Transcript EEN presentation - Australian National University

Waste Policy, MBIs & misguided environmentalism
Economic & Environment Network Seminar
3 November 2005
Drew Collins
BDA Group
Economics and Environment
Historic policy focus on waste collection & disposal

Governments were primarily responsible for waste
collection & disposal


costs met through broader revenue collections (ie; no user pays)
Urban fringe landfills often had poor environmental
controls resulting in environmental & amenity impacts
 Budgetary pressure and landfill impacts led to policy
approaches to reduce volumes to landfill & associated
landfill impacts
BDA Group
Reforms have reduced landfill impacts

Landfill regulation, technological developments & new
management practices have significantly reduced
environmental impacts of landfilling

Amenity impacts also reduced with fewer (larger)
landfills, bigger buffer zones & often remote location

Budget positions also improved through privatisation of
parts of waste collection & disposal systems and through
pricing reforms
BDA Group
European landfill externalities ($A/t waste)
$20
$15
$10
$5
Modern
$0
D
sp
is
la
ce
am
m
en
en
t
ity
te
ac
Le
si
is
em
Po
llu
tio
n
di
Ai
r
-$10
ha
on
s
O
2
C
-$5
Old
BDA Group
But communities continue to call for reductions
in waste volumes

Communities seeking to embrace ‘sustainability’ and
waste volumes explicit indicator of level of resource use

Waste reduction seen as a material way everyone can
contribute


95% of Australian households recycle

19% of NSW people see waste management as one of the top 2
environmental issues for the State
Governments have been complicit in promoting a ‘waste
crisis’ but have had to reinvent the underlying rationale
BDA Group
Waste policy goals have now shifted ‘upstream’


Upstream benefits associated with reductions in waste
volumes can include;

Lower emissions associated with the extraction, processing &
consumption of goods

Lower resource use
This has prompted various life-cycle analyses to
demonstrate the extent of such benefits & efficacy of the
new policy position

A prominent Australian study was undertaken in 2001 by NolanITU investigating the benefits of kerbside recycling
BDA Group
Environmental benefits of kerbside recycling
$/t recyclate (Nolan-ITU 2001)
Traffic
$300
Landfill
$200
Greenhouse
Water emissions
$100
Resources
$0
Air emissions
BDA Group
The life-cycle studies confirm benefits are
upstream !


The Nolan-ITU findings were extended by SKM in 2003
for EcoRecycle Victoria to consider benefits across all
waste streams

Estimated impacts significantly lower but relativities between
impact categories consistent

Despite significant uncertainties surrounding estimated benefits,
the orders of magnitude are instructive
Downstream impacts are now very small


… although ignore illegal disposal impacts from new policies
Upstream impacts dominated by emission externalities
BDA Group
New policy positions

Most State & Territory Governments have now adopted
waste minimisation as a policy goal &:

Adopted a ‘hierarchy of waste’ ideology

Set aggressive targets for reductions in waste volumes to landfill,
down to zero in some jurisdictions

Adopted a range of market instruments to promote waste
minimisation
BDA Group
The waste hierarchy

The hierarchy ranks waste management methods in a strictly
descending order of preference:

source reduction

reuse

materials recycling & energy recovery

landfilling of waste (the last resort)

Reflects a technical goal of waste minimisation rather than
economic efficiency

Obvious end point is zero waste

Yet nowhere else (eg; health, safety, crime, water quality, etc) do
we ignore cost & benefit tradeoffs if determining policy goals
BDA Group
Market instruments

Market instruments include advance disposal fees,
deposit-refund schemes, performance bonds, landfill
levies & variable user collection fees


Recent interest in tradeable certificate systems for a range of
product specific wastes (telephones, computers, whitegoods, etc)
Landfill levies have been extended to most jurisdictions
& are being increased well beyond estimated
(downstream) landfill damage costs
BDA Group
Landfill levies by State - July 2003 ($/tonne)
State
Metropolitan
Rural / Provincial
Municipal
Other waste
19.80
19.80
11.40
11.40
Victoria
5
7
(industrial)
3
5
(industrial)
Queensland
0
0
0
0
Western Australia
3
1
(inert)
0
0
10.10
10.10
5.05
5.05
0
0
0
0
NSW
South Australia
Tasmania
Municipal Other waste
Notes: NSW - levy rates in both metropolitan and extended areas will rise to $25/tonne by 2012.
BDA Group
Rationale for levy increases reflects policy shift
For example;

The NSW levy was originally introduced to
‘internalise the environmental impacts associated with
disposal to landfill’ (NSW EPA 1996)

More recently the NSW Governmnet has indicated that the
purpose of the levy is to
‘promote the diversion of waste from disposal to other uses
and to generate funds for waste management programs’
(NSW EPA 2001)
BDA Group
Similar use of landfill levies internationally
Professor McGlade, Executive Director, European
Environment Agency
Market instruments have been employed in the EU
to get actors to comply with waste reduction &
recycling targets, rather than to ‘internalise
environmental costs’ per se.
If targets are not met, instruments should be
strengthened.
BDA Group
So what’s wrong with the policy approach?
(1) The likelihood of net benefits is taken on faith: ‘ice-
cream is good, more is better’
(2) The policy metric – tonnes of waste to landfill – is
very blunt
(3) Market instruments, such as landfill levies, are being
poorly targeted
(4) Upsteam impacts will most effectively be addressed
through upstream policies
(5) The community is directing its enthusiasm to areas of
low social payoff
BDA Group
(1) Ice-cream is good, more is better

There is no genuine attempt to balance social costs &
benefits, rather the religion of waste policy decrees that
any reduction in waste disposal is beneficial


Waste minimisation objectives rather than welfare optimisation is
seeing arbitrary disposal goals being followed by the inevitable
end-point of Zero Waste targets
As in other areas of public policy, goals should be
directed at optimising social welfare in seeking to
balance the marginal benefits and costs of change

This would fundamentally change waste management strategies
being pursued in Australia
BDA Group
(2) Tonnes of waste to landfill is a blunt policy
metric

Benefits associated with deduced waste disposal are
poorly correlated to weight. Factors influencing likely
benefits include:


Downstream - organic or inert, whether it contains toxic
substances, the technology and management practices at
receiving landfills, etc
Upstream – the component resources, their source, production
processes & costs with virgin versus recycled inputs, cost
structures waste versus recyclate collection, etc
BDA Group
(3) Landfill levies are being poorly targeted

Poor alignment of levies with potential benefits




Generally based on the ‘tonnes’ metric with little differentiation between
waste types
.. yet sometimes a ‘receiving location’ (urban v regional) differentiation
inconsistent with rationale of upstream benefits
Common for levy rates to be reflective of (financial) ‘cost-gap’ between
raw materials and recyclate processing rather than (externality) ‘benefitgap’
Size of cost-gap not discouraging levy increases


Eg: estimated that introduction of UK levy at ₤7 led to economic loss
(costs of changing waste disposal practices) of ₤366m (~0.1 % GDP)
… and usually no account of spillover costs, such as illegal dumping
BDA Group
… Landfill levies

Not directly related to environmental damages or seeking to
equate marginal benefits & marginal costs

Rather are being applied as financial instruments directed at
revenue raising or driving a reduction in general waste
volumes disposed

Unfortunately often touted as economic or market instruments
with the implication that they are welfare promoting

Use of these instruments deserves greater scrutiny!
BDA Group
(4) Upsteam impacts require upstream policies

Policy instruments will be most effective when applied at the
point of incidence of environmental impact (externality) in
supply chains


As instruments become more broadly applied, the link between
behavioural response sought & environmental benefits becomes more
tenuous
Resource conservation is best pursued through natural
resources policy, industrial pollution through industry policy
and only post-consumer environmental impacts through waste
policy

In these circumstances life-cycle analyses would be superfluous as
market prices would guide welfare maximising consumption patterns &
resulting waste volumes would be of no particular policy relevance.
BDA Group
(5) The community is directing its enthusiasm
to areas of low social payoff

In many instances, considerable subsidies & community
altruism are propping up uneconomic recycling & other
waste minimisation programs


These resources could be better directed for higher payoff
It is also influencing other policy areas


For example, water policy is increasingly focussing on
minimisation of water use rather than optimal allocation between
sectors and its overall use
So water ‘saving’ initiatives are variously being pursued at costs
in excess of the opportunity value of water saved
BDA Group
Thank you
BDAGroup
Economics and Environment
BDA Group