FUNDING FOR INCINERATION
114. Many witnesses claimed that incineration had
been, and continues to be, in receipt of large amounts of public
money which are either not available to other options or are more
difficult to attract.
Robin Murray told us that the existing instruments available to
fund new incineration capacity were "like financing an abacus
development programme when we have an electronic revolution around
Public Interest Consultants detailed the incentives available:
"the NFFO support; the
issue of Packaging Recovery Notes; Private Finance Initiative
grants - which are being used almost exclusively for incineration
centred projects; rate relief on incinerators; the classification
of bottom ash as inactive for landfill tax; and possibly still
the Climate Change Levy exemption."
This point was explicitly acknowledged by officials
from the DETR who said, simply, that "we recognise that the
level of support for incineration is greater than the level of
support for recycling."
Robin Murray told us that the net effect of these schemes for
the Kidderminster incinerator was that it received £100 million
of public money out of the total cost of £500 million.
115. As we have already noted, incineration is a
capital-intensive technique and many witnesses argued that, as
a result, it was effectively more eligible for Private Finance
Initiative funding than other, less capital-intensive techniques.
This point too was effectively acknowledged by officials from
the DETR who noted that the PFI rules had now been "tightened
up" to ensure that an incinerator forms "a properly
balanced part of the overall package."
The DTI memorandum lists the new criteria, the relevant one being
that the PFI bid must:
central place of recycling and composting in waste PFI applications.
Proposals for incinerators must demonstrate that all opportunities
for recycling have been considered first, and should include proposals
for combined heat and power where possible."
Although this is clearly an improvement, the Minister
told us that "most, if not all" of the eight PFI projects
which have been approved since the change of rules have still
Nevertheless, Mr Timms was confident that the new criteria would
be reflected in future bids. The nature of the PFI system is such
that it will continue to end up funding large-scale incineration
or large Materials Reclamation Facilities, rather than the incremental
building-up of kerbside recycling facilities.
116. We welcome the Government's amendments to
the rules for Private Finance Initiative funding and expect these
to be fully enforced to ensure that incineration plays only a
moderate role in most bids. Further, the Government should examine
whether the PFI rules can be changed so that long-term improvements
in recycling and composting facilities can be funded from this
source. If not, we recommend that the role of PFI funding for
waste management be progressively reduced.
117. A further aspect of PFI funding raised concerns:
in many cases, PFI funding has been approved before planning permission
for an incinerator has been granted. Not surprisingly, this has
provoked resentment from local communities who feel that they
are being presented with a fait accompli and are being
bounced into accepting a facility without true or full consultation.
Consultation must be pursued before seeking PFI funding.
We recommend that PFI approval not be given until planning
permission has been granted for the facilities required.
118. The other aspects of subsidy to incineration
rest largely upon its classification as a source of renewable
energy. Proponents argue that energy from waste is renewable on
the basis that it displaces fossil fuels, thereby producing a
net reduction in emissions of carbon dioxide, the principal greenhouse
gas. Critics argue that the net reduction in emissions is not
large: for example, Greenpeace stated that energy from waste incineration
produced 80% of the emissions produced by a fossil-fuel power
Leaving aside the question of emissions, Ms Hewitt, the DTI Minister
told us that a renewable source of energy is one which is "continuously
and sustainably available"
and this point was echoed by Stephen Timms, the Treasury Minister.
Mr Meacher seemed less convinced, noting that "there is still
the question about the conceptualisation of energy from waste
and whether that is renewable."
Certainly, it is difficult to feel comfortable with a system of
renewables classification which categorises energy from waste
alongside solar, wind and wave power. Some witnesses argued that
by classifying energy from waste as 'renewable', these other sources
were being deprived of funding.
119. This confusion over whether energy from waste
can be classified as "renewable" seems to extend into
the different schemes of taxation, funding and targets. At present,
energy from waste incineration is being counted towards the Government's
target of generating 10% of electricity from renewable sources
by 2010 and the DTI estimate that it will fulfil around one-quarter
of the target.
Indeed, we strongly suspect that the discrepancy in attitude towards
incineration between DETR and the DTI which we have noted elsewhere
is the result of DTI's need for incineration if it is to achieve
its target on renewable energy.
120. Energy from waste will be exempt from the Climate
Change Levy when it is introduced in April of this year on the
basis of its classification as 'renewable'. Incineration has also
qualified for subsidy under the Non-Fossil Fuel Obligation, receiving
some £420 million under this scheme.
However, it is now proposed that it is excluded from the successor
scheme, the Renewable Energy Obligation, on the grounds that:
within the Renewables Obligation would have high dead weight costs
for any new projects it would bring forward, but that inclusion
within the climate change levy definition could produce a small
but worthwhile stimulation effect..."
On the other hand, the Energy from Waste Association
told us that it was "absolutely vital" that energy from
waste qualified for the Renewable Energy Obligation. However,
David Tuthill from the Essex Waste Disposal Authority commented
"Because of the number
of subsidies which have in the past brought down the gate fees
of incinerators the industry has the view now that the level at
which they have to bid is now so low that it is a commercial enterprises
and the number of subsidies could disappear without affecting
121. There is a real question about establishing
the right balance of encouragement for energy from waste so that
it does form a limited component part of the waste strategy. But
we do not accept that energy from waste incineration is a renewable
form of energy. Even if one considers that it meets the technical
definition of renewable energy, it utterly fails to meet what
might be called a 'common-sense' interpretation. A waste stream
is only 'sustainable' in the most twisted definition of the word
since sustainable waste management has as its cornerstone the
minimisation of waste, and the explicit maintenance of waste streams
for the purposes of incineration is in complete contradiction
of this principle. By classifying energy from waste as renewable
energy, a signal is sent to the public and business that it is
acceptable to continue producing waste because 'renewable energy'
is generated from it. We therefore recommend that:
- energy from waste incineration be excluded
from counting towards the target for 10% of electricity to be
generated from renewable sources;
- the Government's exclusion of energy from
waste incineration from the Renewable Energy Obligation proposals
- the exemption of energy from waste incineration
from the Climate Change Levy be withdrawn.
122. Despite some changes to the various measures,
we are very concerned that incineration may be being favoured
by the structure and nature of fiscal instruments. There must
be no subsidy to the growth of incineration. If fiscal instruments
favour the development of incineration, then the result in 20
years time could be a large and overbearing incineration industry
which effectively crowds out the more attractive options of minimisation,
re-use, recycling and composting.