The high cost of living with incineration
The level of subsidy given to incinerators is not only uneconomic, but unfair when you take into account greener options, argues Chris Edwards
Last month Environment Secretary Caroline Spelman withheld PFI credits provisionally allocated to Norfolk County Council for a proposed incinerator at King's Lynn. My hope is that these PFI credits are cancelled, and that the incinerator never gets built as I believe such facilities to be a highly inefficient form of waste disposal.
The costs of incineration are much higher than those of landfill. According to WRAP figures, average landfill gate fees were £21 per tonne in late 2007 and £22 in 2008. By contrast, gate fees for post-2000 and planned incinerators in the two surveys averaged £80 and £92.
By this calculation, the cost of incineration is about £65 per tonne higher than that of landfill. This means that the additional cost of the King's Lynn incinerator over 25 years works out as follows - £65 multiplied by 270,000 tonnes (planned annual capacity) multiplied by 20 years (operating at full capacity) - giving a total of £350m.
Why, then, is Norfolk County Council considering going ahead with the incinerator given its much higher cost and the massive opposition to it? The answer lies in the large subsidy for waste treatment plants, the first component of which consists of WI credits (previously known as PFI credits).
The WI credit for the proposed incinerator at King's Lynn is worth £169 to Norfolk County Council over 25 years. If it goes ahead, the council is likely to contract for the supply of 3.4m tonnes of household waste over the next 25 years. On this basis the WI credit works out as a subsidy of £50 per tonne.
The second component is the tax on biodegradable waste going to landfill. In the present fiscal year, this is £56 per tonne but it is due to rise by £8 per tonne per year to £80 per tonne in 2014-15. By contrast, there is currently no tax on incinerators.
So we have a subsidy to incineration (compared to landfill) in the current fiscal year of £106 per tonne. This is more than adequate to offset the higher cost of incineration of £65 per tonne.
Defenders of incinerators might argue that the gate fees given above do not include external costs in the form of greenhouse gases (GHG) and other forms of pollution. This is true and if the environmental costs of landfill are much higher than those of incinerators, the high tax on landfill might be justified. However this is far from the case. If anything, the environmental costs of incinerators are much greater than those from landfill.
Defra's June 2011 paper on The economics of waste and waste policy makes this clear when it states that: "the performance of some of the technologies is not much better than landfill". It goes on to say: "As the assumed biodegradability of wastes falls in the future, landfilling may actually become more GHG-friendly than some other forms of residual waste treatment".
In the same paper, Defra admits that incineration is not paying its proper price in carbon terms. It states: "The emissions from waste combustion of non-biogenic material (via any technology including mass-burn incineration) are also not comprehensively reflected in the price of disposal".
Note that Defra's conclusion is reached after looking at GHG emissions only. The paper does not look at the likely impact on health of emissions and of potentially hazardous bottom ash. So what is the way forward? Landfill is not the answer, nor is incineration. The solution is to go for a near-zero residual waste policy by reducing total waste arisings and by recycling more of it.
There is considerable scope for more recycling. The percentage of household waste that is recycled is about 41%. The recycling rate for commercial and industrial waste is about the same. A combined push on reducing waste and increasing recycling is likely to be more than sufficient to meet our EU 2020 targets.
If other incinerators are built alongside the one in Norfolk, there will not only be an extra cost to the Treasury of about £1bn in WI credits, but an extra cost of waste disposal for the country of more than £30bn over the next 25 years.
The Treasury's public expenditure statistical analysis gives the cost per head of municipal waste management as rising by 15% between 2008-9 and 2009-10, from £88 to £101 per head. Such a rise would be the pattern for the foreseeable future if the remaining WI credits for incinerators were to be confirmed.
The Government should impose an incinerator tax of £24 per tonne to match the rise in landfill tax over the next three years. The savings from the WI credits and the money coming in from a tax on existing incinerators could then be directed at further reducing waste and increasing recycling.
Dr Chris Edwards is a senior fellow at the University of East Anglia