Post on 04-Jan-2016
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Consultant: CMDC Joint Venture
How to take into account economy and local conditions in implementation of BAT?
Consultant: CMDC Joint Venture
IPPC and economics
Economics reflected in ‘available’ element of BAT‘Available’ techniques shall mean those developed on a scale which allows implementation in the relevant industrial sector, under economically and technically viable conditions, taking into consideration the costs and advantages (Article 2(11) IPPC Directive)
Key points “economically and technically viable” “taking into account the costs and advantages” We require sufficient data in order to be able to make a decision
Consultant: CMDC Joint Venture
The IPPC Balancing Act
BEST AVAILABLE TECHNIQUE
Non-EnvironmentalCommercialPressures
PollutionControlCosts
Economic Viability
Technically Viable Techniques
Local
Environmental Issues
Global
Regional
Desired Environmental Outcome
Advantages Costs
Consultant: CMDC Joint Venture
Waste Incineration Plant
BEST AVAILABLE TECHNIQUE
Non-Enviro. Commercial Pressures
Competition Within Sector Power of Suppliers & BuyersThreat of New Entrants & SubstitutesReturn Expected from Investors Cost of Capital
Pollution Control Costs
Waste Handling / mixingFurnace configurationFGR / SNCRElectrostatic PrecipitatorDry or Wet Scrubber
Economic Viability- how much additional cost burden can sector absorb
Technically Viable Techniques
From Technical Guidance
LocalNOx, PM10’s
Metals Dioxins Furans
Odour Noise
Health, Amenity
CO2Global Warming
RegionalSOx, NOx, Acid Rain
Desired Environmental Outcome - Operating Techniques and Emission limits
Advantages Costs
Consultant: CMDC Joint Venture
Waste Landfill
BEST AVAILABLE TECHNIQUE
Non-Env Commercial Pressures
Competition Within SectorPower of Suppliers & BuyersThreat of New Entrants & SubstitutesReturn Expected from Investors Cost of Capital
Pollution Control CostsLiner / barrier techniquesCapping, leachate treatmentGas Control/ FlareWaste HandlingFencingMonitoring MethodsFinancial Provision
Economic Viability- how much additional cost burden can sector absorb
Technically Viable Techniques
From Landfill Directive Technical Guidance
LocalProtection of
Local Surface & GroundwaterOdour Noise
Litter
Health, Amenity
CH4Global Warming
Regional
None?
Desired Environmental Outcome - Operating Techniques and Emission limits
Advantages Costs
Consultant: CMDC Joint Venture
When would the Authority need to collect costs / make assessment?
In the development of guidance the balancing of these issues is already being addressed at increasingly detailed levels
BREF National Technical Guidance Individual Permits Landfill Directive
Not in all cases -so don’t worry !
Collection of cost data / specific economic assessment is not required:• Where either BAT or the “best environmental option” as per guidance is already
proposed by the operator with no specific local environmental issues that require a
beyond guidance solution.• For a new installation the DETR Practical Guide sets out that the best technique is
normally expected to be BAT (as per guidance)
Consultant: CMDC Joint Venture
Collecting cost data and economic assessments will however be required:
When there are multiple candidate BATs -- and selection of the appropriate one is not
clear-cut
When the BAT set out in the BREF/TGN is not appropriate, e.g. covering the sub-sector
under examination
Where local environmental impacts require a “beyond guidance BAT” solution
Where there are claims for a “sub BAT” outcome
For an existing installation where flexibility might be allowed re scale and timing on the
basis of disproportionate costs
This list is not exhaustive: costs can be required to make the decision whenever the Authority sees fit
Consultant: CMDC Joint Venture
Assessment of costsStep 1: obtain cost estimates from operators
Step 2: examine the credibility of the operator’s cost data are they complete? are they accurate?
Step 3: assess whether the costs are excessive economically viable in proportion to the environmental benefits
Consultant: CMDC Joint Venture
Step 1: collecting costs Require all costs for the operator resulting from the decision to invest in the
technique capital and operating costs in disaggregated form cost savings and changes in revenues assumptions on aggregation (eg discount rate, time horizon)
Required for all options examined
Operator is responsible for preparing costs
Where possible apportion costs to individual pollutants
Performance of different options varies therefore require cost represented per unit of pollution abated
Consultant: CMDC Joint Venture
Illustrative cost data submission
This submission is not sufficient to determine BAT
The cost data cannot be assessed on the basis of this break-down
Option Option 1(business as
usual)
Option 2 Option 3
Annualised capital costs (£’000) 1100 800 1500
Annualised operating costs(£’000)
900 1200 1000
Total annualised costs (£’000) 2000 2000 2500
NOx abatement (tonnes/yr) 1600 1000 2000
Cost / tonne abated (£/t) 1250 2000 1250
Consultant: CMDC Joint Venture
Step 1: total costsCOST COMPONENT OPTION 1 OPTION 2 OPTION N
COSTS
Total capital costs (£’000)
Net change in annual operatingcosts (£’000)Economic assumptions Time horizon (years) Discount rate (%)Equivalent annual costs(£’000 / yr)POLLUTION ABATEMENT
“Pollution abatement” (tonnes)
Unit cost (£’000 / tonne)
Consultant: CMDC Joint Venture
Step 2: examine the credibility of the data
Three key questions: are all the relevant cost components included? are the costs accurate and reasonable? are the assumptions for discount rate and economic lifetime of equipment consistent and
plausible
How to assess (will vary on a case-by-case basis): probe the operator expert judgement and internal consultation control cost database (benchmarking) economics support
Consultant: CMDC Joint Venture
Step 3: assess whether the costs are excessive
In IPPC this relates to: “economic viability” “taking into consideration costs and advantages”
=The IPPC balancing Act (see balance diagrams)
Economic viability: implies affordability for average operator to afford the technique; not necessarily for each individual operator. Work is in progress to maintain an ongoing view by collating business information on the sector from annual reports and
the internet.
Consideration of Costs and advantages: implies a cost-benefit comparison: balancing cost (£) v abatement level and associated advantages (usually not
expressed in £ terms) Remains an expert and sometimes negotiated judgement Work in progress to create a database of costs of abatement techniques
Consultant: CMDC Joint Venture
The IPPC Balancing Act
BEST AVAILABLE TECHNIQUE
Non-EnvironmentalCommercialPressures
PollutionControlCosts
Economic Viability
Technically Viable Techniques
Local
Environmental Issues
Global
Regional
Desired Environmental Outcome
Advantages Costs
Consultant: CMDC Joint Venture
Step 3: determining economic viability- Existing Burdens
Financial Resilience of Firms within the Sector Using Ratio Analysis of ‘Average Good Operator’, ‘ best’& ‘Worst’ to gain a measure of: Liquidity Solvency Financial return Efficiency
Consultant: CMDC Joint Venture
Step 3: determining economic viabilityImplies affordability by the ‘average’ operator not by the individual operator
Examine in terms of impact on unit profit margin, eg: market price : £100 per unit profit margin : £10 per unit change in abatement cost : £2 per unit
Can realistically request these data from operators but analysis should be undertaken by/with economists
Can be very complex and requires extensive sectoral knowledge (eg whether firms can pass through or must absorb cost increases)
Consultant: CMDC Joint Venture
Step 3: assessing costs and advantagesCosts should not be disproportionate to the environmental benefits, - a
useful means to assess is by £s per tonne of pollution abated
The control cost database can support by providing such figures
But there still remains a need for the Account manager’s expert judgement in selecting the appropriate option