How To Develop An E-Waste Recycling System In Pembroke

Transcription

1 Ministry of Environment WEEE/E-WASTE BUSINESS MODEL Prepared by the Ministry of Environment (MoE) Supported by UNEP-DTIE OCTOBER 2009

2 Table of Contents Executive Summary... 2 CHAPTER 1: INTRODUCTION & BACKGROUND Introduction Project on Waste Electronic and Electric Equipment/ E-waste Management in Phnom Penh City Project Objectives Approach and Methodology Outcome Format of Report CHAPTER 2: BUSINESS MODEL AND STRATEGIC ANALYSIS Introduction Basis for Development of Business Model Business Model SWOT Analysis PPP based E-waste business model in Combodia CHAPTER 3: RECOMMENDATIONS AND TIME LINE Recommendations General Recommendations Steps involved in Implementation of Business Model List of Tables Table 2.1: Project Risk Profile Table 2.2: Established European WEEE Schemes (EU/EEA): Flexibility of Cost Models Table 2.3: SWOT Analysis Table 2.4: Summary Mapping of model versus instruments/incentives List of Figures Figure 2.1: Financial Model of Netherlands NVMP A Collective EU Collective Compliance System Figure 2.2: Financial Flow Model of Japanese E-waste Take back System A Consumer/Retailer based system Figure 2.3: Financial Flow Model of Swiss E-waste

3 Executive Summary E-waste inventory ranges from 6792 metric tons in 2008 to 22,443 metric tons in It is expected to grow exponentially with a significant correlation during the next decade both in terms of numbers and weight. In terms of numbers E-waste from mobile phones is expected to grow at a higher rate followed by TVs, PCs, refrigerator, air conditioners and washing machine. This will form the basis of planning for product wise intervention. In terms of weight, E-waste from TV is expected to grow at a higher rate followed by PCs, refrigerator, air conditioners, washing machine and mobile phones. The E-waste inventory projections both in numbers and weight show significant growth starting from the year 2012 onward. It gives policy planners, implementers and other stakeholders three years to plan and implement future interventions starting from the year 2009.From the regulatory perspective, definition of electrical and electronic equipment is not covered under the existing regulations. One of the major gaps, which have been identified, is the lack of clear definition of E-waste under existing regulations. There is a need to cover E-waste either under existing regulations or a separate regulation depending on the time frame and capacity of regulatory agencies to implement it. Since draft 3R strategy is being formulated in the country, E-waste can also be brought under its purview so that necessary regulatory interventions can be planned and implemented. The E-waste trade value chain consisting of stakeholders implementing twelve processes indicates that future interventions are required at level 1 and level 2 consisting of primary E-waste generators and secondary E-waste generator. Considering the 1 st and 2 nd level E-waste treatment, plant specifications have been defined and financial viability has been assessed. The volume of E-waste item to be collected and transported till 2020 based on E-waste inventory estimates in Phnom Penh ranges from 4490 m 3 to m 3 for washing machine, 5140 m 3 to 6925 m 3 for personal computers, 9m 3 to 46m 3 for mobile phones, 2918 m 3 to 9573 m 3 for refrigerator, 1458 m 3 to 5976 m 3 for Air Conditioners and 1557 m 3 to 2618 m 3 for washing machine. This is based on 50% availability of E-waste for recycling. Depending upon the type of E-waste, different types of bins/ cages have been identified and recommended. The collected E- waste in container will be lifted manually, through fork lifts, placed into small trucks/ container carriers and transported from the collection facility to E-waste treatment facility. Depending on the collection efficiency and availability of the input raw material, the facility can start with one shredder of half the capacity followed by the second. There is huge variation in the prices of the treatment system starting from US$ to US$ 3.1 million depending on type of technology. The output from the E-waste recycling system will be sold/ exported to metal recyclers outside Cambodia. E-waste export market is expected to follow the same trend as that of global market for precious metals. The analysis of the price graphs indicates that metal market peaks and bottoms out in a ten year period. E-waste purchase price in PPM has ranged from US$ 1/kg to US$ 4/kg during the last ten year period. A financial analysis for the 7500 tons per annum E-waste recycling facility in PPM has been carried out based on capital and operating cost estimates, local land prices, labor costs, customs duty, equipment costs, electricity costs and current interest rates. It has been proposed that the capital costs will be in the form of debt and equity in a ratio of 70:30. The financial viability indicators e.g. IRR shows viability of the project. NPV is positive and decreases with high cost of capital. But the financial indicators are not strong enough to attract private investment because IRR value is much lower than 25% and payback period is 5 years. The project is most sensitive to land prices followed by interest rates, and customs duty. This analysis also indicates that if lower quantities of PC are dismantled then financial viability goes down 2

4 significantly. It shows that for waste white goods treatment and disposal, the combination of incentives should be higher. Financial viability is also sensitive to price fluctuations i.e. prices with respect to both input raw material as well as output. A comparative analysis of financial analysis indicators shows that viability improves with the improved capacity utilization. Capacity utilization depends upon the availability of the raw material. In order to make the project more viable an efficient E-waste collection and transportation system and a set of incentives like lower interest rate or duty exemption or subsidy on land may be planned. These measures need to be implemented in the form of a business model. The key elements, which form the basis of development of business model include risk profile of the project, financial viability of the project and consumer behavior. The major risks of medium to high intensities, which have been identified, are given below. 1. Risks due to lack of definition of E-waste in existing regulations 2. Risks due to part inclusion of E-waste in existing Waste Rules 3. Risks due to lack of harmonization of E-waste in Export/ Import rules 4. Risks of availability of raw material 5. Risk associated with collection 6. Risk associated with competition 7. Type of raw material/ input to E-waste recycling system 8. Scale of operation 9. Expected yield/ output 10. Price Risks Risks 1 to 3 are related to policy and regulatory level interventions. Risks 4 to 6, 10 are related to market and logistics interventions. Risks 7 to 9 are related to technology level interventions. Consumer behavior reflects the attitude of the consumer for E-waste management. It has been well established that consumers want value of their E-waste and may prefer exchange schemes where retailers offer them discounted price of the brand new item in exchange of their old electrical and electronic equipment. The three different types of E-waste business models, which can be implemented, are described below. 1. Conventional E-waste Recycling Model 2. Public Private Partnership (PPP) based E-waste Business Model 3. Extended Producer Responsibility Based Business Model The analysis of the above three models indicates that there are three mechanisms for E- waste management out of which two mechanisms are at extreme levels i.e. conventional E-waste recycling model and EPR based business model. Strength, Weakness, Opportunities and Threat (SWOT) analysis of these two extreme mechanisms has been carried out to understand the applicability under the current business environment. The common points, which can be inferred from this analysis, are given below. 1. Regulatory intervention is required in implementation of both the models. 2. Government participation will boost the implementation of both the models. 3. Potential of leakage exists in both the systems i.e. they are not foolproof system. Though EPR system offers the potential of reduction of leakage of waste to informal sector, it is also not 100% foolproof. The recent EU report 3

5 on the implementation of WEEE directive in member countries clearly states the gap in WEEE collection efficiency. The major point of difference in the implementation of the two models is the money flow i.e. who pays whom. In Combodian context, the EPR system will lead to a complete shift in consumer behavior. The existing consumer, which is used to receive the best salvage value of their E-waste, will start giving it free of cost and start paying Recycling Fee at the same time. The major barriers, which are expected to implement this system, are given below. 1. Is the consumer ready at the moment to adopt the system or shift in attitude? 2. If yes, then what is the time line for implementation? 3. Does the regulatory monitoring system have capacity to monitor this system? 4. Who will be responsible for leakages and implementation of penal provisions? 5. Who will be responsible for ownership of imported E-waste seized at the point of entry in the country? 6. How many E-waste recycling facilities will be viable under this system and how the E-waste collection and transportation system will be organized considering intra province or province state issues? A summary mapping of the sensitivity analysis versus the three models shows that a clear trade off exists between the government participation in terms of land/ subsidy/ customs duty & octroi waiver/ income tax rebate/ interest rate rebate on one hand and input raw material cost, rights to sell recovered material and recycling fee on the other hand. The timing of this trade off can be linked to time taken to shift consumer behavior. This provides the basis for either supporting the recyclers for a particular period of time or lead to development of PPP model for E-waste management. Though Combodia has no experience of implementing PPP models in infrastructure sector, the proposed E-waste recycling project can be formulated and implemented along the PPP mechanism. The salient features of this proposed model is given below. 1. The project should fall under the category of urban infrastructure. In case, it is not included in this category then efforts should be made to included it under urban infrastructure category. 2. Any statutory/ government agency can become partner in the project both in terms of provision of land on concession basis and/ or equity partnership % to 40% of the project cost can be contributed by the government in order to make it viable. 4. User Fee or Service Fee can be in the form of annuity transferred from the government to the recycling project operators every year. This annuity can be transferred by the authorized government agency in proportion to the recycled E-waste by recycler every year. The mechanism for implementation includes recovery of the user fee at the point of sale can be transferred to a fund specially created for E-waste recycling. This fund can be managed by the government agency or an independent fund manager. Money from this fund can be transferred to the recycler as per approved annuity based on statement of accounts submitted by the recycler to statutory entity. PPP model can provide ideal solution at the time when the E-waste management is entering into implementation 4

6 stage where the situation appears to be in transition. One of the major advantage of this mechanism could be that this user fee can be levied at the time of sale of brand new electrical and electronic equipment and transferred to the same fund in case of EPR regime. The management of the fund can also be transferred to an independent fund manager under EPR regime. The timing of this transfer will be in line with PPP contract conditions, when government wants to exit out of the model and transfer all its roles and responsibilities to an entity in EPR regime. A rough estimate of this exit could be after eight to ten years depending upon the financial indicators, when the E-waste recycling facility becomes profit generating entity. 5

7 CHAPTER 1: INTRODUCTION & BACKGROUND 1.0 Introduction Basel Convention s, Report on the Survey of the Import and the Environmentally Sound Management of Electronic Wastes in the Asia-Pacific Region, stated that E-waste release per annum is roughly 276 units of computer, 2,760 units of TV sets, 5,520 units of mobile phones and 690 units of fixed phones. This report also indicates that there is a rapid increase in the import of electronic equipment in the country. Moreover, with rapid increase in internet and information technology penetration and decrease in the retail prices of EEE, their end of life is getting reduced. Therefore, a need was identified to carry out due diligence as part of preparatory work for developing E-waste action plan for Cambodia. As a next step, the MoE of KoC got support from SBC and MoE of Japan, to implement the project Environmentally Sound Management of Electrical and Electronic Waste in Cambodia in A technical field study was conducted by local NGO, namely, Cambodia Environment Association (CEA) in a selected sample of provinces and cities that have different socio-economic conditions of high, medium and low income families in order to prepare a detailed E-waste inventory in the country. This study was carried out under supervision of the MOE of Cambodia, MoE of Japan and EX Corporation. The study items included E-waste from TV, computer, air-conditioners, mobile phone, refrigerator and washing machines. The major findings of this study included E-waste estimation as of 2007, which consisted 40, kg from TV, 13, kg from airconditioners, 2, kg from mobile phones and 1, kg from personal computers. It was also found that major quantities of E-waste are generated in Phnom Penh City. Further, the study indicated usage of low repairing/dismantling technology with inappropriate facilities in study areas, which threaten the environment and public health. In Phnom Penh, many small family workshops, within houses, have been established to recover reusable and recyclable materials from E-waste without proper precautions. The residual E-waste is disposed off as municipal solid waste in bins and landfill sites. Since EEE contain hazardous materials, these family level operations create a direct risk to workers and their families, to the community and to the environment, especially due to release of hazardous substances in soil, water and air. In order to achieve improved environmental conditions and high economic values from E-waste prior to its disposal, a pilot project is being planned in Phnom Penh since this city is considered to largely generate E-waste than other provinces and cities in Cambodia. 1.1 Project on Waste Electronic and Electric Equipment/ E-waste Management in Phnom Penh City Based on the current situation of E-waste handling in Phnom Penh, a comprehensive pilot project is designed to build the local capacity for proper E-waste management, including recovery of valuable materials. The local capacity building effort is aimed at national and local government level including small businesses and private sector. In this regard, MoE, Government of Cambodia has received a support from UNEP-DTIE-IETC to implement the project, E-waste Management in the Phnom Penh Municipality. The project has started in earlier 2009, after the official signing by the representatives of MoE and UNEP-DTIE-IETC. 6

8 1.2 Project Objectives The objective of the proposed project is to formulate, design and implement an integrated WEEE/E-waste management pilot project in PPM. After augmentation of local capacity, the level of effort could be scaled up to the national level and replicated in other countries. Specific objectives of the proposed pilot project are given below. Build the national and local capacity in Cambodia on inventorization and management of E-waste by undertaking various activities, including the inventory of E-waste and a pilot project to process E-waste in and environmentally sound manner with optimum level of recovery for recycling. Bring out the guidelines and training materials for dissemination for other developing countries to replicate similar projects and capacity building process. 1.3 Approach and Methodology The capacity building is designed for government institutions, private sector and local NGO. The current capacity building effort is being targeted in two major areas i.e. E- waste inventorization and E-waste management. UNEP has already produced two volumes of E-waste Manual. The first volume provides guidelines for E-waste inventorization, while second volume provides guidelines for E-waste Management. This project will utilize these manuals as part of their comprehensive approach and methodology as described below: Activity 1: Inventory of E-waste Assessment of the Phnom Penh City with respect to generation of E-waste from various sources (residential, commercial, industrial, inter-city, etc.) Establishment of Material flow with respect to E-waste generation in Phnom Penh City and identification of stakeholders Quantification and characterization of E-waste in Phnom Penh City, including quantity of various types as well as characterization of each type of E-waste Technical assistance to institutionalize E-waste inventory and its updating with Phnom Penh City Government Output: Activity 2: Report on current inventory and future projections of WEEE/ E-waste and mechanism for its update. Study of E-waste recycling structure Study of E-waste recycling/ other recycling infrastructure (formal/informal) and its capacity Study of E-waste toxic footprint by inventorizing E-waste recycling sites in case recycling occurs in informal sector in Phnom Penh City Study of the feasibility of the level of treatment of E-waste in formal sector in Phnom Penh City Output: Status report on existing recycling system and its capacity. 7

9 Activity 3: Design of pilot project for E-waste storage, collection and transportation system Study of consumer behavior for E-waste storage, collection, transportation and disposal in Phnom Penh City Study of existing infrastructure for storage, collection and transportation system in Phnom Penh City Pilot testing of E-waste storage, collection and transportation system using existing infrastructure Output: Activity 4: Output: Activity 5: Output: Feasibility report on E-waste collection and transportation system. Identification of best practices and enabling policy/ regulatory requirement to ensure E-waste management including collection, transportation, and treatment and disposal system includes possibilities of public private partnership Feasibility report on a model E-waste management. Identification of stakeholders (manufacturing industry) and initiating a dialogue with them to involve them in future work related to EPR/e-design of key electronic components (e.g. computers keyboard manufacturers) Stakeholders Workshop and Report Activity 6: Dissemination of the project experiences, including guidelines and E- waste Plan for Phnom Penh City, at national level. This will help other cities to develop their own plans based on local data Output: National Workshop and Report 1.4 Outcome The outcome of activities 1, 2 and 3 has lead to development of E-waste inventory, collection, transportation, treatment and viability of an E-waste management system in PPM. E-waste inventory ranges from 6792 metric tons in 2008 to 22,443 metric tons in It is expected to grow exponentially with a significant correlation during the next decade both in terms of numbers and weight. In terms of numbers E-waste from mobile phones is expected to grow at a higher rate followed by TVs, PCs, refrigerator, air conditioners and washing machine. This will form the basis of planning for product wise intervention. In terms of weight, E-waste from TV is expected to grow at a higher rate followed by PCs, refrigerator, air conditioners, washing machine and mobile phones. This will form the basis of planning for any collection, transportation and recycling facility in future. In terms of E-waste fractions, the availability of iron ranges from 3079 tons to 7249 tons followed by glass, which ranges from 1344 tons to 7277 tons. Plastic availability ranges from 1190 tons to 4091 tons while non-iron metal, which constitute precious metals and other metals like copper, lead etc. ranges from 607 tons to 1991 tons. The availability of electronic component ranges from 618 tons to 1690 tons while others range from 536 tons to 1558 tons. The E-waste inventory projections both in numbers and weight show significant growth starting from the year 2012 onward. It gives policy planners, implementers and other stakeholders three years to plan and implement future interventions starting from the year

10 From the regulatory perspective, definition of electrical and electronic equipment is not covered under the existing regulations. One of the major gaps, which have been identified, is the lack of clear definition of E-waste under existing regulations. There is very little difference between definition of used EEE and E-waste. Role of collector/ transporter is defined only in the context of hazardous waste and solid waste. There is no specific definition of generator or producer of E-waste. However, definition of importer of Used EEE is mentioned in the existing regulation. There is a need to cover E-waste either under existing regulations or a separate regulation depending on the time frame and capacity of regulatory agencies to implement it. Since draft 3R strategy is being formulated in the country, E-waste can also be brought under its purview so that necessary regulatory interventions can be planned and implemented. EEE market in PPM is organized in three different types of market segments i.e. shops selling brand new EEE, shops selling brand new as well as second hand EEE and shops selling second hand EEE. The majority of EEE market in PPM is organized in mixed market conditions with shops selling a combination of new and second hand items and shops selling second hand items. The market share of second hand EEE is increasing every year, although, some of brand-new items are cheaper. Consumers prefer branded EEE even when it is second hand. Shops selling second hand EEE have multiple functions of selling, repairing, refurbishing and dismantling. Geographically, it is organized in different hubs catering to ICT and white goods sector. It is observed that the major hubs of AC refurbishing / dismantling also serve as major hubs for refrigerator refurbishing/ repair and dismantling. Major hubs for TV and PC are located at different places. However, hubs at Chamkamorn and Toul Kok serve as two major hubs for TV and PCs. Chamkamorn, Toulkok and Meanchay also serve as major repairing/ refurbishing centre for washing machine. Therefore, four functions can be geographically addressed at one place while considering future interventions. There are twelve processes, which need to be considered for environmentally sound management while planning for future interventions since no chemical processing is occurring within municipal boundary of PPM. The E-waste trade value chain consisting of stakeholders implementing twelve processes indicates that future interventions are required at level 1 and level 2 consisting of primary E-waste generators and secondary E-waste generator. Considering the 1 st and 2 nd level E-waste treatment, plant specifications have been defined and financial viability has been assessed. The volume of E-waste item to be collected and transported till 2020 based on E-waste inventory estimates in Phnom Penh ranges from 4490 m 3 to m 3 for washing machine, 5140 m 3 to 6925 m 3 for personal computers, 9m 3 to 46m 3 for mobile phones, 2918 m 3 to 9573 m 3 for refrigerator, 1458 m 3 to 5976 m 3 for Air Conditioners and 1557 m 3 to 2618 m 3 for washing machine. This is based on 50% availability of E-waste for recycling. Depending upon the type of E-waste, different types of bins/ cages have been identified and recommended. The collected E- waste in container will be lifted manually, through fork lifts, placed into small trucks/ container carriers and transported from the collection facility to E-waste treatment facility. Depending on the collection efficiency and availability of the input raw material, the facility can start with one shredder of half the capacity followed by the second. There is huge variation in the prices of the treatment system starting from US$ to US$ 3.1 million depending on type of technology. The output from the E-waste recycling system will be sold/ exported to metal recyclers outside Cambodia. E-waste export market is expected to follow the same trend as that of global market for precious metals. The analysis of the price graphs indicates that metal market peaks and bottoms out in a ten year period. E-waste purchase price in PPM has ranged from US$ 1/kg to US$ 4/kg 9

11 during the last ten year period. A financial analysis for the 7500 tons per annum E-waste recycling facility in PPM has been carried out based on capital and operating cost estimates, local land prices, labor costs, customs duty, equipment costs, electricity costs and current interest rates. It has been proposed that the capital costs will be in the form of debt and equity in a ratio of 70:30. The financial viability indicators e.g. IRR shows viability of the project. NPV is positive and decreases with high cost of capital. But the financial indicators are not strong enough to attract private investment because IRR value is much lower than 25% and payback period is 5 years. The project is most sensitive to land prices followed by interest rates, and customs duty. This analysis also indicates that if lower quantities of PC are dismantled then financial viability goes down significantly. It shows that for waste white goods treatment and disposal, the combination of incentives should be higher. Financial viability is also sensitive to price fluctuations i.e. prices with respect to both input raw material as well as output. A comparative analysis of financial analysis indicators shows that viability improves with the improved capacity utilization. Capacity utilization depends upon the availability of the raw material. In order to make the project more viable an efficient E-waste collection and transportation system and a set of incentives like lower interest rate or duty exemption or subsidy on land may be planned. These measures need to be implemented in the form of a business model. 1.5 Format of Report This report describes the E-waste business model after completion of activity 4. The report consists of three chapters. Chapter 1 gives background information, approach and methodology used, training and its outcome and format of the report. Chapter 2 describes business model and strategic analysis. Chapter 3 describes recommendations and timeline. 10

12 CHAPTER 2: BUSINESS MODEL AND STRATEGIC ANALYSIS 2.0 Introduction This chapter describes the basis of business model, description of business model followed by strategic analysis on the application of the model. Further, recommendations have been formulated including time line for implementation of the recommendations. 2.1 Basis for Development of Business Model The key elements, which form the basis of development of business model, are given below. a. Risk profile of the project b. Financial Viability of the project c. Consumer Behavior Risk Profile The cumulative risk profile of the entire project is summarized in table 2.1. Table 2.1: Project Risk Profile Factors/ Intensity High Medium Low Regulatory Risks Risks due to lack of definition of E-waste in existing regulations Risks due to part inclusion of E-waste in existing Waste Rules Risks due to lack of harmonization of E- waste in Export/ Import rules Market Risks Risks of availability Short term of raw material Long term Risk associated with Short term collection Long term Risk associated with Short term transportation Long term Risk associated with Short term competition Long term Technology Risks Type of raw material/ input to E-waste recycling system Scale of operation Expected yield/ output Experience of technology supplier Environmental Issues Price Risks 11

13 The major risks of medium to high intensities, which have been identified, are given below. 11. Risks due to lack of definition of E-waste in existing regulations 12. Risks due to part inclusion of E-waste in existing Waste Rules 13. Risks due to lack of harmonization of E-waste in Export/ Import rules 14. Risks of availability of raw material 15. Risk associated with collection 16. Risk associated with competition 17. Type of raw material/ input to E-waste recycling system 18. Scale of operation 19. Expected yield/ output 20. Price Risks Risks 1 to 3 are related to policy and regulatory level interventions. Risks 4 to 6, 10 are related to market and logistics interventions. Risks 7 to 9 are related to technology level interventions. Financial Viability Under the existing policy and regulatory regime, financial analysis has been carried out by factoring in risks 4 to 10. Financial viability has been assessed in terms of internal rate of return (IRR), net present value (NPV), payback period and their sensitivity with respect to different interventions. The salient features of this analysis are given below. 1. Project IRR indicates that the project is capital intensive. Though IRR, NPV are positive, they are not high enough to attract financial investment from private sector. 2. If the land is allocated at subsidized rate or comes free then maximum increase in project IRR is deserved. 3. In case interest rates decrease then project IRR increases. 4. If customs duty on equipment is not levied then project IRR increases. Consumer Behavior Consumer behavior reflects the attitude of the consumer for E-waste management. It has been well established that consumers want value of their E-waste and may prefer exchange schemes where retailers offer them discounted price of the brand new item in exchange of their old electrical and electronic equipment. 2.2 Business Model The three different types of E-waste business models, which can be implemented, are described below. 4. Conventional E-waste Recycling Model 5. Public Private Partnership (PPP) based E-waste Business Model 6. Extended Producer Responsibility Based Business Model 12

14 Conventional E-waste Recycling Model Conventional recycling model is based on recycling of E-waste purchased by recycler from generator. The entire model is based on conventional business model, where recycler recovers money by selling by selling the products. The salient features of existing model are given below. 1. Recycler establishes E-waste recycling facility. 2. Recycler purchases input raw material from the E-waste generators. 3. Recycler recovers money by selling the E-waste fractions/ final product to smelters. 4. Recycler has its own collection and transportation system for input raw material. 5. Recycler finances the entire cost of collection, transportation and recycling through its own resources or through loans. Recycler can avail of existing incentives available for industrial promotion offered by different government agencies. However, the application of these schemes is dependent on classification of this type of business activity. Public Private Partnership Business Model Project on Public Private Partnership (PPP) Project model is based on a contract or concession agreement, between a Government or statutory entity on the one side and a private sector company on the other side, for delivering an infrastructure service on payment of user charges. Therefore, government participates to mitigate risks in order to promote infrastructure services. The features of this model are described in terms of definitions, eligibility criteria and government support as given below. Definitions 1. Private Sector Company means a company in which 51% or more of the subscribed and paid up equity is owned and controlled by a private entity. 2. Lead Financial Institution means the financial institution (FI) that is funding the PPP project, and in case there is a consortium of FIs, the FI designated as such by the consortium. 3. Total Project Cost means the lower of the total capital cost of the PPP Project: (a) as estimated by the statutory entity that owns the project, (b) as sanctioned by the Lead Financial Institution, and (c) as actually expended; but does not in any case include the cost of land incurred by the government/statutory entity; 4. Viability Gap Funding or Grant under this model means a grant one-time or deferred, provided under this Scheme with the objective of making a project commercially viable. Eligibility (a) The project shall be implemented i.e. developed, financed, constructed, maintained and operated for the Project Term by a Private Sector Company to be selected by 13

15 a statutory entity through a process of open competitive bidding;. (c) The project should provide a service against payment of a predetermined tariff or user charge. (d) The concerned statutory entity should certify, with reasons; (i) (ii) (iii) that the tariff/user charge cannot be increased to eliminate or reduce the viability gap of the PPP; The Project Term cannot be increased for reducing the viability gap; and The capital costs are reasonable and based on the standards and specifications normally applicable to such projects and that the capital costs cannot be further restricted for reducing the viability gap. Statutory Support (1) The total Viability Gap Funding under this scheme shall not exceed a certain percent of the total project cost. (2) Viability Gap Funding under this scheme will normally be in the form of a capital grant at the stage of project construction. In this model, the recovery of the revenue for the services rendered is dependent on the user fee, which in case of E-waste management could be recycling fee, which may be recovered from the consumer. Extended Product Responsibility Based Business Model The entire business model in Europe is based on Extended Producer Responsibility, where the producing organizations are responsible for E-waste take back and treatment. The business model is an integrated model consisting of E-waste collection, transportation and treatment. The conceptual guidance for financing each of these schemes has been provided by EU directive. These guidance features as per EU directive are given below. 1. Producers are responsible for the costs of picking up E-waste from collection facilities and for refurbishing waste products for reuse or for recycling and recovery. 2. When producers put a new product on the market, they must provide a financial guarantee that waste management of the product will be paid for. Producers can get waiver on this guarantee by participating in a producer responsibility organization (PRO), paying recycling insurance, or setting up a special bank account for this purpose. ICT sector and brown and white goods sector have different preferred business models with regard to E-waste management. In Europe, brown and white goods producers are comfortable with the schemes set up to address brown and white goods, while the IT producers are comfortable with those schemes set up to address IT goods. The major difference in business model lies in the method of charging fee/ money for E-waste management. The fee structure consists of different options. These options include actual costs of recycling, projected costs of recycling per category and cross subsidization. Cross subsidization occurs if the fee charged on one category of E-waste 14

16 is higher than its recycling costs. The differential is used to pay for the recycling of another category of E-waste, whose recycling costs are higher than the fee charged. Table 2.2 gives an example of fee structure. Table 2.2: Established European WEEE Schemes (EU/EEA): Flexibility of Cost Models Scheme Recupel (Belgium) NVMP (The Netherlands) ICT Milieu (The Netherlands) EI Retur (Norway) EI Kretsen (Sweden) SWICO (Switzerland) Number Type of Cost Allocation of Cost Models 1 Fixed Fee Model All categories. 1 Fixed Fee Model Certain categories excluded 1 Debiting Model ICT products. Real costs are calculated on a month-by-month basis and divided amongst members on a market share basis, calculated monthly. 3 Fixed Fee Model (EE Bransjen) According to type and volume of product placed on market (Brown Goods). ICT Model (IKT Retur/IT Retur) Actual Costs are calculated month by month and divided amongst members on a current market share basis. Fixed Fee Customer Model White Goods (Hvitevareretur). A fee is levied by customs on import and passed to PRO Spell out what it means! 3 Debitting Model Preliminary Cost. A preliminary cost (per unit, per kg or % of sales values) is fixed for the year. These fees are compared against actual costs at year-end and difference settled.. Debitting Model ICT products. Real costs are calculated on a month-by-month basis and divided amongst members on a market share basis, calculated on the preceeding year. Costs per unit will therefore vary on a month-by-month basis. Other Debitting Model. Special fixed fee debiting models have been developed for specific product groups e.g. light bulbs (2500 SEK per year). 2 Fixed Fee Models: ICT Products. Fixed fee tariff banded according to sales price. 12 fee bands with no fee for products under 50CHF. Fixed Fee Model: Consumer Electronics/Photographic. Fixed tariff according to product category. 5 fee levels with no fee for price below 50 CHF. Funding for supply chain The fee charged catalyses financial flow along the E-waste supply chain. This financial flow meets the costs of E-waste collection, transportation and treatment. Examples of funding of E-waste stakeholders along the supply chain in Netherlands, Japan and Switzerland are shown in figure 2.1, figure 2.2 and figure 2.3. The salient features of Netherlands NVMP (PRO) supply chain model are given below: 15

17 1. Producers/ Importers pay NVMP to manage their E-waste responsibilities under Dutch legislation. A fixed fee is paid to NVMP for each product placed on the market. This fee is passed on to the consumer with no mark up. The scheme covers household E-waste. 2. Households pay a visible fee on the purchase of new EE products. Households also pay a local municipal waste tax to fund general waste collection and operation of municipal sites. Households may return E-waste free of charge to municipal collection sites. Municipalities provide some kerbside collection. Households may also return E-waste to a retailer/distributor free of charge on the basis of 1:1 new for old purchase. Retailers may charge for collection of the old product from household. 3. Retailers are obliged to take back E-waste on a new for old basis from consumers. They may then transfer the E-waste to a municipal waste site, direct to the regional sorting stations (RTS) or pay for collection by NVMP. 4. Municipal collection sites receive E-waste and take responsibility for delivery to regional sorting stations operated by the municipalities and NVMP. Municipalities are not reimbursed. 5. Regional sorting stations receive E-waste free of charge and sort for collection and treatment. NVMP makes a financial contribution to the operation of RTS. 6. Transport contractors are responsible for the collection of E-waste from the RTS and delivery to treatment plants and recycling firms. Contractor invoices on the basis of weight. Logistics are organized in house by NVMP. 7. Treatment and recycling contractors take receipt of E-waste and process. Contractors invoice NVMP on the basis of actual treatment costs. The salient features of Japanese supply chain model are given below: 1. Consumers pay an end-of-life fee for product disposal and treatment as opposed to the producer responsibility concept in the E-waste Directive. This fee is paid to the retailer, and passed on to one of two industry consortia who are responsible for the collective management of E-waste in the specified categories. 2. Retailers are obliged to take back goods on a new for old basis. This applies both to replacement products, but also to products from non-identical product categories. It is estimated that 80% of waste is currently collected through the retail stream. 3. The Association for Electric Home Appliances (AEHA) is a trade group responsible for orphan products. Some collection services are also subcontracted to AEHA, who operate in isolated or rural areas not served by retailers. 4. Each Industry Consortium manages approximately 200 consolidation and bulking centres across Japan. These are privately owned and managed, although 16

18 retailers, local government or another designated organisation is obliged to deliver goods from the retailer. 5. Each consortium operates approximately 12 treatment centres for different project types and groups. Transport from the consolidation to treatment centres is outsourced. The Swiss system is based on EPR, both legally and operationally i.e. producers and importers are both physically as well as the financially responsible for an environmentally sound disposal of E-waste. The salient features of Swiss E-waste supply chain model are given below: 1. The entire operative responsibility is shared with the two PROs SWICO and S.EN.S, who manage and operate the system on behalf of their member producers. 2. Secured financing of the collection and recycling is ensured by way of the Advance Recycling Fee (ARF) charged on all new appliances. The ARF is used to pay for the collection, the transport and the recycling of the disposed appliances. The ARF can range from a minimum CHF (Swiss franc) 1 on small items, such as hair dryers and electric shavers, to up to CHF 20 for TVs or CHF 40 for refrigerators. Both SWICO and S.EN.S have distinct categories of products according to the approximate cost of recycling them. It is seen that the largest portion of the ARF goes to the recyclers. 3. The Swiss ARF is an intergenerational contract between appliances purchased in the past and those that will be purchased in the future, similar to a pension system. Therefore, it requires accurate estimations of how much waste will be generated and how many new products will be sold. 4. SWICO and S.EN.S have official collection points around Switzerland in addition to the thousands of retail locations which have to take back old equipment free of charge, irrespective of the brand or year of manufacture. It becomes easier for consumers to dispose their E-waste at appropriate locations. 5. By having common collection points, the PROs are better able to manage logistics, benefit from economies of scale and provide a consumer friendly, allinclusive solution instead of a prohibitively expensive brand specific one. 6. Both material and financial flows are controlled at every stage, as shown in figure 2.3. The independent controls not only deter free riders, but also give credibility to the entire system. It also ensures participation of retailers and consumers. Financial guarantee Producers have to provide a financial guarantee for fulfillment of their take back obligation for electrical and electronic products placed on the national market after the effective date of the local legislation (so called New waste ) by giving evidence of a guarantee (e.g. blocked bank account/insurance) for future E-waste management costs. In most European countries an additional financial guarantee is not needed if the producer is member of a collective scheme. 17

19 Retailers (3) Household (2) Producers/Importers (1) Municipal Collection Sites (4) Regional Collection Stations (5) Transport Partner (6) Treatment Partner (7) NVMP In house logistics (7) Financial Flow WEEE/ E-waste Flow Source: Chapter 5, Financing Mechanism for WEEE/E-waste management, Volume 2, E-waste Manual, United Nations Environmental Programme, Division of Technology, Industry and Economics, International Environmental Technology Centre, Osaka/Shiga. Figure 2.1: Financial Model of Netherlands NVMP A Collective EU Collective Compliance System 18

20 Retailers (2) Household (1) AEHA (3) Consortium Collection Sites (4) Consortium Treatment Centre (5) In house logistics Manufacturer Consortium Financial Flow WEEE/ E-waste Flow Source: Chapter 5, Financing Mechanism for WEEE/E-waste management, Volume 2, E-waste Manual, United Nations Environmental Programme, Division of Technology, Industry and Economics, International Environmental Technology Centre, Osaka/Shiga. Figure 2.2: Financial Flow Model of Japanese E-waste Take back System A Consumer/Retailer based system 19