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Solving the waste management crisis

Infrastructure investment required
When China notified the World Trade Organisation in July 2017 that it planned to restrict imports of 24 types of waste as part of its Blue Sky/National Sword program a waste management crisis was triggered in Australia.

One of the outcomes of China’s ban has been to identify the need for significant investment in waste management infrastructure.1 The need for investment is becoming urgent with expectations that the flow of recyclable waste will increase over coming decades. NSW EPA has acknowledged the need for significant infrastructure investment to process an anticipated 20 million tonnes of waste that New South Wales will generate by 2021 whilst the Western Sydney Regional Organisation of Councils Waste and Recycling Infrastructure Needs Assessment (2015) has identified that by 2021 there is approximately a 994,000 tonne gap in facilities available to process mixed waste treatment, garden organics processing and putrescible organics processing compared to projected waste generation figures.2

Where will investment come from?  

The waste management sector itself is not a cohesive single industry but consists of a range of industries with multiple sectors (waste collection and transfer, sorting of waste, recycling, disposal).3

There are no easy solutions to resolving Australia’s waste management crisis - the Senate Environment and Communications References Committee inquiry into waste made eighteen separate recommendations.4 Beyond important issues such as developing markets in Australia for recycled material, we need to think through the way waste management infrastructure investment should be structured.

A waste truck in Canberra

Waste truck kerbside collection in Canberra.

Waste collection and transfer is an activity that has traditionally been conducted at local level through local councils. The logic of local councils managing waste management made sense in an era when waste was principally dealt with at the local tip. But as cities have grown, and recycling has become a large business, this logic needs to be questioned.

An integrated, lifecycle approach

We have seen in the water sector that corporatisation has proved an effective way to establish financial discipline whilst at the same time giving water utilities control of their balance sheets to be able to plan and implement infrastructure investments.

One suggestion is that water corporations could play a greater role in the waste management life cycle by taking on new functions. Water corporations already have significant expertise around waste as a result of their public functions to manage sewerage.

One of the advantages of water corporations taking on waste management functions is that they already have strong balance sheets and a capacity to invest. An example is Sydney Water which has built a portfolio of renewable energy assets including cogeneration facilities that have been rolled out in eight wastewater treatment plant sites. Sydney Water is also trialling co-digestion of sewage sludge and organic food wastes.5

Integration requires Government support

Establishing integrated water and waste corporations would require support from Federal and State Governments. In order to ensure that investment was financially sustainable there would be a need for the Federal Government to create a national framework that supports the development of a lifecycle approach to products. The Federal Government also needs to ensure that the regulatory environment is supportive of collaboration. An example occurred in 2016 when the ACCC denied authorisation for five South Australian councils to jointly procure kerbside waste collection services. The ACCC subsequently issued a new draft determination in July 2018 that it would authorise joint procurement.

State Governments have an important role to play in enabling water corporations to take on new responsibilities. There are a number of different models that could be adopted. There is the potential for instance for water corporations to create joint ventures with infrastructure investors.

Suggestion for a partnered approach

Whilst water corporations are all owned by governments the technical nature of some services means that there has always been a strong relationship with the private sector including extensive regulation of public-private-partnerships. A joint venture structure, which is commonly used in construction projects to bring together skills and align incentives, is a way that superannuation funds and water corporations could partner more effectively particularly if they both share long term time horizons. When it comes to investments in infrastructure superannuation funds commonly look for assets where they can invest for 20, 30 or 40 year time horizons.

The community needs to be reassured that waste can and will be managed efficiently and responsibly. There is scope for significant reform and greater stewardship in the waste sector and cross-industry learning from, for example, the water sector.

The Customer Stewardship Blueprint provides a good template for navigating change in the waste sector to ensure the long term outcomes are secured for the economy, the environment and community.

  2. NSW Legislative Council, Portfolio Committee No. 6 - Planning and Environment, ‘Energy from waste’ technology, 28 March 2018
  3. Western Sydney Regional Organisation of Councils Waste and Recycling Infrastructure Needs Assessment (2015)
  4. Senate Environment and Communications Reference Committee, Never waste a crisis: the waste and recycling industry in Australia, June 2018, p8
  5. Senate Environment and Communications References Committee, Never waste a crisis: the waste and recycling industry in Australia, June 2018