Waste - bury, burn or export? Waste incentives distort the recycling market

By Ernie Richardson, CEO, Eastwood Langley

UK business is constantly exhorted to increase their export activities, but it may come as a surprise to hear that currently one of our most active exports is waste. Every week the UK is exporting something like 50,000 tonnes of domestic and commercial waste - and this is not the apocryphal ship loads of rubbish making its way to India or China. Believe it or not, 70% of all waste packaging exports are made across the North Sea to Holland. 

This comes as a real surprise; not least because it prompts the question "What do the Dutch know that we don’t?”.

The Dutch waste industry is booming at present and for good reasons. They are genuinely world class in recycling, which can be attributed to three features – socio-cultural, technological and integrated logistics. But they are also thriving on the back of sorted and semi sorted waste material exported from the UK; most of it packaging waste.

At the same time the UK waste and recycling industry is in the doldrums. Waste volumes have still not yet returned to the post 2008 levels, a policy of bury (landfill) or burn (incineration) still pervades the sector and finally the depression of virgin commodity prices (particularly oil) has eroded the returns available to recyclers. This means that we have, in general terms, excess re-processing and recycling capacity in the UK and this in turn results in UK waste processors competing for this ‘valuable’ resource.

Whilst this is a real problem if you are a UK waste processor, isn’t it just part of the normal ebb and flow of a healthy economy? Well, no! There is an additional burden placed on the UK market by government policy; specifically, the use (or mis-use) of a mechanism called PRNs. Please excuse me at this point, but now it gets a little technical!

PRNs (or packaging recovery notes) are part of a scheme aimed at ensuring that producers of waste packaging take steps to ensure that their waste packaging is recycled. In effect packaging producers are obliged to buy PRNs in accordance with how much (and what type of) packaging they produce. In turn this money is passed on to registered recyclers who demonstrate that they are recycling this waste material. In simple terms it means that the "waste producer pays”. This scheme also covers exported material where UK exporters can claim the benefit of PRNs as long as they can show that their material was intended to be recycled at the export destination.

This is a well-established (over 20 years) mechanism which in general terms meets much of its original objectives. However, this is where the fun starts!

A domestic recycler can only claim a PRN on the percentage of material actually recycled, so the proportion of input material that is discarded (typically say 30% for contamination and by-products) does not attract a PRN. But because of a regulatory glitch, someone exporting material can claim a PRN on the entire weight of what’s exported, because they can claim it is all intended for recycling, and no-one checks how much actually was, or even could be recycled. This permanent 30% advantage can be a material benefit to waste exporters, and distorts the market, causing waste resources to be un-necessarily lost to UK plc. It’s also worth noting that the absolute level of incentives in Europe (the equivalent of PRNs) is much higher than in the UK. For an authoritative analysis of this problem you should follow Paul Levett’s blog on - http://www.lrsconsultancy.com/news-events/blog/

What this all means is that the UK Government (i.e. you and me) are in effect subsidising the export of waste, whilst significant parts of the UK waste industry are competing to secure feed stocks. This is nonsensical.

Now I appreciate that unravelling incentive schemes can sometimes create more problems than it solves. However, what is needed now is a major overhaul of the PRN/ PREN schemes to ensure that UK waste processors are at least on a level playing field as compared to Dutch and other overseas re-processors. The UK Government should get round the table with the leading operators and funders in this field such as Viridor, Veolia, Foresight, Gravis and the Green Investment Bank to develop a revised or new scheme.

In the longer term don’t we need a more coherent and comprehensive national strategy for waste, on which basis the waste industry can make long term plans?