7 Scheme alternatives and evaluation
7.1 What could be done?
On the basis of the evaluation of the existing TyreTrack scheme (Section 5.0) and a brief review of overseas initiatives (Section 6), it is clear the existing situation in New Zealand could be improved. Despite TyreTrack successfully raising awareness of the used-tyre problem in New Zealand and currently providing a mechanism for tracking over a million tyres per annum, there appears to be significant further scope for increased diversion of tyres from landfills and illegal dumping to viable end-uses.
The objective of this section is to look beyond TyreTrack, as it is currently structured, to future potential expansion and the policy framework necessary to meet stated government objectives as applied to tyres.
In this context, the following scenarios are evaluated.
- Retaining the status quo - no government financial or regulatory intervention, but continuing level of support for TyreTrack.
- An expanded scheme - financial and regulatory intervention to expand TyreTrack, develop and impose additional regulations (mandatory sign-up to TyreTrack, increase fines for illegal disposal, increased landfill charges and potentially an Advanced Disposal Fee (ADF)).
- Business-to-business partnerships - cease all government intervention (including TyreTrack) and leave it to the private sector to arrange sustainable disposal options. This would enable organisations in the private sector to establish partnerships to divert tyres from landfills - for example, between Bridgestone Tyres and Pacific Steel.
Of these scenarios, options 2 and 3 are both consistent with the currently preferred government policy option - general support/facilitation/education for private sector initiatives and intervention, where required, for sectors where "free-riders" have a competitive advantage compared to companies taking a responsible approach to product stewardship.
7.2 Evaluation framework
The above scenarios which could be applied to the tyre sector have been evaluated against:
- product stewardship government policy objectives;
- environmental and social outcomes;
- stakeholder opportunities and risks.
The objective is to inform government policy development, as it could potentially apply to tyres. The evaluation has included all of the product stewardship policy objectives, as listed in Section 5. These have also been expanded to include more general environmental and social outcomes and stakeholder opportunities than those listed by Ministry for the Environment as specific policy objectives. The specific additional criteria under each of these groupings are listed in Appendix D.
7.3 Evaluation
Appendix E provides an analysis of each of these options with respect to the stated government policy objectives and also additional social and environmental and stakeholder opportunity criteria. Note that the analysis focuses on the extent to which these three scenarios meet a set of objectives. There has been less analysis of the differential costs of implementing each of the scenarios.
The key findings of the analysis are as follows.
- The status quo (TyreTrack) falls well short of both the government policy objectives and the broader environmental and social considerations. This supports the earlier analysis of TyreTrack but, in this case, the findings are compared with the alternatives (fully-fledged regulatory and financial intervention, mandatory sign-up or private sector arrangements only).
- An expanded scheme, including enforced mandatory sign-up to TyreTrack and fiscal intervention to cover the real costs of tyre disposal, could be designed to meet all stated objectives.
- Leaving further developments to the private sector only would potentially meet some government environmental objectives (for example, diverting tyres to landfill) but not the broader government policy objectives including education and dissemination of information. A fully functioning private sector arrangement (for instance, between Pacific Steel and Bridgestone Tyres) would alter the existing competitiveness of the larger retailers vs. the smaller retailers who would not be able to cost-effectively collect and transport dispersed tyres into a central location. It would also potentially provide a competitive advantage to the tyre-user, in this case Pacific Steel, if the tyre material input was more cost-effective than current alternatives. These arrangements could be seen as a natural market response to raised environmental awareness amongst companies and customers, providing an advantage to those who are in the best position to find efficient solutions. (Also note that leaving the development of schemes to the private sector may not create a change in the overall "drivers" for responsible tyre disposal.)
The latter two scenarios are not, necessarily, mutually exclusive - an enhanced tracking scheme (through mandatory participation), more realistic disposal costs (through some form of fiscal intervention) and private sector arrangements could occur simultaneously and would all contribute to alleviating the existing problem.
The analysis of different options focussed more on the potential benefits than the costs. The costs of an expanded scheme with mandatory sign-up to TyreTrack are significantly greater (in respect to government support and enforcement) than private sector arrangements.
7.4 Application of the currently proposed policy to the tyre sector
On the basis of the evaluation completed of the different future scenarios and existing New Zealand practices, the currently proposed product stewardship policy could be effectively applied in the tyre sector. This statement assumes the tyre sector would be one of the product sectors where some fiscal and/or regulatory intervention was targeted to eliminate the risk of "free riders" not accepting responsibility for the environmentally acceptable disposal of EoL tyres.
The specific nature of the fiscal and/or regulatory intervention will need to be further developed in a more detailed economic analysis. However, the following initial conclusions can be made. They are based on the premise that central government, in this case the Ministry for the Environment working with other relevant government departments such as the Ministry of Transport, take the lead in further developing the product stewardship policy and implementing any fiscal/regulatory intervention.
Regulation to require mandatory registration to TyreTrack
Based on current experience (where only 30% of the market has voluntarily registered), the most effective way of achieving 100% participation in TyreTrack would be through legislation to make registration mandatory. This legislation could be developed as a first "test case" in the application of the currently proposed product stewardship policy. The regulation would need to be drafted to:
- enhance the administrative functions for the existing TyreTrack scheme;
- allow for mandatory enforcement actions and penalties if collectors/retailers did not register with the scheme;
- require all tyres to be reported through TyreTrack.
The legislation would need to be actively enforced. It is envisaged enforcement costs would initially be high but, as more retailers signed up, the costs "per tyre tracked" would gradually decrease. (Note that the requirement for mandatory sign-up could apply to the existing TyreTrack or a revised version of the scheme).
Actions needed to support regulations
The regulations requiring mandatory registration with TyreTrack, to be developed under the auspices of the currently preferred product stewardship policy, would need to be supported through:
- expanding the current administrative body within the MTA to support the expanded scheme;
- funds to assist with enforcement;
- working with local councils to develop ways to actively enforce registration.
Financial incentives to register with TyreTrack
The proposed policy and assumed regulatory intervention for the tyre sector would be most effective in achieving the stated aims (related to responsible tyre disposal) if there were significant incentives for both small and large retailers and collectors to register with TyreTrack. This situation would reduce enforcement actions and costs. At this stage, there is no financial incentive to register with TyreTrack, aside from potentially more efficient access to retailers (if you operate as a collector) or to collectors (if you operate as a retailer). The potential for large scale tyre procurers, for example, government departments and large corporations, to only buy from registered retailers would help with the business case for registering, but probably only for the larger retailers operating in these markets. For the small, local garage, with a pile of tyres accumulating in the shed until they are carted away by a local farmer, there is little incentive to register.
Further study should be carried out on the possible use of the proposed ADF. This is discussed in detail below as a means of generating funds which could be used to support administration costs.
Advanced disposal fee
The feedback received from the sector group and from some of the stakeholders consulted during this study supports the implementation of an ADF. This would operate in a similar manner to the Advanced Recycling Fee (ARF) being proposed in Australia. [URS Australia. 2005. Financial and Economic Analysis of the Proposed National Used Tyre Product Stewardship Scheme.] (Note that the term ARF was considered as a recommendation arising from this study, but discarded as it would not be currently accurate to refer to "recycling" tyres when the majority are being disposed of. ADF was seen as a broader term, potentially covering disposal at landfill and also alternative reuses.)
This ADF is an alternative form of "fiscal intervention" and, therefore, generates the same concerns in terms of working through the implications for the different facets of the tyre sector (that is further evaluation is required). It could be developed, with the regulatory and fiscal measures discussed above in specific relation to TyreTrack, under the auspices of the currently preferred product stewardship policy.
The ADF appears to have received support to date for two reasons. Firstly, that it would be relatively simple to administer as it could potentially be applied as a customs levy on imported tyres and at the Bridgestone and South Pacific Tyre manufacturing plants in New Zealand. Secondly, because it could generate funds that could be used to support development of higher-value tyre reuse options and, potentially, supplement transport costs to ensure these alternatives are economically viable. The disadvantage of this approach, however, is it does not send any direct market signals that would influence behaviours to avoid landfill disposal of tyres. If the manufacturers or importers pass on the additional ADF to the customer, there would be no incentive directly arising from the ADF for the retailers collecting the used tyres to select reuse options instead of landfill. One possible scenario would be for the ADF to be developed and applied first to help generate commercially viable, tyre-reuse options and then the Waste Disposal Fee (or WDF, discussed further below) would be developed and applied, once these reuse alternatives were in place.
To cover the full spectrum of tyres entering New Zealand, the ADF would need to be applied to new and used cars. Further analysis is required to investigate alternative options for application of a "tyre levy" to cars, for example, through Ministry of Transport regulations.
It is not possible to establish the appropriate value of an ADF as a result of this initial evaluation of options for government intervention in the tyre sector. Assuming the ADF was applied at $2 per tyre, approximately $8 million would be generated from the scheme. Allowing for approximately $400,000 in additional enforcement and administration costs (on the basis that sign-up to TyreTrack would be mandatory), there would be in the order of $7.6 million available for education and promoting alternative tyre end-uses.
Funds from the tyre ADF should be passed directly on to TyreTrack to be managed. Further study is required to identify the specific infrastructure requirements (expanding TyreTrack administration) and how funds would be allocated. It is recommended that the funds are directed towards enforcing the proposed legislation, plus research, feasibility evaluations and market testing of different New Zealand based tyre-reuse options.
7.5 Other supporting measures
In addition to specific regulatory and fiscal intervention to be developed under the auspices of the currently preferred product stewardship policy, the following New Zealand initiatives should be considered to address the issues of tyre disposal.
Waste disposal fee
The potential for a waste levy or WDF in New Zealand is currently being evaluated. A Ministry for the Environment paper on the topic entitled "Issues Associated with a Solid Waste Levy" has just been released (March 2006). This paper is the latest step in a series of studies and evaluations that have been completed, in association with the development and implementation of New Zealand's Waste Strategy, on the potential for a waste levy (eg, the New Zealand Institute of Economic Research's 2002 study "A Landfill Levy - Economic Principals and Implementation of a Waste Levy" and the Ministry for the Environment's "Landfill Full Cost Accounting Guide"). In addition, the New Zealand Business Council for Sustainable Development (NZBCSD) is starting an evaluation of a possible WDF for New Zealand. Both the Ministry for the Environment and the tyre sector representatives should consider contributing to this study. Findings from the study should be used to support the limited analysis completed for this study on the costs and benefits of some form of WDF.
To provide the price signals required to divert tyres from landfill, the most appropriate form of fiscal intervention is to apply a WDF at the landfill gate/point of entry. The retailer would have two options - pay a collector a high price for disposal at landfill or a lower price for an alternative use.
The major risk arising from a more accurate pricing of tyre disposal to landfill (which takes into account the externalities of landfilling) would be to exacerbate the existing illegal dumping problem. To avoid this occurring, the measure would need to be implemented alongside the mandatory membership of TyreTrack. In this way all tyres would be tracked from the retailer/collector and there would be no opportunity for illegal dumping. The Ministry for the Environment might also consider delaying imposition of the WDF until viable end-uses have been better established.
One possible outcome from imposing a tyre WDF in the current situation would be the gradual decline of small tyre retailers. It is possible these small operators would not be able to cost-effectively dispose of tyres to alternative end-users such as Pacific Steel. Their choices would be more restricted than the larger companies, and they might gradually become less competitive as they would need to continue charging the higher WDF price through to their customers. This potential impact supports the argument that alternative tyre end-uses need to switch from being a cost to a revenue source. One of the key government policy objectives is to maintain market competitiveness. As a result, the impact of any WDF on both small and medium retailers/collectors would need to be evaluated as part of the detailed scheme design. The WDF scheme could be designed to minimise impact on small operators and the mandatory registration with TyreTrack would help "even the playing field" by ensuring that potential end-users were aware of the locations of all available EoL tyres.
The proposed WDF should not necessarily impact on the economics of the collectors - they would continue to act as a middle-person, charging the retailer slightly more for collection than the disposal fee to cover their transport and shredding costs, plus a profit margin. This analysis is theoretically correct except that, in New Zealand, the collectors are an optional service which might be circumvented once the price pressure increases. Again, a well-designed scheme could mitigate this risk.
Controls on tyre disposal and tyre piles
There appears to be a level of support amongst sector group members for standardised requirements in regards to disposal of tyres to landfill and stockpiling. On the basis of previous studies, [MWH 2004 and Firecone 2004.] there is considerable information available on responsible stockpiling of tyres. Some local councils, for example Hamilton, have produced guidelines for responsible tyre piles. [www.mfe.govt.nz/publications/waste/tyre-storage-enforcement-action-jul04/html/page14.html.] The available guidance should be expanded to develop guidelines for landfill and transfer station operators.
Minimise illegal disposal - through the Resource Management Act, district scheme provisions and Litter Act fines
The Ministry for the Environment has recently completed a study evaluating the potential for the Resource Management Act (RMA) to be used to impose penalties on illegal tyre dumping. [MfE. 2005. Enforcement Action under the Resource Management Act 1991 to deal with unlawful storage dumping and disposal of tyres.] The study concludes that if there is a potential impact (for example, tyres stored near a river or creating a fire risk), then enforcement action can be taken under the RMA.
Potentially, district councils could develop bylaws preventing tyre dumps and, under the Local Government Act, could impose penalties for illegal disposal of tyres (note that district councils are already actively using RMA provisions to prevent illegal disposal of waste products, including tyres). The bylaws would, however, need to be specifically related back to one or more of a set of prescribed purposes (including preventing public nuisance, health and safety). Based on anecdotal evidence collected during this study, it is likely that local government authorities would use the Resource Management Act rather than the Local Government Act provisions to discourage illegal tyre dumping.
The Litter Act provides another vehicle for penalising illegal tyre dumpers and revisions of this act should be evaluated, potentially as either an alternative, or an additional, regulatory control to the Local Government Act bylaw development. We understand the fines applicable under the Litter Act are currently before the Select Committee as part of the Local Government Reform Bill.
Interpretation of the Resource Management Act
Based on feedback received during this study, in particular from Pacific Steel, the interpretation of the RMA to allow for prescriptive conditions on industrial material and energy inputs is hindering significantly high volume potential reuse of tyres. This does not seem to be a barrier overseas and we are unable to define any reason why it should be in New Zealand. Conditions for discharge permits under the RMA should focus on environmental emissions and this would allow the flexibility for industry to change their material and energy inputs while meeting specified acceptable environmental limits. As a result there would be a significant environmental gain (diversion of tyres from illegal dumps and landfills) and no environmental loss (emission conditions continue to be met). Based on discussions with Auckland Regional Council representatives, there is some support for including additional flexibility in the development of permit conditions, as long as "due process" is carried out to ensure that, as appropriate, the public have an opportunity to contribute. Rigorous effective monitoring programmes would also need to be in place to ensure that, despite changes in material and fuel inputs, the atmospheric emissions from the process were not significantly altered.
There is currently no provision in the RMA to balance different environmental trade-offs, for example, diversion of material from landfill compared to atmospheric emissions. We do not believe, however, that this bigger picture perspective is required for tyre burning. On the basis of overseas experience, decisions on the acceptability of atmospheric emissions from controlled, high-temperature tyre burning can be made based solely on the nature of the emissions themselves. In other words, trade-off against landfill space issues is not required to support the environmental acceptability of burning to provide an energy source.
Education
Significant educational material has already been developed by the Ministry for the Environment on the environmental issues associated with tyres (refer to the Ministry for the Environment website). The study stakeholders and the industry group have indicated, however, a need for further education about tyres.
- Customers: It is believed customers are not aware of the environmental and social hazards associated with tyres. Tyre waste is quite inert and New Zealand doesn't have large tyre stockpiles. Most of the population live in urban areas and are not exposed to the visual pollution on remote farms. As a result, customers are unwilling to pay a disposal fee and the retailers are hesitant to charge one, preferring to divert the tyres to farmers or dispose of them in a way that doesn't accrue any costs. Education about the tyre problem, potential solutions and individual responsibility would help convince customers of the need to pay a disposal fee and choose retailers who deal with their tyres in a responsible way. It could also increase demand for end-use products.
- Retailers: There is some resistance among small tyre retailers to participating in the scheme and recording EoL tyre destinations. Promotion of the scheme and its benefits among these retailers could help reduce this resistance. Customer pressure would play a role here too.
- Collectors and end-users: Increased participation from collectors and end-users would make the scheme more attractive to the retailers. Collectors and high-volume end-users would benefit from more comprehensive information about tyre flows. Mandatory participation in the TyreTrack scheme would provide more robust information for the end-use market and allow a more secure operating environment.
Infrastructure
As governments, manufacturers, retailers and consumers increasingly evaluate the environmental performance of different products, there is a growing need for a type of product or environmental organisation to overview and coordinate initiatives in this area.
In Australia, there is now a Product Responsibility Organisation (PRO) that provides "umbrella level" advice on product stewardship beyond different sectors. This organisation was established following significant analysis. [Environmental Protection and Heritage Council. 2004. Co-regulatory Frameworks for Product Stewardship - An Industry Discussion Paper.] Given the number of product stewardship-related issues that apply across different sectors, we support the establishment of this type of central educational and administrative organisation. One option that should be considered is the expansion of the current Environmental Choice organisation. Environmental Choice currently administers development and implementation of Environmental Choice product labelling in New Zealand. It is, therefore, well placed to work across different sectors assisting with the implementation of different product stewardship schemes. The role of this organisation could include:
- providing education on all aspects of product environmental performance - eg, the roles of consumers, retailers and landfills in adopting environmentally responsible tyre disposal methods;
- coordinating information exchange/learnings/best practice amongst the different sector product stewardship schemes - for example, TyreTrack and private sector cell phone takeback schemes (given the common objective to divert waste from landfill there would be significant common ground to be shared amongst participants on what works and what doesn't etc);
- carrying out research into life cycle impacts of different products in New Zealand and continue to develop specifications for product environmental labels;
- providing support for both government (eg, Govt3) and private sector product procurement initiatives designed to selectively purchase environmentally preferable products.
7.6 Other relevant feedback
The following points were raised repeatedly by stakeholders and sector group members during the study, and are relevant to the development of recommendations.
- There is a significant amount of goodwill generated by TyreTrack and the scheme could potentially be expanded to cover wider responsibilities such as education and research into alternative end-uses.
- There is wide support for the ADF, as long as it is used to support landfill disposal and the development of end-uses and is applied across the whole of the industry.
- Improvements to the current regulatory environment are strongly supported, including standardising tyre disposal, and encouraging or facilitating alternative end-use "start-up" companies.
- A large number of industry members would support enforcement of participation in TyreTrack.
