The waste crisis that China has inflicted on Australian councils will likely push up rates

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  • A perfect storm involving a crash in commodity prices and a rise in recyclable waste in Australia has led to the problems.
  • Some waste contractors are agitating for new contracts to reflect lost income from waste sales to China.
  • The Victorian Government steps in with funding to ensure rates don’t rise, for now.

  • Australian councils are under growing pressure to put up rates to cover the increased costs of kerbside pickup of recycled waste following an importation ban by China.

    The impact is varied across Australia with pressure on some local councils just starting, while others have contractors pushing for new contracts because the value of the recycled material they pick up has plunged.

    In Victoria, lobbying by local councils has produced a $13 million package from the state government to support kerbside collection of household recyclable waste, giving councils and contractors time to develop longer-term solutions, including renegotiating contracts.

    The urgency isn’t as great in the rest of Australia but the new financial year from July will see pressure from contractors to be paid more for removing recyclable waste.

    Before the China ban, many councils were paid a fee by recyclers for each tonne of household recycling. This fee was often used to offset collection costs. The material was then sold to China, where the waste was processed, at a higher price.

    Many recycling companies now plan to charge councils a fee to take recyclable waste.

    The Municipal Association of Victoria said many councils face unbudgeted costs of more than $120 per tonne and this means all Victorians could face a rate increase above the state-imposed rate cap.

    The association calculates the cost implications raised by recyclers represent a rate increase for affected councils of between 1.1% and 2.5% on top of the 2.25% state rate cap.

    A perfect storm

    “The current situation is a perfect storm resulting from a crash in commodity prices, an increase in recyclable materials collected, and more than a decade of underinvesting Sustainability Fund money by successive state governments into our waste and resource recovery industry, amongst other factors,” Rob Spence, CEO of the Municipal Association of Victoria, said.

    Australia produces about 64 million tonnes of waste, or about 2.7 tonnes per person, according to government estimates for 2014-15. About 60% of that is recycled in some form.

    China’s Ministry of Environmental Protection in July last year filed a notice to the World Trade Organisation advising that low grades of recovered mixed paper, textiles, plastics and some metals would be banned from import.

    The ban, an extension of China’s Operation Green Fence policy to prohibit the importation of unwashed and contaminated recyclable materials, came into effect in January, barring 24 categories of solid waste, sending already weak prices for recyclable material to rock bottom and making some materials unsaleable and ultimately destined for landfill or for stockpiling.

    Last year China created what it called the National Sword program to stop smuggling of foreign waste. China now says this flow of waste has seriously polluted its environment. It wants its industry to deal with its own waste rather than process the world’s.

    More than 20% of Australia’s entire annual trade is with China.

    Lily D’Ambrosio, Victoria’s Minister for Energy, Environment and Climate Change, said recycling is ultimately a matter for local councils.

    “We’re stepping in to help councils and industry affected by China’s new import rules,” she said. “This is about protecting jobs and ensuring Victorians have confidence to continue recycling.”

    Councils, recyclers, collectors, state government ministers, and the Department of Environment, Land, Water and Planning have been meeting. The same is happening in NSW.

    All agree that investment in the recycling industry is needed to help strengthen the waste collection system, and protect jobs and the environment.

    Pass on the costs

    Spence at the Municipal Association of Victoria expects the state’s funding will help cover part of the increased costs being imposed on councils by the recycling industry until June 30.

    “This will assist councils to avoid withdrawing funds from other essential community services to pay the increased recycling fees,” he said.

    “However beyond 30 June, affected councils will need to pass on the new costs imposed by the recycling industry to residents through the waste management charge that appears on rates notices or through the rate for those councils without a waste charge.”

    Councils in New South Wales contacted by Business Insider report no urgency in lifting rates to cover the increased cost of picking up recycled material from yellow topped bins at the kerbside.

    However, Local Government NSW (LGNSW) said China’s strict application of rules about contamination in material sent for recycling does have implications for council kerbside collections and recycling in the state.

    “The local government sector is currently working closely with the State Government and EPA (Environmental Protection Agency) to develop a multipronged approach managing the impacts of this fundamental change in commodity markets, and with the Federal Government through the national peak body – the Australian Local Government Association,” said a LGNSW spokesperson.

    “The domestic waste management charge is set by councils each year on a cost recovery basis. While it appears on a rates notice, the charge is separate from rates and thus not subject to the rate cap set by the Independent Pricing and Regulatory Tribunal.”

    This means the council charge for waste can increase without approval from the regulator but LGNSW said higher prices won’t solve the recycling problem.

    Councils don’t need approval

    “The clear long-term solution is the need to develop onshore processing capacity for recycled materials and to encourage their use as part of a circular economy; a move which may require the fast-tracking of approvals and licences for material sorting/reprocessing and remanufacture, granting resource recovery exemptions where possible and within environmental constraints,” the LGNSW spokesperson said.

    “Equally important is the need to remove barriers to the use of products with recycled content, to improve packaging standards to reduce the contamination caused by composite packaging, and to encourage behavioural change around recycling through informed procurement and greater community awareness.”

    The City of Sydney is in discussions with Visy, which contracts to do the city’s recycling, to assess whether China’s ban on imported recycling waste will have a long-term impact.

    A City of Sydney spokesperson said Visy advised that yellow bin waste collected in the city is mostly reused locally.

    “Up until now, the state and federal governments have left recycling to the market,” they said.

    “As exportation is often a low cost option, this has led to limited investment in recycling infrastructure in Australia.

    “This situation highlights the need for greater investment in local recycling infrastructure, particularly to process glass, plastics and electronics.”

    The contractor for North Sydney Council is URM. The waste management company also has a number of contracts with Sydney north shore councils.

    “North Sydney Council does not have any ownership to the recycling items collected,” a spokesman said.

    “URM deal directly with the MRF’s (Material Recycling Facilities) that trade/sell the recycling to China.

    “The situation in China is not affecting our Council at the moment, but it may in the future.”

    The City of Melbourne said its recycling contractor, SKM Recycling, has not approached the council regarding any change to the current contract service or rates.

    “In the short term, we are not expecting an increase in our costs for pickup of recyclable material,” a council spokesperson said.

    Sydney’s Randwick Council said the decision by China has had more of an impact on Victoria, due in part to their lack of processing facilities and therefore their greater reliance in exporting to China.

    “In NSW, there are still processing facilities in operation and council has not been advised of any change to their viability,” the council said.

    For waste paper, the annual waste paper import in China reached 28 million tonnes in 2017 compared total waste paper consumption of 78 million tonnes in China.

    In January this year, waste paper imports fell by 90% because of the ban. The ban is not for all waste paper, just for a certain grade. Higher quality paper — that which has been processed well to remove impurities — still gets through.

    Industry analysts believe that waste paper imports will trend upward again as countries adjust to the higher quality requirements by doing more processing in Australia before exporting.

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