It’s time for a national recycling bank

A national recycling bank would help fund infrastructure for the industry, writes Alex Serpo, National Secretary at the National Waste and Recycling Industry Council.

The need for a national recycling bank has never been more critical. Despite efforts by industry and government, waste generation rates continue to grow exponentially. While it’s difficult to predict the future, it’s hard to imagine a scenario where Australia’s waste stops growing, given waste generation is a function of population and economic growth.

By 2040, national waste mass should fall within the range of 70 to 140 million tonnes with a high degree of confidence – assuming we don’t fall into economic disaster. This means we will need a lot more infrastructure. Increasing resource recovery rates requires a double effort, as new recycling infrastructure is required to maintain diversion alone as waste volumes grow.

For example, if we generate 140 million tonnes of waste per annum by 2040 with a recovery rate of 75 per cent (energy and material), waste tonnes that will need to be landfilled will increase by 38 per cent, while tonnes to recovery increase by just over 400 per cent. So in the high generation scenario, we will need to build three new recycling plants for every one we have today, and 20 or more large landfills – in 23 years.

Landfills fill up, so even if total waste to landfill falls substantially, we will still need more landfills. Even with resource recovery rates of 95 per cent or more – the need to build new landfill cells doesn’t completely disappear. Some materials also have no fate other than landfill, including asbestos, contaminated soils and heavy metal contaminated materials. And don’t forget that a natural disaster can generate huge waste volumes which need to be cleared quickly.

So the mantra for improving Australia’s waste and recycling system is infrastructure, infrastructure, infrastructure. More recycling and waste infrastructure leads to large capital investments.

But this challenge is compounded by a poor economic climate for recyclers. Right now global commodity prices are at record low levels – including the price for oil, plastic, paper and scrap metals. Recyclers are also subject to a tough labour market and difficulty sitting and licensing facilities. There is also the looming Chinese ‘National Sword’ (formerly Greenfence) policy, which means the world’s largest importer of recyclate will impose strict new contamination and import standards.          

There are opportunities inside every challenge. State government landfill levies are now raising more than $1 billion per year. Here are approximate figures:

  • NSW: $660 million
  • Victoria: $200 million
  • South Australia: $100 million (with an additional $64 million raised as the levy rises to $103 per tonne from $63)
  • Western Australia: $60 million (rising to close to $90 million as the levy reaches $70 per tonne).

With the reelection of a Labor Government in Queensland, the introduction of a levy there would likely raise around $40-60 million, bringing the 2020 total close to $1.2 billion per year. It’s essential this large capital flow be deployed effectively. As landfill levies are ‘levies’ and not ‘taxes’, the proceeds should be returned to industry to solve our growing waste and recycling challenges.

HOW LEVIES ARE SPENT TODAY

The National Waste and Recycling Industry Council (NWRIC) is an industry body that meets four times per year.

Our members are the largest and most forward thinking operators in the industry. They include both ‘waste and recycling’ companies and ‘pure recyclers’. This year we debated the best mechanism to spend landfill levy revenue.

While the application of landfill levies vary, they are always spent in four ways:

  • To fund EPAs
  • To fund sustainability agencies (such as Sustainability Victoria or Green Industries SA)
  • On grants programs
  • The remaining capital returned to general revenue.

Industry supports points one, two and four. Even handed enforcement of standards across all industry players is essential. Ongoing waste education is important. However, industry broadly believes that the existing grants programs are flawed. Here are some of the reasons:

Grant schemes benefit some players and not others

They lack ‘commercially viable’ check and balance measures, with some previous grants supporting projects which later failed

Grants have a limited time window, which can clash with investment cycles, market fluctuations and the needs of businesses.

Instead, industry would like to see funds deployed through a ‘national recycling bank’, which would see the government offer recyclers low or no-interest loans to fund new infrastructure. Grants could still be utilised, but limited to the most critical innovation projects.

IT’S TIME FOR A NEW NATIONAL RECYCLING BANK

This approach has a proved precedent. The Clean Energy Finance Corporation (CEFC) has been a quiet achiever in the energy infrastructure space. It’s one of the few initiatives that has survived the ‘Clean Energy Futures’ package first pitched in 2011, largely because it has consistently performed. The CEFC is a specialist financier, investing with commercial rigour to increase the flow of finance into new infrastructure. While EPAs are skilled, they are not independent, specialist financiers.

Here are some of the reasons a ‘recycling bank’ would be better than grants programs:

  • Funds would be repaid, so the important capital raised from levies could generate ongoing value
  • Money would be available to all players in the industry equally
  • Funds would only go towards ‘bankable’ projects – therefore fitting the criteria to receive a loan from a commercial bank
  • Loans would always be available to industry – solving the ‘timing’ and ‘type’ issue of grants

Another point to consider is – if the ‘bank’ was national – then larger amounts of capital could be available to fund larger and better projects. It could fund projects where they are most needed, rather than where revenue is available.

What are your views on this idea? I welcome feedback to Alex Serpo: secretariat@nwric.com.au