Throughout the COVID-19 crisis it’s be heartening to see that RDF export logistics have been maintained and material has continued to move relatively freely from the UK to off-takers across Europe.
By far the biggest challenge has been the dramatic fall in waste arisings. This is particularly true in the C&I market where tonnages fell by approximately 60% with MSW production only increasing by around 15%. As a result, alternative fuels have been in high demand, especially in the UK due primarily to the technology employed and heavy reliance on gate fees. We do however expect any issues with supply to be relatively short lived and anticipate we’ll be somewhere close to previous levels once the winter demand for export starts to grow.
In addition to its direct effects, Coronavirus has also served to compound the challenges still faced as a result of Brexit and the uncertainty it has caused in relations to ports and customs, future trading agreements, and any potential RDF duty. We’d urge the relevant authorities to now start to prioritise this work again and open up better lines of communication with the industry around some of these key issues.
Range of drivers
Outside of COVID-19 however the UK and international RDF markets continue to be subject to a huge range of political, economic and social drivers, which vary greatly from country to country. In many countries for example we are now seeing a much more coordinated and strategic approach to meeting CO2 targets and tackling the issues associated with plastic waste.
This approach is less evident in the UK where despite some moves towards a more coherent approach designed to address the issues associated with climate change and resources scarcity, much of the sector is still reliant on policy founded on the need to ensure the safe disposal of waste.
Inconvenient truth
The inconvenient truth however is the UK’s continued acceptance of landfill as means of managing its waste. We have seen that Landfill Tax increases alone will not eliminate its use. No matter what rate is set all you do is create a ceiling price above which all other options, no matter how sustainable or beneficial, are likely be ignored.
We are already seeing this ceiling come into play following the implementation of the Dutch RDF tax in January this year. Figures from the Environment Agency data request for February 2020 showed only 56,000 tonnes was exported, down 54% from 2019. Given that UK EfW infrastructure and alternative export routes are pretty much at capacity, the likelihood is that most of this material is probably going to landfill.
The situation in the Netherlands also highlights the fact that single pieces of relatively blunt policy implemented in isolation are not generally not effective. The premise for the Dutch RDF tax was to support the reduction of CO2 emissions (although in reality it was as much about freeing up capacity for domestic material which was already subject to a tax and had been displaced to other countries). All it has really done however is drive material to landfill in the country of origin making it harder for Europe to meet its target. Time will tell what impact the Swedish carbon tax will have on the market but the fact that it’s set at a significantly lower rate will certainly make it more palatable.
We recognise the economic implications of a landfill ban ( it generated about £0.8 billion in 2019/20 for the Treasury) but at the same time if we address the planning process and other areas of policy that restrain the development of recycling resource management capability in the UK we could replace this with job creation and other more positive sources of wealth creation.
We could all perhaps benefit from looking more closely at the approach taken by our Scandinavian colleagues who seem to have combined targets, policy and infrastructure in a more strategic and productive manner. Scandinavia has fully committed to meeting its CO2 reduction targets and is looking to take this further by working towards carbon neutral cities. The ability for regional facilities to provide district heating, as well as electricity, promotes a healthy commercial model where a far larger percentage of revenue is derived from the sustainable energy and heat outputs. This is in contrast to material hungry facilities in the UK which are largely dependent upon gate fees for their commercial viability.
Looking ahead we expect to see continued demand for high quality UK fuels from already established markets where the sustainable energy infrastructure is not matched by pre-treatment capability and who also rely on the export experience and expertise of the UK.
Pressures
While there is certainly the appetite from other countries to increase their use of alternative fuels the development of these markets remains hampered by political and regulatory pressures. It is also constrained by the fact that we still have landfill available in the UK and the associated ceiling price again applies.
Realistically we are now entering a period of consolidation but that doesn’t not mean that we need to stand still. At Totus we are pushing ahead with plans to open two new international offices in the Balkans and Scandinavia. These locations will give us the opportunity to further develop relationships and demonstrates our commitment to be a genuinely European operator. As demand in the UK increases we will also continue to develop our UK offtake network and develop processing facilities of our own to ensure that continue to offer cost effective and sustainable solutions for our customers in the future.
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