The Roadmap to a Resource Efficient Europe what will this mean for the longer-term

development of the secondary commodity market in Europe?

Dr. Adam Read – DirectorWaste Management & Resource Efficiency, AEA

Secondary Commodity Markets Conference13th November 2012One Drummond Gate, Victoria, London

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+ Personal welcome

+ About AEA

+ The context of Resource Efficiency

+ Overview of the Roadmap to Resource Efficiency?

+ Is the Roadmap Deliverable?

+ Defra / BIS Resource Efficient UK

+ The EU as a Commodity Trading Block

+ Impacts for Recyclers

+ Unforeseen Consequences

+ In Summary …

Presentation scope

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A personal welcome

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A personal welcome

+ Dr Adam Read- Practice Director @ Ricardo- AEA for Waste Management & Resource

Efficiency- 18 years of operational expertise - 80 consultants (UK) - Former Local Authority Recycling Officer (RB Kensington & Chelsea)- Project Director for a number of EC product policy jobs- Technical Advisor to Defra on their Resource Scarcity Action Plan- Working with a number of waste companies on materials strategies

+ Acknowledgements- AEA team (help with the research) - My clients for allowing me to ‘share’ their experiences- The organisers for the invite

www.ricardo-aea.com

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Our Experience ….

+ Resource Efficiency studies- Defra, WRAP, Envirowise, Private Sector companies

+ Product Policy studies- Defra, Environment Agency, European Commission

+ Resource Risk studies- Defra, ZWS, DfID

+ Private Sector Support- Shanks, Connaught, Dairy UK, Veolia, Sita, Biffa, Hills- RFU, Christies, Diageo etc.

Working in this space…

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Context to the RE Roadmap

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The Context

+ There is only one world and one Europe!

+ Growth of European economy even in times of austerity

+ Increasing globalisation leading to increasing resource use- Pressure on dwindling resources

+ European challenge = stimulating growth whilst leaving a sustainable future for future generations

+ In the EU each person consumes- 16 tonnes of materials annually of which 6 tonnes are wasted (37.5%)- 3 tonnes of this going to landfill

+ Businesses are facing ever rising costs for raw materials as resource availability comes under pressure- a real driver for change!

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Looking forward …

+ Worldwide, demand for food, fibre and feed is predicted to grow by 70% by 2050

+ Net imports of resources per person are at their highest in Europe (global comparison) but expect significant increases from rapidly developing economies (India, China, Brazil etc.)

+ Predicted to require two planets to sustain us by 2050 (1.3 at current) = NOT SUSTAINABLE

+ World Business Council for Sustainable Development states that ‘we require significant improvements in RE by 2020’

+ Therefore, RE is a fundamental part of the European agenda for future global competitiveness… this is a business issue!- Will create jobs- Will help address the current global economic crisis locally …

Liz Goodwin just last week!

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“In a recent survey 80% of UK based CEOs of manufacturing companies said raw material shortage was a risk to their

business.” “A 147% surge in real commodity prices since 2000, and the uncertainty being

caused by historically high levels of price volatility are hampering investment and

economic growth”

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Europe 2020 Strategy

+ Adopted in 2010 as a growth strategy for the EU to become a smart, sustainable and inclusive economy within the next decade

+ One of the three reinforcing priorities = to promote a resource efficient, greener and more competitive economy

- to help decouple economic growth from the use of resources, support the shift towards a low carbon economy, increase the use of renewable energy sources, modernise our transport sector and promote energy efficiency….

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The agenda has been bubbling …

The Times 28th May 2009

“The robust international trade in illegally mined, quota-busting rare-earth metals highlights China’s

near monopoly on the raw materials for environmental technology – a 95% dominance of world supply that is likely to become more widely

noticed as China tightens its grip”

“The robust international trade in illegally mined, quota-busting rare-earth metals highlights China’s

near monopoly on the raw materials for environmental technology – a 95% dominance of world supply that is likely to become more widely

noticed as China tightens its grip”

What is Resource Efficiency?

+ Doing more with less!

+ Preventing waste, promoting reuse and recycling, developing markets for valuable products

+ Generating the greatest benefits with the smallest quantity of natural resources

+ Producing and consuming within both physical and biological limits of the earth

+ Underpinned by LCA 14

Materials identified @ risk

+ Antimony

+ Cobalt

+ Indium

+ Lithium

+ Niobium

+ Platinum

+ Rare earth metals

+ Tin

+ Tungsten- Taken from the DEFRA report ‘A Review of the Future Resource Risks Faced

by Business and an Assessment of Future Viability’ (AEA)15

Recycling rates globally ….

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China’s dominance …

+ China is a leading producer of:

- Rare earths (97%)- Antimony (91%)- Tungsten (81%)- Magnesium (77%)- Graphite (71%)- Germanium (71%)- Flourspar (59%)- Indium (50%)- Gallium (32%)

+ Other leading producers:

- Brazil – Niobium (92%), US – Berylium (86%)- South Africa – Platinum (61%), Congo – Cobalt (40%)

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Forecast prices to 2020

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Forecasts to 2020

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Priority Materials in the EU

European priorities ….

+ EC report (2011) highlighted 14 critical raw materials- Antimony Beryllium - Cobalt Fluorspar- Gallium Germanium- Graphite Indium- Magnesium Niobium- Tantalum Tungsten- Platinum Group Metals- Rare earths

+ Raw materials are an essential part of both high-tech products and every-day consumer products

+ Without these raw materials in sufficient supply, EU industry may be forced to stop production….

+ We rely on the rest of the world for most of our supply 21

Critical access is required!!

Roadmap to a Resource Efficient Europe

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So what next?

+ Worldwide demand for these (and other) raw materials increases ….

+ Need an increase in collection and recycling of them

- reducing the pressure on demand for raw materials- reducing energy consumption- reducing GHG emissions etc.

+ 'Urban mining‘ is one of the main sources of metals and minerals for European industry

- Need to build upon this….

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The RE Roadmap

Roadmap to a RE Europe

+ Adopted in September 2011

+ Outlines the key challenges and opportunities for Europe up to 2050

+ Puts forwards issues which need addressing NOW

+ Sets the milestones (some in 2020) which illustrate what is needed to put Europe on a path to resource efficiency and sustainable growth

+ Provides a framework explaining how policies inter-relate and build on each other

+ Outlines key inter-linkages between key sectors and resources

+ Indicates how Member States should strive to remove the barriers that hold back resource efficiency

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RE Roadmap – Three strands

+ Transforming the economy+ Addressing natural capital+ Tackling key sectors+ Also highlights governance & monitoring

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Transforming the Economy

+ Step 1 - Sustainable consumption and production

+ Changing behaviours

- Driving RE and delivering cost savings- Leading to demand for RE services- Leading to demand for RE products

+ Can lead to a ‘rebound effect’

+ Milestone:

- By 2020, we should have the right incentives to choose the most RE products and services through appropriate price signals and clear environmental information. - These purchasing choices should stimulate innovation

amongst producers to supply more RE products and services27

Transforming the Economy

+ Step 2 - Boosting efficient production

+ Improve re-use – one man’s waste is another’s gold

+ Improvements in non-core business activities

+ Thinking beyond the short-term

+ Avoiding the use of certain componentsand chemicals > REACH

+ Milestone:

- By 2020, market and policy incentives that reward business investments in efficiency are in place. These incentives have stimulated new innovations in resource efficient production methods that are widely used… 28

BAA Waste Waste to MRF Res idual to EfW

Ferrousrecycling

Alum iniumrecycling

Plas ticsrecycling

Paper

OTHEROTHER

Transforming the Economy

+ Step 3 – Turning waste into a resource

+ In the EU we throw away 2.7B tonnes of waste; 98M of which is hazardous – only 48% of this is re-used or recycled!

+ Improved waste management can create jobs – the ‘green economy’

+ Milestone:

- By 2020, waste is managed as a resource. Waste generated per capita is in absolute decline. Recycling and re-use of waste are economically attractive options for public and private actors due to widespread separate collection and the development of functional markets for secondary raw materials. Energy recovery is limited to non recyclable materials …

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Step 3 continued ….

+ The Commission will:

- Stimulate the secondary materials market and demand for recycled materials through economic incentives and developing end-of-waste criteria (in 2013/2014)- Review existing prevention, re-use, recycling, recovery and

landfill diversion targets to move towards an economy based on re-use and recycling, with residual waste close to zero (in 2014)- Assess the introduction of minimum recycled material rates,

durability and reusability criteria and extensions of producer responsibility for key products (in 2012)

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Tackling Key Sectors

+ Food

+ Mobility

+ Housing / building

+ Typically responsible for 70-80% of all environmental impacts in industrialised areas

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Deliverability

What will it achieve ?

+ Depends on Member States and how they go about implementation

+ History repeats itself ……

- Landfill Directive- Waste Framework Director- Producer Responsibility Regs

+ We need all member States to embrace this ‘reality’ and look to drive change sooner rather than later…..

+ Is the UK Government up for it? Probably more so than Ireland, Portugal, Greece etc.

+ This is an important point in global history…. Can we change what has been forecast?

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RE Roadmap Deliverability

+ Barriers

- Leakage of waste from the EU to sub-standard facilities- Obstacles to development

FinancePlanningRisk perception

- Inadequate innovation in recycling solutions- Behavioural lapses- Ignorance of decision-

makers

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RE Roadmap Deliverability

+ Opportunities

- Innovation needed in extraction, processing, design, recycling, material substitution etc.- Innovation Challenge Fund (Defra)

will establish the feasibility of new approaches enabling local businesses to extract value from domestic and commercial waste streams (i.e. through re-use and recovery)

should encourage partnerships between business, local authorities and local communities

- WRAP’s Waste Prevention Loan Fund- Tighten waste legislation

TFS, WEEE recast etc.- Waste-matching services (NISP etc.)

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UK – parallel strategy

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WRAP leading the charge!

They aren’t the only ones…

+ Challenges businesses to see risks as opportunities for change and improvement

+ Focuses on specific scarce metals and minerals

- those recognised as critical by businesses- especially in the hi tech,

defence and environment sectors

http://www.defra.gov.uk/publications/files/pb13719-resource-security-action-plan.pdf

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New approaches to embrace

+ Re-design

- Make recovery of these materials easier- Design products that are less reliant on ‘at risk’ materials

+ Materials substitution

+ New product engineering

- University of Tokyo has developed an electric motor that can be used with Lithium batteries for electric vehicles on campus which doesn’t use rare earth elements in battery production

+ Recycling

- There is room to do more- We must focus on the resources at risk and those critical to EU

manufacturing39

So what should we expect?

+ More WEEE recycling!

- It’s obvious in it?+ An increased interest in household & SME materials

- WEEE, Batteries etc. (collection services or drop off?)+ New Campaigns

- Get old mobiles etc. out of the cupboard @ home- Capture computers & TVs at the end of their life ‘better’

+ New Partnerships

- Hi-tech manufactures invest in closed loop recycling systems - Synergies with waste collection / processing companies- Evolution of the Tesco’s and Sainsbury’s models

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But when?

+ Resource security and risk has been an issue for the last 5 years

- So still slow to react+ The Oil crisis in the 1970’s was a pre-cursor

- Did we learn our lessons then?+ So will the EU Roadmap make a difference?

- Of course, it sets the agenda- UK Government has responded ….. Action Plan (March 2012)

+ The current economic climate is helping make resource efficiency more mainstream – an issue for the Board Room!

- Many Corporates are looking at resource risks / security- This will generate demand for local materials- This will drive European recovery @ all levels! 41

Necessity is the mother of …

+ Evolution of dentists from extraction to preventative care …. 42

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The EU Trading Block

So what?

+ Can the EU achieve Resource Efficiency in a global market?

- It can improve its ‘rating’- But reliant on many manufactured products from South Korea,

China etc.- Should look to deliver significant closed loop improvements

+ This means we need to look closely at what we will be manufacturing and then secure the right feed stocks….

+ Needs closer attention to EU trading patterns

+ Needs all member States to embrace this ‘joined up approach’ and not have its own trading arrangements…. Unlikely!

- Are we really that enlightened…..- Too much ‘let the market decide’

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The EU as a trading block

+ There is a degree of waste commodity tradingalready happening – e.g. Solid Recovered Fuel

- Is the UK giving up a valuable commodity?- Wrong material, wrong place, wrong time?

+ Going forward ‘in demand’ materials likely to be ferrous and non-ferrous, textiles, WEEE etc.

+ Commodity markets require standardisation to avoid ‘leakage’

+ Need to aim for an equilibrium where we use (recycle) as much as we produce across Europe (or even in the UK!)

+ Should we have recycling system that works at a EU level or should the UK be looking at self-sufficiency ‘to some degree’?

Barriers

+ Will the EU co-operate?

- danger that each country will look after themselves (to be resource secure)- could drive over-capacity

+ Infrastructure needs to be improved

- requires capital investment which isn’t readily available in the current climate

+ China is key to markets around the globe

- difficult to change overnight + Commodity waste exchanges across EU may

be difficult without a single currency etc.

+ Is it the most cost efficient approach?46

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What Will This Mean for the UK Waste Sector?

Benefits….

+ The UK Waste Sector is already ‘European' in flavour

- Greater synergies between EU member States is inevitable- Material flows will continue where it makes sense (paper to

Scandinavia)- Glass to France and Germany etc.

+ Greater clarity over the target materials needed to ‘fuel’ the EU

- These will increase in price- This allows Waste Companies to invest in collection &

segregation equipment etc.- New technologies that allow segregation will come to the fore- Local markets for some rare earth metals etc. are likely to

develop as global mining companies or larger waste management companies deem them a suitable risk…. 48

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Impacts for ‘recyclers’

+ Technological advances

+ New business models – leasing etc.

+ More political drive and media attention

+ More funding

+ More support (corporate and public)

+ Better collection systems to preserve quality

+ Full move to a circular economy

+ Logistics will become key!

- Quality materials segregated and in the right place @ the right time!

Quality trends since 2010

+ Increasing concerns about quality from the end markets

+ Less guarantees from Chinese & Indian reprocessors

+ Returned loads from Indonesia and Brazil

+ EA has clamped down on ‘waste’ exports

+ UK and EU reprocessors continually setting the ‘bar’ higher in terms of quality and consistency

+ Needs additional investment at MRF

+ Needs more than 1 cycle @ MRF

+ Now looking at evolution of service provision …..

+ Quality is critical to closed loop reprocessing …..

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Energy in the sector

+ Ensure that energy is recovered from non-recyclable waste only

+ Reduce energy intensity of waste treatments (AD, EfW etc.)

+ Increase use of biodegradable waste for bioenergy generation

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Urban mining offers rewards ….

+ Primary mining

- 5g of gold per tonne of ore+ Urban Mining

- 250g of gold per tonne of PFC circuit boards- 350g per tonne of phones

+ Recycling this stuff NOW makes sense!

+ And what about landfill mining for old resource ‘reserves’?

- Research is underway- Demonstration plants in Europe & US

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How far could it go?

+ Lets stop exporting raw materials worth money from the UK!

- Rare earth metals- Recyclables- SRD / RDF

+ Lets look at this holistically

- We have an energy crisis- We need to generate jobs- We have potentially valuable raw materials that we export

+ Lets think EU and lets make it happen

- Needs strong Government leadership- Needs brave industrialists- Needs a fully engaged waste management sector …..

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Unforeseen Consequences

Unforeseen consequences

+ Predictions can be difficult …

+ Nationalist boundaries?

+ Collapse of the EU?

+ Holding onto what’s yours?

+ The flow of materials?

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In Summary

In summary …

+ Short term (5 years from now)

- Global production will continue to grow…- Europe comes out of austerity ….. - Enhanced waste management infrastructure is developed to

address new target materials and manufacturing feedstock needs….

+ Medium term (20 years from now)

- Circular (oval if we are being honest) economy is established- Increasing energy and waste management costs drive

efficiency improvement and innovation- Real corporate nervousness as materials start to run-out- More joint working between recyclers and manufacturers

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But ….

+ EU will need more teeth to make this Roadmap a reality

- but a European Commodities market does make sense!+ Member States will need to take the ‘bigger picture’

- or waste money and resources on over-capacity and inappropriate trading patterns

+ The waste industry will respond

- it always does!- targeting new materials (rare earths etc.)- developing partnerships

+ But without Government leadership we may have some false dawns and some ‘dead ends’ before we find the right path!

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The last slide … promise!

Dr Adam Read

Global Practice Director

Waste Management & Resource Efficiency

07968 707 239

adam.read@ricardo-aea.com

www.ricardo-aea.com

I will be staying for 1 or 2 orange juices …