House of Commons - Environment, Food and Rural Affairs

Select Committee on Environment, Food and Rural Affairs Fourth Report

5 What is needed to increase our chances of meeting the targets?

61. To meet the targets for diversion of waste away from landfill, it is necessary to reduce the amount of waste being produced, and to reuse or recycle a greater proportion of the waste which is subject to disposal. The Government has done a great deal to assist businesses to find ways of minimising waste and reusing materials, for instance through the funding of the Waste Implementation Programme (WIP), the Waste and Resources Action Programme (WRAP) and Envirowise.[112] The Government is also continuing to provide funding for local authorities to further develop household recycling and similar projects. Financial instruments like the Landfill Tax and the LATS also have an important role. We address some of these issues in this section of our report. First, however, we address another important factor in diversion from landfill: the adequacy of treatment capacity for existing and future waste streams.

Developing additional treatment facilities

62. There is a range of treatment methods for municipal waste, set out in Table 4.

Table 4: Waste Management Technologies for Municipal Solid Waste

Treatment	Definition
Biological Processes
Anaerobic Digestion	Biodegradable wastes are decomposed by bacteria in the absence of air, under elevated temperatures in much the same way as organic waste degrades in landfill sites to produce methane but under accelerated controlled conditions. This leads to the production of a 'digestate' containing bio-solids that may be suited for application to land and/or a liquid, and a methane rich 'biogas' which can be used as a fuel to produce electricity. Can be used to deal with certain high organic content industrial or agricultural wastes.
Centralised Composting	Green wastes (and sometimes kitchen waste or the biodegradable fraction of MSW e.g. cardboard) are composted in a centralised facility. Where kitchen waste is involved, this requires in vessel or enclosed systems. The process is tightly controlled to achieve and maintain specific temperatures to facilitate bacteria/pathogen destruction to satisfy the provisions of the Animal By-products Order. Produces a compost or soil conditioner which may have a market value. May also accept certain commercial wastes e.g. catering waste, due to be banned from landfill under ABPO.
Thermal Processes
Conventional incineration with energy recovery (EfW)	Combustion of mixed waste under controlled conditions, to reduce its volume and hazardous properties, and to generate electricity and occasionally heat. It uses a wide variety of combustion systems developed from boiler plant technology and also more novel systems such as fluidised bed. Principal residues produced are: bottom ash, which is non-hazardous and can generally be recycled as an aggregate; metals which can be recovered for recycling; and fly ash, which is classed as hazardous and requires specialist treatment/disposal.
Gasification	A high temperature (800-1200⁰C) thermal process, similar to pyrolysis but involving breakdown of hydrocarbons into a gas via partial oxidation under the application of heat. Some outputs (syngas) can be used as a fuel to produce electricity, some may find a use as a chemical feedstock but may require disposal if no markets are available. May be used in combination with combustion of syngas.
Pyrolysis	A thermal process (400-700⁰C) where organic based materials are broken down under the action of applied heat in the absence of oxygen to produce a mixture of gaseous and liquid fuels and a solid char fraction (mainly carbon). Most technologies prefer a homogenized feedstock containing limited non-organics. The outputs may be used as a fuel to generate electricity, while others may require disposal or additional processing for recycling/energy recovery. May be combined with gasification to maximise production of 'syngas'.
Hybrid Processes
Mechanical Biological Treatment (MBT)	A generic term covering a range of technologies for the processing of MSW using the combination of mechanical separation and biological treatment. In its simplest form MBT biostablises the mass of residual waste to be landfilled. Normally the processing of the incoming waste stream permits the extraction of fractions of the waste stream with end purposes in mind, with biological processing of the residual waste. Some systems use in-vessel composting or Anaerobic Digestion to process the residual biodegradable elements of the waste. Most systems generate a material suitable for use as a refuse derived fuel (RDF). MBT is extensively used in Germany, Austria and Italy.
Mechanical Heat Treatment	Using mechanical and thermal processes to separate/prepare mixed waste into more usable fractions and/or render it more 'stable' for deposit into landfill. An example is the application of steam and pressure to a mixed waste stream in a sealed vessel (autoclave) to initially degrade the waste. The remaining material may be sorted, depending on the available applications. May be used in combination with gasification.

Source: Beyond Waste

Investment issues

63. Evidence to our inquiry made clear that the demand for new treatment capacity, to replace the country's historic reliance on landfill, is immense. The Environment Agency estimated in 2003 that at least 1,000 new treatment facilities would be needed in England to meet the requirements of the Directive.[113] The Institution of Civil Engineers (ICE) cited a figure of "between 1,500 and 2,300 new facilities" in the UK as a whole, costing between £10 billion and £33 billion.[114] The CIWM suggested that £1 billion a year needed to be invested.[115] The Prime Minister's Strategy Unit cites research from Ernst and Young that an additional £600-700 million over ten years would be needed.[116] Whichever figure is right, this represents a very large level of capital investment. The ICE was concerned that the level of investment, and the number of contracts necessary, might be beyond the capacity of the waste management industry.[117]

64. In addition to the capital cost of new plants, witnesses drew attention to the length of time it takes to develop new waste treatment facilities. Witnesses suggested that it could take anything between two and ten years for a facility to move from conception to operation.[118] This does not allow England much time to develop sufficient capacity by the deadlines set by the Directive. To attract investment in such schemes, there needs to be certainty about the regulatory framework and its enforcement, so that investors can be confident of the flow of business. The CIWM told us:

A lot of this money is going to come from private sector investment … they will want to see planning timescales that give the ability for real thresholds of return and for the higher rates of return to be achieved. They will want to see pricing structures and they will want to see contracting arrangements with authorities which enable prices to be achieved and returns to be achieved that make those investments worthwhile.[119]

65. Defra acknowledges that the delivery of national waste policy objectives will require "significant new investment" in, among other things, waste processing plants.[120] The Minister drew attention to "major investments" now taking place.[121] The Government is also aware of the need to increase confidence in some of the newer technologies. Two funding programmes under the Waste Implementation Programme (WIP) have been launched to encourage the take up of new technologies in the treatment of biodegradable municipal waste, allocating around £2 million through the Technology Research and Innovation Fund (TRIF) to address the current lack of funding for research and development projects into new technologies; and some £30 million to help to establish new waste treatment technologies and instil confidence in them.[122]

66. We welcome the money the Government has allocated to increased research into new treatment technologies and to develop confidence in them. However, the Government is relying on the private sector to invest very significant sums in the future of waste treatment. We have already noted the importance of greater clarity and certainty in the legislative and regulatory environment. Without it, investor confidence is unlikely to be high enough to generate the level of commitment to new treatment facilities that is required. The Government should initiate an immediate study to determine if sufficient private investment is likely to be made in the appropriate technology required for new waste treatment facilities.

The Private Finance Initiative

67. The Government regards the Private Finance Initiative (PFI) as "one of the best ways to support value-for-money investment in waste services". Defra told us that 16 waste PFI projects have been approved, of which nine are operational. PFI projects totalling £1 billion have been signed or are in procurement., with more projects in the pipeline. "Current healthy levels of demand for PFI projects suggest that many local authorities and funding institutions are content with the PFI approach".[123]

68. The LGA welcomed the funding available through PFI, but had some concerns about the costs involved. However, LGA witnesses stressed that a good deal of work was being done with Defra, including on standardised contracting. The LGA also wanted Defra funding for the creation of a national waste procurement centre, based in one of the existing regional centres of procurement excellence. The LGA felt that such a national centre would enable councils dramatically to reduce the costs they pay during the procurement process, and beyond it, as they manage their contracts.[124]

69. Witnesses from industry also suggested that there were problems with the PFI process, but that there was scope for alleviating them. The ICE argued that companies in the construction sector would be ideal partners in consortia developing PFI waste schemes, but believed that such companies had not entered the market because of "serious concerns with the nature and allocation of risk in waste PFI contracts and the high upfront costs of bidding". The ICE noted, however, that Defra had recognised this problem and was taking steps to seek a resolution.[125] The CIWM told us that it was working on guidance on best practice in developing contracts, with input from waste management operators and local authorities. The CIWM also made the point that in order to recoup the high capital costs of investment, PFI contracts would have to be long-term. But this did not mean that parties should automatically be locked into an inappropriately constrictive contract: "flexibility has to be the order of the future". The CIWM were, however, convinced that this kind of flexibility would be achievable.[126]

70. The Government sets great store by the PFI process in creating sufficient new treatment facilities to allow the country to meet its landfill diversion targets. We recommend that, if this route is to deliver all that the Government hopes, steps should be taken to ensure that maximum flexibility is built into the process. We also recommend that Defra provide funding to support the development of a national centre of waste procurement excellence, which would help ensure that local authorities are able to manage all their procurement as efficiently as possible.

The planning process and public attitudes

71. One of the factors to which witnesses attributed some of the uncertainty over development of waste treatment facilities was the planning system. The impact of the planning system was acknowledged by the Strategy Unit in 2002:

Delays in obtaining planning permission are perceived as a barrier to the delivery of the Landfill Directive targets and to moving to more sustainable waste management. The issues of concern are:

the length of time it takes to secure planning permission;

the risks that permission will be refused due to public opposition; and

inconsistency in planning decisions.[127]

The Minister acknowledged that there was always opposition to any new facility, of whatever type, and "the planning process has slowed investment in the infrastructure and that is not helpful in relation to the urgency that we have in terms of meeting these targets".[128]

72. Industry witnesses complained of the length of time and cost it took to get projects through the planning process, as well as the relationship between planning system and the Environment Agency's permitting system.[129] Cory Environmental, a waste management company, stated that the planning lead time on even a small-scale composting facility could be two years, while for larger-scale facilities it could be up to a decade.[130] SITA UK's comment was fairly typical:

the waste management industry has for many years faced inordinate delays in achieving planning and permitting for its facilities, be they incinerators or "greener" alternatives such as recycling and compost plants.

SITA recommended that the planning process be conflated with the separate process by which the Environment Agency issues permits for treatment operations.[131] The LGA also noted problems with the planning process, but argued that the main problem was with the "challengability" of proposals. The ability of local people to make such challenges was a matter of "local democracy".[132]

73. The ODPM and Defra are currently consulting on revised planning guidance (PPS10) as part of a wider review of sustainable waste management. The intention of the new guidance is:

to deliver sustainable development and deliver a better match between the waste communities generate, and the facilities needed to manage this waste … The new policy requires clear policies regionally and locally, and sites to be identified in local plans, so as to increase certainty for both local communities and industry.[133]

The Minister argued that the new guidance would allow for "a more strategic approach to the facilities which seem to be required in relation to waste treatment", as well as involving local communities more in the decision-making process.[134] The ESA felt that the consultation paper on revisions to planning guidance was "a step in the right direction" but did not go far enough.[135] The LGA broadly welcomed the consultation paper, although it felt that it raised questions about the capacity of local government to deal with, in particular, environmental impact assessments. This is in the context of what the LGA described as "a severe shortage nationally of planning officers in the waste planning area".[136] Cory Environmental argued that the new guidance would be an opportunity for the Government to lay out "the guidelines upon which decisions on infrastructure must and will be based … Clear guidance on required facilities, unambiguous policy direction and supporting legislation will enable local authorities to take the decisions necessary."[137]

74. We welcome the close working between the ODPM and Defra on ensuring that the planning system helps deliver the capacity for dealing with the country's waste. We are especially pleased that the draft planning guidance is aimed at increasing certainty for all parties involved. We hope that the revisions to the planning guidance will remove any structural problems within the planning process. But the planning system must balance the country's strategic need to manage the waste we produce with the right of the public to challenge planning proposals. The key to developing treatment facilities is not to curtail the public's right to challenge proposals, but to ensure they fully understand the need to cope with the country's waste streams, which they play a part in creating, and the details of proposals for particular treatment facilities.

75. The Government has made it clear that decisions on planning applications for new waste treatment facilities are a matter for local planning authorities. But those authorities need to work within the Government's national strategic priorities for waste management. It would assist local authorities in managing the planning process if the Government could make clear its own attitude to different types of waste treatment facility, including incineration.

76. We further recommend that, in its response to this report, the Government gives an assessment of how feasible it would be to combine some elements of the Environment Agency's permitting system into the planning process, as this could save duplication and thus reduce the time taken from conception to operation of new facilities.

77. One of the most important functions of the planning process is to give the public a chance to make its voice heard. So the way in which the system works is closely related to the public's attitude to, and understanding of, waste treatment. There is clear evidence for public support for recycling of waste, but more must be done to ensure that the general public fully grasps the impact of their own consumption and disposal habits on the waste stream. We noted in our last report that "consumers need to be made aware of waste as an important environmental issue".[138] This can cover not only raising public awareness of the need for, and benefits of, recycling, but also their awareness of new methods of waste treatment. For example, Defra noted that one of the factors affecting the mix of technologies that would be available to process waste would be the extent to which local communities will support energy recovery facilities.[139]

78. The Government has initiated various programmes to help achieve this. For instance, funding for WRAP includes work in improving public awareness of recycling and waste reduction. The Government has also funded Recycle Now, a £10 million national awareness campaign for England featuring TV and press advertising, a support package for councils and celebrity endorsements.[140] The 'Demonstrator' Programme will provide some £30m, through the Waste Implementation Programme, to help instil confidence in, and help overcome the perceived risks of implementing, the new technologies, and to provide accurate and impartial technical, environmental and economic data about them.[141]

79. There is often a lack of knowledge about the potential impacts on health and the wider environment of different waste treatment technologies. In our earlier report, we concluded that well-managed, well-regulated waste management facilities, operating to the best available techniques, pose a minimal threat to human health.[142] This was, broadly, the message of the Review of Environmental and Health Effects of Waste Management, which we discuss further below.[143] But this is not always the perception of the public, particularly residents in areas where such facilities are sited. An especially acute example is that of incineration, which we deal with separately in paragraphs 81-96 below.

80. Public attitudes to waste treatment are fundamental to the successful achievement of the landfill diversion targets, given that waste minimisation and reuse cannot in themselves ensure that the targets are reached. Even the more "acceptable" treatments of waste, such as recycling and recovery of materials, will require the development of more facilities. We conclude that the public has to recognise that, while society continues to produce more waste, they will have to accept that more and different waste treatment methods will be required. Central to the public accepting this will be the Government's role to play in ensuring that the public has confidence in the systems put in place to treat waste.

Incineration and cement kilns

81. The incineration of waste, and especially incineration using cement kilns, was highlighted in our inquiry. Incineration is regarded by the Government as preferable to landfill, although it still has a low place in the "waste hierarchy". Some of the evidence we received argued strongly in favour of the inclusion of incineration, including energy production (also know as energy from waste) in the range of options for treating waste. Sheffield City Council has used incineration for many years as one way of dealing with the city's waste. The Council argues that "state of the art incinerators with energy recovery will be a safe, cost effective way of meeting landfill diversion targets". Its own energy from waste plant provides heating to some 42 major buildings, and also converts spare heat into electricity, which is sold through a Non Fossil Fuel Obligation agreement. Sheffield also cites the experience of other EU countries as appearing to show that "a balance of incineration with waste minimisation and recycling" can deliver results in terms of landfill diversion.[144] The Environmental Audit Committee noted that other European countries incinerate a large proportion of municipal solid waste. Denmark, for instance, sends more than half of its waste to incineration and the Netherlands a third.[145] The Irish Government has made clear its belief in the use of incineration, in addition to recycling, as part of an integrated waste management strategy.[146]

82. We also received evidence criticising the incineration of waste, on health grounds and because it is regarded as less environmentally friendly than other forms of treatment. Dr C V Howard, a toxico-pathologist, argued that incineration was

a totally unsustainable use of resources and the inevitable emissions of particulates and toxic organic chemicals such as dioxin-like substances are likely to have harmful effects on health, especially the health of the most vulnerable members of society [e.g. babies in the womb and young children].[147]

The Green Alliance was also concerned about the use of incineration, especially where it is not combined with energy recovery, on environmental grounds. The Alliance argued that it should be subject to the same kind of tax as landfill, as this would encourage more sustainable forms of waste treatment.[148]

83. The Strategy Unit's report noted concerns over the health impacts of various forms of waste treatment and recommended that the Government commission an independent review of the subject. The Government accepted this recommendation and the resulting report was published in May 2004 as Review of Environmental and Health Effects of Waste Management—Municipal Waste and Similar Wastes. The Review noted that some adverse health effects had been noted in populations living around older, more polluting incinerators and industrial areas, but it

did not find a link between the current generation of municipal solid waste incinerators and health effects ... the current generation of waste incinerators result in much lower levels of exposure to pollutants. We considered cancers, respiratory diseases and birth defects, but found no evidence for a link between the incidence of disease and the current generation of incinerators.[149]

84. The Review noted concerns about emissions of dioxins and furans and their potential impact on boys in the womb. However, the Review concluded that emissions from municipal solid waste incinerators accounted for less than one per cent of the dioxins experienced by members of the public. This compares to 18 per cent from domestic sources such as cooking and burning coal for heating. The Review notes that dioxins from an incinerator in an industrial environment will only slightly increase the total deposition of dioxins; although an incinerator located in a relatively clean rural environment could significantly increase the dioxin deposition, this would "not be expected to be a concern with regard to health".[150] The Review concluded that managing municipal solid waste accounts for less than 2.5 per cent of most emissions in the UK.[151]

85. The Review also considered the environmental impacts of different waste treatment methods. It concluded that the most significant effects reported in the scientific literature were in respect of global warming impacts, and that avoiding the landfill of municipal solid waste gave a benefit in avoiding emissions of methane which would otherwise have a significant effect on global warming. The impact of incineration on global warming was "unlikely to be significant".[152]

86. The Green Alliance regarded the findings of the Review as "counter-intuitive", and drew our attention to concerns expressed by the Royal Society about the quality of the data it employed.[153] The Society had "substantial concerns" about an earlier version of the report, but was satisfied that the revised version addressed a significant number of these concerns.[154] The Minister told us that the Royal Society had identified some concerns in relation to the data and interpretation, but not concerns that would invalidate the conclusions of the report. He explained that the Government had commissioned further research into the areas the Society had identified, specifically composting and digestion.[155] The Review admits that the information in this field is incomplete, but notes however that "relatively reliable information" exists concerning emissions to air from incineration.[156] In the light of the report's findings, the Minister has urged local planning authorities to press ahead urgently with the task of approving planning applications for waste management facilities.[157]

87. The use of cement kilns for the burning of waste has always been a particularly sensitive matter. Recent discussion about possible changes in the type of materials which may be disposed of by this method has again aroused public sensitivities. Although the evidence we received focused on the incineration of hazardous, as opposed to non-hazardous waste, in cement kilns, we have included the issue in this section of our report, given these wider concerns about the use of cement kilns for general waste treatment. The cement industry in the UK and throughout the world uses waste as a substitute fuel in place of fossil fuels such as coal and petroleum coke. Substitute fuels can include waste materials such as tyres, paper, waste solvents from the chemical industry, plastic, sorted municipal waste, paint residues from spray coating, sewage sludge or meat and bone meal. World-wide their use is long-established. Substitute fuels comprise around 65% of fuels used in kilns in the Netherlands, 30% in Switzerland, Germany, Austria, and France. In the UK the figure is around 6%.[158] It is argued that using such substitute fuels can help with the sustainable management of waste by reducing the volume of waste which has to be disposed of in less environmentally favourable ways such as landfill. The use of waste as a substitute fuel is governed by the Environment Agency's Substitute Fuels Protocol (SFP). During the course of our inquiry, the Environment Agency consulted on a revision to the SFP, and the revised SFP was published on 1 February 2005.[159]

88. The Air We Breathe Group, based in Wiltshire, was especially concerned about the Environment Agency's proposed amendments to the SFP. The group argued that the changes meant, in effect, that the operators of cement kilns would be allowed to treat hazardous waste without being subject to the same strict rules as dedicated incineration plants. They were concerned that the revised SFP would allow the release of more substances into the atmosphere that could be damaging to health, and regarded the consultation by the Environment Agency as unsatisfactory.[160] The Welsh Groups Network argued that standards for co-incineration of hazardous wastes in a cement kiln were worse than for waste incinerators, with much less stringent limits for particulates, nitrogen oxides and sulphur dioxide.[161] The Minster told us that the Environment Agency would not allow anything to be burned within the cement kilns which could have a detrimental effect on the environment or on people's health.[162]

89. Neither The Air We Breathe nor the Welsh Groups Network made any criticism of either the incineration of hazardous waste other than in cement kilns, or the incineration of non-hazardous waste in cement kilns. The Air We Breathe group noted that "the disposal route to Hazardous Waste Incinerators is a proven environmental benefit", and were concerned that the changes to the SFP could damage the viability of the hazardous waste industry, by allowing operators of cement kilns to undercut it financially.[163]

90. Representatives of the cement industry argued strongly in favour of increasing the use of waste as a substitute fuel in cement kilns, and therefore of revising the SFP. The British Cement Association (BCA) noted that other EU countries have a higher use than the UK of co-incineration by cement kilns using alternative fuels and high temperature incineration. In 2001, 4,370,000 tonnes of waste were recovered in European cement kilns. Of these, 20% were liquid, 80% were solid, and about one-third were hazardous wastes. The BCA argued that cement kilns have a very positive role to play within the UK's waste infrastructure, not least as they represent existing treatment capacity which could accept some of the hazardous waste that can no longer be landfilled.[164]

91. We asked representatives of the waste management industry about the potential impact on their business of an increase in the co-incineration of waste in cement kilns. The ESA told us that as long as kilns operated to the same emissions standards as any other facility that manages waste, they had a legitimate place in the treatment infrastructure:

as the European legal framework takes full effect, cement kilns will have a recognised place and a legitimate place … They are not really going to impact negatively on the economic of our sector.[165]

92. The Environment Agency considers, on the basis of extensive domestic and international experience of the use of substitute fuels, that substitute fuels are, overall, beneficial in terms of making a contribution to sustainable development by recovering wastes as fuel, and also have the potential to contribute to reducing emissions from kilns to air.[166] The Agency states that the new SFP will:

help conserve our natural resources by using the energy from waste and saving non-renewable fossil fuels
help with the sustainable management of waste and contribute to the Government's Waste Strategy by reducing the amount of waste that has to be disposed of
reduce the overall emissions to air, primarily oxides of nitrogen (NOx) that are normally produced by combustion processes

The Chief Executive of the Agency has stated:

The revised protocol will continue to provide effective protection of public health and the environment. We will ensure there are mechanisms in place to keep local communities well-informed about emissions and engaged with the regulatory decision-making process where plant operators propose substituting conventional fuels … The Agency will continue to encourage the recovery of energy from waste and prevent the use of cement and lime kilns for the disposal of waste that does not provide energy to the process.[167]

93. We have noted the evidence for and against the use of incineration as a way of treating waste. We conclude that it is a valid method of treating waste, insofar as it reduces dependence on landfill, on the condition that it recovers energy from the waste incinerated, and assuming independent scientific research confirms that incineration is not more harmful to health than other forms of waste treatment. In this context we note the apparently reassuring conclusions of the independent review of the health impacts of waste treatment, although we look forward to the outcome of the further research commissioned by the Government.

94. There was a suggestion in evidence that we might expect to see a change in the direction of Government policy as regards incineration. An ESA witness told us:

There is a suspicion … that we are perhaps being softened up in fact to take this material [waste] elsewhere … Maybe it will be diverted to electricity generation, whether thermally or through gasification, and of course, via cement kilns.[168]

We do not believe that incineration should be seen by the Government as a panacea for meeting the landfill targets, but only as one part of a wider strategy. We recommend that, in its response to this report, the Government give a clear indication of its attitude towards incineration. It should also define the role it expects incineration to play, and provide a definitive statement on the public safety issues raised by the use of this waste disposal technique.

95. It is clear from the written evidence we received that the incineration of hazardous waste in cement kilns is of particular concern. Although both the Minister and the Environment Agency have stressed that the changes to the Substitute Fuels Protocol will not allow any increase in harmful emissions to the air, those opposed to the practice are obviously not convinced. We were also concerned about criticisms of the consultation process undertaken by the Agency. We conclude that the incineration of hazardous waste in cement kilns may be a legitimate treatment route, provided that such facilities meet the same standards as incinerators. The Environment Agency must not allow any "sham" treatment of waste to take place - that is, the blending of wastes with no fuel value with other wastes with a fuel value to avoid having to pay for disposal in a merchant waste incinerator.

96. Given the concerns raised by witnesses to our inquiry, we also expect the Agency and cement companies to undertake the fullest possible consultation with local residents about changes to the nature of wastes being co-incinerated, and for the views of local residents to be adequately addressed before any Agency permit to co-incinerate is issued.

Resources for local authorities

97. Meeting the landfill diversion targets will require significant efforts from local authorities in increasing recycling and composting rates. This requires substantial levels of funding to allow authorities to implement options that divert waste from landfill. Defra provides a range of funding to assist local authorities in meeting their recycling targets. These include the Revenue Support Grant, the Private Finance Initiative, the Waste Minimisation and Recycling Fund (and its successor the Waste Performance and Efficiency Grant), and a number of smaller-scale grant schemes. Direct support, advice and guidance, and assistance in building capacity is available through the Waste Implementation Programme (WIP) and the Waste and Resources Action Programme (WRAP). Defra states that this support enables local authorities to draw up suitable local waste strategies and to meet the goals contained in those strategies. Diversion options can include waste reduction (e.g. real nappy initiatives), reuse (e.g. helping charities to reuse clothing, footwear and furniture), recycling (e.g. through segregated kerbside, bring bank or civic amenity site facilities) or composting of green and kitchen waste (e.g. through home composting, segregated kerbside or civic amenity site facilities).[169]

98. Defra noted that in the 2004 Spending Review, the Government announced an increase in the Environmental Protection and Cultural Services block of the Revenue Support Grant of £888 million by 2007-08, compared to 2004-05. This increase includes the return of revenues from the increased landfill tax, fulfilling the Chancellor's commitment to keep landfill tax increases revenue-neutral to local authorities.[170] Funding via the EPCS is not hypothecated; it is up to individual local authorities to decide how to allocate it between different services.[171]

99. The LGA told us bluntly that insufficient funding was available to allow them to meet their targets. LGA witnesses focused on the funding available through the Environmental Protection and Cultural Services block of the Revenue Support Grant:

Lack of adequate funding remains the single most challenging issue facing local councils … The Government's Spending Review 2004 did not provide the additional funding which will be needed to deliver Article 5 targets, and the LGA is still extremely concerned that the shortfall in funding remains a significant obstacle to delivery of Government targets.[172]

The LGA argued that increases in the local authority settlement did not match the task of managing an increasing waste stream:

We have calculated that the [increase in EPCS] is only a two and a half per cent increase into that block against, as you were saying, increasing waste growth and an awful lot of other calls on that money.[173]

The LGA further argued that the 2.5 per cent increase did not in fact represent a real-terms increase in the funding settlement, as it just accounted for inflation.[174] LGA witnesses welcomed increases in the Waste Implementation Programme (WIP), which offers technical support to local authorities, and other programmes, but argued that the funding gap was still "very large - and possibly as much as a half a billion pounds a year for waste services alone (rather than EPCS services as a whole)".[175]

100. The LGA also felt the Treasury should do more to explain how it reached its conclusions about the level of the 'waste element' of the EPCS block.[176] We put this point to Defra, whose response was:

As part of the Spending Review 2004 process, Defra undertook a modelling exercise to estimate likely total spend by local authorities on waste management over the Spending Review period. This analysis was shared with the Local Government Association, who were broadly supportive. HM Treasury took account of the outputs of the modelling exercise in taking decisions on the Spending Review settlement.[177]

101. It was not just the LGA which suggested that they were under-funded for the task. SITA UK, while noting that expenditure on recycling services had increased year on year, argued that it was still well short of the amounts required to bridge the gap between the present household waste recycling rate and the 2005-06 target.[178] The ESA argued more resources need to be invested in the management of the municipal waste stream, as this country spent "only half what comparable European countries spend on municipal waste management".[179] (Defra did not believe that this calculation took account of differences in government systems and waste management operations, or of 'value for money' considerations.[180])

102. Like the LGA, we welcome the fact that funding for waste management through the Environmental Protection and Cultural Services block of the Revenue Support Grant has increased. But the evidence we heard has not convinced us that the increase will be sufficient to meet the increasing demands placed on local authorities. We are aware that it is up to local authorities to determine how their funding from central government is spent, and it is open to any individual authority to divert spending to waste away from other services. There are always hard choices to be made in deciding how to divide up the cake, and it is clear that additional spending on waste would not be regarded as a priority by many local residents. This reflects the low profile of waste, which we have already noted. We also note that increases in council tax to provide more funding for recycling and other forms of treatment might have a disproportionate impact on less well-off households.

Financial instruments

103. The use of financial instruments to reduce reliance on landfill, and more generally reducing the generation of waste, by changing behaviour, was widely supported in our inquiry. In this section we look at three such instruments: the Landfill Tax, the Landfill Allowances Trading Scheme, and incentive schemes and variable charging for households.

The Landfill Tax

104. The Landfill Tax was introduced to stimulate reductions in the levels of waste going to landfill and encourage the development of more sustainable waste management practices. The tax was introduced in October 1996, at a rate of £7 per tonne for active waste. The rate was increased to £10 with effect from April 1999, and an escalator of £1 per tonne per annum was also introduced. The escalator will rise to £3 per tonne with effect from April 2005. Defra's aim is that the tax should reach £35 per tonne in the medium term. The rate is currently £15 per tonne.[181]

105. There was general support for the tax. The Minister told us the tax, especially as it reached the £35 target, would provide an incentive to divert waste away from landfill, while it was pitched at a level that gave those industries which were providing alternative treatment routes economic viability.[182]

106. In our report in 2003, we welcomed the tax and recommended that it be increased more quickly to the £35 per tonne level.[183] Witnesses in our present inquiry made the same point. The Environment Agency noted that, if the rate of increase were to be escalated faster, it would give much clearer and faster signals to waste producers, consigners and operators.[184] Previously, Ministers had been concerned that raising the tax too quickly would cause difficulties for waste producers, and it was necessary to give them time to adjust.[185] However, the Environment Agency noted that the system was adjusting quite quickly and that a case could therefore be made for a faster escalator.[186]

107. Representatives of the waste industry told us that it should be raised more quickly: a £35 landfill tax would immediately equalise the cost advantage currently enjoyed by landfill, and would give the waste management industry far more incentive to put forward proposals for alternative treatment. It would also encourage local authorities to invest in facilities.[187] The Environmental Industries Commission argued that as the tax was a key instrument to deliver diversion from landfill, it should be raised faster. This would also encourage minimisation, especially if revenue were spent on minimisation initiatives.[188] The Green Alliance argued that the tax needed to rise faster to overcome the view that recycling was uneconomic.[189]

108. The CBI felt that a quicker increase in the tax would have a varying impact on different firms:

Those who have done a lot to date will have less ability to do other things with waste and will have to, as it were, take a greater hit on margins as a result of the tax. Others who are not quite so far down the road of behavioural change may be incentivised to do things they would not otherwise have been incentivised to do through the tax.[190]

109. The CBI was especially keen that revenue raised from the tax went back to assist businesses in waste reduction.[191] The Chief Executive of the Environment Agency also noted that increasing the tax would also generate more money that could be recycled back into business to allow them to adopt more sustainable waste practices and materials resource handling practices.[192] Defra has announced that £284 million will be returned from the proceeds of the Landfill Tax over the three years from 2005-06, to assist a range of projects that support businesses, and also to the Environment Agency.[193]

110. We once again recommend that the Government raise the level of the Landfill Tax to the £35 per tonne level as soon as possible. Not only would this provide a significantly increased driver for change, but it would also provide additional funding for programmes designed to reduce the waste streams. We welcome the funding that has already been made available from the proceeds of the tax, and recommend that the Government consider whether, if the level of the tax were increased, more could be allocated to the Environment Agency for its enforcement work. Without effective enforcement, as we have already noted, financial drivers such as the Landfill Tax could have a perverse effect on behaviour.

The Landfill Allowance Trading Scheme

111. The Landfill Allowance Trading Scheme (LATS), under which councils are allocated an allowance representing the maximum amount of waste they can send to landfill, and creates arrangements for these to be traded, is an innovative approach to waste policy and practice for the diversion of biodegradable municipal waste from landfill. It is the first such scheme in the world. Defra intends that it should provide a cost-effective way for England to meet its targets for reducing the landfilling of biodegradable municipal waste. The Minister has stated that the scheme "gives authorities the flexibility to decide how and when to make the necessary changes in the way they handle their waste, while ensuring that England meets national and international obligations in the most cost effective way".[194]

112. The Waste and Emissions Trading Act 2003 provides the legal framework for the scheme and for the allocation of tradable landfill allowances to each waste disposal authority (WDA) in England. These allowances will convey the right for a waste disposal authority to landfill a certain amount of biodegradable municipal waste in a specified scheme year. Under the scheme, each waste disposal authority will be able to determine how to use its allocation of allowances in the most effective way. It will be able to trade allowances with other authorities, save them for future years (bank) or use some of its future allowances in advance (borrow). This will allow individual waste disposal authorities to use their allowances in accordance with their investment strategy. Defra allocated landfill allowances to each waste disposal authority in England in February 2005.

113. Defra argues that the advantage of a trading scheme is that it overcomes the fact that the diversion costs faced by each WDA will differ according to their circumstances. WDAs with low diversion costs will have an incentive to divert as much biodegradable municipal waste to landfill as possible, selling their surplus allowances to WDAs that face a higher cost of diversion. Therefore, trading should help local authorities find the most cost effective way of diverting from landfill to reflect their local circumstances.[195] A detailed analysis of the scheme is included in written evidence from Professor Chris Coggins.[196]

114. The Minister told us that LATS would make "a huge difference" to local authorities' behaviour. It would

force local authorities to meet [the] targets or to buy in credits to allow them to achieve them. That is also an encouragement for good local authorities who have made excellent progress who will have credits to sell. It is also an inducement to them to continue the work that they are doing in relation to minimising waste. In relation to other local authorities, there will be a considerable cost, including fines, for not achieving those targets. Those are very powerful drivers.[197]

The Minister noted that carbon trading schemes "work very well", with the implication that therefore LATS would also work well.[198]

115. The LATS has not yet come into effect, so our discussions of it in this inquiry centred on preparations for it and speculation about the effect it might have in practice. On the first point, the LGA's principal concern was that preparing for, and eventually running, the scheme "diverts resource in terms of sheer funding - and really a very important resource, which is our officer time - from the prime objective of dealing with waste".[199] Defra acknowledges that this is a new way of working for local authorities and has arranged a series of seminars for local authority officials on how the scheme will operate.[200]

116. On the question of whether the LATS would help in reaching the targets, the LGA was sceptical:

There is no reason why landfill trading alone will ensure the delivery of the 2009-10 target, since it simply allows councils to buy off their obligation by purchasing permits from councils which have them to sell without giving a clear picture of the overall amount of new infrastructure (diversion capacity) being built. Not only will it not ensure delivery on its own but, in its current form, it introduces rigidity and expense rather than the flexibility it was intended to afford.

The LGA argued that the scheme needed to be improved in two ways:

Councils need to have access to market intelligence, i.e. a collation of predictions for the amount of BMW each waste disposal authority intends to send to landfill over time, which would translate into the number of permits it could buy or sell over time[201]
The penalty needs to be reduced dramatically to much nearer the level of the likely cost of a permit on the market.[202]

117. Professor Coggins also noted evidence that authorities would be risk-averse to trading allowances and would instead bank them (at no financial cost to the local authority) in case of unforeseen events which would cause them to miss their targets.[203] This would of course have a tendency to distort the operation of the market.

118. The Minister argued that some councils were in favour of the scheme:

very efficient local authorities who have done well in their waste management and are likely to have credits and who like the scheme … can see the logic in this scheme and they can see how it can work to their benefit. It should not necessarily be a cost on local authorities who are achieving their targets.[204]

The LGA also felt that the scheme would work for some authorities, but not others.[205] Sheffield City Council told us that it had "taken waste and turned it into an asset that will enable the City to realise a financial benefit from use of the Landfill Allowance Trading Scheme".[206] The Environment Agency told us it supported the scheme and would help the Government with administration and monitoring. Agency witnesses thought the system would work, but "it will be tough … it is an incentive scheme and incentive schemes are about promoting innovation, promoting faster movement than hitherto has been the case".[207]

119. The Landfill Allowance Trading Scheme has yet to come into operation and we cannot therefore comment at this stage on how it will work in practice. We recognise that this is an innovative and potentially useful way to encourage local authorities to divert waste away from landfill and that, in theory, it would reward those authorities which are effective at diverting landfill while providing significant incentives, through the use of financial penalties, to the less well-performing authorities. However, we are concerned by the comments of the Local Government Association that, in practice, the market operated under the scheme will not be perfect, in particular because of the lack of access by councils to accurate market intelligence. In its response to this report, Defra should set out how it will address such concerns.

Variable charging and incentive schemes for households

120. There has been a long-standing debate about the possible role of variable charging , or incentive schemes, for the collection of household waste. Such schemes, sometimes known by the general title Direct and Variable Charging (DVR), can take various forms. For instance, direct charging can take the form of charging a household by reference to the quantity - e.g. weight, volume - of the waste put out for collection. Alternatively, householders can be encouraged to separate waste into different categories, with unseparated waste being charged for. This provides an incentive to improve separation of materials, as well as reducing the amount of waste put out for disposal.[208]

121. In our last report on waste issues, we noted:

Householders pay for the collection and management of their waste through their council tax. The cost of waste management is not differentiated from the costs of the other services their council provides, and few people know how much of their council tax is spent on waste. In addition, the cost to the householder is the same no matter how much waste they throw away or recycle, so there is little incentive for individuals to try to reduce the amount of waste they produce.

We therefore encouraged the Government to complete its consideration of policy in this area as soon as possible. Our report supported household incentive schemes, while noting that variable charging for waste collection can be regressive, and thus should only be introduced if people had a means of controlling the amount of waste they dispose, e.g. through the provision of good recycling services.[209]

122. Evidence to our present inquiry once again strongly supported a range of charging and incentive measures. The ESA argued that variable charging and rewards for householders who achieved specified levels of separation of wastes, would apply the 'polluter pays' principle. However, the ESA felt that the primary aim should be to increase funding for waste management rather than to disburse funds to householders through reward schemes.[210] The CIWM also argued that local authorities should also be allowed to trial direct or variable charging for residual waste collection, and noted that such charges have been used effectively elsewhere in Europe, assisting waste diversion and recycling.[211]

123. The LGA believed that household incentives had a role to play. Some local authorities believed such schemes would encourage local people to recycle more waste, and would also help increase the funding available for recycling programmes. The LGA emphasised that whether to establish such schemes, and the approach employed, should be left to the discretion of individual authorities, which would need to develop schemes that suited their local communities. Schemes would only be effective where local communities were fully engaged in their development. Schemes can be quite modest, but get good returns: one authority puts households that are participating in their recycling scheme in for a prize draw for a gift voucher, which has increased participation.[212]

124. The Environment Agency thought that putting in place economic incentives to promote greater household segregation of waste would help local authorities to meet their targets. The Agency drew our attention to research which indicated that households were willing to sort their waste if they were given the right facilities to do so and that they were willing to be incentivised by paying a higher charge for unsorted waste for the future.[213] The Green Alliance argued that local authorities should be given powers to introduce economic incentives for householders to reduce waste:

Introduction of economic incentives is a vital step in raising public awareness of waste and broader consumption issues. These should be enabling powers, not a requirement to implement schemes, and should only be used after good quality kerbside recycling facilities are already in place.[214]

In its response to our earlier report, the Government noted that it was carrying out further work, with the LGA, on the practicalities of operating such schemes.[215] The Minister told us that, in principle, he was in favour of incentives for households. He thought there was "a very strong argument" for a differential approach in relation to waste charging, for instance in relation to weight, but he noted that allowing councils to make differential charges would require primary legislation. However, incentive schemes that, for instance, gave some benefit to people who minimised, separated waste and recycled waste, did not need new legislation. The Government would welcome local authorities undertaking pilot schemes along these lines.[216]

125. We welcome the Government's support for schemes that would allow local authorities to provide incentives to households to minimise, separate and recycle their waste, and would encourage local authorities to develop schemes along these lines. Such an approach would contribute to meeting the landfill diversion targets, as well as making the general public more aware of the impact of waste, the real cost of its treatment and their responsibility for helping tackle the growing municipal waste stream. Discretion about whether to introduce such schemes should be left with local authorities, who in turn should ensure that their local communities are fully engaged with the process. We believe that priority should be given within such schemes to incentives to minimise the overall amount of waste put out for disposal.

126. We were also interested to hear the Minister's agreement, in principle, to the idea of variable charging for household waste. This would be a significant step further than schemes that reward households. Such schemes would be a further encouragement to households to tackle the waste stream, but care would need to be taken to ensure that variable charging did not have an unfair impact, especially on low-income families. Adequate facilities for recycling and composting would have to be available before this kind of charging came into operation. In addition, charging could create an incentive to dispose of waste illegally, to avoid paying the charge. This reinforces our earlier conclusions that effective policing of fly-tipping and other illegal waste disposal would be necessary for such financial instruments to work properly.

112 Ev 48-49, paras 30-38, and Ev 65 [Defra]; Ev 170 [WRAP]; www.envirowise.gov.uk Back

113 Eighth Report from the Committee, Eighth Report of Session 2002-03, HC 385, The future of waste management, para 38, Ev p 105 Back

114 Ev 160, para 2 [Institution of Civil Engineers] Back

115 Q 61 Back

116 Waste not, want not, p 101 Back

117 Ev 161, section 4 [Institution of Civil Engineers] Back

118 Ev 160, summary [Institution of Civil Engineers] Back

119 See e.g. CIWM, Q 60 Back

120 Ev 49, para 39; Q 204 [Defra] Back

121 Q 157 Back

122 Ev 66 [Defra] Back

123 Ev 66 [Defra] Back