Select Committee on Environmental Audit Second Report


APPENDIX 16

Memorandum from the Environment Agency

1.  THE ENVIRONMENT AND PRE-BUDGET REPORT 2001

  The Agency welcomes this opportunity to comment to the Environmental Audit Committee on this year's pre-budget report.

  For many years there have been promising developments in the way the Chancellor has used the budget process to further sustainable development. This year's Pre-Budget Report has brought further specific moves in this direction. The Agency welcomes especially:

    —  The further moves to incentivise industry to adopt clean technology: in particular we welcome the inclusion of technology to improve water use and quality.

    —  Continued pressure on transport emissions, with the extension of the reform of VED and new incentives for cleaner fuels and cleaner technology. The fact that this reform has continued over many years shows that the Treasury firmly believes in the importance of the links between the budget process and the environment.

    —  The introduction of a simple aggregates tax, with no let out for so-called "green quarries" and continued pressure on the use of pesticides.

  The Agency is also pleased to see that the Pre-Budget Report includes references to sustainable development other than in specific green measures. We welcome the Treasury's decision to publish its guidance on sustainable development in SR2002. We trust that this means that the Treasury will press strongly for Departments to take a holistic view of their contribution to sustainable development.

  The Agency also welcomes the fact that, in the midst of a standard discussion of the economics of productivity in the Pre-Budget Report, the Treasury included a reference to recent work on resource productivity. However it seems clear that this does not yet fit into the Treasury's growth paradigm—for example there are no particular conclusions drawn on how it might be used as part of the drivers for productivity growth, nor for how it could be used as measure of success. The Agency hopes that the Treasury will continue to work on developing these areas in future.

  Finally, the Environment Agency welcomes the Treasury's increasing openness on this issue. With fellow agencies and other environmental interests, we have been made welcome by Treasury and feel that our concerns are actively listened to.

2.  THE AGENCY'S VISION FOR THE BUDGET PROCESS

  We would like to use this opportunity to focus not just on the specifics (though we do have specific measures to propose) but to reflect on what has been achieved, and on where we might go in future. The Environment Agency's Vision document has already spelled out the potential role of economic instruments in the future of environmental protection. [2]

  Because much has been done, we appreciate that there is a need for allowing some of the measures already introduced, most notably the Climate Change Levy, to bed in. Therefore we are not altogether surprised that the Pre-Budget Report does not contain some of the further measures that are needed in the longer term to deliver sustainable development. However that does not mean that this should be a time of inaction. There are three elements that we think need to be addressed, not just as part of a single budget paper, but as part of the overall process. These are:

    1.  A systematic review of existing measures, to determine the environmental outcomes and behavioural changes they are delivering.

    2.  An immediate start on medium term actions that we already know are essential.

    3.  A longer term comprehensive review of the overall taxation system, to ensure it is on a path to deliver sustainable development.

2.1  A systematic review of existing measures, to determine the environmental outcomes and behavioural changes they are delivering.

  It seems widely acknowledged that to deliver sustainable development and a better environment, we need more than traditional regulation. The Agency's Vision clearly envisages a wider portfolio of policy instruments being used in a complementary fashion. In order to develop this portfolio, we need to evaluate the performance of existing instruments.

  The Agency believes that this requires systematic research into the way that existing measures, such as the Climate Change Levy and the Landfill Tax Credit Scheme are changing environmental outcomes and behaviour. Without this background information, it will be difficult to develop these instruments, and to design improved instruments for the future.

  The Agency has been involved in setting up the systems that monitor the Climate Change Levy and the Pesticides Voluntary Agreement. We do believe that this will enable us to better understand the performance of these measures, and improve them in the future, provided that a systematic review, that looks across the environmental, economic and social dimension is put in place.

  We would look to a similar broad based analysis of the Landfill Tax, which would complement ongoing work in DEFRA.

2.2  An immediate start on medium term actions that we already know are essential

  In parallel with setting up this essential research, we know that we can move forward on some critical areas of work. In this regard, we see it as being essential that there be a comprehensive review of the waste taxation system. Central to this would be the conversion of the landfill tax into a waste disposal tax.

  This is vital if the UK is to deliver on its waste strategy, without constructing costly and unpopular incinerators. The current demanding recycling targets, and the need to reduce waste to landfill, require significant changes in behaviour and in institutional arrangements.

  Refocused waste taxation would send signals to all producers of waste about the relative environmental damage of waste disposal routes. The revenues from taxation could then be used to fund changes in the way we deal with waste, for example, providing more effective kerbside collection, etc. In this way, the changed basis of waste taxation, instead of being a burden, could be used to make the achievement of targets, and compliance with regulations such as the Landfill Directive, more efficient and effective.

  The current escalator on the Landfill Tax is a positive signal of the direction that waste taxation needs to go. We believe it is important that we start now so that we have a full system to implement, at the latest, when the escalator finishes in 2004.

  The Agency's views on waste taxation are set out more fully in the attached papers:

    —  "Scope for Economic Instruments—2001-02—Summary of Environment Agency paper for the Treasury"

    —  "Environment Agency Position Statement: Responding to the challenge of sustainable waste management."

2.3  A longer term comprehensive review of the overall taxation system, to ensure it is on a path to deliver sustainable development

  The Agency's long term goal is for the fiscal system as a whole to reflect a drive for sustainable development and the environment. It will best do this by taxing resources, and reducing taxes on labour and other goods, and by incentivising people to think and act environmentally. To that end we support calls for a wider review of the tax system, to deliver the changes needed. Only such a review will ensure that the tax system can truly make its full contribution to sustainable development. This could cover the extent to which fundamental changes in VAT or corporation taxes could be used to promote greener consumption and investment.

  The recent PIU study on resource productivity will be a major element in taking this work forward. Moreover this is also a potential way in which the Treasury can further improve the environmental information in the Budget and Pre-Budget Reports. For example, relatively simple measures such as the carbon intensity of output or of value added would indicate how successful the Treasury was in promoting, not just investment that increased GDP, but in promoting truly sustainable development.

  We commend these ideas to the Environmental Audit Committee and would be happy to elaborate on them if the committee wishes.

3 December 2001

ANNEX A: SUMMARY OF AN ENVIRONMENT AGENCY PAPER FOR THE TREASURY

SCOPE FOR ECONOMIC INSTRUMENTS—2001-2

RECOMMENDATIONS

  The Agency would like to maintain and increase the momentum of developing fiscal instruments to address environmental issues and enhance resource productivity.

  Waste and resource policy particularly need further stimulus from economic instruments. The Government has made a major commitment to increasing waste recycling in the UK, shifting from our current reliance on landfill. There is a critical need to bridge the gap between current practice, and what needs to be done to deliver such sustainable waste management. If these changes are not made, the UK faces a difficult time, including addressing the construction of many, unpopular, waste incinerators.

  A waste disposal tax, developed from the existing landfill tax, would give business and consumers incentives to enhance resource productivity and make it easier for the UK to achieve the targets of the Waste Strategy. Other possible measures include:

    —  Aligning other fiscal incentives to waste disposal routes with the waste hierarchy. For example, because incineration is exempt from the Climate Change Levy it becomes more attractive than recycling.

    —  Recycling a greater portion of waste tax revenues to local authorities. This could be done in proportion to the amount recycled and composted so there is a dynamic incentive to encourage such activity. This would also help ensure a level playing field for recycling, which may be at a disadvantage in competing for PPP funding, which tends to favour large scale capital intensive solutions.

    —  Introducing tradable credits so as to allow local authorities a degree of economic flexibility in attempting to reach their recycling/composting targets. Credits would also produce a financial incentive for local authorities to improve their recycling and composting performance.

    —  Incentivising manufacturers to reduce or recover packaging. For example this could be addressed by giving manufacturers rebates on general taxation (eg Corporation Tax), where they operated an accredited scheme. This could also help forestall further regulation in this area, so reducing the burden of regulation on firms that behave well.

  Moreoever, we believe that the Government needs to show leadership in the area of variable charging for domestic waste. We recognise that this is politically sensitive, but simple measures now (eg pilot schemes, separately identifying waste costs in local authority charges) will pave the way.

  Diffuse pollution and planning policy are other areas where fiscal and other economic instruments would make a difference. Regulation alone cannot deal with diffuse pollution—hence we encourage the exploration of economic instruments. We also support work by DTLR on developing economic instruments for planning policy.

ANNEX B: RESPONDING TO THE CHALLENGE OF SUSTAINABLE WASTE MANAGEMENT

POSITION STATEMENT

KEY ISSUES

  Waste should be viewed as a potential resource and the production of waste as a waste of resources. The link between improved prosperity and domestic waste generation must be broken. Society should come up with a solution for its waste and we should not pass on our problems to future generations. The Agency supports the waste management hierarchy: prevention, minimisation, reuse/recycle and disposal.

  Local and regional waste strategies need to link effectively with the planning system. Waste strategies should be based on the Best Practicable Environmental Option, taking into account waste management impacts across the life cycle including transport, local environment concerns, biodiversity and "environmental equality" issues.

  There is no risk-free waste treatment or disposal option. With the Government, the Agency is sponsoring research into the potential health impacts of waste management activities.

THE AGENCY'S ROLE

  We regulate the treatment, storage and disposal of controlled waste at over 8,000 waste management sites to prevent pollution of the environment or harm to public health. We also register and monitor the performance of businesses that produce waste. We monitor and enforce controls over waste transport, including registering 50,000 waste carriers and tracking up to 750,000 movements of hazardous waste a year. As well as being a regulator we advise, working for instance with waste minimisation clubs to help reduce water use, production of solid waste and energy consumption. We investigate and prosecute in cases of environmental crimes such as fly-tipping.

SOLUTIONSWE CALL FOR:

  A significant reduction in the disposal of toxic, persistent and bio-accumulative waste, with the aim of eliminating it. Specific waste streams need to be targeted based on quantity and hazard.

  The Agency to be funded, via the revised Special Waste Regulations, to audit and advise producers to reduce hazardous waste generation by businesses. Industry, business and commerce to reduce waste production and find alternative beneficial uses for wastes.

  Better understanding of why municipal waste continues to grow, in order to deliver a year on year reduction. Businesses should reduce the amount of material which householders have to dispose of after buying goods, and the principle of producer responsibility should be extended to more products.

  Local authorities to be allowed to pilot charging schemes for domestic waste.

  Reform of the landfill tax credits scheme to focus on waste reduction, re-use and recycling.

  Conversion of the landfill tax into a waste disposal tax, with graduated charges according to the environmental impacts of the disposal method.

  Exemption of secondary materials reprocessing from the climate change levy.

  The introduction of deposit refund schemes for household hazardous wastes which should be treated at the correct facilities.

  Encouragement of the Regional Technical Advisory Bodies to broaden their membership to include local community stakeholders.

  Greater stakeholder engagement in the development of local strategic waste plans, and the translation of the plans into facilities and contracts.

  Planning and pollution control applications to be determined at the same time.

  Reliable and up to date waste generation and management data.

  Implementation of new regulatory waste duties as far as possible through Pollution Prevention and Control. New duties such as the Landfill Directive, end of life vehicles, agricultural waste, and special waste need to be adequately funded: these will have substantial resource implications for the Agency.

  Given the extent of the changes required, new regulatory regimes for waste—including agricultural controlled wastes, new producer responsibilities, and new hazardous waste controls—should be phased.

BACKGROUND

  The UK currently generates annually around 29 million tonnes (mt) of municipal solid waste (MSW) every year, 78mt of commercial and industrial waste, and 400mt in total (which includes construction and demolition waste). Of the MSW, ten per cent is recycled/composted, eight per cent incinerated and 81 per cent landfilled. Half of industrial and commercial waste is landfilled, and 39 per cent recycled.

  Overall waste production is being reduced but household waste is growing. The number of facilities required to meet the Landfill Directive diversion targets over the next 15 years will depend upon MSW stock. If it continues to grow at 3-5 per cent per annum, the annual amount will have doubled by 2020, the UK will have to recover around 40 million tonnes annually, and 1,000 to 2,000 new waste facilities will be required.

  For an average householder, the annual water bill is £135 but the average waste bill is £50.

  By 2020 there has to be a 65 per cent reduction in the amount of biodegradable municipal waste landfilled compared with a 1995 baseline.

  Various materials are to be banned from landfills: hazardous liquids and corrosive materials by July 2002, whole tyres by July 2003 and shredded tyres by July 2006.

  There are eleven municipal waste incinerators in England and Wales. These are all new or significantly modified since 1996. All meet European standards of construction, maintenance and operation. The Agency is aware of around 20 potential new incinerators. The "energy from waste" industry estimates that only 6-11 will be built over the next five to 10 years. Other research puts the figure at around 100 incinerators.

  The Agency has no objection in principle to incineration provided that: it does not undermine better waste management options within the waste hierarchy; it represents the Best Practicable Environmental Option (BPEO) for disposal taking into account the waste hierarchy; it forms part of a regional or local strategy developed by local authorities based on the BPEO, taking into account the waste hierarchy and the need to dispose of waste in the nearest appropriate installation; the size, location and type of incinerator is consistent with the regional strategy and with statutory requirements to establish an integrated and adequate network of waste disposal installations; and individual incinerators meet stringent controls so as to minimise pollution of the environment, impact on human health and the effects on the local amenity.


2   An Environmental Vision-The Environment Agency's Contribution to Sustainable Development, 2001. Back


 
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