The way that local authorities deal with waste is evolving because of changes to regulations over the past 20 years and because of the introduction of new technologies that make it increasingly economically viable to reduce the amount of waste put in landfill.
As well as UK and EU regulation, the ability to generate energy from waste and improved recycling technologies are helping local authorities to move to more sustainable management of waste.
The EU legal framework
The principal EU directive regulating waste is the Waste Framework Directive 2008 (WFD). The EU publishes advice on the interpretation and application of the Directive, which requires member states to establish waste management strategies by 2013 and requires the Commission to set waste prevention objectives for 2020. The WFD establishes a five-tier hierarchy for how waste should be managed:
- disposal (as a last resort).
Member states are obliged to reflect the hierarchy in their domestic legal framework.
The legal framework in England and Wales
The Environmental Protection Act 1990 (EPA) prescribes the legal framework for waste in England and Wales. The current waste strategy for England is set out in the Waste Policy Review and Action Plan published by the Department for Environment, Food and Rural Affairs (DEFRA) in June 2011. There is a separate waste strategy for Wales.
The Waste (England and Wales) Regulations 2011 implement the WFD in England and Wales, including the Hierarchy. Guidance from DEFRA provides further advice on the application of the hierarchy supported by guidance on the legal definition of waste. Separate Regulations apply in Scotland.
Waste management activities in England and Wales are regulated by the Environment Agency (EA) through the Environmental Permitting Regime (EP Regime) set out in the Environmental Permitting Regulations 2010. It is an offence to undertake waste activities other than under the EP Regime, unless a waste exemption has been registered with the EA.
Activities which fall within the EP Regime where the WFD overlaps with other EU Legislation include landfill (regulated by the Landfill Waste Directive 1999) and waste incineration (regulated by the Waste Incineration Directive 2000).
Emissions to air, water and land from a number of industrial activities, including certain waste incineration plants, are governed by the EP Regime and require an environmental permit.
Planning Policy Statement 10: Planning for Sustainable Waste Management, published in 2011, sets out the hierarchy and waste priority order for waste management. Local authorities must take the hierarchy into account when considering planning applications.
The creation of the Private Finance Initiative/Public Private Partnership waste market
The private finance initiative (PFI) is a way of creating public-private partnerships (PPPs) by funding public infrastructure projects with private capital. Authorities who do not qualify or who opt out of the PFI route can set up a standard PPP arrangement.
Under PFI, a public body such as a local authority will contract a private provider to design, build, finance and operate a facility. The private contractor will typically be able to recoup their capital investment through charging the authority a service fee for its operation of the facility.
PFI is a structured process, with a standardised bid process and forms. There are strict EU requirements with regards to procurement, timescales and transfer of risk.
A standard PPP takes a similar form, but there is more flexibility with regards to the form the contract takes and sources of funding.
For more information about public private partnerships, see our separate Out-Law Guide.
Key risks in waste projects
Certain risks are common to all PFI/PPP projects in any sector, and will be relevant to waste management projects. They include:
- construction cost and time overruns;
- cost of finance;
- ground conditions and potential contamination - this risk is exacerbated in waste projects compared to many other infrastructure projects;
- title to property;
- performance standards;
- operating cost overruns;
- maintenance of the facility over its lifespan;
- changes in the law;
- supervening events, such as unpredictable 'force majeure' and relief events;
- termination of the contract, and providing compensation on termination.
Waste specific risks
In addition, there are numerous risks which apply specifically to waste operations and the waste management sector.
Site issues – where the PFI or PPP acquires the land, this provides a strategic advantage.
Environmental planning and consenting:
- timing of planning applications;
- application and appeal costs;
- adverse planning conditions and architectural enhancements;
- planning failure and funder protection
- environmental permitting risk;
- environmental and contamination risks;
- landfill tax risk.
Waste composition risks:
- exclusive rights to receive waste arising from the collection process;
- the role of waste collection authorities;
- kerbside collected recyclables;
- kerbside collected compostable waste;
- biodegradability and calorific value of input waste;
- waste minimisation vs. tonnage fees.
Risks to third party income generation:
- revenue from recyclables;
- sale of space capacity;
- electricity, heat and power costs;
- technology risk (whether the technology will work as designed);
- contingency arrangements (what if the waste facility is unavailable?);
- Renewables Obligation Certificates (ROCs) and carbon trading.
Other waste specific risks
- changes in the law;
- changes in technology;