The government’s announcement of a carbon price plan might well lead to a rise in recycling rates for high embodied energy materials such as aluminium and plastics, but could also bring challenges such as increased operating costs. While the industry awaits further details from the government, industry consultant Mike Ritchie said the carbon plan is the right reform but that waste and recycling remain the “poor cousins”.
“People are not looking at the potential for recovering embodied energy from waste and it’s a real problem and a lost opportunity,” said Ritchie, “It could reduce Australia’s emissions by 7-8%.”
He said regulators need to understand what recycling has to offer in terms of scale and establish national accounting which can measure the carbon savings from recycling activities. It is hoped that some of the government’s $10 billion in funding for renewable energy technologies will go towards projects that convert waste to energy.
“Having said that, there is plenty the government could be doing right now to encourage more recycling…if there was a concerted effort by governments over the next five years that would have an enormous implication for carbon emissions,” said Ritchie, suggesting that a target of 70% would be achievable for diversion of waste from landfill.
He sees numerous benefits to the government’s carbon plan and Carbon Farming Initiative with the latter providing new revenue for small and regional landfill operators to capture gas from landfills. In terms of a carbon price he said, “You’ve got to ask the questions.. Will recycling become more valuable under a carbon price, the answer to that is Yes… Will recycling be advantaged within the domestic market? Yes.”
Under a carbon price input costs such as electricity will go up. Companies in the manufacturing space that use recycled input products will generally find their costs go up less than companies which are not using recycled product, because they can take advantage of the embodied energy in the materials, according to Ritchie. Although he said it is difficult to make generalities when input costs for individual companies vary widely.
“For example, making aluminium cans from recycled cans is going to be proportionally more cost competitive than making aluminium from virgin bauxite,” said Ritchie, adding that a carbon price will recognise, in commercial terms, the additional energy benefit of recycling. In the case of recycled aluminium, the energy savings can be as high as 95%.
Secondly, a carbon price will lead to an increase in the cost of landfill for waste disposal. Ritchie believes this will drive development of alternative waste treatment (AWT) and greater diversion of waste from landfill.
“Wherever landfill prices go up, recycling becomes more affordable,” said Ritchie. “That happens immediately …the moment that landfill has to pay for its emission profile its costs go up and that happens in 2012.”
“The expected landfill price increase is anywhere from $8-35/tonne of waste, depending upon the methane generating potential of the waste, how much methane gas the landfill is able to capture, whether the landfill is captured under the ETS and the pricing policies of the operator.”
“It is highly likely landfill operators will pass on the full cost of the future emissions liability of each tonne of waste that comes over the weigh bridge. They will do that at the time they receive it, because that is the only time they have a chance to pass on the costs to you and I, even though the emissions could be coming out of the landfill for 30 years thereafter,” Ritchie added.
“As the price of landfill rises, any products that are indifferent in cost terms between landfill and recycling (such as many plastics, timber, pallets, food and green waste) become marginally more cost effective to recycle, because landfill has become $8-35/t more expensive,” said Ritchie.
“The reason we don’t have AWTs or the three-bin system (a food and green waste bin) across this country is because landfill is historically very cheap and until that price gap is closed you won’t see the uptake of large-scale AWTs or organics recycling.”
Organics is the next big challenge Ritchie said. “Over 60% of household waste and over 70% of commercial waste is organic. That includes food, timber, green waste, cardboard and the like i.e. all those things that used to be alive.” Ritchie said.
He said that while a carbon price won’t drive a massive transformation in the waste sector it may allow councils which are close to a price “trigger point” to make a decision in favour of new technologies or services, particularly those that are faced with significant costs for landfill.
Ritchie believes that under a carbon price a range of products will become more economically viable for recycling including plastics and cardboard in regional locations.
“Plastic in 2011 is where cardboard was in 1990. It was a marginal business subject to booms and busts. At present the moment the fuel price decreases plastic recycling becomes uneconomic and when fuel price rises all these exporters come out of the woodwork,” he said.
“When you add a carbon price, recognise the embodied energy of this material and landfill becomes more expensive, then you put a floor under the variability, you make that commodity that bit more valuable.”
“Cardboard in low quantities is the same. As the landfill option becomes more expensive, then the local shop that doesn’t have a recycling bin at the moment now has an additional price signal to make the decision in favour of recycling.”
It’s possible that a carbon price may also help to accelerate waste diversion from landfill in the commercial and industrial waste stream, through making the operations of commercial waste materials recovery facilities more economically viable. Currently there are only three such facilities in Australia, all located in Sydney, with another one currently in the pipeline.
“You have to get up around $200 per tonne before commercial waste sorting becomes viable,” said Ritchie. Landfill levies and the carbon price will help a bit but we are still a long way away in all States except NSW he added.
“Recycling offers huge benefits in sustainability and resource reuse. We could abate 7% of Australia’s greenhouse gas emissions just by keeping organics out of landfill and capturing the emissions from the landfills we already have. We just need to get the right signals in place to encourage investment in new systems and technologies. We are on the right road but have a long way to go,” he added.