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The economics of landfills
 

The economics of landfills

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  • Why are landfills an economic issue?For the simple reason that landfills cost money to design, engineer, build, maintain and close, and do have negative side-effects on some people and ecosystemsBudget constraints shapes the need for priorities. Where do we spend our money on? Improved landfills, alternative waste management options? Producer and consumer responsibility?How much on each?These are real questions facing anyone who manages waste and thus an area of economics to get involved in. Scarce financial resources, a vital service that needs to be delivered in an affordable and cost-effective way.In this talk we will look at a waste costing approach developed by the CCT as well as some literature on the external costs of landfilling.
  • An often overlooked question in economic analysis, is who and what is negatively impacted by landfills.That includes owners of properties close to landfills, water users and ecosystems, people living and working within the airshed of landfills as well as the recipients of climate change attributed to increases in greenhouse gases.Landfills do have environmental impacts, although the impacts diminish rapidly with well-managed sites. These are:Gas production – greenhouse gasesLeaching* – water users, riversDisamenity – householdsAlso dust, surface run-off and contaminated sediments if not properly managed*Leachate: the infiltration of precipitation into landfills, togetehr with physical and bio-chemical processes, produces lesachate – high in organic and inorganic componnets
  • Apart from environmental issues, there is the question of available landfill spaceSuitable land comes at a premium, esp. in physically constrained cities like Cape Town. Based on latest assessment in the City there is around 12-14 yrs of space, which is below international benchmark of 15 years.In such a setting, the capital and operational costs of future landfills and/or alternative waste management options becomes a pertinent question. One cannot assume BAU.
  • Another issue to look out for is waste trends. One cannot just assume that waste will continue to increase at a certain fixed rate.Waste generation and disposal fluctuates.as clearly illustrated in this Figure for Cape Town.In 1997, municipal waste disposed at landfills averaged around 1.4 kg/pp/dayThis increased to 2.3 kg/pp/day in 2006, before returning to levels around 1.2 kg/pp/day in 2009.Such fluctuations make it more difficult to plan for new landfills.You may well be interested what caused such a spike and decline? Well, the verdict is still out, but here are a few suggestions as based on our research:
  • Waste disposal trends are dependent on socio-economic factors for one.As a rule of thumb a 1% change in GGP leads to a change of 0.6% in MSW generated, but be cautioned there are large variances in these numbersThe structure of the economy also matters. When larger economic sectors, such as trade, manufacturing and transport (in the CT context) experience change, one is more likely to see it in the amounts of waste generated than when smaller sectors such as electricity, gas, water and construction start changing.Interestingly, demography and even gender seems to matter. The more people there are aged between 45-69 yrs and between 15-19 yrs, the more waste is proportionally generated when compared to other age groups.And, even the split between male-females in a population seem to matter. A higher percentage of males is highly correlated with the amount of waste generated.These results are subject to further statistical testing, but certainly illustrated the point that waste trends are impacted by broader socio-economic trends.Thus, waste projections can only benefit from a clear idea of how local economies function.
  • Another vital piece of information in costing landfills and/or alternative waste management systems is the characteristic of waste that is landfilled. Knowing what the physical, material flows of waste are helps in having more targeted interventions.Here is an example of Cape Town’s waste as characterised by mass – most builders rubble, followed by other trade waste and household packaging.Note the small % of greens.Now we see the next slide where waste is characterised by volume.
  • Greens from households and parks as well as free waste, claim the most space in landfills, closely followed by household packaging.Density factors become important when managing landfills as it is all about landfill space available and not so much about the tonnages landfilled. The question of what target one is managing for namely increasing diversion only or increasing diversion to save landfill space is an important one. Mass and volume can differ substantially for alternative types of waste.
  • With the broader contextual picture now explained, the question is how one would go about costing landfills.A costing model would take account of all financial costs to run landfills as well as the so-called external costs to third parties.Financial costs are organised differently in different cities, but for CT data was sourced for cleaning, collecting, disposal (inclminimisation) and supporting functionsImportantly, this cost model is focussed on the direct and indirect costs to the municipality only.
  • Now for some results.Baseline waste management operational cost data for CT was R1.5bn and CAPEX costs R317m in 2009/10, that is approx R480pp.Landfill disposal and drop-offs accounted for 22% of operational costs and 75% of capital budget in that year.Note that collections and area cleaning together account for nearly 70% of the operational budget, suggesting that no landfill or any alternative solution for that matter can be analysed from an economic perspective without understanding how waste is collected and how areas are cleaned in the first place.
  • For CT, when all costs for landfilling is extracted from waste management finances, including all OPEX, CAPEX as well as rehabilitation and closure costs, the financial costs of landfilling amounted to R216/t in 2011 and projected to increase to close to R250/t in 2019.These figures were used as a basis to value landfill air space.
  • Using this formulae,Basically all financial costs over the lifespan of the landfill, divided by the total volume of the landfill (and adding a profit when dealing with private sector landfills)The results?The value of air space in CT ranges from R150/m3 in 2007/8 to R250/m3 in 2013/14.Thus, air space costs more money to manage over recent time.
  • Now, what about the second part of our costing approach namely external costs?Recent research in Australia suggest that external costs are usually between 20-45% above baseline landfill costsBut that this number decreases significantly with best practice controls.
  • Let’s look a bit further than Australia. Here a selection of external costs for landfills from various countries and regions. In Europe between 11 and 26 Euro/t or in the region R100 to R150/t.In the US between 3 – 15 $ or in the region of R25 – R130/tIn the UK between 4,6 and 7 Pounds or in the region R50 – R90/tIn New Zealand between NZ$10 and 60 or in region R60- R400/tIn Australia A$1 – 19 or in region of R9 – R170/tWithin these ranges the Cape Town result of R111/t seems reasonable.Note that the CT results are driven for most by dis-amenity costs, followed by air and water emissions and the external costs of transport.
  • So let’s add them together.Recall that the municipal cost of landfilling was R216/t in 2010Our best estimate for the external costs in R111/t.The baseline costs of landfilling in Cape Town in 2010 was therefore close to R327/t.It is not about the exact figures, as these would have changed already with newer financial data and for example fluctuating house prices around landfills and the expected costs of carbon dioxide. It could be R300/t or maybe even R400/t, but the range of total landfill costs is clear.What is important is that these figures set the baseline to which the total costs of other waste management options need to be compared.
  • To do this comparison both direct and indirect costs need to be taken into account.If one were to implement a composting or curbside recycling programme for example, there are additional costs of collection and processing that needs to be counted. Also the benefits of reduced landfiling costs and savings in planned expansions of landfills. However, from a municipality’s perspective there is a decrease in revenue from landfilling that needs to be recouped somewhere else. Such costs are real and have to be counted as they will filter through to those who pay for such services.
  • Based on such a calculation Cape Town’s S78(3) ASD assessment concluded that“It remains financially more feasible to landfill waste rather than to collect, process and divert waste … if funded by the City alone”.That never suggests that landfilling is the way to go. Surely not.But it does in part explain the road of partnerships with those who benefit from certain diverted waste treams.There is value in waste, nobody wants to have that destroyed. The private sector is now coming to the party to secure those streams of waste as municiplaities cannot afford to go that route on their own.Households are asked to come to the party by particpating in curbside recycling programmesConsumers by exercising responsible buying behaviour and Producers by taking up their responsibility in the pro-active management of waste early in the value chain.
  • In conclusion,Landfills have undesirable environmental impactsLandfill space is a growing concernWaste trends are strongly influenced by socio-economic conditionsCost comparison needed between all waste management options, incl. baseline financial, additional and external costsLandfills remain a least-cost option when compared to alternative waste management systemsAffordable tariffs to broad population remains a key concernCertain waste streams are valuable resources in local economiesThe development of cost-sharing models between municipalities and private sector to ensure sustainable provision of recycling services is key priority

The economics of landfills The economics of landfills Presentation Transcript

  •  The  economics  of  landfills   Learning  from  the  city  of  Cape  Town  coupled  with  some  trends  in  interna8onal  work  on  the  external  costs  of  landfills   Presented  at  The  Vision  Zero  Waste  Seminar,  Sandton  Conven8on   Centre,  27  July  2012   by   Mar8n  de  Wit   mar8n@sustainableop8ons.co.za  
  • Landfills  as  an  environmental  problem   Image  Credit:  utminers.utep.edu  
  • Landfill  space  and  8ming  as  a  problem  “Based  on  the  latest  assessments,  the  remaining   lifespan  of  the  City’s  landfills,  when  no  addi8onal   diversions  from  landfill  are  implemented  over   and  above  current  diversions  and  excluding   private  landfills,  is  between  12–14  years  coun8ng   from  2010  onwards.  Remaining  landfill  space  is  below  the  interna8onal   benchmark  of  banked  landfill  space  of  15  years“   Source:  Akhile  Consor8um  (2011)  
  • Waste  trends  Municipal  waste  disposed  at  landfills,  Cape  Town  (kg/pp/day)     Notes:  Popula-on  data  based  on  Census  1996,  2001,  GHS  2005-­‐2008,  QLFS  2009.  Es-mated  growth   figures  in  popula-on  for  periods  in  between  1996  and  2001  and  between  2002  and  2005     Source:  De  Wit  &  Nahman  (2009)  
  • Waste  trends:  more  than  what  meets   the  eye  •  Economy  ma]ers:     –  As  a  rule  of  thumb,  a  1%  change  in  GGP  leads  to  a  0.6%  change  in  MSW   generated  (but  very  large  variance)    •  Structure  of  economy  ma]ers:     –  Fluctua8ons  in  MSW  generated  is  influenced  most  by  rela8vely  larger   economic  sectors,  such  as  the  trade,  manufacturing  and  transport  sectors.     –  Smaller  sectors  such  as  electricity,  gas  and  water  as  well  as  construc8on  less   detectable  impacts.      •  Demography  ma]ers:     –  The  largest  posi8ve  correla8ons  between  age  groups  and  the  amount  of  MSW   produced  (from  1996  to  2009)  is  for  those  aged  between  45  and  69  years  old   as  well  as  those  aged  between  15  and  19  years  old.    •  Gender  ma]ers:     –  There  is  a  high  posi8ve  correla8on  between  the  percentage  of  males  in  the   popula8on  and  the  amount  of  MSW  generated  in  the  City  as  measured  over   the  period  1997  to  2009.   Note:  Data  and  analysis  for  Cape  Town  and  subject  to  further  sta8s8cal  tes8ng  
  • Waste  characteris8cs  (mass)   Source:  Akhile  Consor8um  (2011)  
  • Waste  characteris8cs  (volume)   Source:  Akhile  Consor8um  (2011)  
  • Towards  a  Cos8ng  Model  •  Full  Cost  =  Financial  Cost  +  External  Cost  •  Costs  can  be  categorised  into  four  main  func8ons   of  solid  waste  management   –  cleaning,  collec8ng,  disposal  as  well  as  waste   minimisa8on,  and  suppor8ng  func8ons.  •  Costs  expressed  in  terms  of  physical  units  of   waste  cleaning,  collec8on  and  disposal  (R/t  or  R/ m3).    •  The  focus  is  on  direct  and  indirect  financial  costs   to  the  municipality.  
  • Municipal  Costs  -­‐  baseline  data   +/-­‐  R480pp   R1.5bn   R317m  The  opera8onal  budget  expenditure  for  solid  waste  management  in  Cape  Town  for  2009/10  was  approximately  R1.5bn,  of  which  R332m  (22%)  for  disposal  (incl.  drop-­‐offs)   Source:  Akhile  Consor8um  (2011)  as  based  on  City  of  Cape  Town  data,  2009/10  
  • Unit  Disposal  Costs  in  Cape  Town  •  The  unit  cost  of  disposal  in  landfills,  including   normally  projected  OPEX  and  CAPEX,  as  well   as  addi8onal  rehabilita8on  and  closure  costs   not  budgeted  for  earlier,  increases  from  R216/ t  in  2011  to  R248/t  in  2019*   *  When  CAPEX  is  amor8sed  at  8%  and  all  landfill  closure  costs  counted  for  
  • Valuing  landfill  airspace   The  model  that  is  used  is  as  follows:   where   Capital  cost  includes  planning  and  (sunk)  upfront  capital  costs   Opera8onal  cost  includes  opera8ng  costs  over  the  life8me  of  the  landfill   Closure  costs  include  the  costs  of  closure,  rehabilita8on,  and  post-­‐closure   maintenance  and  monitoring  Value  of  airspace  ranges  between  R150/m3  and  R250/m3  from  2007/8  to  2013/14.   Source:  De  Wit    &  Nahman  (2009);  Akhile  Consor8um  (2011)  as  based  on  City  of  Cape   Town  data,  2009/10  
  • Coun8ng  for  external  costs  •  Monetary  es8mates  of   environmental  costs   –  increase  costs  of   landfilling  in  mostly  poor   control  landfills   –  One  interna8onal  study   suggests  an  increase  of   20-­‐45%  above  baseline   landfill  costs,  but  much   lower  (1-­‐4%)  for  land-­‐fills   with  best  prac8ce   controls*   *BDA  Group,  2009.  The  full  costs  of  waste  disposal  in  Australia  
  • Landfill  external  costs  es8mates  Study   Year   Country/Region   External  costs/ton  European  Commission   2000   Europe   €  11  -­‐  20  Porter   2002   US   US$  3  -­‐  15  Davies  &  Doble   2004   UK   £  4.6  -­‐  6  Dijkgraaf  &  Vollebergh   2004   Netherlands   €  26  Fullerton   2005   US   US$  5.8  –  14.2  Kinnaman   2006   US   US$  5.38  –  8.76  Pearce   2005   UK   £  6  –  7  Covec   2007   New  Zealand   NZ$  10  -­‐  60  BDA   2009   Australia   $  1  –  19  Nahman   2010   Cape  Town   R  111   Of  which   -­‐  Dis-­‐amenity:  R  57   -­‐  Emissions:  R  29   -­‐  Transport:  R  24    
  • Summary  of  exis8ng  cost  numbers  for   Cape  Town  •  Best  available  es8mate  of  full  municipal  cost   of  landfilling  (2010)  is  in  order  of  R327/t   –  Municipal  cost  of  landfilling  =  R216/t   –  External  costs  of  landfilling  =  R111/t  •  These  figures  must  be  compared  with  financial   and  external  costs  of  alterna8ve  waste  service   delivery  mechanisms  
  • Direct  and  indirect  costs  of  alterna8ves  •  Direct  costs     –  Addi8onal  Costs  to  Collect  (incl.  Transport)   –  Addi8onal  Costs  to  Process  •  Indirect  costs   –  Avoided  Disposal  Costs   –  Decrease  in  Revenue  from  Disposal   –  Savings  in  Planned  Expansions  of  Landfills  
  • Landfilling  as  default  op8on  •  Cape  Town’s  S78(3)  ASD  assessment  concluded:  “It  remains   financially  more  feasible  to  landfill  waste  rather  than  to  collect,   process  and  divert  waste  …  if  funded  by  the  City  alone”.  •  Interven8ons  are  costly,  in  general  more  costly  than  current  default   landfilling  op8on   •  Es8mated  direct  and  indirect  costs  of  landfilling  in  Cape  Town  at  R220–R250/t*  •  Municipali8es,  and  thus  residents,  should  not  bear  costs  alone  •  There  is  value  in  waste,  waste  is  a  resource  with  financial  value   –  Private  sector  involvement  in  alterna8ve  op8ons  for  managing  post-­‐ consumer  waste  needed   –  Towards  PPPs  •  Move  towards  precau8on;  responsible  produc8on  and   consump8on  –  address  the  waste  problem  closer  to  source  for  real   sustainability   *subject  to  changes  in  medium  term  budgets  on  disposal  
  • Conclusions  •  Landfills  have  undesirable  environmental  impacts  •  Landfill  space  is  a  growing  concern  •  Waste  trends  are  strongly  influenced  by  socio-­‐economic  condi8ons  •  Cost  comparison  needed  between  all  waste  management  op8ons,   incl.  baseline  financial,  addi8onal  and  external  costs   –  External  costs  in  order  of  R100-­‐R120/t,  but  site  specific  •  Landfills  remain  a  least-­‐cost  op8on  when  compared  to  alterna8ve   waste  management  systems   –  Affordable  tariffs  to  broad  popula8on  a  key  concern  •  Certain  waste  streams  are  valuable  resources  in  local  economies  •  Develop  cost-­‐sharing  model  between  municipali8es  and  private   sector  to  ensure  sustainable  provision  of  recycling  services  
  • Acknowledgements  This  presenta8on  is  based  on  work  done  for  the  City  of  Cape  Town  in  the  period  2008-­‐2011,  both  in  own  capacity  and  as  part  of  a  team  managed  by  Akhile  Consul8ng.  Key  documents  are:  Akhile  Consul8ng.  2011.  MSA  Sec-on  78(3)  to  Assess  Alterna-ve  Service  Delivery  Op-ons  RFP  NO:  554C/2008/09  CONSOLIDATED  REPORT.  Final  Report    (Version  7.0)  prepared  for  Solid  Waste  Management  Depatment,  City  of  Cape  Town,  4  February  2011    De  Wit,  M.P.  &  Nahman,  A.  2009.  Cos-ng  the  Integrated  Waste  Management  Bylaw  with  specific  reference  to  airspace  savings.    Drav  report  to  Solid  Waste  Management  Department,  City  of  Cape  Town  and  School  of  Public  Management  and  Planning,  University  of  Stellenbosch,  30  June  2009