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 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 firstname.lastname@example.org
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
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