EIMPack Economic Impact of the Packaging and Packaging Waste Directive

Transcription

1 EIMPack Economic Impact of the Packaging and Packaging Waste Directive The Economics of Packaging Waste Recycling: The Case of Romania February 2012

2 Legal notice This report consists of a study based on the information provided by the Romanian waste management companies. It was prepared as part of the work programme of EIMPack - Economic Impact of the Packaging and Packaging Waste Directive, financed by the European Investment Bank. The European Investment Bank or any person or company acting on behalf of the Bank is not responsible for the contents and use that may be made of the information contained in this report. Research team Rui Cunha Marques (Principal Investigator) Nuno Ferreira da Cruz (Researcher) Sandra Faria Ferreira (Research grant) Marta Cabral Pereira (Research grant) Pedro Simões (Research grant)

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4 Executive Summary Romania joined the European Union on 1 January Since then, this country adopted appropriate legislation and strategies for waste management, particularly regarding packaging waste management, in order to comply with European objectives. Taking into account the underdeveloped state of the country (the lack of infrastructures, the low level of public information, the need for large investments, etc.), together with the large quantities of municipal solid waste (MSW) produced annually, the waste management and recycling activities have become increasingly a business opportunity in Romania. Currently, there are seven companies licensed for the management of packaging waste, but Eco-Rom Ambalaje (ERA) is the market leader and the company in charge of the Green Dot scheme. Despite the efforts of ERA to implement a selective collection system at the national level through contracts established with local authorities and sanitation operators, only about 7% of household packaging waste (which represents 60% of the waste produced by the Romanian population (Eco-Rom, 2010) was selectively collected and recovered in The main recovered fraction, through the ERA s system, comes from the industrial/commercial packaging waste flow. This flow has been collected and recycled/recovered, under contract, by the waste management companies (WMCs). Both operators (WMCs and sanitation operators) receive a financial support from ERA to declare the quantities of recycled/recovered packaging materials. The present study intends to provide an economic-financial analysis, comparing the costs and benefits of the selective collection and sorting activities carried out by WMCs (private operators) and sanitation operators (private and public operators), contracted by local authorities. The data were obtained through surveys and the results show that the current Romanian recycling system (i.e. the ERA s system) is not sustainable. Considering the costs avoided with refuse collection and landfilling (economic perspective), the ERA Bonus payment (given to the operators) should increase by 17 /tonnes collected (32 /recovered tonnes). From financial perspective, 66% of the total service costs were covered by the industry in 2010 and, thus, the financial support should raise 44 /tonnes collected (83 /recovered tonnes). i

5 Since Romania has not yet a national selective collection system widely implemented, our data mainly refer to the management of the industrial/commercial packaging waste flow. In order to meet the EU targets for packaging waste recycling and recovery by 2013, a reassessment of the financing system of the service should be carried out. ii

6 Table of Contents Page 1. INTRODUCTION THE LIFE-CYCLE OF PACKAGING WASTE INSTITUTIONAL AND LEGAL FRAMEWORK FINANCIAL TRANSFERS Introduction Green dot scheme Bonus payment for WMCs Other financial transfers ECONOMIC ANALYSIS METHODOLOGY ECONOMIC ANALYSIS OF RECYCLING CONCLUDING REMARKS...24 REFERENCES...26 iii

7 List of Figures Figure 1 Current life-cycle of packaging waste in Romania... 3 Figure 2 Packaging waste management ERA s system... 7 Figure 3 Distribution of selective collection systems supported by ERA... 9 Figure 4 ERA s model for funding the recycling of packaging waste Figure 5 Financing of packaging waste collection and treatment services Figure 6 Graphical outcome of cost-benefit analysis of recycling in Romania Figure 7 Service cost recovery considering quantities collected and quantities taken back Figure 8 Cost of selective collection and sorting Figure 9 Operational cost per packaging waste material Figure 10 Economic benefits per packaging waste material Figure 11 Financial benefits per packaging waste material Figure 12 Cost recovery of WMCs excluding the opportunity costs iv

8 List of Tables Table 1 Waste management companies/operators in partnership with ERA, in Table 2 Legal recycling and recovery objectives by Table 3 Performance of the Romanian recycling system managed by ERA, in Table 4 ERA s green dot fees...12 Table 5 ERA s financial support for WMCs...13 Table 6 Average price of each packaging material delivered to recycler/recover, in Table 7 Average acquisition values for packaging material delivered by the population, in Table 8 Variables used to calculate the costs avoided with refuse collection and waste treatment Table 9 - Variables used to measure the return on capital employed...18 v

9 Acronyms Acronyms ERA Eco-Rom Ambalaje EU European Union GD Government Decision MSW Municipal solid waste PPW Packaging and packaging waste WMC Waste management companies vi

10 1. Introduction 1. Introduction Romania s accession to the European Union (EU) and the large quantities of waste produced in this country has turned waste management (and recycling, in particular) into an emerging market. In the past seven years, about 8 million tonnes of municipal solid waste were generated annually in Romania; the quantity of packaging waste is estimated to be around 1 million tonnes (Eurostat, 2011a). Many political efforts to implement national waste policies and strategies have been conducted. Considering the progress made on recycling of packaging waste, the situation remains unsatisfactory compared with other Member states. The greatest difficulty in achieving the EU targets is related to the lack of awareness, information and education, which is also induced by the absence of training programmes (supported by relevant institutions). However, the lack of infrastructures and the non-existence of a market to absorb the by-products of material recovery and composting are also factors that explain the current situation of the country (WB, 2011). Landfilling remains the most frequent waste disposal solution in Romania and several of the country s landfills do not comply with EU requirements. In fact, a transitional period for the municipal landfills was set until 2017, in order to avoid Community infringement proceedings (Istrate and Ragazzi, 2010). Local authorities have the legal duty of managing municipal waste (including packaging waste). However, the collection of specific waste materials (such as cardboard and PET) was initiated by private sector operators. Currently, there are already some deposit/collection points where the population can deposit (with or without remuneration) wastepaper, cardboard, glass and plastic (UK Trade & Investment, 2010, p.3). The composting of biodegradable waste is also beginning to be established in Romania. 1

11 1. Introduction In 2009, 40% of packaging waste was recycled compared to 1% of municipal waste recycling. In 2010, the recycling rate of municipal waste was 5% and a recent study (WB, 2011) considers that an increase of 4% is not sufficient to achieve the recycling target of 55% (by weight) imposed by the Directive 94/62/EC on packaging and packaging waste (PPW). Eco-Rom Ambalaje, a Green Dot Company and the first entity licensed for managing packaging waste in Romania, has been striving to meet the challenges set up for the period The main concern has been the development of a unitary selective collection system 1, establishing partnerships with local authorities and ensuring the sustainability of the services and the efficiency of collection (Eco-Rom, 2011a). In this report, we intend to study the financial transfers between the various stakeholders involved in the current Romanian packaging waste management system. We also attempt an economic-financial analysis, taking into account the costs and benefits related to the selective collection and sorting activities, including the financial support coming from the industry. After this introduction, section 2 presents an overview of the life-cycle of packaging waste. Section 3 describes the institutional and legal frameworks that regulate the packaging waste management system in Romania. In section 4, the main financial transfers involved in this system are analysed. The methodology implemented is defined in section 5 while the results are discussed in section 6. Finally, the concluding remarks are highlighted in section 7. 1 The unitary system tends to provide the same standard service to the clients (economic agents) and to the partners. 2

12 2. The life-cycle of packaging waste 2. The life-cycle of packaging waste Current life-cycle of packaging waste in Romania is illustrated in Figure 1. The selective collection and recycling of household packaging waste are relatively recent activities in Romania. In 2008, about 96% of MSW was collected arbitrarily (Târtiu, 2011) but landfilling is the main waste final disposal without any material and/or energy recovery. Figure 1 Current life-cycle of packaging waste in Romania Incineration of MSW was not a feasible process in Romania, due to the poor calorific value of the combustible faction of MSW. Nowadays, this calorific value is on the low limit allowing the functionality of an incineration plant. However, the majority of the incineration 3

13 2. The life-cycle of packaging waste plants in the country belong to the private sector that mainly incinerates its own hazardous waste. Romania has been carrying out co-incineration of waste (including packaging waste) in approved cement factories (Istrate and Ragazzi, 2010). Composting is slowly gaining relevance in the Romanian waste sector, mainly through pilot projects. Currently only two cities have implemented a system to collect the biodegradable fraction of MSW (Târtiu, 2011). In principle, the packaging waste collected with the biodegradable fraction should then be separated and sent to the recycling flow. The low level of public information and awareness regarding waste management issues along with the underdevelopment of the infrastructures (and thus the need of high investments) have led to a gradual implementation of selective collection in Romania. In this regard, three stages were defined (Târtiu, 2011): for (selective collection reality) adaptation, developing pilot projects and raising awareness among the population for implementing a national system for extending the system to collective housing, dispersed rural areas and mountain areas. Nowadays, packaging waste is usually selectively collected in igloos, (1100 l) containers and/or large size deposits. In the first two cases, the collection is carried out according to the following code of colours: Paper/cardboard (including composite packaging for foodstuffs) in blue colour igloos or containers; Glass white/coloured in white/green colour igloos or containers; Ferrous and plastic in yellow colour igloos or containers. Packaging waste selectively collected is later on submitted to a manual or automatic selection process, mainly, performed by the recycling industry (Ucenic and Tpalu, 2008). Nevertheless, there are already some sorting stations in the country located in large urban 4

14 2. The life-cycle of packaging waste centres (especially in Bucharest, Constanta, Arad and Piatra Neamt), created through public funds and managed by public operators. 5

15 3. Institutional and legal framework 3.Institutional and legal framework In Romania, the PPW Directive began to be implemented in The achievement of the European objectives has to be attained until the end of In line with the procedures carried out by other Member States, the transposition of the Directive into national legislation led to the establishment of an integrated management system (including selective collection, sorting, recycling and energy recovery) of packaging waste. According to the polluter pays and the extended producer responsibility principles, all economic operators who place packaging and packaging materials on the national market are responsible for their adequate treatment. However, this responsibility might be delegated to a licensed company. Nowadays, there are seven authorized companies for managing the packaging waste recycling chain (see Eimpack, 2011), but Eco-Rom Ambalaje (ERA) is the organization that manages the Green Dot system. This system involves several partnerships, as shown in Figure 2. ERA provides a contract for transfer of legal responsibility of the packaging industry (called hereinafter the beneficiary ) under Government Decision (GD) no. 621/2005. The beneficiary has to report (monthly) the quantities of packaging and packaging materials put into the market, paying a fee. Therefore, all beneficiaries acquire the right to use the Green Dot logo. Any documentation that the beneficiary must fill and submit to the competent authorities (Ministry of Environment and Water Management, Administration of Environment Fund, Territorial Environment Agency, etc.) remains its responsibility. The contract is valid for one year and is automatically renewed for successive periods of 12 months, unless the beneficiary submits a notice of termination up to 30 days before the end of the contract period. 6

16 3. Institutional and legal framework Source: Adapted from Eco-Rom (2010) and Eco-Rom (2011b) Figure 2 Packaging waste management ERA s system In order to comply with the national and EU recycling/recovery packaging waste obligations, ERA firms contracts with private WMCs that are authorized to collect and recycle industrial and commercial packaging waste (and eventually, packaging waste from the household flow) and with the sanitation operators that carry out the management of the household packaging waste flow. Those companies receive a financial support for the provision of these services. In exchange, they have to declare all the quantities of packaging waste collected from the industrial/commercial flow, but also selectively collected and delivered by the population. These entities must also report the quantities sent to recycling and recovery plants. On the other hand, a three-party agreement has been established among the Green Dot Company, sanitation operators and local authorities. Although local authorities have the exclusive responsibility of managing MSW (according to the Law no. 101/2006), including the selective collection systems, the services can be delegated to other entities. Currently, sanitation services are performed by private and public operators. 7

17 3. Institutional and legal framework In the ERA s agreement, local authorities stipulate, along with other partners (sanitation operators and the Green Dot Company), the location of drop-off containers (igloos of 2,5 m 3 and/or 1100 l containers) and promote the information, education and communication of population. In 2010, ERA had already signed 1809 contracts with the economic operators and 190 partnerships with authorized packaging waste management companies/operators. It also supported (financially) 93 selective collection systems which covered inhabitants (about 18% of national population). Table 1 shows the total number of waste management operators by region and Figure 3 represents the geographical distribution of selective collection systems supported by ERA. Table 1 Waste management companies/operators in partnership with ERA, in 2010 Region Sanitation operators OPP Remat 2 Other WMC 3 Total number North-East (6 counties) South-East (6 counties) South (7 counties) South-West (5 counties) West (4 counties) North-West (6 counties) Centre (6 counties) Bucharest-Ilfov Total Source: adapted from Eco-Rom (2010) Despite the economic crisis, ERA has been trying to define new management strategies, leading to a gradual increase of the packaging waste recycling and recovery rates, as 2 OPP Remats are non-profit professional organizations gathering the traditional Romanian scrap collectors that carry out the recovery of packaging waste from the industrial/commercial flow. They also recover the household packaging waste from some collection centres implemented in large towns. 3 Hereinafter, we will use the term WMCs for all partners of ERA regarding waste management services, including the sanitation operators. 8

18 3. Institutional and legal framework shown in Table 2. In 2008, the European objectives for the paper/cardboard and metals were achieved. The full compliance of the PPW Directive is expected to be achieved in 2012 (Eco-Rom, 2010). Source: Eco-Rom (2010) Figure 3 Distribution of selective collection systems supported by ERA Table 2 Legal recycling and recovery objectives by 2010 Minimum national recycling and recovery obligations (%) ERA achievement (%) Year Paper/cardboard ,5 Plastic Glass Metals Wood Global recycling ,7 Global recovery ,7 Source: Adapted from Eco-Rom (2010) 9

19 3. Institutional and legal framework Although the Green Dot Company dominates the Romanian market 4 of packaging waste recycling (ERA s rates are close to national rates), it still has to improve the effectiveness of the system. Note that only about 7% of packaging waste recycled, through the ERA s system in 2010, came from household selective collection (see Table 3), but the household packaging waste corresponds to 60% of the total MSW (Eco-Rom, 2010). Table 3 Performance of the Romanian recycling system managed by ERA, in Packaging waste generated in Romania (in tonnes) a Packaging waste recycled in Romania (in tonnes) (38% b ) Packaging waste recovered in Romania (in tonnes) Packaging placed on the market by ERA s clients (in tonnes) Packaging waste collected through household selective collection (in tonnes) Packaging waste recycled through ERA s system (in tonnes) Packaging waste recovered through ERA s system (in tonnes) (45% b ) (2,4% c ) (7,4% d ) (32,6% c ) (33,2% c ) a According to the Eurostat statistics in 2009 b Include packaging waste from household and commercial flow c Value estimated based on the quantities of packaging waste generated in Romania in 2009 d Value determined based on the quantities of packaging waste recovered/recycled through ERA system in 2010 Source: based on Eurostat (2011b) and Eco-Rom (2010) 4 ERA holds about 65% of market share. 10

20 4. Financial transfers 4.Financial transfers 4.1 Introduction As already mentioned, in Romania, the market of packaging waste recycling and recovery is dominated by ERA, who supports the management of household and non-household packaging waste. Its activity is financed by the green dot fees which are paid by the industry. These fees should cover the costs of collection and recycling/recovery services performed by authorized public and private companies. ERA s income should also cover the population awareness costs. Figure 4 represents the model for funding the ERA s recycling system of packaging waste. Source: Adapted from Eco-Rom (2010) and Eco-Rom (2011b) Figure 4 ERA s model for funding the recycling of packaging waste 4.2 Green dot scheme ERA is responsible for the management of the Green Dot scheme, although the trademark is used on a voluntary basis. The green dot fee is based on the quantity and type of packaging placed on the national market. The green dot fees charged in 2010 are indicated in Table 4 (the fees for 2011 and 2012 are also shown). 11

21 4. Financial transfers Table 4 ERA s green dot fees Packaging Material Fees ( /tonne) Glass 16,29 18,01 19,60 PET 21,47 31,19 33,19 Plastics 11,68 12,63 14,55 Cardboard paper 13,27 13,27 14,52 Steel 10,27 11,15 12,41 Aluminium 10,27 23,35 30,85 Wood 10,53 11,15 10,78 Source: PRO-Europe, 2010 and PRO-Europe, 2011 The gradual increase of fees should encourage the eco-design and the minimisation of packaging waste production. PET and aluminium stand out among the other materials due to their high economic value. In the country, the use of PET has been growing at a rate of 15% per year and many industries import and use about 30,000 to 40,000 tonnes of PET as raw material for the production of packaging (Ucenic and Topalu, 2008). The aluminium problem lies with the high energy consumption used in the extraction and production of raw materials. Its (aluminium) recycling reduces significantly the energy consumption (Eco-Rom, 2011a). In 2010, the industry paid a total of 8,3 million euros in contributions to ERA (Eco-Rom, 2010). 4.3 Bonus payment for WMCs According to the model adopted by ERA to finance packaging waste management, the authorized companies receive a financial support (called bonus payment) for the services carried out. The financial support is agreed between the parties, by contract, based on operational costs and on the market share of each packaging material. The payment is based on the quantity and type of material sent to recycling/recovery. Table 5 presents the financial support per tonne of each packaging waste material in 2010 and In 2010, ERA paid to the WMCs around 4,4 million euros (Eco-Rom, 2010). 12

22 4. Financial transfers Table 5 ERA s financial support for WMCs Packaging Material Eco-Bonus ( /tonne) Glass 23,89 23,66 PET 32,40 32,84 Plastics 15,39 15,39 Cardboard paper 13,67 13,91 Steel 13,88 13,82 Aluminium 13,89 13,82 Wood 10,60 11,64 Source: WMC, Other financial transfers As mentioned before, the costs of selective collection and treatment (including sorting and baling operations) are (partially) supported by the green dot fees, but also by the sales of packaging waste material. The average price of each packaging material, paid by the recyclers/recovers to the WMCs in 2010, is shown in Table 6. Table 6 Average price of each packaging material delivered to recycler/recover, in 2010 Packaging Material /tonne Glass 6,9 PET 333,5 Plastics 253,0 Paper and cardboard 126,5 Steel 218,5 Aluminium 977,5 Wood 29,9 Source: WMC, 2012 There are some small collectors (WMCs) which pay an acquisition value for the packaging waste delivered by the citizens, as can be seen in Figure 5. In 2010, the population delivered about 14% of the total quantities of packaging waste recycled/recovered through 13

23 4. Financial transfers the ERA s system. The average acquisition prices, paid to the people per tonne of delivered material, are shown in Table 7. Figure 5 Financing of packaging waste collection and treatment services Table 7 Average acquisition values for packaging material delivered by the population, in 2010 Packaging Material /tonne Glass 4,6 PET 230,0 Plastics 149,5 Paper and cardboard 55,2 Steel 147,2 Aluminium 805,0 Wood 2,3 Source: WMC,

24 5. Economic analysis methodology 5.Economic analysis methodology This chapter presents the methodology applied in the economic viability analysis of packaging waste recycling in Romania. The methodology establishes a comparison between the costs and benefits that result from the activities of selective collection and sorting carried out by the WMCs. It takes into account the financial and economic perspectives. On the costs side, the model includes the operational costs (the costs associated with service provision), depreciation of fixed assets and return on capital employed (debt and equity) on the investment allocated to selective collection and sorting activities. Concerning the benefits, the model includes the bonus payment to WMCs (financial support given by ERA), the sale of packaging materials to the recycling industry and, under an economic perspective, it also considers the savings attained from the diversion of packaging waste from the refuse collection circuits and landfilling. The various variables assumed in the economic analysis are presented in Figure 6. The costs and benefits were calculated based on tonnes of packaging waste taken back (quantities that are effectively financed by the Green Dot Company). In order to establish an international comparison, the analysis was also performed based on tonnes collected. Most of the required variables were obtained through surveys sent to the partners of ERA (WMC, 2012), having 2010 as the reference year. The opportunity costs, avoided with the diversion of packaging waste from the refuse collection and landfilling activities, were calculated separately and according to equations (1) and (2). 15

25 5. Economic analysis methodology Costs avoided with Quantity of waste Unit cost of refuse refuse collection ( /year) = selectively collected (t/year) collection ( /t) (1) Costs avoided with Quantity of waste Unit cost of treatment waste treatment = taken back and disposal (2) ( /year) (t/year) ( /t) Table 8 presents the values used to determine the costs avoided with the refuse collection and landfilling. Figure 6 Graphical outcome of cost-benefit analysis of recycling in Romania 16

26 5. Economic analysis methodology Table 8 Variables used to calculate the costs avoided with refuse collection and waste treatment. Value Observation Unit costs of refuse collection Unit cost of other treatment Efficiency: Glass Other packaging materials 12 /t 15 /t 90% 45% These assumptions were taken from a survey sent to the WMCs (ERA s partners). These values were weighted by the waste collected. In Romania, the percentage of packaging waste rejected during sorting is still high and most of household packaging waste is sent to the landfilling. The cost of the landfilling of packaging waste rejected was included in operational costs. On the other hand, the return on capital employed on the investments made on selective collection and sorting equipment and infrastructures was calculated through the following equations (3) and (4). Return on capital employed ( /year) = (Depreciation-subsidies) ( ) Useful life of the assets (-) WACC (%) (3) WACC (%) = Cost of equity Equity (1-marginal corporate tax) + Cost of debt Debt (4) where, WACC is the weighted average cost of capital. The values of the variables are presented in Table 9. It is important to mention that the present study only intends to assess the extra-costs incurred by WMCs due to the procedures, equipment and infrastructure necessary to the 17

27 5. Economic analysis methodology routing of packaging waste for recycling. Afterwards, the main objective is to compare these costs with the revenues/benefits attained by those companies during that process. Table 9 - Variables used to measure the return on capital employed Value Useful life of the assets (years) 9,6 Cost of equity (%) 6,0 Equity in the capital structure (%) 18,99 Marginal corporate tax (%) 16 Cost of debt (%) 4,6 Observation This value was achieved considering the assets and its depreciation. This value was weighted by the waste selectively collected. This value takes into account a non-risk (of 3%) and a risk premium (of 3%, related to the German Treasury Bonds). This value was defined taking into account the weight that equity has on the capital structure of the WMC (i.e. in relation to the liabilities). This value was weighted by the waste selectively collected. This value was calculated according to the (national) tax paid by the WMCs. This value was weighted by the waste selectively collected. This value was achieved considering the average interests paid for the utilities loans. This value was weighted by the waste selectively collected. 18

28 6. Economic analysis of Recycling 6. Economic analysis of recycling The economic analysis of the Romanian recycling market is based on the methodology shown in figure 6. Two different sets of results are presented; the first one is based on the waste collected (the commonly used in literature) and the second one is based on the waste taken back, which takes into account the inefficiency of sorting (and allows us to know the real cost of each tonne of recycled material). Figure 7 shows the balance between the economic-financial costs and benefits of selective collection and sorting activities, conducted by the WMCs partnering with ERA. Two types of perspectives were analysed (including and excluding savings attained with the diversion of waste from the undifferentiated flow. On average, the costs and benefits per tonnes taken back are (roughly) double of the ones per tonnes collected, highlighting the effects of the low efficiency of sorting facilities in the country (on average, 45% for paper, plastic and metal packaging waste). In the first case, WMCs benefited 208 per tonne of packaging waste sorted and sent for recycling in In a strictly financial perspective (not taking into account the avoided costs), the benefits represents only 157 per tonne of the packaging waste taken back. Each tonne of packaging waste entering the recycling system of WMCs had a total cost of 240 per tonne. Based on tonnes collected, the economic benefits and total costs decreased to 111 per tonne and 129 per tonne, respectively. As can be observed in figure 7, currently, the cost coverage is around 87% considering an economic perspective but only 66% if the cost savings due to recycling are not taken into account. The question about the fairness of financial transfers has to be raised. Under an economic approach (including opportunity costs ), the bonus payment should have significantly increased (about 179%) in If the industry was fully responsible for 19

29 6. Economic analysis of Recycling processing of their packaging waste, the increase in the bonus payment should be even higher (+459%) than the value practiced in The costs of the service were separated into the costs of selective collection and the costs of sorting of packaging waste. The results are presented in Figure 8. It is concluded that the global cost of sorting is 86 per tonnes effectively sent for sorting (note that not all packaging waste selectively collected is actually sorted), and the global cost of selective collection is 83 per tonnes collected. Figure 7 Service cost recovery considering quantities collected and quantities taken back Among other aspects, the recycling costs (selective collection and sorting) of packaging waste depend on the different characteristics of several material flows. The reduced service costs of the waste glass (in comparison with other packaging waste materials, mainly the packaging waste of plastic and metal) can be justified by its high weight and density. Considering the same waste capacity, the glass is collected less frequently, which substantially reduces the fuel consumption. Moreover, waste glass (such as waste wood) is not sorted neither baled. The unit operational cost for different flows of packaging waste was calculated according to the information provided by the WMCs. The results are presented in Figure 9. Regarding the service benefits for each material, the PET and 20

30 6. Economic analysis of Recycling especially the aluminium have greater economic and financial benefits due to their high market value (see Figures 10 and 11, respectively). Figure 8 Cost of a) selective collection and b) sorting Figure 9 Operational cost per packaging waste material 21

31 6. Economic analysis of Recycling Figure 10 Economic benefits per packaging waste material Figure 11 Financial benefits per packaging waste material Figure 12 shows the whole participation of the industry in the cost recovery of selective collection and sorting of packaging waste in Romania. In fact, only 66% of the costs are being supported by industry. Any public money that has entered in the service funding system is still unknown, because the selective collection of household packaging waste (usually, performed by private companies contracted by local authorities) is not yet widely implemented in the country. Currently, ERA manages a 22

32 6. Economic analysis of Recycling significant quantity of packaging waste, but only about 7% comes from the selective collection of household waste. The remaining 93% comes from the industrial/commercial flow, being collected and processed directly by the industry. This is the main reason why Romania shows low operational costs for the services, compared to other EU Member States (e.g., Portugal and France). Figure 12 Cost recovery of WMCs excluding the opportunity costs 23

33 7. Concluding remarks 7.Concluding remarks In Romania, the European Directive on PPW, has been slowly implemented since 2005, when the Accession Treaty to the EU was signed. ERA is the authorized company for managing the Green Dot scheme in this country. There are six more licensed companies in charge of packaging waste management. However, ERA is the market leader, managing the household and industrial/commercial flows. This report aimed at analysing the economic-financial balance between costs and benefits of the selective collection and sorting activities. In addition to the operational costs and depreciations of the fixed assets, the methodology also included the return on capital employed. On the benefits side, the avoided cost, with the refuse collection and landfilling (also called opportunity cost ) were included as an economic benefit attained with the recycling of packaging waste, along with the financial transfers from ERA and the sale of sorted materials. Despite the low cost of refuse collection and landfilling in this country (27 /collected tonnes), to take into account the opportunity costs is the difference between a need to increase in 179% (17 /tonnes collected) or in 459% (44 /tonnes collected) the Eco- Bonus paid by ERA, and therefore, to increase significantly the green dot fees paid by the industry. From this analysis, it was possible to conclude that the financial benefits do not cover the total costs of the service. In addition, it was also observed that the operational costs are not as high as in other European countries. This circumstance is basically due to two factors: (1) the reduced costs with staff, (2) the fact that most of the packaging waste recovered has been collected and treated directly through industrial/commercial flow (which is the cheapest flow to be recovered and recycled) and, (3) the low technological level of waste collection equipment and recycling equipment. The household flow still represents a small fraction of 24

34 7. Concluding remarks the quantities recovered through the ERA s system. Considering that the European targets should be fulfilled by 2013, a re-evaluation of the economic-financial balance should be carried out until then. Finally, public authorities should strive to increase the citizens awareness and disseminate information on environmental sustainability, in order to instigate recycling among the population and promote the separation of waste at source. Inevitably, this must be the next step for the Romanian recycling industry. 25

35 References References Eco-Rom (2010). Recycle now for a better future Annual report Eco-Rom Ambalaje, Bucharest. Eco-Rom (2011a). The Maturity Exam. Newsletter no. 4, September November Eco-Rom Ambalaje, Bucharest. Eco-Rom (2011b). New Legislation Challenges. Newsletter no. 3, June August Eco-Rom Ambalaje, Bucharest. Eimpack (2011). Framework and Evolution of the Packaging Sector in Romania. Economic Impact of the Packaging and Packaging Waste Directive, Instituto Superior Técnico, Lisbon. Eurostat (2011a). Packaging waste.. dataset=env_waspac&lang=en (accessed on ). Eurostat (2011b). Eurostat Environmental Data Centre on Waste. (accessed on ). Istrate and Ragazzi, Waste management in Romania: Past, present and trend. A Glance at the World/Waste Management 30 (2010), PRO-Europe (2010). Producer Responsibility in Action. PRO-Europe, Brussels, Belgium. PRO-Europe (2011). Participation Costs Overview PRO Europe, Brussels, Belgium. Târńiu V. (2011). Selective collection of municipal waste in Romania: characteristics and challenges. Management Research and Practice vol. 3 issue 3 (2011) pp

36 References Ucenic and Topalu (2008). Waste Recycling in Romania, a Component of Waste Management. Case Study Economic Model for Evaluating a Recycling Process. 2 nd International Conference on Waste Management, Water Pollution, Air Pollution, Indoor Climate (WWAI 08), Corfu, Greece, October 26-28, UK trade & Investment (2010). Sector briefing: Recycling and Waste Management Opportunities in Romania. Published by UK trade & Investment. WB (2011). Solid Waste Management in Bulgaria, Croatia, Poland, and Romania - A cross-country analysis of sector challenges towards EU harmonization. World Bank, Washington, US. WMC (2012). Interview with WMCs Romanian managers and solid waste experts, Romania. Websites Ministry of Environment and Forests The National Environmental Protection Agency National Authority for Regulating the Community Services and Public Utilities Eco-Rom Ambalaje S.A. Organization Association of Responsibility Transfer ECO-ROMANIA 27