Obstacles to waste diversion

Ontario’s Minister of the Environment says that it is his second highest priority to increase waste diversion from landfill. Can he do it? Yesterday, Dianne gave a well-received keynote address to the Municipal Waste Association on Obstacles to Waste Diversion.In addition to the usual challenges of uncertainty, delay,  complexity, and policy instability in a time of financial constraint, Dianne focussed on the economics of the current waste diversion structure; the definition of waste; approvals terms and delays; liability, and the very low tolerance for complaints about odour. If Stewardship Ontario succeeds in its current program direction, the current waste diversion program may relieve municipalities of a substantial burden. But if things don’t work out as planned, won’t municipalities end up with ultimate responsibility?

Here are some supporting notes on the funding issue:

Drummond Report

• · Does not specifically mention recycling
• · Move towards full cost recovery and user-pay models for environmental programs and services – cost burden of providing service should be placed on beneficiary’s shoulders, not the public’s[1]
• · Municipalities provide many services — such as …waste management — that are governed by provincial legislation and standards. Most municipal revenue comes from local sources, mainly property taxes. Yet provincial transfers account for nearly one-fifth of their revenue, including contributions to cost-shared programs and unconditional funding through the Ontario Municipal Partnership Fund (OMPF).[2]

Budget

• · The Auditor General and the Commission on the Reform of Ontario’s Public Services also recommended that greater emphasis be placed on prevention and the polluter-pay principle. This recommendation applies to Ontario’s contaminated sites. The Province also recognizes that those responsible for creating pollution and waste should generally bear the costs of environmental programs and services.[3]
• · Hazardous Waste Fee to be revised – will raise tonnage fees; this is estimated to generate $2.5 million in 2014-15 and on ongoing basis.[4]
• · See Ministry expenses (all) on p. 195 – plan for 2012/13 for MOE is decrease from $536 million to $486 million
• · OMPF discussed on pp 51ff

Minister’s February 9 2012 letter to WDO Chair

• · Re move to skills-based board
• · New regulation made under WDA to implement a new fee-setting methodology that enables Stewardship Ontario to recover full costs of operation of MHSW from stewards & will address creation of deficits/surpluses[5]
  • New regulation:[6]
    • Prescribes new methodology Stewardship Ontario (SO) must use to finance MHSW program
    • Replaces fee based on unit/volume [so no more fee schedules]
    • Methodology applies to recovery of ongoing operating costs & accumulated deficits
    • Calculation is “share-of-cost” based on reported “share-of-sales” – i.e., stewards paying for actual costs incurred in each quarter
    • Stewards will be invoiced on actual operating costs every quarter, starting in Q2 (when deficit share invoicing begins, for those materials with deficits)
    • Calculation (see also s. 4 of Reg): quarterly reported quantity by steward as a proportion of total quantity reported to SO  x actual cost for that quarter = payment obligation for following quarter
    • Notes that 7 of 9 materials in MHSW program have deficits due to several factors, incl collection volume, inadequate fee rates, higher costs than estimated [these materials are antifreeze; fertilizers; lubricating oil containers of 30 L or less; oil filters; paints & coatings & containers; pesticides; pressurized containers; single-use dry cell batteries; solvents & containers

• · Minister directs WDO to work with the tire and electronic stewardships to develop similar cost recovery and accumulated deficit/surplus recovery approach
• · Directing WDO to review/analyse all proposed IFO budgets and to monitor actual expenditures on ongoing basis & to implement monitoring/audit program to review IFOs’ annual performance and achievement of plan targets
• · Industry Stewardship Plans (ISP)
  • Costs of ongoing monitoring, auditing and reporting of ISP will be paid by the plans
  • WDO directed to review its policy & procedures on ISP and consider the following when it reviews an application or approves an ISP:
    • Does ISP achieve diversion targets that are similar or better than the associated waste diversion program?
    • Fair operation of the ISP in the marketplace
    • Does ISP ensure accessibility for consumers through its delivery of services?
    • Before accepting any ISP, WDO must consult with public
    • Directs WDO to submit its proposed policy and procedures on ISP to Minister by June 1 2012
    • Consultations set for May 14 (in person) and written submissions invited from May 1-16[7]
• · Incentive programs
  • Directs WDO to review development and implementation of financial incentives paid to service providers by Stewardship Ontario under MHSW, Electronic Stewardship, WEEE program and Ontario Tire Stewardship – reviews to be carried out in consultation with municipalities and other stakeholders

Info from Stewardship Ontario[8]

• · SO is the IFO identified under the WDA[9] as the organization that develops, funds and operates the Blue Box program and MHSW program
• · Accumulated deficit:
  • July 2008- Dec 2009 – Deficit $573,306
  • 2010 – Surplus of $310,059; accumulated deficit $263,247
  • 2011 – Deficit of $3,309,713; accumulated deficit $3,572,960
• · Upcoming changes
  • Reviews of IFO incentive rates
  • Reviews of WDO budgets/expenditures
  • WDO boards no longer include representatives from industry even as IFO’s are required to pay for greater oversight
• · Additional info from SO – general info, backgrounder, FAQ – hard copies provided[10]
• · MHSW rules – 2012[11]
  • Includes fee rates for various products
  • Published Dec 2011, i.e., before Minister’s letter to WDO of Feb 2012

KPMG’s Waste Diversion Ontario Review of MHSW Program – Report – April 12 2012[12]

• · Analysis of the Municipal Depot Transportation and Processing Incentive Program (MDT&PIP) [JC note: which was launched by SO in January 2012]
• · Before MDT&PIP, SO reimbursed municipalities for post-collection costs of transporting and processing phase 1 MHSW materials
• · Now, under MDT&PIP,
  • Municipalities no longer required to pay transporters & processors to manage the phase 1 MHSW materials
  • Instead, municipalities select contractors to manage the materials (from list of service providers approved by SO)
  • Municipalities participating in program must operate collection (drop-off) depots for their phase 1 MHSW and other waste – SO compensates them for a portion of costs of operating these depots via fixed hourly rate
  • There are incentive rates for transporters, processors (i.e., the prices SO will pay, on a “take it or leave it” basis)
• · SO sees launching of MDT&PIP as shift from municipally-contracted program to an open market incentive program
• · Municipalities were a customer in the old system; now, they are service providers; KPMG identifies this as a concern as municipalities continue to believe they have jurisdiction for waste management[13]
• · Report did not address hourly rate paid to municipalities for materials collection at municipal depots or discrete municipal collection events
• · Identified concerns
  • Materials must now be weighed and reported (in past, recorded volume in litres or estimated weight) – service providers want compensation for additional time this takes
  • New system lacks independent verification of processes, procedures, and diversion outcomes in the industry – mistrust among service providers and concerns with oversight of the program by SO suggest that a 3d party may be needed to audit companies, materials, processes the incentive program covers
  • SO may make decisions re rates in a non-transparent and exclusionary manner, making investments by providers riskier – several have said they are unlikely to make long-term investment decisions where a rate decrease is likely
  • In the past, materials other than just MHSW were collected from municipalities as a bundle and then stored at the transfer station; this does not happen with new process
  • No consensus on definition of “extended producer responsibility”
  • Industry assumes financial responsibility for waste diversion, but differences of opinion as to degree that industry (through an IFO) assumes operational responsibility – critical to precisely determine this
  • varying and conflicting views on the roles and responsibilities of stakeholders (e.g., MOE, WDO, SO, municipalities and service providers)
  • confusion re accountability mechanisms required from IFOs to WDO and MOE
  • Municipalities believe they are ultimately accountable for MHSW materials – they are the face of waste diversion to their citizens. If services are compromised, municipal government feel they would be held accountable.  However SO says it is responsible once the MHSW materials are dropped off at municipal depot[14] – that municipalities provide collection & depot services

Thank you to Jackie Campbell for her assistance in preparing these materials.