INDEPENDENT ASSESSMENT OF KERBSIDE RECYCLING IN AUSTRALIA. John Nolan and Leanne Philpott Nolan-ITU Pty Ltd
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1 INDEPENDENT ASSESSMENT OF KERBSIDE RECYCLING IN AUSTRALIA Background John Nolan and Leanne Philpott Nolan-ITU Pty Ltd The kerbside recycling systems introduced in Australia during the late 1980 s and early 1990 s have been seen as a cornerstone of environmental policy and municipal waste reduction. Community support across Australia has produced participation rates in excess of 85% and resulted in more than 18 percent of the domestic waste stream being recovered for recycling. Despite this, the overall costs and benefits of recycling systems were largely unknown. Media speculation was bringing about concern in the broader community that the costs of recycling may not be justified by the benefits. Without a sound technical, economic and environmental impact assessment, the future of kerbside recycling would remain uncertain. The signing of the National Packaging Covenant by government and industry in August 1999 was a catalyst for change. Before committing industry and government to a path of continuous improvement, the members of the National Packaging Covenant Council wanted certainty about the net costs and benefits of recycling. An independent assessment of kerbside recycling was to be completed as a matter of priority. The Covenant Council developed Terms of Reference and a Steering Committee was appointed to manage the process. The National Packaging Covenant Council commissioned Nolan-ITU Pty Ltd in association with SKM Economics to undertake an Independent Economic Assessment of Kerbside Collection and Recycling Systems for Used Packaging Materials in Australia. The purpose of the study was to assess the net costs and benefits of kerbside collection and recycling systems and their future viability. Key objectives included providing an improved framework for transparent decision making on sound financial, environmental and social grounds; and to provide a framework through which industry can assist local government authorities to improve the long term sustainability of recycling programs. This study marks an important step in the analysis of kerbside recycling in Australia in that it examines the financial, environmental and social costs and benefits rather than just the financial costs of systems and operations, where the focus of work has been in recent years. The Independent Assessment considered the range of different collection systems for metropolitan and regional areas in each State and Territory of Australia. Information was collected and collated from about 200 Councils across the country, representing 12 million people, or two thirds of the Australian population. In addition, a selection of alternative waste management systems has been assessed on the basis of available technology and feasibility. The Methodology Integrated Cost Benefit Assessment is used as the overarching methodology. Environmental costs are determined using techniques as required including Life Cycle Assessment and Environmental Economic Valuation. The environmental costs are combined with financial costs to provide a full cost/benefit assessment of current and alternative systems. The assessment of
2 current systems includes metropolitan and regional centres. These have then been compared against the base case of no recycling with all domestic waste sent to landfill. For these systems, a range of sensitivities and scenarios such as high yields, changes in the mix of materials collected, and changes in commodity prices, have been assessed. Alternative systems for the management of used packaging have been selected on the basis of available technology and industry interest and were then assessed for their financial and environmental performance. These systems are: Paper and plastics collection with energy recovery; Paper and glass collection and recycling only; Shift in packaging from glass to PET; Mechanical Biological Treatment (MBT); and Waste-to-Energy (WTE) from all domestic waste. The assessment confirms a common perception that current kerbside system in metropolitan and regional centres provides a total net benefit to Australian communities. This benefit is estimated to be $42 per household per year when considered as an overall average. This comprises an average net financial cost of $26 per household per year and an average environmental benefit of $68 per household per year. This translates to a total national environmental benefit of kerbside recycling estimated to be in the order of $424 million per year. With the national net financial cost for recyclables collection, sorting and delivery throughout Australia estimated at $158 million per year, this translates to an overall benefit of $266 million per year. The figure below provides an overview of the net financial costs and net environmental benefits of recycling systems studied $/hhld/yr Financial Costs Environmental Benefits Total Benefits M1 C(w) mrf,p(w) M1 C(w) ks,p(w) M1 C(f) mrf,p(f) M1 C(f) ks,p(f) M1 C(w) mrf,p(f) M2 M3 M4 M5 M6-40 M1: Crate systems M2: MGB & paper separate M3: Split MGB for Garbage and Recyclables M4: Split MGB for Recyclables M5: 2 MGBs, one paper, one container M6: Commingled MGB for Figure 1: Costs and Benefits of Metropolitan Kerbside Recycling (National Average)
3 Key Financial Findings The key findings from the financial analysis are: For metropolitan systems, the collecting, sorting and delivery costs of recycling ranges between $36 and $60 per household per year, or 70 cents to $1.15 per hhld For regional systems, the collecting, sorting and delivery costs of recycling ranges between $36 and $53 per hhld per year, or 70 cents and $1.02 per hhld The net, or additional cost for both metropolitan and regional systems, compared to landfilling, varies between $17 and $38 per household per year, or cents per hhld Costs for each system type vary considerably, depending on material yields. Costs escalate significantly when yields are low. In general, the cost efficiency of collection systems becomes poor when the yield falls below around 1.8 kg per hhld Net costs in regional areas are typically about 5% to 15% higher due to lower yields and less benefit from avoided garbage costs due lower recyclable yields and lower landfill disposal charges. For individual systems, the range in costs is much wider in regional areas than metropolitan areas. The financial benefit from avoided garbage costs attributable to recycling currently averages around $10 per household per year in metropolitan areas and $3 per household per year in regional areas. The variation is wider across individual systems due to the different system yields, and disposal costs. Crate based kerbside sort systems are not significantly different in cost terms to crate based MRF systems, ie the additional labour costs of the kerbside sort component are similar to the MRF sorting costs. The key findings from the financial analysis are: For metropolitan systems, the collecting, sorting and delivery costs of recycling ranges between $36 and $60 per household per year, or 70 cents to $1.15 per hhld For regional systems, the collecting, sorting and delivery costs of recycling ranges between $36 and $53 per hhld per year, or 70 cents and $1.02 per hhld The net, or additional cost for both metropolitan and regional systems, compared to landfilling, varies between $17 and $38 per household per year, or cents per hhld Costs for each system type vary considerably, depending on material yields. Costs escalate significantly when yields are low. In general, the cost efficiency of collection systems becomes poor when the yield falls below around 1.8 kg per hhld
4 Net costs in regional areas are typically about 5% to 15% higher due to lower yields and less benefit from avoided garbage costs due lower recyclable yields and lower landfill disposal charges. For individual systems, the range in costs is much wider in regional areas than metropolitan areas. The financial benefit from avoided garbage costs attributable to recycling currently averages around $10 per household per year in metropolitan areas and $3 per household per year in regional areas. The variation is wider across individual systems due to the different system yields, and disposal costs. Crate based kerbside sort systems are not significantly different in cost terms to crate based MRF systems, ie the additional labour costs of the kerbside sort component are similar to the MRF sorting costs. Key Environmental Findings The average national environmental benefit of current kerbside recycling in metropolitan and regional centres is conservatively estimated to be $68 per household per year (between $41 and $119 depending on the system and location). The average additional benefit of the recycling system is $71 per household per year. The majority of this comes from the air and water emissions associated with avoided product credits during manufacture from virgin materials. Of less significance are the impacts associated with the collection system (around $3/hhld/yr). The findings defy a perception that the environmental cost of collection may be greater than the environmental benefit of recycling. Environmental Valuation Results System Environmental Benefit ($ /hhld/year) Collection System - $ 3 Recycling System + $ 71 Total (national Average) + $ 68 The environmental impact categories, which contribute to the overall benefit of current collection and recycling systems, are presented in the figure below. The greatest impact comes from air and water pollution credits arising from the avoided impacts associated with production from virgin materials. The natural resource value of recycling is the next most influential factor at 21 percent of the benefit. This is followed by global warming credits, valued at 4 percent, and landfill savings at 1.6 percent. Traffic (Noise and Traffic) represents a net environmental cost to the system of 2 percent. All impact category results represent the total of the collection and recycling systems ie: transport, sort, landfill & recycling.
5 $/hhld/yr traffic landfillregional landfillmetro gwp water resources air Figure 2: Environmental Costs and Benefits of Recycling ($/hhld/yr - Population Weighted National Average) Market Conditions A total of over tonnes of kerbside collected recyclate is reprocessed annually in Australia. The majority or 92% (by weight) is made up by paper, cardboard and glass. These materials contribute around three quarters of the revenue. Commercial and industrial recycling systems are typically more cost-efficient on a per tonne recovered basis than kerbside recycling because more material can be collected at fewer collection points and the material is usually of a higher quality. Recycled commodity prices are subject to the same potential volatility as other commodities. The prices for the major recycled commodities have been deviating around relatively linear trend lines for the past decade. Prices paid to sorters by reprocessors vary depending on a number of factors of which the most important are contract periods and quantities supplied. For most materials, there appears to be sufficient reprocessing capacities in Australia. The exception is used mixed paper and cardboard which, in future, may need to be exported or further sorted into quality grades. In regional and remote areas in particular, it is important to continue identifying and developing secondary markets. Preferred Collection Systems Preferred kerbside collection and recycling systems to maximise the benefits, and to limit worker health and safety risks, are: Weekly two-crate systems in inner city areas with small dwellings, restricted space, street parking etc, and in small provincial and rural/remote Councils; 240L MGBs, preferably split (ie, one side for paper and the other for containers), collected fortnightly for outer metropolitan areas and larger provincial centres; and
6 MGBs for containers and collection of paper separately in a crate, or the two-bin recycling system (one MGB each for containers and paper) may deliver good results for Councils that wish to explore less common systems which appear to have high net benefits, or where residents have expressed a preference for such systems. In future, new systems may be developed which also result in the desired outcomes of improved yields, and hence efficiencies, as well as diminished OH&S risks. Conclusions And Recommendations When combining the financial costs of kerbside systems with the environmental benefits, it is clear that practically all current systems provide a net benefit to Australian communities. The inclusion of environmental benefits (expressed in dollar terms) together with current recycling and collection system costs provides an overall average benefit of $42 per household per year. This comprises an average net financial cost of $26 per household per year and an average environmental benefit of $68 per household per year. The estimate is only relevant in the context of the goal and scope of this study as all systems should be assessed on a case-bycase basis. Based on extrapolation, the national net financial cost for recyclables collection, sorting and delivery throughout Australia is estimated at $158 million per year or, if current collection practices (double siding) are included, $136 million. This represents the current cost over and above the base landfill option. The national net environmental benefit of kerbside recycling (over landfill) is $424 million dollars per year. The overall benefit is therefore an estimated $266 million per year. The net benefit to society may be further improved by increasing yields and reducing contamination (within the capacity of the collection systems and the range of materials currently collected). Obtaining the highest resource value utilisation of end products is key to economic and environmental sustainability. Highest resource value is obtained when the financial and environmental performance is maximised. If environmental costs were met by society rather than externalised from financial transactions, the highest net resource value would also be the highest financial value. As these costs are not included in the market price, they may be determined by other methods such as full cost benefit analysis. Existing recycling practices have gravitated to the highest value use and this should be maintained and possibly improved in the future. Recommended Actions For Consideration Based on the findings of this study, there are a number of readily identifiable actions which are available to the National Packaging Covenant Council to improve the financial, environmental and social performance of the current kerbside recycling systems.
7 Action Adopt preferred kerbside collection systems, with continuous improvement objectives, which are convenient to residents, and result in higher participation rates. Increase the uniformity of materials collected. Adopt preferred practices based on local priorities and implement appropriate systems to increase efficiencies and to achieve quality specifications. Provide up-to-date information on typical system costs for collection and recycling, and commodity price trends. Likely Benefits Reduced unit financial costs, increased environmental benefits, and high level of community acceptance. Reduced financial costs. Reduced worker health & safety risks. Increased environmental benefits through highest resource utilisation. Reduced financial cost through lower cost contracts, and improved financial viability within the sorting industry. Promote the outcomes of the assessment to decision makers and the community. Conduct a full social preference survey on kerbside recycling based on new understanding of environmental issues. Provide improved access to decision support and assessment tools so that the full environmental and cost performance of systems and alternatives may be available to decision makers in all spheres of government and industry. Identify barriers to commercial and industrial sourced used packaging, and through research implement measures to overcome these barriers. Continuation of market development activities as detailed by the National Packaging Covenant including research into end use markets, collaboration in the development of markets and purchasing programs based on information. Explore the potential to establish a secondary commodities trading market. Development of an improved Australian database on environmental costs and benefits for the kerbside collection system, including ancillary activities. Investigate economic instruments that provide for the full cost pricing of commodities, including both the financial and environmental costs. Investigate the level of direct financial subsidies of products manufactured using virgin materials, and consider options to either remove these subsidies or provide equivalent support for products manufactured with recycled material. Reduce material and energy consumption and waste production throughout the product life cycle while maintaining product quality through the implementation of product stewardship and producer responsibility as outlined in the Covenant Schedule. Reduced unit financial costs, increased environmental benefits, and high level of community acceptance. Obtain true community attitudes on options, and the level of willingness to pay and acceptance of a user pays system. Greater awareness and improved understanding of environmental impacts associated with waste management systems. Greater capacity to target improvements. Reduced sorting costs for kerbside collected materials, and environmental benefits for the non-domestic sector. Increased environmental benefits through highest resource utilisation, and reduced financial costs. Improved linkages with the market. Increased environmental benefits through highest resource utilisation. Improved market transparency to reduce/stabilise costs. Refined environmental evaluation, which would assist in targeting key activities in which increased environmental benefits could be derived. A levelling of the economic playing field so that recycled materials are not disadvantaged. This would increase the demand for and prices of recycled materials. A levelling of the economic playing field so that recycled materials are not disadvantaged. This would increase the demand for and prices of recycled materials. Reduced environmental costs. Potentially (increasingly) reduced financial costs.
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