Memorandum submitted by Mr John Doyle
on behalf of Solvent Resource Management Ltd (SRM)
1. INTRODUCTION
1.1 Solvent Resource Management (SRM) specialises
in the recycling of waste organic materials, preferably to a reusable
product but if this is not possible we process wastes into a form
that can be used in a waste-to-energy process.
1.2 In particular, the process is the manufacture
of a secondary liquid fuel (SLF) for use in the cement industry.
SLF is a direct replacement for the more usual fuel, namely coal
and one tonne of SLF replaces one tonne of coal.
1.3 The use of SLF in cement kilns is now
a mature operation in the UK and many other countries. We have
been making and supplying SLF for in excess of 10 years and Solvent
Resource Management (SRM) have participated in two environment
committee inquiries regarding the use of SLF in the cement industry,
giving both written and oral submissions at each inquiry.
1.4 We welcome the announcement of this
inquiry and note that the Committee will look, in particular,
at energy recovery during incineration and wishes to look forward
to what can be done to promote the movement of waste up the hierarchy.
1.5 We would ask the Committee to consider
just one initiative that will give a significant driving force
in moving waste up the hierarchy. If requested, we can give further
evidence either in writing or orally.
2. THE PROBLEM
2.1 Solvent Resource Management (SRM) manufacture
SLF from a variety of organic waste liquids, solids, sludges and
tars. These wastes currently have no other recycling possibilities
other than use in a waste-to-energy process and increasingly,
due to changes in landfill legislation, these wastes are being
diverted from landfill to energy recovery.
2.2 Solvent Resource Management (SRM) also
recover wastes by distillation to make reusable solvents and,
indeed, this is the preferred processing route but many wastes
either have no technical recovery route or they have no uses if
recovered. By-products and residues from the distillation process
are a major and important constituent of the SLF and when viewed
as a whole, the process, whereby a waste is processed to give
the maximum reusable solvent and the residues used in a waste-to-energy
process, represents the current best practice for these wastes.
2.3 Many of the constituents of SLF are
hydrocarbons and Customs and Excise have adopted a policy which
recognises that SLF is a hazardous waste but they argue that it
is also a fuel and, as such, excise duty is applicable. Customs
and Excise also argue that if SLF is used in a manufacturing process,
ie to make cement, then fuel excise duty must be paid. If it is
used in an incinerator without heat recovery to destroy other
wastes, they argue that no duty need be paid as the process is
one of destruction rather than recovery.
2.4 The effect of this interpretation of
the relevant Hydrocarbon Oils Duty Act (HODA) is the exact reverse
of what this Committee is trying to achieve. It provides a financial
incentive to push waste down the hierarchy. Waste incinerated
without heat recovery is tax free. If you recover the heat then
tax is payable.
2.5 Apart from encouraging waste down the
hierarchy, the excise duty often renders waste commercially unrecyclable
for energy use. As an example, there are many tens of thousands
of tonnes of hazardous tars in landfill pits in the UK. We have
the innovative technology to process and use these materials as
a fuel but the excise duty is approximately £26.00 per tonne.
If we add this to the processing cost, it is significantly more
than the coal it would replace and so we won't process wastes
such as these.
2.6 This difficulty has arisen because the
rules and definitions of fuels for Customs and Excise purposes
are written and devised for conventional fuels such as petrol,
diesel, paraffin, aviation fuel, etc. SLF is a hazardous waste
but Customs and Excise argue it can be a hazardous waste under
one set of legislation and fuel under their definitions.
2.7 SLF does not readily fit any definition
but is classified as a "light oil" by Customs and Excise
as this is the only definition that could remotely fit the description
of the waste and, as such, is taxed as a heating fuel at a similar
level as other light oils used for heating. Physically, SLF resembles
a heavy fuel oil, it is black with 20% solid matter suspended
in it and is very viscous due to the tars and sludges incorporated
into the blend.
2.8 We note the pre-Budget policy statement
from the Chancellor of the Exchequer proposed changes to the treatment
of Environmentally Friendly fuels. I am sure the main thrust is
towards encouraging bio-fuels, but SLF could be included in these
changes.
2.9 SLF is also an environmentally friendly
fuel. Its use reduces emissions of sulphur dioxide and oxides
of nitrogen, both of which cause acid rain.
2.10 Every tonne of SLF replaces one tonne
of fossil fuel and produces only half the level of CO2 emissions
produced by coal. CO2 reductions are a prime target of the Kyoto
agreement.
2.11 All SLF is created from wastes which
have been elevated up the hierarchy either from landfill or incineration
without heat recovery.
2.12 The forthcoming budget could include
the changes outlined in the proposed solution below.
2.13 It should be noted that landfill tax
was introduced to encourage waste up the hierarchy. Excise duty
on hazardous waste fuels is about double the level of landfill
tax per tonne of hydrocarbon and, as such, there is no incentive
to move hydrocarbons out of landfill if you double the tax by
using it in a waste-to-energy programme. Worse still, dropping
down one level to incineration without energy recovery saves £26.00
per tonne of hydrocarbon.
3. PROPOSED SOLUTION
3.1 The Hydrocarbon Oils Duty Act (HODA)
places a requirement on Customs and Excise to charge excise duty
on all hydrocarbon oils used as heating fuel and SLF is currently
classed as a "light oil" with a sub-category of "rebated
furnace fuel" and it has an excise rate which is reviewed,
and usually raised, at budget time.
3.2 We are not suggesting changing the law
to stop excise duty being charged, we are suggesting the creation
of another category of fuel which more accurately fits ours which
can be achieved without changing primary legislation.
3.3 At the moment, there are seven categories
of light oil, all with different rates of excise duty, namely:
3. Other unrebated light oil.
4. Ultra low sulphur petrol.
7. High octane (super) unleaded petrol.
3.4 Hazardous waste, such as SLF, does not
fit easily with any of the above categories but is currently classed
as No 5 —Furnace fuel because it certainly isn't any of
the others.
3.5 We propose a further category be created
of "Waste derived fuel" and this to be fully rebated,
giving an effective rate of duty of zero.
3.6 This is not a unique proposal or solution
as there are several categories of fuel such as some grades of
heavy fuel oil which are already fully rebated and SLF is much
more like heavy fuel oil.
3.7 Also, the list is regularly extended
at budget time to include extra categories such as ultra low sulphur
fuels and the appropriate rate of duty is attached to encourage
their use. If we want to encourage waste-to-energy, then we need
this new category.
4. CONCLUSION
4.1 We would ask the Committee to give serious
consideration to making the recommendation outlined above. We
have the innovative technology, we have the waste-to-energy process,
this is a mature market but we have identified areas for growth,
particularly processing wastes from landfill but an excise duty,
which for each tonne of hydrocarbon is twice that of landfill,
will not encourage this type of waste to move up the hierarchy,
it will encourage it down.
4.2 If we are to encourage waste-to-energy
programmes, we cannot continue to classify waste as fuel and apply
Excise duty as other light oils. Hazardous waste fuel is completely
different from petrol or aviation fuel or furnace fuel and should
be treated accordingly.
John F Doyle
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