On the 2nd February, the government published a white paper outlining its plans for Brexit, providing a level of certainty to the direction waste legislation is heading. The white paper has confirmed that the Government’s intention is to transpose current environmental regulations originating from the EU into UK law, once the UK has left the European Union. Since the publishing of this white paper, the Prime Minister has formally signed article 50 triggering the two-year process for our exit from the European Union and additional details regarding the Great Repeal Bill have also been released.
The UK will therefore still work towards achieving the targets set by the EU, such as household recycling rates of 50% by 2020. However, in the long term the UK Government may wish to supersede these targets with others to ensure its own agenda can be met.
This confirms previous speculation from individuals in the waste industry that all EU based regulations will be transposed into UK law after leaving the EU. This approach does seem to be the most rational option at present as UK government departments continue to operate under stringent budget limitations, limiting their ability to produce entirely new legislation for industry. These budget limitations, combined with the percentage of business conducted between the UK and EU, makes it beneficial to have equilibrium between UK and EU legislation so products and services are not negatively impacted by additional trade barriers.
What does all mean for the UK refuse derived fuel (RDF) market?
Using England as an example, DEFRA’s latest provisional figures for 2016 show that England alone exported 3,194,426 tonnes of RDF material between January – December 2016. Although this figure is high and exports of RDF are increasing year on year the statistics for RDF exports appear to show the export market is decelerating. This may be due to a range of factors:
- Overcapacity of European plant infrastructure: The sheer amount of waste infrastructure situated within many European countries compared against the levels of RDF produced by a plant’s home nation has led to net overcapacity and a reduction in gate fees. These reduced gate fees and costs of shipping RDF to the continent make it commercially unattractive for European plants to perpetually accept RDF exports from the UK.
- The rising level of UK waste infrastructure capacity: Year on year more plants are coming online which are also targeting these RDF streams taking RDF away from the export market.
Depending upon the deal reached between the UK government and the European Union, Brexit has the potential to further damage the RDF export market, highlighting the need for further internal treatment routes to be developed. If the fall in the pound continues, it may not be an attractive proposition for a waste exporter to ship their RDF to the continent. Another factor relates to direct trade barriers. If the UK does not remain part of the single market, trade tariffs could be imposed between the UK and EU which would add an additional cost and administrative burden when products are exported, specifically RDF. The present uncertainty within the UK surrounding the future of Brexit is also stifling investment. This is likely to mean large waste infrastructure projects will be put on hold due to companies/investors not being willing to take the financial risk.
Based on the factors above, the RDF industry appears to be heading towards a shift from large scale recovery plants and export of RDF to a series of local small scale recovery plants. These small scale local plants could potentially pose less of a risk to investors and company business models, increasing their attractiveness as uncertainty continues. This is likely to present a real opportunity to independent producers/brokers of RDF if they can successfully develop and operate commercially viable small scale recovery plants. These small-scale projects could also contribute to energy security.