Environment Group Research Programme Research Findings No. 7Local Authority Waste Management: The Cost Implications of Meeting the EU Landfill Directive Diversion Targets
The National Waste Strategy: Scotland (NWS), published by SEPA at the end of 1999, recognises that the implementation of the EU Landfill Directive will have significant cost implications for future waste management arrangements in Scotland, particularly for local authorities. The Directive must be transposed into UK law no later than 16 July 2001 and in addition to tightening up landfill engineering and operating standards, it will require local authorities to divert increasing quantities of the biodegradable fraction of Municipal Waste from landfill. In order to meet the targets set, Local Authorities will require to make significant investments in the development of new infrastructure over the next few years to allow alternative collection, treatment and disposal methods to be put in place to separate, treat and dispose of the diverted waste. A system of tradable permits is currently being proposed by the Scottish Executive (and DETR) as a mechanism which would provide direct benefits to local authorities through costs savings and flexibility in the choice of response to meeting the statutory diversion targets for the diversion of Biodegradable Municipal Waste (BMW).
Local authority costs for Municipal Waste management in Scotland are likely to rise from the current annual expenditure (approximately £194 million), by around 50% by 2010 and 100-120% by 2020 in real terms. This rise is a combination of increasing 'baseline' waste management costs (as a result of increasing waste quantities and higher landfill operational standards baseline costs in 2010 are likely to be 20-25% higher than those for 2000, and 50-60% higher by 2020.) and the higher costs associated with meeting the Directive BMW diversion targets;
Given Scotland's historic reliance on landfill, the costs of achieving the Landfill Directive targets for diversion of BMW will be significant. Incremental cost increases (over and above the predicted 'baseline' costs) of around 15-20% by 2010 and 35-40% by 2020, as a minimum, are likely. These costs are the minimum likely cost increases and are based on the assumption that cost is the only driver for local authority waste management decision making.
Allowing local authorities to trade between themselves will reduce the overall Scotland-wide cost of meeting the diversion targets in the Directive. The cost saving is estimated to be a 10-15% reduction in cost compared to the 'no-trading' situation where each local authority must achieve the diversion targets on its own.
Allowing trading between Waste Strategy Areas and between Scottish local authorities and those in other parts of the UK would further reduce the overall cost of complying with the Directive.
In order to predict the cost implications of the Landfill Directive, both with and without the use of tradable permits, a detailed costs modelling study was undertaken to estimate waste management costs on an all-Scotland basis, for the years 2000 - 2020. In order to allow subsequent evaluation of the potential benefits of trading, it was necessary in the modelling to first calculate the costs on an authority-by-authority basis and then aggregate up to an all-Scotland basis. The costs modelling is based on 1999 prices and was carried out on the basis of three main diversion options:
a) An assumed 'baseline' of diversion activity, i.e. where the level of waste diversion activity carried out by local authorities does not increase from the present level; this allows the incremental increase in costs to meet the Directive Diversion targets to be calculated;
b) The Directive costs (no trading) - where no permit trading takes place between local authorities (i.e. local authorities effectively operate in isolation from each other); and
c) The Directive costs (trading) - where permit trading between local authorities (or Waste Strategy Areas) takes place.
The modelling results are underpinned by a number of key assumptions:
The definition of Municipal Waste is taken to be 'household waste and any other waste under the control of the local authorities, or agents acting on their behalf'';
The biodegradable content of Municipal Waste is assumed to be 60% on average - based on the published results from the Environment Agency's National Household Waste Analysis programme;
A Municipal Waste growth rate of 2% per annum applies in Scotland - as reported by the NWS;
The total quantity of waste arisings for the 1995 baseline year (from which the diversion targets are calculated) is 3 million tonnes of Municipal Waste and 1.8 million tonnes BMW - as estimated by SEPA and published in the NWS; for the purposes of the modelling a waste arisings figure has been allocated to individual local authorities on a pro-rata basis using the reported data for 1997 and 1998, while keeping the all-Scotland totals as those quoted above;
The UK will accept the opportunity for a four year derogation of the diversion target dates for restricting landfill of BMW; the derogated target dates are 2010 (75% of baseline BMW permitted to landfill), 2013 (50% of baseline to landfill) and 2020 (35% of baseline to landfill);
The present level of baseline diversion away from landfill is 10% across Scotland - based on a combination of 5% EfW (this represents the new plants in Dundee and Shetland) and 5% recycling and composting. Current landfill disposal of Municipal Waste in Scotland equates to approximately 90% of the total arisings.
Survey of Local Authorities
The costs modelling study was also informed from a detailed survey of all 32 local authorities in Scotland, carried out using a pro-forma questionnaire to provide local data on waste quantities, current waste management arrangements, and where known, future local authority plans to comply with the Directive diversion targets. Information on the current costs of waste management (as reported by local authorities for 1998/99) was provided by the Scottish Executive.
The EU Directive Diversion Requirements
The challenge in meeting the Directive diversion targets is presented in Figure 1:
Figure 1: The EU Directive Diversion Requirements
Since the purpose of the costs modelling is to provide a best estimate of the minimum costs at the all-Scotland level, generic waste management costs were used as input, with some variations allowed for local circumstances. The modelling also assumed that cost is the only driver for Local Authority waste management decisions and ignored other pressures such as geographical, cultural, environmental (e.g. the requirement to use BPEO assessment in the development of local area waste strategies) and political factors, which in reality will influence decisions taken on the ground about future waste management options. Also, private sector waste and local authorities response to this in selecting their waste management arrangements was not included in the modelling. Neither was the use of waste minimisation or other similar practices included in the study, although it is accepted that these will have a place in implementation of waste management strategies.
As a result, the predicted costs from the modelling are likely to be minimum costs and may not be representative of actual costs once the local Area Waste Plans have been prepared and waste management decisions taken on the basis of a Best Practical Environmental Option (BPEO) assessment.
The main options considered for the purposes of the costing study for handling BMW diverted from landfill were:
Recycling: collection of paper/card for recycling (via 'bring' or kerbside collection systems);
Composting: collection of garden and putrescible wastes for composting;
Energy from Waste: thermal treatment to recover energy - for the purpose of the study, mass burn technology with energy recovery was assumed.
Collection costs were determined for each authority for a combination of up to 9 possible collection options, depending on the residence profile for the local authority area. The model then considers 3 alternative composting options, 6 materials recycling options and 5 different incineration (energy from waste) plant capacities. The model determines the diversion required in each local authority in each year up to 2020 to comply with the Directive. This is calculated by projecting forward BMW arisings, BMW diversion from landfill and the allowed BMW disposal to landfill under the Directive. Using average unit cost and diversion data generated by the model for each authority the cost of achieving the required diversion is calculated. This calculation is performed for each year up to 2020 and for each of the many permutations of recycling/disposal options.
Typical unit costs data used as input into the model included: landfill gate fee £10/tonne (excluding tax), transfer £10/tonne; haulage £0.26/tonne/mile; windrow composting £12/tonne and EfW plant gate fees of £26 - £65/tonne, based on 5 plant sizes ranging from 55ktpa - 400 ktpa.
The output from the modelling analysis is a plot of unit costs of diversion (£/t) against a range of diversion tonnages for each local authority (based on the range of collection, treatment and disposal options identified earlier) and this is used to determine the minimum diversion cost curve for each local authority and hence the minimum cost of achieving the Directive's diversion targets for Scotland as a whole. The effects of trading are estimated by performing the same calculation on the 'all Scotland' diversion cost curve. This cost curve represents the sum of all diversion opportunities across Scotland (i.e. the sum of each individual authority cost curves).
A summary of the results of the costs evaluation study is presented in Table 1. The total additional costs of meeting the Directive diversion targets over the 20 year period represent some £520 million, in net present value terms.
Table 1: Summary of Results from Model
Baseline costs (£m) - Gross1
Directive costs (£m) - No Trading
Additional Cost of Directive (£m),
(compared to baseline)
Directive costs (£m) - Trading
Percentage Benefit of Trading
1. Based on net revenue expenditure and gross capital expenditure for local authority waste services, as reported to the Scottish Executive (NB. gross costs exclude third party revenue to local authorities from waste collection and disposal services from the private sector).
2. The modelling output is not considered to be representative for these years; in practice the benefits of trading are expected to stabilise at 10-15%.
The results of the costs modelling study have predicted the likely minimum costs increases on an all-Scotland basis for meeting the Directive diversion targets. However, as stated earlier, the modelling assumes that cost is the only driver for waste management decision-making, whereas in reality a wide range of other factors (identified earlier) will influence local authority decisions on the selection of waste management options and this is likely to result in significantly higher costs of meeting the increase the Directive diversion targets than the minimum costs predicted by the study. The implementation of a tradable permits system will reduce the overall cost of meeting the statutory Directive targets while ensuring compliance with the diversion targets on a national basis.
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