FCC Environment’s Kristian Dales considers the politics of waste in an exclusive for the CIWM Journal Online, along with the impact of low commodity prices, infrastructure, the possible impact of a Brexit and the fact that we need clarity on our direction of travel, Brexit or otherwise…
Two years ago we said: “The industry needs consistency regarding legislative and economic drivers to encourage investment in infrastructure and market growth. It’s the responsibility of the waste management and resource sector to work with the existing framework of regulations to drive up recycling and energy recovery rates. However, too much regulation of the industry will stifle competition and damage the long-term viability of the sector.”
A year ago we said: “Arguably the biggest dilemma facing our industry today is how best to balance and align EU-driven environmental imperatives with hard, economic realities. If we are to take advantage of new resource opportunities, whereabouts on the waste management spectrum should those investment decisions sit? As the resource equation shifts from the front end of process management (gate fees) to the back end (refining the output), what strategic approaches look most likely to offer the best return, both in the short and long-term?”
Politically in this time we have lived through a referendum on independence in Scotland, a UK general election, the revised CE Package is now under review and we are soon to vote on our future in the European Union. In that time we have seen an almost annual churn at the helm of Defra, a stepping back and a slimming down.
And economically in that time we have seen some high profile business casualties which must re-focus our thoughts on the end game.
The industry has been divided for some time in its approach to dealing with waste as a resource, a situation compounded by the absence of clear legislative and fiscal drivers, particularly in England.
In 2014 our Mapping the politics of waste report examined the political dynamics at play in five key areas: recycling targets, the zero waste agenda, the circular economy, resource efficiency and green investment. Eighteen months on it is frustrating to see that little has been done to address the underlying market tensions highlighted in this report.
Low Commodity Prices
Low commodity prices continue to offer dwindling returns for reprocessors. As the economics around recycling become more difficult to reconcile there have been some high profile casualties. Recycling rates are still flatlining, with wide variations in local authority recycling performance. Although moves have been made to consider standardising recycling collections across the UK, it remains unclear whether this will actually help remedy the situation.
Infrastructure capability and a lack of investment in new waste facilities remains a pressing concern, given the Government’s withdrawal of PFI support and an inconsistent approach to renewables incentives for energy recovery. New merchant energy-from-waste (EfW) are coming on-stream, which could help build a new domestic market for refuse derived fuels (RDF). However, speculation over whether EfW should be regarded as a ‘transitional technology’ is fuelling yet more uncertainty.
The reality is that the industry needs clarity on direction of travel right now, irrespective of whether the UK votes to stay in or leave Europe.
If we remain in Europe, it will likely be “business as usual” with the expectation that the UK will sign up to the EU Circular Economy package. Under the package, the European Commission is considering a 65% household recycling target for 2030. There could be a role for EfW as part of this. The Commission maintains the sector offers significant growth potential, and is looking to announce a ‘communication’ on EfW by the end of the year.
If We Opt To Leave?
If the UK opts to leave Europe, then the industry’s position is less clear, at least in the short term. Firstly, there will be a wealth of legal formalities to address in order to exit, which could prove a lengthy process. During this time there could be an operational hiatus, which may affect investment and policy decisions. Until the UK legally terminates formal membership of the EU, there are questions over whether the industry would still be bound to the various EU directives and targets, most notably around landfill, recycling and producer responsibility obligations.
Given the Government’s increasing disengagement with the resources agenda, it is also questionable whether Defra will have the appetite to create new waste laws, which are bound to be costly and time-intensive. The Government might opt instead to maintain the existing principles of EU Directives – it could effectively enforce this by seeking to rejoin the European Economic Area (EEA).
This means the UK would continue to abide by any waste-related and environmental protection laws, and it would remain a signatory to the Basel Convention that governs trans boundary waste regulations. There might be a slight relaxation in domestic policy affairs however, particularly in England, with more of a light touch approach to compliance. In time, this could lead to further diversification of waste policy across the UK – especially in Scotland which is likely to press ahead with a second Scottish referendum should the UK leave Europe.
In terms of key sectors, there is little to suggest the industry’s buoyant RDF export market will be affected by an exit scenario, particularly if the UK remains part of the EEA. This is due to the integral role it plays in maintaining Europe’s EfW industries and the amount of investment capital tied up in existing contracts and infrastructure. However in the absence of any free trade agreement, individual EU member states may seek certain caveats from the UK in regard to such shipments.
The circular economy represents more of an unknown. Should we leave Europe, the EU’s package of measures would unlikely be transposed into UK law. However should Scotland subsequently vote to split from the UK, and rejoin Europe, we might see an almost unprecedented situation whereby Scotland ends up adopting the EU circular economy package and the rest of the UK does not. Given Scottish appetite for a more progressive and reformist waste agenda, this could lead to heightened tensions within the industry as it attempts to address these cross-border conflicting priorities.
Ultimately, what these scenarios highlight are pressures that run much deeper than the UK’s relationship to Europe. The industry faces a number of system constraints – weak policy, outdated legislation, devolved agendas, a lack of leadership on vision or strategy – and an in/out vote is not going to fix that anytime soon.
Because of this, the EU referendum vote could be perceived as a red herring. But it does offer the opportunity, regardless of the outcome, for the industry to re-engage with Government. Post-referendum, it is likely there will be a change in political dynamic – potentially a reshuffle or change in party leader depending on the outcome – and this could prove fortuitous timing to push for a united call to action.
A roots-and-branch review of how this industry operates is long overdue. It could mark the starting point for a re-energised dialogue with ministers, and pave the way for the development of a coherent, long-term directional framework.
In or out of Europe, this industry will prosper. But if it is to fully capitalise on its ability to improve the UK’s energy and resource security, much stronger domestic policy signals are needed to enable it to invest with confidence and certainty.