Assessing the impact of increased energy and fuel costs across the waste sector

Conducted by Oakdene Hollins for Defra, the overarching aim of this project was to qualitatively and, where possible, quantitatively assess the impact of increased energy and fuel costs on the waste sector in England. The data and insight generated from the research aimed to provide Defra with:

• A better perception of the waste sector’s resilience to price shocks

• An understanding of the sector’s key hotspots and risks in relation to fuel and energy costs.

• Insight on policy options which could mitigate these risks

This study’s methodology has three main types of activities repeated in two different phases: Stakeholder engagement through semi-structured interviews; Data gathering through a targeted scoping review; and Liaising and sense-checking with Defra. There were several conclusions that were drawn from the study.

Conclusions:

The impact of the energy price increases has been significant, but the sector as a whole seems to have enough resilience for now. The research suggests that unless there is a significant decline in energy and fuel costs within the next 6 months, there could be severe but localized impacts via business failure, downscaling or termination of services, e.g. local authorities stopping garden waste collections or redirection to more profitable activity, e.g. EfW disposal. Certain ‘hotspots’ within the waste sectors are more vulnerable (e.g. high energy-intensive waste reprocessing for certain materials, small SMEs focusing more on collection and local authorities operating waste services via in-house or LATCo arrangements) and are worthy of special attention as highlighted in this report.

There have been specific cases where resilience has been severely tested such as Local Authorities managing waste services in-house, high energy-intensity waste processors such as automotive salvage and, high fuel-intensive waste collection for certain materials such as glass and automotive salvage.

Policy options which could mitigate these highlighted risks were identified such as pending policies on consistancy of collections (DRS and EPR) which will result in major changes for England’s waste sector. Legislative uncertainties, volatility of commodity prices and of the price of fuel, have also impacted the waste industry by causing hesitancy towards investment. The revision of EBRS and ETS could also cause changes in the waste sector. From a long-term perspective realising the ambitions of the recent Energy Bill of decoupling renewable energy prices from gas prices would have a major impact on reducing the volatility of energy supply.

Beyond the policy considerations listed above there are more practical, knowledge and best practice sharing that Defra and Civil Service, more generally, could facilitate amongst different stakeholders in the waste industry tackling the increase of energy and fuel costs. A further opportunity could be for Defra, drawing from this research, to compile and disseminate best practice on coping with fuel/energy costs and disseminate them via signposting channels mentioned in the report.