August 21st, 2015
The speed of change in the residual waste sector is both unprecedented and unrelenting. There are many positives to emphasise – some efforts towards waste prevention, more reuse and recycling, and new and environmentally preferable treatment technologies are all having an impact.
Residual waste arisings have declined as the recycling rate has risen, and a push to meet our 50% target for 2020 will see this trend continue. We are currently producing around 25m tonnes per annum of residual municipal, commercial and industrial waste, but this is projected to drop to around 11m tonnes by 2030. Residual treatment capacity is also increasing and could overtake waste arisings by 2018. If used to its potential, UK residual waste treatment will soon virtually eliminate the need for landfill.
Pressure has been building on landfill operators since the Landfill Tax escalator was introduced in 2005, with a current rate of more than £80/tonne for active waste making it increasingly difficult for landfill to compete with treatment alternatives. The combined impact has been to quickly reduce the amount of waste being landfilled at standard rate – from 43m tonnes in 2005/06 to less than 15m tonnes in 2014/15. As a result, the number of (non-hazardous, non-inert) landfill sites in the UK has decreased dramatically. Once the backbone of waste management, but latterly its bugbear, in five years’ time perhaps barely a hundred will remain.
Perhaps the pace is greater than operators, regulators or even the tax man has planned for. Certainly they don’t yet appear to be taking account of the entirely foreseeable consequences of the demise of the dump.
One indicator that this problem has not yet been fully recognised is the government’s continued optimism about Landfill Tax income. The Office for Budget Responsibility has projected a short-term decline in revenues followed by a levelling out, with a projected income of £1,092 million in 2020; by contrast, we would expect to see it plummet much further than this in the next three years.
The aim of the Landfill Directive, which came into force in 2001, was to improve the lifetime management of landfills in order to reduce the risk to human health and the environment. It helped to bring common standards into effect in areas such as:
- ensuring landfill cells are adequately lined before use and capped after use in order to create an impermeable barrier to the environment;
- collection, storage and treatment of leachate (water that has been contaminated with landfill waste); and
- the collection of landfill gas, whether for use as an energy source or for disposal via flaring, which reduces its climate change impact.
Landfill sites need to be managed throughout their lifetime, not just during the operational phase when waste is accepted, but also during a site’s closure period, when waste is no longer accepted and any open cells are being capped. Management also extends into the aftercare period, when capping is completed, but activities such as gas capture and leachate management may continue. These aftercare management activities can be pretty expensive and can be required for far longer than the site was operational. So how are these activities funded when the landfill closes, and revenues are no longer being generated?
Suffering from exposure
The Landfill Directive stipulates that this should be addressed through financial provision (FP), a pot of money which operators have to set aside to pay for landfill aftercare and to cover one pollution event. The ‘exposure liability’ (any gap between the amount of FP made and the liability the landfill represents at a point in time) should not exceed 10% of the total FP.
The amount of money needed for FP is unique to each landfill site. In the UK, operators negotiate the amount with their regulator (the Environment Agency (EA) in England) before a permit is granted and is re-adjusted – again through negotiation – every three years. The money can be set aside in a variety of forms, most commonly as a bank bond.
Thus far, FP appears to have been doing its job of ensuring landfill operators set aside enough money to cover aftercare costs. However, as the market changes, flaws in the FP system may be exposed.
- When FP is calculated, it is assumed that the aftercare period will last for 60 years and that after this point the landfill will be in a state suitable for the surrender of the permit. However no landfill covered by the Directive has got that far into the aftercare period and none have surrendered their permits, so it is unclear whether the 60 year rule is anything more than an arbitrary number. If it proves too low, there could be a substantial additional liability to be funded by the operator.
- Landfills are closing earlier than planned. This may be positive in terms of waste management, but FP is based upon the assumed total tonnage accepted and corresponding revenues generated. A sudden, sharp reduction in revenue may lead to operators being unable to honour their FP.
- Reduced tonnages are also leading to changes in the planned topography of landfills, for example from convex to concave, which will in turn alter the behaviour of planned drainage systems and higher aftercare costs than planned for.
- Some operators with portfolios of landfill sites may be using the revenues from the ‘young’ landfills to pay for the aftercare of the ‘old’ landfills – just as income from current workers pays for pensions. If more of their landfills retire early, even the large operators may feel the financial strain.
- The regulator relies upon the belief that if the operator defaults before aftercare is completed, the FP will allow the Agency to manage aftercare itself. Yet it appears that no landfill operator has yet defaulted, and therefore this assumption has not been adequately tested.
- There have been numerous cases of landfills not being properly managed. Rather than treating leachate as it is generated, landfills can be used to store it up in order to continually defer the costs that management would entail. This increases the overall liability of the site – each m3 of leachate represents a cost, and storing up thousands of m3 could pose a liability far higher than the total FP set aside. Leachate can constitute over 50% of the total landfilling costs. If the operator becomes insolvent, it is possible for the administrator to disclaim their permit (at least in England and Wales – it is slightly more complicated in Scotland) potentially leaving the regulator to carry the costs of aftercare.
With FP about to be comprehensively stress tested for the first time, what should be done to reduce the impact of landfill aftercare on the public purse?
- As many have pointed out before, the regulator (backed by legislation) needs to step up its regulation of landfill sites, in order to prevent the build-up of problems such as leachate.
- The three-year reassessment of FP should be linked to a site inspection to determine the actual liability the landfill represents, rather than a projected liability. This would incentivise good management.
- Perhaps operators could be released early from aftercare liabilities provided they transfer the remaining FP to the regulator, to create a legacy fund for use when operators default. A similar approach is taken in the Swiss Canton of Zürich, where operators are released from aftercare obligations after 5-15 years but transfer the remainder of their 50 year FP to the regulator.
- The possibility for permits to be disclaimed when operators default in England and Wales should be removed.
The pressures being faced by landfill operators are intensifying, and there are an unsettling number of reasons to be concerned that the way FP is being managed may not be fit for purpose. If it proves not to be, abandoned landfills could soon – and for many years ahead – make current issues with abandoned waste sites seem like a very small problem indeed.