Waste Tax 1987-1996 5. Industrial/commercial waste and construction/demolition waste5.1 Introduction 5.1 Introduction Lack of good data In this chapter the results of the study of the effects of the waste tax on industrial and commercial waste and construction and demolition waste are described. Industrial and commercial waste (waste from trade and offices and industry) accounted for some 30 per cent of total waste amounts in 1995, whereas construction and demolition waste accounted for around 23 per cent (Miljøstyrelsen, 1996:6). Total waste amounts include waste for recycling. Due to the lack of good statistics on industrial and commercial waste and corresponding sector specifications, the starting point for this study was rather difficult. It is not possible to set up time series for the development in the different sectors' waste generation and to compare these to the development in production, employment or consumption. Consequently, it is not possible to calculate key figures of waste amounts and to estimate their development over time. 5.2 Study of enterprises Interview studies The purpose of the study of industrial and commercial waste and construction and demolition waste was to clarify the role of the waste tax for the waste management in different enterprises. The study was planned as an interview-based case study of selected enterprises. At the planning of the study, the starting point was taken in selected sectors, and subsequently a certain dispersion was aimed at, geographically and by size. The study of enterprises was not planned as a representative random check, but more as a case study of the behaviour of enterprises towards waste separation and recycling and of their perception of the effect of the waste tax on their own waste management. Enterprises in the following sectors/areas were interviewed: iron/metal, newspapers, breweries, trade and service, a public institution, and building and construction. Characteristics of sectors In the manufacturing industry, iron and metal represents a sector with quite large waste amounts. It is also a sector generating heavy waste and as such it should be expected to be sensitive to a weight-based tax. Large waste amounts generated in newspaper production make it reasonable also to consider newspaper production as a waste intensive sector. A large part of Danish manufacturing industry processes food, but surveys of abattoirs and fish-processing industries showed that very limited amounts of residual waste were generated here. In this study, breweries are included as a more waste-intensive sector in the generally low-waste food-processing industry. The opportunities for recycling especially of paper, cardboard and packaging are good, and consequently the study comprises trade and service. Focus has been put on supermarkets (packaging waste etc.) and a telecommunications company. Furthermore, one public institution and an enterprise in the building and construction sector have been included. Selection criteria Interviewed enterprises have been selected relatively randomly by checking commercial registers and by using criteria of geographical location and size. The use of environmental management, certification or similar has not been a selection criterion, even though such facts might have improved the information base at the individual enterprises. The reason for not using such criteria was that more conventionally operated enterprises would then have been underrepresented in the study. The study has not made a systematic survey of waste streams and costs at the enterprises if such a survey was not already available. For each sector, a visit was paid at the first selected enterprise, whereas subsequent interviews were carried out by a mixture of visits and telephone interviews. Questioning technique Enterprises have presented their waste streams, separation measures and recycling of material fractions, if any. This presentation took the form of an open discussion which was completed with a summing up of information in a structured questionnaire. At the completion of the questionnaire, the enterprise was also asked to evaluate the effect of the waste tax. The central question in the study was to urge enterprises to identify themselves the motivation for their behaviour towards waste separation, and to give their views on the impact of treatment costs and waste taxes on this behaviour. 5.3 Outline of selected sectors and enterprises An outline is given below of selected sectors and enterprises. Iron and metal Recycling tradition In this sector four enterprises were interviewed - three relatively large enterprises with more than 500 employees, and one small enterprise. The enterprises manufacture pumps, transport material, machinery and various metal articles. Enterprise A is very advanced in environmental management and has recently received an EMAS certificate. It has a very detailed knowledge of waste streams at the enterprise. Waste - especially stainless items - has a considerable economic value. Sales generate an income of some DKK 26 million annually which should be compared to the overall result in the last accounting year of DKK 80 million. Around 93 per cent of waste - scrap and plastic items - is transported to recycling. Also at the three other enterprises, separation and sale of metals take place. At enterprise B the recycling rate is 37 per cent of total waste amounts, and primarily scrap is recycled. Plastic and other waste types go to landfill or incineration. Recently, the enterprise has launched a project on environmental management and green accounting. Enterprise C is a medium-sized ISO certified enterprise. Extensive separation of waste takes place, but for reasons of competition the enterprise does not want to state quantities (production can be derived from these figures, and the enterprise is in heavy price competition with another Danish enterprise). Enterprise C does not see any significant financial benefit from separating and selling scrap, but no detailed outline of revenues could be given. Enterprise D has taken no special initiatives to reduce waste amounts and only sells metal for reprocessing, whereas other fractions are disposed of conventionally. At enterprise D it was not possible to state total waste amounts or rate of recycling, but it was estimated that scrap accounted for some 95 per cent. Newspaper printing houses Modest knowledge of costs Enterprises interviewed are distributed over the entire country: one very large enterprise in Copenhagen, two medium-sized in Jutland/Funen and a small enterprise on Sealand. In general, there is no very precise knowledge of actual costs of waste disposal in the sector, including the effect of the waste tax as a cost component in relation to other cost components. The reason for this is that responsibility for the physical disposal is often separated from financial responsibility. The most solid knowledge of physical amounts is found in a recent life cycle analysis in one of the printing houses. The dominating waste type is waste paper and residual rolls from the printing process. 12 to 14 per cent of paper purchased is wasted in production. Waste paper constitutes 90 per cent of total waste amounts. The largest enterprise has invested in a new material handling system, limiting the damage to paper rolls and thereby also waste amounts. Separation for recycling of paper is systematised at all four enterprises, and all enterprises have collection of metal (especially aluminium), plastic, electronic waste and ordinary domestic waste. Breweries Good environmental management Two of the largest enterprises in the sector were interviewed. Breweries have a wide range of waste types; kieselguhr from filtration, draff and yeast are special to this sector. A large proportion of these waste types are transported to wastewater treatment plants, biogas generation or agriculture. Breweries had the most precise knowledge of waste amounts and related costs of all interviewed enterprises. Enterprise A has a comprehensive environmental management system, and for the last two years a separate section on the environment has been included in the annual report. Waste is separated according to the municipal waste regulation into 16 different fractions, and for each fraction the enterprise has stated costs of carrier, treatment and taxes so that it is possible to act continuously in response to developments in costs. However, it is first and foremost the pressure from local authorities that has led to the extensive separation; at another plant belonging to the group in another part of the country the local council allows less extensive waste management. Enterprise B has no dedicated waste policy, but has introduced extensive separation and collection systems for a number of fractions. Also at this enterprise, precise knowledge of different cost components has been established. The enterprise tries very consciously to optimise waste management. Separation of plastic and plastic film has been given up, and due to low prices at the moment of waste paper, labels are not sold to recycling, but disposed of with other waste. Trade and service Interviewed enterprises are a large supermarket chain, a regional shopping centre and a small local supermarket. Furthermore, a telecommunications company has been interviewed as an example of a modern service enterprise. Limited attention In the supermarket chain A, responsibility for environmental management is centralised at the head office where the interview also took place. In another supermarket chain, which is not included in the study, responsibility was delegated to individual shops, so the interviewed chain is not totally representative of this retail type. Enterprise A has centralised waste management, and all invoices are sent to the head office which is in charge of contact to carriers. No actual registration of waste amounts has been made at individual shops. The enterprise has a turnover of DKK 2 billion and waste generation of 500 tonnes per year. All food waste is collected in accordance with the Danish Statutory Order on Waste. Transportation of this fraction is relatively expensive, and by finding a carrier using weight-based invoicing, it has been possible to reduce costs by half. Enterprise B is a regional shopping centre covering almost all articles. Enterprise B has no formulated strategy of waste management which is rather ad-hoc and decided by possible financial advantages gained from modified procedures. No central registration of costs and revenues of waste management takes place, and economic optimisation of waste management is also ad-hoc. Enterprise C is a local supermarket. The enterprise has taken no measures to reduce waste amounts, but does separate waste in three fractions: fruit/vegetables, meat waste and paper/cardboard. Enterprise D is a nation-wide telecommunications company. Responsibility for waste management is shared by five different people, and it was difficult to get a full view of waste amounts. In addition to iron and metal, paper and cardboard is separated. Costs of waste management are considerable, around DKK 1 million annually, but the enterprise did not give the impression of being very active with regard to the environment compared to manufacturing enterprises in other sectors. Generally, the impression is that trade and services are not very attentive to waste management and related costs. Public institution Considerable amounts The institution interviewed is a state-owned university. Waste streams at the university consist mainly of traditional office waste (paper/cardboard, electronics, plastic, batteries, fluorescent tubes etc.), but also park waste and problem wastes are generated, for example from laboratories. Paper/cardboard is collected, as is mandatory. Park waste is transported to a municipal collection centre. The responsibility for problem wastes is delegated to the different institutions. Disposal costs amount to DKK 1 million annually, but the university informs that it has taken no specific initiatives to reduce waste amounts apart from the mandatory collection scheme. Building and construction The enterprise interviewed is engaged in train operation (Danish State Railways - Building and Construction). The enterprise is state owned, but is operated as an independent company. Source separation of construction and demolition waste DSB Building and Construction was recently divided into DSB building division and a service division of the Danish National Railways Agency. The latter is responsible for bridge construction, rail establishment, establishment of stations and platforms etc. In this service division, two employees are responsible for guidelines on waste management to the different project groups. The aim is to establish source separation (in 35 fractions) and to increase internal recycling. The recycling rate amounts to 50 per cent. The Danish National Railways Agency is preparing general project guidelines that will comply with all municipal waste regulations. A/S Øresundsforbindelsen (fixed link between Denmark and Sweden) is mentioned as the first client to make environmental requirements to the enterprise, but requirements did not exceed already established practice. The largest single fraction of waste is broken stone from railway tracks, polluted with oil residues and heavy metals; this fraction amounts to 50,000 tonnes per year. Summary Big variation in waste management In conclusion, especially breweries and iron and metal enterprises have a well developed waste management system. In these sectors, an acceptable statement of waste amounts is found, and costs and possible revenues are in most cases surveyed. This is also to some extent the case for the Danish National Railways Agency, which is preparing a coherent waste strategy. Waste management in newspaper printing houses is decided by requirements in the Danish Statutory Order on Waste to recycle paper and cardboard and by the fact that enterprises are positive to recycling; also here there is a large recycling rate. The least developed waste management is found in trade and services and at the university. Amounts are merely estimated, and knowledge of costs of waste management is only found in the bookkeeping department where it was not possible without some effort to state such costs separately. The poor attention at these enterprises cannot be explained by small residual waste amounts. The supermarket chain A, for example, has a residual waste amount of 500 tonnes per year, whereas the university generates 1,000 tonnes per year. In comparison, residual waste amounts at the iron and metal enterprises A and B amount to around 500 tonnes and at the brewery A to some 2,000 tonnes per year. However, it may be of some importance that total waste amounts before recycling are considerably larger in manufacturing enterprises. 5.4 Results of interviews Results of the questionnaire study are presented below. Measures to reduce waste amounts Initiatives towards waste reduction By way of introduction, enterprises were asked whether in recent years they had taken any measures to reduce waste amounts. 13 enterprises answered in the affirmative; only three enterprises have taken no initiatives to reduce waste amounts. These three enterprises are iron and metal enterprise D, supermarket C and the university. However, the iron and metal enterprise sells its scrap iron, and the supermarket and the university undertake the mandatory separation of paper/cardboard.
Table 5.1. Number of enterprises which have taken measures to reduce waste amounts. Tables 5.2 and 5.3 show in more detail which waste types are generated at which enterprises, and which are separated for recycling or recovery.
Table 5.2. Which waste types are generated in the enterprise ?
Table 5.3. Which waste types are separated for recycling or recovery ? Collection of metal and paper most widespread Table 5.2 shows that iron and metal, waste paper and ordinary domestic waste are the dominating waste streams, but many enterprises also generate electronic waste and oil/chemical waste. A comparison of Table 5.2 and Table 5.3 shows that primarily iron and metal waste and waste paper are separated. Concerning plastic, construction and demolition waste and glass, efforts are modest. It is surprising that only three enterprises separate glass. Concerning separation within the different sectors it is seen that all four iron and metal enterprises separate iron and metal waste, all four printing houses separate both paper and metal waste, both breweries separate metal, paper, plastic and glass, three trade and service enterprises separate paper, and the university and Danish State Railways separate paper. Manufacturing enterprises have the widest range of separation, whereas trade/services and the university focus mainly on paper and cardboard. Other recycling Reduction in waste amounts may also be achieved in other ways than by conventional separation, for example through in-plant recycling, changed raw material consumption and requirements to suppliers. Such measures were clarified by an additional question to those enterprises that had taken initiatives to reduce waste amounts. Four enterprises have in-plant recycling: enterprise A uses for example paper and cardboard residues as shock-absorbing packaging instead of the traditional expanded polystyrene "chips". Two enterprises answer that they have made requirements to suppliers. Iron and metal enterprise A has requested a changed format of iron sheets entailing less wastage, and newspaper printing house A has modified production equipment to reduce paper wastage. Two enterprises reply "other", including a newspaper printing house which has introduced thinner paper.
Table 5.4. Other measures to reduce waste amounts. Motivational analysis Many different factors play a role for enterprises' decision to reduce waste amounts, and these factors were surveyed through interviews on waste management. Motivation for separation and recycling As mentioned in Chapter 4, the iron and metal industry has a well-established tradition of not discarding metal and scrap. It is sold, often entailing a quite considerable revenue. Newspaper printing houses are subject to requirements in the Danish Statutory Order on Waste to recycle paper and cardboard, but as waste amounts from this source are quite significant (especially paper rolls from the press constituting close to 90 per cent of waste collected), it is probably finansially advantageous to avoid landfilling or incineration. However, the printing houses had no picture of financial advantages of recycling, as they primarily wished to comply with the requirements of the Statutory Order. Both at breweries, several of the printing houses and one iron and metal enterprise, it was a management decision to opt for recycling based on more general considerations of the environmental profile of the enterprise. Within trade and service and at the university economic advantages of recycling were less in focus. One supermarket chain desired to strengthen its environmental profile. Two other supermarkets and the university were found to have internal organisational and institutional barriers that make waste management costs more or less invisible to specific decision makers. Essential factors In order to identify factors that have had an impact on waste management in enterprises, interviews were completed by asking enterprises to state which factors had been essential for them in their effort to reduce waste amounts.
Table 5.5. Results of motivational analysis Frequent mention of sale of residual products Table 5.5 shows that the most important reason for the reduction in waste amounts - mentioned by 10 of 13 enterprises having taken measures to reduce waste amounts - is the possibility of generating revenues through the sale of residual products. Second-most important factors are the desire to reduce costs of waste disposal and the desire to enhance the environmental profile of the enterprise, both reasons mentioned by eight enterprises. Seven enterprises mention requirements in municipal waste regulations (most frequently, the obligation to separate paper). Requests from clients is the lowest ranking factor. Enterprises stating a desire to reduce costs as an important factor were specifically asked about the impact of the waste tax.
Table 5.6. Direct impact of waste tax in relation to the reduction in waste amounts. Direct effect of waste tax Table 5.6 shows that only two of eight enterprises mentioning the reduction of costs as an important factor, found that the waste tax had a direct impact "to a large extent" or "to some extent" in relation to other cost components. Six enterprises saw no impact from the tax. The enterprise stating an impact "to a large extent" is brewery B, one of the few enterprises with a total picture of costs of waste management. The modest attention to the waste tax at enterprises is demonstrated by the fact that few enterprises envisaged changes in behaviour as a consequence of the tax increase agreed in 1993 and effective from 1.1.1997, cf. Table 5.7. Three enterprises envisaged increased recycling or other measures, whereas the remaining enterprises either expected no impact or were not aware of the tax increase.
1) In some cases due to lack of knowledge. Table 5.7. Reactions to the increase in the waste tax rate as from 1.1.97. 5.5 Financial evaluations of enterprises' behaviour Waste cost components As mentioned in Chapter 3, the waste tax is only one of several cost components related to waste disposal. In addition to the tax, total disposal costs will normally also comprise cost components such as rent of containers, transportation, fees for landfilling or incineration, as well as internal staff and surface costs. Apart from fees and the tax, the same cost components will in principle apply to recycling. Whether the tax can shift the balance between recycling and conventional disposal will also depend on the price of recyclates. The enterprise will also be able to save costs by reducing costs of transportation or by compressing waste more, so it is not necessarily true that an increase will result in a reduction in waste amounts. A tax increase will, however, often draw attention to waste management. Enterprises which have carried out precise financial calculations have generally been reluctant to give specific financial information as this will require detailed insight in contracts on disposal of industrial and commercial waste including discounts, as well as sales prices of residual products. Better exploitation of staff resources Brewery A stated that the largest saving in waste management has been achieved by a better exploitation of staff resources. Better planning of work has led to savings of DKK 350,000 which can be related to a total waste bill of some DKK 3 million. The sale of residual products has for a long time generated revenues. Before 1988 revenues amounted to DKK 950,000 annually, and after the introduction of recycling measures revenues have increased to around DKK 1.1 million. Direct savings in the waste bill as a consequence of recycling are limited to around DKK 100,000. Enterprise B in the iron and metal sector separates and recycles 37 per cent of waste generated, and the costs of disposal of residual waste, including hazardous waste, amount to around DKK 300,000 annually. This amount is modest and does not immediately give hope for large economic gains from enhanced recycling efforts. At the time of the interview, the enterprise had just engaged an environmental expert who, in addition to optimising waste disposal, was also to analyse wastewater treatment which for this enterprise represents a considerable cost. Limited gain from increased paper separation The university and the telecommunications company, each with a total waste bill of around DKK 1 million annually, do not seem to have a possibility of considerable savings. At the university separation of paper and cardboard takes place, but is not very efficient. The waste company charges the same rate for container rent and collection of residual waste and waste paper when container volumes are identical. The rent of a 6 cu.m. container amounts to DKK 2,280/year and each collection costs DKK 150. Due to the development in the waste paper market with negative prices for several years, disposal of paper must be paid for. The sales price for one tonne of paper fluctuates, but ranks from DKK +100 to -275/tonne. Contracts ensure that sales prices are adjusted regularly. This amount should be compared with the price of disposal of one tonne of residual waste which comes on top of the price for container rent and collection. This price was in 1996 DKK 459/tonne. This means that savings of between DKK 184 and 559/tonne waste paper that is separated instead of disposed of as residual waste can be achieved. However, the sales price of waste paper has almost constantly been negative. DKK 46,000 savings by 25% increased recycling The calculation below illustrates well why the question of recycling often depends on the price of recyclates. The university has around 1,000 tonnes of residual waste annually, and the composition of this waste is not fully known. If it is assumed optimistically that around 25 per cent of this waste is paper that could be recycled, it would be possible with the present price of paper to save around DKK 46,000 on the annual waste bill. This is a modest gain from a reduction in residual waste amounts by 25 per cent, when total waste disposal costs around DKK 1 million. The limited gain is due to the fact that the sale of paper for recycling also entails considerable costs, primarily for container rent and collection. Surplus capacity for recycling is expensive The situation for the university, or any other enterprise considering increasing recycling, is furthermore that the question of exploitation of capacity becomes central for the marginal economic gain from increased recycling. If the institution already pays for a certain capacity of collection of residual waste, and it will have to pay extra for a capacity for the collection of another fraction, for example paper, it must be decided with certainty how much capacity should be moved from residual waste to paper. If, as a consequence of recycling, there is unexploited capacity in the containers for residual waste, the recycling effort will entail extra costs for the enterprise. Thus, it will be rational for the enterprise to calculate the capacity of recycling conservatively, as all waste can always be disposed of as residual waste. Only under the assumption that paper is such a valuable residual product that companies would collect it free of charge and also be in charge of containers, would it be possible to disregard costs of containers and collection completely and to enjoy the full savings corresponding to the waste reduction. Positive price of waste products help The impact on recycling from the positive price of waste products was also seen above in the interview results and is supported by the enterprise studies. Especially in the iron and metal sector there is a market for residual products, cf. enterprise A that sells relatively valuable waste products for DKK 26 million annually. The exception from this is shown in the building and construction sector. Waste amounts for some construction and demolition works are so large that costs of disposal incl. taxes are visible and will have an impact on profitability. Effect on construction and demolition waste In the case of the Danish National Railway Agency having 500,000 tonnes of broken stone, total disposal costs, including DKK 50/tonne for the cheapest landfill and DKK 335/tonne in taxes, are estimated at around DKK 19.2 million excluding transportation. Without the state tax the cost would be some DKK 2.5 million. It has not been possible to set up a precise calculation of alternative disposal costs of recycling, which would also comprise transportation costs, but the Danish National Railway Agency, however, is aware that landfilling is very costly. It has succeeded in selling the broken stone for reprocessing. A study of crushing and recycling of a concrete bridge of the Danish State Railways revealed additional costs of DKK 38/tonne in relation to conventional demolition, which balanced with a waste tax of DKK 40/tonne (Miljøstyrelsen, 1990b: 13). The sales price of the crushed concrete was not included. At today's prices, the landfilling of 4,700 tonnes of concrete from the bridge would cost DKK 1.8 million and recycling would give a surplus of DKK 297/tonne. 5.6 Summary In conclusion, it is seen that the waste tax has had a modest impact on industrial and commercial waste, whereas it plays a more significant role for construction and demolition waste in large, concentrated fractions. Limited knowledge of costs In general, interviews left the impression that many enterprises had limited knowledge of costs of waste management. Often it was not possible for the person responsible for waste management to calculate total costs of waste management, neither immediately nor at a follow-up after the interview. At newspaper printing houses, as also in other sectors, physical responsibility was isolated from financial responsibility, and therefore there was limited knowledge of various cost components and their interrelationship. This also seemed to be the case within trade and service and at the university. The modest attention to economic aspects of waste management is in itself not very surprising, as costs of disposal of residual waste normally do not exceed 0.5 per cent of enterprises' turnover. This phenomenon is known from the energy area where costs rarely exceed 2 per cent of turnover, and waste evidently is placed one step lower than energy in cost consciousness. Price span not large enough Some manufacturing enterprises, especially within iron and metal and food processing, have a tradition of recycling which has now been enhanced. Waste costs are generally modest compared to operations as a whole, but some enterprises, in connection with the introduction of more general environmental management systems, have tried to reduce amounts and increase recycling. With the often modest or even negative price of waste products, the waste tax does not seem to have created a price span large enough to create a strong incentive for recycling. This may be changed with the tax increase taking effect on 1.1.1997.
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