Improving the Storage and Disposal Regime
Separate storage and disposal from recycling
In our discussion with MfE, industry, councils and other interested parties we have noticed a tendency to see issues relating to greater recycling of tyres in broadly the same light as issues relating to the need to ensure that an effective waste management regime for EOL tyres is put in place.
We agree that these issues are interlinked. But in our view there are risks in seeing them as all being part of a single problem. Instead we recommend that they should be handled separately, while ensuring that the approach taken to each one 'dovetails' with the other. Our reasons for recommending they be handled separately are that:
- at the very least, New Zealand needs an effective storage/disposal regime for tyres (as it does for any significant waste product)
- government has a well established role in New Zealand of ensuring, and sometimes paying for, waste management. But this is not the case for encouraging recycling
- the policy questions associated with the two issues are quite different
- the disposal regime needs to be robust to changes in the types of recycling that
occur, and the occasional failure in those recycling enterprises
- New Zealand's history with recycling suggests that sporadic failures in recycling ventures are likely (as with Rubber Technologies)
- It's therefore more sensible to design the two components separately, so that each can exist independently of the other
- providing an effective storage/disposal regime will help to address market supply problems.
Accordingly we discuss only changes to the storage and disposal regime in this section. Possible mechanisms for encouraging greater levels of recycling are discussed in the following section 'Encouraging greater levels of recycling'.
Approaches used internationally
It is frequently useful to review the sorts of policy approaches that are used internationally before deciding what approach should be adopted in New Zealand. We have identified a large number of policies used or being considered internationally, [A number of sources were drawn on to create this list, including: The JWGT submission in response to the EPHC discussion paper, 'Scrap Tires in the US - Overview 2002 Update', 'End Of Life Tyres - An Overall Picture Of ELTs Management In Europe', Environment Canada Website: http://www.ec.gc.ca/epr/en/stewardship.cfm, Industry Product Stewardship Business Plan (British Columbia).] and have grouped them under headings for convenience:
- General facilitation
- education, information, research and marketing strategies
- establishment of advisory bodies
- or encouraging the creation of advisory bodies by stakeholders.
- Broader measures to reduce supply
- improve tyre life (i.e. measures to improve tyre quality and education about matters such as correct inflation)
- reduce vehicle mileage (i.e. enhance public transport options)
- improve the retread rate.
- Enhanced regulatory requirements
- banning of whole tyres in landfills
- permit only shredded (not quartered) tyres in landfills
- specific storage standards for tyre mono-fills
- limits on maximum number of tyres in any one-tyre pile site
- limits on maximum number of tyres on any one property
- storage requirements for outdoor tyre piles (security; shielding from public view; pile size limits; berms; fire control provisions; fire breaks).
- Strengthened compliance mechanisms
- registration of all tyre collectors, shredders and tyre piles
- documentation of movement of tyres through 'supply chain'
- accreditation of scrap pile operators and processors
- heavy fines for illegal dumping
- promulgation of industry standards for storage and processing
- making it compulsory for retailers to accept scrap tyres (take-back schemes).
- Subsidisation of collection, storage, or
transformation
- tax credits
- low-cost loans
- central government grants
- payment per tonne of tyres recycled
- earmarked funds for site clean-ups.
- Increased industry responsibility
- voluntary or mandated industry bodies responsible for managing the system.
Core changes
The Government would clearly not want to implement all of these possible policies. A choice between a number of broad different approaches is required. But in our view there is a subset of core policy changes that are needed regardless of the broad policy approach the Government ultimately chooses to adopt.
Accordingly, before turning to a discussion of the broad policy options, this section discusses the core policy changes that in our view should be implemented as soon as practical.
Establishment of district plan requirements
It is essential that a clear set of policies in relation to private tyre piles be established in all regions where piles exist, or may occur. Without this, councils will inevitably struggle to control the activity.
The Government should therefore facilitate the establishment of tyre pile requirements for inclusion in local authorities' district plans. Once these requirements have been incorporated in their district plans, councils will be able to ban tyre piles in certain situations, and to set standards for their operation where they are allowed.
We therefore recommend that the Government draw up a set of guidelines that specify:
- the number of tyres a landowner can store on his/her property before a resource consent is required
- the maximum number of tyres allowed per tyre pile and per property
- location requirements (distance from boundaries, buildings and waterways)
- pile height, width, and length
- fire safety precautions (such as berms, sprinkler systems and fire breaks).
More effective mechanisms for policing and preventing tyre dumping
The illegal dumping of tyres must also be resolved regardless of the broad management approach taken to EOL tyres. It is true that the industry could take the steps necessary to prevent dumping, rather than the Government, if some form of extended producer responsibility scheme was pursued. However, we consider that it is desirable to strengthen the Litter Act regardless. This reflects the fact that the problem of dumping is not limited to tyres - it occurs with used cars, for example - and that it is sensible to ensure that dumping can be prevented regardless of any future changes in the broad management regime for EOL tyres.
Such strengthening could include the introduction of higher maximum penalties under the Littler Act, or the introduction of a new category of offence relating to the dumping of large quantities of material.
It may also be sensible for the Government to encourage industry initiatives to ensure improved behaviour by collection and transportation operators. For example the industry could establish a voluntary code of practice and award some form of 'quality mark' to those operators who agreed to adopt the code.
We therefore recommend that the Government initiate a review of the Litter Act with a view to implementing changes to strengthen provisions against the deliberate dumping of tyres and other large-volume waste products such as used cars.
Agreed responsibility for funding the clean up of tyres where no private party can be held responsible
It is almost inevitable that responsibility for removing tyres will fall on councils and central government in some cases. This reflects the fact that tyres may be dumped on council or government-owned land, and that unmanaged tyre dumps will sometimes occur when a firm becomes insolvent, in which case it may not be possible for councils to pursue costs from any private party.
However, we suspect that at present both councils and the Government are resisting taking responsibility for the cost of removing specific tyre piles for fear of creating a precedent, or more generally of encouraging the dumping of tyres on land for which the Government or councils are ultimately responsible.
Turning first to the concern of encouraging the dumping of tyres on council or government land, we do not see this outcome as likely. Unscrupulous operators or tyre owners already seem able to dump EOL tyres with little risk of being caught or fined. Accordingly their behaviour is unlikely to be affected by any government/ council policy over who will pay for removing tyres when no one else can be held responsible.
Turning to the concern of setting a precedent, we agree that this is a risk. However, simply avoiding paying for the removal of tyre piles is unlikely to be sustainable in the medium to long term. Accordingly we suggest that it would be better for both councils and the Government to agree a sensible approach now, in order to ensure that the precedent set when either party is first required to pay, is a sensible one. To that end, we would suggest that a key aspect to any agreement reached would be that both councils and the Government would pay for removal of a particular pile only once all efforts to pursue relevant private parties for those costs had failed.
Accordingly we recommend that a national policy be established on who will be responsible for meeting the costs involved in tyre removal, and under what circumstances.
Encouraging the use of mono-fills
It seems inevitable that a significant portion of New Zealand's EOL tyres will continue to be placed in landfills over the foreseeable future, given the current lack of commercially viable recycling options in many parts of the country. However, steady advancements in tyre recycling are being made internationally, and it is likely that recycling will become more profitable over time.
Given that tyres do not degrade to any significant degree, we therefore see logic in encouraging councils to store all tyres in appropriately managed mono-fills. This would allow tyres to be recovered and recycled at some stage in the future if there was an appropriate use for them.
We therefore recommend that the Government work with councils to encourage them to introduce a requirement for appropriately managed tyre mono-fills.
Impact of core changes
If these core changes were made we would expect a far greater proportion of New Zealand's EOL tyres to end up in authorised landfills or better managed private storage sites. This in itself would be a significant step forward from the current approach. But it will not address all of the weakness identified in the current regime:
- tyres may still be dispersed across a number of different sites, meaning that potential recyclers would still face insecure supplies and relatively high transport costs
- councils are still likely to need to ensure compliance and prosecute illegal dumping
- some individual landowners may still suffer dumping on their land and therefore be subject to high costs.
So further additions to the regime may be warranted.
Options for further enhancements
Specific policy changes to enhance the EOL tyre management regime could potentially be made in all of the areas discussed previously:
- general facilitation
- enhanced regulatory requirements
- strengthened enforcement mechanisms
- subsidisation of specific components of the regime
- increased industry responsibility.
Actions in each of these areas are not necessarily mutually exclusive. But nor will all possible combinations of different policies be sensible. Accordingly we have identified five 'packages' of policy measures we consider offer the most promise. Those packages are:
- further strengthening the existing regulatory regime
- government subsidy of collection, shredding and storage activities
- a take-back scheme
- an industry-led voluntary scheme
- a compulsory Expanded Producer Responsibility (EPR) scheme.
These options are shown in Figure 2 below.
Each of these options is first described, and then assessed in the sections below. We then finish the section by drawing conclusions about which options are likely to be the most appropriate.
Further strengthening the existing regime
Once the core changes discussed in the previous section have been implemented, there will be a clear specification of what behaviours are, and are not, allowable in relation to the disposal of used tyres. Any further strengthening the regime should therefore focus on enforcement.
In our view the only way that enforcement of the regime could be strengthened significantly would be to monitor the movement of EOL tyres through the supply chain more carefully. If implemented effectively, a monitoring regime of this nature would make it much more difficult for operators to dump or store tyres inappropriately.
An effective monitoring regime would require:
- registration and auditing of all sources
of tyres
- there are around 600 retail tyre outlets in New Zealand
- it seems likely that they produce most of the used tyres in New Zealand
- these outlets could be registered, and required to supply EOL tyres to accredited users only, and keep accurate records of the sources and destinations of all tyres bought and sold
- accrediting of all tyre collectors, processors and storage facilities
- for registration to be effective, all users of EOL tyres would also need to be accredited to ensure that their use of tyres was acceptable
- otherwise rogue collectors/processors would be likely to emerge.
An incentive-based regime
The current approach to EOL tyre management can essentially be described as a penalty-based regime. The activities that parties are, and are not, allowed to undertake are specified under legislation (albeit imperfectly at present) and any parties that act inconsistently with those requirements are penalised.
Under an incentive-based regime, this approach is turned on its head. Instead of 'pushing' tyres through the supply chain by specifying and enforcing allowable behaviours, an incentive-based regime would 'pull' tyres through by rewarding parties for undertaking the activities that are sought.
While incentive-based approaches can take a number of forms, the most appropriate approach in the context of EOL tyres is likely to be to subsidise the collection, transformation, and storing or tyres. Once an appropriate level for the subsidy had been determined, tyres would cease being waste products in the eyes of operators. While operators would still face costs to collect, transport and transform EOL tyres, those tyres would be worth more than they are now. So it would be in operators' interests to collect and transform them.
Under a regime of this type:
- the Government would tender the right for
one or more operators in each region to:
- receive and collect used casings
- manage the necessary storage/stockpiling function
- facilitate the availability of good casings for re-treading
- supply those casings not worth re-treading to accredited recyclers and end users on a commercial basis
- dispose of the remaining shredded product in authorised landfills
- each operator would be paid the agreed fee per tyre disposed of (evidence on the costs of collecting and shredding tyres suggests that this subsidy would need to be in the order of $1.50-$2.00 per tyre)
- an auditing regime would need to be established to ensure operators did not attempt to cheat the system.
A take back scheme
Under a take-back scheme, all tyre retailers would be required to accept (typically for no charge) any EOL or unwanted tyre.
Given the nature of the retail tyre industry, used tyres are typically already taken back from users when new tyres are fitted. But this is not universally the case. A formal take-back scheme would differ from the current arrangements in that tyre retailers would be required to accept any used tyres presented to them, regardless of whether they were selling new tyres to the person providing them, or whether they were tyres that the retailer had originally sold.
A voluntary industry scheme
Industry may well be better placed than the Government to arrange for operators to collect, shred and dispose of tyres. Under a voluntary industry approach, the Government would work with the tyre industry to develop a management approach that was suitable to all parties, but it would then be the responsibility of industry to run the system.
Under this approach we would expect:
- industry would enter into a voluntary agreement
- the industry would develop the arrangements, in consultation with the Government, considered most suitable to ensure that all tyres were collected, shredded and disposed of
- the industry would run that system once it had been put in place
- the costs of whatever arrangement was put in place would be recouped through payments from all industry participants (who would be likely to recover those costs through charging higher retail tyre prices)
- the Government would agree the arrangements proposed (including the proposed institutional arrangements and minimum shredding and storage/ disposal standards).
A compulsory extended producer responsibility scheme
Lastly, an increasing number of countries are establishing formal extended producer responsibility (EPR) arrangements. Under a compulsory EPR approach, the Government would pass legislation making the tyre industry legally responsible for appropriately disposing of EOL tyres, and providing industry members, or a representative body, with the powers necessary to undertake the task.
There are two broad ways an EPR regime could be implemented: creating an industry body and making it responsible for managing EOL tyres, or making each industry member responsible for managing its tyres.
Under an industry body approach we would expect:
- a formal tyre industry management body would
be established
- empowered by legislation
- responsible for the storage/disposal of all tyres in New Zealand
- participation in the scheme would be compulsory
- fees (and penalties if relevant) would be set in regulation
- the body would be funded through an industry-specific tax or some form of levy (probably on both imports and manufacture)
- the management body would be responsible for end-to-end management of the storage/disposal system
- the recycling options and/or disposal methods would be approved by Government
- the management body would be required to report on operations and financial performance
- the Responsible Minister would have the right to intervene in the event of breach of duties and if necessary disband the body.
Under an individual firm approach:
- each industry member (such as retailer, importer, or owner of the trade mark under which a product is sold) would be required under legislation to ensure its tyres were stored or disposed of properly
- the industry member would have to prepare a plan for the Government setting out how they would meet their requirements
- groups of industry members would be allowed, or encouraged, to band together into an association and manage their responsibility jointly (but participation in the association would be voluntary)
- each industry member, or group of members, would be required to report on operations and financial performance
- each member would fund the cost of their obligations as they saw fit, and any voluntary association would levy its members as it saw fit (so long as it did not breach any Commerce Act provisions).
Advantages and disadvantages of the different options
In this section we discuss the advantages and disadvantages of each option, and provide our assessment of which approaches are likely to be most suitable.
Any choice between broad policy options of this nature requires a degree of judgement: the choice cannot be made in a purely mechanistic way. But it is nevertheless important to have a clear sense of the criteria that will be used to guide the decision. In our view, the choice between these options should be based on an assessment of each of them against the following criteria:
- financial cost: all other things constant, it is clearly preferable to choose the solution that imposes the smallest overall financial cost on the government, consumers and industry
- equity: for an option to be politically sustainable, and to secure 'buy-in' from all relevant parties, it must be perceived by them to be fair
-
effectiveness at
encouraging/securing:
- increased levels of recycling
- reduced EOL tyre numbers
- more cost-effective storage and disposal techniques
- degree of compliance: the effectiveness of each of the options discussed will depend crucially on the extent to which the parties involved comply with the requirements placed on them
-
competitive neutrality: for
broader economic reasons, it is important to minimise the extent
to which:
- any firms within the industry are disadvantaged relative to their counterparts; and
- the tyre industry is advantaged or disadvantaged relative to other industries.
Further strengthening the existing regime
In our view it would be quite possible to put a system in place that tracked the movement of all EOL tyres through the supply chain, and to accredit all recipients of EOL tyres to ensure they used or stored them appropriately. By doing so, the Government could significantly increase compliance with the proposed regulatory requirements, and thereby reduce the level of dumping and use of private tyre piles.
However, we expect that doing so would be costly in terms of the time and resources required to set up and operate the system. Significant costs would be likely to stem from the:
- drafting and passing of the legislation required
- establishment of the systems and processes needed (such as reporting by retailers and accrediting users)
- time taken by operators to provide the necessary information
- government staff that would be needed to audit the information provided by operators.
While we have not been able to estimate the likely costs, on balance we expect that this option would be unduly costly, given the magnitude of the current problems and the costs of the other options available. In that regard we would note that these costs would be over and above the costs of transporting and transforming the tyres which occur under all options.
An incentive-based regime
We consider that an incentive-based regime could be very effective. It could also be implemented relatively quickly and at reasonable cost. No legislation would be required and the system could be used for all types and sizes of tyres, regardless of their source.
The key tasks and costs involved would be for the Government to:
- draw up a contract specifying the services it wanted delivered, and the associated terms and conditions; and
- call for tenders from operators interested in providing the service.
The disadvantages of this approach are that it would place additional costs on the Government - probably in the order of $6-8 million. It would also release the industry from responsibility for helping to address the problem, which is inconsistent with the Government's support for the principle of extended producer responsibility, as set out in the NZ Waste Policy published in 2002. By removing the responsibility from industry this approach would also reduce incentives on industry participants to develop more cost-effective solutions.
A take-back scheme
A take-back scheme on its own would be unlikely to solve the key problems we have identified with the current regime. Unscrupulous operators could still dump tyres, and the number and size of private tyre piles would not be affected. However, a take-back scheme could be effective if used in conjunction with a voluntary industry scheme, or as part of an overall tightening of the current regime.
The key disadvantages with a take-back scheme are that it would require legislation to implement, and that it would disadvantage the tyre industry relative to the other suppliers of EOL tyres (such as wreckers and car importers) unless a way could be found to include those other suppliers in the scheme, or subject them to equivalent controls.
A voluntary industry scheme
A voluntary industry scheme would impose only modest costs on the Government, whose involvement would be limited to ensuring that the approach developed by industry met its objectives, and reviewing the ongoing effectiveness of the regime once it had been in place for 2-3 years. Similarly, the costs of a voluntary scheme on the industry should be manageable (again, these costs are likely to be in the order of $6-$8 million). A voluntary industry scheme would also be consistent with the NZ Waste Strategy (2002) which promotes the general principle of making producers carry the costs and responsibility of managing the wastes caused by their industry.
The key weaknesses with a voluntary approach are that:
- it relies on all players in the industry being able to work together effectively
- not all EOL tyres entering the supply chain come from operators within the tyre industry. Accordingly some tyre sources outside the industry would need to be included in the scheme, which could make it harder to reach agreement, or they would have to be covered by other mechanisms
- the Government has no obvious sanctions to impose if things go wrong (other than implementing a different regime altogether)
- care must be taken to ensure that the competition policy provisions under the Commerce Act are not breached.
However, we consider that each of these weaknesses should be able to be managed to a reasonable level. Combining a formal take-back scheme and voluntary industry scheme would solve the first concern, as it would mean that all tyres were covered by the Agreement, regardless of their source. Similarly, we believe that it should be possible to avoid raising Commerce Act concerns by focusing on the level of contribution each party is required to contribute to the scheme, rather than attempting to make any agreement on price setting. With regard to working together, the tyre industry has shown an ability to work together in the past which suggests it should be able to run a voluntary scheme effectively.
A compulsory extended producer responsibility scheme
Lastly, a formal extended producer responsibility (EPR) scheme would have the advantages of:
- sheeting home responsibility for EOL tyres to the industry
- providing a complete and robust solution.
The key benefits of making the industry responsible for managing EOL tyres, are that it will give industry a greater incentive to find innovative ways to increase recycling, reduce EOL tyre numbers and to keep storage and disposal costs down. Again, a formal expended producer responsibility scheme would be consistent with the recent NZ Waste Strategy.
But a compulsory EPR scheme would be likely to be at least slightly more costly for both Government and industry than a voluntary scheme, as at a minimum it would require legislation to implement, and is likely to require more formal reporting and control mechanisms. If a formal industry management body were established, the Government would need to retain oversight of it, given that it would have a number of statutory powers.
Overall assessment of the options
None of these options is inherently better or worse than any other. All have strengths and weaknesses, and all could be made to work. The choice between them therefore needs to be based on the Government's objectives, and take account of the characteristics of the EOL tyre supply chain.
It should also be remembered that we have recommended that the following core changes be implemented regardless of which, if any, of the additional options for strengthening the regime is chosen:
- establishment of restrictions on private tyre piles in district plans
- strengthening the Litter Act to prevent tyre dumping
- agreeing funding for the clean-up of tyres where no private party can be held responsible
- encouraging landfills to accept whole tyres where shredding facilities are not readily available
- encouraging the creation of tyre mono-fills.
These steps in themselves will go a long way towards fixing the weaknesses in the current regime that we have identified. Any assessment of the costs and benefits of further action need to take this into account.
Given this, we consider that options A (further strengthening the existing regime) and C (introducing a take-back scheme on its own) are unlikely to be as cost effective as the remaining options, and should therefore be discarded.
However, the choice between the remaining three options is less straightforward:
- B: Government subsidisation of collection, transformation and disposal activities
- D: a voluntary industry approach
- E: a formal EPR regime.
On balance we would suggest that either B or D be pursued first, and E be adopted only if the more cost-effective approaches prove not to be effective. This reflects the fact that options B and D will be cheaper and quicker to implement, and that the core changes proposed will already have addressed a significant proportion of the concerns with the EOL tyre regime that we have identified. Put another way, we see logic in assessing the effectiveness of a lower-cost approach first, before turning to the more formal and costly approach of a formal EPR regime.
However, we accept that the success of a voluntary industry scheme is less certain than that of a formal EPR scheme, and therefore accept that option E may still be needed in the future.
Turning to the final choice between options B and D, it is difficult to reach a clear conclusion without taking account of the Government's broader intentions in the area of waste management and resource utilisation. If EOL tyres were a 'one-off' challenge we would recommend that option B be implemented, as there are less risks around its likely effectiveness. However, we understand that the Government is in the process of reviewing its approach to a number of waste products such as oil, used cars, and electronic goods. We would see Option D as making more sense if the Government decides that it is inclined toward the approach of steadily increasing the degree of producer responsibility across a range of sectors.
