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Recycling: Cost Benefit Analysis

Executive Summary

1 Introduction

2 Approach to Analysis

3 Waste Volumes

4 Benefits of Recycling

5 Markets and Value of Materials

6 Costs of Recycling

7 Net Benefits of Recycling

8 Conclusions

Annex 1: Landfill Assumptions

Annex 2: Willingness to Pay Survey

Annex 3: Analysis of Willingness to Pay Results

5 Markets and Value of Materials

The value of the different materials collected represents the final component of value of recycling. In this section we outline the markets in New Zealand for the different products and provide estimates of the value.

5.1 Plastics

5.1.1 Quantities

An estimated 35,442 tonnes of plastics were recovered in New Zealand in 2004 of which 79 per cent (28,004 tonnes) was packaging.⁴² Projections have been made by Plastics New Zealand of future recovery rates for packaging plastics. Total quantities recovered were regressed against time, the previous year’s recovery rate and actual or projected packaging recovery to project future plastic recovery rates. These suggest that approximately 41,000 tonnes will be recovered in 2007 (Figure 6).

The material collected is divided into different plastic types as shown in Table 20 and into sources: industrial (64 per cent)⁴³ and post-consumer domestic (36 per cent).⁴⁴

Table 20: Total quantities of plastics recovered by material type

Source: Plastics New Zealand (2005) Sustainable End-of-Life Options for Plastics in New Zealand.

5.1.2 Markets

Most of the pre-consumer industrial waste is scrap and products that were out of design recycled in-house.

Plastics are recycled in a number of plants in Auckland and one in Otaki. Values of materials have been obtained from recycling industry representatives and from Plastics New Zealand. The results are shown in Table 21.

Table 21: Values of plastics in end-use markets

5.2 Paper

The most significant markets for paper in New Zealand are Carter Holt Harvey’s mills at Penrose (Auckland), Kinleith and Whakatane. In addition there are smaller local markets for the production of moulded fibre (egg cartons and apple trays) and for hydro-seeding.⁴⁵ There is no real market for office paper in New Zealand, separate from that for lower value grades. Values of materials are based on long run US (New York)⁴⁶ estimates of approximately $50/tonne for mixed paper and $140/tonne for white office paper (Figure 7); this is translated to New Zealand values using an exchange rate of US$0.6:NZ$1 and converted to metric tonnes. We have used a simple assumption of $90/tonne for all markets in New Zealand.

Table 22: Size and value of recycled paper markets

1 http://www.chhwhakatane.com/WSMApage/0,1585,14107-1,00.html

2 http://www.fullcircle.org.nz/

3 Covec estimate.

Source: Bureau of Waste Prevention, reuse and Recycling (2004) Processing and Marketing Recyclables in New York City. Rethinking Economic, Historical, and Comparative Assumptions. Rethinking Economic, Historical and Comparative Assumptions. New York City Department of Sanitation ww.nyc.gov/html/nycwasteless/html/recycling/waste_reports.shtml#mkts.

5.3 Glass

Glass is manufactured in New Zealand in a single plant in Penrose, Auckland operated by O-I New Zealand. Approximately 95,000 tonnes of glass is recovered currently of which about 70,000–80,000 tonnes is used by O-I.

The value of materials in glass manufacture is based on the costs of manufacturing glass from alternative materials. Recently O-I reduced the price paid for cullet from $92/tonne for all types of glass to $75/tonne for coloured glass and $10/tonne for clear glass.⁴⁷ An analysis of the costs of manufacture of glass from alternative raw materials versus cullet was used to confirm that the revised price paid for coloured glass was close to the costs of manufacture from raw materials.⁴⁸ For clear glass, the market price is set so that supply is constrained and the price paid is well below the value of the material in glass manufacture.

For cost benefit purposes, the market value for clear glass is assumed to be the value in recycling at O-I for all its consumption. The difference between the current price paid and this value is regarded as a surplus to O-I.

O-I New Zealand intends to invest in a third glass furnace which could increase its ability to recycle green glass by approximately 50 per cent above the existing capacity (to more than 100,000 tonnes per annum). This furnace was scheduled to become operational in 2007 but has now been deferred for a minimum of twelve months due to capital cut-back across the O-I Group worldwide.

In analysis we assume there is a market for coloured glass in bottle manufacture in Auckland equal to 70,000 tonnes per annum and for clear glass equal to 10,000 tonnes per annum, and both are valued at $75/tonne. All glass collected above these amounts is valued at zero.

5.4 Metals

Aluminium and steel are collected and recycled. The value of the collected materials is determined by the international prices of the raw materials as stated on the London Metal Exchange. We use the following prices for these materials based on long run averages rather than current relatively high prices:

• $1700/tonne for aluminium;

• $120/tonne for steel.

5.5 Organics

Organic waste sent to landfill consists largely of food scraps and domestic garden material. Of household refuse, 40–50 per cent is organic material, resulting in approximately 400,000–430,000 tonnes being landfilled per year. Commercial organic waste is generated from two main sources: restaurants and the food industry, and agriculture. The majority of the green waste created by the agricultural sector is already recovered whereas most of the kitchen waste generated in the food sector is not, although there are several small scale operations that recover food waste from commercial kitchens. The total amount of domestic and commercial organic waste sent to landfills is estimated at 760,000 tonnes.⁴⁹

Options for recovering a greater proportion of organic waste include having separated kerbside collection. Such collections can have a number of different design features including using bags or mobile bins for collection, frequency of collection and which specific types of organic waste are collected and how they are treated. For instance, different climactic conditions may mean different TAs may need to treat the collected material differently. The prevalence of multi-tenanted dwellings in certain locations may also influence the types of collection methods.

The price of compost in the small-scale domestic market is around $30–$50 per tonne, whereas in the larger-scale agricultural market the price may be as low as $10–$15 per tonne. These prices are sufficient to ensure the sale of the current quantity of compost produced. However, industry estimates suggest that if the price paid in the agricultural sector were reduced to $5 per tonne, the resulting demand would be sufficient to utilise the compost that could be produced if all of the country’s organic waste was collected. The price the agricultural market is willing to pay is determined partly by the additional costs that would be incurred in the process of spreading compost over the ground. Spreading compost can be costly, requiring specialised machinery (ie, spreader trucks or spreaders pulled behind tractors) and labour. These costs are estimated to be in the vicinity of $15–$20 per tonne.⁵⁰ Also relevant to the returns from compost is that one tonne of green waste converts to just over half a tonne of compost and the ratio of green waste to food waste used in the production of compost is 3:1. Existing commercial composting operations also charge dumping fees for green waste. These fees will be some proportion less than the local landfill charges.

5.6 Construction and demolition waste

Approximately 850,000 tonnes of construction and demolition (C&D) waste is disposed of in landfills. A large amount of C&D waste is also disposed of in cleanfills. Cleanfills are waste disposal sites that accept only inert wastes, such as concrete, bricks and natural materials. Because these materials do not have an adverse effect on the surrounding environment there is no need to control for leachate or hazardous substances. The total amount of material sent to cleanfill is estimated at 2.7 million–3.7 million tonnes, with a large proportion likely to be natural materials, ie, soil, clay, stone and rock.⁵¹ MfE estimates that, in addition to waste disposed of in landfills and cleanfills, around 1 million tonnes of C&D material is recovered.⁵²

Wood (38 per cent), and concrete and rubble (25 per cent) constitute the main categories of C&D waste sent to landfill.⁵³ Other items include plasterboard, metal, expanded polystyrene, window glass and various salvageable items, such as windows, doors, fittings, etc. Given the relatively small proportion of these materials, this analysis focuses on wood, concrete and rubble.

Timber and wood fibre sent to landfill consists of 450,000 tonnes with an unknown quantity sent to cleanfills. Wood can be used for a variety of different purposes, ranging from low-quality, temporary work like survey pegs and boxing for concreting to high-quality, permanent uses like floor boards, beams and other architectural features if the recovered material is native hardwood. Along with the well established market for recovered native timber and second-hand sales of pine timber for construction, renovation, craft work, etc, untreated timber off-cuts can be chipped into mulch and used in landscaping, used as firewood in private residences or converted into heat energy through larger scale combustion.

Wood from C&D waste competes with forestry and manufacturing wood waste as an input for industrial furnaces and boilers, particularly in pulp and paper mills. The value of wood and wood products used as fuel is approximately $108 per tonne.⁵⁴

Concrete and rubble can be crushed and used as aggregate for roading, pavements and drainage and can be used as a base material to rehabilitate quarries and construction industry uses, such as filling foundations and underground pipework. Based upon charges for sorting mixed C&D waste that is delivered to recycling centres, the cost of sorting concrete is around $7 per tonne. The cost of preparing the concrete and rubble for crushing, which typically requires pulverisors and excavators to break the material into smaller pieces suitable for crushing, is around $4 per tonne. The cost of crushing concrete is around $8 per tonne.

However, while using crushed concrete as aggregate is a viable alternative to natural aggregate in Auckland and Waikato regions, this is not the case in all areas. For instance, because of the plentiful supply of river gravel in the Canterbury region, extraction is often encouraged to reduce the risk of flooding. This gravel provides a lower-cost substitute for recovered concrete and rubble for aggregate. Thus, diverting concrete and rubble from landfill and cleanfill in areas such as Canterbury could incur additional costs as either the concrete or river gravel would need to be transported to other areas or alternative flood protection measures would need to be undertaken. Consequently, the price for aggregate is relatively localised. Site specific factors, including the charge for accepting C&D waste, which depends upon local landfill charges, also influences the viability of C&D recovery.

5.7 Tyres

Approximately four million tyres require disposal annually. Roughly 75 per cent of these are landfilled, 10–15 per cent are re-used in some form and the rest are illegally dumped.⁵⁵

Potential alternative uses for tyres include use as an energy source, material recovery (ie, rubber, which can be used for sports arena and road surfaces, and steel), silage covers on farms or for civil engineering purposes, such as in retaining walls, anti-erosion measures, etc.

Of these re-use options, the most appropriate and least-cost method of dealing with used-tyres is likely to be as a source of energy, specifically as fuel for cement kilns. This is because it is unlikely that there would be sufficient demand for other uses, such as rubber recovery for flooring and sports arena surfacing, to use all four million that are created each year. Additionally, the temperature at which tyres would be burnt in kilns would minimise environmentally harmful emissions, the main by–products created from combustion being carbon dioxide and water. Whole tyres can be used for incineration, avoiding the costs of quartering or shredding, typically required before tyres will be accepted by landfills.

In addition to the value of tyres as a source of energy and the avoided landfill costs, (estimated cost of collecting, shredding, transporting and landfilling tyres is $1.50–$2 per tyre)⁵⁶ recycling tyres would reduce the costs associated with illegal dumping and tyre fires. Disposing of illegally dumped tyres is estimated to cost around $1 per tyre. In some instances, up to 60,000–80,000 tyres have been illegally dumped on both private and public property. A recent tyre fire in the Waikato took 16 hours to put out at a cost of $90,000, excluding the environmental costs associated with the emissions.

There are additional costs of switching to using tyres instead of coal for fuel: the one-off, capital costs relating to adjusting the kilns to accept tyres rather than coal, and any resource consent costs that would be incurred to allow alternative fuels to be used. These costs are not expected to be significant in relation to the ongoing fuel costs.

An alternative use for tyres is as an input into the roading surface bitumen. This practice is common overseas and provides a higher quality of bitumen than current petroleum based inputs. This process requires end-of-life tyres to be ground into granules, known as rubber crumb. This rubber crumb can be used to replace some proportion of the petroleum-based products used in the production of bitumen. Because the size of the granules required for this process are much smaller than for other uses, such as sports area floors, the costs of grinding are likely to be higher.

Using rubber crumb is more expensive than existing inputs and, although bitumen made with rubber crumb may have a longer life, it is not certain that this would be financially advantageous over existing production techniques.

5.8 Used oil

Approximately 65 million litres of oil are purchased each year. Roughly 40 per cent of this is consumed during use, leaving around 33–40 million litres of used oil that requires disposal. Of this used oil, 15 million litres is collected and delivered to Holcim Cement for use as fuel. A further nine million is used in industrial burners, processed into fuel oil or used for public road oiling.

This leaves 9–16 million litres of used oil which is unaccounted for. Uses for this include private road oiling and various agricultural and other private uses with some proportion being landfilled (for example, landfilled oil filters could contain up to 500 ml of oil) or dumped illegally. Because much of this oil may be used “productively” it may not be able to be collected even if more collection facilities or services were available. For example, workshops may use used-oil for their own burners or heaters to avoid expenditure on electricity, etc.

All additional used oil collected could be used at the Holcim Cement kiln, and potentially at other industrial burners, such as pulp and paper mills or the Golden Bay Cement kiln. However, to be used as a source of energy, these furnaces are likely to need a relatively constant supply of used oil. This is because of the technical requirements of industrial furnaces, which need to be set up to receive a specific mixture of different fuels. The value of this oil is around $0.17 per litre.⁵⁷

Potential users of any additional used oil collected include those industrial activities that operate large scale furnaces, such as the two cement kilns described above and the various pulp and paper mills, for instance Kinleith, Kawarau, Whakatane, PanPac (Napier) and Winstones (Ohakune).

5.9 Summary of values

The values used in analysis are shown in Table 13. Costs of getting materials to market are estimated in the next section.

Figure 8: Value of recovered materials

1 See Table 21; 2 Clear glass is assumed to have a value of $75 despite its $10 market price.

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