10 December 2015
The climate change negotiations in Paris are stealing all the headlines at the moment. As a result the European Commission’s launch of the new Circular Economy Package on 2 December has flown slightly under the radar.
For those in the waste and resources sector it is an extremely significant development that will guide the growth of waste and resources legislation and related controls for the foreseeable future.
The expert teams at WYG, Grant Thornton, and Weightmans have come together to launch an initiative that will break the new Package down and focus on the likely impacts for local authorities and the services that they provide. Collectively we will give you a unique insight into the financial, practical and legal aspects of the Package.
This note and the webinar planned for 19 January 2016 provide an introduction to the headlines of the Package. Future blogs and workshops will look in more detail at specific aspects of the Package as more information is released by the European Commission.
Financial – Grant Thornton
The financial implications of the proposed Package are likely to place greater financial burden on local authorities if there is a requirement for greater source segregation where this is not already undertaken.
Whilst there is an argument that greater source segregation will help reduce contamination and generally increase the quality of recyclables collected, which in theory should increase the value of those materials, it does not alter the fact that these are commodities, with all the uncertainties of operating in commodity markets. The revenue generated will likely remain unpredictable, certainly for the foreseeable future, and the local authority will be exposed to this or be prepared to accept very low guaranteed income from the private sector. Whilst the EU say they recognise the essential role of the private sector in creating demand for secondary products, there are going to be no financial stimuli such as tax incentives for use of these materials, and hence no certainty of reasonable levels of income to offset those extra costs for local authorities.
Therefore, when you add the potential requirements for separately collected food waste the burden will potentially become greater. The extent of this will depend on what the options and cost of treatment or onward sale of materials are. This in turn will be impacted by the nature of existing arrangements and who does them, any existing contractual obligations (such as CV on thermal processing contracts which could be impacted by removing plastics from the residual stream). The analysis really is going to have to be a comprehensive whole system cost assessment. Albeit, any outcomes of such analysis may well be trumped by the legal obligations that come with the initiative and in particular any financial penalties for not meeting the requirements.
Technical – WYG
The proposal to amend the Waste Framework Directive 2008/98/EC (rWFD) responds to the legal obligation to review the waste management targets in that Directive. This Directive and other associated EU waste management Directives have been seen as successful drivers in improving waste management across the EU, but discrepancies still exist with certain Member states. Implementation of the Package through amendment of these Directives is seen to be building on the legislative approach taken so far and is designed to drive waste management up the waste hierarchy and thereby achieve improved resource efficiency across Europe.
Two key areas that could potentially ‘pull’ against each other in respect of impacts on Local Authorities as the Package is introduced through amendments to existing rWFD concern the following:
Other areas of impact, for some Local Authorities that, so far, do not have solutions in place or plans for residual waste recovery, include the introduction of a gradual limitation on landfilling municipal waste to 10% by 2030. And those councils that have or plan to put Energy from Waste solutions in place to treat their residual waste may face the possible implementation of incineration charges. ‘Pay as you throw’ schemes are also muted in the proposed amended Directive, as an example of financial incentives aimed at achieving waste prevention and recycling objectives. Local Authorities will have concerns that such an approach could disproportionately affect low income households and may lead to an increase in fly tipping.
Legal – Weightmans LLP
The Commissions announcement identified a number of hard measures concerning amendments to 6 specific waste related Directives. The majority of the changes will introduce revised targets (such as those referred to in the Technical section above). They will also introduce other detailed measures, such as greater clarity around terms such as “by- products”. It is likely these changes will come forward in 2016 as part of the EU work programme. These changes will directly affect the services being offered by local authorities.
The Commission announcement also identified a number of softer measures many of which can be found in the Action Plan. The lack of detail around these softer measures which relate mostly to non-waste considerations has caused a ripple of concern amongst a number of commentators. That is primarily because the only way the circular economy will succeed is if the Commission simultaneously addresses all parts of the circle e.g. raw material use, product design, consumer choices and also reuse, recovery and secondary markets for recycled products. The use of an action plan in relation to these other areas, rather than firm legislative proposals, is indicative of their complexity.
The Action Plan introduces a number of ‘voluntary’ measures to address some of these more complex issues. This should only be seen as a short to medium term solution. In the long term hard measures will be required to tackle these more complex issues.
The Package advocates the further use of financial incentives to properly implement the waste hierarchy. That is not an approach favoured by the UK Government, but is it something that local authorities will need to do in light of the increasing budget pressures and increasing demands to offer ever more effective waste and resources solutions? The answer has to be yes.
The development of markets for recycled materials and the promotion of ‘pull or demand side’ measures is of vital importance. Disappointingly there is not much detail around this in the Package. This ties into recent reports of the need for local authorities and their contractors to share the risk associated with the markets for, and price of, recyclable materials. In the absence of any specific demand side measures in the Package, the need for a new approach to the sharing of risk is even more urgent. No doubt we will see a move to develop a new approach in the contracts and models used by local authorities when procuring waste services.
It is important to note that the announcement of the Package is just the start of the circular economy journey which will last for a number of years.
Join us for our joint webinar on 19 January to find out more about what the Package will mean for your authority and the services you provide. Register for the webinar on 19 January here.
For further information or to discuss any of the issues in this update, please contact:
Simon Colvin, Partner, on 0161 233 7356 or email firstname.lastname@example.org
Mike Read, Director, on 0797 1 409 287 or e-mail email@example.com
Dr. Jeff Evans, Associate, on 0113 219 2204 or e-mail firstname.lastname@example.org
Weightmans LLP December 2015