Consultation Paper

Regulation of the Waste Management Sector

Part 1 – General

Purpose of the document 5Invitation to comment 5Freedom of Information 5Address to which comments should be sent 6

Part 2 – Background

Introduction 7The Existing Regulatory Framework 7Government policy in regard to waste management 8The changing nature of the waste management sector 10

Part 3 – Main Issues Arising in the Waste Sector

Introduction 14Upward pressure on charges for waste management services 14Competition Issues 14Recommendation of Indecon Review of Local Government Financing 16

Part 4 – Regulation

Introduction 17Government policy on regulation 17Alternative models of regulation 17Alternatives to regulation 19

Part 5 – Regulation of the Waste Sector

Introduction 20Who would regulate the waste sector? 20Which waste services would fall within a regulator’s remit? 20What powers would a waste regulator have? 21

Summary of key questions to be addressed 29

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Contents

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Purpose of this documentThe waste management industry has evolved over recent years with the growinginvolvement of the private sector in service delivery and the movement of localauthorities towards full cost recovery. It is recognised that competitive marketsmay work perfectly well without any need for regulation, however the wastemanagement sector may benefit from some form of regulatory framework, whichwould work in the interest of both service provider and consumer.

The Government undertook, in its White Paper “Regulating Better”, to consultmore widely before regulating. The purpose of this public consultation document isto provide an opportunity for interested persons to comment on whether there is aneed for a regulatory framework in the waste management sector, and, if such aneed is identified, to identify the most appropriate form of regulation which shouldbe applied.

Invitation to comment Interested parties are invited to comment on the key questions raised by this paperby close of business on 6 October 2006.

Where respondents wish to comment on specific points in the consultation paper, itwould be appreciated if the comments could be structured so that they includereferences to the relevant part and section number in the document.

In addition to commenting on specific points in the paper, respondents may wish toconsider and comment on the following issues:

• is there a need for regulation in the household waste collection sector only,or should there be regulation of the entire waste sector

• who would enforce the regulator’s decisions • if there is no identified need for an actual regulator, is there any other

available option for improving the operation of the waste managementsector.

Freedom of Information Respondents should note that, in the event of a request being made by any personunder the Freedom of Information Act, 1997 (as amended), it may be necessary forthe Department to disclose any, or all, of the submissions received. The Departmentmay refuse to disclose information only in exceptional circumstances, as specifiedin the Freedom of Information Act, 1997 (as amended).

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Part 1 - General

Address to which comments should be sent:

Submissions on this consultation paper should be forwarded to:Waste Infrastructure and Regulation,Department of the Environment, Heritage and Local Government,Custom House,Dublin 1. Phone: (01) 8882474 Email: wasteregulation@environ.ieFax: (01) 8882014

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Introduction

Part 1 of this consultation paper contains an invitation to interested parties tosubmit their views on whether or not the waste management sector should beregulated.

There have been rapid changes in the waste management sector in recent years dueto the increased involvement of a developing and consolidating private sector, thechanging role of local authorities as service providers and competitors within theindustry, and the movement towards full cost recovery for waste services whichhas led to increased charges for the consumer.

The waste management sector is now one which is fully and properly regulatedfrom an environmental perspective. To date no similarly comprehensive system ofsocio-economic regulation has been put in place. The policy document Taking Stockand Moving Forward (2004) identified the need to consider such a development. Thisis perhaps particularly relevant in a context in which the private sector has come toplay such a key role in the provision of waste collection and, increasingly, treatmentservices while the public sector remains a key player, with both sectors tending toin effect provide services to each other. There are concerns that the high cost ofwaste management services in the Irish economy may signal a need for betterregulation of the sector from a socio-economic perspective. While the evidence isnot conclusive the concerns of bodies such as Forfás have been noted (WasteManagement Benchmarking Study (2006)).

This part provides a short synopsis of the regulatory framework which underpinsthe current waste management system. It also provides an overview ofGovernment policy in the area of waste management and a summary of the mainchanges which have occurred in the waste management sector in recent years.

The existing regulatory frameworkHistorically, the waste sector was unregulated as it was based on a lowest costsolution without regard to strategic waste management planning. Wastemanagement policy placed little emphasis on waste prevention or reduction andwas focussed almost exclusively on disposal to landfill. The majority of theselandfills did not meet the high environmental standards which are required oflandfill operators today.

In the 1970s, the EU began to focus on the area of waste management and theefficient use of resources as a means of reducing negative environmental impacts.

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Part 2 - Background

The EU Waste Framework Directive of 19751 and the EU Landfill Directive of 19992

and associated EU case law provide the basis for Ireland’s current system of wastemanagement.

Ireland has transposed the waste management provisions of the relevant EUDirectives by means of primary legislation, the most important of which includesthe Environmental Protection Agency Act, 1992, the Waste Management Act 1996,the Waste Management (Amendment) Act, 2001 and the Protection of theEnvironment Act, 2003. A series of regulations has also been made to implementwaste management policy in the specific areas, inter alia, of licensing, permitting,incineration, hazardous waste and the landfill levy.

Notwithstanding the introduction of a modern legal framework in Ireland, therehas been a recorded growth in the generation of all waste streams in recent years.This growth can largely be attributed to the effects of population growth, economicgrowth and better data collection and reporting.

Government policy in regard to waste managementCurrent Government policy in relation to waste management is grounded in theinternationally recognised hierarchy of waste options. The most favoured option iswaste prevention, followed by minimisation, reuse, recycling, energy recovery andthe least favoured option of disposal to landfill. This can be represented graphicallyas follows:

Waste Hierarchy

1 Council Directive 75/442/EEC of 15 July 1975 on waste2 Council Directive 1999/31/EC of 26 April 1999 on the landfill of waste

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Disposal

Energy Recovery

Recycling

Reuse

Minimisation

Prevention

least favoured option

most favoured option

The Government has supplemented the primary and secondary legislativeframework with a series of policy documents and reviews which set out thedirection in which Ireland is moving with regard to both waste prevention andwaste management.

‘Changing Our Ways’ (1998)The policy document, ‘Changing Our Ways’, was published in 1998. This documentfocussed on an “integrated waste management” approach based on theinternationally adopted hierarchy of waste management options. It also stressedthe need to “modernise waste management practice and secure the provision ofenvironmentally efficient infrastructure” and established the framework forregional waste management planning.

Key targets were set for municipal waste recycling and biological treatment. Thesetargets were to be achieved within a 15 year timescale and included:

• Diversion of 50% of overall household waste away from landfill.• Minimum 65% reduction in biodegradable wastes consigned to landfill.• Development of composting and other biological treatment facilities capable

of treating up to 300,000 tonnes p.a. as an alternative to landfill.• Recycling of 35% of municipal waste.• Recycling at least 50% of C&D waste within a 5 year period, with a

progressive increase to at least 85% over 15 years.• Rationalisation of municipal waste landfills, leading to a network of 20 state

of the art facilities.• Reduction of 80% in methane emissions from landfill.

Regional Waste Management PlansThere is a legal requirement on local authorities to prepare waste managementplans which detail how they will deal with the waste arising in their areas. Wastemanagement plans were drawn up by the 34 local authorities over the period 1998-2002. Seven regional groupings prepared plans (Dublin, North East, Midlands,Connaught, Cork, Limerick/Clare/Kerry and the South East) while three countiesprepared individual plans (Donegal, Kildare and Wicklow). Each of the plans settargets to be achieved on a regional basis which will assist in achieving the nationaltargets set out in “Changing Our Ways”. These plans are currently being revised totake account of progress made in their implementation.

“Changing Our Ways” highlighted the need for co-operation by neighbouring localauthorities and the use of the private sector to contribute to the delivery of wasteinfrastructure and services.

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Infrastructure Grants SchemeIn 2002, the Department of the Environment, Heritage and Local Governmentlaunched a capital grants scheme which is targeted towards the provision by localauthorities of waste recovery infrastructure, the need for which was identified in, orhelps to achieve the objectives of, the local authority waste management plans. Thetypes of infrastructure that are deemed eligible for support under the schemeinclude:

• Networks of “Bring Banks” for recyclable materials.• Civic amenity sites for recyclables and bulky household wastes.• Transfer stations facilitating recovery facilities.• Materials recovery facilities (MRFs) for ‘dry’ recyclables.• Biological treatment of “green” and organic household waste.

The Department also makes grant assistance available to local authorities to offsetthe rising operational costs of operating existing recycling facilities.

Preventing and Recycling Waste: Delivering Change (2002)“Delivering Change” proposed steps which should be taken in order to secureprogress in the areas of waste prevention, minimisation and recovery.

Taking Stock and Moving Forward (2004)This review evaluates the progress being made in the provision of wasteinfrastructure and sets out a programme of actions needed to achieve furtherprogress.

National Overview of Waste Management Plans (2004)This report examines the current state of progress in relation to implementation ofthe waste management plans for each of the ten waste management regions.

National Strategy on Biodegradable Waste (2006)This strategy sets targets for the diversion of biodegradable municipal waste fromlandfill and sets down the measures needed to enable these targets to be met. Theamount of biodegradable municipal waste going to landfill is to be reduced to justover 450,000 tonnes by 2016, or 35% of the amount produced in 1995.

The changing nature of the waste management sectorThe composition and operation of the waste management sector has evolvedsignificantly over the last decade. The main changes include:

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(a) Development of private sector involvementTraditionally, local authorities played the key role in the household waste collectionand disposal market. Private sector involvement in the waste sector wascharacterised by small-scale localised waste collectors who tended to specialise inthe commercial and industrial sectors. “Changing Our Ways” highlighted the scopefor increased participation by the private sector in all areas of waste management.

In recent years, there have been significant levels of investment and growth in scaleof the private waste industry. A report by Davy Stockbrokers in 2003 included apreliminary estimate that the industry generates annual revenues of approximately€1 billion.

The refuse collection market is now composed of three main services:

• collection directly by local authorities, • contracting / franchising out by local authorities to other operators, • provision by the private sector where the local authority has exited from the

collection market.

As with any utility which effectively becomes privatised, there is a need to guardagainst any deterioration in standards of service, any “cherrypicking” of customersand any monopolistic generation of excessive profits to the detriment of theconsumer.

(b) Consolidation within the waste industryTraditionally the waste market was divided into sub markets relating to collection,segregation of recyclable goods, transport and disposal. However, in recent yearsthere has been a rapid movement towards market consolidation, with a markedprocess of both vertical and horizontal integration occurring within the industry.

The effect of vertical integration is to enable single companies to offer servicesthroughout various stages of the whole waste chain (e.g. from collection stagethrough to disposal). Rising disposal fees coupled with the small, geographicallyspread out nature of the customer base in Ireland have encouraged horizontalintegration as a small number of significant operators have acquired the business oftheir smaller counterparts. The 2003 report by Davy Stockbrokers indicated that itis likely that the current process of industry consolidation will continue. Thiscreates the opportunities for monopolies to develop within the waste sector, whichmay ultimately lead to higher charges and a loss of choice for the consumer.

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(c) Conflicting role of local authorities as both regulator and competitor in themarket

Traditionally, local authorities were the main operators in the waste collectionmarket. As a consequence of increased private sector involvement in this market,the private sector is now the dominant collector in at least 20 of the 34 localauthority areas. However, in spite of increased private sector involvement incollection, the control of landfills and waste treatment facilities still rests primarilywith local authorities. Local authorities do not require collection permits or wastefacility permits for their own activities, however they are statutorily responsible forissuing waste collection and waste facility permits to the private sector. This placeslocal authorities in the potentially conflicting position of both regulating andcompeting within the waste industry.

(d) Movement of local authorities towards full cost recovery and full costpricing in the collection market

In the past, outside the urban centres, it was often the case that local authorities didnot provide a waste collection service. Where such a service was provided, the costsof the service were often not calculated to reflect the “polluter pays principle”.Instead the costs were determined as part of the local authorities’ annual budgetaryprocess.

In the areas which are serviced by local authorities, waste charges have steadilyrisen to levels which are a more realistic reflection of the actual costs of disposal. Inareas being served by private collectors, costs have also risen and are related to themarket costs of providing the service.

Increasing waste charges are mainly driven by the higher environmental standardswhich are now being demanded by both the regulatory authorities and societygenerally. This includes costs associated with the proper operation of landfills, andtheir closure and ongoing management thereafter, as well as the need to contributeto the costs of the provision of appropriate recycling facilities. However, there is aconcern that high waste charges will lead to an increase in the illegal disposal ofwaste.

In order to reflect the “polluter pays principle” and incentivise households torecycle more of their waste, the Department asked waste collection serviceproviders to move to a system of use based charging from the start of 2005. Usebased charging acts as an incentive for individuals and families to change theirbehaviour by effectively rewarding those who minimise their waste output throughrecycling.

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On foot of concerns about the impact of lump-sum payments on lower incomegroups, the Department has asked local authorities to engage with commercialwaste collectors with a view to agreeing to make pay-as-you-go arrangementsavailable where necessary.

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Introduction

Part 2 of this consultation paper gave an overview of the regulatory frameworkwhich underpins the waste management system. It also provided a summary ofGovernment policy in the area of waste along with a short description of the mainchanges which have occurred in the waste management sector in recent years.

The rapid evolution of the waste management sector has led to the emergence of anumber of issues which have prompted the Government to consider whether thewaste sector should now be regulated in a manner consistent with the regulation ofother utility type activities. This part provides a short overview of these issues.

Upward pressure on charges for waste management servicesIn accordance with section 52 of the Protection of the Environment Act 2003, thedetermination of waste management charges is a matter for the relevant localauthority, where it acts as the service provider. Similarly, where a private operatorprovides the collection service, it is a matter for that operator to determine charges.

From the consumer’s perspective, waste collection charges have been seen to berising rapidly in recent years. These rises can generally be explained by themovement of local authorities away from their historically low charging leveltowards full cost recovery of waste disposal costs.

Nonetheless, concerns have been expressed that there could be an element ofexcessive charging in the market, particularly by collectors who are in amonopolistic position. The Competition Authority recently investigated andreported on the level of waste collection charges imposed by one private sectoroperator. The Report found no evidence of abuse of dominance in this particularcase, but did comment that the “market for household waste collection is notworking well for consumers”.

This prompts the question as to whether or not there is a need for some sort ofregulatory system to protect consumer interests and prevent the possiblegeneration of excessive profits by monopolies.

Competition issuesUnder current legislation, local authorities are responsible for waste managementplanning and the regulation of waste activities and facilities. They perform theseroles whilst also competing with the private sector in the provision of wasteservices and waste infrastructure. This dual role of local authorities acting as both

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Part 3 - Main Issues Arising In The Waste Sector

competitor and regulator (as discussed in part two of this paper) may distortcompetition in the waste sector in favour of local authority provision of services.

The private waste sector has highlighted the following main areas of concern to theindustry:

(a) Unlike their private sector counterparts, local authorities are not required toobtain collection permits in order to engage in the commercial collection ofwaste.

(b) Local authorities are required to undergo a less onerous registration processfor certain waste activities, whereas their private sector counterparts arerequired to obtain waste permits for the same activities. Permitting is alsomore costly for the private sector.

(c) The planning system operates differently for private sector and publicsector projects. It takes longer to obtain planning permission for privatesector projects than it does to obtain permission for local authority projects.In addition, while local authorities can obtain registration for their projectswithin a short timescale, the permitting of private sector projects can besubject to delays. Disparities in planning and permitting timescales maygive local authorities an advantage over private waste companies in settingup their own waste facilities. The Strategic Infrastructure Bill seeks toaddress this issue.

(d) The Environment Fund comprises monies raised through both the plasticbag levy and the landfill levy. The landfill levy is charged at €15 per tonnebased on every tonne of waste which goes to landfill. Local authority wasteinfrastructure projects are part funded by the Environment Fund, howeverno funding is available for private sector waste projects despite thecontribution that private sector waste companies make towards the landfilllevy and ultimately the Environment Fund.

(e) Local authorities and the private sector are both competing in the samemarket therefore it would be expected that they would operate under thesame market conditions.

Changes in the regulatory framework could address these issues to a significantdegree.

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Recommendation of Indecon Review of Local Government Financing

The Indecon Review of Local Government Financing was published in March 2006.This report recommends the establishment of an appropriate regulatory frameworkto protect consumer interests and to prevent excessive profits being generated incases where local authority services are contracted to private sector localmonopolies.

Recommendation no. 11 of the Indecon report states that:-

“In assessing the activities of local authorities it is important to identify whetherthere is a financing, delivery or regulatory role for government. There may be caseswhere central or local authorities’ role or that of a separate agency, should focus onservice regulation rather than more traditional financing or delivery role. The issueof appropriate regulation is particularly relevant in areas where local authoritieshave withdrawn from service provision and where private suppliers are now fillingthe gap. This is a particular issue in the market for refuse collection, where anumber of different delivery mechanisms are now in operation. These include directprovision by local authorities, contracting out / franchising out, and where localauthorities have exited totally from provision and the service is now provided by aprivate operator. It is this latter case where appropriate price and quality regulationis required to ensure that service standards are maintained and that consumers arenot paying excessive prices. These developments pose questions for regulatoryauthorities and the optimal manner in which local authorities should withdraw orcontract out services. Waste management is an example of one area whereregulation is needed. In the cases where a competitive tendering process for afranchise arrangement is implemented additional regulation may not be necessary.”

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IntroductionPart 3 of this consultation paper gave a short summary of the main issues whichhave prompted the Government to consider whether the waste sector should nowbe regulated. This part provides an overview of current Government policy inrelation to regulation and a synopsis of the alternative models of regulation whichcould be applied. It also presents alternative courses of action which could befollowed if it is decided that regulation is not the most appropriate option for thissector.

Government policy on regulationIn 2004, prompted by the effect that regulation can have on nationalcompetitiveness, the Government produced a White Paper entitled “RegulatingBetter”. The White Paper aims to improve the overall quality of regulation,although it is recognised that, depending on the individual circumstances, moreregulation or less regulation may be needed.

The Paper sets out six core principles of good regulation which should be taken intoaccount when considering the need for regulation. These are:

1. Necessity – is regulation necessary? 2. Effectiveness – is the regulation properly targeted and can it be enforced? 3. Proportionality – is regulation the most suitable way to achieve the

objective? 4. Transparency – has there been stakeholder consultation and is there

explanatory material?5. Accountability – is there a clear line of accountability and an effective

appeals process?6. Consistency – is the regulation consistent with other regulations already in

place in this area?

Alternative models of regulationThere are 3 broad models of regulation which can be used to regulate a particularsector. The choice of model will depend on the suitability of the model to theparticular circumstances.

(a) Governmental regulationThe traditional “command and control” model involves the making of bindingrules and regulations by the Government. Generally this is in the form of primaryand secondary legislation which can be monitored for compliance and enforcedwhere necessary.

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Part 4 - Regulation

Ireland’s waste management and environmental legislation provides a regulatoryframework for the waste management sector. Local authorities and theEnvironmental Protection Agency are responsible for monitoring compliance withthis legislation. However, their role is limited to ensuring that the environment isprotected and they do not have any role to play in the determination of wastecharges by the private sector, or other socio-economic issues. The Governmentcould introduce a “waste regulator” for the purposes of ensuring that there is areasonable basis for the determination of waste charges and an appropriate level ofservice.

(b) Industry self regulation or co-regulationThere could be a form of industry self regulation by means of a national body whichwould comprise members of the particular industry, local government and centralgovernment. The body could coordinate national activity by the members of theindustry and monitor any lack of compliance by individual members.

(c) Performance based regulationThis form of regulation requires the least Governmental intervention, because therequired outcomes and objectives are specified, but there is discretion as to themeans to be used to achieve them. This focus on outputs, rather than inputs, meansthat the Government can specify the particular desired outcome but will leave it tofirms/individuals to decide the process by which they will comply with the law.Industry self regulation or co-regulation may be used to monitor and enforce theachievement of the objectives.

The Minister for the Environment, Heritage & Local Government is alreadyempowered under Section 60 of the Waste Management Acts to issue policydirections in relation to certain waste related matters. This power was used for thefirst time in 2005 when the Minister issued a policy direction to local authorities toencourage them to intensify their enforcement activities in relation to illegal wasteactivity. A similar power to issue directions could be vested in a waste regulator, sothat the regulator could direct the waste industry, local authorities or the EPA (asappropriate) to achieve certain specified outcomes.

A waste regulator could for example use this power to direct that any competitivetendering of waste collection services would include a requirement that thesuccessful tenderer should provide a satisfactory waste collection service on lesseconomic routes.

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However, in view of the variety of issues which are causing concerns, it may bedifficult to balance the interests of both consumers and the waste managementindustry using this approach.

Alternatives to regulationIn some cases, it may be inappropriate or unnecessary to regulate. In such cases,there are two options:

(a) No intervention/do nothingWhere a regulatory intervention would have a neutral effect, or where a situationcan be resolved without any further action, it would then be appropriate to donothing. However, in situations where regulation would have a neutral effect, itmay be the case that some other non-regulatory intervention may be appropriate.

(b) Incentivisation through use of market/economic instrumentsMarket/economic instruments can be used to provide direct or indirect monetaryincentives for achieving a particular objective (e.g. for the purposes of reducingwaste output, increasing recycling levels, direction of waste etc.). The use ofincentive based instruments may prove effective for the faster delivery of outcomeswithout the need for more prescriptive measures such as regulation which wouldimpose a higher administrative cost. The use of such instruments also has theadvantage of flexibility as they can be adjusted easily to adapt to producer orconsumer behaviour.

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Key Question 1

Which model of regulation would be most appropriate for the wastesector?

(a) Governmental regulation; or

(b) Industry self regulation or co-regulation; or

(c) Performance based regulation.

Key Question 2

Is there a more appropriate alternative to regulation of the waste sector?

(a) No intervention/do nothing; or

(b) Incentivisation through use of market/economic instruments.

Introduction

Part 4 of this consultation paper gave an overview of Government policy onregulation and queried if regulation would be appropriate to the waste sector.Assuming that the waste sector should be regulated, this part raises issuesregarding who should regulate and the format that this regulation should take.

Who would regulate the waste sector?

If it is decided that there is a need for a waste industry regulator, the question thenarises as to who that regulator should be. There would appear to be two options:

(a) Appointment of a new regulator for the waste industryThe Government has stated in its White Paper on Regulation that it will “create newsectoral regulators only if the case for a new regulator can be clearly demonstratedin light of existing structures”. Given the resource implications of establishing anew body, there would have to be a convincing argument that the functions couldnot be carried out by an existing regulator.

(b) Assignment of additional regulatory powers to an existing regulatorAdditional regulatory powers could be conferred on one of the existing sectoralregulators. The expansion of an existing regulator’s remit would also have staffingand funding implications for the regulator involved.

Which waste services would fall within a regulator’s remit?

If it is decided to regulate the waste sector, it would be necessary to determinewhich services would fall within a regulator’s remit.

(a) Domestic waste collection serviceAll domestic waste collection services provided by both local authorities and theprivate sector. The regulator’s remit could also include domestic waste servicessuch as skip hire etc.

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Part 5 - Regulation of the Waste Sector

Key Question 3

Who would regulate the waste sector?

(a) Appointment of a new regulator for the waste industry; or

(b) Assignment of additional regulatory powers to an existing regulator.

(b) Commercial waste collection serviceAll commercial waste collection services provided by both local authorities and theprivate sector.

(c) All waste recovery and disposal facilitiesRegulation of services provided by all waste recovery and disposal facilities whichultimately impose either direct or indirect charges on the consumer. This wouldinclude waste infrastructure provided by either local authorities or the privatesector, such as waste recovery facilities, thermal treatment facilities, landfills etc. Itcould also include vesting the power to direct waste to particular facilities in theregulator to ensure optimal use of waste infrastructure having regard to the wastehierarchy, economic viability and the achievement of the national targets set out inPart 2.

The Government policy statement, Taking Stock and Moving Forward (2004) stated(pg. 24): “The regional approach to waste management strikes the most appropriatebalance – providing the scale to make waste services economically viable while atthe same time ensuring that responsibility for dealing with waste is kept sufficientlyclose to the areas in which waste is generated.” While this remains the position itmay be that a regulator could be assigned a role of ensuring that the regional plansproperly reflect overall national and EU policy and, in particular, respect for thewaste hierarchy described earlier.

What powers would a waste regulator have?

The powers which a regulator might have could be divided into two broadcategories –

(1) powers in relation to economic issues, and

(2) powers in relation to operational issues.

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Key Question 4

What combination of services would fall within a regulator’s remit ?

(a) Domestic waste collection service;

(b) Commercial waste collection service;

(c) All waste ecovery and disposal facilities.

(1) Powers in relation to Economic IssuesLike any market, the waste management sector can be subject to market failureswhich affect the efficiency of the market. There may be imperfect competition in themarket with a result that monopolies can charge higher prices than they would ifthey had to compete within the market. In addition, monopolists will not have thesame incentive to provide the most efficient service possible because theircustomers do not have any option but to use them.

Market failures can also lead to inequity in society if consumers do not have thesame financial means as each other to pay for the same service. In particular,persons of limited means (such as pensioners or the unemployed) may experiencedifficulty in paying for a waste collection service.

A regulator could be empowered to address economic issues in the wastemanagement sector, where the market appears to have failed to provide theoptimum result in terms of both efficiency and equity. The economic issues whicha regulator could address might include the following:

(a) Determination of an appropriate waste charging structure

Price settingA regulator could be given the power to determine a nationwide waste chargingstructure. If this route were to be followed, then the regulator could be empoweredto set waste charges either on a nationwide basis or else within a geographical oradministrative area to take account of local circumstances. In setting charges, aregulator could ensure that an adequate level of service is provided to allconsumers, irrespective of their profitability to the service provider.

Price cappingInstead of determining individual charges, a regulator could be empowered to set asingle nationwide price cap. This would be similar to the power which theCommission for Communications Regulation currently has to cap the price whichEircom can charge subscribers for fixed telephone line rental. However, the effectof a cap on waste charges would be to cross-subsidize the less profitable customers(e.g. those in rural locations) through a higher charge to those customers in areaswhere the cost of service provision is lower due to economies of scale (e.g. urbanareas).

There could be inherent difficulties with placing the onus on a regulator, rather thanthe market, to establish either an actual price or a price cap. If the price is set too

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high there will be additional costs to consumers. A price which is too low will leadto under investment in the service with a possible withdrawal of the private sectorfrom service provision. In addition, an artificially low price would not be in linewith Government’s stated policy to implement the “polluter pays principle”.

“Watchdog” roleAlternatively, waste service providers could continue to determine their owncharging systems, but a regulator could be given a “watchdog” role andempowered to investigate complaints regarding excess charges. Depending on thetype of regulatory framework put in place, a regulator could then have the powerto cap certain charges where they could be demonstrated to be excessive.

Type of chargesAnother relevant issue is the type of charges that the regulator would deal with.The regulator could be empowered to deal with all waste charges – domestic andcommercial, fixed and variable – or some combination of these. All domestic wastecollection charges are currently required to be calculated on a usage basis. Some ofthese charges are purely use-based variable charges (e.g. tag a bag, bin tags etc)while others also incorporate a fixed standing charge element to cover the costs (e.g.staff costs, transport, maintenance, insurance etc.) of providing the weeklycollection service to each customer, whether or not a bin is presented for emptying.A regulator may be empowered to examine either/both the fixed and/or variablecosts of collection.

Gate feesA regulator could also be empowered to regulate the gate fees charged at landfillsites and waste to energy plants. This would particularly arise in circumstanceswhere waste is being directed to a particular facility. It is likely that any suchregulation would need to have regard to the additional costs incurred by localauthorities in maintaining landfills and preparing them for eventual closure,provision of additional recycling infrastructure, promotion of waste awarenessactivities etc. Therefore provision could be made for local authorities to earn a“margin” over their landfill costs, similar to the margin which a private sectoroperator would make for profit.

(b) Imposition of a public service obligation

As a general rule, a competitive market tends to provide direct benefits to theconsumer by way of lower prices, more extensive choice and higher standards ofgoods and service. However, where there is a competitive market for a utility such

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as waste collection, it is open to service providers to decide to cherrypick theircustomers by competing only in the areas which have the type of customer basewhich would maximise their profits.

Section 33(3)(b) of the Waste Management Act, 1996 provides that there is no dutyto collect waste where the cost of collection would be unreasonably high. Inaddition there could be little interest from the private sector in competing for thecollection market in rural areas which have a dispersed customer base, unlesscharges could be pitched at a sufficiently high level to generate a return oninvestment.

In order to create a greater parity between the waste collection charges beingimposed on customers in different geographical areas, the regulator could beempowered to impose a public service obligation levy on all customers of wasteservice providers. This levy could be used to recoup the additional costs incurred inservicing less profitable/unprofitable areas or households judged unable to meetelements of collection charges.

(c) Supervision of competitive tendering arrangements

In 2005 the Competition Authority conducted an investigation into allegations ofexcessive pricing by a private sector company involved in providing a householdwaste collection service. Following an investigation, the Competition Authority,issued a decision (No. E/05/002) of 30 August, 2005, which determined that theprices being charged were not unrelated to the cost of providing the service and thatthere was no evidence that this particular company had abused its dominantposition in the waste collection market. However, the Competition Authority didcomment that the household waste collection market was not working well forconsumers. The Authority reviewed the ways in which similar services wereprovided in other countries and concluded that the competitive tendering of wasteservices contracts could yield significant cost savings for consumers. Under acompetitive tendering arrangement, waste service providers would be invited tocompete with each other for markets and customers. Following an open tenderprocess, contracts would then be awarded to successful firms for definedgeographic areas and limited time periods. Conditions and penalty clauses couldbe built into the contracts to ensure an adequate level of service delivery.

Competitive tendering may not be appropriate for all local authorities e.g. where awork force is already employed and equipped to provide a collection service.However, a regulator could be empowered to perform a supervisory role in the

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competitive tendering of waste services contracts by some local authorities. Aregulator could supervise the placing of advertisements, opening of tenders andarrangement of contracts to ensure that the consumer is provided with the bestpossible service at the most competitive price.

(2) Powers in relation to Operational IssuesAs discussed in Part 3 of this consultation paper, there is an apparent conflictbetween the role of local authorities as both regulators of the waste market andcompetitors within the same market. The practical effect of this dual role may bethat local authorities are granted an advantage over the private sector in theprovision of both waste infrastructure and waste management services. This couldhave the potential to distort competition by discouraging the entry of more privatesector companies into the market.

A regulator who has no commercial interest in the provision of waste managementservices could be vested with powers to determine the operational issues involvedin the waste management sector. This power might relate only to the operationalactivities currently carried out by local authorities and would in no way supersedeany of the regulatory functions which are currently carried out by theEnvironmental Protection Agency.

The operational issues which a regulator could address might include thefollowing:

(d) Issue, renewal and revocation (where necessary) of waste collection permitscentrally

In accordance with the Waste Management (Collection Permit) Regulations, 2001(S.I. 402 of 2001) the issue and renewal of waste collection permits is a function oflocal authorities. However, as discussed previously in Part 3 of this paper, thisfunction gives local authorities a dual and potentially conflicting role as bothcompetitors and regulators in the waste market.

A possible solution to this apparent difficulty would be to place a requirement onlocal authorities to obtain collection permits for their activities and then pass thepermitting function to an independent regulator who could issue and renewpermits centrally and within a strict timeframe to both private sector operators andlocal authorities. Conditions could be attached to permits which would guaranteea specified level of service and at a reasonable price.

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(e) Enforcement of waste collection permitsThe provisions of the Collection Permit Regulations could be expanded to providea role to a regulator to revoke permits where conditions have not been compliedwith and to impose financial penalties where appropriate.

(f) Coordination of the scope and objectives of the regional waste managementplansThe need for strategic waste management planning was first highlighted in thepolicy document “Changing Our Ways”. Local authorities were encouraged to co-operate with neighbouring authorities and to utilise the expertise of the privatesector, where possible, to deliver waste infrastructure and services.

By 2001, seven waste management planning regions (encompassing 31 localauthorities) had evolved with the preparation of seven regional plans, while threelocal authorities had prepared their own individual plans.

A number of environmental principles underpin EU waste legislation. One of theseis the Proximity Principle, which places an obligation on Member States to takeappropriate measures to “establish an integrated and adequate network of wastedisposal installations and, as far as is practicable, to move towards self-sufficiencyin waste disposal.” In order to ensure that Ireland moves towards self sufficiencyin waste disposal, it is essential that the waste management plans are coordinatedso that there is appropriate provision of the necessary waste infrastructure.

In order to better align the scope and objectives of individual regional wastemanagement plans, a waste regulator could be tasked with coordinating thedevelopment of the plans so that any overlapping is avoided. This would have theeffect of creating a way to coordinate waste management planning on a nationalbasis.

(g) Determination of waste movementsIreland currently has seven waste management planning regions, comprised of 31local authorities divided into geographical groupings of neighbouring localauthorities areas. Three local authorities (Kildare, Wicklow and Donegal) have theirown individual waste management plans.

The EU’s Proximity Principle requires that waste should be disposed of as close aspossible to the place where it is produced. The Government supports this principlein its policy document Taking Stock and Moving Forward which accepts that facilitiesprovided in a region must deal primarily with waste from that region.

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However, in some instances where waste is being produced, the closest disposalfacility may be situated within an area covered by a separate regional wastemanagement plan.

The Minister issued a policy direction (under Section 60 of the Waste ManagementAct, 1996) to local authorities which confirmed that one of the fundamentalcomponents of policy in regard to the regulation of the movement of waste is theapplication of the proximity principle. However, it also recognised that anunnecessarily restrictive approach may not be in keeping with the philosophyunderpinning the regional approach to waste management planning and, byimplication, the rational use of waste management infrastructure. TheEnvironmental Protection Agency has also indicated that “the inter-regionalmovement and treatment of waste should be provided for…in appropriatecircumstances ”

The Minister has recommended that “relevant authorities, in preparing wastemanagement plans, determining the necessary statutory authorisations and inregard to other associated waste management functions, should recognise that theapplication of the proximity principle does not entail interpreting administrativewaste management planning boundaries in such a manner as to inhibit thedevelopment of waste infrastructure which will support the attainment of nationalwaste management policy objectives through the rational development and use ofsuch infrastructure.”

A regulator could be empowered to direct waste to an appropriate facility in adifferent region in such cases. In addition, it could also be open to a regulator todirect waste to facilities which are higher up the waste hierarchy so that the wasteis dealt with in the most environmentally sound manner. The regulation of facilitygate fees could also be used by a regulator for this purpose.

(h) Setting and monitoring minimum standards of service deliveryWaste permitting legislation could be amended to provide a regulator with a role insetting and monitoring minimum standards of service delivery. Used inconjunction with competitive tendering (if this were to be the preferred option), thepermits system could provide a means of ensuring that services are delivered to anacceptable standard. A regulator could be empowered to impose sanctions, revokecontracts or revoke permits where the service has not been acceptable.

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Key Question 5

What functions would a waste regulator have?

Economic Issues(a) Determination of an appropriate waste charging structure;

(b) Imposition of Public Service Obligations;

(c) Supervise competitive tendering arrangements;

Operational Issues(d) Issue, renewal and revocation (where necessary) of waste collection

permits centrally;

(e) Enforcement of waste collection permits;

(f) Coordination of the scope and objectives of the regional wastemanagement plans;

(g) Determination of certain waste movements i.e. the direction of waste;

(h) Setting and monitoring minimum standards of service delivery.

Summary of Key Questions to be addressed

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Key Question 1

Which model of regulation would be most appropriate for the wastesector?

(a) Governmental regulation; or

(b) Industry self regulation or co-regulation; or

(c) Performance based regulation.

Key Question 2

Is there a more appropriate alternative to regulation of the waste sector?

(a) No intervention/do nothing; or

(b) Incentivisation through use of market/economic instruments.

Key Question 3

Who would regulate the waste sector?

(a) Appointment of a new regulator for the waste industry; or

(b) Assignment of additional regulatory powers to an existing regulator.

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Key Question 4

What combination of services would fall within a regulator’s remit ?

(a) Domestic waste collection service;

(b) Commercial waste collection service;

(c) All waste ecovery and disposal facilities.

Key Question 5

What functions would a waste regulator have?

Economic Issues(a) Determination of an appropriate waste charging structure;

(b) Imposition of Public Service Obligations;

(c) Supervise competitive tendering arrangements;

Operational Issues(d) Issue, renewal and revocation (where necessary) of waste collection

permits centrally;

(e) Enforcement of waste collection permits;

(f) Coordination of the scope and objectives of the regional wastemanagement plans;

(g) Determination of certain waste movements i.e. the direction of waste;

(h) Setting and monitoring minimum standards of service delivery.