cost impact of profiteering within weee directive 300112 2 final version

8/3/2019 Cost Impact of Profiteering Within WEEE Directive 300112 2 Final Version

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Cost impact of WEEE evidence tradingProject Report for Hewlett Packard by 360 Environmental

1.Executive summary

a. The current UK WEEE market works within a system of opaqueness wherebythose that pay the price of compliance generally have very little idea of theactual costs, the infrastructure involved and the margins that are extracted bythat infrastructure.

b. This paper has analysed that market based on information supplied by a range

of participants, most of who contributed on the basis of commercialconfidentiality.c. The paper has looked initially at the impact of ransom price profiteering in

2007 and then at the cost to producers of the current evidence system.d. The key findings are that:

i. Whilst excessive ransom pricing is seen as the primary cost issue, ofmuch greater significance for producers has been the wider disconnectbetween the market for evidence compared to the actual cost of

collection, treatment and recycling of household WEEE.ii. Producers are paying a price for evidence that has remained relativelyconsistent over the last three years despite increased collection andtreatment efficiencies and rising commodity values.

iii. This price now relates primarily to perceived trading values rather thanactual costs.

iv. Commodity values and excess treatment capacity have driven down thecost of processing WEEE over the last three years to a point where the netcost of collecting and treating WEEE has become better than cost neutral.P d C li S h (PCS) h i i l d t d


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v Producer Compliance Schemes (PCS) have increasingly moved towards

a. The implementation of the WEEE Directive in the UK in 2007 was achievedfollowing extensive debate between Government Departments and industry overthe most cost effective way to achieve the key requirements of the Directive:

Adequate infrastructure of free disposal for end users Collection rate of at least 4kgs per head Financing of all collected household WEEE by producers

a. The system that emerged required producers to take responsibility for thefinancing of collection, treatment and recycling of all household WEEE on acollective basis through a market share approach.

b. This required producers to join PCSs which would be required to demonstratethat they had evidence of their market share of collection and treatment of

WEEE by contracting with Local Authorities for the management of WEEE atDCFs. All household WEEE collected would require evidence of treatment andrecycling to be issued by AATFs.

c. The expectation was that PCSs would look after the interests of their membersby taking physical control over the collection of WEEE and driving down cost.However, by requiring all evidence to be purchased and by enabling PCSs totake on more WEEE than they needed for their own obligations, the Governmentopened up the potential for profiteering.

d. One scheme in particular, saw the opportunities for over-collection and enteredinto an agreement with a large waste management operator to gain access tosurplus evidence that could then be sold at a price the was significantly abovethe cost of collection and treatment.

e. Although robustly challenged by other schemes, the legal requirements of theRegulations forced acceptance of this position which has since led to the marketprice for evidence dictated by trading values rather than actual cost.

f. A status quo has emerged that now sees the majority of evidence provided toPCSs though arrangements agreed with the waste management companies that

operate the DCFs The price they will charge for evidence tends to reflect the


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The waste management companies that operate collection facilities The PCSs The Local Authorities

The AATFsa. There appears to be little sign of a direct relationship between evidence costsand gate fees.

b. The graph below shows the change in the representative amount charged (orpaid) by AATFs for WEEE received over a weighbridge. These are known as thegate fees/values.


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d. The combination of gate fees/value and logistics costs are the net costs/valuesfor those that collect the WEEE at DCFs.

e. Therefore the cost of evidence should show similar decreases to the increased

value/decreased gate fees. Clearly, this has not occurred.f. The graph below shows the cost comparison between these prices and thecharges for evidence where nv is the net value or cost of the material takinginto account collection costs and gate fees/values.

Fig.3 Showing the difference between the cost of generating evidence and thecharge made for evidence for each WEEE category/group.

g. Overall, this produces a /tonne differential as shown below.


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b. A calculation has then been made applying the extreme costs at the time acrossthe full tonnage.

c. It is estimated that ransom pricing might have accounted for 10% of the

tonnage in 2007. A calculation has therefore been applied assuming that 10%has been charged to producers at extreme prices.d. Appendix 1 shows the table of estimated costs derived from supplied data.e. These indicate that for 2007, the following applies:

Average cost for collection and treatment across all categories -73/tonne

Average cost for evidence at normal market rates - 118/tonne Average cost for evidence at extreme prices - 182/tonne

Average cost for evidence assuming 10% at extreme prices - 136/tonne

1.Cost estimates for later years

a. The impact of extreme pricing was particularly felt in 2007 and 2008. In lateryears, the general dynamics of the market have changed to the extent that theyhave less impact.

There is less traded evidence with a higher proportion collected by those

that need it. The requirement for contracted agreements between PCSs, whilst not

generally being price specific, has dampened excessive pricing. Those that initially imposed the extreme prices have been less aggressive

in their attitude. More profit is probably being extracted at market prices for evidence.

a. However, it is clear that those with the highest surplus do still try and trade atprices approximately 25% higher than the normal market position. The prices

below are known trading requests made by one compliance PCS in 2011 for


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2007 2008 2009 2010

Large Household Appliances 5-15 10-20 12 12-15

Small Household Appliances 115 140 122-157 120-133

IT and Telecoms Equipment 93-147 88 60-90 92-151

Consumer Equipment 73-140 102-132 70-186 61-124

Lighting Equipment

Electrical and Electronic Tools 153-183 123 110-151

Toys Leisure and Sports 152 160 143 86-151

Medical Devices 95 95 95 95-180

Monitoring and Control 111-216 110

Automatic Dispensers

Display Equipment 217 225 225 225

Cooling Appliances 119 103 179

Gas Discharge Lamps 2506

Fig.6 Range of evidence prices charged by Compliance Schemes fromproducer survey

d. Trading between PCSs generally takes place at a perceived market level on thebasis that whatever the evidence has cost to produce, a PCS does not want tolose out on potential revenue by trading at a lower price. Evidence has tended tobe traded at the following prices across all the years that the WEEE Regulationshave been operating:

LDA - 15-20 Cooling - 140-180 Mixed - 100-140

Displa s 220 300


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Fig.7 Estimated make up of revenues and costs for 2010 WEEE showing netvalue extracted

a. Overall, it shows that in 2010, the combined value of material and reuse waspositive with a speculated figure of 8m. This compares with a negative figure based on the same criteria, but adjusted for average material net values of12m, a swing in one year of approximately 20m.

Gate fees/values 2007 2008 2009 2010 2011

Av. Collection

cost per tonne

LDA 110 135 95 160 175 -40

C li 0 10 0 15 20 85


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Where PCSs control collection and disposal, it is assumed that they retain100% of the value of evidence.

b. Using the total net revenues from para 7i, it is therefore estimated that the split

would be as follows where: LA is local Authorities AATF is treatment facilities CS other is PCSs that do not run collection and treatment CS DCF is PCSs that do run collection and treatment WMC is waste management companies

Fig.9 Estimated of how the net margin has been split between sectors

1 C t i t b d th d l


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Economic conditions Technology developments Human nature

Fig.10 Reported data for EEE placed onto UK market 2008-2010

a. The calculations have therefore assumed a flat level of EEE supply through to2020. This might seem unreasonable for displays which are showing a consistentdecline. But the percentage collection rate for those has been growing at arapid rate of 20% per year and the potential decline in supply is therefore offsetby assuming a decline in percentage collection rates. Cooling also sits above

50% b t it i f i t th t thi h ld ti t i d 65%


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b. For LDA, it is assumed that sufficient is being collected and that there is noadditional cost related to growth as this will come from either protocols ofimproved enforcement. The graph in para 9c shows the potential for profiteering

from evidence values applied across the full tonnages required to meet thetargets.c. For Displays, it is assumed that there should be no additional cost as the level of

display collection currently exceeds the 2020 targets. Indeed, it is expected thatcost should reduce due to the declining weight of collected displays.

d. For Cooling, there should also be no additional cost to achieve the target as thehazardous nature of this category should mean that all available items arecollected anyway.

e. It is only for Mixed that there is likely to be the additional costs associated withmeeting the targets.

f. Research has been conducted within the Local Authority sector to estimate thecosts of extending recycling collections to include small WEEE.

g. The universal response has been that for LAs, WEEE is simply not an issue andcertainly not a priority collection stream. Their view is that any expansion ofWEEE collections would be funded by Compliance PCSs through their refusecollection contractor.

h. Likewise with CA site operations, there are no perceived incremental costs forLocal Authorities for WEEE separation and management on site. There are,however, historical commercial relationships between LAs and their CA sitemanagement contractors that are reflected in current revenue flows although itis not possible to estimate the scale of these.

i. These are highly significant as anecdotally, they suggest that in most cases, theoperator retains the revenue as part of their overall commercial position withthe LA.

j. The general view is that effectively, LDA evidence will therefore always be at

b t F f Ch t PCS h th th i id th h t


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Total cost a. assumes that the current net costs for each type of WEEEare applied to the total tonnage at the assumed growth rates. Thisreduces due to the sharp growth required for LDA.

Total cost b. assumes that incremental mixed WEEE growth will only beachieved through high cost extraction and therefore adds 100/tonne tothe cost of collecting Mixed WEEE over and above 2010 levels.

High assumes that all evidence will be charged at the current extremetrading levels.

Extreme assumes that all evidence will be charged at 2007 extremetrading levels.

Costs per tonne are assumed as follows:

Low High Extreme a. b.

LDA 15 20 20 -120 -120

Cooling 140 180 190 70 70

Displays 230 200 340 78 78

Mixed 120 170 220 34 150

Net WEEE costEvidence charge to producers

Fig.13 Costs used for Fig 14 predictive graph


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in 2012 and assessing the tonnage that would be required by 2016 to meet thetargets, but as in the UKs case, that certainly for displays, the amount beingcollected would be well above the target.

g. The validity of these figures is extremely questionable as it does not takeaccount of the current positions of other Member States. But it demonstrates apotential comparison between the actual costs of collection and the charges toproducers should a current UK type regime be allowed to spread.

Fig.15 Potential costs for 2016 based on expected EU WEEE arisings

1 S


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Appendix 1

2007

Averagegate

fee/value

2007

Average

collection

costs

2007

Average

costs

2007

Average

market

Evidence

charges

2007

Average

market cost

used for

calculation

007 extreme

trading

charges

007 WEEE

tonnage

collected

collected Av. total cost

Total cost at

av. Mkt

prices market

price

Cost @

extreme

prices

applied to

total

Costs @ extreme

prices appli ed to

10%

Predicted 2016

tonnage@ 65%

(other than

displays)

016 costs @

extreme

prices

016 costs @

average

prices

016 costs @

average2011

costs

Lar ge Household Appl iances -110 40 0 5 5 20 60,395 0 301,974 1,207,894 422,763 321,882 6,437,636 1,609,409 -43,454,041

Small Household Appliances -15 70 55 115 120 190 6,514 358,251 781,639 1,237,595 905,387 97,061 18,441,567 11,647,305 -1,067,670

ITand Telcomms Equipment -15 70 55 93-147 125 190 6,393 351,598 799,086 1,214,611 920,535 133,851 25,431,646 16,731,346 -1,472,358

Consumer Equipment -15 70 55 73-140 120 190 6,304 346,715 756,470 1,197,744 876,232 48,487 9,212,473 5,818,404 -533,354

LightingEquipment -15 70 55 17 913 0 0 0 33,442 0 0 -367,866

Electrical and Electronic Tools -15 70 55 153-183 150 190 3,455 190,021 518,240 656,437 583,869 51,852 9,851,836 7,777,765 -570,369

Toys Lei sur eand Spor ts -15 70 55 152 150 190 174 9,589 26,152 33,126 29,449 40,389 7,673,935 6,058,370 -444,280

Medical Devices -15 70 55 95 120 190 2 97 211 334 233 7,596 1,443,293 911,554 -83,559

Moni tor ingand Contr ol -15 70 55 111-216 150 180 166 9,123 24,881 29,858 27,852 14,769 2,658,468 2,215,390 -162,462

Automatic Dispensers -15 70 55 0 0 0 0 0 5,231 0 0 -57,541

DisplayEquipment 120 40 160 217 225 340 44,049 7,047,842 9,911,028 14,976,664 11,408,672 123,301 41,922,340 27,742,725 7,644,662

CoolingAppliances 0 80 80 119-160 140 220 58,263 4,661,010 8,156,768 12,817,779 9,438,532 133,108 29,283,781 18,635,133 8,652,026

Gas Di schar ge Lamps 2,000 2,300 2,300 307 613,676 705,727 705,727 776,070 9,413 21,650,925 21,650,925 14,120,168

Total 186,037 13,588,836 21,982,177 34,077,770 25,389,593 981,459 174,007,899 120,798,326 -17,796,645

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Appendix 2 Proposed B2C targets that would be necessary to achieve the proposed recast targets with B2B collections atcurrent rate

B2C % targets 2011 2012 2013 2014 2015 2016

LDA 34% 40% 46% 52% 58% 64%Cooling 44% 46% 48% 50% 52% 54%

Displays 97% 96% 95% 95% 94% 93%

Mixed 23% 31% 39% 47% 55% 63%

Total 15% 18% 20% 23% 25% 28%

B2C tonnages 2011 2012 2013 2014 2015 2016

LDA 169,622 199,361 229,101 258,841 288,580 318,320

Cooling 89,306 93,507 97,709 101,910 106,111 110,313

Displays 126,029 124,933 123,837 122,742 121,646 120,550

Mixed 150,129 204,273 258,417 312,561 366,704 420,848

Total 535,086 622,075 709,064 796,053 883,042 970,031

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cost impact of profiteering within weee directive 300112 2 final version

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