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The economics of landfills
1. 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
2. Landfills
as
an
environmental
problem
Image
Credit:
utminers.utep.edu
3. 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)
4. 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)
5. 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
8. 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.
9. 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
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
11. 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
12. 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
13. 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
14. 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
15. 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
16. 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
17. 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
18. 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
Editor's Notes
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
