Faaiqa Hartley, Tara Caetano, Reza C. Daniels

2017 Annual TIPS Forum

13 -14 June 2017

Bulk of generated waste is landfilled

◦ approximately 90% in 2011 (National Waste Information Baseline Report, 2012)

Recovery, recycling and reuse has potential economic benefits

◦ DST (2014): Value of lost resources ~R17 billion in 2011

◦ ERC (2016): Simple supply shock analysis (manna from heaven)

Result suggests real GDP could increase by up to 0.5% with ~14,000 FTE jobs created

does not include the catalytic impacts from expanding recovery and recycling industries nor

potential costs of these industries

This paper: economy-wide impact of waste recovery, recycling and reuse

◦ Consider waste tyres only (0.2% of total waste): funded; extended producer responsibility;

significant progress since 2011

◦ First attempt proof of concept, paper therefore more focused on methodology

2011: Very little recycling/recovery less than 4% or 10,000 tonnes

2012: Integrated Industry Waste Tyre Management Plan (IIWTMP)

◦ supports and promotes waste tyre beneficiation

◦ provides the collection and depot infrastructure required to collect waste tyres and deliver to approved recyclers

◦ assists in developing and supporting the collectors, storage depots, recyclers, and secondary industries that make products from recycled output

◦ funded through a waste management fee of R2.30/kg of new tyre rubber produced (local and imported)

2012-2016: ~ 42,000 p.a. (2013: 16,037; 2015: 71,806)

Waste avoidance and reduction

Reuse

Recycling

Recovery

Treatment

/disposal

Consumer Education

Retreading Kraftek

Crumbing – rubber products

WTE - gasification, pyrolysis, incineration

Landfill/Dumping

Gasification & pyrolysis by-products include: steel, diesel and char

27%

35%

13%

Waste avoidance and reduction

Reuse

Recycling

Recovery

Treatment

/disposal

Consumer Education

Retreading Kraftek

Crumbing – rubber products

WTE - gasification, pyrolysis, incineration

Landfill/Dumping

Existing technologies in waste recovery, recycling and reuse

Available information

Pyrolysis excludes elec

Recovery & recycling virgin intermediate commodity substitutes

Reuse final consumption

Existing studies generally use extended standard Input Output frameworks given complexity

◦ Models are useful for analysis as they include linkages between sectors in the economy

◦ Examples: Leontief (1970); Huang et al. (1994); Pimenteira et al. (2005), Nakamura and

Kondo (2002, 2006a, 2006b); Nakamura et al. (2009)

◦ IO frameworks has limitations

linear; no price impacts; no behaviour, static

◦ CGE models, which also has limitations, improve on these frameworks by addressing

limitations

Use input-output or supply and use tables to inform database (i.e. social accounting matrix)

Non-linear model

Includes prices and behavioural responses (functional forms; elasticities)

Incorporates macroeconomic constraints such as labour constraints

Can also run dynamically over time

Miyata (1995, 1997) ; Miyata and Pang (1999)

◦ CGE model to analyse the waste-economic system (waste-economic accounting matrix):

cost of waste treatment enters production and cost functions therefore influencing

production decisions and prices

◦ Extended to consider waste transformation to assess impact of a zero-emissions

orientated society (economic-material accounting matrix): waste is either treated and

disposed of or transformed by either internal/external material transformation sectors;

recycled products are re-introduced for intermediate consumption

South African General Equilibrium (SAGE) model

◦ dynamic recursive (UNU-WIDER; National Treasury) first pass, run in static mode

◦ 2009 SAM (Davies and Thurlow, 2013)

◦ 49 activities and 85 commodities

◦ 4 labour groups by level of education

◦ 14 expenditure-based representative households

Non-shaded: economy without IIWTMP; shaded: blocks added to capture IIWTP

Refuse disposal -

Landfill

IIWTP

Reuse, Recycling, Recovery

(crumbing, pyrolysis, Kraftek)

Collection, storage &

transportation

Management & coordination

www.redisa.org

Representative

Industry

FINANCIAL INFORMATION FROM REDISA

Representative

Industry Labour (70%)

Low skill intensive

Capital (10%)

Intermediate goods & services (20%)

Rubber (19.3%), steel (9.9%), diesel (7.2%), coal (5.7%), other manufacturing activities (0.4%)

Transportation and storage service for waste tyres (58%)

• Scenario 1: Baseline scenario

• counterfactual: no IIWTMP, activity in the tyre recycling industry and hence output from the industry is

set close to 0 (check SAM to see if 4% included)

• effective subsidy

• Scenario 2: 25% (42 000 tonnes)

• Representative of annual 2012-2015 impact

• Scenario 3: 100% (170 000 tonnes)

• crumbing (60%), which represents the REDISA target for 2020

• assume loss of 25% - prolonged use of tyres; unrecorded use (REDISA Interview, 2016)

Stylised facts for SA

◦ labour market: high skilled labour = fully employed; unskilled labour (<Matric) = unemployed

◦ no significant change in investment and government expenditure as shares of GDP

◦ flexible exchange rate; flexible government savings no fiscal rule

Recycled products perfect substitutes

◦ Outputs from crumbing and pyrolysis intermediate consumption; Kraftek outputs final consumers

Capital required for the tyre recycling industry assumed to be available therefore no impact on general capital use and allocation in the economy

◦ new capital account is created for the tyre recycling industry. The industry must however compete with the rest of the economy for labour and intermediate goods and services.

Pyrolysis exclude electricity generation. REDISA notes this technology does not currently exist in South Africa however it is possible that electricity generation could be a potential output of this activity in future.

There are significant environmental and health benefits associated with recycling, and the economic benefits from these positive externalities are not quantified nor included in this study. This presents an interesting case for future work.

25% waste tyre use 100% waste tyre use

GDP 0.002 0.005

Private consumption 0.001 0.004

Gross fixed capital formation 0.002 0.005

Government consumption 0.002 0.007

Exports 0.001 0.006

Imports 0.001 0.005

Employment* 346 1448

*Number of additional jobs. All other results are per cent deviation from baseline.

Overall positive impact on GDP and employment

Private consumption rises as household incomes increase increased low skilled employment; higher high skilled wages; additional capital returns

Higher investment higher incomes; new investment in beneficiation industries; rise in government savings (less expenditure; increased tax revenue)

Improved trade balance

Manufacturing sector experiences the largest gains in real gross value added relative to the baseline. Driven by new sector, but also increased growth in sectors that use recycled products as intermediates (metal product industry; food and beverages). Mining and agriculture also experiences stronger growth.

Rubber industry experiences the largest decrease in GVA due to the direct increase in production costs for tyre producers from the waste management fee.

Service GVA decreases marginally due to increased competition for high skilled labour

25% waste tyre use 100% waste tyre use

Agriculture, fishing and forestry 0.001 0.004

Mining and quarrying 0.002 0.010

Manufacturing 0.010 0.037

Services -0.001 -0.002

All results are per cent deviation from baseline.

Real household incomes increase

◦ concentrated at the lower end of the income distribution as employment of lower skilled workers increase: employment in the tyre recycling industry; increased employment in other sectors

Household real consumption levels also increase but dampened by overall increase in prices

0.000

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0.010

0.015

0.020

0.025

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25% waste tyre use

100% waste tyre use

Possible strategy for assessing waste beneficiation and extended producer responsibility

◦ Inclusion of sector is dependent on data and information

◦ Further improvements: are all links accounted for?; better information?; dynamic?

New industry provides additional value to the economy, results not large but telling

◦ Small share of waste <0.2% of total waste

◦ employment of new labour and capital; new source of demand; increased ‘useful’ resources; reduced financial burden on government producers pay for the disposal of their product

Impacts potentially understated

◦ environmental benefits not included; static analysis potential compounding impacts of higher investment

Increased high skilled labour could result in larger impacts

Impacts may be smaller if

◦ capital not as easily available to the sector; beneficiation products less substitutable; other sector production constrained