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The Landfill Allowance Trading Scheme
Purpose
In April 2005 the world’s first allowance scheme for municipal waste was launched in England, with the aim of encouraging local authorities to deliver reductions of 75% of the amount of biodegradable municipal waste (BMW) produced in 1995 being sent to landfill by 2020.
This Policy Position Statement (PPS) outlines the main requirements of the Landfill Allowance Trading Scheme (LATS), highlights the implications of the scheme for the waste disposal authorities (WDAs) who will be required to deliver the Scheme’s requirements, and sets out CIWEM’s position and recommendations on how best to progress on this sensitive issue.
CIWEM’s Position on LATS:
In order to satisfy the requirements for WDAs to meet their LATS targets and the UK to meet its commitments under the EC Landfill Directive, CIWEM calls for a number of actions to be taken:
1. The Waste and Emissions Trading (WET) Act 2003 to be modified to include flexibility of diversion targets for areas selected for significant demographic growth;
2. Measures to be implemented which will enable WDAs to obtain sufficient new treatment capacity without incurring unacceptable levels of investment and borrowing;
3. The Government to promote actively the use of alternative (LATS-friendly) technologies and assist with overcoming barriers to their implementation such as restrictions under the Animal By-Products Regulation;
4. The Government to ensure that the scheme is independently regulated to prevent profiteering and price fixing by WDAs which are in the position to trade their allowances;
5. The mandatory inclusion of waste collection authorities (WCAs) in the scheme to ensure that they put in place collection programmes for diversion of biodegradable municipal waste (BMW).
The Chartered Institution of Water and Environmental Management (CIWEM) is the leading professional body for the people who plan, protect and care for the environment and its resources, providing educational opportunities, independent information to the public and advice to government. Members in 96 countries include scientists, engineers, ecologists and students.
Context
The United Kingdom is required by the European Landfill Directive (1999/31 EC) to reduce the impact of landfill on the environment, especially regarding the contribution of landfills to climate change. The Directive focuses on reducing the amount of biodegradable waste sent to landfill, as this waste forms methane, a powerful greenhouse gas.
In accordance with Article 5(2) of the Landfill Directive, the Waste and Emissions Trading (WET) Act 2003 was passed. This Act empowered the Secretary of State to provide allocations of biodegradable municipal waste (BMW) for the UK and individual countries (England, Scotland, Northern Ireland, Wales). The Act also provides the legal framework for the trading of landfill allowances in England under the world’s first trading scheme for municipal waste allowances, the Landfill Allowance Trading Scheme (LATS). The Government believes that a trading scheme will allow authorities to make the best use of the waste management funding that is available to them. LATS was launched on 1 April, 2005 and operates up to 2019/20.
To meet UK targets under the Landfill Directive, each English and Welsh Waste Disposal Authority (WDA) is given a steadily reducing annual allowance (tonnage) for the amount of BMW they may send to landfill. Targets have been set for Scotland and Northern Ireland, but there are no trading schemes in these countries. In England and Wales, allowances to WDAs are tradable under LATS and are designed to provide a flexible economic instrument that will bring new ways of working for local authorities. Some offset between years will be permitted, to a maximum of 5% of the allowance (borrowing). Where landfill is lower than the allowance, the spare allowances may be saved (banked) and used later, or traded with other WDAs.
Failure to meet targets will require either the purchase of allowances from WDAs with surplus allowances (such as areas of diminishing population or where there are waste incinerators) or a fine of £150 per tonne. This penalty for exceeding LATS allowances is based upon three times the average cost of landfill, but in certain local authorities can be as much as six times the current cost. The price of surplus allowances is not specified but realistically it is unlikely to exceed £150 per tonne. Defra has stated that one authority has already offered allowances for sale at £32 per tonne, although it is likely that prices will rise as targets become more challenging and demand for extra allowances becomes greater.
68% (by weight) of the total municipal solid waste (MSW) will be regarded as biodegradable municipal waste (BMW) in England, with 61% in Wales (although in practice this proportion may vary quite widely from authority to authority). It is this biodegradable portion which is used to calculate LATS compliance. LATS does not cover materials such as metal cans, plastics and glass, which are already commonly collected for recycling and also diverted from landfill.
The Department for Environment, Food and Rural Affairs (Defra) consulted on LATS in the summer of 2003. In response, a number of concerns were raised, particularly by WDAs, and especially with regard to current, and more significantly, future demographic growth as it was proposed that the landfill allowances would not be increased per capita.
Key Issues
The following are highlighted as issues of key significance to WDAs arising from the LATS:
• Landfill Allowances for each WDA are calculated by applying their percentage contribution to 2001/02 (which is taken as the base year) municipal waste arisings to the maximum amount of BMW that can be sent to landfills in target years.
• Between 2005 and 2010 targets are “back-end trajectory” loaded (i.e. increasingly onerous towards the end of the period), to allow time for authorities to put in place treatment capability. Following this period, diversion targets become proportionately more severe with time.
• Whilst provisions in the WET Act require WCAs and WDAs to produce Joint Municipal Waste Management Strategies to ensure a partnership approach to waste management, the statutory duty to deliver LATS reductions falls exclusively on WDAs.
• No allowance is made for per capita growth in waste production, nor for the effects of demographic (population) growth. On average these contribute at least 3% waste growth per annum. However, the planned acceleration of housing growth in some parts of the country is likely to result in waste growth to nearer 5% annually.
• The Government has indicated it will monitor but not regulate landfill allowance trading.
• Acceptable treatment technologies and disposal routes to meet LATS have not been agreed and there is no linkage in planning policies and strategies for fast-tracking the introduction of LATS friendly technologies such as mechanical biological treatment or incineration.
• There are legislative barriers such as the Animal by Products Regulation which prevent the processing of new BMW streams such as kitchen waste & organics using cheap and widespread current technology.
Discussion
Using the modelling tool provided by the Environment Agency for calculation of BMW it is likely that most WDAs will not be in breach of their LATS allowances until the first target of 75% diversion of BMW is reached in 2009/10.
Regulating trading
Some local authorities face potentially significant early penalties where their projected landfilling of waste exceeds their LATS allowance, assuming that they are unable to purchase sufficient surplus allowances from elsewhere (it is only possible to purchase allowances for 5% of the next year’s allocation). The Government has indicated its non-intervention in regulating the scheme to address price fixing and distribution of available surplus capacity, therefore CIWEM considers it important that an independent regulator should be appointed.
New processing technology
For WDAs to ensure landfill of BMW does not exceed their LATS allowances it is likely there will need to be considerable investment in processing technology within the next three to five years. The Environment Agency has published guidance on the best way of sampling and measuring the biodegradability of municipal waste from treatment processes such as MBT and other pre-treatment processes, which is likely to go a long way in clarifying the contribution such technologies can make to delivering LATS targets.
It is likely that new facilities will require lengthy planning applications and may face strong opposition from local residents and pressure groups, which may delay/halt the process. This could potentially result in the WDA incurring penalties for not meeting LATS targets. It is suggested that measures to encourage the implementation of LATS-friendly technologies should therefore be introduced into planning policy.
For those WDAs likely to exceed their LATS targets, diversion schemes may include introducing kitchen and garden waste collection. Unfortunately for WDAs the technology for treating this waste needs to satisfy the Animal By Products Regulations, as such material may contain meat products. In the case of composting, this requires retention of the material at 70oC for 1 hour prior to treatment, since there is no guarantee that meat products can be screened from the kitchen waste component. Without kitchen waste, WDAs may not achieve the BMW diversion required under LATS. This not only drives up the overall cost of processing waste, but also negates the use of existing low-tech methods such as windrow composting.
Dealing with more waste
In some parts of the country some WDAs could face challenges in meeting the requirements of LATS whilst also having to cope with growing waste production due to both demographic (population) growth, as well as per capita increases in waste production. Certain areas of the country, in particular the South East of England, have been selected by the Government for significant demographic growth resulting in a potential doubling of some areas’ population. However, no allowance for the extra tonne or so of waste per year that each additional property brings has been made when setting targets for such areas. The Environment Agency states that any disadvantage of this kind should be outweighed by the benefits in WDAs knowing their targets up to the end of the scheme, allowing them to make long-term plans which may take account of expected population patterns. CIWEM considers that the Government should ensure that planned growth includes zero waste planning policies or provision of extra capacity.
Responsibility for delivery of targets
Whilst the duty to deliver LATS targets falls on WDAs only, the WET Act does require a partnership approach between them and their respective WCAs, with the production of joint Municipal Waste Management Strategies to set out agreed approaches to delivering sustainable waste management. If need be, a WDA may direct a WCA to deliver waste in a separated form so that it may meet its statutory obligations, but will be required to financially compensate for this if necessary. This power of direction is subject to consultation and guidance by the Secretary of State. Whilst this situation is clearly intended to ensure that WDAs and WCAs cooperate in delivering waste management obligations, CIWEM considers that the placing of the statutory duty to deliver LATS solely on WDAs means that there is a risk WCAs may not be as cooperative as they might be were the duty to be placed on both authorities. Such a situation would be unlikely to arise in a unitary authority.
Conclusions
CIWEM is pleased to see innovative tools such as trading schemes being developed for municipal waste management. However, it may be concluded that there are still issues to be tackled if the scheme is to effectively deliver the environmental benefits it sets out to. These include:
• The short timescale to implementation, causing forward planning difficulties both operationally and financially.
• Lack of clear guidelines regarding the acceptability of alternative treatment processes to satisfy LATS requirements.
• There is no provision in planning policy to encourage introduction of LATS friendly processes.
• Many local authorities will need to introduce new materials e.g. kitchen waste into the waste diversion stream to meet LATS, but there is a current lack of treatment capacity capable of dealing with these due to restrictions under other legislation such as the Animal by Products Regulation. Such legislative barriers should be addressed.
• Social and demographic growth in waste production within the LATS timescale is likely to place significant extra pressures on some authorities which have not been recognised in setting the LATS targets.
• 2nd Tier Authorities such as County Councils responsible for waste disposal only are heavily reliant on cooperation of WCAs to put in place robust programmes for diversion of BMW. However, WCAs have no statutory duty to deliver the LATS targets.
December 2005
Note: CIWEM Policy Position Statements (PPS) represents the Institution’s views on issues at a particular point in time. It is accepted that situations change as research provides new evidence. It should be understood, therefore, that CIWEM PPS’s are under constant review, that previously held views may alter and lead to revised PPS’s.
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