Economic risks and opportunities of new waste legislation

Evidence from Cape Town

Presentation at Waste In Business Seminar, 14 April 2011by

Martin de Wit

(As based on inputs to a study for City of Cape Town by the Akhile Consortium)

Legislative drivers

• The National Environmental Management Waste Act, into effect on 1 July 2009– requires that waste minimisation be considered by municipalities

in addition to municipal services such as cleaning, collection and disposal to landfill.

• City’s Integrated Waste Management Bylaw– Waste minimisation as specific function

• Section 78 (3) Assessment of Alternative Service Delivery (ASD) mechanisms (Local Government Municipal Systems Act (MSA)) – One of the requirements of the MSA is to assess costs and

benefits of alternative service delivery mechanisms.

International evidence• no one preferred waste management option is identified, highlighting the

importance of an assessment based on local conditions. • with the exception of a few countries, landfilling remains the default option, even in

several highly developed economies. • waste collection and sorting options are vital in a sustainable waste management

system, as this choice determines which downstream waste management treatment option(s) will be most effective

• composting options struggle to be financially viable and only have a chance of being successful at high volumes with a marketable quality

• thermal treatment yields net environmental benefits when compared to landfilling and mechanical-biological treatment options, but is financially expensive

• recycling proves difficult to implement in relatively large volumes• landfilling remains the most widely used waste management option, but once the

full costs are taken into account the sustainability of this option may be questioned

Systems approach

• Emphasises the need for a systems approach. – A system has a purpose and consists of an interrelated set of

elements or components • An integrated waste system is one that recognises:

– the different elements of the waste system as a whole from generation to disposal

– a range of options on various scales (e.g. household, neighbourhood, city)

– interactions between the waste system and other systems (socio-economic systems for example)

– inputs from various stakeholders and interest groups in the design of a system that is acceptable and feasible

Economic Systems Model

• Net Additional Cost = Total Additional Costs – Total Additional Benefit

• TAC mainly include:– Additional Cost of Collections (incl. Transport)– Additional Cost of Processing– Decrease in Revenue from Disposal

• TAB mainly include:– Avoided Disposal Cost– Savings on Planned Expansions (airspace saved)

Data on generation and diversion

• Formal waste management system in Cape Town (MSW and private) handled over an est. 3 million tons of waste in the 2008/2009 financial year

• Round ¼ of the waste in the formal waste management system diverted from landfill

• Mostly commercial and industrial re-use and recycling, but also by Municipality

Source: Wise, C. Jeffares & Green

Financial baseline data

Source: Akhile Consortium (2011) as based on City of Cape Town data, 2009/10

R1.5bnR317m

+/- R480pp

Baseline costs per ton MSW

• The estimated average cost per ton of waste that was handled by municipality for the year 2009/10, including operational and capital expenses is estimated at approximately:– R1 700/t for cleaning– R1 200/t for collections– R400/t for disposal– R120/t for support and administration services

• Estimates are very sensitive to costs and MSW generated

Additional Waste Costs

• Economic assessment of alternative service delivery (ASD) options:– The additional direct and indirect costs per ton diverted

lowest for the Builders’ Rubble ASD, followed by;– The Organic Waste Management ASD at an additional cost

of between R750–R960/t;– The Co-mingled Waste ASD at additional cost between

R1 350–R1 660 per ton; and – The Household Hazardous Waste ASD at additional cost

between R2 900–R3 500/t.• Note: These are estimates based on high-level systems analysis. Project level

figures likely to vary

Model limitations

• Reduced cost to collect solid waste– Not included as normal service delivery proceeds– Real potential for cost savings only be seen once implemented

• Possible savings to waste generators not included• Monetary estimates of environmental costs excluded

– increase costs of landfilling in mostly poor control landfills– International studies suggest increase of 20-45% above baseline

landfill costs, but much lower for land-fills with best practice controls*

– Important fraction, but not likely to change results on ranking of alternative service mechanisms, even if assume poor controls

– More research likely to shed more light on quantum*BDA Group, 2009. The full costs of waste disposal in Australia

Discussion of results

• Waste is not for free– Interventions are costly, in general more costly than default landfilling

option• Estimated costs of landfilling at R220–R250/t*

• Estimated large volume diversions– Organic Waste & Composting and Builders’ Rubble options

• Organics & Composting option by far largest air space savings– >5 times that of second option, builders rubble

• Smaller volumes and air space savings from separation of comingled waste

• From diversion perspective focus on alternative Organics & Composting and Rubble mechanisms

*subject to changes in medium term budgets on disposal

Implications for business• Rationale for business

– possible private benefits from waste (Income > Cost)– consider dynamics of supply and demand

• Supply of waste: – Relative large additional costs (over and above costs of waste service delivery) to

‘unlock’ suitable streams of solid waste from municipality• Realistic to assume that municipality will not be in a position to carry all these costs• Model to share risks and costs between municipality and private operators needs further

attention

– Assurance of waste volumes and quality of waste stream– Municipality’s imperative to divert relatively large waste from landfill

• Demand for waste products:– Possible focus for business on waste capture earlier in cycle– Market development for recycled products is an important business function

• Not a municipal mandate and function

• Both aspects vital for a sustainable waste recycling and re-use economy

Risks and opportunities for waste economy

• Relative high additional cost of diversion– but lowest for Rubble, Organics & Composting– higher than default landfill option

• Ability to divert large volumes to be tested– Organics, composting and rubble– Mixed results earlier smaller scale attempts

• Ability to deliver quality products to market to be demonstrated– High quality compost and rubble prerequisite

• Need for market development of waste products• Some options for higher market value, smaller diversion waste

streams (comingled)• Negotiate sharing of risks, costs and benefits between municipality

and private operators