Storing up trouble: is export the cause of ‘orphaned’ waste?

To call the increase in the amount of UK waste being exported to mainland Europe as refuse derived fuel (RDF) over the past few years ‘dramatic’ would be an understatement. Growth from around 270,000 tonnes in 2011 to over 1,500,000 tonnes in 2013 has now been surpassed with current tonnages of 800,000 in the first quarter of 2014. With landfill around £100/t, exporting residual waste to take advantage of low gate fees at underused European incinerators is an enticing prospect. Recently, this prospect has become relevant not only to waste companies managing C&I waste but also to those handling municipal waste. And with European facilities usually considerably more efficient than those in the UK – harnessing heat in addition to generating electricity – there can even be a strong environmental case for export.

But the growing role of waste export has not been universally welcomed. Naturally enough, the domestic waste industry is concerned with the rising quarter billion pound lost revenue. Some will dress that up as concerns about the loss of our precious resources (something the same industry fails to apply to waste they export for recycling). Attention is also drawn to horror stories in the wider media about abandoned waste piling up at UK docksides, transfer stations or in fields. With media attention focussed on such extreme cases there is a danger of waste export in general being tarred with the same brush, and waste exporters being blamed. So, in order to guard against any scapegoating, I’m keen to ask who the main culprits really are.

Whodumpedit?

Although cases of waste being ‘orphaned’ – and sometimes ignited – in fields, sheds, transfer stations and at ports may seem closely linked to the growth in RDF export, I suspect that there are other factors in play. After all, we’re talking about waste that is located in the UK, and whilst there will undoubtedly be exceptions – such as Boomeco’s recent fly infested RDF at Avon docks – most of this waste isn’t the subject of Trans-frontier Shipment (TFS) certificates, and is not – manifestly – destined for export. So although such cases are cited as the malign effect of waste export, they might better be understood as a matter of domestic non-compliance and enforcement.

Are brokers to blame? Brokers will of course act as middle men between UK waste operators and European off-takers (the incinerator operators), but in practice whilst brokers will often raise expectations around ultimate treatment prices they rarely take ownership of the waste at any point. There are some exceptions to this in the form of waste ‘traders’ who will take responsibility for the waste in the UK, manage the TFS certificates and even take shipping and exchange rate risks, but these organisations are selling the services of the overseas off-takers which have an interest in the waste arriving at their sites ready to burn.

It’s far more likely that UK waste transfer station operators, of which there are thousands, require closer scrutiny.

A baleful sight: unmanageable stores of waste can meet an unsavoury fate. Image by weegeebored via Flickr (Creative Commons)

Problems piling up

Why would UK waste operators deliberately abandon waste? With the best of intentions, some will have invested in a business model that relies upon the export market for baled waste offering an outlet at or below a certain price, and will have charged their customers accordingly. If that price can’t be achieved then the waste – literally in some cases – piles up.

Such operators may genuinely hope or expect the cost of disposal to return to an affordable level and in the short term a waiting game might seem to have its advantages. If they’re lucky with the weather, the operator may even find that the stored waste reduces in tonnage due to moisture loss, making it cheaper to dispose of. They can also accrue some interest, and if they continue to receive waste then cash-flow will be very healthy indeed.

But as time goes on, if treatment costs still can’t be met the operator will ultimately reach a crisis point to which they have no real business solution, having missed the one opportunity to charge enough to cover their subsequent costs. This means they simply can’t pay for all of the waste they hold to be disposed of legitimately. At this point, illegal means of disposal may seem like the only option to avoid going under. To make matters worse, operators storing large amounts of waste for long periods are likely to find themselves in breach of their operating permits, putting them between a rock and a hard place: they are breaking the law if they leave the waste where it is, while the only affordable ways in which they can remove it are also illegal.

Disposed to change

Part of the problem is that fluctuating disposal prices are still a relatively new phenomenon, with many more contributing factors today than in the past. A few years ago before the landfill tax was high enough to make non-landfill options attractive – at home or abroad – things were pretty stable. Landfill prices were rising, but doing so steadily and predictably enough to enable businesses to plan accordingly. However, in the last few years the cost of landfill has come to exceed the price of alternatives, with the result being that landfill no longer sets the market level.

Due to spare capacity on the continent export options have now come into the mix, as well as new treatment facilities in the UK. I have predicted for some time that export tonnages will continue to grow, at least by another few million tonnes. The brake on export will be primarily commercial, coming from rising prices as Holland rapidly fills its capacity and the subsequent logistical headaches as the shift to Scandinavian facilities – whose raison d’etre is mainly the supply of heat – brings into focus the seasonal nature of that outlet. That’s assuming of course that UK governments don’t mishandle the review of regulations around export, partly in response to the rise in waste crime.

So now the prices paid by UK operators depend on the balance between the supply of waste and the availability of treatment capacity across Europe, not just in the UK. As facilities come on or off stream, as deals are signed and as waste arisings and recycling levels change, prices can move quickly. In short, residual waste treatment market prices are much harder to predict now than they used to be. So – without for a moment condoning illegal activity – it’s understandable that some operators are getting caught out, regardless of whether they are themselves engaged in waste export. I am deliberately not addressing the issue of waste criminals who set out to cash-in early on abandoned waste.

Establishing better management control of ownership of waste seems to be a key issue here. If my analysis is correct, the damage is done when a UK waste operator – probably a waste transfer station operator – receives waste at too low a gate fee, before the waste leaves their site let alone has a chance to be exported. From that point on, since there are insufficient funds to subsequently treat it all, unless the operator is able to fund the shortfall from reserves, it becomes inevitable that some of the waste will become abandoned, if not through bankruptcy then through desperate illegality.

This is the risk that needs protecting against, and I see an argument for waste transfer station operators above a certain scale having to make a financial bond available to cover the cost of onward treatment of waste until such treatment is complete. After all, that’s exactly what waste exporters have to do (via TFS certification) to reduce the risk that waste might be abandoned after export, and to ensure that if for any reason it should be that the funds are available to repatriate it for treatment. In order to protect both human and environmental health – and indeed the reputation of respectable transfer station operators – it seems prudent and logical that we should guard against the domestic abandonment of waste in the same way.