State of Origin of Waste – NSW v QLD
Voluntary action by every individual helps to grow recycling rates; an extra milk bottle in the recycling bin; installing a home composting system, all contribute. Australia leads the world in household recycling rates.
In the business sector most of the economically viable streams are already being recycled (cardboard, paper, metals and plastic) although there is still leakage to waste.
Cardboard, paper, metals and plastic streams have sufficient commodity value to justify collection and reprocessing. But for many waste streams the inherent commodity value is just too low to justify the costs of recovery.
In these cases, the price differential to landfill is the key driver of private sector investment and council decisions to increase resource recovery. To put it another way, it is the opportunity cost of landfilling that drives recycling investment.
Landfill price and levies
Governments really only have three levers for waste reform – regulatory (e.g. enforcement, bans, Producer Responsibility etc), pricing (e.g. levies and grants) and education. However, education’s effectiveness is limited when it runs counter to market price signals.
Not many companies will recycle when it is cheaper to landfill, no matter how much we try to ‘educate’ them. That is why most businesses limit their recycling to cardboard, plastic and metal which are revenue raisers, or at least cost neutral.
There is now enough data to show that when landfill prices rise (notably via levies but not exclusively), there is an increase in resource recovery rates. Higher landfill prices provide the economic impetus for waste service providers (WSP’s) to invest in resource recovery equipment, governments to initiate infrastructure grants and consumer education programs, and for businesses to prioritise recycling over landfill.
NSW, VIC, SA, WA and ACT all have landfill levies ($133, $58, $57 $55 and estimated $60/t respectively for metro putrescible waste) and grants schemes supported by the levies (to varying degrees). All are growing their recycling rates and have generally set ambitious targets for recycling of 70-80% by 2020 or thereabouts.
Tasmania has a voluntary levy of $2.50 and is now considering a State based levy of $10/t. ACT has a levy imbedded (in the Mugga Lane landfill gate fee) of an estimated (MRA) $60/t. Only QLD and the NT have no levy. (The NT only has a few small landfills and they have recently established the second Container Deposit Scheme in Australia, after SA). That leaves QLD.
A tale of two States – NSW
The NSW Government Waste Less, Recycle More (WLRM) $467 million grants program for recycling is the largest in Australian history. It is 100% funded through the NSW landfill levy ($133.10/t in metro and $76.70/t in the regional regulated area). That equates to an average 20% hypothecation rate. (Of course an argument can be made for higher or continuing hypothecation but WLRM is a pretty persuasive step forward).
In its report card[iii], the NSW EPA tells us that as of June this year, $210.3 million has been distributed to 447 projects, creating 609 jobs and enabling the processing of more than 1.6 million tonnes of waste that would otherwise have been sent to landfill.
The NSW government is pouring millions of dollars (over $200 m) into new infrastructure to process organics and divert waste from landfill. Both private operators and local councils are the beneficiaries.
On the flip side landfill disposal in South East QLD is unbelievably cheap at $30/t, as a result of there being no levy and strong market competition amongst landfills.
Figure 1 shows the historic relationship between recycling rates and landfill levy costs in NSW and QLD.
In short NSW has progressively grown its recovery rate whereas QLD has flat lined.
NSW has created a virtuous cycle of landfill levy funding being hypothecated to new recycling services and infrastructure. Total waste to landfill is now trending downward in NSW. The reverse is true in QLD.
Note that when the QLD Government did introduce its $35/t waste levy (on commercial waste only) in 2013 there was an immediate spike in recycling. But 18 months later, after the removal of the levy, recycling rates crashed by 15% overnight and have not moved since.
Owner and director of Polystyrene Recycling Queensland, Leo Sines, said
“When the levy was introduced the phones ran off the hook with enquiries from businesses on how to divert their waste from landfill, how to minimise their waste and what options were available for recycling. The day the levy was removed, the phones stopped ringing.”
State of Origin of waste
With the significantly cheaper option of landfilling in QLD, carting waste from Sydney to Brisbane [v] landfills suddenly became commercially viable. In 2014, 20,000 truck movements ploughed along the Pacific Highway from Sydney to Brisbane and back, carting some 400,000 tonnes of waste to tip in SE QLD. (It is rumoured that some Victorian waste is also heading to QLD.)
The NSW Government implemented the ‘Proximity Rule’ in part to limit waste heading north, but while truck movements have slowed, a lot of waste is still going by rail (which is not covered by the Rule).
Importantly, that is 400,000 t/yr of material that NSW recyclers cannot access. It adds very little to the QLD economy and rapidly reduces SE QLD landfill capacity.
To be clear – the public policy problem lies with the removal of the QLD levy. The problem does not lie with waste transporters who arbitrage the policy vacuum. The QLD government needs to re-introduce a pricing signal (or regulations) to encourage recycling.
No one can seriously argue that moving 400,000 tonnes of waste over 1000 km is a sensible public policy outcome. It is a direct result of the $0 landfill levy in QLD combined with a very competitive landfill market.
Getting the politics to work
The data clearly indicate that using landfill levies as a price signal and a source of funding for resource recovery, works. It is not the only mechanism, but in the absence of a price signal, most other efforts are less effective.
The waste industry is ready to invest in new infrastructure and technologies (AWT, organics recovery etc.) and jobs, but only when it can make a commercial return.
The new QLD government has said there will be no levy (on household waste) in this term of government. Local government, business and the recycling industry need to bind together and in partnership, provide the QLD government the political capital they need to review that decision. The government needs community and industry based support for reform.
By the way, a $50/t levy on all waste is equivalent to $1 per week per household. It is only charged on waste that is landfilled. The private sector pays as well when it landfills waste. The impact on business is small. Councils will actually gain revenue from a hypothecated levy to put towards waste and other services. Importantly the recycling industry gets the price signal it needs to invest and create jobs. Waste flows from NSW and VIC will cease. Win, win, win.
As always, I welcome your feedback at the MRA blog ‘The Tipping Point’.
[ii] http://www.abs.gov.au/ausstats/abs@.nsf/Products/4602.0.55.005~2013~Main+Features~Main+Findings?OpenDocument (National Waste Data Report 2014)