How does the White Paper affect the waste sector?

By Claire Smith.

Key Points:
Landfill operators will need to start thinking about how to factor CPRS compliance costs into their business models.

Landfills

The Government has taken on board the waste industry's concerns about the difficulty in passing through costs and quantifying legacy emissions (primarily methane) generated from past waste streams. The policy position announced by the White Paper is as follows:

• landfill sites that are already closed (ie. prior to 30 June 2008), where operators have no opportunity to pass on their CPRS costs, will be excluded from the CPRS;
• all other landfill facilities will be covered from the commencement of the CPRS (subject to the following participation thresholds);
• the general CPRS participation threshold for emissions from landfill facilities will be 25,000 tonnes of carbon dioxide equivalent (CO2-e) per year;
• a lower threshold of 10,000 tonnes of CO2-e per year will apply to a landfill facility operating in close proximity (ie. 80 kilometres) to another operating landfill facility. The rationale is to avoid displacement of waste to sites not covered by the CPRS. To reduce the burden on landfill operators post-closure, the Government will return sites at the lower threshold to the higher threshold 25,000 tonnes of CO2-e 10 years after the site closes;
• the Government will not exclude legacy emissions from the CPRS entirely, but will exclude them until 2018;
• methane that is captured will be allocated equally between legacy and new emissions; and
• solid waste landfills will be required to use National Greenhouse and Energy Reporting System Methods 1-3 (ie. an indirect emissions estimation methodology) to quantify legacy emissions with the Government leaving open the option of imposing new minimum standards for emissions estimation methodologies for a particular source or activity.

Implications

Landfill operators will have a short term reprieve in respect of CPRS liabilities for legacy emissions but will nevertheless need to start thinking about how they are going to factor CPRS compliance costs into their business models going forward and whether there are any opportunities for reducing legacy emissions through abatement technologies.

Further, it is not clear exactly what the Government means by "landfill sites that are already closed prior to 30 June 2008". Many landfill sites are comprised of numerous cells some of which are closed and some of which are operating. Is a "site" taken to be a whole facility including closed and open cells? Presumably this will be clarified in the legislation next year.

Operating landfills that exceed the thresholds will need to address increased costs associated with non-legacy emissions (ie. emissions from existing and new waste streams) from the commencement of the CPRS. Operators will most likely seek to pass through their CPRS costs via increased landfill gate fees but there are still apparent difficulties in accurately measuring emissions profiles of landfills and thus determining what those liabilities may be. The White Paper acknowledges the complexity and problems with having to quantify legacy as well as non-legacy emissions from the same landfill and, consequently, the potential inequalities if emissions profiles are not accurately estimated.

The waste industry will need to continue to work closely with the Government to develop the more accurate emission measurement methodologies (eg. direct methods) and ensure that participating landfill sites are on a level playing field in terms of measurement and verification standards.

Waste water

Waste water emissions arise primarily from the decomposition of organic matter in waste water at municipal and industrial waste water treatment plants (WTPs). International reporting protocols require emissions (particularly nitrous oxide which has a global warming potential of 300 times that of carbon dioxide) from on-site treatment WTPs and emissions from the subsequent release of treated water into waterways (post discharge emissions) to be reported.

The Government has resisted calls to exclude post discharge emissions from the Scheme as it would heavily penalise WTPs that have pre-treatment processes in place (eg. de-nitrification) that result in a substantial reduction in post discharge emissions.

The Government has decided to include industrial facilities with WTPs that process waste with a high organic content from the following sectors: dairy production, pulp and paper production, meat and poultry processing, organic chemicals production, sugar production, beer production, wine production, fruit processing and vegetable production.

CPRS obligations will apply to entities with a facility that has direct (scope 1) emissions (including post-discharge emissions) of 25,000 tonnes of CO2-e a year or more.

In contrast to the solid waste sector, the Government has determined that the participating threshold does not need to be reduced as there is little scope for waste displacement or market distortion because most large WTPs are government owned and waste water flows through established pipeline infrastructure. The Government has also resisted reducing the threshold to capture more industrial sector WTPs to avoid bringing large numbers of small WTPs in regional towns and urban areas into the CPRS at this stage.

Implications

Like landfills, more accurate emissions estimation methodologies will need to be developed for post discharge emissions to avoid unfairly penalising operators that carry out less pre-treatment processes.

WTP operators that are likely to meet the CPRS thresholds will presumably seek to pass through costs to their consumers and weigh up future CPRS compliance costs versus the cost of implementing emissions abatement technologies.

For further information, please contact Claire Smith.