by Mike Brown
6 minute read
Amongst the speakers at the Resource & Waste Management show in Birmingham last week was physicist Brian Cox, who explained the likely cost of disposing of waste by sending it into space. It would be about $2,000 per kilogram, apparently, to reach only a low earth orbit, where I expect it would be a hazard to satellites and spacecraft. To propel our waste into the safety of deep space would require a gate fee that was… well, astronomical.
The group speaking at the Summit Roundtable was a touch less glamorous – for one thing I’d been asked to participate. Our discussion of “the big questions facing waste companies” touched on whether, when the landfill tax had done its job, other forms of treatment should be taxed. Perhaps more interesting than the actual debate was how reluctant everyone in the room was to name openly the “incineration tax” we knew was our subject.
I’ve never previously given proposals for an incinertion tax in the UK much credence. Its few advocates have been drawn mainly from anti-incinerator groups seeking an indirect way to derail new energy from waste (EfW) projects, and a recent DirectGov e-petition gathered only 1,200 signatures of support. Nevertheless, I am starting to think that a government may take this tax seriously in the near future, and could make quite a robust waste management case for it.
Emission impossible
To understand the thought process a government may follow, let’s go back to the origins of the landfill tax, which started as an attempt to internalise the estimated environmental externalities of landfill. The European Landfill Directive followed, motivated by concern about emissions from decomposing organic waste: methane, a greenhouse gas (GHG) 25 times more potent than CO2, and leachate with the potential to contaminate water. The UK government used targets and allowances to make local authorities divert biodegradable waste from landfill, and soon began escalating the tax, far beyond the value of its externalities. The aim now was to help alternative treatments to compete with cheap and plentiful landfill void.
Marchwood EfW Plant, Hampshire. Photo by Peter Facey, via Wikimedia Commons
EfW was one such alternative. Despite having externalities little better than those of landfill, it had a surge of popularity with policy-makers seeking a waste and power win-win. The real value of each of these wins is questionable, though. EfW emits CO2, and whether it reduces greenhouse gas (GHG) emissions depends heavily on the composition of its feedstock, what would have happened to it otherwise and what method of electricity generation is displaced.
EfW is quite a CO2-intensive power source. In fact, unless it displaces energy from a coal or oil power station, EfW without heat recovery typically generates more CO2 than it saves[1]. Coal-fired electricity is on the wane in the UK, so the proper comparison is gas, which is far more efficient. EfW plants make the majority of their income from the gate fee they charge, not from the power they generate. As a result they may accept feedstock that has very low calorific value. The high moisture content of food waste, nappies and so on means that burning it consumes almost as much energy as it releases. But a throughput of heavy, low-calorie materials that can be burned quickly is good for gate fees, if not for power generation.
The GHG scales tip firmly against EfW if a significant amount of its feedstock might otherwise have been recycled. Certainly, there is little at the level of material science to stop most of the plastics that are incinerated from being recycled instead – we just need to get better at separating this material out, whether at source or at MRFs.
Most local authorities that started incinerator projects, often with government PFI support, did so with a clear commitment to burn only what couldn’t be recycled, but then found themselves tempted by a business case that stacked up better for a big plant than for a small one. Once the incinerator is built, they have to keep it supplied and rapidly the economic logic of return on investment trumps concerns about recycling.
Grate expectations
This is perhaps a longhand way to say that EfW is low on the waste hierarchy. Energy recovery is one step up from disposal – so long as the plant meets the R1 threshold, which many current UK facilities fail to do – but below recycling. Wherever EfW draws in waste that could otherwise have been reused or recycled, it can be argued that waste management policy is failing. None of these points is new, though, and countries such as Austria and Belgium have long since taxed incineration: why would the UK government act now on evidence it has ignored for years?
If waste to landfill continues to decrease, landfill tax income will fall fast.
One consideration might be the new requirement that the waste hierarchy must be implemented in policy and in law, but the simple answer is: money. The Treasury has become used to rising landfill tax receipts, exceeding £1bn in 2011/12. The chart above shows that standard rate landfill tonnage has declined by 60% since 2001/02, and halved since 2006/07. But the annual landfill tax escalator, which has stopped this fall from eroding tax receipts, is due to peak (in real terms) at the £80 per tonne 2014/15 rate. If the decrease in landfill tonnage continues as I expect, the Treasury’s receipts will start to decline for the first time around about now.
As if this wasn’t bad enough for Treasury, the Government stated in its Budget 2012 that it expects tax receipt growth to £1.5bn in 2014/15 and £1.6bn in 2015/16. Huge unannounced increases in the tax rate are unlikely, as is the sudden leap in landfill tonnage the Budget estimates would require. Much more likely is a government left with a substantial shortfall that it looks to make up from the waste sector. In that context, incinerators could appear quite a soft target. In Denmark, where the incinerator tax is now €44 per tonne, the explicit motivation for its introduction was a decline in landfill tax income.
An incinerator tax would cause ructions in the waste sector on a scale to make the trommel fines dispute look like a playground squabble. Many local authorities are committed to long-term incinerator contracts; whether they or the contractor bore the risk on a new tax, the result would be a financial catastrophe for someone. Some fragile-looking business cases would fall apart, and many EfW plants could be left as stranded assets on the hands of their owners and backers. On the other hand, the investment case for recycling facilities would be far stronger.
These are good reasons for those in the waste sector with big investments in EfW to keep silent on the topic for now, and campaign vigorously against a tax if the time comes; but government can counter this by pointing to the waste hierarchy, and arguing that the success of landfill tax means it is now time to push waste further up it. I can’t see a small, targeted incineration tax making deep space disposal competitive any time soon, but for a government approaching the event horizon of a financial black hole its attraction could be irresistible.
[1] See Friends of the Earth, Dirty Truths: Incinerators and Climate Change, Graph 1, page 3
Last year I put a question to Defra about their calculations for residual capacity, the response was that they expect waste arisings to rise over the coming decade. When challenged that this view is at odds with evidence of last few years, the answer was that their calculations had to be ‘prudent’. I dare say, the same assumption about increased arising has been passed to Treasury.
The Treasury estimates for LFT receipts in the next few years are very peculiar. There may be a temporary increase in landfill tonnage as material that was being shredded and landfilled as inert trommel fines starts being charged for, but that won’t be on the scale needed to derive £1.6bn from this tax in a couple of years.
The landfill tax escalator has been really effective at diverting material. The average decrease in landfill has been over 4m tonnes per year since it came in. For the budgeted income to be achieved in 2015/16, the next two increases in tax would have to deliver no effect at all, with the same amount of waste being landfilled that year as in 2011/12. It seems that somewhere in Whitehall, someone’s sums are a bit awry.