Reality stranger than fiction

Today sees a guest post from Alex Serpo, editor of Inside Waste, Australia's leading waste journal.

It is presented unedited (other than to sort out hyperlinks), but before we present the article, some background.

The key piece of information required for the story is that New South Wales has landfill levy in the order of $95/tonne. Neighbouring state Queensland has a landfill levy, but it was set at $0/tonne when Campbell Newman was voted into the Queensland government earlier this year. Finally, at 800 km away, Sydney is not close to Queensland.

So here goes Alex. After Alex, some of my opinions.

Reality stranger than fiction 

In June, Inside Waste's satirical column, Wasted Space, wrote that if the disparity in disposal cost between Queensland and NSW continues to rise, it might be economical to build a giant garbage chute straight from Sydney to SE Queensland.

Campbell Newman's landslide

At the time we dubbed it 'Campbell Newman's landslide' and plainly intended it as a joke. As it turns out, reality is stranger than fiction, with industry sources now saying as much as 500,000 tonnes per annum may be heading north.

In an even stranger twist, it turns out at least one (and probably several) Sydney landfills are mining their voids and shipping waste north - liberating valuable airspace and taking advantage of a price window that may close soon.

And the story gets even thicker - last week the NSW EPA confirmed thousands of tonnes of contaminated soil from Sydney's high-profile (and sustainable?) Barangaroo development is heading north. Perhaps it might be cheaper (and safer) to build that chute/conveyor/railway after all.

In a rare showing for waste and resource recovery, this issue has gained serious media attention. Both commercial media and the ABC have repeatedly run the story, putting intense pressure on NSW Environment Minister Robyn Parker.

This leaves two questions for waste and resource recovery. Firstly, 'what will the government do' and secondly, 'will it be good for industry?'

Let's start with the first question. Clearly the onus here is on the NSW government, with the Newman government standing firm on its 'no waste levy' promise, which Queensland Minister Andrew Powell has repeatedly described as "job destroying".

Queensland has limited options anyway, because under the Constitution it has no ability to restrict the movement of goods between states. Meanwhile, the NSW government has just completed a levy review, giving it window for change. This puts the ball firmly in Parker's court.

Obviously, the easiest thing will be for Parker to simply reduce the waste levy. But to completely put a stop this to problem, she may have to reduce it by as much as $40 per tonne from its current $95.20. After all, if businesses can make even $1 per tonne, why wouldn't they?

But given that much of the waste levy in NSW goes directly into consolidated revenue, any reduction will leave NSW Treasury spinning. Of course, it is already losing money from an already strained budget due to the waste heading north, so the question surely taxing Treasury's financial boffins is at what point they maximise revenue inflows.

In 2009-2010, the NSW Local Government and Shire's Association estimated the landfill levy income at $295 million, with approximately 55% hypothecated.

To take a punt, the most likely outcome will be a small reduction in the NSW levy - although other options like targeted exemptions may also be possible.

Parker's office has said an announcement on the issue will be released "shortly" (read: probably on Christmas Day to reduce media coverage). Whatever the outcome, it's unlikely the industry will get what it wants.

Voices in the sector have said the best policy would be consistent, national waste levies that are hypothecated back to industry. Both South Australia and Victoria provide a model for this, where much lower levies provide much higher levels of resource recovery.

While state governments control most environmental legislation, this is just another example of poor co-ordination and communication between states - even while both NSW and Queensland have conservative governments. It's far from the only example - think of waste definitions or conflicting policies on waste to energy.

Potentially, this problem of waste movements interstate isn't going away soon. After all, even if Queensland was to enact a waste levy, the Northern Territory isn't that much further away.

States (and territories) need to learn to cooperate to create an effective policy landscape for best practise waste management and optimum resource recovery. This should be seen as an opportunity to reinvigorate the National Waste Policy agenda, which has drifted a little since former federal Environment Minister Peter Garrett was shifted to education.

Otherwise, industry will be left playing a game of 'drive the waste through the legislative loophole' just to stay competitive.

My two bob worth

On the face of it, this shows the idiocy of different states legislating differently, and the race to the bottom which results. Levy too high leads to perverse outcomes, so you reduce your levy to overcome it. To sort this all out we need state governments to unify, harmonise, yield to the logic of the waste market. It's a story that has been told in Europe, America and so on.

Or is this the story?

I'd suggest an alternative. Waste is an unbelievable opportunity, and the reason we end up staring at this abyss of regulation not working is because we see it as a problem to be regulated. And the industry, loaded up with its huge investments of trucks and tips and massive capital focus, has become a seething mess of rent seekers. The industry will do all in its power to make the waste industry look just like it always has. A game that can only be played with deep pockets. In this regard, there IS no waste market, at least not as commonly understood. 

So I'd suggest that the story is whole lot more interesting. It is a story about how clever disruptors could tear the industry apart. They are probably already moving. And so, when the "big boys" (and it is invariably a man's game) are shirt-fronting each other over which subsidy they can screw out of the government, some upstart is coming in and rewriting the game.

So there you have it. I don't have anything to back me up here other than the belief that this looks awfully like computing in the 60's (70's maybe?). Back when computers were huge, expensive, and needed government contracts (such as defense) to support them. Then along came the PC, and the game flipped. The old players were swept aside, and the industry shifted. It continues to shift, and now that the opportunity is unleashed, continues to reverberate around the world.

So perhaps reality is stranger than fiction. I suspect it's going to get a whole lot stranger yet.