ETS Operational Policy – Landfill
Exemptions
FINAL REPORT

15 February 2016
ETS OPERATIONAL POLICY – LANDFILL EXEMPTIONS
FINAL REPORT – PREPARED FOR
THE MINISTRY FOR THE ENVIRONMENT

Author:
Sam Bridgman and Tim Hewitt
Project manager:
Bruce Clarke
15 February 2016
Published in May 2012 by the Ministry for the Environment
Publication No: CR 123
Sinclair Knight Merz
Level 3, 86 Customhouse Quay,
PO Box 10-283
Wellington, New Zealand
Tel: +64 4 473 4265
Fax: +64 4 473 3369
Web: www.skmconsulting.com
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Knight Merz Limited. Use or copying of this document in whole or in part without the written
permission of Sinclair Knight Merz constitutes an infringement of copyright.
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agreement between Sinclair Knight Merz and its Client. Sinclair Knight Merz accepts no liability or
responsibility whatsoever for or in respect of any use of or reliance upon this report by any third
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SKM ETS Landfill exemption study
Contents
1.
Introduction
1
2.
Landfill case study selection
4
3.
Case studies
6
3.1.
Victoria Flats Landfill
7
3.1.1.
3.1.2.
3.1.3.
3.1.4.
Cost impact of the ETS
What will happen if the landfill operator is not issued an exemption?
What will happen if the landfill operator is issued an exemption?
Conclusion and recommendation
7
8
9
10
3.2.
Pongaroa Landfill
10
3.2.1.
3.2.2.
3.2.3.
3.2.4.
Cost impact of ETS
What will happen if the landfill operator is not issued an exemption?
What will happen if the landfill operator is issued an exemption?
Conclusion and recommendation
11
11
12
13
3.3.
Russell Landfill
13
3.3.1.
3.3.2.
3.3.3.
3.3.4.
Cost impact of ETS
What will happen if the landfill operator is not issued an exemption?
What will happen if the landfill operator is issued an exemption?
Conclusion and recommendation
14
14
15
15
3.4.
Waiapu Landfill
16
3.4.1.
3.4.2.
3.4.3.
3.4.4.
Cost impact of ETS
What will happen if the landfill operator is not issued an exemption?
What will happen if the landfill operator is issued an exemption?
Conclusion and recommendation
17
17
18
19
4.
5.
Exemption criteria
20
4.1.
4.2.
4.3.
4.4.
20
21
22
23
Annual placement rate
Transport distance to nearest modern landfill
Deprivation Index
Recommendations
Conclusion
24
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1.
Introduction
The Ministry for the Environment (MfE) has engaged Sinclair Knight Merz Limited (SKM) to
provide advice on the implementation of the Emissions Trading Scheme (ETS) to the waste sector.
Specifically:

whether the cost that the ETS will impose on landfills will result in negative environmental or
social outcomes that could outweigh the benefits for particular communities and therefore
exemptions are needed

if there are any criteria that could be used to define those communities where exemptions are
needed.
To complete this analysis SKM was asked to identify and agree on four landfills to use as case
studies. The case studies identify (and quantify where possible) issues that affect the landfills,
including the following:

ability to pass costs on to people generating waste for disposal, and where the cost falls, if this
is not possible

the level and impacts of compliance costs including administration and reporting on emissions

the viability and costs of transport and/or alternative disposal if the landfill is closed.
For each landfill studied a discussion is provided that draws together the findings and provides
recommendation on the case for an ETS exemption.
If ETS exemptions are recommended for any of the landfill operators that are studied, then
common elements between those landfills are identified to use as possible exemption criteria to be
applied to landfill operations across all New Zealand.
Costs and benefits
It is acknowledged that comparing the costs and benefits is not straightforward. In the case of the
ETS there is a national and global environmental effect that is being mitigated (benefit) but the
costs of doing this are currently to be incurred locally.
The benefit of the ETS is that it helps ensure an externality (GHG) is accounted for in a financial,
market-based system. The cost to purchase offsets (New Zealand Units (NZUs)) should encourage
Disposal Facility Operators (DFOs) to find the lowest cost abatement option. This could be through
one, or a combination of, the following actions:
SINCLAIR KNIGHT MERZ
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SKM ETS Landfill exemption study
1)
implementing LFG capture systems1 and/or
2)
applying for an Unique Emissions Factor (UEF) based on waste composition
(reducing material with Degradable Organic Content (DOC) entering the landfill)
and/or
3)
reducing the waste sent to landfill and/or
4)
purchasing New Zealand Units.
The scale and nature of a landfills operation may mean some of the options above are not feasible.
This is discussed for each case study.
The (negative) costs of the ETS include the time and resource (funds) required by councils to
administer the ETS requirements and source and purchase appropriate NZUs, as well as the effect
on local communities and how they may or may not adapt to the implementation of the ETS in nonfinancial terms (environmental and social factors).
If a landfill was exempt, the cost of the GHG emission would still need to be accounted at a
national level for as long as an international climate change agreement remains in place. Rather
than the local community shouldering the costs, central government would need to purchase the
necessary offsets. This would not necessarily be the lowest economic cost option for reducing or
mitigating GHG emissions from the exempt landfills at a national level.
This report provides generally qualitative commentary on the costs and benefits, rather than
presenting a formal weighted or financial net cost of the ETS on small landfills. Such an exercise
would rely on significant subjectivity and assumptions and could therefore be misleading.
However, based on the costs and benefits identified, the report provides a broad indication of
whether the costs may potentially outweigh the benefits.
Format of report
This report firstly outlines the screening criteria used for the selection of landfills to be case
studies, then presents the case studies, with identified costs and benefits, and finally discusses
possible exemption criteria.
1
The amount of gas that can be recovered through an LFG capture system depends on many variables
including the landfill’s age, depth, surface area, lining and capping materials and waste composition.
The capital and operational costs of LFG systems and potential uncertainties in gas capture volumes
means it is generally uneconomic for LFG systems to be implemented on small or medium landfills.
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SKM ETS Landfill exemption study
SKM would like to acknowledge the assistance given by Stu Clark (New Zealand Environmental
Technologies), Stefan Boroway (Queenstown Lakes District Council), Tracey Nikora (Tararua
District Council), Bruce Hows (Far North District Council) and Dwayne Pomana (Gisborne
District Council) with the landfill case studies.
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2.
Landfill case study selection
Four landfills were selected as case studies. These four landfills were identified by a process of
screening landfills from the 138 New Zealand landfills that SKM is aware of.
Firstly, all closed landfills were excluded. Then landfills that have, or are planning to implement,
landfill gas (LFG) collection systems were excluded as the implementation of the ETS is unlikely
to cause significant costs to the landfill compared with those that are unable or unwilling to
implement the systems. The remaining landfills were screened against five further aspects in order
to select four landfills that represent a mix of situations. These aspects were:

ownership
- private or public ownership. If a landfill is owned by a local authority they are more
likely to influence/engage with the community waste generators and run the landfill
as part of an overall waste strategy. A privately run landfill is more likely to be solely
focussed on landfill operations

geographic isolation
- if a landfill is near other landfills the effect of price increases as a result of the ETS
may be different than those in remote areas and ETS exemption could cause waste
flight. Landfills were classified as rural, semi-rural or municipal

placement rate
- the rate at which waste is placed at the landfill varies and is not always related to the
size and capacity of the landfill. It is important to have a mix of placement rates

landfill life expectancy
- the life expectancy of the landfill is important. Landfills that are likely to close in the
next five years could be affected by the implementation of the ETS in different ways
compared with those open for 10 years or longer

regional Deprivation Index
- some communities will have less ability to absorb any costs associated with the ETS,
the extent of which will depend on the community’s ability to pay. The Deprivation
Index is a useful and objective metric that represents the average relative socioeconomic deprivation of an area. The index is compiled by the Ministry of Health
from census data, with the most recent index being compiled in 2007 based on the
2006 census. The index is presented in quintiles (ie, 1–5) and deciles (ie, 1–10),
where 1 is the least deprived quintile or decile, 5 is the most deprived quintile, and 10
is the most deprived decile. For simplicity, the quintile index is referred to in this
report.
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Using the information gained, the Victoria Flats, Pongaroa, Russell and Waiapu landfills were
selected, and agreed with the Ministry, for use as case studies. The details of these landfills are
provided in Table 1.
Table 1 Case studies
Victoria Flats
Landfill
2
3
4
Pongaroa Landfill
Russell Landfill
Waiapu Landfill
Location
Victoria Flats,
Queenstown
Lakes District
Pongaroa, Tararua
District
Russell, Bay of
Islands
Ruatoria, East
Cape
Ownership
Private/Public –
Scope Resources
under a BOOT
contract with
Queenstown
Lakes and Central
Otago District
Councils
Public – Tararua
District Council
Public – Far North
District Council
Public – Gisborne
District Council
Transport
Distance to
Modern2 Landfills
150–200 km (AB
Lime Landfill or
Green Island
Landfill)
130 km (Bonny
Glenn Landfill)
50–100 km
(Whangarei
Landfill)
Over 200 km
(Wairoa Landfill)
and over 400km
(Paeroa Landfill)
Estimated Closing
Date
2071
2021
20233
2025
Approximate
Placement Rate
(current annual
tonnes)
35,500
Less than 500
500
1,000
Deprivation Index
(1 = least
deprived, 5 = most
deprived)4
1
2
3
4–5
In the report a ‘modern’ landfill is considered to be a landfill with a ‘Class A’ rating with landfill gas
capture infrastructure.
The Far North District Council has indicated it may close the Russell Landfill at the end of 2012 due
to the implementation of the ETS.
Atlas of Socioeconomic Deprivation in New Zealand NZDep2006 accessed at
http://www.moh.govt.nz/moh.nsf/indexmh/dhb-maps-and-background-information-atlas-ofsocioeconomic-deprivation-in-nz-nzdep2006.
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SKM ETS Landfill exemption study
3.
Case studies
The location of the four case studies is shown in Figure 1 below.

Figure 1 Case study landfill locations
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3.1. Victoria Flats Landfill
Victoria Flats Landfill is located 17 km from Frankton on the East Side of State Highway 6
between the Victoria Bridge and the Nevis Bluff. Scope Resources Limited is contracted to run the
landfill on behalf of the Queenstown Lakes and Central Otago Districts on a Build, Own, Operate,
Transfer (BOOT) contract by Scope Resources. The Class B landfill, which was issued consent in
1998, has capacity for 3,000,000 tonnes of material. It is lined with a geomembrane liner over clay
and leachate is drained to a pond.
Approximately 35,000 tonnes of waste per annum is placed at the landfill and this is rising. The
landfill services Queenstown Lakes and Central Otago catchments (domestic collection as well as
commercial users), which have a community deprivation index ranking of 1 (lowest deprivation) 5.
There is no public access to the landfill but the public can drop off waste at a Queenstown Lakes
District Council (QLDC) transfer station for $182.50 per tonne ($39 of this is a levy placed by the
QLDC to help fund waste minimisation initiatives). As part of the waste infrastructure QLDC
provides recycling centres, greenwaste drop-off areas and cleanfills.
The nearest landfill is AB Lime landfill in Southland which is approximately 175 km away.
3.1.1.
Cost impact of the ETS
Based on an annual placement of 35,000 tonnes and using the default Emissions Factor (EF),6 total
annual ETS liability is likely to be 38,500 tCO2e. Based on a price of $25/tonne7 this would add
$962,000 to the landfill’s costs. Scope Resources also charges a 12% administration fee which is
based on gate fees. This covers a number of costs such as the administration of the waste levy. As it
is based on gate fees this would also increase costs to users. If ETS costs and the administration fee
were passed directly to public users the price per tonne of waste would rise approximately 15%
from $182.50 to $210.50.8 The 12% fee may increase with the administration time required by the
ETS (logging tonnages, identifying and purchasing NZUs etc), however no indication of this has
been provided and it could be covered by the increase in the absolute value of the administration
fee (ie, 12% of $25 per tonne).
5
6
7
8
Atlas of Socioeconomic Deprivation in New Zealand NZDep2006 accessed at
http://www.moh.govt.nz/moh.nsf/indexmh/dhb-maps-and-background-information-atlas-of-socioeconomicdeprivation-in-nz-nzdep2006
1.1 t CO2e per tonne of waste.
$25 per tonne is an estimate commonly used by the New Zealand Government for the short-medium term
international carbon price.
Assumes price per tonne was $162.9 + 12% Scope Resources fee (total $182.5) and new price per tonne would be
$187.9 + 12 % Scope Resources fee (total $210.5).
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SKM ETS Landfill exemption study
3.1.2.
What will happen if the landfill operator is not issued an exemption?
As discussed in Section 1, under the ETS a DFO has four options to find the lowest cost abatement
option, each of which has financial implications that must be balanced with potential savings.
These actions are:
1)
implementing LFG capture systems and/or
2)
applying for an Unique Emissions Factor (UEF) based on waste composition
(reducing material with Degradable Organic Content (DOC) entering the landfill)
and/or
3)
reducing the waste sent to landfill and/or
4)
purchasing New Zealand Units.
Under the National Environmental Standards (NES) for Air Quality9 a landfill that has over
200,000 tonnes of waste and with capacity for over a 1,000,000 tonnes of waste must implement
LFG systems. Victoria Flats Landfill falls into this category but has not yet installed an LFG
collection system. Implementing an LFG system with 50% collection efficiency would reduce the
landfill’s ETS costs by approximately $481,000 (half of the $962,000) per annum. There are doubts
whether it is realistic to achieve this efficiency in the short term.10 Given this uncertainty and the
estimated cost of implementing and running an LFG capture system (which could require over $1
millon in capital and over $200,000 for annual operating expenditure), this is unlikely to go ahead
for at least five years although enforcement of the NES may bring this forward.
The landfill operator may wish to apply for a UEF if it was considered that this would result in a
lower waste tonne to GHG conversion factor. Efforts are already being made to reduce degradable
waste entering the landfill. Applying for a UEF would require appropriate SWAP audits, and
quotes supplied so far are close to $140,000 for the two required audits. This would only be viable
if the landfill operator believes the UEF approved may be less than the default emissions factor
value of 1.1. For instance a UEF of 0.9 tCO2e or less would have a payback period of 1–2 years. (A
UEF of 0.9 tCO2e would result in an ETS cost of $787,500. This is $174,500 less than using the
default EF).
9
10
Ministry for the Environment. 2011. 2011 Users’ Guide to the revised National
Environmental Standards for Air Quality. Wellington: Ministry for the Environment.
This is not a true representation of collection efficiency because the ETS calculation is of methane
generated over the lifetime of the waste placed in a year, rather than the methane generated in a single
year from all accumulated waste. Early in the life of the landfill, the actual annual methane generation
will be lower than that covered by the ETS because of the time lag (ie, methane generation takes
longer than one year). In the case of Victoria Flats the landfill operator also believes that methane gas
generation is low due to the relatively new age of the landfill and the dry local climate.
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The costs from the operation of the landfill would be passed directly back to the users ie, QLDC
and commercial operators. QLDC has indicated it would in turn pass the costs to residents (as
QLDC runs a user pays system) and businesses. Therefore, cost increases would not necessarily
pull funding out of other QLDC spending areas, particularly given the community is considered to
have a low level of deprivation – although there will be extremes of wealth within the community
so some people will be relatively worse off.
Such a sudden increase in landfill fees may have several benefits including improving the financial
business case for alternative disposal methods (eg, composting facilities), improving recycling rates
and causing residents to think more strongly about waste minimisation and use of alternatives to
disposal.
The last time there was an increase in waste fees in the district, QLDC noted a slight increase in
fly-tipping and a reduction in waste to landfill (as residents looked at alternatives). The relative
ability to pay by a community with a high socio-economic status may mean that increased prices in
these areas are less likely to increase fly-tipping than in other areas. However, there is little robust
empirical evidence about the price sensitivity of fly-tipping11 and the increase in waste fees
occurred at the same time the recession hit so it has been difficult to draw direct relationships.
Also, anecdotal evidence in New Zealand suggests the price response is mostly a short-term
phenomenon.
There may be some waste flight (from the district) to AB Lime Landfill which will likely have a
lower gate fee due to the use of the LFG capture system. However, the extent of this is difficult to
gauge as it would depend on what commercial terms could be achieved for any waste transporter.
The cost of transporting waste the 175 km is likely to be in the range of $30–$50 per tonne.
3.1.3.
What will happen if the landfill operator is issued an exemption?
Should the landfill be exempt it is likely the priority QLDC gives waste minimisation would
remain similar and resources would still be directed towards reducing waste to landfill in order to
minimise costs and extend the life of the landfill.
Although it is unlikely any waste flight (to the district) would occur given the distance to the
nearest landfill and the similarity of gate fees, this cannot be ruled out as commercial arrangements
may be reached that make this option economic.
11
Economic Instruments for Waste Management, prepared for the Parliamentary Commissioner for the
Environment by Covec, 2005.
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3.1.4.
Conclusion and recommendation
Based on the above, the DFO has the full range of mitigation options available as the scale of the
landfill makes LFG capture systems and UEF SWAP audits potentially financially viable. If an
ETS was implemented the council has also indicated it would likely keep the landfill open.
Overall, the costs of implementing the scheme will be borne by the waste generators (residents and
business). The Deprivation Index for the region was ‘least deprived’, which may generally indicate
the local community has more ability to absorb the price rises, although the Deprivation Index is an
average so does not account for inequality within an area.
Based on previous experience when waste disposal prices increased, QLDC noted some positive
change in waste minimisation behaviour although there were other influencing factors such as the
start of a recessionary period. As time goes on, LFG capture and other technologies to minimise
GHG emissions may be incentivised as the payback period is shorter due to the increase in landfill
prices as a result of the ETS charges, waste levy fee etc.
Based on the above, the benefits of the ETS are likely to outweigh the costs for Victoria Flats
landfill and an exemption is not warranted.
3.2. Pongaroa Landfill
Pongaroa Landfill is located in Urupa Street, Pongaroa, in the Eastern part of the Tararua District.
The landfill is owned and run by the Tararua District Council (TDC) and is open three days a week
(Saturday, Sunday and Monday). It is used by the rural Pongaroa community which has a
community Deprivation Index ranking of 2–3 (medium deprivation).12 There is a transfer station on
site where users can deposit recyclables and green waste, all of which are taken to Eketahuna for
recycling (or mulching). Very little green waste is collected which is most likely a reflection of the
community demographic. For example, there are relatively few sources of food waste due to the
lack of restaurants and cafes and rural households are likely to use compost heaps or feed pigs,
chickens, etc. Less than 500 tonnes of waste a year are reported to be placed in the landfill.
12
Atlas of Socioeconomic Deprivation in New Zealand NZDep2006 accessed at
http://www.moh.govt.nz/moh.nsf/indexmh/dhb-maps-and-background-information-atlas-of-socioeconomicdeprivation-in-nz-nzdep2006
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It is a Class B landfill with a clay liner. Leachate is collected and recirculated. Current gate fees are
$36/m3 ($180 tonne13). The nearest landfill is the TDC-run Eketahuna Landfill approximately 70
km away where gate fees are the same and there is no LFG collection system.
3.2.1.
Cost impact of ETS
Based on an annual placement of 500 tonnes and using the NZ default Emissions Factor (EF) for
waste to landfill,14 total GHG emissions to be estimated for the purposes of the ETS are 550 tCO2e.
Based on a price of $25/tonne this would add $13,750 to the landfill’s costs. The TDC does not
expect ETS administration costs to be significant given reporting on a per tonne basis is already
required for the waste levy. The council has indicated it is unlikely all the costs would be passed
directly to users, although no official position has been adopted. If the cost was passed directly to
users then gate fees would rise 14% to $41/m3 ($208 per tonne of waste).
The council may also incur further costs as it seeks advice on administering the ETS and securing
and purchasing NZUs. However the council was not able to provide much information on the scale
of the ETS costs nor how they were to be managed. There will likely be staff time and transactional
costs to secure and surrender emissions units. The council will look to learn from other councils in
similar positions.
3.2.2.
What will happen if the landfill operator is not issued an exemption?
As discussed in Section 1, under the ETS a DFO has four options to find the lowest cost abatement
option, each of which has financial implications that must be balanced with potential savings.
These actions are:
1)
implementing LFG capture systems and/or
2)
applying for an Unique Emissions Factor (UEF) based on waste composition
(reducing material with Degradable Organic Content (DOC) entering the landfill)
and/or
3)
reducing the waste sent to landfill and/or
4)
purchasing New Zealand Units.
Due to the capital and operational costs and the potential uncertainties in gas capture volumes, the
TDC is not considering implementing LFG capture systems.
13
14
Conversion based on uncompacted waste – 200kg/cubic metre sourced from Ministry for the Environment. 2009.
Calculation and Payment of the Waste Disposal Levy: Guidance for waste disposal facility operators. Wellington:
Ministry for the Environment.
1.1 tCO2e per tonne of waste
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The TDC may wish to apply for a UEF if it was considered this would result in a lower emissions
factor. Green waste is already diverted from the landfill and one option may be for the council to
further increase efforts to reduce degradable material entering the landfill thereby helping reduce
any potential UEF. Initial quotes provided to TDC indicate the price of SWAP audits required for a
UEF would be in excess of the annual increase from ETS costs – making this option uneconomic as
a short payback but possible if costs are considered over a longer period.
Should the ETS be implemented the TDC believes it will have little ability to reduce the ETS
liability other than by continuing its efforts to reduce total waste entering the landfill and that costs
incurred may be passed to the users through increases in user charges. When waste disposal prices
have increased in the past, the TDC noted increases in fly-tipping (worse for the first six months
and then reducing) and rubbish being burnt on private land. Fly-tipping already costs the council
$20,000–$30,000 per annum and the TDC expects this amount may double as a result of any
increase in waste fees. The relative inability to pay by a community with a low socio-economic
status may mean increased prices in these areas are more likely to increase fly-tipping than in other
areas. However, there is little robust empirical evidence about the price sensitivity of fly-tipping,15
although anecdotal evidence in New Zealand suggests the price response is mostly a short-term
phenomenon.
However, the TDC has also noted waste disposal price increases have also resulted in an increase
in recycling levels, more awareness of waste minimisation in the community and an uptake of
council waste minimisation educational material.
Implementation of the ETS is unlikely to lead to the TDC closing the landfill given the distance to
the nearest modern landfill with LFG capture facilities (Bonny Glen Landfill 130 km away)
although this option may be cost effective if a suitable transport price can be reached. Regardless,
the transfer station would still need to be operated in order to deliver effective service to the
surrounding community.
3.2.3.
What will happen if the landfill operator is issued an exemption?
Should the landfill be exempt the TDC is unlikely to lower prioritisation of waste minimisation. If
Pongaroa Landfill was exempt while Eketahuna was not, the TDC does not think there would be
any waste flight given the transport distances involved.
15
Economic Instruments for Waste Management, prepared for the Parliamentary Commissioner for the
Environment by Covec, 2005.
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3.2.4.
Conclusion and recommendation
Based on the above, the council has limited mitigation options due to the small annual placement
rate of the landfill (reducing the cost-effectiveness of LFG capture systems and UEF application).
If an ETS was implemented the council has also indicated it would likely keep the landfill open.
Therefore, the only feasible option is to meet the full cost of the ETS by purchasing NZUs, AAUs
or CERs. This limits the ability of the DFO to control the cost of the ETS to users as there is only
one abatement option available to it.
ETS coverage of the Pongaroa Landfill may increase negative environmental outcomes such as flytipping and rubbish burning on private land if the cost is added to landfill gate fees (as noted the
council has observed a correlation between price increases and fly-tipping in the past). However,
the long-term sensitivity to price of these activities is likely to be quite inelastic. In addition,
rubbish burning on private land is legal in some circumstances, in which cases it is a legitimate
form of emission abatement.
The Deprivation Index for the region was ‘low deprivation’, which may generally indicate the local
community has some ability to absorb the price rises, although the Deprivation Index is an average
so does not account for inequality within an area.
Issuing an exemption could avoid environmental damage from increased fly-tipping and illegal
backyard disposal and the costs of monitoring those activities by the TDC. It would mean,
however, that an environmental externality (GHG) remains unaccounted for and a further incentive
(price) to encourage behaviour change towards waste minimisation would not be used.
Based on the comments above Pongaroa Landfill should not be considered for an exemption.
3.3. Russell Landfill
Russell Landfill is situated near Russell in the Bay of Islands, Northland. The landfill is owned by
the Far North District Council (FNDC) and the day-to-day management is conducted by Transfield
Services. The landfill services the Russell community with a population of 816 people although
this increases dramatically in the summer tourist season. The local region has a
Deprivation Index of 3 (medium deprivation).16
The site contains a transfer station where users can deposit recyclables and green waste, all of
which are diverted from the landfill. It has a total capacity for 27,000 tonnes of waste and currently
around 500 tonnes are placed in the landfill per annum. It is funded through a mix of user pays and
16
Atlas of Socioeconomic Deprivation in New Zealand NZDep2006 accessed at
http://www.moh.govt.nz/moh.nsf/indexmh/dhb-maps-and-background-information-atlas-of-socioeconomicdeprivation-in-nz-nzdep2006
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SKM ETS Landfill exemption study
general rates. Users pay $3 per bag or $41per m3, while the running cost of the landfill is close to
$150/tonne (excluding transfer station, recycling costs etc).
It is a Class B landfill situated in a sloping gully with a clay liner. Leachate is drained and sent to
the Russell Wastewater Treatment Plant. The nearest landfill is at Whangarei (85 km) away where
LFG capture systems are planned to be implemented. Gate fees at Whangarei are not publicly
listed.
3.3.1.
Cost impact of ETS
Based on an annual placement of 500 tonnes and using the default EF,17 total annual GHG
emissions are likely to be 550 tCO2e. Based on a price of $25 per tCO2e this would add $13,750 to
the landfill’s costs. The FNDC does not expect ETS administration costs to be significant given
reporting on a per tonne basis is already required for the waste levy. Therefore, total cost to the
council would rise approximately 17% (assuming current operating cost to council is $150 per
tonne). If the 17% increase was passed to users then fees would rise from $3 per bag to $3.50 per
bag and from $41/m3 to $48/m3.
The council may also incur further costs as it seeks advice on administering the ETS and securing
and purchasing NZUs, but some staff are currently working on this issue as part of a broader inhouse work programme. However, the council was unable to provide much information on the
scale of the ETS costs nor how they were to be managed. There will likely be staff time and
transactional costs to secure and surrender emissions units.
3.3.2.
What will happen if the landfill operator is not issued an exemption?
As discussed in Section 1, under the ETS a DFO has four options to find the lowest cost abatement
option, each of which has financial implications that must be balanced with potential savings.
These actions are:
1)
implementing LFG capture systems and/or
2)
applying for an Unique Emissions Factor (UEF) based on waste composition
(reducing material with Degradable Organic Content (DOC) entering the landfill)
and/or
3)
reducing the waste sent to landfill and/or
4)
purchasing New Zealand Units.
17
1.1 tCO2e per tonne of waste
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SKM ETS Landfill exemption study
Due to the capital and operational costs and the potential uncertainties in gas capture volumes the
FNDC is not considering implementing LFG capture systems.
The FNDC may wish to apply for a UEF if it was considered this would result in a lower emissions
factor. Green waste is already diverted from the landfill and one option may be for the council to
further increase efforts to reduce degradable material entering the landfill, thereby helping reduce
any potential UEF. However, based on initial quotes provided, the FNDC indicates the price of
acceptable SWAP audits would be approximately equal to, or higher than, the annual increase from
ETS costs – making this option uneconomic when considered on a short-term basis.
Should the ETS be implemented then the FNDC would consider closing the landfill as costs would
rise to a level where it may be cheaper to export the waste to a modern landfill (with LFG capture
systems there are lower ETS costs) than to continue to operate its own; however an official
decision has not been made. Likely landfills include Whangarei Landfill or Redvale Landfill in
northern Auckland. FNDC estimates the transport and gate fees are likely to be over $100 per tonne
but only slightly more than the current spend on land filling. This may allow user pay inputs to be
held at existing levels and any cost increase to be funded through general rates. A transfer station
would remain on the Russell site and a cleanfill established on the landfill part in order to minimise
transport of this heavy material. This would result in the service levels to the community remaining
unchanged.
There is little robust empirical evidence about the price sensitivity of fly-tipping,18 although
anecdotal evidence in New Zealand suggests any price response is mostly a short-term
phenomenon.
3.3.3.
What will happen if the landfill operator is issued an exemption?
Should the landfill be exempt it is likely the FNDC would keep the landfill open. Waste flight (to
the landfill) may occur but due to the geographic isolation this is likely to be minimal. The local
residents group also monitor the use of the landfill closely and would attempt to halt any outside
waste entering the site (the group has blocked the road in protest in the past and the landfill
management plan states the landfill is just to service the Russell peninsula).
3.3.4.
Conclusion and recommendation
Based on the above, the council has limited mitigation options due to the small annual placement
rate of the landfill (reducing the cost-effectiveness of LFG capture systems and UEF application).
18
Economic Instruments for Waste Management, prepared for the Parliamentary Commissioner for the
Environment by Covec, 2005.
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SKM ETS Landfill exemption study
The FNDC has said it would consider bearing any increase in costs, closing the landfill and
exporting the waste to a modern landfill such as Whangarei or Redvale Landfill. From a GHG
emissions perspective these sites are an environmentally better option (even given the GHG
emissions from waste transport). There could be some increase in costs incurred by the council, but
not as much as keeping the Russell landfill operating under a ETS.
The Deprivation Index for the region was ‘medium deprivation’, which may generally indicate the
local community has some ability to absorb the price rises, although the Deprivation Index is an
average so does not account for inequality within an area.
The FNDC has indicated it would bear any increase in costs, in which case the landfill users would
not receive the incentive to reduce emissions efficiently.
Issuing an exemption would mean an environmental externality (GHG) remains unaccounted for
and a further incentive (price) to encourage behaviour change towards waste minimisation would
not be used. However, FNDC has indicated it would mute this price signal to landfill consumers by
absorbing it if they did not receive an exemption. This would be similar to the central government
receiving the price signal from the international climate agreement but not passing it on by giving
an ETS exemption, except that the local government has some ability to affect waste minimisation
and also the landfill choice (ie, one with LFG capture capability).
Based on the comments above, the benefits of the ETS outweigh the cost in the case of the Russell
Landfill and as such an exemption is not warranted.
3.4. Waiapu Landfill
Waiapu Landfill is located in Ruatoria on the East Cape of the North Island. The landfill is owned
by the Gisborne District Council (GDC) who contract out the day-to-day management. It services
the wider Waiapu District which includes the area from Hick’s Bay to Tolaga Bay. This area has a
Deprivation Index of 5 (high deprivation).19 There is a transfer station on site where recyclables
and green waste are dropped off separately from residual waste. The landfill is funded by the GDC
and is free for residents while commercial users pay $240 per tonne to dispose of waste. The cost to
run the landfill is approximately $346,000 per annum (roughly $346 per tonne, although this
includes various running costs as well as the transport of recyclable materials to markets). Around
1,000 tonnes a year are placed at the landfill which has capacity for 304,000 tonnes.
19
Atlas of Socioeconomic Deprivation in New Zealand NZDep2006 accessed at
http://www.moh.govt.nz/moh.nsf/indexmh/dhb-maps-and-background-information-atlas-of-socioeconomicdeprivation-in-nz-nzdep2006
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SKM ETS Landfill exemption study
It is a Class B landfill with a clay liner and leachate is recirculated. The nearest landfills are at
Wairoa (over 200 km away) and Paeroa (over 400 km away).
3.4.1.
Cost impact of ETS
Based on an annual placement of 1,000 tonnes and using the default EF,20 total annual GHG
emissions are likely to be 1,100 tCO2e. Based on an ETS price of $25/tonne this would add
$27,500 to the landfills costs. The GDC does not expect ETS administration costs to be significant
given reporting on a per tonne basis is already required for the waste levy. Therefore, total costs the
GDC incurs would rise approximately 7%. If the ETS charge was passed to commercial users, only
based on their level of waste, then commercial user fees would rise from $240 per tonne to $257
per tonne and the rest of the landfill’s ETS liability would be funded through rates. However, the
GDC is considering a move to a partly user pays system for residents and ETS costs would be
reflected in this.
The Council may also incur further costs as it seeks advice on administering the ETS and securing
and purchasing NZUs, but some staff are currently working on this issue as part of a broader inhouse work programme. However the Council was unable to provide much information on the
scale of either the ETS costs nor how they were to be managed. There will likely be staff time and
transactional costs to secure and surrender emissions units.
3.4.2.
What will happen if the landfill operator is not issued an exemption?
As discussed in Section 1, under the ETS a DFO has four options to find the lowest cost abatement
option, each of which has financial implications that must be balanced with potential savings.
These actions are:
1)
implementing LFG capture systems and/or
2)
applying for an Unique Emissions Factor (UEF) based on waste composition
(reducing material with Degradable Organic Content (DOC) entering the landfill)
and/or
3)
reducing the waste sent to landfill and/or
4)
purchasing New Zealand Units.
Due to the capital and operational costs and the potential uncertainties in gas capture volumes the
GDC is not considering implementing LFG capture systems.
20
1.1 t CO2e per tonne of waste
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SKM ETS Landfill exemption study
The GDC may wish to apply for a UEF if it was considered this would result in a lower emissions
factor. Green waste is already diverted from the landfill and one option may be for the council to
further increase efforts to reduce degradable material entering the landfill thereby helping reduce
any potential UEF. Consideration is being given to this option however the cost of the audits would
need to be balanced against the potential reduction in ETS costs.
The geographic isolation of the Waiapu Landfill means it is unlikely the council would have the
option to close the landfill and transport waste to a modern landfill (which may have less ETS
liability because of a LFG capture system).
The relative inability of a low socio-economic community to pay may mean increased prices are
more likely to lead to an increase in fly-tipping than in areas with a high social-economic ranking.
The waste officers expect that any increase in waste fees will lead to an increase (around 30%
above existing levels) of fly-tipping, over the first 3–6 months from implementation. Based on
previous experience this would then drop (on the upside – past price rises have also led to an
increase in recycling). However, there is little robust empirical evidence about the price sensitivity
of fly-tipping,21 although anecdotal evidence in New Zealand suggests the price response is mostly
a short-term phenomenon as suggested by GDC.
The GDC is already putting resources into waste minimisation activities and staff interviewed
believe there would be no changes to these efforts if the ETS is implemented. However, the
funding for ETS costs would need to be sourced from somewhere (ie, increased rates, debt,
deferred new spending) which may result in some negative impacts outside of the waste sector.
3.4.3.
What will happen if the landfill operator is issued an exemption?
Should the landfill be exempt, the GDC is unlikely to lower the resourcing of waste minimisation
initiatives, particularly because the investment that has been made in the landfill means it is
economic to extend the life of the asset as far as possible. The GDC would still progress with its
consultation on a part user pays system.
Given the geographic isolation of the landfill it is unlikely there would be any waste flight into the
landfill from non-exempt landfills.
21
Economic Instruments for Waste Management, prepared for the Parliamentary Commissioner for the
Environment by Covec, 2005.
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SKM ETS Landfill exemption study
3.4.4.
Conclusion and recommendation
Based on the above the council has limited mitigation options due to the low volume of waste
placed at the landfill, the high deprivation level of the community and the distance to the nearest
modern landfill.
If an ETS was implemented, the council has indicated it would likely keep the landfill open and the
service levels would remain unchanged. Therefore, the council has two options, to develop its own
UEF (which may focus the council’s efforts to reduce degradable material entering the landfill)
and/or meet the full cost of the ETS by purchasing NZUs, AAUs or CERs.
Under current plans, the GDC would bear any increase in costs, but regardless of the ETS, it is
consulting the community on a part user pays funding model for waste services which may reduce
some of the impact directly to the council. Any implementation of landfill fees may increase illegal
disposal activities (which the council has noted in the past) and an exemption (from the ETS) may
result in these fees being lower then what they could be. However, the long-term sensitivity to price
of these activities is likely to be quite inelastic.
The Deprivation Index for the region was ‘high deprivation’, which may generally indicate the
local community (and therefore the council) has little ability to absorb the price rises, although the
Deprivation Index is an average so does not account for inequality within an area. However, ETS
costs would likely be more significant to this community then to the others studied in this report.
If an exemption is to be considered key factors include the annual placement rate, high level of
socio-economic deprivation in the local community and the distance to the nearest modern landfill.
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SKM ETS Landfill exemption study
4.
Exemption criteria
This section of the report considers the suitability of the identified possible exemption criteria as
national exemption standards, based on whether the outcomes of using these criteria would match
the case study recommendations. If appropriate, these could be used under Section 60 of the
Climate Change Response Act 2002.
Three possible exemption criteria have been identified from the case studies. The individual criteria
would probably not be sufficient to justify an exemption on their own; and in order to ensure only
appropriate landfills are granted an exemption it may be necessary for two or all criteria to be met.
The possible exemption criteria are:

annual placement rate (of less than 1,000 tonnes of waste per annum)

transport distance to nearest modern landfill (over 150 km)

Deprivation Index score of community serviced (4 and above).
There may be other outcomes from the use of exemption criteria (such as a reduction of efforts to
minimise waste) and these criteria are only considered with a view to finding the lowest cost
abatement option.
4.1. Annual placement rate
The most appropriate measure for assessing landfill size is annual placement because this
represents the amount the landfill is currently used, regardless of its history. This would not
override the National Environmental Standards for Air Quality, which require landfill gas
collection and destruction for landfills with design capacities of 1,000,000 tonnes or greater once
the accumulated placement reaches 200,000 tonnes.
In landfills with a small placement rate, it is generally not economically viable to design, install,
and operate a LFG collection and destruction system. These landfills also usually have little ability
to reduce the amount of waste received because their high expense has already resulted in waste
minimisation opportunities such as green waste diversion being introduced. However, an increase
in waste disposal fees as a result of the ETS may make diversion activities more attractive. The
relative inability to implement LFG capture systems or apply for an UEF means the landfills are
left with little option but to purchase NZUs. This reduces the ability of the landfill to control the
cost of the ETS.
The placement rate of New Zealand landfills ranges widely, with the smallest consented landfills
having annual placements of less than 500 tonnes and the largest landfills having annual
placements of over 200,000 tonnes per year. An annual placement rate threshold could be aligned
PAGE 20
SKM ETS Landfill exemption study
with the waste levy threshold for smaller landfills, 1,000 tonnes (landfills under this size only need
to submit waste levy information annually22). This would capture three of the landfill studies for
this report (Waiapu, Russell and Pongaroa).
A placement rate growth criterion to prevent waste flight from non-exempted landfills would need
to be set. This would prevent unintended expansion of exempted landfills, although it may be a
complicated criterion as it would need to be monitored and assessed ex-post.
4.2. Transport distance to nearest modern landfill
Restricting an exemption to landfills that are a long distance from the next nearest modern landfill
would cover two issues:

isolated communities have no other option other than disposing of residual waste in the local
landfill if there are no larger and better managed landfills nearby

waste flight from modern landfills to exempt landfills would be minimised if only isolated
landfills could gain exemption.
The cost and level of GHG emissions from transport of waste is relatively small. Initial estimates
indicate the cost of transporting waste is approximately $0.25 per tonne per km (of course this
would vary for each arrangement). For Pongaroa Landfill, for example, the cost of transporting the
waste to Bonny Glenn Landfill (approximately 130 km) would be in the range of $30–$35 per
tonne. However, the council officers spoken to from all four case study landfills thought that waste
flight would not occur over those distances.
GHG emissions from the transport of waste are generally small compared to the emissions caused
from the waste itself. For example, the GHG emissions from transporting waste from Pongaroa to
Bonny Glen would be approximately 16 tCO2e per year for 500 tonnes of waste, which compares
to the 550 tCO2e that would be generated from an annual placement of waste in terms of methane
generation.
Consideration should be given to whether this criterion should be for the distance to any nearest
landfill, or the distance to the nearest modern landfill. The latter would maintain the protection
from waste flight that increases GHG emissions. Waste flight will only significantly increase GHG
emissions when it is waste that would otherwise have been disposed of in a landfill with an LFG
collection system.
22
Ministry for the Environment. 2011. Online Waste Levy System – User guide for waste disposal facility
operators. Wellington, Ministry for the Environment.
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SKM ETS Landfill exemption study
A transport distance criterion in the range of 50–100 km is likely to be the approximate distance
where the transport cost is similar to the ETS cost, however there is a relatively small transport
distance and all four landfills in this report would be captured by this criteria. Another limitation of
basing this criterion on price is that transport prices are not static. For all of the case studies the
staff interviewed did not believe any other landfills were close enough to make transporting the
waste economic; however, our analysis showed only Waiapu Landfill could confidently be said to
be too far from other landfills for transport to be viable (based on current transport and carbon
prices).
There may be some cases where a simple transport distance metric is not equitable, such as the
Claris Landfill on Great Barrier Island or the landfills situated on Chatham Islands which would
require sea transport as well as road transport.
This discussion above demonstrated the complexity and difficultly in using distance as an
exemption criteria in isolation. If it is to be used it should be used in conjunction with another
criteria to ensure only suitable landfills are captured.
4.3. Deprivation Index
The use of a socio-economic criterion for ETS exemption of landfills could be considered due to
the negative effects that the increased costs of the ETS would have on some communities. Where
communities have low socio-economic status, it can be generally considered that the cost of the
ETS would place a larger relative burden on the community than a community with a high socioeconomic status. The ETS costs in low socio-economic areas may result in a decreased level of
service from the local council, or increased rates or landfill fees for the community, although there
will always be a spread of wealth levels in any region regardless of the average deprivation level
index. It should be noted the degree to which costs are passed on will also be influenced by the
prioritisation that a particular council may place on waste services and how they are funded (user
pays or rates).
The relative inability to pay by a community with a low socio-economic status may mean increased
prices in these areas are more likely to increase fly-tipping than in other areas. However, there is
little robust empirical evidence about the price sensitivity of fly-tipping,23 although anecdotal
evidence in New Zealand suggests the price response is mostly a short-term phenomenon.
The Minister could select a Deprivation Index quintile range of 5, 4–5 or 3–5 as a criterion to
represent lower socio-economic communities. It would be important to calculate the average
23
Economic Instruments for Waste Management, prepared for the Parliamentary Commissioner for the
Environment by Covec, 2005.
PAGE 22
SKM ETS Landfill exemption study
Deprivation Index over the whole community served by the landfill rather than just the Deprivation
Index of the area directly surrounding the landfill.
4.4. Recommendations
Table 2 shows which of the case studies would meet any exemption criteria that may be
implemented. The Waiapu Landfill is the only one of the four case studies that meets all of the
criteria discussed in the section. The table also shows the socio-economic deprivation criterion is
the key differentiator.
Table 2 Exemption status of case studies based on proposed exemption criteria
Exemption criteria
Victoria Flats
Pongaroa
Russell
Waiapu
Annual placement
rate of less than
1,000 tonnes
X



Distance to nearest
modern landfill is
over 150 km24

X
X

Level of socioeconomic
deprivation of 4 or
above
X
X
X

Not exempt
Not exempt
Not exempt
Exempt
Overall
24
A ‘Class A’ landfill with Landfill Gas Capture infrastructure in operation.
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SKM ETS Landfill exemption study
5.
Conclusion
A range of costs and benefits are likely to stem from the implementation of the ETS for landfills,
which are summarised in Table 3 below.
Table 3 Possible costs and benefits of the ETS on small landfills
Benefits



Price incentive to identify the lowest cost
abatement option
Lower quality landfills may close
reduction in GHG emissions
reduction of local environmental effects
Potential increased waste minimisation
incentive
Costs





Increase costs to councils through
administration of ETS requirements
sourcing and cancelling emission units
Potential increase in fly-tipping
Increased burden on low socio-economic
communities (and their council services)
Increased budgetary pressure on waste
minimisation activities
Potential increase in private waste incineration
The four case studies show some negative social and environmental outcomes may occur.
However, it could be argued the adjustment that will occur is a necessary part of the market
economy recognising that GHG emissions need to be costed and the changes are part of the societal
readjustment as the lowest cost abatement option is identified.
All four of the case study landfills were already situated in communities undertaking some degree
of waste minimisation activities, which they plan to continue regardless of whether or not the ETS
is applied to them (although increasing the costs could focus councils’ efforts more sharply on
waste streams that cause GHG emissions).
It is likely total GHG emissions would be greater if smaller landfills were given exemptions as
landfills without LFG capture systems would be able to remain open. For example, the Russell
Landfill is likely to close if the ETS is applied to it, in which case the waste from the area would be
transferred to the Whangarei or Redvale Landfill, which have, or plan to install, LFG collection
systems.
The individual criteria would probably not be sufficient to justify an exemption on their own; and
in order to ensure only appropriate landfills are granted an exemption it may be necessary for all
criteria to be met.
Based on the four case studies, the exemption criteria that are recommended for detailed analysis
under Section 60 of the Climate Change Response Act 2002 are:

annual placement rate (of less than 1,000 tonnes of waste per annum)

transport distance to nearest modern landfill (over 150 km)

Deprivation Index score of community serviced (4 and above).
PAGE 24