Higher targets set for packaging recovery
PRN rates are likely to rise in 2001 as the Government sets improved targets for the recycling and recovery of packaging waste which should continue to provide a stimulus to growth in the waste management sector and boost demand for waste handling equipment.New targets for the recycling of packaging waste have been set by the Government in a consultation paper*, issued by the DETR on 15 August. The proposals involve increasing the packaging waste recovery target from 52 to 58% and the material specific recycling target from 16 to 18%.
The Department says that the increased targets "will enable next year's EU deadline to recover 50% of all packaging waste by June 2001 to be met, and ensure that the UK meets its commitments at the lowest possible cost to business."
Estimating the quantities of waste packaging involved, the consultation paper states: "Taking account of the growth anticipated for aluminium and plastic packaging flowing into the waste stream, the recovery and recycling targets for 2001 will to achieve recovery of at least 50% of 9,212,971 tonnes, ie 4,606,485 tonnes. It will, however, be worth establishing whether the anticipated annual growth in aluminium and plastics has in fact occurred so that measurement of achievement in 2001 does not assume a higher total of packaging waste arisings than necessary."
The DETR also acknowledges that the key to determining what the targets need to be in 2001 is to know how much of the tonnage of packaging flowing through into the UK waste stream is obligated and how much is not.
At this stage the Department says that it still has to make estimates for some figures, but states that the following assumptions underlie the Government's proposals for 2001:
- that packaging handled by all obligated businesses with turnover over £5 million/handling more than 50 tonnes is obligated
- that packaging handled by those with turnover between £2 million and £5 million (some 3,000 businesses) is obligated
- that packaging handled by businesses obligated in Northern Ireland is also obligated
- that there are tonnages that should have been obligated hitherto but were not reported.
On the latter issue the document says that significant tonnages of packaging not being reported, although they are obligated, relate principally to paper, wood and "other" packaging materials. The Material Organisations' estimate of the tonnage of wood flowing into the waste stream is 670,000 tonnes. In 1999, obligated businesses (those with over £5 million turnover) reported 120,264 tonnes of wood packaging. This is assumed to be due partly to under-reporting.
In the section of the paper dealing with draft regulatory impact assessment (RIA), the DETR states that two options have been identified after consultation with the Material Organisations and after the consideration of the results of consultancy work.
Option 1 - Keep the planned recovery/recycling targets for 2001
Option 2 - Change the planned recovery/recycling targets for 2001.
Under Option 1 targets for 2001 are left at the current level of 52% overall recovery and within this 16% for each specific material by recycling (except from wood and other).
Under Option 2 targets are increased by 58% and 18% as reported earlier.
Price of PRNs
The document also outlines the likely average price of Packaging Recovery Notes (PRNs) in 2001.
The average price of a PRN in 1998 has been used to estimate an average price of a PRN in 2001. The DETR explains that such an assumption is considered more appropriate than using or including the average price for 1999 as 1999 prices were generally lower than the 1998 prices, and higher prices are expected for 2001. PRN prices are expected to rise as the targets rise from the 2000 level (45% recovery, 1£% material specific).
The estimated prices are used for both option 1 and option 2. However, due to more stringent targets, PRN prices may rise higher under option 2.
The average (1998) prices used in order to estimate the price of a PRN in 2001 were £112/t for plastic, £21/t for aluminium, £32/t for paper, £22/t for glass and £30/t for steel.
The paper says: "Economic theory suggests that the price of wood recovery and mixed (incineration) PRNs will be the same. The average (1998) price of an incineration PRN is £31; this price will also be used for wood. The price of £31/t will also be applied to 'other' materials. These estimate prices are based on average prices for PRNs paid by one compliance scheme during 1998."
The document also states that under certain scenarios the differential cost between option 1 and option 2 is estimated as £17,000,000 plus £4,732,000 per £1 increase in PRN prices from 1998 average prices between the two options.
- if PRN prices did not rise above 1998 average, the estimated differential cost would be £17,000,000
- if PRN prices rose by an additional £1 across all materials on average in option 2, the estimated differential cost would be £21,732,000
- if PRN prices rose by an additional £5 across all materials on average in option 2, the estimated differential cost would be £40,660,000.
The anticipated increase in packaging waste recovery targets should provide a further stimulus for the waste management industry and its waste handling and recycling equipment suppliers and the likelihood of improved PRN prices over last year should also offer some incentive for improved recycling performance in this sector.
Waste management growth
A further indication of continuing growth in the waste management sector came with the recent announcement that Duke Street Capital, a London-based independent private equity company has acquired a 51% interest in The Wastepack Group, the environmental services business, in a deal which values the company at around £30 million. Barry Van Danzig, founder of the company, retains a 49% stake and has made a long-term commitment to stay with the restructured group as Chief Executive.
Westpack Group currently operates in three main business areas - outsourced waste management, packaging waste compliance and management of recyclable material.
Waste issues continue to attract the attention also of politicians, with the Environment Sub-committee of the House of Commons Select Committee on the Environment, Transport and the Regions about to probe into progress on delivering sustainable waste management, in the wake of the publication of the Government's new Waste Strategy.
*Consultation Paper on Recovery and Recycling Targets for Packaging Waste in 2001 - The Producer Responsibility Obligations (Packaging Waste) Regulations. Copies available from DETR Free Literature, PO Box 236, Wetherby, LS23 7NB, Tel: 0870 1226 236, quoting product code - 00 DPL 007.