Working W
Marsden Jacob Associates
Financial & Economic Consultants
ABN 66 663 324 657
ACN 072 233 204
Internet: http://www.marsdenjacob.com.au
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Melbourne office:
Postal address: Level 3, 683 Burke Road, Camberwell
Victoria 3124 AUSTRALIA
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Brisbane office:
Level 14, 127 Creek Street, Brisbane
Queensland, 4000 AUSTRALIA
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This report has been prepared in accordance with the scope of services described in the contract or agreement between Marsden Jacob Associates Pty Ltd ACN 072 233 204 (MJA) and the Client. Any findings, conclusions or recommendations only apply to the aforementioned circumstances and no greater reliance should be assumed or drawn by the Client. Furthermore, the report has been prepared solely for use by the Client and Marsden Jacob Associates accepts no responsibility for its use by other parties.Copyright © Marsden Jacob Associates Pty Ltd 2013
Table of Contents
Page
Key Points 1
1. Introduction 2
1.1 Report purpose 2
1.2 Scope of analysis 2
2. Potential co-benefits 4
2.1 Background 4
2.2 Assessment of co-benefits associated with drop-off at collection depots 5
2.3 Co-benefits associated with options 2a-2e and 3 14
3. Conclusions and recommendations 16
References 17
National Environment Protection CouncilDistributional and cost benefit analysis for the packaging impacts decision RIS: Co-benefits / ES.i
Key Points
§ Three potential pathways for the achievement of co-benefits are considered in this assessment:
1. co-benefits achieved through the use of container deposit scheme (CDS) collection depots or hubs to provide a ‘drop-off’ service for non-CDS materials; these co-benefits are assessed in relation to Options 4a, 4b and 4c;
2. co-benefits associated with implementation of programs initiated through non-CDS options (Options 2a-2e and 3); and
3. co-benefits achieved through establishing a commercial and industrial (C&I) collection service as an additional component of Option 4a.
§ The key consideration with respect to the first pathway is whether the implementation of a CDS nationally, using collection depots (Options 4b and 4c) or hubs (Option 4a) for collection of non-CDS materials, will result in additional recycling of non-CDS materials beyond what would have happened in the absence of a CDS. There is insufficient evidence to answer this question conclusively. Nevertheless, indicative estimates have been made of the net benefits of this collection service using assumptions about levels of additionality. Annual net benefits of approximately $1.2 million, $5.3 million and $8.0 million have been estimated for Options 4a, 4b and 4c respectively.
§ For completeness and consistency potential co-benefits associated with non-CDS options have been assessed on a comparable basis to co-benefits estimated for Options 4a, 4b and 4c. These have been assessed through the application of a ‘Marginal Recycling Cost Curves’ (MRCC) model (see Data Assumptions report) and will be detailed in the CBA report.
§ While the third pathway has the potential to lead to co-benefits, the proposed pathway can be regarded as a new option, requiring comprehensive modelling to develop robust estimates of its costs and benefits. This modelling is beyond the scope of the study. Nevertheless, indicative estimates of the net benefits of a C&I collection service can be developed drawing on the MRCC process proposed for Options 2a to 2e to gain an estimate of the infrastructure and operating costs of the service.
Sensitivity/ threshold analysis will be used outside of the model to determine whether the inclusion of co-benefits associated with the three pathways substantially alters cost benefit analysis (CBA) conclusions with respect to any of the options.
1. Introduction
1.1 Report purpose
Australian environment ministers, through the Standing Council on Environment and Water, have agreed to develop a Decision Regulation Impact Statement (DRIS) in 2013 on a range of national options to increase packaging resource recovery rates and decrease packaging litter. The DRIS will continue a process progressed through the ‘Packaging Impacts Consultation RIS’ (CRIS) and subsequent public consultation. A ‘Distributional and Cost Benefit Analysis’, entailing financial and economic analysis of the options, will provide an important input to development of the DRIS.
This document discusses the potential co-benefits associated with recycling of non-beverage container materials that could be collected at container deposit scheme (CDS) depots. The analysis will provide an input into subsequent phases of the project, notably the data assumptions report and cost benefit and distributional analysis. The analysis presented in this report discusses:
§ non-CDS materials that are likely to be collected at a CDS depot on a voluntary basis by the private party operating the depot;
§ the potential increase in recycling (if any) if a national CDS were in place;
§ the potential benefits and costs resulting from additional recycling; and
§ the treatment of those benefits and costs in the DRIS.
1.2 Scope of analysis
Co-benefits have been defined as “benefits that accrue as a side effect of a targeted policy” (Pearce 2000, p.1). Those benefits could be intended but secondary to the targeted policy, or they could be unintended.
In the case of recycling policies, and specifically a CDS, various possible co-benefits have been identified by stakeholders including increasing recycling of other materials, reducing litter in general (not just packaging litter), increasing employment, and reducing energy and water use (SCEW, 2012). Some of these apparent co-benefits, such as water and energy use associated with the manufacture of packaging from virgin materials, are ‘upstream’ impacts not directly related to waste policy and are therefore outside of the scope of this assessment. Others, such as downstream environmental impacts, including greenhouse gas emissions, are already captured in the cost benefit analysis. Still others, such as increasing employment, are not economic benefits per se and in any case employment effects of policies would need to be assessed through a macroeconomic analysis, which is outside of the scope of the assessment. Finally, given difficulties in estimating packaging litter benefits associated with options (see Data Assumptions), it is unlikely that non-packaging litter reductions could be estimated with any level of assurance, even order of magnitude.
Analysis of co-benefits for this study is therefore confined to non-CDS materials collected at CDS depots on a voluntary basis by the private party operating the depot and recycled as a consequence of introducing a CDS. Non-CDS materials include:
§ packaging materials, other than the beverage containers targeted by the CDS that are collected at the CDS; and
§ non-packaging materials that are collected at the CDS (e.g. TVs, computers and batteries).
Although the focus of this analysis is on co-benefits associated with CDS options (4a, 4b and 4c), work on assessment of recycling opportunities and costs associated with Options 2a to 2e indicates that those options also have the potential to generate co-benefits. That potential is discussed further in section 2.2.4.
2. Potential co-benefits
2.1 Background
2.1.1 Drop-off at collection depots
The collection of non-CDS materials at CDS depots on a voluntary basis has been raised in a number of studies and submissions as a potential co-benefit of container deposit or container refund schemes. This pathway involves the use of CDS collection depots (in the case of Options 4b and 4c) or hubs (in the case of Option 4a) to provide a ‘drop-off’ service for non-CDS materials. For example, a representative of the South Australian Environment Protection Authority (EPA), in a response to the 2009 report ‘Beverage container investigation’ (BDA 2009), notes that estimates of the economic costs and benefits of container deposit schemes in the report have not allowed for the:
“benefits of the value of a broader range of recyclable materials that are recovered as a result of the establishment of a network of collection centres” (SA EPA, 2009, p.4).
Specific reference is made to the network of container deposit collection depots across metropolitan and regional South Australia that provide drop-off services for a broad range of materials in addition to deposit containers, including packaging and non-packaging materials:
§ paper and cardboard;
§ non-deposit plastic bottles;
§ non-deposit HDPE milk containers;
§ non-deposit steel cans;
§ mixed clean plastic;
§ car batteries; and
§ ferrous and non-ferrous metals.
The CRIS provides a qualitative assessment of the co-benefits associated with the drop-off of these non CDS materials (PWC & WCS 2011). It notes that the depot infrastructure constructed as part of the CDS options could indeed lead to additional benefits of the recycling of other items, but stresses (correctly in our view) that this would be at additional cost. Any assessment of co-benefits needs to take account of all potential costs and benefits on a net basis – a consideration taken up when assessing collection depot co-benefits in section 2.2.
2.1.2 C&I recycling
The Boomerang Alliance (BA 2012) promotes an additional pathway for achieving co-benefits through Option 4a. It presents a scenario whereby C&I waste generated by the retail, property and business services and hospitality sectors (representing approximately 18% of the C&I waste stream) is collected through CDS collection services that will be provided to commercial premises as part of the CDS. The BA estimates that approximately 99,400 tonnes of non-CDS material, with a market value of $37.7 million, could be recovered in this way. This value is assumed to equate to the total benefit of the service.
There are two significant shortcomings with analysis of this pathway as presented by the BA.
First, it is not possible to substantiate key assumptions underpinning co-benefit estimates. The most significant of these are assumed take-up rates of the additional recycling service (ranging from 50% for non-CDS cardboard and paper, plastics and metals to 80% for glass). The pathway assumes that take-up rates will be achieved without provision of an incentive to businesses that is sufficient to overcome costs involved in participating in the scheme (such as distances between business sites and hubs).
Second, and more fundamentally, the co-benefits pathway as presented by the BA is a minor variation of Option 4a, with little or no additional costs involved. In reality, a non-CDS material collection service amounts to a significant variation to Option 4a; one that is likely to entail a substantially different cost structure to Option 4a as originally proposed. There are a number of additional costs that are likely to significantly affect assessment of the net benefits of the proposed service and of the CDS option overall. Those costs include:
§ costs associated with establishing new infrastructure;[1]
§ business participation costs associated with sorting the non-CDS material from general waste and storing it;
§ handling costs associated with the non-CDS material;
§ costs associated with reconfiguration/ larger space required at hubs; and
§ system administration costs.
As well, the BA analysis assumes no additional transport and collection costs beyond those involved in CDS recovery. While that outcome is feasible in most cases, the use of the collection service as described by BA would, in some cases, involve a dual trip (collection point to hub and hub to material recovery facility (MRF)) compared to the single trip the material would otherwise require (collection point to landfill or MRF).
Given the new cost structure and different category of benefits associated with this sub-option, it should be viewed as a discrete option. As such, a robust estimate of its net benefit will require full modelling with separate assumptions developed for all cost and benefit variables, something that is beyond the scope of this study.
2.2 Assessment of co-benefits associated with drop-off at collection depots
2.2.1 Boomerang Alliance analysis
To date, the only analysis that has sought to quantify co-benefits associated with drop-off at collection depots is contained in the report ‘The BA Solution – Co-benefits of Hubs’ submitted in response to the Consultation RIS by the Boomerang Alliance (Boomerang Alliance 2012).
Drawing on data provided by Recyclers SA,[2] the BA analysis uses annual collection data from 55 depots in South Australia to extrapolate Australia-wide should a similar drop-off service be provided through 250 CDS hubs. The results of the BA analysis are summarised in Table 1 below.[3]
Table 1: Boomerang Alliance assessment of annual benefits associated with non-CDS materials recovery at CDS hubs
Commodity / Tonnes collected at 55 SA CD Depots / Extrapolate (Pro-Rata 55 Depots to 250 Hubs) / Market Value / Tonne / Revenue / Less: Cost @ MRF Charge of $85/tonne / BenefitNon Deposit Glass / 7,401 / 33,642 / $100.00 / $3,364,227 / $2,859,593 / $504,634
Brass, Copper, Batteries / 5,125 / 23,295 / $525.00 / $12,230,114 / $1,980,114 / $10,250,000
Mixed Plastics / 212 / 965 / $660.00 / $636,600 / $81,986 / $554,614
LPB / 333 / 1,514 / $150.00 / $227,045 / $128,659 / $98,386
Paper and Cardboard / 8,061 / 36,641 / $181.00 / $6,632,005 / $3,114,477 / $3,517,527
Steel / 3,600 / 16,364 / $280.00 / $4,581,818 / $1,390,909 / $3,190,909
Total / 24,733 / 112,420 / $27,671,809 / $9,555,739 / $18,116,070
Source: Boomerang Alliance 2012
Some cost items have been overlooked in the analysis, including handling and administration costs. Furthermore, some of the material market values used in the BA analysis appear to be inflated (notably plastics and glass). On the other hand, some benefit items are also overlooked (notably avoided landfill costs, and costs of transporting waste to landfill). After taking all of these factors into account however, the estimates provided in Table 1 could represent reasonable ‘ballpark’ estimates of the net revenue that would be generated by the collection of non-CDS materials at CDS hubs, assuming that none of this material would have been collected in the absence of a CDS.
2.2.2 Additionality
What is missing from the analysis though, is consideration of ‘additionality’. Any assessment of co-benefits in the context of a CBA needs to look at the net impact of CDS hubs on the collection of non-CDS materials. This requires an answer to the following question: