Waste Management: Productivity Commission Draft Report

Transcription

1 Waste Management: Productivity Commission Draft Report Abstract Waste management and resource recovery issues are an integral part of the sustainability debate, especially given the emergence of the throw-away society and its associated linear flows of resources associated with a take-make-wastesystem of production and consumption. In response many governments around the world have introduced waste diversion targets, with some jurisdictions aspiring towards zero waste. However, the challenge of increasing resource recovery invariably devolves to a comparison of the costs and benefits of recycling. The Productivity Commission Inquiry into Waste Generation and Resource Efficiency was established to examine these costs and benefits of recycling. The focus of the Inquiry was to examine ways in which, and make recommendations on how, resource efficiencies can be optimised to improve economic, environmental and social outcomes (italics added). The Productivity Commission s draft report Waste Management was released in May 2006 and presented the Commission s preliminary findings and recommendations on waste generation and resource efficiency based on a net social benefits approach delivered through economic efficiency. The overall conclusion of the draft report was that best practice landfill, combined in some circumstances with appropriate kerbside recycling, remains the preferred option for dealing with municipal waste. The final report is expected to be released before March This paper presents an overview of the Productivity Commission s draft report Waste Management. Following an overview of the original terms of reference to the Inquiry, an examination of the methodology used in the Commission s assessment of Waste Generation and Resource Efficiency is provided. The draft key findings and recommendations from Waste Management are presented, followed by the potential implications for resource recovery, should the draft recommendations be implemented. The paper concludes by examining some of the critical points that need to be addressed in the final report, in particular, the societal costs of greenhouse gas emissions. (Note that this paper is based on a presentation given at the Waste Management Institute NZ Inc Eighteenth Annual Conference held in Christchurch 7-9 November 2006 by Matthew Warnken). Introduction and Background The Australian Treasurer, Peter Costello, announced terms of reference for an Inquiry into Waste Generation and Resource Efficiency on 20 October These terms set the following scope for the Productivity Commission (emphasis added) - the Commission is to examine ways in which, and make recommendations on how, resource efficiencies can be optimised to improve economic, environmental and social outcomes. 1 Specific issues to be addressed included: economic, environmental and social benefits and costs of optimal approaches for resource recovery and efficiency and waste management impeding institutional, regulatory and other factors, including barriers to the development of markets for recovered resources data adequacy for material flows, and relevant economic activity (including suggestions for improvement) impact of international trade and trade agreements on the level and disposal of waste in Australia strategies for government and industry to encourage optimal resource efficiency and recovery. 1 Note that unless otherwise stated, all references, quotes and page numbers used in this paper refer to: Productivity Commission, 2006, Waste Management, accessed at October WARNKEN ISE Waste Management: Productivity Commission Draft Report Page 1 of 5

2 Other factors for consideration included performance indicators for resource recovery practices; government procurement and optimal resource recovery; and impacts of government support to production and recovery industries. The process used by the Productivity Commission to undertake the Inquiry involved two major rounds of stakeholder feedback, both through formal written submissions, and more informal public hearings. Firstly a discussion paper was released in December 2005, shortly after the Inquiry was announced in October last year. There were 123 initial written submissions made early in 2006 in response to this discussion paper and the original terms of reference. Following the close of written submissions, there was a round of nine public hearings held around Australia in late February and early March The written submissions and feedback through the hearings were considered (and mostly discarded) by the Commission in the draft report Waste Management, released May Written submissions were invited on the draft report and 150 were received. An additional round of public hearings on the draft report was held. The extra 8 sessions took place in early July and late August The final report was completed 25 October 2006 and delivered to Australian Treasury. However the report needed to be tabled in Parliament before public release. The Government has 25 sitting days to table the report, so at the latest the final report will be released before the end of March 2007, along with a formal Government response. (Note that at the time of printing this paper, the final report had not been released. This conference paper thus presents the draft findings of the Productivity Commission s Inquiry into Waste Generation and Resource Efficiency.) Inquiry Methodology The original terms of the Inquiry were met with some enthusiasm from the resource recovery sector, especially given the mandate to consider resource efficiency. However, in the draft report Waste Management, the Commission re-interpreted the terms of reference as an invitation to consider how waste management (not resource efficiency) should occur to achieve the best overall outcome for the community (p 305), with the best outcome delivered when net social benefits are maximised (or net costs minimised) (p59). The net social benefits approach (pp 1, 57-60) takes into account expected private and external costs and benefits (as measured in dollar terms) when deciding how waste should be managed. Private costs and benefits are the direct financial costs or gains from dealing with wastes, for example gatefees and product sales minus operating expenses. External costs and benefits are the environmental and other types (for example social) of upstream or downstream externalities. Externalities in turn refer to the positive or negative impacts on third parties who were not involved with the original transaction. Under a net social benefits approach a distinction is also made between potential and expected costs. Potential costs refer to a worst case scenario, while expected costs discount the worst case scenario on the basis of the degree of risk that the potential impact will arise. The Commission s opinion was that many estimates of waste management externalities were overstated because of inadequate accounting of risk (p60). Other features of the Commission s net social benefits approach include: the counting of extra jobs for recycling as a cost (wages and superannuation), not a benefit (p112); inclusion of upstream benefits only where alternative direct upstream intervention is not justified (in order to remove risk of double counting p114); and removing the measurement of waste disposed of to landfill as a as an indicator of net social benefit (p297). The Productivity Commission s methodology also equated resource efficiency with economic efficiency meaning that the returns to all resources, not just raw materials, should be maximised (p1). The reasoning for this equation is that economic efficiency requires that no other combination of resource use could lead to a higher level of community wellbeing. Environmental and social issues must be brought into this framework by giving appropriate recognition to relevant externalities (p7). The Commission also asserts that economic efficiency is the best way of delivering ecologically sustainable development because environmental protection will not always contribute to sustainability. It is possible that such protection could impose costs that lead to reduced investment in human or man-made capital that would have been more valuable to future generations (p99). Using the above methodology as a starting point, the Productivity Commission developed a series of draft Key Findings and Recommendations. These are presented in the following section WARNKEN ISE Waste Management: Productivity Commission Draft Report Page 2 of 5

3 Draft Key Findings and Recommendations A selection of the important draft Key Findings and Recommendations, and accompanying explanatory quotes is presented below (page numbers refer to the draft report Waste Management ): removal of the waste management hierarchy as a policy making tool in favour of a net social benefit assessment (Recommendation (R) 7.1) The waste management option with the highest net social benefit will not always be consistent with the preferred option suggested by the waste hierarchy (p128) there should be no direct or indirect targets for waste minimisation or recycling (R7.2) Zero waste is neither technically nor economically sensible, and while such targets might be intended to be aspirational, they are simply not credible (pxxix) abandon plans to ban plastic bags unless supported by transparent cost-benefit analysis (R8.1) it appears that further enforcement and community action against littering might be more effective and efficient than banning HDPE bags, especially the 99 per cent that do not end up as litter (p144) landfill regulation or levies should not be used to address greenhouse gas externalities of landfill (R8.2) - best practice regulation for non-hazardous landfills should reduce risks of damage related to pollution of air, surface waters and groundwater, and amenity losses to acceptable levels, but not include gas collection systems for greenhouse gas abatement, nor requirements to divert non-hazardous materials from landfill (p168) increase the level of public awareness about the costs and benefits of different waste disposal options, including the capture of energy from waste (R8.3) energy-from-waste facilities, while costly, can be managed with negligible environmental impacts and offset fossil fuel energy while having lower greenhouse gas impacts, and as such should not be prevented from consideration by irrational political and community constraints (p175) stop the use of landfill levies (R9.1) The total external costs of well located landfills that incorporate gas capture (with electricity generation) and landfill liners are likely to be less than $5 per tonne of waste (p71), landfill levies are unable to reflect the variability of type of waste and location of disposal on balance the Commission does not favour the use of landfill levies in Australia (p187) use the scheduled 2008 review of the National Packaging Covenant to consider whether the Covenant (and supporting regulation) delivers a net benefit to the community (R10.1) the review should assess whether sufficient evidence exists to justify the Covenant and supporting NEPM on the basis of objective and scientific evidence about the consequences of landfilling or creating energy from packaging waste in addition to considering all costs and benefits (p 243) product stewardship schemes for computers, televisions and tyres should only be introduced if there is robust evidence of a net community benefit that is greater than other policy options (R10.2) The Commission considers that mandatory co-regulatory schemes for many of the products targeted by governments are likely to have a net cost (p237) ensure that all local government operated landfills comply with relevant licence conditions and charge users full costs of waste disposal (R12.1) one difficulty with full cost recovery is excessive illegal dumping. Additional enforcement is generally a more preferable way to discourage illegal dumping. That effort, however, will in part depend on whether the expected benefits from the extra enforcement outweigh the costs (p265) shift the responsibility for waste management in large urban centres from local government to appropriately constituted regional bodies (R12.2) assigning responsibility for waste management to a regional body would address the planning and capability problems that are becoming increasingly difficult to deal with at a local government level in many urban areas (p270) review regulatory requirements that lead to unnecessary regulation of byproduct materials that can be safely reused or recycled (R12.3) The controls governing recyclable material should be based on the risks posed by the material itself and not on the waste stream from which it was sourced (p275) replace product standards that frustrate the use of recycled products and/or call for the use of virgin materials with (where feasible) performance-based equivalents (R12.4) There is scope to improve economic efficiency 2006 WARNKEN ISE Waste Management: Productivity Commission Draft Report Page 3 of 5

4 and encourage the use of recovered materials by moving to performance-based standards for a range of materials, including those used in building and construction (p280) develop a concise, nationally consistent, data set for waste management through Environment Protection and Heritage Council that would facilitate evaluation and comparison of waste management policies across jurisdictions (R13.1) data that could be used to understand the size and scope of particular waste-related problems would be useful (p302) government-funded data collection on waste management should focus only data needed to address important policy issues (R13.2) - while data inadequacy may hamper development of markets in recovered resources it is not clear why governments should be responsible for providing or funding such market research (p302). Implications of Implementing Draft Key Findings and Recommendations There was a mixed reaction to the Productivity Commission s draft recommendations and findings, as is evidenced by subsequent written submissions and public hearing transcripts. Some of major issues raised related to the Commission s departure from the original terms of reference, in addition to questioning the likely impacts that would follow implementing recommendations on recycling, especially whether these impacts would indeed result in improved economic, environmental and social outcomes. One assessment from the New South Wales branch of the Waste Management Association of Australia, with assistance from Warnken ISE, estimated that recycling would be cut in half if the Commission s recommendations were implemented, in particular those regarding removing the waste management hierarchy, removing waste minimisation and resource recovery targets, and removing landfill levies. The flow on impacts from this loss of recycling included: 2 reduction in recycling material volumes by 50 per cent, reducing recycling in Australia to 7.4 million tonnes (23% instead of current 46%) associated loss of approximately $400 million in commodity sales increase in waste disposal (grows to 25 million tonnes which is approximately 77% of total waste generation) loss of over 5,000 jobs representing over one third of the entire sector employment (losses include 3,450 from material reprocessing approximately 1 position for every 2,200 tonnes of recycled material processed; 1,580 jobs associated with recycling collection; and 600 waste education jobs) reduced product quality from reduced recycled content, for example, recycled content newsprint has better printing performance, allow for finer surfaces and better print detail increased energy usage as recycled product uses less energy to manufacture than virgin alternative reduced government revenue (approximately $191 million) from loss of landfill levies, potentially increasing other areas of taxation or reducing service delivery. Critical Points to be Addressed in the Final Report The Productivity Commission s draft report Waste Minimisation had a polarising impact on the resource recovery and waste management industry, with landfill on one side, resource recovery on the other, and much debate and discussion in between. There are a number of key points that will be of critical importance to how the final report is received, for example, the cost of carbon emissions. The Productivity Commission put the social cost of greenhouse gas emissions between A$7 and $A21 per tonne of carbon dioxide equivalent (CO 2 e). The recently released Stern Review on the economics of climate change, however, estimated a much higher social cost of CO 2 e at $A110 per tonne. Using the Stern costs of carbon drastically alters the calculations and hence recommendations of the Productivity Commission. 2 NSW WMAA, 2006, NSW Branch of the Waste Management Association of Australia: Comments on Productivity Commission Draft Report Waste Management, Productivity Commission, Canberra, accessed at October WARNKEN ISE Waste Management: Productivity Commission Draft Report Page 4 of 5

5 Also in light of the recent media attention and community concern regarding climate change, the embodied energy opportunity cost becomes very important. (This is the lost opportunity to save energy on materials manufacture through recycling). Preliminary analysis undertaken by Warnken ISE indicates that the potential greenhouse gas reduction from reduced energy usage in manufacturing recycled materials is greater than total emissions from landfill gas. The embodied water calculation also needs to be examined, given that recycled materials (in general) use less water than their virgin alternatives. Conclusion The Productivity Commission s Inquiry into Waste Generation and Resource Efficiency was tasked with examining ways to improve economic, environmental and social outcomes associated with resource recovery and waste management. The Commission s net benefits approach to determining the best social outcome was not fundamentally flawed, but does highlight the paramount issue of valuing the environment. Climate change is proof positive that the market left to its own devices is unable to put a proper value on environment. So setting appropriate price signals on environmental considerations as they relate to waste, through strong policy and innovative market interventions, becomes of vital importance. The Commission s draft report was considered by many to be lacking in its valuation of the environment. Especially given the conclusion that best practice landfill, combined in some circumstances with appropriate kerbside recycling, was the preferred option for dealing with municipal waste. If the Productivity Commission s final report neglects to address the implications of implementing their final recommendations, does not use a higher societal cost of greenhouse gas emissions to assess the impacts of landfill, and fails to consider the lost opportunity to abate carbon and the lost opportunity to conserve water that results through continued landfilling, it is likely to be rejected by State regulators and resource recovery industry participants alike. However, regardless of the outcome, the Inquiry into Waste Generation and Resource efficiency can be viewed in a positive light in that it has engendered debate on the value proposition of resource recovery. The Commission s draft report forced the resource recovery industry to defend itself against a negative neo-classical cost benefit analysis. The sector is now better able to articulate the value delivered to society by resource recovery across social, environmental and economic measures. Although unintentional, this result may be the mechanism by which the final report of the Productivity Commission makes a contribution to improving economic, environmental and social outcomes in Australia. Contact Warnken ISE Warnken ISE is a sustainability, business development, and research consultancy. Our goal is simple to work with clients on projects that add ongoing value to society while decreasing associated impacts. We consult to leading business, government and non-government organisations, and offer expertise in: resource recovery, renewable energy and materials; market research; risk, legislation and technology assessment; sustainability planning and reporting; corporate strategy; public policy; and green property rights. Warnken ISE PO Box 705 GLEBE NSW 2037 T: F: E: wise@warnkenise.com.au W: Disclaimer This paper is supplied in good faith and reflects the knowledge, expertise and experience of Warnken ISE. The nature of this paper is a generic overview only and data should be treated as indicative. The paper is made available on the basis that responsibility for decision making rests entirely with the reader. It is highly recommended that data be validated and that independent project-specific advice be obtained before making any commercial decisions. The paper is free to print and distribute provided it is not changed in any form and that appropriate acknowledgement is given to Warnken ISE. For example: Warnken, M., 2006, Waste Management: Productivity Commission Draft Report, Warnken ISE, Sydney, accessed at WARNKEN ISE Waste Management: Productivity Commission Draft Report Page 5 of 5