The waste management industry's enthusiasm for waste-to-energy projects looks set to grow following the announcement in yesterday's Pre-Budget Report that the renewable obligation will be extended by 10 years to 2037, writes Steve Eminton.

While the extension will boost projects such as gasification, the Pre-Budget Report from Chancellor Alistair Darling also reiterated that the Landfill Tax will continue to rise after the current £8 per tonne escalator ends in 2010/11. The Chancellor did not grant any concessions in the Report to local authorities who face higher tax charges for landfilled waste in future years. The Report also commented on carrier bags and packaging.

Landfill: The Chancellor repeated Treasury policy that landfill tax will keep rising

The Report's environment section concentrated on the energy sector and noted that amidst the global financial crisis action to achieve environmental goals "remains a high priority for the government".

It added: "The government is putting in place policies and investment to support a low-carbon recovery with new jobs and businesses created through green growth. Government policies are driving £50 billion of investment in the low-carbon sector over the three years to 2011. The sector already employs 350,000 people; over the next 20 years, more  than one million people could be employed in the UK's environmental industries."

Looking ahead to the Budget next Spring for 2009/10, the Chancellor confirmed that a carbon budget will be published alongside the main Budget.

Renewable obligation

Responding to the extension of the renewable obligation, the waste management industry's trade association, the Environmental Services Association, welcomed the move. Dirk Hazell, ESA chief executive, said: "There is much for environmentalists to welcome in the Chancellor's Pre-Budget Statement and we welcome the ten year extension of the Renewable Obligation to 2037."

Mr Hazell added a call for government action to boost the recycling markets in the wake of the fall in commodity values, suggesting a need to push through green procurement plans. He said: "It would be a helpful strengthening of recycling markets if the Government - and, indeed, the Scottish Government - could now announce an acceleration of green procurement plans as this would provide British jobs."

Philip Wolfe, director general at the Renewable Energy Association, welcomed the extension to the renewable obligation. He said: "This signals the Government's commitment to the Obligation as the long-term measure to boost bulk renewable energy generation in the UK.  Energy projects are significant undertakings and companies require 15 to 20 years of a stable policy framework stretching ahead of them to give them the confidence to invest."

Some of the implications for the waste management sector are that the extensions will boost technologoes such as anaerobic digestion and other advanced thermal conversion technologies and existing landfill gas projects under the principles of 'grandfathering' sites.

Landfill tax

The Report stated that "landfill tax increases the price of waste sent to landfill, encouraging sustainable ways of managing waste. The tax - working alongside other measures such as the Landfill Allowance Trading Scheme - has been successful with overall quantities of waste recorded at landfill sites registered for the tax falling by around 32 per cent. The UK is on track to meet its 2010 targets to reduce biodegradable municipal waste to 75 per cent of 1995 levels under the Landfill Directive."

And, the Chancellor's Pre-Budget Report confirmed that, as announced in Budget 2007, from 1 April 2008 and until at least 2010/11, the standard rate of landfill tax will increase by £8 per tonne each year. Importantly, the report confirmed that the government expects the standard rate to continue to increase beyond 2010/11. In Budget 2007, the Government also announced that the lower rate, applying to inactive waste, would increase from £2 to £2.50 per tonne from 1 April 2008, but would be frozen at £2.50 per tonne in 2009/10.

One change that is coming into place, following an announcement in Budget 2008 earlier this year and after consultation in the summer, is that legislation has been made to phase out the landfill tax exemption for waste arising from the clearance of contaminated land. The revenue derived from removing this exemption will be used to extend land remediation relief, said the Chancellor. The exemption will be phased out by 1 April 2012.

Packaging

Defra is to publish a new packaging strategy in early 2009, setting out how packaging policy can help the UK move towards a low-carbon economy by reducing waste at source and increasing recycling, the Pre-Budget Report said.

It added that in 2007, an estimated 10.6 million tonnes of packaging was placed on the UK market of which more than 6.7 million tonnes of packaging waste was diverted from landfill.

Carrier bags

The Report appeared to suggest that Defra is pleased with the way retailers are starting to endorse schemes to reduce the number of carrier bags used.

The report said: "Budget 2008 announced that the Government would introduce legislation to impose a charge on single-use carrier bags if there was not sufficient progress on a voluntary basis, and the Government has done so in the Climate Change Bill. Responses by major retailers have been encouraging with all the major supermarkets making plans to reduce the bags they issue by around 50% from 2006 levels by 2009, and other retailers also taking action, for instance by introducing their own charging schemes."

Describing these developments as welcome, the Chancellor's Pre-Budget Report added that these "build on progress already made by retailers in reducing the environmental impact of the bags they issue. Discussions with the British Retail Consortium about the scope for further voluntary action are continuing."