Landfill tax has risen up again by £8 to £72 a tonne this month, with an eventual cap at £80 a tonne in 2014. So, this would be the perfect opportunity for a bit of positive spin for the government to push ahead with landfill reducing projects, yes?
Actually, no. The industry was shocked to hear news of the government’s eleventh hour decision to cancel £200 million of funding to three separate waste-to-energy projects.
These projects were created in order for the UK to meet its renewable energy and landfill targets.
The projects were all opted in for the Waste Infrastructure Credits for Private Finance Initiative (PFI). These credits were earmarked for waste-to-energy projects for three councils – Bradford and Calderdale, Merseyside Recycling and Waste Authority and Halton, and North Yorkshire and City of York.
However, towards the end of February, Defra announced that the credits were being withdrawn – after careful analysis of the effect the projects would make towards the UK meeting its EU targets for the amount of residual waste being sent to landfill.
In the reports, Defra defend their decision,
“If provisional financial support is withdrawn from all of the projects yet to reach financial close, there is an estimated 93% likelihood of meeting the 2020 diversion target using the ranges of inputs that we believe to be realistic. In this scenario the mean surplus capacity is approximately 2.1 million tonnes.
“Hence withdrawing provisional financial support for the projects reduces the likelihood of meeting the 2020 diversion target, by an estimated 2%.”
“Government has already provided £0.6bn in financial support and will provide a further £3bn to 29 waste PFI projects over the next 28 years.
“Defra’s Waste Infrastructure Delivery Programme will continue to provide commercial and technical advice to councils which continue with their procurement of waste infrastructure.”
The projects were all close to financial closure with the Merseyside development having shortlisted two companies and the Bradford and Yorkshire projects having already announced preferred bidders.
The department said it has already provided £600m in financial support to waste PFI projects and will provide a further £3bn to 29 waste PFI projects over the next 28 years.
A spokeswoman for Defra said the decision was solely the result of the analysis under taken by the department into the likelihood of meeting landfill targets and was not related to budgetary pressure.
However, Defra have suffered the most severe cuts out of all the governmental departments. They have also admitted that the unforeseen flooding of the winter and the recent horsemeat scandal have affected budgets. Now that they have pulled the PFI plans, the money is said to have already been reassigned somewhere else.
“We are investing £3.6bn in 29 waste infrastructure projects,” the spokeswoman said. “This will reduce the amount of waste sent to landfill, promote recycling and stimulate economic growth. We now expect to have sufficient infrastructure in England to enable the UK to meet the EU target of reducing waste sent to landfill. Consequently the decision has been taken not to fund the remaining three projects.
“This does not necessarily mean the three projects will stop. That will be a decision for the Local Authorities concerned. We will continue to provide commercial and technical advice to those projects that continue with their procurement process.”
The director of policy at the Environmental Services Association (ESA), Matthew Farrow, said the late decision to scrap the credits was “deeply disappointing”.
“Removing credits at such a late stage in the procurement process has potentially wasted millions of pounds’ worth of time and money, both for the local authorities involved, and also for the bidders participating in complex PFI processes,” he said in a statement. “ESA’s firm view is that this decision will have the knock-on effect of undermining private sector confidence in public procurements and will raise the political risk associated with these types of project.”
He added that even if the cuts do end up having a minimal impact on the UK’s ability to meet landfill targets for 2020, they will still result in higher long-term costs for local authorities and will undermine efforts to build a more efficient “circular economy” that treats waste as a resource.
“Even if Defra is able to meet national targets without the contribution of these projects, the local authorities involved will still be faced with rising waste management costs as a result of the continuing landfill tax escalator,” he said. “This means that they must still find an alternative solution to landfill, but will now have to do so without previously promised central government support.”
Responding to Defra’s announcement, the Chartered Institution of Wastes Management (CIWM) has expressed concern about the short and longer term impact of the department’s decision on the waste and resource management sector.
“This is an example of poor government on a number of important levels,” says CIWM chief executive Steve Lee. “Firstly, it is an inefficient and inappropriate way to manage the delivery of essential infrastructure. Similar to the seven projects refused credit in 2010, the three local authorities involved were clearly caught by surprise. PFI is a complex and costly process and rescinding promised funding to these projects could undermine years of work and taxpayers money. By creating confusion and uncertainty, it is also likely to damage investor confidence in an industry that already faces challenges in attracting the necessary funding.
“The move also serves to highlight the Government’s lack of vision and ambition. It would appear that the aim is for England to meet the bare minimum landfill diversion required by the Landfill Directive, and no more. This is short term thinking and fails to take into account the fact that landfill diversion and other EU waste targets are likely to be raised in the next couple of years. And when industry experts can’t agree whether we have too much or too little waste infrastructure, how much waste will be produced in the future, or how much of the infrastructure currently ‘in the pipeline’ will actually be delivered, Defra’s confidence in its projections, and the lack of any margin for error, could be seen as cavalier.
“Finally, this decision flies in the face of the widely acknowledged need for a long term, joined up approach to resource management in the wider sense. CIWM is technology neutral, but at a time when exports of waste-derived fuel continue to rise, Ofgem issues a warning about the UK’s growing reliance on energy imports, and fuel poverty is a regular headline, EfW may not just a better alternative to landfill for non-recyclable waste, but also a useful source of home grown energy while another Government department makes up its mind on our future energy policy.”
What is the Private Finance Initiative?
The Private Finance Initiative (PFI) is one of the main mechanisms through which local authorities have been able to procure assets in a value for money way in partnership with the private sector. It is a procurement methodology for asset-based services. Long term fixed price contracts are entered into with private sector contractors to deliver services to specified performance stan