Prices remain low in landfill allowance trading scheme

Council finance officers are being urged by their waste officers to provide funding early, to purchase landfill allowances before prices rise.

The scheme, which began in April 2005, sees waste disposal authorities set an annual allocation of allowances for the amount of biodegradable waste they send to landfill. Those authorities that cannot meet their set allocation can buy spare allowances from authorities that can easily meet their targets.

Prices
In the first year of the scheme, waste disposal authorities were trading landfill allowances at about 20 per tonne, with a handful selling for as much as 40 per tonne.

Trading in 2005/06 saw 14 disposal authorities buying in extra allowances – with just seven authorities selling.

Overall, just over 400,000 tonnes worth of landfill allowances were traded according to the public register.

The second year of the scheme – the financial year 2006/07 – is so far seeing landfill allowance prices below 20 per tonne. Officers have told letsrecycle.com that prices could creep down to 15 per tonne because of an expected high availability this year.

“Buy now”
Some local authority waste officers have said they are suggesting to finance officers that it is time to buy allowances now. Expectations are that as the first EU Landfill Directive diversion target – 2010 – draws near, and before major new infrastructure is up and running across the UK, landfill allowance prices could soar.

The theoretical maximum for the price of allowances should be the 150 per tonne level that Defra intends to fine authorities that do not hold enough allowances to cover their landfilling needs.

Tom Turner, waste disposal co-ordinator for South Tyneside borough council, said: “We're realising that if we get permits now they'll be much cheaper – but it's convincing finance people to buy them now. Councils should get them while they can.”

Incineration
Part of the reason for continuing low prices for LATS in the second year of the scheme has been the increasing use of energy-from-waste incineration. The selling of allowances so far has been dominated by authorities relying on incinerators to divert waste from landfill, and they have been able to set the current price of allowances.

Some other authorities believe more should be done within the LATS system to encourage other forms of diversion technology. Cambridgeshire county council told letsrecycle.com that it had 20,000 tonnes' worth of permits available in 2005/06, but had been able to sell only 5,000 tonnes' worth.

The county said the market had been “flooded” by allowances from incinerator authorities.

Mark Shelton, waste management officer at Cambridgeshire county council, said: “We wanted to sell our LATS at a price that reflected the money we put into in-vessel composting. But the other waste authorities who had incinerators could afford to sell them cheaper, and undercut us. The system needs to reward councils who opt for environmentally sustainable methods.”

It is thought that there is even some frustration among government officials that such low prices for allowances could reduce potential incentives for authorities to invest in diversion plants.

Defra is currently considering the results of the first year of landfill allowance trading, and confirmation on whether authorities met their landfill limits is expected to come in the autumn.

Fines
Council officers have said the success of the LATS system now relies on Defra going through with its threat to fine any authorities that do landfill more material than they have allowances to cover.

Richard Johnson, waste officer for Portsmouth city council, said: “If the government doesn’t take action and penalise non-compliance, the whole scheme will collapse.”

“Our authority made a decision to invest in infrastructure, so we need more LATS income to keep investing. If the government is not firm, what is the incentive to invest?”

In Cambridgeshire, the county council has written to ministers to demand a firm statement regarding LATS fines.

Mr Shelton explained: “We want a firm statement form Ben Bradshaw saying that the government will impose fines on councils for missing their targets – even if it makes them bankrupt.”