Regions and the Welsh Office (and now the National Assembly for Wales) have commissioned an annual survey of local authorities in England and Wales to collect information on the collection, treatment and disposal of municipal and household waste (this coincided with the period in which the Scottish Office ceased collecting similar data for Scotland). This survey indicates that in 1997/8, two million tonnes of household waste were collected for recycling or composting, comprising about 8% of total household waste (increased from 6.5% in 1995/6). Paper and card accounts for 37% of the household waste collected for recycling, and glass 18%. In addition, waste collected for centralised composting has more than doubled in two years to 380,000 tonnes in 1997/8 (DETR 1999a). The estimates for home composting are, for obvious reasons, a matter of some conjecture.

These recycling rates have been achieved through a combination of the introduction of "bring" sites for recycling and, increasingly, the introduction of "kerbside" recycling schemes. There are currently around eight bring sites available per 10,000 households. For kerbside collection, 38% of households are now serviced by a kerbside recycling scheme of one type or another, up from 17% in 1995/6. The range of materials collected and the quality of the service on offer varies considerably from one authority to another. There is a substantial difference between a single material collection scheme involving somewhat tired vehicles and multi-material collections using more modern vehicles and kerbside boxes, often using materials recovery facilities (MRFs) to separate materials.

The Draft Waste Strategy for England and Wales (DETR 1999a) commits the Government to a "substantial" increase in recycling rates. There are good reasons to believe that without increased efforts to collect at kerbside, the costs for many households, and the effort required to become engaged in recycling will place limits on the increases in recycling rates which can be achieved. This is supported by work undertaken in the US by Jenkins et al (1999) which sought to understand (through econometric analysis) the determinants of levels of household recycling:

As expected, the presence of a curbside recycling program has a positive and significant effect on intensity of recycling activity for all five materials [newspaper, glass bottles, aluminium, plastic bottles and yard waste]. Regular curbside collection of recyclables lowers the out-of-pocket costs of recycling by eliminating the need to transport recyclables to central (and possibly distant) collection points… Introducing a non-mandatory curbside recycling scheme increases the probability that the average household recycles over 95 percent of glass and plastic bottles by more than 36 percent; over 95 percent of yard waste by more than 28 percent; and over 95 percent of aluminum by slightly less than 13 percent. (Jenkins et al 1999).

A dense network of bring schemes might provide an alternative approach, but unless the density is high, it will most likely remain the case that such an approach will exclude some citizens who might otherwise participate in recycling of those materials targeted by bring schemes. Kerbside schemes make recycling 'easy' for citizens by reducing requirements for transport of materials.

On the other hand, many European schemes maintain a 'bring' component to their overall recycling strategy. In the Netherlands, an attempt to standardise a model for MSW collection actually suggested that the basic model might be:

·         Glass collection by means of bottle banks at a density of one per 650 inhabitants;

·         Paper and board collection at kerbside at least once a month

·         Textiles collection at kerbside at least once every quarter, as well as by textile banks;

It was anticipated that this could raise collection rates for these materials to 90%, 85% and 50% respectively (Ministry of Housing, Spatial Planning and the Environment u.d.).

Approaches which seek to separate materials for recycling after collection suffer from two shortcomings: the first is that the quality of materials produced tends to be much lower than in the case where materials are separated at source (so that at times where secondary materials prices are low the materials from a dirty MRF tend to be the first to be rejected as merchants and reprocessors become more choosy about the inputs to their process); and the second is that the potential to educate the public concerning waste is not so much lost as never really seized in the first place.³ Schemes based on source separation effectively require those who participate to take some responsibility for their wastes, and kerbside schemes in particular carry that message to the doorsteps of households in the scheme (although the degree to which different participating households actually take this responsibility varies under any scheme).

[³ Following effective kerbside schemes, post-collection separation tends to generate only limited additional material collection.]

As part of its deliberations DETR is evidently considering the relative costs and benefits of recycling and of increasing recycling rates, and the results of these deliberations will, in turn, be used in discussions with other government departments. Annex C of the Draft Waste Strategy provided some insights into the possible costs and benefits of different approaches to management of MSW in the context of the Landfill Directive, but the costs and the benefits are subject to considerable uncertainty. The sources of this relate to:

·         poor state of knowledge of the composition of UK waste (though this will always be subject to some margin of error) and how this will change over time;

·         poor state of knowledge concerning the financial costs of certain waste management options and how these might change due to better or worse integration of system components, the influence of European legislation, variation in location type (sparsity of population, housing stock, socio-economic status), and of course, time (effects of innovation);⁴ and

·         uncertainties in the measurement of the external costs of waste management options; This makes any attempt to analyse costs and benefits over time somewhat difficult.

[⁴ Also deserving of consideration is the question of accounting for costs incurred and the financing mechanisms available. To the extent that financing mechanisms such as PFI tend to favour (from the local authority perspective) schemes for which the capital costs of waste treatment are more significant, there is an element of distortion in the financing mechanism towards capital intense schemes. ⁵ In addition, it is sometimes the case that the year for which costs are estimated is not obvious. Generally, however, we are talking of adjustments of the order 10%, so the effect of choosing the 'base year' wrongly might be expected to incur errors of the order 5% at most. This is probably less significant than errors incurred in carrying through an assumption that all costs can be re-based to 1999 using GDP deflators.]

This Chapter reviews information in the public domain. Some of the figures are somewhat dated. We have suggested what sorts of adjustment should be applied on the basis of exchange rate conversions and GDP (Gross Domestic Product) deflators, but it should be recognised that not all costs will have followed inflation. For example, in the collection and transport of waste, the role of the fuel duty escalator has been to move fuel prices ahead of inflation. Note that where we have adjusted quoted estimates, we have done so simply by accounting for inflation through straightforward application of GDP deflators. It goes without saying that there may be reasons to expect these costs to vary in ways which are unrelated to inflation rates.⁵ Fuel duty, landfill tax, and materials prices may affect costs of specific treatment options significantly but their movement will not be closely related to inflation rates.

[⁵ In addition, it is sometimes the case that the year for which costs are estimated is not obvious. Generally, however, we are talking of adjustments of the order 10%, so the effect of choosing the 'base year' wrongly might be expected to incur errors of the order 5% at most. This is probably less significant than errors incurred in carrying through an assumption that all costs can be re-based to 1999 using GDP deflators.]

3.2 Review of Existing Studies / Information

3.2.1 Capital Costs

Published comparisons between the relative capital costs of different waste management or disposal options are infrequent, and generally provide insufficient background information to be of value in any more detailed assessment of waste recycling options.

DTI (1997) presented a table of the capital costs of various disposal options for household and commercial wastes (Table 1 below), indicating the highest investment costs are required for incineration.

Table 1: Capital Costs Of Facilities for Household And Commercial Wastes -Processing 200,000 tonnes per year (£ Million) (figures in parentheses are 1999 £)

Source: J Holmes, as cited in DTI 1997

This partly explains the long-term nature of contracts usually required in order for the construction of an incineration plant to be worth the risk of the capital commitment. It also helps illustrate the manner in which local authority decisions are likely to be distorted by financing mechanisms such as PFI (Private Finance Initiative) that effectively grant local authorities credits to cover the costs of borrowing for capital equipment.

More commonly, the available cost comparisons take account of both capital and operational costs to establish a figure or range for the overall costs per tonne of dealing with waste through the various disposal options.

3.2.2 Costs of Recycling

Estimates of recycling costs are provided in Coopers and Lybrand's (1993) analysis, which provided the marginal costs associated with different recycling options (Table 2). It is worth noting that the cost of collection in bring schemes is given net of sales revenue (hence, the zero revenue figure for bring schemes). An important point to note is that the separation cost is given as the same irrespective of the level of materials separation prior to collection. Our work suggests this is highly questionable.

Table 2: Summary of Recycling Costs (figures in parentheses are 1999 £)

Source: Coopers & Lybrand, 1993

A study carried out by Atkinson et al (1996) estimated costs for bring and kerbside recycling schemes in five cities in the UK. The costs of bring systems varied between £40-£49 per tonne (£43-£53 in 1999 terms) in low-density bank systems (one site per 3,500 households) to £65-£133 per tonne (£71-£145 in 1999 terms) in high-density areas (one site per 500 households). These are much higher than the Coopers and Lybrand estimates. For kerbside collection schemes, the study differentiated between separate collections and integrated collection schemes - the former costing between £140-£231 per tonne (£153-£252 in 1999 terms) and the latter costing £79-£155 per tonne (£86-£169 in 1999 terms). Again, the higher end of this range is higher than one sees estimated in other studies (see below). The higher costs were associated with the separate kerbside collection system involving two collections per household, one for recyclables and the other for residual waste. Yet even accounting for this, the range £140-231 seems high. Indeed, all the costs estimated incorporate (within ranges) values that are higher than in the Coopers and Lybrand report.

Work by Brisson (1997), based on work in which she was involved (EC 1996) suggests financial costs for the UK (given in Euro) as at Table 3 below. The presentation of a single figure is somewhat unrealistic, and other studies are apt to make use of a range of values (see above). Even allowing for this, the point to be made is that the figures are not easily reconciled with those from the Coopers and Lybrand report.

Table 3: Costs of Recycling, 1993 ECU (figures in parentheses are 1999 £)

Source: Brisson 1997

A number of councils that have established recycling schemes are starting to present more detailed economic information about the operation of their scheme. One such example is given in Box 1.

Ecologika (1998) report on a Coopers and Lybrand survey of four schemes, the best performing of which (in terms of diversion) cost £108 in gross terms with revenues of £13 (so net costs of £95).

The Audit Commission's Recycling Cost Survey, carried out in 1996, provides a detailed analysis of the relative costs of bring and kerbside recycling in 21 local authorities. The survey categorised the schemes into different types:

• Householder waste presentation method (box / sack / wheeled bin / bundled / carrier bag, etc.);

• Frequency of collection (weekly / fortnightly);

• Co-collected or not with refuse for disposal; and

• Vehicle type (multi-compartment / split / standard etc.), together with details of the population served, and the tonnes recycled.

The survey identified the range of materials collected, including paper, glass, metals, plastics, textiles, other, and the costs per tonne for the various materials collected. These data, combined with information provided on the various financial costs experienced by the authorities to establish and run the schemes, provided details on the gross and net costs (i.e. including receipts from sales of materials collected) for each of the authorities. Recycling credits were excluded.

The survey reported a wide variation in the costs of kerbside collection schemes. Average gross costs per household were £8.99, but these costs varied between different collection schemes from as low as £2 per household to as much as £18.

The report noted the wide variation in costs between kerbside schemes, and suggested that the principal reasons for these variations may be attributable to a range of factors, most notably:

• frequency and method of collection

• materials and tonnages collected

• population density

• number of households served

• efficiency of the collection, transport and sorting system

• materials income and recycling credits (Audit Commission 1997)

However, with only 21 authorities investigated in the survey, the relative importance of each of these factors could not be assessed in detail. The influence of 'less tangible factors' such as scheme age and the information processes used to promote participation, are not mentioned as being of influence, though other country experience suggests they may be important. There is no distinction made between schemes that do, and schemes that do not operate a MRF.

Some analysis was carried out to demonstrate the effects of the tonnages collected from each household on average costs per household. This is presented in Table 4 below. The Table appears to suggest that a) the costs per household increase as the rate of materials capture increases, but b) that costs increase at a lower rate than materials collection (so that the costs of waste collection per tonne fall even as the costs per household increase). This is consistent with other countries' experience, and would be in line with what is expected when increases in participation rates occur, perhaps with the scheme's maturity, though costs may also increase with the inclusion of new materials (especially plastics). In the former case, the marginal costs of collection may be close to zero, though costs will be incurred in materials transport to reprocessors.

Table 4: Kerbside Recycling Costs and Performance (figures in parentheses are 1999 £)

(Excludes kerbside schemes covering less than 10,000 households)

Source: Adapted from Audit Commission Recycling Cost Survey, 1996

The same finding is reported in work conducted in the US on kerbside schemes. Stevens (1994) reports that cities with relatively high recycling rates had costs about one third that of schemes with lower recycling rates.

The US Environmental Protection Agency reported similar findings for 'multi-family recycling' (high rise buildings etc.) (USEPA 1999). Ecologika (1998) report that the costs of a UK blue box scheme fell over three years from £95 per tonne to £50 per tonne through reducing collection and sorting costs and increasing income through consortia selling. The same study sites evidence from North America that suggests the potential for cost reduction over time. One suspects that reductions arise both through 'learning by doing', and to some extent, through increases in participation, though net costs (as opposed to gross costs) are vulnerable to swings in materials prices, which obviously affect revenue streams.

Though Table 4 may appear to show that there is a correlation between costs and materials capture, the range of influential factors would appear to make the strong application of such a conclusion somewhat premature. In many cases, one is probably comparing apples with pears. Glancing at the full dataset, one notes, for example, that the scheme recycling most per household (146kg) has a net cost per household (£11.26) that is less than that of one of the low performing schemes (65kg at £14.61). At the same time, one scheme reports negative net costs per household with capture rates of 61kg per household. Though average gross costs of kerbside collection are £143 per tonne, these range from £41 - £290, whilst net costs average £107 per tonne, but range from £-4 to £277.

In general it is clear that variation in the costs of waste treatment exist not just between the different waste management options but within those options too. The term 'kerbside collection' encompasses a whole range of activities and approaches whose gross costs (expressed in terms of £/tonne of material collected) vary considerably. For exactly this reason, it is very difficult to draw firm conclusions about 'the costs of recycling' without far more detailed investigation, and closer specification as to what it is whose costs one seeks to understand (and in what specific context). There may also be variation related to the start date of the scheme. This is suggested by studies in the US, one of which revealed a statistically significant effect of scheme age upon the collection rates for different materials (Jenkins et al 1999).

Arguably, for recycling systems, the factors affecting the costs of the scheme are more numerous than for other technologies. The logistics concerning collection method and frequency are subject to a number of variables, but it seems fair to say that lessons are being learned in this area. Collection methods, decisions concerning materials coverage and collection frequencies cannot be divorced from decisions concerning the nature of the vehicles and containers being used in the collection. These then influence the labour requirements of the scheme. Each of these inter-related decisions has implications for costs both for the scheme itself and 'downstream', as in the case of scheme-organisers' decisions to deploy (or not) MRFs. There seems to be more potential for 'learning by doing' in recycling than there might be in, say, the more traditional final treatment options, if only because, certainly in the UK, we are still in the 'steep segment' of the learning curve.

3.2.3 Costs of Composting

One of the Government's key objectives is to increase the amount of organic material in the municipal solid waste stream that is composted. This objective may yet be propelled by legislative force in the form of a proposed Composting Directive. This might require local authorities to collect organic waste separately. Similar issues concerning the cost of schemes are likely to arise here because of the nature of the collection process. At the same time, there may be specific characteristics of organic wastes (for example, its density, the proportion found in the MSW stream, its moisture content, its putrescible nature) which make it suitable for collection in ways to which mixed dry recyclables are not so well suited.

The Composting Association (1997) estimates that each UK household sets out some 200-250kg of VFG (vegetable, fruit and garden) waste each year. The term VFG is used (in their report) to maintain consistency with the nomenclature of other European countries and is used to differentiate such waste from purely garden waste. An estimated 100kg p.a. of green waste per household is also available for composting.

In 1997/8, just over a third of local authorities in England and Wales had established centralised composting schemes. These receive organic waste from both bring schemes and from civic amenity sites. The Composting Association (1997) and HDRA (1999) have investigated the costs of establishing and running a centralised composting scheme in some detail.⁶

[⁶ This unpublished work was carried out under a sub-contract to ECOTEC.]

Estimates of composting costs were provided in Coopers and Lybrand's (1993) analysis, which provided the marginal costs associated with different recycling options (Table 5). This study includes a value for separation of materials for home composting. This is not a value for separation per se but an estimate of the total costs of minimisation via this route. The Coopers and Lybrand report expressed the view that 'kerbside collection of organic waste is extremely expensive, averaging £95 per tonne.' This is not clear from the work we have undertaken, much depending on vehicle design and collection logistics.

Table 5: Summary of Composting Costs (figures in parentheses are 1999 £)

(1) Based on bring system; (2) Based on a split bin, kerbside collection Source: Coopers & Lybrand, 1993 (in 1999 terms, the costs would be of the order 15% greater)

In respect of composting costs, the outcome of the Composting Association's own survey of capital and operating costs is shown in Table 6 below. Their comment concerning costs is worth quoting:

'Unfortunately, a general answer to this question [how much does composting cost?] is impossible - costs are heavily dependent upon site-specific factors such as land ownership, the nature of capital financing used, the throughput, and the type of process required.'

Note that the costs do not include the collection process that is covered in the Coopers and Lybrand (1993) study. Without collection, the operating costs range from £6 to £30. Note also that the figures above show gate fees for composting sites. These are not so different from landfill gate fees (see below).

HDRA (1999) identified the principal composting systems currently available and presented example costs. The open air turned windrow composting system is currently the most prevalent in the UK. In this system, the compost feedstock is formed into long windrows, in the open air. The compost is then aerated by regular turning of the material. HDRA (1999) suggests costs are typically in the range £8-£18 per tonne throughput, depending on site requirements and equipment used. HDRA also carried out a more detailed cost analysis for an example of a plant processing 18,000 tonnes per year, a summary of which is presented in Table 7 below.

Table 6: Operational and Capital Costs of Composting

Source: Composting Association 1997

Table 7: Open Air Windrow Composting System

 (1) Investment costs were annualised and included in operational costs Source: HDRA 1999

The report also provided estimated costs of a smaller operation, processing 10,000 tonnes of green waste per year. For this example, total investment costs were £281,733, with operating costs totalling £18.79 per tonne to produce a bagged 10mm screened product. The relative costs of these two processing operations indicate the potential for economies of scale with larger installations. An earlier assessment of costs of centralised composting facilities at varying levels of scale was provided by Leeds University, and also suggests economies of scale for larger scale operations - see Table 8 below. Such scale economies are likely to be realised within specific technical options, but the costs across technical options will vary significantly (see above and below).

Table 8: Centralised Composting Costs

(1) The net cost is based on a sales value of £15 to £20 per tonne. Source: Department of Civil Engineering, Leeds University, as cited in Coopers & Lybrand, 1993

HDRA also provided example costs for a variety of in-vessel composting systems. They identified five main types of in-vessel system -containers, silos, agitated bays, tunnels and enclosed halls. Detailed specifications for two types of in-vessel systems were provided, for a GICOM batch tunnel composting system and a Herhof composting plant. These are summarised in Table 9 below. Evidently these facilities are more costly than open-air windrows, but the in-vessel nature of the process has advantages over open air systems. These relate (amongst others) to the speed at which material is processed (so less land is required), and the degree to which odours can be controlled (allowing processing of malodorous wastes).

Table 9: In-vessel Composting Systems (costs per year)

 (1) Financing of investment costs included in operational costsSource: HDRA 1999

From this brief review, it would seem that for open-air windrows, the costs of composting technologies might be of the order £10-£20 per tonne. To this one must add the costs of collection and separation, and it may be true to say that lower cost collection incurs higher costs in terms of separation. Equally, better separation is likely to lead to higher quality end-products. Hence, countries which have made most progress in composting, such as Austria, have strict rules concerning what fractions of waste must be separated or home composted, and a supporting system of standards designed to prevent land spreading of compost which has high levels of contamination.⁷ Optimisation of collection systems has to occur in the context of broader considerations of the integration of components of the waste management system.

[⁷ See the Austrian submission in DHV et al (1997).]

3.2.4 Home Composting

Home composting reduces the quantities of organic waste for collection without adding to collection costs. Costs associated with home composting are primarily associated with any costs for provision of home composting (compost bins, wormeries, digesters), and any additional publicity or information material required. The distribution of the financial costs between those undertaking the activity and the bin providers will be determined by the level of subsidy provided by a given service provider.

Few studies appear to have addressed the financial costs of home composting. An exception is the Coopers and Lybrand (1993) study (see Table 5 above). We estimate that home composting can reduce disposals by 10-20% (figures used by Local Authorities to estimate home composting rates tend to use values between 75kg and 150kg per annum per household that is believed to be engaged in the activity). A composting bin may cost £35-50 unsubsidised. There is no obvious reason why basic bins would have limited lifetimes. The costs of treatment per tonne will depend upon the way in which one accounts for the outlay.

Collection costs could not be expected to fall on the basis of marginal changes but disposal costs might. For 100kg of waste, the savings on disposal may be of the order £2-£3 (including Landfill Tax). Assuming straight-line depreciation, and assuming the materials are used by the householder, the bin pays for itself if it lasts 10-15 years even if the Local Authority pays for the bin (assuming bulk purchases result in low costs for the bin). Issuing free bins may present its own problems. Under a 50% subsidy, a £30 bin would pay for itself if it lasts 5-8 years.

3.2.5 Landfill and Incineration costs

The work carried out by Coopers & Lybrand (1993) also evaluated the current (1993) and future (next 10 years) costs of landfill and incineration, and their estimates are given in Table 10 below. Note that most of the figures discussed below do not include landfill tax, which now stands at £10 per tonne for municipal waste, and will increase by £1 per year to 2004. The figures for future costs represent the likely range of costs after existing incinerators were to be fitted with emissions control equipment beyond 1996. Figures from Brisson (1997) for the UK are given in Table 11. The two sets of figures are not comparable since Brisson's effectively include collection costs whereas the Coopers and Lybrand work figures do not. Note also that the two studies seek to capture variation in landfill costs across different dimensions, the one looking at variation with gas collection / energy recovery, the other looking at the rural/urban dimension. In practice, both will affect costs. It is worth noting in passing that all landfills accepting biodegradable waste (in practice, probably all receiving municipal waste) will be required to have gas collection equipment in place in the near future (as a consequence of the Landfill Directive).

Table 10: Costs of Waste Disposal Options (figures in parentheses are 1999 £)

Source: Coopers & Lybrand 1993

Table 11: Financial Costs Of Waste Management, ECU/Tonne (figures in parentheses are 1999 £)

Ecologika (1998) report costs in terms of the breakdown between collection and treatment. For London, they estimate these (per tonne) as:

Landfill - £25 for collection, £30 for disposal. Revenue from energy sales (where energy is recovered) equivalent to less than £1 per tonne. This would give a total of the order £54-55 for delivery of waste for disposal / recovery at landfill; and Incineration -£25 for collection, £44 for incineration, £13 for the disposal of residual ash, and £15 from the sale of heat and power. This would give a total of £67 per tonne for a new 300,000 tonne plant.

The Government's Draft Waste Strategy (DETR 1999a) gives details of a modelling exercise carried out into municipal waste targets. The modelling used a set of assumptions of the costs of different waste management options, as given in Table 12 below. These are the total resource costs, excluding the landfill tax. The costs include collection, transfer and transportation to the disposal or recovery facility, as well as gate fees. They include operational and capital costs (which are annualised for conversion to costs per tonne). The recycling and composting costs assume a zero price for recyclables (no income is received from the supply of waste for recycling or composting).

Table 12: Costs Of Different Waste Management Options

Treatment Cost Range (£/t)

Source: DETR 1999a

The wide range in costs demonstrates the uncertainty over present and future costs and variations between authorities and regions, both in actual costs and in the approach to reporting costs (in particular, whether or not collection costs are included, and whether or not what is being reported includes capital costs, and if so, how this is accounted for).⁸ The costs of collection, transfer and transport, which are significant components of the overall cost, are simply not uniform across different parts of the country, partly for geographic and demographic reasons, put also because of the different systems used in these parts of the process. The location and scale of the plant also affects costs, as does the sophistication in terms of monitoring and gas recovery equipment at landfills, and the pollution control equipment at energy from waste incineration plants.

[⁸ It has been suggested that the ownership of facilities is a factor which can affect the way in which costs are accounted for.]

3.2.6 Revenues From Material Sales (Recycling, Composting and Incineration)

In some of the studies surveyed above, the costs incorporate the revenues from material sales. It is worth considering these separately. Revenues from dry recyclables will depend on the weight contribution provided by each recovered fraction and on the price (£/t) received for that fraction. Coopers & Lybrand (1993) reported the relative weight contributions from each of the separated recycled materials (Table 13).

Table 13: Weight Contribution For Recyclable Materials (kg/tonne)

Coopers and Lybrand 1993

These compositional data, to the extent that they are indicative of the relative quantities of material collected for recycling (and clearly, they will not be so for collections which do not collect all these materials - in any case, see below for compositions of kerbside collections), show how important in weight based terms the collection of paper and board is in recycling schemes.⁹ According to these figures, along with glass, these materials account for three-quarters of materials collected (and in the kerbside schemes examined below, the proportion is much greater). Clearly, fluctuations in the price for these materials are important in the context of mixed collections of materials from the waste stream. Equally, however, the significance of the materials is effectively weighted by their relative price. In this respect, because the prices paid for aluminium are typically much higher than those for other materials, aluminium acquires some greater significance than its low proportion (by weight) suggests.

[⁹ Our figures suggest that these numbers grossly underestimate the significance of glass and paper in kerbside collection (and almost certainly in collection at bring sites as well).]

More generally, the price which is secured under any given contract, along with the terms of any contract, will be an important determinant of the net costs associated with any specific recycling scheme (and their stability). These terms may be better or worse depending upon the timing of any contractual negotiation. It is for this reason that many have argued for the need for longer term contracts and/or market development activity, to give stability to materials revenues, as well as increased value for the material itself.

Where composts are sold, sales prices for waste-derived composts range from about £1.50 to £3 for 40-50 litres (delivered), alternatively bulk delivery of one tonne or more of compost can also be provided at approximately £10 per tonne.

MSW incinerators will typically extract steel (and in some plants, aluminium) from bottom ash. This is now typically done post-incineration since the incineration process effectively resolves problems associated with mixed materials (e.g. disposable razors, etc.). There are quality issues associated with this approach to materials extraction since the material can take up some slag during the incineration process. However these materials have value and are cleaned and baled for sale. Increasingly, incinerator operators are also looking to make use of bottom ash in construction applications. This also recovers value. However, whilst the environmental benefits associated with metals recovery may be significant, they may be less so for bottom ash recovery (see below). One of the rationales for making use of bottom ash is that this avoids disposal costs associated with landfilling the material. As such, there may even be a net financial saving even where construction operators are paid to use such materials, or given the material at zero cost. In this sense, the landfill tax affects bottom ash in a similar way to traditional construction wastes, encouraging their recovery / utilisation rather than delivery to landfills.¹⁰

[¹⁰ Note that if one assumes that around 25-30% of treated material is left as bottom ash, then 3.3 million tonnes of capacity or more would be required to generate 1 million tonnes of material. This is unlikely to destabilise aggregates markets greatly given that the aggregates industry supplies a market of the order 200 million tonnes.]

Recycling credits are paid to waste collection authorities (WCAs) and (outside Wales), at the discretion of the waste disposal authority (WDA), to third parties. Guidance on the payment of recycling credits suggests that these should reflect the avoided cost of disposal of the marginal unit of waste. This includes landfill tax. However, although it can be argued that third party credits help avert expenditure on collection as well as disposal, the cost of collection is never included in third party credits. One could argue that this 'omission' is significant to the extent that third parties recycle significant quantities such that these reduce the cost of residuals collection below that which would prevail in the absence of the scheme.

3.2.7 Revenues from Recovery of Energy

Both landfill and incineration generate revenues through the sale of energy. Both have benefited from the existence of contracts and funding through the Non Fossil Fuel Obligation. Particularly for landfill (because of the conversion of methane to carbon dioxide, reducing the global warming potential of the gaseous emissions per atom of carbon), this makes the recovery of energy a beneficial process both in terms of reducing external costs associated with the process (this would occur only indirectly for incineration through displacement of alternative energy sources - see Chapter 4), and reducing private financial costs.

3.2.8 Packaging Recovery Notes (PRNs)

More recently, energy-from-waste (EfW) plants have benefited from their being able to issue PRNs against waste delivered for recovery. This could change in the future depending upon the European Commission's view concerning the role of EfW in fulfilling the recovery obligation under the Packaging Directive. To our knowledge, and on the basis of current and past work, few if any authorities are, or have been, seeking to become involved directly in the market for PRNs. This statement requires some qualification.

Firstly, even if no authority were directly involved in this market, the price for the materials delivered could increase. However, in this context, a number of points are worth considering:

• The products which, by weight, are most significant from the point of view of local authority collections are newsprint / magazines and glass. The former are not classified as packaging, so that delivered material would not be expected to benefit from any price premium related to PRNs (and Figure 1 provides an illustration of the effect on packaging grades of waste paper).

• In general, because the supply of PRNs has been in excess of demand, the value of PRNs required to make up an obligated entity's recovery obligation has been relatively low (at least, once it became clear that supply would outstrip demand). This is partly due to the very fact that the large quantity of PRNs related to reprocessing of paper and board packaging has 'cross-subsidised' other materials in respect of making up the gap between materials specific recycling obligations and the overall recovery obligation. This may change if the revised Packaging Directive increases materials-specific recycling targets.

• The material whose PRN price is most likely to rise in the near future (on the basis of material-specific targets not being met - much depends here on the rate of growth in exports of plastic packaging to foreign reprocessors) is plastic, a material which is collected in relatively small quantities through local authority recycling schemes.

Overall, the very short-term prospects for enhanced materials value from the average tonne of material recycled by local authorities is not great. Beyond this, however, as the current situation of PRNs surplus begins a transition to possible deficit, the prospects for enhancement of materials prices begins to look more promising (if, indeed, that is the right term to use in this context). Furthermore, the much-awaited revisions to the Packaging Directive will have implications which, on the basis of the discussions which have been ongoing, would seem to make this scenario more rather than less likely (and especially in respect of plastics).

Figure 1: Changes in Materials Prices for Waste Paper Grades

Source: PPI 1998 (in Enviros RIS 1999)

Back to Top