Memorandum submitted by Biffa
Thank you for the opportunity to respond to
your enquiry—our specific points relate to the last item
on your call for evidence on "any other aspects of environmental
tax and incentive policy".
Biffa Waste Services is one of the largest waste
management companies 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, and specialist
hazardous waste management systems, and has a turnover of just
under £800 million at a current annualised rate. We have
over 150 operating centres throughout the UK and handle 14 million
tonnes of material that is treated, landfilled or recycled on
behalf of an extensive customer base exceeding 85,000 in the public,
commercial and industrial sectors plus collection services to
1.3 million households.
Rather than come up with a further recitation
of long held beliefs regarding the reasons for market failure,
I thought it might be more appropriate to innumerate below abstracted
paragraphs from letters sent to members of the government on this
subject [letters not printed]:
— Our figures—supplied by
HM Customs—suggest that in the 10 years since the tax was
introduced, inputs declined from 97 million tonnes to 74 million
tonnes per annum and, as you state, the amount of active waste
declined by 16%. However, the tax increased by 300% in that period,
reinforced by (our estimate) over £250 million in grants
for plastic recycling buckets to local authorities. The latter
led to a seven million tonne diversion of municipal waste (not
only the tax), or over 50% in reduction. (Letter to John Healey,
page 1, paragraph 3, dated 2 October 2006.)
— Why is the (landfill) tax not
working? Because the six or so Boards of the major waste companies
still find it is in their economic self interest to do so (ie
continue using landfill). The tax, coupled to average gate fees
(today totalling around £35 per tonne), is still well below
the threshold for new technologies (which require gate fees of
£50-£60 per tonne) to be attractive. (Letter to John
Healey, page 1, paragraph 4, dated 2 October 2006.)
— This lack of understanding of
the dynamics in the waste industry has resulted in us being left
in limbo—enjoying substantial cash flow from our legacy
investment in landfill but lacking any case for investment in
new technologies for another year or so due to lack of bankability
in a competitive landfill market. In consequence, you have witnessed
a bout of activity in terms of venture capital and market consolidation.
(Letter to John Healey, page 2, paragraph 6, dated 2 October
2006.)
The essence of our case is:
(i) The waste industry re-investment programme
is in limbo because the landfill tax escalator is too relaxed.
(ii) When that ceases to be the case, waste
processes can assist with the looming energy gap with an abundant
supply of short cycle renewable carbon feedstock.
(iii) Those technologies need to be regulated
in the EU ETS framework to ensure that overall CO2 emissions impacts
are properly internalised. (Letter to John Healey, page 3,
paragraph 17, dated 2 October 2006.)
Examples of the need to establish (these) cross
cutting trade-offs abound, of which the following are examples:
(i) Linkages between agricultural support
strategies for biomass and the Energy Strategy.
(ii) Trade-offs between micro generation
support and decisions on centralised power generation plants,
nuclear or otherwise.
(iii) Flexing between stack emissions/discharges
to sewer and hazardous waste arisings.
(iv) Assessments of logistics impacts for
material diverted from landfill in coming years and those planning
road/rail transport capacity over the same period. (Letter
to David Miliband, page 1, paragraph 3, dated 12 June 2006.)
At the moment, the lack of an integrated approach
(in part because DEFRA is the lead department on the environment
but lacks the necessary powers to cover all the cross cutting
environmental issues) results in all that one would expect where
misinformation and poor communication proliferate:
(i) Gladiatorial approaches between industry
and government.
(ii) Failures in the bankability of new projects
until government passes regulations and/or confirms appropriate
tax structures.
(iii) Substantial negative reaction in terms
of public perception of the wider game plan and resistance to
environmental improvements.
(iv) Poorly implemented, non integrated programmes
which leave gaps or duplicate, unnecessarily, costs in the water/waste
and/or IPPC framework. (Letter to David Miliband, page 2, paragraph
5, dated 12 June 2006.)
There is a need for DEFRA to map the full extent
of the technological and operational framework needed to deliver
a 2020 environmental framework for Britain, including a 20% minimum
reduction in CO2 emissions. Out of such a technological assessment,
one can then draw conclusions with regard to:
(i) Trade-offs between emissions to air,
ground, and water.
(ii) Implications for spatial and transport
planning strategies.
(iii) Identification of economic blockages
in terms of economic cost pass throughs into society (through
producer product responsibility, environmental cost allowances
in regulated sectors, Traded Pollution Permits, metering, or whatever).
(iv) Establish the "low hanging fruit"
to identify where (for instance) substantial reductions in CO2
are available at least internality economic cost. (Letter to
David Miliband, page 2, paragraph 6, date 12 June 2006.)
I suggest it is in our interest to adopt a more
continental approach to these challenges by identifying the scale
and direction of the destination we are setting ourselves first,
in advance of setting out on the journey. In all likelihood, such
a methodology is more likely to assure us of value for money and
success. In total the capital expenditure investment for a state
of the art 2020 clean economy could thus be of the order of £80
billion-£100 billion (approximately equivalent to the sunk
capital cost in the NHS). (Letter to David Miliband, page 3,
paragraph 8, date 12 June 2006.)
Behind this investment requirement lies huge
opportunities for industry, the City, academics, job seekers,
and government, in the form of genuine economic growth, research/development
and innovation, employment, and lending opportunities which can
create an underpinning opportunity to export no-how and skills
at a time when mass manufacture is no longer an option for us.
The Swedes, Danes, and Swiss have recognised this process for
decades in the environmental area, and it is about time that we
in Britain utilised our core strengths in terms of enterprise,
academia, and sound finances to develop these environmental opportunities
as a platform for that future prosperity. (Letter to
David Miliband, page 3, paragraph 9, date 12 June 2006.)
The real sadness of this process is that since
the September 1998 discussions around "Less Waste, More Value",
there has been much activity but still little in the form of outcomes
after eight years, in terms of delivering a significant shift
up the waste hierarchy across all waste streams. A failure to
make these projects bankable due to a pedestrian rate of increase
in the landfill tax, coupled to a fragmented and uncoordinated
approach to Producer Responsibility (which could have initiated
large scale recovery for around 10 million tonnes of materials
in the domestic stream, and transferred the cost from the public
to the private sector) and the relative level of ignorance in
the general population on the looming crisis in waste reprocessing,
is a testament in itself. We really are in the last chance saloon,
and the time for yet more consultation is over—the final
strategy should make clear, unequivocal statements of what government's
intentions are, rather than embarking on yet another endless round
of consultation. (Response to DEFRA Waste Strategy Review,
1 May 2006.)
January 2007
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