Select Committee on Environment, Food and Rural Affairs Minutes of Evidence

Memorandum submitted by Biffa Waste Services Ltd

  Thanks for the opportunity to respond to your enquiry on the subject of fridges.

  Biffa Waste Services is the largest waste management company operating in the UK and can justifiably claim to be the most diverse in terms of its spread of interest in industrial/commercial and domestic collection, landfill, liquid waste stream and specialist hazardous waste management systems. The company has a turnover of £550 million at a current annualised rate. We are a wholly owned subsidiary of Severn Trent Plc with over 110 operating centres throughout the UK. We handle 12 million tonnes of material which is treated, landfilled or recycled on behalf of our extensive customer base exceeding 58,000 in the public, commercial and industrial sectors. Biffa services 20 local authority contracts as their appointed agency for waste collection contracts.

  (A)  An important aspect of our submission is that, in our view, the current debacle is a product not so much of the specifics of CFC legislation, fridges, fridge processing technologies or the specifics of the electrical industry in particular. Rather we are where we are because of a more deep rooted and fundamental malaise in the way in which environmental regulation in the UK is developed, introduced and regulated on a cross cutting basis. This assertion is at the heart of our submission although we are also qualified given our specific track record in relation to the fridge question. Before moving to the former, therefore, I will relate our particular experience in relation to fridges.

  (B)  Annexed to this submission is the chronology of our correspondence with Government from 5 September 2000 through to my correspondence with the Minister of State for the Environment on 14 January 2002. This correspondence explains where we are seeking or offering clarification and ideas which—we believe—could have been acted upon on a consultative basis with our competitors and others in the entire electricals supply chain to arrive at a much better managed framework than we find ourselves in today. The key points of that correspondence are:

5 September 2000: Letter to DTI asking if foams in domestic as well as industrial fridges are covered by appropriate European draft instruments on 1 January 2002. Not formally replied to.

19 March 2001: Letter to Head of Waste Regulation at the Environment Agency. By this stage we are convinced that the regulations will apply within nine months and we point out that "fridges will thus inundate civic amenity sites from January next year". At this stage we were seeking clarification from both DTI and DETR and are trying to involve the Agency in the hope that they will define a code of conduct/operating standards for appropriate equipment to process fridges. Without such assurances from the Agency we as a company point out that we will not invest in the necessary infrastructure since we have no guarantee that others would not undercut us with inferior plant. An English translation of the German code of practice was attached to the letter.[1] No recorded reply.

August 2001: DETR representative attended an Industry Council for Electrical & Electronic Recovery (ICER) meeting and indicated that frameworks for enforcement and standards would be developed once industry had invested in the necessary equipment. We point out to the Agency that no company will make any decision to invest in plant and equipment until either the Agency or DETR confirm the operating standard and minimum performance required for process equipment. No reply to the 19 March 2001 letter had been received so a further letter was sent to the Agency on 24 May 2001 and the final paragraph says it all—"We are desperate to make the necessary applications for planning and licensing consent but we can't make a decision on the type specification on the equipment until you tell us what the standards are. Help!"

17 July 2001: In the absence of replies from the Environment Agency we write to the Minister of State, Michael Meacher, alerting him to the looming problem on 1 January 2002, quantifying that 200,000 fridges per month will cease to go through car fragmentation plants. For the first time we put in our estimate of costs at around £30 per fridge. We reiterate our interest in providing necessary capital infrastructure.

A copy of the above letter was sent to Paul Boateng as Financial Secretary at the Treasury and this we followed up on 30 July 2001 suggesting that local government will be asking to a special precept to fund the expected £60 million to £70 million incremental management cost. An alternative approach is suggested whereby the Treasury and/or DEFRA might consider tendering waste management companies and other interested parties to collection fridges on a national or regional basis which is then managed centrally. Conversely these costs could be offset against landfill tax liabilities as part of an environmental bookkeeping exercise by the Treasury. The Treasury responded to this indicating that various options were under consideration but were a matter for DEFRA/DTI.

26 July 2001: The Head of Waste Regulation Policy at the Environment Agency is copied on the correspondence to the Ministers at the Treasury and DEFRA as well as to Sir John Harman. Still no response has been received from the Agency with regard to our English translation of the German operating specification. Week commencing 20 July 2001, civil servants in DEFRA respond and ask for our suggestions amplifying some of the ideas contained in our letter of 17 July 2001. Specifically we clarified our thinking on the cost per unit (where the £15 to £20 per unit range in Germany was identified as one applying in a mature market framework using outdated technology and reaffirming our belief that £25 to £30 per unit is a realistic long term planning figure.

Various options were proposed in terms of Tradeable Permits and hard data provided in the context of avoided CO2 equivalent from the 1,200 tonnes of CFC material likely to be recovered. The advantages of the Treasury managing the funding and reclamation process centrally—either directly or via DEFRA—is reiterated. At this stage it was becoming evident that cheaper, outdated European technologies were being considered. These latter technologies have a lower CFC agent recovery level and are thus less expensive on capital terms. The manufacturers were also keen to dispose of such technologies into the UK to fund second and third generation equipment needed in the European market according to our intelligence from the offers we were receiving as potential purchasers of such equipment. The key phrase is "either Government wants the best available technology or it wants to fudge the issue by raising the pollution permitted for inefficient plants. If you wish to go down this route tell us now." The message then becomes quite simple—"invest in the cheapest technology without regard to real environmental impact".

21 August 2001: DEFRA/DTI/Environment Agency organise a round-table session of all interested parties in the supply chain at the DTI Conference Centre.

23 August 2001: We follow up with a letter to Anna Stacey of DTI summarising the essential pre-requisites for companies to invest on a speculative basis in tackling the fridge problem. Those pre-requisites are:

      (a)  Clear undertakings with regard to the specification of acceptable processing equipment.

      (b)  Clear understanding of which party has liability long term for paying.

      (c)  Clear assurances on a level playing field with regard to enforcement.

In the course of November DEFRA circulated Draft Standards for foams and storage.

10 December 2001: We ask for clarification on the recommendations for PCB comparators in fridges.

10 December 2001: Referred to Jane Stratford (who is copied)—no further responses.

As of 25 February 2002, none of these basic requirements have yet been responded to. The Annex to our letter offered seven different funding options ranging from full Producer Responsibility brand by brand through to DEFRA/Environment Agency or Government negotiating a national rate with reprocessors and collectors bypassing multiple involvement from local authorities. Follow up e-mail to DTI referred to DEFRA.

14 January 2002: We point out to Michael Meacher that we are now no longer interested in becoming involved (at least in the short term) in investing in the necessary equipment. Nevertheless we write to express our extreme concern at the potential damage which will accrue to our industry by allowing disreputable companies to enter this market place. This letter followed from market intelligence to us that a number of companies with no transparent or long term trading history are now stockpiling fridges in much the same way that others have done for clinical waste and tyres in past years.

We reiterate the three basic requirements for strategic investment to take place in a sensible way. As at the date of presenting our evidence no response has been received to this letter from the Minister although Baroness Young has responded.

This then is the factual relation of our experience as part of this saga.


  We would suggest that although these difficulties occurred in the context of fridges it could equally as well apply to many products which are the subject of extant or forthcoming European Directives in the context of Integrated Product Policy (IPP). Four key strands need improved focus if we are not to repeat this saga with other consumer capital or consumption goods in the waste stream. These are:

    (a)  Single point authority and responsibility. Some of the difficulties which have emerged result from the DTI having primary responsibility for negotiating technical regulatory requirements in Europe and then passing this over to DEFRA without realising the significance of the content of that to which they have agreed. DEFRA probably connected with the significance of acceptance of the regulations but appeared to blame the DTI and left them to go back and renegotiate. Whatever happened we need a single negotiating body with preparedness to take responsibility for proactively driving European regulations through into operational best practice in the UK. We would suggest that the lead body for such initiatives would be the DTI given their technical excellence and their linkage into specific product supply chains in the economy.

    (b)  Regulatory Impact Assessments—accounting for environmental legislation. A broad range of products are or are about to be impacted upon by IPP and Producer Responsibility legislation emanating from Europe (electrical equipment, end life vehicles, tyres, household hazardous wastes to name the more obvious) yet it does not appear to us that sufficient round-tabling is occurring to carry out realistic Regulatory Impact Assessments in terms of logistics and process technologies to achieve the desired recovery/landfill diversion objectives for these products. More importantly once that round-tabled cost has been developed—based on defined standards of plant and equipment operation—the costs should be benchmarked against existing internality levels of turnover for the appropriate product. In the case of fridges the retail market in the UK currently stands at just over £700 million per annum whilst realistic assessments of BPEO solutions to collect and process fridges are in the range of £50 million to £70 million (7 per cent to 10 per cent of industry added value). Similar calculations can be carried out for targeted recovery percentages on insecticides/pesticides/other electrical equipment/end life vehicles—all of which (as accrued average) will probably point to an approximate on cost for the supply chain of around 3 per cent to 5 per cent. Fridges are above this average because of the exceptional nature of the pollutant, the specialist nature of the processing equipment and its relative specificity to the product being processed. These calculations should be carried out in advance of developing regulations in conjunction with manufacturers, retailers, waste companies, local authorities and NGOs and subjected to external consultant scrutiny from the OFT.

    (c)  Funding strategy: Contingent with the absence of sensible RIA/costing estimates is an absence of strategy with regard to who is going to fund these incremental supply chain costs. It must be obvious that there are incremental costs attached to improved sustainability otherwise such systems would be implemented as a matter of course.

      Government needs to pay far more attention far earlier when defining how these costs are going to be passed through to the consumer—will it be permissible to load them through the supply chain as a transparent green management charge or will they be recovered from direct and indirect taxation and remitted via the Treasury and the local authority rate precept system under the Barnett formula? Additionally it would be especially efficient to develop alongside that direct funding strategy the role of indirect instruments such as Tradeable Permits and regulatory controls such as landfill bans, etc.

    (d)  Implementation and enforcement: The fridges saga has taught us that the Agency has a key role to play in defining what it is prepared to accept as minimum operating standards for appropriate technology. It has consistently been reluctant to confirm those standards in the case of fridges and this matches our experience with other new technologies such as gasification systems, anaerobic digestion and the like. We would suggest that until the Environment Agency is in a position to indicate minimum operational standards for such technology and provide absolute guarantees that it can offer a level playing field of enforcement in each of its geographic areas then industry players with an interest in investing in such technologies will hold back until the last possible moment. Instead the Agency will encourage in chancers who will adopt cheap technology options with less than acceptable operating standards. In turn this creates significant communication difficulties with the public and leads to a general loss of confidence—both in the strength of the regulator and the efficacy of the waste sector in general. This is clearly demonstrated as a result of the growing fridge piles and mountains around the country (particularly those created by companies which were not in existence three months before).


  It is easy to be destructive of the process with the benefit of hindsight. It is particularly galling for us to find the UK in the current position given that the warning signs were flagged up nine months or more ahead of what has come to pass. Nevertheless we offer the following as a constructive framework for moving forward in the development of product centred waste strategies in future:

    (i)  There needs to be a proper econometric Regulatory Impact Assessment of each directive drilled down to specific product classes as defined by the appropriate supply chains. These discussions should be developed on a round-table basis involving NGOs, manufacturers, retailers, local government and the waste sector/end life material reprocessors. At the moment considerable exaggeration occurs in estimates of the costs of introducing various European directives. In part this is because particular supply chains (in electricals and electronics or cars) assume that the infrastructure for logistics and processing will need to be introduced specific to their range of products. Clearly this is not the case—much of the transport logistics infrastructure for recovering electrical brown goods from households is no different from that utilised for collecting scrap glass or household hazardous waste in years to come, for instance.

    (ii)  Having arrived at ballpark externality prices those costs should be benchmarked against different levels of target achievement based on percentage recovery rates, levels of pollution or operating standards. Those options should then be related to current internality turnover profiles in the industry to define the relative impact on supply chain and national inflationary pressures.

    (iii)  The round-tabling process should be tasked with identifying preferred cost transfer mechanisms onto the customer supply chain—whether this be in the form of transparent green surcharges, direct subsidies to manufacturers which are reduced year on year on a descending basis or by direct subsidies from Treasury onto local authorities. Either way society as a whole in the UK will pay.

    (iv)  The sectoral management and enforcement strategies should be backed by agreements between supply chains, the waste sector and the Environment Agency and translated through into a cohesive framework, if necessary down to necessary regional and planning infrastructure impacts. The timing and nature of implementation of these regulations for many supply chains has implications in terms of national and international competitiveness and it would be wrong if the manufacture of certain products were withdrawn from the UK on the basis of poorly implemented environmental legislation.

    (v)  Such supply chain/product specific recommendations need to be coordinated within the framework of some form of Environmental Tax Commission so that there is transparency on funding flows and operational standards which can be communicated easily through all ministries to the general public and to the appropriate planning/regulatory specialists. Specifically the objectives of such an Environmental Tax Commission should be to ensure that:

      (a)  In the economic dimension the process whereby price increases for environmental stabilisation are passed through are transparent and acceptable to the Office of Fair Trading and the appropriate regulatory competitive bodies.

      (b)  In the planning framework these initiatives need to feed through the regional offices given that capital investment in process plant requires scale, supported by markets of one million households. These regional initiatives need to interlink with Agency assessments on the scale, effectiveness and risks of available technology.


  Treasury reassurance is needed on their calculations on the costs of extant IPP initiatives in the economy. We believe these are likely to lead to increased environmental costs in a variety of supply chains of the order of £4 billion to £6 billion per annum. The timing and focus of those incremental costs will vary in specific product supply chains but it is important that the Treasury has reassurance as to how those funding flows are to be managed and administered. In the case of fridges, for instance, it is possible that the incremental cost to target levels of emission improvement are agreed at £50 million to £60 million. The Treasury might prefer to offer implementation cost support via a reduction in VAT (if such an arrangement were possible within the EU rules—which they are not at the moment). This would represent a reduction of around 50 per cent on current VAT levels on fridges, a rate reduction which could be cut back progressively over a eight to 10 year cycle period so that at the end of that period the environmental externality costs are fully absorbed in the retail selling price of the product. (Current VAT take on the sale of fridges is around £130 millin per annum.)

  The ETC role would be to ensure that no unfair competitive advantage or market distortion occurs as a result of imbalance in negotiating strengths within supply chains (between manufacturers, retailers, waste sector operators or end life reprocessors)—in short to supply the transparency that is sadly lacking today and resulted in the current difficulties. Unless these structural frameworks are developed we will repeat the saga with TVs, electronics tyres, clinical waste and a host of other products.

Peter T Jones

Director, Development & External Relations

1 March 2002

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