Economic risks and opportunities of new waste legislation


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Waste is valuable.
Waste is not for free.
Sustainable management of waste brings risks and opportunities for private business.
A reflection on the case of Cape Town.

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Economic risks and opportunities of new waste legislation

  1. 1. Economic risks and opportunities of new waste legislationEvidence from Cape Town<br />Presentation at Waste In Business Seminar, 14 April 2011<br />by<br />Martin de Wit<br />(As based on inputs to a study for City of Cape Town by the Akhile Consortium)<br />
  2. 2. Legislative drivers<br />The National Environmental Management Waste Act, into effect on 1 July 2009<br />requires that waste minimisation be considered by municipalities in addition to municipal services such as cleaning, collection and disposal to landfill.<br />City’s Integrated Waste Management Bylaw<br />Waste minimisation as specific function<br />Section 78 (3) Assessment of Alternative Service Delivery (ASD) mechanisms (Local Government Municipal Systems Act (MSA)) <br />One of the requirements of the MSA is to assess costs and benefits of alternative service delivery mechanisms.<br />
  3. 3. International evidence<br />no one preferred waste management option is identified, highlighting the importance of an assessment based on local conditions. <br />with the exception of a few countries,landfillingremains the default option, even in several highly developed economies. <br />waste collection and sorting options are vital in a sustainable waste management system, as this choice determines which downstream waste management treatment option(s) will be most effective<br />composting options struggle to be financially viable and only have a chance of being successful at high volumes with a marketable quality<br />thermal treatment yields net environmental benefits when compared tolandfillingand mechanical-biological treatment options, but is financially expensive<br />recycling proves difficult to implement in relatively large volumes<br />landfillingremains the most widely used waste management option, but once the full costs are taken into account the sustainability of this option may be questioned<br />
  4. 4. Systems approach<br />Emphasisesthe needfor a systemsapproach. <br />A system has a purpose and consists of an interrelated set of elements or components <br />An integrated waste system is one that recognises:<br />the different elements of the waste system as a whole from generation to disposal<br />a range of options on various scales (e.g. household, neighbourhood, city)<br />interactions between the waste system and other systems (socio-economic systems for example) <br />inputs from various stakeholders and interest groups in the design of a system that is acceptable and feasible<br />
  5. 5. Economic Systems Model<br />Net Additional Cost = Total Additional Costs – Total Additional Benefit<br />TAC mainly include:<br />Additional Cost of Collections (incl. Transport)<br />Additional Cost of Processing<br />Decrease in Revenue from Disposal<br />TAB mainly include:<br />Avoided Disposal Cost<br />Savings on Planned Expansions (airspace saved)<br />
  6. 6. Data on generation and diversion<br />Formal waste management system in Cape Town (MSW and private) handled over an est. 3 million tons of waste in the 2008/2009 financial year<br />Round ¼ of the waste in the formal waste management system diverted from landfill<br />Mostly commercial and industrial re-use and recycling, but also by Municipality<br />Source: Wise, C. Jeffares & Green<br />
  7. 7. Financial baseline data<br />R1.5bn<br />R317m<br />+/- R480pp<br />Source: Akhile Consortium (2011) as based on City of Cape Town data, 2009/10<br />
  8. 8. Baseline costs per ton MSW<br />The estimated average cost per ton of waste that was handled by municipality for the year 2009/10, including operational and capital expenses is estimated at approximately:<br />R1 700/t for cleaning<br />R1 200/t for collections<br />R400/t for disposal<br />R120/t for support and administration services<br />Estimates are very sensitive to costs and MSW generated<br />
  9. 9. Additional Waste Costs<br />Economic assessment of alternative service delivery (ASD) options:<br />The additional direct and indirect costs per ton diverted lowest for the Builders’ Rubble ASD, followed by;<br />The Organic Waste Management ASD at an additional cost of between R750–R960/t;<br />The Co-mingled Waste ASD at additional cost between R1 350–R1 660 per ton; and <br />The Household Hazardous Waste ASD at additional cost between R2 900–R3 500/t.<br />Note: These are estimates based on high-level systems analysis.Project level figures likely to vary<br />
  10. 10. Model limitations<br />Reduced cost to collect solid waste<br />Not included as normal service delivery proceeds<br />Real potential for cost savings only be seen once implemented<br />Possible savings to waste generators not included<br />Monetary estimates of environmental costs excluded<br />increase costs oflandfillingin mostly poor control landfills<br />International studies suggest increase of 20-45% above baseline landfill costs, but much lower for land-fills with best practice controls*<br />Important fraction, but not likely to change results on ranking of alternative service mechanisms, even if assume poor controls<br />More research likely to shed more light on quantum<br />*BDA Group, 2009. The full costs of waste disposal in Australia<br />
  11. 11. Discussion of results<br />Waste is not for free<br />Interventions are costly, in general more costly than defaultlandfillingoption<br />Estimated costs of landfilling at R220–R250/t*<br />Estimated large volume diversions<br />Organic Waste & Composting and Builders’ Rubble options<br />Organics & Composting option by far largest air space savings<br />>5 times that of second option, builders rubble<br />Smaller volumes and air space savings from separation of comingled waste<br />From diversion perspective focus on alternative Organics & Composting and Rubble mechanisms<br />*subject to changes in medium term budgets on disposal<br />
  12. 12. Implications for business<br />Rationale for business<br />possible private benefits from waste (Income > Cost)<br />consider dynamics of supply and demand<br />Supply of waste: <br />Relative large additional costs (over and above costs of waste service delivery) to ‘unlock’ suitable streams of solid waste from municipality<br />Realistic to assume that municipality will not be in a position to carry all these costs<br />Model to share risks and costs between municipality and private operators needs further attention<br />Assurance of waste volumes and quality of waste stream<br />Municipality’s imperative to divert relatively large waste from landfill<br />Demand for waste products:<br />Possible focus for business on waste capture earlier in cycle<br />Market development for recycled products is an important business function<br />Not a municipal mandate and function<br />Both aspects vital for a sustainable waste recycling and re-use economy<br />
  13. 13. Risks and opportunities for waste economy<br />Relative high additional cost of diversion<br />but lowest for Rubble, Organics & Composting<br />higher than default landfill option<br />Ability to divert large volumes to be tested<br />Organics, composting and rubble<br />Mixed results earlier smaller scale attempts<br />Ability to deliver quality products to market to be demonstrated<br />High quality compost and rubble prerequisite<br />Need for market development of waste products<br />Some options for higher market value, smaller diversion waste streams (comingled)<br />Negotiate sharing of risks, costs and benefits between municipality and private operators<br />