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TERU Focus Report - Competitive Waste Markets and the Circular Economy
The Importance of Free
and Fair Competition June 15,
2015 -- Michael Theroux
Introduction
In May 2015, the European Union (EU) launched a broad
public consultation addressing the Circular Economy (see our Focus Report). This week, the EU released a follow-up consultation with a more narrow focus, specifically on the functioning
of the region's waste markets and how this impacts the larger Circular Economy question. It is helpful for
outsiders to understand the European perspective; for this, Teru Talk is publishing another opinion piece,
word-for-word, with the express permission of the organization.
In the fourth in his series of articles on the Circular
Economy, David Palmer-Jones, President of the European Federation of Waste Management and Environmental Services
(FEAD), and CEO of SUEZ UK, explains the importance of free and fair competition for achieving economic and
environmental goals.
Free and Fair Competition is Essential for the Circular Economy
FEAD, June 2015 - David
Palmer-Jones
Achieving a circular economy and a more resource
efficient society will require major changes in the use of resources, backed up by new European policy measures.
This will involve introducing market based conditions along the whole value chain to incentivise all actors to take
their responsibilities. Open markets and fair competition stimulate customised services and solutions, and open up
possibilities for innovation and investment. They also help small companies to enter the market.
Waste legislation must be developed in this direction
and adapted to a circular economy, not only from an environmental point of view but also from an economic point of
view. By ensuring open markets and fair competition, jobs and growth will be created.
Private sector waste and resource management companies
play a key role in a circular economy by delivering high quality services and by helping their customers to turn
waste into resources, so reducing both costs and environmental impact. The waste and resource management companies
provide services to the households and businesses which generate waste and also act as raw material and energy
suppliers to industry. For the private sector to deliver these services and make the necessary long term
investments for a circular economy, they need legal certainty and fair competition rules ensuring that the
household waste market is opened up for increased competition.
But across the EU the principle of fair and open
markets is not consistently applied. In some Member States municipalities claim that both waste from households and
similar waste from the commercial and industrial sectors should come within their exclusive rights. In-house
services in the municipalities are increasing, which can result in them awarding contracts for household waste
management to themselves without tendering, giving rise to inefficient "municipal monopolies". In some cases
municipalities are also selling waste management services on the commercial waste market, taking unfair competitive
advantage of concessions such as lower-rated VAT, only afforded to public bodies.
The mixing of household waste management services and
commercial activities by municipalities risks giving rise to illegal state aid and cross-subsidisation, as
householders are put at risk of paying for the collection and treatment of commercial waste. Many Member States do
not have sufficient controls in place to prevent this from happening.
In addition, decisions on waste management are often
taken by local public authorities with no or little coordination with private actors. This can lead to sub-optimal
practices, for example municipalities investing in waste treatment which is at a lower level in the waste
hierarchy, and sometimes creating local over-capacity, so affecting the possibility of reaching EU recycling
targets.
FEAD has observed a clear trend towards increasing
public sector activity in the recycling market in several Member States. This goes against ample evidence which
shows that competition through private sector involvement delivers better outcomes for the environment and for
taxpayers. Municipal involvement without recourse to competitive tendering can mean an inefficient use of resources
and unnecessarily high costs for residents. Municipal undertakings have fewer incentives than private providers to
operate efficiently since any losses can be covered via tax receipts or charges, whereas private undertakings must
acquire expensive capital or even leave the market.
Against this background, FEAD makes the following
recommendations:
-
Household waste management markets should be opened up to competition from
private entities. Competition in waste markets should be the norm.
-
The legal responsibility of municipalities should be limited to the
collection arrangements for household waste only, by recourse to mandatory open tender to provide the
best value-for-money service to the taxpayer and the most efficient use of taxpayer
funds.
-
In line with European Commission recommendations, Member States should not
attach specific public service obligations to waste management services that are already provided or
can be provided by undertakings operating under normal market conditions.
-
There should be equal market conditions and clear regulations for
municipalities operating both on the household and commercial waste markets. The competitive advantages
enjoyed by municipal undertakings should be removed (such as lower VAT rates and the possibility of
“cross-subsidisation”).
A crucial element in delivering a circular economy is
to create open markets and fair competition for waste and resource management services. Fair competition will
deliver a circular economy much more effectively and efficiently. The benefits are clear; more choice for
customers, lower costs for households, higher recycling rates, more innovative recycling solutions and the
potential for higher growth and more jobs.
Link to original report -
http://www.fead.be/uploads/FEAD%20Opinion%20piece%20on%20competition.pdf
About FEAD
The European Federation of Waste Management and
Environmental Services (FEAD) represents the European waste management industry. FEAD’s members
are national waste management associations covering 18 EU Member States, Serbia and Norway. They have an
approximate 60% share in the household waste market and handle more than 75% of industrial and commercial waste in
Europe. Their combined annual turnover is approximately € 75 billion. FEAD represents about 3000 companies with
activities in all forms of waste management. These companies employ over 320000 people who operate around 2400
recycling and sorting centres, 1100 composting sites, 260 waste-to-energy plants and 900 controlled
landfills.
Parting Shots
In FEAD’s learned opinion, "waste" is clearly to be
considered first as an openly traded resource. For this to occur, agencies should pretty much step out of the way,
restricting their purview to environmental quality while ensuring free trade. Doing so would cut the regulatory
structure out of the Business of Business, and allow a free market economy to dictate just when and by what means
something thrown away by one entity could be cleanly converted back to valued goods, by another.
FEAD’s approach mimics Governor Brown's mandate to
California’s waste management agency, to pursue a "feedstock driven, technology neutral" pathway to optimal
resource recovery. If a company can stay within the standards of good business and environmental quality
protection, they get to compete evenly for that waste-sourced resource . In this open and competitive environment,
the marketplace will sort out what is functional. When cleanly operating companies can secure sufficient waste as
feedstock, have their technologic platform well defined and advanced, and can rack up the right product value
through off-take agreements, funding will flow and the expensive societal onus of "waste management" can truly
become the functional economic driver of "waste-to-product".
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© Teru Talk by JDMT, Inc 2015. All rights
reserved. You are free to reprint and use
this report as long as no changes are made to its content or references and credit is given to the author,
Michael Theroux. http://www.terutalk.com
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