SUPPORT TO THE WASTE TARGETS REVIEW

Transcription

1 SUPPORT TO THE WASTE TARGETS REVIEW ANALYSIS OF NEW POLICY OPTIONS Dr Dominic Hogg Thomas Vergunst Timothy Elliott Laurence Elliott Mark Corbin 19 th October 2015

2 Report for Michel Sponar, DG Environment of the European Commission Prepared by Thomas Vergunst, Timothy Elliott, Laurence Elliott, and Mark Corbin Approved by Dominic Hogg (Project Director) Eunomia Research & Consulting Ltd 37 Queen Square Bristol BS1 4QS United Kingdom Tel: +44 (0) Fax: +44 (0) Web: Disclaimer Eunomia Research & Consulting has taken due care in the preparation of this report to ensure that all facts and analysis presented are as accurate as possible within the scope of the project. However no guarantee is provided in respect of the information presented, and Eunomia Research & Consulting is not responsible for decisions or actions taken on the basis of the content of this report.

3 Contents 1.0 Introduction Model Updates Model Background Phase 1 of Model Development Phase 2 of Model Development Overview of Key Updates Comparison with Impact Assessment Results Main Uncertainties and Limitations Waste Collection Waste Treatment Externalities Waste Prevention Impacts Summary New Policy Scenarios Results of Modelled Scenarios Full Implementation Scenario Financial Environmental Net Social and Employment Option 3.8(a) / Scenario Financial Environmental Net Social and Employment Option 3.8(b) / Scenario Financial Environmental Net Social and Employment Option 3.8(c) / Scenario ANALYSIS OF NEW POLICY OPTIONS iii

4 4.5.1 Financial Environmental Net Social and Employment Scenario Financial Environmental Net Social and Employment Option 3.9(a) / Scenario Financial Environmental Net Social and Employment Option 3.9(b) / Scenario Financial Environmental Net Social and Employment Option 3.9(c) / Scenario Financial Environmental Net Social and Employment Option 3.9(d) / Scenario Financial Environmental Net Social and Employment Option 3.9(e) / Scenario Financial Environmental Net Social and Employment Comparison of all Modelled Scenarios Model Sensitivities Key Parameters Approach to Analysing Sensitivities Results of Sensitivity Tests iv 19/10/2015

5 APPENDICES A.1.0 Member State Specific Results ANALYSIS OF NEW POLICY OPTIONS v

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7 1.0 Introduction After the withdrawal of the legislative proposal under the previous circular economy package the European Commission is aiming to present a new proposal towards the end of This report revisits the analysis which was undertaken for the Commission s impact assessment on the revision of the European waste management targets and introduces a number of new waste management targets. The report is intended to accompany the new supplement to the impact assessment by providing additional detail on the results and a more extensive discussion of the changes that have been made to the various models since the publication of the impact assessment. This report is comprised of the following sections: Section 2.0 describes how the European Reference Model on Municipal Waste Management and earlier versions of Eunomia s Packaging Waste Model and Landfill Diversion Model have been updated to allow for the costs and benefits of a revised suite of policy options to be analysed; Section 3.0 provides a summary of the 19 policy options which have been analysed as part of this contract; Section 4.0 presents the EU28 results for the key policy scenarios that have been included in the Commission s supplement to impact assessment on the revision of the waste management targets; Section 5.0 compares the overall results of the 19 policy scenarios which were modelled and looks at the synergies of different policy packages; and Section 6.0 discusses the key model sensitivities by examining how changes in input assumptions impact the final model outputs. 1 European Commission (2015) Moving Towards a Circular Economy, Date Accessed: 25 th June 2015, Available at: ANALYSIS OF NEW POLICY OPTIONS 1

8 2.0 Model Updates Eunomia Research & Consulting (Eunomia) and colleagues assisted DG Environment of the European Commission with the first revision of the waste management targets in 2013 and As part of the original contract Eunomia undertook the initial public consultation on the review of European waste management targets 3 and used the European Reference Model on Municipal Waste Management to analyse the policy options which were included in the Commission s impact assessment which accompanied the proposal for reviewing the targets (throughout this document reference to the impact assessment refers to this document). 4 Under this follow on contract Eunomia has been commissioned by DG Environment to provide additional technical support to the Commission. To analyse the costs and benefits of the policy options included in the Commission s impact assessment Eunomia developed three standalone, but closely interlinked, models: 5 1) European Reference Model on Municipal Waste Management (from here on referred to as the Municipal Waste Model); 2) Packaging Waste Model; and 3) Landfill Diversion Model. These models were developed and expanded under earlier contracts and have been used again in a slightly modified form to analyse the new policy variants under this contract. This section introduces the models and outlines the key modifications that have been made since the publication of the impact assessment. This section comprises of the following sub-sections: Section 2.1 introduces the three models with particular emphasis being given to the Municipal Waste Model and describes how they were developed in two phases; Section 2.2 presents the key technical changes that have been made to both the Municipal Waste Model and the Packaging Waste Model since the results included in the impact assessment were published in early The technical 2 Eunomia Research & Consulting, Copenhagen Resource Institute, and Öko-Institut (2014) Impact Assessment on Options Reviewing Targets in the Waste Framework Directive, Landfill Directive and Packaging and Packaging Waste Directive, February 2014, 3 The consultation was hosted between June and September 2013 see 4 European Commission (2014) Impact Assessment Accompanying the Document: Proposal for Reviewing the European Waste Management Targets, July 2014, 5 European Commission (2014) Impact Assessment Accompanying the Document: Proposal for Reviewing the European Waste Management Targets, July 2014, /10/2015

9 changes present here are all changes which will have had a material impact on the results generated by the two models; 6 Section 2.3 compares the results generated using the revised models with those published in the impact assessment. This provides a means for demonstrating the extent to which the model outputs have changed following the modifications described in Section 2.2; and Section 2.4 summarises the main uncertainties and limitations of the modelling. 2.1 Model Background The Municipal Waste Model has been under development since The model was developed under the following two contracts: Development of a Modelling Tool on Waste Generation and Management ; 7 and Further Development the European Reference Model on Waste Generation and Management. 8 Eunomia s contract to review the targets in the Waste Framework Directive, Landfill Directive, and Packaging and Packaging Waste Directive was undertaken in parallel to the first contract listed above (Figure 2-1). 9 An early version of the Municipal Waste Model, with a bolt on Packaging Waste Model and Landfill Diversion Model, was used to analyses the costs and benefits of the policy scenarios which were included in the Commission s impact assessment. 10 The two projects were therefore linked very closely and together enabled Eunomia to deliver the analysis that underpinned the impact assessment. Under a separate contract with the EEA the Copenhagen Resource Institute (CRI) developed a waste model which preceded the Municipal Waste Model. Under this contract CRI consulted relevant stakeholders and aimed to populate their model with relevant Member State data. Some of this information was fed into the Municipal Waste Model which CRI also helped to develop as part of the original contract. 6 The structural changes that have been made to the Municipal Waste Model are described in: Eunomia Research & Consulting (2015) Further Development of the European Reference Model on Waste Generation and Management, Report for European Commission Directorate-General for the Environment, May Eunomia Research & Consulting, and Copenhagen Resource Institute (2014) Development of a Modelling Tool on Waste Generation and Management, Report for European Commission Directorate-General for the Environment, February 2014, 8 Eunomia Research & Consulting (2015) Further Development of the European Reference Model on Waste Generation and Management, Report for European Commission Directorate-General for the Environment, May 2015, 9 Eunomia Research & Consulting, Copenhagen Resource Institute, and Öko-Institut (2014) Impact Assessment on Options Reviewing Targets in the Waste Framework Directive, Landfill Directive and Packaging and Packaging Waste Directive, February 2014, 10 European Commission (2014) Impact Assessment Accompanying the Document: Proposal for Reviewing the European Waste Management Targets, July 2014, ANALYSIS OF NEW POLICY OPTIONS 3

10 A timeline showing key dates and development stages of the Municipal Waste Model are shown in Figure 2-1. This figure shows that the development of the model has occurred in two phases: Phase 1 this involved the original development of the model for analysing the policy scenarios that were included in the impact assessment; and Phase 2 the model was further improved and enhanced prior to being used for analysing the new policy options that have been included in the new supplement to the impact assessment. Each phase is described below Phase 1 of Model Development The steps taken in developing the model under the contract Development of a Modelling Tool on Waste Generation and Management included (contract 1 in Figure 2-1): Reviewing the original EEA waste model; Developing a new model; Developing technical documentation for the new model; Peer reviewing the technical documentation; Consultations with Member States and non-member State stakeholders to gain input data for the model; Input baseline data (including details on collection and treatment systems); Develop and document baseline future projections; and Model policy scenarios as part of the Commission s impact assessment of the review of European waste management targets. As part of this process, relevant officials in all Member States were identified and sent a detailed questionnaire which requested country specific information which was required for input into the model. These questionnaires were sent out prior to Member States being visited in person to gather further information and to better understand the missing data gaps in the questionnaires which had been returned prior to these face-to-face meetings. Nineteen Member States were visited by members of the project team and these visits helped to develop a much more detailed view of current performance and future plans with respect to waste management. 11 The countries which were not visited were felt to already be the better performers in terms of waste management and a substantial amount of information and data is already publically available; thus, information on these countries was gathered via the country questionnaire that was sent out combined with publically available sources of information. 11 The following Member States were visited: Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, Finland, France, Greece, Hungary, Italy, Latvia, Lithuania, Malta, Poland, Portugal, Romania, Slovakia, Spain, and Sweden. Six of these countries were visited by the European Topic Centre on Sustainable Consumption and Production (ETC/SCP) on behalf of the European Environment Agency (EEA): Finland, France, Poland, Portugal, Spain, and Sweden. 4 19/10/2015

11 Industry was consulted via an online consultation which was hosted on the project s official website. 12 This consultation sought to obtain further information from stakeholders on: waste composition; collection systems operated in Member States and collection costs; and treatment system costs. Information gathered as part of the consultation process was used as source of input data for the model which had been developed by the project team. The input data allowed a detailed picture to be build up for each Member State and enabled a baseline case to be developed for each country. The key technical documentation describing the approaches used within the model was subject to peer review notably the financial modelling was peer reviewed by Scuola Agraria del Parco di Monza, and the environmental modelling by BIO Intelligence Service. Once the model had been finalised it was used to analyse the policy scenarios that emerged from the public consultation that was held as part of the contract Impact Assessment on the Options Reviewing Targets in the Waste Framework Directive, Landfill Directive, and Packaging and Packaging Waste Directive (referred to from here on as the Targets Review Project see contract 2 in Figure 2-1). Under the Targets Review Project the project team was tasked with developing a standalone Packaging Waste Model to analyse the scenarios relating to the packaging waste targets. This model was developed specifically for the revision of the targets and was not included in the Municipal Waste Model ANALYSIS OF NEW POLICY OPTIONS 5

12 Figure 2-1: Municipal Waste Model: A Timeline of Development Stages 6 19/10/2015

13 2.1.2 Phase 2 of Model Development Phase 2 of the model development started in the summer of 2014, under the contract Further Development the European Reference Model on Waste Generation and Management (contract 3 in Figure 2-1). Under this contract Eunomia continued to develop and enhance the Municipal Waste Model by: Making a number of technical changes to the calculations and updating some assumptions (e.g. updating to 2015 prices and changing the dataset used for labour cost ratios). These technical changes are summarised in Section 2.2 below to provide a clear indication of how the model outputs may have changed since the analysis was undertaken for the impact assessment. Developing a user interface for the model which included the following inbuilt tools: o Tool for testing different municipal waste targets; o Eurostat data conversion tool; o Waste prevention tool; and o Sensitivity test tool. Incorporating inbuilt guidance and navigation tools within the model to aid understanding of complex modelling processes and/or terminology and to allow for easy movement around the model; and Reducing the size of the model by streamlining the calculations using VBA macros and splitting the model into two separate Excel documents. The first excel file contains the user interface and is used to run the model and generate the results. The second file deals with the model calculations and is effectively hidden from view when model users edit and change assumptions and parameters in the user interface. As part of the revised circular economy package the Commission was required to revisit the original analysis in the impact assessment and propose a number of new policy variants which account more accurately for the significant differences in where Member States are starting out from. As part of this fourth and final contract Eunomia and colleagues were commissioned to provide further Support to the Waste Targets Review (contract 4 in Figure 2-1). Before the proposed policy options could be modelled a number of additional modifications had to be made to the Municipal Waste Model, Packaging Waste Model and the Landfill Diversion Model. These included: Including a fourth target year in the Municipal Waste Model for testing different target years. The model previously only allowed for targets to be set in three years, but the revised suite of target options required that targets could be set in up to four different years (e.g. 2020, 2025, 2030 and to account for the setting of derogations ); Updating and integrating the Packaging Waste Model into the Municipal Waste Model to create a combined model which could run scenarios which included both targets on municipal solid waste (MSW) and packaging waste; and Updating the standalone Landfill Diversion Model to account for policy options which included the landfilling of non-hazardous and non-mineral wastes which are similar in composition to MSW. This module links directly to the Municipal ANALYSIS OF NEW POLICY OPTIONS 7

14 Waste Model and was built to allow for landfill diversion targets to be considered which extend beyond municipal waste. It is worth describing in a little more detail the logic behind the updated Landfill Diversion Model which takes a similar approach as to that described in the impact assessment, but uses updated Eurostat data. In essence, the model was developed as follows: 2012 data on total landfilling of non-hazardous, non-mineral waste was extracted from Eurostat; 13 From this dataset all waste streams deemed to be similar to municipal waste were isolated (see list of waste below); Data on the quantity of MSW landfilled in 2012 was extracted from the Municipal Waste Model; This then enabled the calculation of the additional non-msw landfilled waste to be calculated; The unit impacts that is, the financial and external cots per tonne of waste processed were extracted from the Municipal Waste Model; and Finally, the unit impacts (costs and externalities) were applied to the additional waste diverted to calculate total additional costs and benefits. The non-hazardous, non-mineral waste streams that were deemed similar to municipal waste for the purposes of the landfill diversion target considered as part of this work are as follows (other mineral and sludge based wastes were excluded): Health care and biological wastes; Metal wastes, ferrous; Metal wastes, non-ferrous; Metal wastes, mixed ferrous and non-ferrous; Glass wastes; Paper and cardboard wastes; Rubber wastes; Plastic wastes; Wood wastes; Textile wastes; Waste containing PCB; Discarded equipment (except discarded vehicles and batteries and accumulators waste) (W08 except W081, W0841); Discarded vehicles; Batteries and accumulators wastes; Animal and mixed food waste; Vegetal wastes; Animal faeces, urine and manure; Household and similar wastes; Mixed and undifferentiated materials; and 13 Eurostat (2015) Treatment of Waste [env_wastrt], Date Extracted: 29 th July 2015, /10/2015

15 Sorting residues. The above should provide a clear outline of how the model has been developed since the start of Eunomia s original contract with the European Commission in August A more detailed summary of the key technical updates that have been made to the three models since the publication of the impact assessment is presented in the next section. 2.2 Overview of Key Updates As noted in the preceding section, the Municipal Waste Model, Packaging Waste Model, and Landfill Diversion Model have been updated in a number of ways as part of the second phase of the model development. The key technical changes that is, changes that may impact on the final model outputs are summarised in Table It is important to note that the updated models have been used to produce all of the results which are presented in this report. We therefore also summarise in Table 2-2 how the individual changes will have altered the results since the model was used to run the scenarios for the impact assessment on the review of waste management targets. Significant improvements have been made to the models since the previous round of modelling was undertaken for the first impact assessment. The key factors that have led to these improvements include: New data has become available the addition of updated data over the last year has improved the accuracy of the results and brought them up-to-date (e.g. data on labour costs, employment intensity factors, waste composition data, packaging waste arisings, and the volume of non-hazardous/non-mineral waste being sent to landfill were all updated); Feedback from stakeholders and interested parties feedback via various channels has helped to identify areas where improvements could be made to the model so that it more closely reflected the operational realities of managing waste in different countries (e.g. the maximum levels of MSW captured were capped at a lower rate, thus reducing material revenues and consequently increasing the net costs); Changes in market conditions the global market for secondary materials was more buoyant when the analysis was undertaken previously. Given developments over the last two years, the revenues included in the model relating to the sale of materials have been reduced, resulting in a net increase in the overall cost of recycling (material revenues effectively offset collection costs in the modelling); and Functional improvements some aspects of the model functionality had to be simplified for the first impact assessment due to time constraints. Work has been undertaken to address these aspects and improve the accuracy of the modelling (e.g. improvements were made to account more accurately for the differences in the cost, and the capture of materials for recycling, associated with collecting 14 The structural changes that have been made to the Municipal Waste Model are described in: Eunomia Research & Consulting (2015) Further Development of the European Reference Model on Waste Generation and Management, Report for European Commission Directorate-General for the Environment, May 2015 ANALYSIS OF NEW POLICY OPTIONS 9

16 material from high rise/multiple occupancy dwellings compared to single households: this has had the effect of increasing the costs; reject rates were also applied in a much more detail way, leading to higher collection rates needed to meet the targets). For a technical description of the Municipal Waste Model interested readers should refer to the final reports which were produced as part of Eunomia s earlier contracts with the Commission. 15,16 A high level description of the Packaging Waste Model was presented in Appendix 4 of the final report for the original Targets Review Project. 17 As part of this contract an expanded an updated description of the Packaging Waste Model will be developed and included in the final report. The approach to modelling the landfill diversion target for all waste going to Category B landfill sites was also described in the original contract and interested readers should refer to Section 8.11 of the main report for more details. 18 As noted above, the key technical changes that have been made to each of the models are presented in Table 2-1. Table 2-1: Summary of Key Changes to the Municipal Waste Model, Packaging Waste Model, and Landfill Diversion Model MUNICIPAL WASTE MODEL Key Changes Given changes in the market for secondary materials over the last couple of years the material revenues for dry recyclables were updated. The changes were not substantial and are based on the average market price over the last two years. Further details on the updated prices can be found in Section 4.4 of Appendix 3 in the cited report. 19 Impact on the Results/Outputs Relative to the Version of the Model used for the Impact Assessment Given the fall in commodity prices over the last couple of years the assumed revenues derived from secondary materials in the Municipal Waste Model have, for the most part, been reduced slightly. This update has meant that the amount of revenue derived from the sale of recyclables is lower and thus the net cost of collecting dry recyclables is slightly higher. 15 Eunomia Research & Consulting, and Copenhagen Resource Institute (2014) Development of a Modelling Tool on Waste Generation and Management, Report for European Commission Directorate-General for the Environment, February 2014, 16 Eunomia Research & Consulting (2015) Further Development of the European Reference Model on Waste Generation and Management, Report for European Commission Directorate-General for the Environment, May Eunomia Research & Consulting, Copenhagen Resource Institute, and Öko-Institut (2014) Impact Assessment on Options Reviewing Targets in the Waste Framework Directive, Landfill Directive and Packaging and Packaging Waste Directive, February 2014, 18 Ibid. 19 Eunomia Research & Consulting (2015) Further Development of the European Reference Model on Waste Generation and Management, Report for European Commission Directorate-General for the Environment, May /10/2015

17 Key Changes Changed datasets used for the labour cost ratios following comments from the EEA harmonised datasets in the model using the hourly rate data from Eurostat, rather than mean net annual earnings. 20 Switched from the EU28 deflators to country specific deflators which are used to adjust some of the landfill and other taxes. All costs have been updated to 2015 real terms prices based on country specific deflators. In the first impact assessment the Net Present Value (NPV) of all scenarios was compared based on the period 2014 to In this contract we considered two scenarios which extend out to. It was therefore necessary to extend the NPV calculations out to. Adjusted employment intensity factors in light of new information. The original model included a goal seek function to pin Member State recycling and landfilling rates to the recycling target /landfill diversion target which had been set as part of the scenarios being modelled. This goal seek function was accurate to within ±1%. The functionality has been improved so that the model does not step by % point increments, and therefore is more accurate. Some aspects of the collections module have been updated to account more accurately for differences in collecting materials between a shared service (i.e. flats) and individual houses (i.e. door-to-door). The approach to calculating the cost of operation civic amenity sites (container parks) has been improved. Instead of calculating a single per household cost, the model now calculates the following element separately: 1) investment costs, 2) labour costs and 3) other operational costs per tonne of throughput. Impact on the Results/Outputs Relative to the Version of the Model used for the Impact Assessment The labour cost ratios will have changed for all Member States marginally affecting the labour costs in treatment plants and in waste collection services. This appears to have had a minimal effect on the results. Very slight changes to costs calculated. The outputs of both the financial and environmental modules will now be slightly different as the deflators have been updated. This change affects the magnitude of the results. As the value of money increases over time, moving from 2013 to 2015 prices will increase the costs or benefits, depending on the outcomes of the scenarios. Extending the NPV calculation beyond 2030 has no material impact on the results but does affect the magnitude of the figures as they are reported. Because an additional five years of costs and benefits are added, there is an associated increase/decrease in the final reported NPV figures. Slight changes in the employment impacts of individual scenarios. This change will reduce the generation of anomalous results for Member States who are already very close to achieving the target recycling rate set out in a given policy scenario. For some countries the results will have changed by up to 1%. The extent of the change varies from country to country, depending on the proportion of the housing stock which is made up of buildings with more than 10 households each, and therefore, are assumed to utilise shared collection services. This change limits the capture from shared properties. The overall effect has been to increase the costs of waste collection. The overall effect had been to increase the costs of waste management, though it should be noted that the model drives Member States towards a high density of CA site provision that might prove difficult to achieve in practice in many situations. 20 Eurostat: Labour cost levels [lc_lci_lev], ANALYSIS OF NEW POLICY OPTIONS 11

18 Key Changes The calculation method chosen by Member States for reporting performance against the existing 50% recycling target was updated for Denmark and the Netherlands as new information was made available to the European Commission (Denmark is now using method 1 and the Netherlands is using method 2). The assumed composition of MSW has been updated for Lithuania because the country assumed that scrap metal was included in the municipal waste stream. The metal content of the waste stream was therefore very high and skewing the results. PACKAGING WASTE MODEL As a significant proportion of packaging waste arising in the municipal waste stream the updates mentioned above for the Municipal Waste Model apply equally to the Packaging Waste Model The baseline Eurostat data used in the model has been updated from 2011 to 2012, which, at the time of writing, was the latest available data. LANDFILL MODEL FOR NON-MUNICIPAL WASTE The baseline data used in the model has been updated to the latest available Eurostat data (i.e. data from 2012). 21 In the impact assessment a target option was considered for the diversion of all non-hazardous waste sent to Category B landfills. This approach included a broader range of materials than considered as part of the analysis conducted in this study which has been restricted to waste that are similar to MSW (see list presented in Section Impact on the Results/Outputs Relative to the Version of the Model used for the Impact Assessment This change has had a relatively minor impact on the EU-28 results. This appears to have had a very minimal effect on the EU-28 results. See above. The nature of the change will vary depending on the trajectory of the packaging waste arisings in each Member State (some waste streams have grown and some have decreased there is no consistent trend). The nature of the change will vary depending on the trajectory of the waste arisings in each Member State. Given the slightly narrower definition of the landfill diversion targets (i.e. from all waste sent to Category B landfill sites in the impact assessment to all waste similar to MSW) the net costs and benefits are likely to have reduced. 2.3 Comparison with Impact Assessment Results For two options Table 2-2 compares the results between those generated for the impact assessment and those generated using the updated models. This comparison is intended to provide an indication of the extent to which the model results have changed as a result of the changes to the models that have been identified above. For comparison purposes we have used the following scenarios from the impact assessment: Option 3.1-High 22 this scenario assumes that Member States will achieve 50% preparation for reuse / recycling of MSW by their chosen calculation method in 21 Eurostat (2015) Treatment of Waste [env_wastrt], Date Extracted: 29 th July 2015, /10/2015

19 2020, and then 60% and 70% preparation for reuse / recycling by method 4 in 2025 and 2030, respectively; and Option this was the preferred scenario identified in the impact assessment and included Option 3.1-High, plus ambitious packaging recycling targets and a landfill diversion target of a maximum 5% for all waste sent to Category B landfill sites. Table 2-2 compares the results from the first impact assessment to those produced using the updated Municipal Waste Model. The comparison is intended to provide an indication of the extent to which the model outputs have changed as a result of the further development and enhancement of the Municipal Waste Model. The Table aims to isolate the impact that the changes listed above have had on the Municipal Waste Model from those that have occurred as a result of inflating the prices to 2015 real terms prices and adjusting the period over which NPV is calculated to 2015 to. When comparing the NPV figures in Table 2-2 it can be seen that the financial benefits of the change relative to Full Implementation have fallen by 2.7 billion, from billion in real 2013 terms to billion in real 2015 terms. By contrast, the external benefits have increased by 2.5 billion, falling from in real 2013 terms to - 11 billion in real 2015 terms (negative costs represent a benefit to society). Despite the changes to the financial and external costs, the net social cost of the move from Full Implementation to Option 3.1- High shows that there has been little change to what was published in the first impact assessment. 22 Option 3.1.c in Eunomia Research & Consulting, Copenhagen Resource Institute, and Öko-Institut (2014) Impact Assessment on Options Reviewing Targets in the Waste Framework Directive, Landfill Directive and Packaging and Packaging Waste Directive, February 2014, 23 Ibid. See Option 3.4.c ANALYSIS OF NEW POLICY OPTIONS 13

20 Table 2-2: Comparison of for Option 3.1-High in the Impact Assessment 1 Model Version / Model Variations First IA Model NPV 2014 to 2030, Billion, 2013 Prices Updated Model NPV 2015 to 2030, Billion, 2015 Prices Updated Model NPV 2015 to, Billion, 2015 Prices Notes: Financial External Net Social 2 Employment 3 Net Present Value 4 1,000 FTEs In 2030: 138 In 2030: 135 In : 139 Reduction in Greenhouse Gas Emissions Million Tonnes CO 2 eq In 2030: -39 In 2030: -38 In : to 2030: to 2030: to : See the Commission s Impact Assessment for more details on Option 3.1-High and the analysis that was undertaken: European Commission (2014) Impact Assessment Accompanying the Document: Proposal for Reviewing the European Waste Management Targets, July 2014, 2. Net social costs = financial costs + external costs. 3. Employment figures represent direct employment only (no multiplier effects have been included). 4. Negative costs represent a benefit to society. NPV measures the flow of costs over time. In line with the European Commission approach to impact assessments, a discount rate of 4% per annum was used again as part of this additional analysis. Despite the fact that future costs are discounted the addition of an extra five years of costs significantly alters the final NPV figure. This is clearly shown in Figure 2-2 where the area under the graph provides a hypothetical example of the flow of money over time (this hypothetical example is based on the trends emerging from the analysis of the new policy options see Section inr4.0). Triangle A shows the flow of costs between 2020 and 2030, whereas the flow of costs between 2020 and will include the entire area shown by A and B. This provides a clear illustration of why extending NPV to has such a marked impact on the results /10/2015

21 Net Social, Milion Euro, 2015 Real Term Prices Figure 2-2: Net Present Value (NPV) Measures the Flow of over time which is Represented by the Area Under the Graph A and B ,000 A B - 2,000-3,000-4,000-5,000-6,000-7,000 Option 3.7 was considered the 'preferred' Option in the initial impact assessment. In this case, the updated results show a bigger change compared to those calculated for Option 3.1-High (Table 2-3). This is particularly true for the financial costs, where the net benefits have decreased from billion in real 2013 terms to billion in real 2015 terms. The reduction in the calculated external benefits has been less marked, these falling from billion in real 2013 terms to billion in real 2015 terms. Unlike Option 3.1-High, which is restricted to a MSW recycling target, Option 3.7 includes both packaging waste recycling targets and a landfill diversion target, which covers MSW as well as the landfilling of other similar wastes. Thus, the calculation of the final results for this option requires the use of all three models described above. It has been shown above that changes to the Municipal Waste Model has caused the financial costs of Option 3.1- High to increase by 2.7 billion. This, therefore, explains part of the reduction in costs recorded in relation to Option 3.7. The remaining 7.9 billion increase in financial costs occurs due to additional improvements to the Packaging Waste and Landfill Diversion Models. ANALYSIS OF NEW POLICY OPTIONS 15

22 Table 2-3: Comparison of for Option 3.7 in the Impact Assessment 1 Model Version / Model Variations First IA Model NPV 2014 to 2030, Billion, 2013 Prices Updated Model NPV 2015 to 2030, Billion, 2015 Prices Updated Model NPV 2015 to, Billion, 2015 Prices Notes: Financial External Net Social 2 Employment 3 Net Present Value 4 1,000 FTEs In 2030: In 2030: 186 In : 199 Reduction in Greenhouse Gas Emissions Million Tonnes CO 2 eq In 2030: -62 In : to 2030: to 2030: to : See the Commission s Impact Assessment for more details on Option 3.7 and the analysis that was undertaken: European Commission (2014) Impact Assessment Accompanying the Document: Proposal for Reviewing the European Waste Management Targets, July 2014, 2. Net social costs = financial costs + external costs. 3. Employment figures represent direct employment only (no multiplier effects have been included). 4. Negative costs represent a benefit to society. The following points outline the improvements to the Packaging Waste Model: In the analysis conducted for the first impact assessment, the modelling implied that an unrealistically high fraction of packaging waste could be captured from the MSW stream. This proportion has been reduced, and the limit set on a material by material basis. The update had the result of limiting the capture of packaging from the MSW stream, which had two effects. Firstly, the household collection costs went up due to less revenue being generated from the captured material, and secondly, more material had to be captured from non-msw sources, again, increasing the costs of the meeting the targets; and The packaging waste data was updated from 2011 to Eurostat s latest publication for The following points outline the improvements to the Landfill Diversion Model: In the impact assessment a target option was considered for the diversion of all non-hazardous non-mineral waste sent to Category B landfills. This approach included a broader range of materials than considered as part of the analysis conducted for this supplement (i.e. to produce the results for Option 3.9(e)) which has been restricted to wastes that are similar to MSW (see Section 2.1.2). The approach taken to calculating the financial and environmental costs and benefits has also been improved. As noted in the impact assessment the analysis of this option was originally undertaken using a very high level approach that was applied to the EU28 as a whole. In the original analysis, the destination of material diverted from landfill by 2030 was set at the EU level (i.e. across all Member States) using the following proportions: 50% of diverted material would go to dry recycling, 20% to organic treatment, 15% to MBT and 15% to 16 19/10/2015

23 incineration. In contrast, the updated approach used Member State specific proportions, based upon the waste flows in each country. The result was that less material was diverted to recycling, and therefore, greater quantities of the diverted material are routed into MBT and incineration, both of which imply a higher net cost in the cost benefit analysis (which, it should be re-emphasised, excludes transfers and taxes, such as landfill taxes, and price support for energy); and Finally, in the impact assessment Eurostat data from 2011 was used, whereas this was updated to 2012 data for the purposes of the new analysis (i.e. the latest available data at the time of undertaking the modelling). The above explains why a greater variance has been recorded when comparing the final results for Option 3.7 as presented in the first impact assessment to those being calculated using the updated models. It should be noted that the relative positions of the different scenarios has not changed a great deal, the main changes being that all of the Options imply a lower financial benefit than in the impact assessment. Even so, the ranking remains much as before, and notwithstanding all the changes that have been made the results still show net social benefits under all scenarios. Finally, the figures shown here should be considered in the context of the total estimated cost of managing waste in the EU. For municipal waste alone, the changes in NPV are relative to a Full Implementation figure of the order 470 billion for municipal waste only. Therefore, changes of around 5 to 10 billion are relatively small by comparison, as indicated by the sensitivity analysis conducted on specific variables (see Section 6.0). 2.4 Main Uncertainties and Limitations For the sake of clarity it is worth reiterating here what the Municipal Waste Model does and does not include. This section is taken directly from Section 4.0 of the main technical report which accompanies the model. 24 The modelling which forms the basis for the impact assessment is complex and incorporates a range of assumptions and variables which can be expected to influence the assessment. In the experience of the modelling team, and reflecting the nature of the model developed, the main uncertainties are set out below insofar as they affect the financial and the external costs. It is also worth noting that the results presented in this report are those of a costbenefit analysis. As such, all subsidies and taxes are excluded from the analysis so as to only value the true resource cost of an activity. This also avoids any double counting of environmental effects that are intended to be internalised within environmental taxes and subsidies. 24 Eunomia Research & Consulting, and Copenhagen Resource Institute (2014) Development of a Modelling Tool on Waste Generation and Management, Report for European Commission Directorate-General for the Environment, February 2014, ANALYSIS OF NEW POLICY OPTIONS 17

24 2.4.1 Waste Collection The model has, necessarily, to simplify somewhat the complexity of the situation which actually exists in Member States. In each country, there are, and are likely to be in future, a range of different collection systems in place. The model simplifies reality by modelling a narrow range of systems. However, although the range is narrowed, the general tendencies are expected to be a reasonable reflection of the relative costs of systems delivering varying recycling rates. The model makes assumptions which determine the number of households which can be served by a given vehicle. These are likely to vary from place to place. The model seeks to deal with this through setting different parameters for urban, suburban and rural households. The model also deals separately with houses and multiple occupancy flats, assuming different material capture rates and collection costs for each. The costs are modelled in real terms. They are essentially deemed to remain constant across time in real terms. The time horizon for the assessment is, however, considerable. Over such a period, the index of some input parameters to the collection model, such as labour costs, might not be the same as the general rate of price increases. As such, the costs might not remain constant in real terms over the time period considered. This is, however, believed to be the most reasonable assumption to make in the circumstances (projecting, for example, the rate of increase in real wages would appear to be rather speculative). The value of materials being captured for recycling is deemed to remain constant in real terms. Following a period in history (roughly spanning the period ) over which real prices for commodities have experienced a secular decline, the last decade has seen that secular decline completely reversed owing to increased global demand, notably from China. Many commentators believe prices may continue to rise in real terms, but there are, equally reasons why prices, not least in real terms, may decline. As such, the assumption regarding constant prices in real terms seems not wholly unreasonable, albeit that any forecast of commodity prices in future is likely to be uncertain. For each country, where municipal waste is concerned, the model uses data from Member States regarding the composition of their municipal waste. The composition data is, in the model team s view, of variable quality. Because of the variation in both waste quantity and waste composition from one country to another, the revenue generated from the capture of recyclables varies across countries (affecting net costs). Quite apart from current waste composition, the modelling effectively has to consider waste composition over the period to. Relatively little is known about exactly how waste composition will change in future. What seems certain, however, is that it will change. It is to be hoped that those changes that do occur will increase the extent to which materials can be easily recycled. What cannot be known, however, is how such changes will affect the costs of collecting and processing materials, and the revenues generated from selling the materials collected. The assumption of constant composition is on the one hand unlikely to reflect reality, but on the other, it is felt that no reasonable alternative assumption exists Waste Treatment The costs of treatment are assumed to remain constant in real terms. For some treatments, as well as taking into account the sale of some materials (see above for a discussion) the net 18 19/10/2015

25 costs take into account the sales of energy. The revenue derived from the sales of energy are assumed to be constant in real terms. This implies constant real terms prices for energy. Energy prices could, of course, follow a different path. The costs are influenced by assumptions regarding capital costs, assumed to be constant across countries, and the costs of other inputs to the process. Labour costs have been adapted to reflect Member State labour costs. There is variation in unit capital costs of facilities, but the model assumes a single figure for a given treatment. This seems reasonable given that the high level, strategic nature of the model means that assumptions regarding the size of specific facilities cannot meaningfully be made. The way in which capital costs are financed will affect the costs for different facilities. In different Member State, there are different patterns of financing and ownership of waste management facilities. Some facilities are funded from savings made by municipalities, whilst others are financed using public / private partnerships. These situations lead to a variety in the costs of capital, and this affects the costs of operating facilities. The model effectively assumes a single figure for the real costs of capital. The central figure is more representative of projects where the private sector is involved Externalities The overall figures for externalities reflect the inclusion and exclusion of various effects in the model. We believe that the main externalities of well operated facilities are captured by the model, but even so, some externalities are not captured by the model (see Section 4.0 of the main technical report which accompanies the model). The model assumes different damage costs for the air pollutants with these adapted for each Member State. These are based on the best evidence available, but clearly, uncertainties exist. The model assumes a profile for the damages associated with greenhouse gas (GHG) emissions. The debate concerning how best to value damages associated with GHGs continues apace. There are clearly alternative assumptions that could be made in this regard. Some characteristics of key processes influence emissions, and hence, externalities. Key amongst these are: The modelling of the extent to which biodegradable material degrades in landfill; The capture of methane generated by landfills for energy generation and flaring (and crucially, the amount of methane escaping to the atmosphere); For technologies generating energy, such as incineration, the nature of the energy source which is assumed to be avoided, at the margin, when new facilities are introduced; and The modelled GHG emissions from facilities relate back to waste composition. If composition data is not of high quality, then the emissions will be subject to considerable uncertainty (and as noted above, composition is likely to change in future). ANALYSIS OF NEW POLICY OPTIONS 19