Where there's muck, there's brass. And, even better, plastic

With oil prices sky-high and landfill taxes rising, businesses and investors are finally starting to realise the value of what we throw away, says Zoe Wood
Zoe Wood
The Observer,
Sunday August 10, 2008

Modern life is rubbish - it generates about 100 million tonnes of it a year - and until recently not many firms wanted to get their hands dirty. However, soaring oil prices and landfill tax mean the economic benefits of recycling are starting to stack up.
Recycling has been a money-spinner for Disney's Pixar, whose film Wall-E features a robot left to clean up a litter-strewn and uninhabitable Earth after humans have abandoned it. But the studio has been accused of hypocrisy for launching a vast range of merchandise on the back of a film with an eco-friendly message.
Back in the present day, however, 'the value of waste is now being realised,' says Peter Mills, commercial director at New Earth Solutions (NES), who reports the extreme phenomenon of 'landfill mining' in the US. 'People are going back in - in New York they are excavating landfill. That's something I've got one eye on here.'
Mills's company is backed by what is thought to be the first retail fund purely focused on investing in UK recycling facilities. Launched last month with a target of £15m, the fund will provide an investment pot for the company, which works with local authorities and claims to be able to recycle up to 60 per cent of the waste dumped on UK doorsteps.
The UK generates around 100 million tonnes of waste a year from household, business and industrial users. This week, figures from the Office for National Statistics showed the household waste mountain decreasing slightly - from 25.8 million tonnes in 2006 to 25.6 million tonnes last year - with around 34 per cent of rubbish now recycled. That meant the volume of waste sent by councils to landfill also fell slightly, to 15.8 million tonnes from 16.9 million tonnes the previous year. Environment minister Joan Ruddock described the figures as 'good progress' but admitted 'we still have some way to go before we are performing at the level of some of our nearest neighbours' on the Continent. That is an understatement. The UK is still considered the dustbin of Europe, with only Greece sending more refuse to landfill.
Phil Conran, recycling development manager at Biffa - a major player in waste management along with Veolia and Sita - points out recycling has always had to pay its way, because firms are only prepared to collect what is cost-efficient to recycle. 'A key factor will be landfill tax going up,' he says. 'The key economic factors in recycling are the value of the materials recovered and the cost of landfill. Because the latter has been so cheap, there has been no financial benefit to the industry.'
However, Conran says this is changing: 'The cost of oil means the cost of producing with virgin materials has gone up. There is now value in keeping materials out of landfill, so the economic equation stands up.'
Landfill tax is currently £32 a tonne, but will increase by £8 a year until 2011. Experts say that, once the gate fees charged at landfill sites are added on top, the cost per tonne of waste could approach £100 - a levy comparable to that charged in Germany a decade ago. Germany sends around 20 per cent of municipal waste to landfill, compared with almost two-thirds in the UK.
Wrap, the government-funded agency, is keen to attract investors to the recycling industry. It estimates the sector is worth about £12bn but says that could reach £30bn within 15 years as UK and EU initiatives gather pace. Steve Creed, director of business growth at Wrap, says that once oil hit $75 a barrel - it is now around $119 - the cost of using recycled plastic was on a par with buying new resin: 'The value of the materials has started to have an impact on what people think, when five years ago it didn't.'
Wrap points to success in recycling plastic bottles - with 182,000 tonnes a year now collected, equal to a third of the bottles used in the UK. Part of that success must be linked to the raw material cost, with the price of HDPE (high density polyethylene) having doubled to £200 a tonne.
Some retailers have complained that the reprocessing part of the recycling industry has not kept pace with collection, meaning efforts to introduce environment-friendly packaging are wasted. Consumers , too, have been disappointed to discover that not all the plastic they conscientiously sort into boxes is reincarnated because of the high costs of extraction.
Creed says Wrap is now working on a strategy to address the problem. 'New technology is required to extract mixed plastics but it is close to being available. The challenge is to encourage investors to look at the sector. Waste has been seen as a 'dirty' area and more risky, but the market has doubled in size over the past few years.'
The rising cost of extracting raw materials has also made the industry pay more attention to the value of metals locked away in old TV sets and computer monitors. The Waste Electrical and Electronic Equipment (WEEE) Directive aims to stop hazardous electricals such as cathode ray tubes, which contain lead, reaching landfill. But David Aitken, managing director at GreenWorld Electronics, says consumers and businesses are confused about how best to conform - and this ignorance has, according to Greenpeace, resulted in toxic waste washing up in scrapyards in Ghana, China and India. The campaign group is lobbying manufacturers to introduce global recycling schemes that would shoulder the burden of recycling old items, a plan Aitken supports: 'When a manufacturer sells a piece of equipment there should be an automatic returns policy,' he says.
However, much of the activity in the sector is geared to tackling municipal waste, as this is more closely tied to EU directives - and because, as Mills says, 'if you go to a bank with a local authority contract, it is as good as a government bond'.
NES has a £50m credit facility with German bank Nord, but Mills says the current climate is making it harder for companies with new technologies to get cash: 'There is a shortage of money in the system. We had an advantage because we agreed our facility before the credit crunch hit.'