Examination of Witness (Questions 21 -
39)
MR PETER
JONES
TUESDAY 24 OCTOBER 2000
Chairman
21. I welcome you to the second session this
morning. Can I ask you to identify yourself for the record?
(Mr Jones) Good morning, ladies and gentlemen.
I am Peter Jones and I have been a director of Biffa Waste Services
since I joined the company almost 12 years ago. I have worked
in industry for my whole working career, generally in industry
sectors undergoing significant upheaval due to supply, demand
or technical pressures.
22. Thank you very much. Everyone is talking
about a step-change in this sort of area. Do you think the Waste
Strategy makes that step-change?
(Mr Jones) We make a point in our submission, Chairman,
that I suppose in some ways we are a little like Oliver Twist,
we are always asking for more once we see the final document.
As a company we certainly feel that the Waste Strategy, as it
has been released, could be much more substantive and much more
strategic. I think the document bears all the hallmarks of a very
positive and proactive DETR looking at areas where they can expand
in areas under their control, and there have been some very good
moves in terms of strategy targets, trade and pollution permits,
a more balanced approach in terms of waste to energy and, indeed,
with the DTI on WRAP. There are four strategic areas where we
would have hoped there would have been much clearer indications
of where the nation is going over the next 10 or 20 years. The
first of those is in recognising that producer responsibility
lies at the key of the market disfunctionalities we have in creating
end use markets by relocating the responsibility for end use markets
with the major industry sectors that are already consuming these
products. That causation and chain does not yet exist, and work
is needed there, of course, with buy in from the DTI, because
that involves cost pressures (transferring the costs on to industry).
Maybe that is why it is only mentioned about halfway through Volume
I. The second area is in the whole area of fiscal instruments.
There are no single measures in this whole debate which are going
to take us from where we are to this magical Valhalla of higher
recycling rates. That, of course, involves the buy-in from the
Treasury. At the moment we see, in our view, around 11 different
fiscal instruments involving end of pipe taxes, regulatory taxes
and front-end virgin input taxes all being introduced on to industry
in a discordant un-coordinated fashion, which, of course, if they
were joined-up between the DETR, Treasury and DTI, could actually
get us a long way down this road. The third area where we detected
a lack of holistic thinking is really, in part, linked to this
whole debate about waste to energy and this very, very narrow
interpretation that waste could go to large scale mass burn plants
with energy recovery. We believe we are using 160 million tonnes
of carbon in this economy from non-renewable sources, (fuel, diesel,
petrol, natural gas and so forth) and at the back end of the economy
we are rejecting over 100 million tonnes, (although the data is
very vague in this area) but certainly over 100 million tonnes
of carbon. If this is going to be a national Waste Strategy with
buy-in across government, then we would have expected to see some
proactive debate about how these two major carbon masses—each,
of course, with substantially different calorific values—can
be sorted. Then, as a waste operator, the fourth key areas where
I think there could have been much more strategic focus is in
the fact that it dwells excessively on end market technologies,
or end exit technologies, and fails to ignore totally the fact
that one has to design the logistics and collections infrastructure,
jointly, and, indeed, behind that, public attitudes and education
into a particular technology fix. We believe a major opportunity
was lost in not resolving the issue of waste collection authorities
being separate to waste disposal authorities. That disfunctionality
is leading society via the lowest common denominator to mass exit
routes. Certainly on my travels around the country, there is clear
political disagreement (for political, technical and engineering
reasons) as how we can make a more complex technological and logistics
infrastructure work and take up a superior environmental paradigm
compared to energy from waste systems.
Chairman
23. You raised a lot of issues, first of all
on producer responsibility, could you explain to me why it is
logical to have an end-use Directive for motorcars when we appear
to have quite an efficient recycling system for old cars, yet
we do not appear to have an end-use Directive for chewing gum,
which it seems we have no control over where it is dumped?
(Mr Jones) That is pretty focused. I would challenge
your assumption that we have an efficient working system for cars.
We certainly have an efficient internalised system for recovering
old cars, because traditionally they have had economic value.
If we look at the number of scrap sites that are around this country,
and we conducted a valuation on the social cost of the pollution
those sites have triggered, then I think the revenue has been
enjoyed by that reprocessing sector over that last 100 years will
pale into insignificance compared to the cost of cleaning up some
of the areas where they have been doing business. Clearly the
recent rationalisation in that sector will address those issues,
because we now have some very large and responsibile companies
emerging. Your point on chewing gum is equally valid. The best
example I can give there is this public notion of risk. There
are various ways of evaluating this risk or danger. Much the same
goes for people's exposure to chewing gum versus motorcars. They
assume that motor car recycling is not a problem because it happens.
They see a market failure in chewing gum and, therefore, they
believe there is a problem. Environmentally, of course, in terms
of LCA then it is going to be very difficult to say to the manufacturers
of chewing gum that they are liable. Nevertheless, it could quite
easily be the case under producer responsibility that the manufacturers
of chewing gum should fund local authorities or directly undertake
the task of using liquid nitrogen to remove that material from
the pavement. I see no problem with implementing those sorts of
systems in the framework of producer responsibility, certainly
in major urban areas.
24. You wanted to rationalise local authority
responsibility, who gets it?
(Mr Jones) One of the problems in this whole debate
that people fear about waste is it is taking us into scale. People
do not like scale, they feel politically disenfranchised when
decisions have to move up any sort of chain which is geographically
remote or politically remote from their ability to influence decisions.
We need to have a dialogue in waste on where the appropriate environmental
as well as financial economies of scale operate and where we should
be selecting those trade-offs. I believe that is an operational
issue. What we have to do is to leave the political task firmly
at the level of waste collection authorities. The closer we can
keep this politically to the man and woman on the Clapham omnibus
the better it will be. Those people are being forced or obliged
to make decisions in areas of operational or technical expertise
where I suspect they feel they have very little technical support
or qualifications to comment on what is the most appropriate course
of action.
25. The last thing, you made a plea for joined-up
Government and then criticised various departments. Does the Department
of the Environment get six out of ten?
(Mr Jones) I would give them eight out of ten in terms
of being able to drive policies through. That score rating would
go up compared to the original discussion documents. I believe
they are in something of a straitjacket because we desperately
need to develop solutions for different materials by the use of
certain fiscal instruments. Landfill taxes are totally irrelevant
to the pharmaceutical industry. Outside waste has to be taken
in conjunction with the issue of our carbon taxation. If you look
at the use of cement as an integral element in the management
of end-use waste streams, for good or ill, then one has to take
that in the context of carbon trading and green energy issues.
We are talking here about a much more macro approach to resource
efficiency in the general economy. You cannot just excise waste
because the economic drivers in that particular area impact on
things that the Treasury are doing or the DTI are thinking of
(in terms of susceptible sustainable problems).
26. Two out of ten for the DTI?
(Mr Jones) No, I think the DTI have swung around significantly.
They are now working, from my experience, very closely with the
DETR. We are now talking about resource efficiency in the DTI
publications. We are seeing close co-operation in sectoral sustainability
strategies, indeed, more dialogue between the DTI and the Environment
Agency I suspect in terms of regulation, planning consents and
the genuine cost to industry. One issue that is driving that process
is the fact that it is dawning on the private sector that very
little of this environmental cost, the so-called externality costs,
will be driven direct from Government to us as private consumers.
There is a marked reluctance to charge the householder. There
is a marked reluctance to apply energy taxation at the level of
the householder. We see that the whole thrust of the environmental
taxes will be driven down the industrial supply chain to this
country. They will then drive the relevant efficiencies. The big
problem, dare I say it, I see is in the Treasury. This has been
commented on by others. Indeed, civil servants responsible for
the operation of the Treasury have gone public, in the sense that
since it lost its involvement with setting interest rates the
Treasury is now going to have to become much more proactive in
how budgetary fiscal instruments are going to impact on the way
we solve issues in these industrial supply chains. I see little
evidence of that, other than, obviously, positive statements coming
through the Budget 2000 statement. There is little real evidence
that they fully understand the breadth and depth of this issue
yet.
Mr Blunt
27. Are the financial resources available, in
your judgment, to deliver what is sought by the Waste Strategy?
If they are not, where do you think those financial resources
should come from?
(Mr Jones) Certainly at macro level if you look at
the turnover of the waste sector we are talking about £4
billion, which is about half the turnover of Tesco. We are not
talking big numbers here. Most waste in this country, the 80 million
tonnes that is disposed of to landfill, is collected, managed
and disposed of for about £50 a tonne. I think that most
of my peers in the industry would recognise that for a further
£50, maybe topside £100 a tonne, then we could achieve
all of these objectives. You are talking about a cost to the nation,
if you like, in terms of inflationary pressures of between £4
billion and £8 billion. That is in terms of running costs.
Implicit in that is funding the technology. You can either have
a dozen large incinerators which burn a quarter of a million tonnes
each (which will cost you around three billion) or you could have
a substantially increased number of smaller gasification plants.
The structure and shape of that scale of investment and the geography
would very much depend on the policy selected.
28. You still have not told me where the financial
resources would come from?
(Mr Jones) It would come from the private sector.
We see ourselves as the largest company in the waste sector actively
committing investment funds. What we need for that process are
long-term contracts, either up the supply chain, in terms of a
supply of waste or recoverable product, and then we enter into
strategic partnerships with people down the supply chain.
29. If the nation decided to double the amount
of money it spent on disposing its waste from £50 to £100
a tonne, we could achieve all of the objectives set out in the
Government strategy. You have still not said how or where that
money will be raised from. What would your suggestion be?
(Mr Jones) At the moment we are seeing £1.2 million
being volunteered by Gordon Brown in relation to household and
domestic waste. In terms of other material you would be looking
at the industrial and commercial sector. That 1.2 billion has
been committed over the next three years and it is uncertain whether
all of that is purely for waste management, it is for wider environmental
issues. Under the framework of producer responsibility, if you
made people that produced packaging, produce cars, produce tyres
and produce all sorts of tangible objects in society, then the
liability on the municipal sector, on the public sector purse
would drop. It would be encumbent on the tyre industry or the
packaging industry to install those systems itself. In previous
submissions we suggested that that would reduce the cost of the
municipal refuse sector by about £500 million a year. Indeed
in Norway local authorities do not fund the recovery of electronic
and electrical scrap. In 2010 car manufacturers will fund the
recovery of cars, that is a natural process because then that
drives improvements in the supply chain, in terms of material
content, weight and, indeed, risk in terms, (as you are seeing
now) with electrical and electronic risk. Immediately the industry
is seeing that it is having to fund that process (and they are
now putting up a spirited defence in favour of liquid crystal
displays) as soon as they are responsible for taking those materials
out at the end of the supply chain, you will see a revolution.
You will see those companies evaluating whether the utility benefits
of using these high risk materials, (much of which could disappear
into energy from waste plants and mercury, will "volatilise"
in those plants). You will see them taking a decision as to whether
the utility benefit of those materials is worth the cost that
they will be getting for taking them out when those products are
scrapped. If they think it is, they will leave those products
in and we as consumers will always pay. What I am not sure of
is whether we will be paying the Government through increased
taxes (because they are going to introduce subsidies or support),
or whether we as consumers are going to, (which I would prefer),
pay for this bottle (indicates)—including the cost to the
glass manufacturer picking it up at the end of its life. It is
a completely revolutionary way of looking at things. Why would
we argue for that? As a company we believe that you do not get
economies of scale in terms of money, cost or environmental impacts
leaving the reclamation plants to deal with 500 or 600 waste collection
authorities in this country. It should be with two major plant
manufacturers or one sector body. If you look at the debate on
glass and the end market for glass, Valpak this week said they
can create a demand for all of the glass that is in this country
by using it in roads and they are supporting that through their
scheme. I said to the glass industry seven years ago, "If
you do not take ownership in the form of producer responsibility
for this glass then you could find that no glass will turn up
at your reprocessing plants because others will attach greater
value to that that glass". I think in three or four years'
time the glass industry will be facing higher energy bills, higher
costs in diesel to move virgin sand and use natural glass to melt
sand and raw materials. They should have taken ownership of glass
reclamation years ago.
Mr Olner: They could make plastic bottles.
Mr Benn
30. Mr Jones, you have referred in your memorandum
to concerns you have about recycled glass materials. You then
refer to the case for virgin input taxes to increase the price
of using renewable materials to re-balance the market. Which materials
would you start with?
(Mr Jones) I am not going to be very popular here.
We have seen that in aggregates. Aggregate tax is levied on a
per tonne basis. Theoretically you have best impact on the materials
that weigh a lot (by definition). You would not levy a virgin
input tax on weight on the plastics industry and, indeed, their
capability to monitor those flows, because fast moving switches
of import supplier would be very difficult to trace and would
be a bureaucratic nightmare. Certainly issues like the glass area
could, in fact, be one of those. It would largely relate to high
density products. If you look at what is happening in cardboard
and paper then what is happening in the market is that we as a
company have a strategic partnership with SCA who are the biggest
suppliers of newsprint in the country. What you are seeing is
people like SCA recognising that they want to sell more paper.
They have the technological skills to recover or to use recyclate,
but they do not want to invest in the logistics and infrastructure.
Companies like us who drive down the cost of recovery are forming
natural partnerships with these people. In some cases virgin input
taxes could accelerate that process. I am not a great believer
in taxation. As we said in our submission, the approach should
be a clear statement going back to joined-up Government and that
maybe in 2006 if we do not achieve those targets virgin input
taxes would be considered for one, two, three, four, five products.
It is often the threat or the statement of threat that has as
much impact. We do not need to self-inflict wounds on ourselves
through inflationary pressures just for the sake of doing it.
Certainly in the case of the landfill tax there should be a clear
statement that this would rise to European levels. If that statement
were made in the next budget statement or next year, that it would
be coming in in 2007/2008, that would have a galvanising effect,
much in the same way of putting in the tax itself. I would give
industry plenty of warning that, I think, is something that the
DTI would champion.
31. What additional measures do you think are
necessary in order to get recycling rates in this country up the
European levels? Do you think what is in place in this Strategy
currently is sufficient to achieve that?
(Mr Jones) No. We are not alone in maintaining this.
There have been significant straw polls now in our industry which
suggest that landfill taxes of £25 and above would accelerate
a substantive increase in recycling from industrial and commercial
sources. What you would have to do is look at front-end mechanisms.
This is where the role of the Treasury comes in. We would support
the case for a Green Tax Commission that actually accounted for
the funding in the economy, so that the proceeds of the so called
"sticks" could be refunded to fund curbside reclamation
systems, so that the financial balance was neutral. We would be
in favour of that. We would not be in favour of just landfill
taxes per se, because they represent a transfer tax on
industry. If that was just going to be rebated in the form of
national insurance contributions the biggest gainer is the National
Health Service, the teaching sector and central and local government,
because they are the biggest employers in the country. That does
not achieve any sensible environmental sector objectives.
Mr Brake
32. What role, if any, do you see for incineration
in the Sustainable Waste Management Strategy?
(Mr Jones) Volume 2 of the Strategy document was very
good insofar as it painted a much broader picture of the available
technologies in this "bucket" of incineration. We are
very dubious about the role of very large incineration plants,
basically because there does not seem to be much technical or
economic sense to us. I am not going to comment about the pollution
issues because I am not qualified. There does not seem to be much
technical or economic justification in building plants that generally
cost around £80 to £100 million where the operators
freely acknowledge that 15 to 20 per cent of the material going
into that plant will not ignite. That is basically aggregates,
ferrous and non-ferrous products and water. There is an awful
lot of water going into these plants. It seems to me that it is
pretty daft to actually build something that is already 20 per
cent bigger than it needs to be, because you just have to shovel
all this stuff through that goes on a big heating journey. The
second issue is around the financial one. We believe that the
key to this whole energy debate is basically about front-end sortation.
If you want to adopt an approach which implies the precautionary
principle you should put all of your resources into quality control
in the front-end segregation of materials. The more you amalgamate
those materials—as is the case in landfill and anywhere
else in the waste industry—any dustbin man worth his sort
will tell you that you can get very strange cross reactions taking
place. So the rule is front-end segregation. Whether that is financed
by local authorities or whether it is financed through producer
responsibility is a moot point. If you then undertake that front-end
sortation we believe that there is probably about three million
tonnes of material in the economy where we need to be persuaded
that there is even an environmental case for doing anything with
that material other than converting it to energy, (and I am referring
to contaminated plastics, packaging in the home, material that
is not contaminated with heavy metals or anything) because they
would come out, you would expel all of these dangerous, tricky
materials that volatilise or whatever. When you look at much smaller
plants, you could be looking at technologies which I must admit
are in their infancy. We are certainly looking seriously at anaerobic
digestion, because we are part of a group that is also a leading
United Kingdom authority on that in the sewage business. We would
certainly look again at gasification systems. I am talking here
about much, much smaller plants, similar in scale to the one we
have on the Isle of Wight. The technology in these plants is simpler
because the effort is applied to front-end sortation. I do not
necessarily see that that cost should be on the public purse,
because if you look at the power consumption in this country from
industry, half of the power consumed is chemicals, engineering
and other sectors. We are certainly looking at opportunities to
talk to the automotive sector, these big energy hungry operations,
and we can bring in the material that is not waste, it is high
calorific material that can be transformed into gas which can
then be converted into combined heat and power. We see that there
may be opportunities for that in the market. Again, it requires
a complete lateral approach to converting carbonaceous material
which is not purely from the household, into energy in those places
and industries where energy is going to be needed.
Chairman: We are a little bit tight for time.
Can I ask you for, perhaps, slightly shorter answers?
Mr Brake
33. We have heard from our previous witness
that there could be somewhere between 112 and 166 incinerators
built as a result of this Waste Strategy. Do you have a view of
whether that is going to be over capacity both in terms of number
of plants and also, as you have already hinted, size of plant,
and what the cost of that over capacity might be?
(Mr Jones) I cannot think that more than 100 of these
very large plants burning more than 100,000 to 200,000 tonnes
will be built. There could be scope for 100 plants burning, maybe,
20,000 or 30,000 tonnes. The cost of that? They come off the conveyor
belt at around £10 million a piece, I believe. I can provide
you with a note on that afterwards. Effectively, I think it is
very dangerous, on the basis of the precautionary principle, to
commit large sums of capital investment for 30 years. If you look
at the incremental costs on these large plants, £30 million
of the costs (on the acceptance of the manufacturers) is tied
up with end of pipe clean up systems. If you had front-end sortation
you would save that money. That £30 million spread typically
across 250,000 households is about £120 cost per household,
stretching over 30 years. You could put in curbside recycling
systems, as we and, certainly, I believe, the Community Recycling
Network agree, at £10 per household per year, whilst you
actually spend much more time in evaluating these smaller plants,
(which could be associated with industrial demands for energy),
rather than be put in at a cost to local authorities.
34. Do you know whether the Environment Agency
is geared up to assist with this process of front-end sortation?
(Mr Jones) We have separately commented on the Strategy
document issued by the Environment Agency, but I believe in this
area they tend to be gearing up for a massive implementation programme,
which, linked to IPPC—Integrated Pollution, Prevention and
Control—is causing them to lose the plot a little. I think
there is a role for the Environment Agency to become involved
in this more strategic debate, because, after all, they will be
responsible for training and developing the people that could
be regulating these plants in the future. At the moment they are
very much ex poste. They are after the event. They do not
seem to be contributing to that. I am sure that under the new
Chairman that will change.
Christine Butler
35. Out of the waste arising, what percentage
is there of non-municipal waste, including hazardous waste?
(Mr Jones) I am waiting for the latest figures from
Customs and Excise, but the latest data we have is that 82 million
tonnes of material is going to landfill in total. There is 28
million tonnes of domestic refuse, or municipal refuse. Of that
about 20 to 25 million tonnes is coming from households. We are
sceptical about this growth figure, which is quite an important
point because it is at the heart of many assumptions in the document.
We believe that a lot of this so called growth in local authority
waste is occurring as a result of commercial waste being transferred
in to the cost liability of local authorities through civic amenity
sites.
36. That is why I asked you that question. Do
you think we are overlooking something very important here, both
in Government strategy and in what is happening on the ground,
and how local authorities decide it? Do you not think that we
should be talking a little bit more about the commercial sector,
the non-municipal waste? What I was going the ask you in particular
was; to tackle that, do you think we are really applying sufficient
resource efficiency measures? Where do you think, for instance,
Government subsidies in one shape or another might come in there
to tackle obvious problems?
(Mr Jones) On the first point, we funded through the
landfill tax a study in the Bristol area—on the analysis
of input to civic amenity sites. There is no doubt to our minds
that this tonnage increase has occurred, not on the dustcarts
that are coming from the households, but what are referred to
as the bulk vehicles being delivered into our landfills from CA
Sites. They have contracts with waste disposal authorities or
unitaries. So there is an urgent need there for some money to
be applied to get to the bottom of that problem immediately. In
terms of commercial streams, the great paradox of this whole debate
has been that sequential waste strategies have emerged around
the area of household waste. Industrial and commercial waste is
much more significant, and more importantly, the economies of
scale that are going to drive the recovery of newspaper, glass
and other materials in the domestic stream are going to be driven
from putting in segregation in the industrial and commercial sector.
That will not happen until companies see that high landfill taxes
are going to be used to beat them with "a stick". Certainly
in the case of glass, that is why I personally developed the bottle-back
system with the brewers. If you want a low-cost, an environmental
low-cost, glass recovery system in this country, or plastic or
anything else for that matter, you go to the biggest single producers,
(which in that case was the brewers). Low-cost plastic reclamation
and market link-up will come, possibly, from the dairy or food
sector, and, of course, this is where producer responsibility
will transform the whole thing.
37. That would not be such a problem for commercial
and non-municipal waste, but it gets mixed up when it gets to
the household, but outside of that it does not sell much so there
is not so much excuse there for dealing with the problem?
(Mr Jones) We are pretty convinced that the costs
that local authorities are paying for glass reclamation at the
moment are well over what they need to be paying. They are certainly
in excess of what the brewers are paying. Through economies of
scale there could be mechanisms which would drive that process.
Mr Olner
38. Really, what you are saying, Mr Jones, is
that the Strategy is over focused on municipal waste?
(Mr Jones) It does leave one with that impression,
but there are references to industrial and commercial and, certainly,
we, corporately, are driving economies of scale through industrial
and commercial waste. That is why we have traditionally majored
in that sector.
39. You mention some of Biffa's schemes on getting
this stuff collected. Do you think there is anything else we ought
to be able to do to make those industries more sustainable?
(Mr Jones) Industry will work on the lowest-cost basis.
They will take the lowest cost option, regardless of the environmental
output. There are very few companies, in our experience, that
are adopting environmental best practice where it is significantly
more expensive for them in terms of their bottom line performance.
So most of this process will be driven by more sticks than carrots,
but there are opportunities for much greater warnings in that
area and more informed debate. Certainly within this loose bracket
of "industry" one is looking at the environmental performance
of major companies. I think the major PLCs have a critical mass
to drive this process, as, indeed, has been in case in brewing
and will no doubt be the case in retailing where the food retailers
have driven issues in terms of their procurement strategy, composting
and so on.
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