Biffa is the third largest waste management company operating in the UK—it is the largest wholly British owned waste management company and can justifiably claim to be the most diverse in terms of its spread of interest in industrial/commercial and domestic collection, landfill, liquid waste stream and specialist hazardous waste management systems. The company has a turnover in the region of £250 million at a current annualised rate and is in the top three waste management companies operating in Belgium. We are a wholly owned subsidiary of Severn Trent Plc—ranked in the FT 100. As such we can claim to be a full environmental services management operation with experience in mainland Europe as well as the UK.

1. The desirability of the options contained in the UK Climate Change Strategy in the light of non EU countries commitments

  Given the growing evidence of the impact of carbon emissions to atmosphere and the uncertain impacts, reluctance on the part of UK Government to develop a suitable framework for dialogue with all stakeholders in society would be folly. Initiatives should be targeted on the same lines as the options outlined in the Climate Change Strategy document.

  Britain has a high population density with an established infrastructure of logistics, academic excellence and stable political framework which—in combination with the right policies—could give us a substantial competitive edge in the development of appropriate technologies, equipment and process systems to anticipate the threats of global warming. The strategy should be sold on a positive rather than a reactive basis and provide a basis for future commercial prosperity.

2. The role of the Climate Change Strategy as the first step towards greater reductions in emissions in the longer term, i.e., beyond 2010, with particular reference to the need for behavioural change

  Thus far much thinking in this area has been fragmented, localised and subject to lack of co-ordinated agreement on the technical and academic justification. In consequence much of the reaction has been negative or resulted in initiatives from industry to neutralise or negate piecemeal policies. There is an urgent need to move away from "end of pipe" strategies to more holistic, integrated frameworks involving substantive redevelopment of joint sectoral responses—a point we expand on in question 5.

  The holistic decision is whether the best trigger for shifts in consumption behaviour—regardless of the fuel input decisions made—are best made by the retailer of energy or the retailer of the energy using device. A matrix approach could be adopted to assess the best methodology for specific products as exemplified. Thus . . .

  From our experience with a wide range of waste generators (and their industry representatives) a fundamental shift in the paradigm of performance for CO₂ reductions will only come from a reassessment of process and technology redesign.

3. The Government's timetable for producing and implementing a Climate Strategy

  By definition time tabling issues are very much a question for industry sector round-tabling. Reference to our response on question 5 (q.v.) emphasises that timing issues are strongly linked to existing pricing, profit, capital investment and cash flow issues in specific industry sectors on a national and international basis. The only common theme running through these challenges is that industry needs:

(i)  As much warning as possible.

(ii)  Involvement in the development of a timetable for action.

(iii)  Concise agreement on final targets by defined dates.

(iv)  Guarantees that successive Government administrations (regardless of political complexion) will enforce and apply previously agreed targets and take strong action against freeloaders (whether national or international competitors).

  Environmental issues flow through a wide range of Government departmental areas of interest. Closer integration is needed between the DETR, DTI and Treasury if their appropriate Ministers are to shape a more holistic approach to climate change specifically and resource management end life issues in general. Suitable mechanisms are emerging in the form of the Foresight Programme and similar initiatives but their ad hoc nature is a limiting factor.

  Key initiatives needed from such integration are:

(i)  Prioritisation on carbon impacts in the context of whole life (as well as manufacturing impacts) for industrial and consumer capital goods.

(ii)  The development of innovative round-tabling mechanisms involving the appropriate Government bodies (above) together with industry sectors, NGOs, local Government and waste management sector.

(iii)  The emergence of integrated fiscal policies underpinned by the likelihood of cost neutrality in the short term as relevant industry sectors introduce efficiency measures to move from one environmental paradigm to a higher one.

(iv)  Research and development programmes operating in conjunction with the academic and other sectors—with or without focused financial support—prioritised on the basis of CO2 impacts in specific sectors.

(v)  A combinantion of fiscal instruments and Tradeable Permit regimes developed in conjunction with a timetable acceptable to affected user segments.

(vi)  An identified programme of revenue flow offsets to offer comfort to the Treasury that fiscal mechanisms will not impact on wider macro economic budgetary objectives.

4. The role of different sectors of the economy in meeting emissions reductions targets and the merits of sectoral targets

  Environmental fiscal instruments—of which carbon taxation is an element—comprise a range of existing and potential economic instruments to influence behaviour. For the purposes of this submission these are considered in the following categories:

—  "end of pipe" fiscal instruments;

—  virgin input taxation;

—  tradeable permits;

—  Producer Responsibility for funding end of life material reclamation.

  The mixture of these four broad instruments is vital in so far as the effect can be accelerated or blunted according to the following key factors present in a particular industry. For environmental purposes those distinctions can be built around the following broad issues:

(i)  The need to scrap existing methods of operation and reinvest (or not) in new reclamation reprocessing and manufacturing equipment.

(ii)  The environmental mass/toxicity impact of a particular sector. To explain this assertion the following examples are offered of industries requiring different mixtures of instruments:

CATEGORY A

—those with relatively low mass of material throughputs, low toxicity impacts but high energy implications.

  The obvious examples are the glass and aluminium reprocessing sectors. These amount to around 2.1 million tonnes of output in the economy, are high consumers of energy when running on virgin inputs but—in terms of what they produce—are relatively low polluters in so far as the material is inert. The best combination of instruments for these areas are virgin input taxes (to encourage re-consumption of recovered materials), carbon taxation (to encourage lower energy inputs on reclaimed material) and—to a lesser degree—Landfill Taxes (in so far as they impose a disposal cost on users of the material). The important feature is that these products face marginal or zero capital investment implications in terms of switching their existing capacity to the reuse of reclaim material.

CATEGORY B

—industries with high forward investment costs for operating with reclaim material, low mass and low toxicity.

  Examples include the plastics and electronics sector. Landfill Taxation is relatively useless in this area due to low mass. Producer Responsibility and tradeable permits are far more effective coupled to energy taxation because of the high blocked in energy content in manufacture. Tradeable permits might apply for direct recovery and reuse and are more appropriate to encourage reinvestment in new reprocessing/remanufacturing systems by placing an economic cost on the failure to achieve target reclaim levels.

CATEGORY C

—sectors facing relatively high future reinvestment costs in new end life reprocessing plant with high mass but low toxicity of products.

  The most appropriate example is fibreboard. Landfill Taxes are most appropriate given the high mass implications and the need to shift segregation and sortation behaviour in the user base to make available large quantities at low cost. Carbon taxes may be relevant but these will influence the process production techniques rather than investment decisions on new plant since energy efficiency is already a key factor. Producer Responsibility is frustrated by the diffused supply chain.

CATEGORY D

—sectors where forward investment to run on reclaimed rather than virgin inputs is probably negative (plant can be scrapped) but material streams are high mass and low toxicity.

  The classic example here is the aggregates and construction sector where Landfill Taxes and virgin input taxes will have effects of far greater significance than tradeable permits or energy taxation, diverting waste from landfill into reuse applications.

CATEGORY E

—low mass high toxicity sector streams.

  Examples embrace the household hazardous materials plus insecticides, pharmaceuticals etc., Landfill Taxes will be of marginal significance—Producer Responsibility and tradeable permits will accelerate action—not so much in reprocessing technology areas or energy use but rather in influencing a preparedness to invest in return logistics infrastructures (which have not been created thus far). Energy taxes in this area are unlikely to be of direct relevance given the low cost to turnover ratio and the sector round-tabling can thus be refocussed on retrieval rather than energy.

5. The policies from the consultation on Climate Change Strategy required to meet the UK's legally binding target for the basket of six greenhouse gases and the domestic target for carbon dioxide emissions.

  The particular style and approach of so called carbon taxes needs to take account of the different types of instrument best suited to particular types of industry sector (see question 4). The key issues are:

—  future investment needs for shift in sustainability performance;

—  labour intensity;

—  the mass and toxicity impacts of an industry sector.

  Provided time is spent on the development of adequate time scales (whereby targets are set in graduated reductions) industry will find it easier to cope. In an oligopolistic/highly competitive structure (automotives, chemicals, retail for example) such a period could be relatively short on the assumption that five major companies occupy 80 per cent of the market. In fragmented sectors where five top players occupy 40 per cent of less of the available market more warning would be required simply because information systems would take longer to develop. The use of sector based compliance schemes in the latter may assist clarity of targets.

  This function of market concentration can be coupled to the target industry sectors responsible for high CO₂ emissions. The matrix suggests a methodology for identifying relevant sectors by way of example . . .

  High emissions/high market concentration is a natural start point (top right).

  An innovative approach could be exemplified by the need to achieve fuel reduction through process redesign. In the case of private fuel consumption this might be best achieved by making car manufacturers responsible specifically for the total tonnage of fuel inputs to their vehicles for private and commercial use. Thus Ford or General Motors would be given a tonnage allowance for fuel consumption by all models of their make of whatever age throughout a base year. (Such a figure might be based on the first year roll out sale of litreage by marque.)

  The technology provider—in this case the car manufacturer—is in the best position to influence car fuel efficiency consumption. Data collection could be made the responsibility of the petrol retailers through adaptation of their software handling systems data management. Tradeable Permits can easily be adopted to encourage internalisation of externalities. Costs of this exercise—in terms of tradeable permits, administration, etc., would be passed to the consumer through the normal working of the market or one off rebate to retailers for costs of the exercise. Manufacturers are not limited to numbers sold in any way.

6. The uncertainties involved in emissions projections and the impact of policies upon those projections

  Better measurement standards are key. Substantial sums of Government funding are committed to universities and research bodies each year—these need to be synchronized and co-ordinated between DTI/DETR and other funding bodies so that overlaps are minimised. We need defined centres of excellence for specific technology areas (power generation, consumer electronics, transport, etc.).

  Such research initiatives should be targeted at defining target levels of performance for their appropriate sphere of excellence which then in turn form the basis of bench marking for target performance.

  We have a particular interest in relation to methane impacts as an operator of 24 landfill sites accepting around 4 million tonnes of end life material inputs each year, of which around 50 per cent contribute to methane generation—which in our case amounts to 75,000 tonnes per annum. We would be more than happy to become involved in dialogue with Government as to how our sector specific contribution to reductions could be developed within an integrated framework of fiscal, budgetary and Tradeable Permit initiatives.

7. The mechanisms required to monitor the effectiveness of policies in reducing emissions

  Measurement systems are woefully inadequate in this area—as is the case in many areas of environmental reporting. Our recent publication—"Great Britain plc: The Environmental Balance Sheet" (copy appended)—was produced to underline this point.

  Such policies presume a consistent, comprehensive analysis of carbon arisings throughout the economy in all subset end use applications. Analysis needs to be taken down to industry sector level and built from the bottom up on the basis of self-assessment systems originating at the level of the firm—initially companies listed as significant plcs in the Times Top 1000. This is in accord with Michael Meacher's exhortation on environmental mass balance reporting, particularly in the area of CO₂ footprints. Once such a framework is established, policy development and communication can be secured within a transparent framework prioritised on the basis of informed fact rather than hunch using agreed standards defined by ACBE, etc. Product bench marking (question 6) reinforces this approach.

8. The extent to which "flexible mechanisms" should be used in achieving the legally binding target

  Our response to questions 4 and 5 emphasize the need for flexibility driven by industry sector based round-tabling initiatives. An important element of such flexibility should include an assumption that any mix of budgetary, fiscal or other instruments and targets should be cost neutral for that sector. This concept presumes a framework whereby Government develops a reporting infrastructure on the economic costs associated with improved environmental performance developed in conjunction with those sectors. Such a framework should be transparent and standard throughout the economy and could then form the basis for agreed "paybacks" to those sectors. If aggregate global warming impacts of a defined activity is reduced, revenue flows from any fiscal "sticks" can be defined and "repaid" in the form of tax breaks, training grants, R&D grants or reviews of VAT. The intention is to ensure that the cost of improved environmental performance is neutral by sector—but policies drive redistributive revenue flows within it (whereby laggards are penalised and innovators are rewarded).

  The waste management planning system inhibits speedy decisions on fuel substitution strategies—such as tyres for coal or energy from waste instead of CHP systems. In consequence the pool of certain types of energy provision are expanded to a point which exceeds natural market capacity. In turn this stimulates a move to marginal pricing structures below a long-term sustainable cost level.

9. The economic and other costs of the options in the Climate Change Strategy

  We are not qualified to estimate such costs but we have already committed £150,000 of Landfill Tax money to achieve a degree of transparency in this area in conjunction with the University of Oxford. Considering the current GDP impact of energy costs and coupling this to an assumption that energy costs should (in theory) be double or treble their current level to impact, one is left with the conclusion that the incremental costs of improved climate change strategies could exceed £100 billion annually. The UK cannot afford such a figure—and it is on these grounds that we advocate—in responding to question 8—that the focus should be on how these on-costs can be managed on a regional and sectoral basis. The emphasis should be on developing a strategy for redistributive effects of these on-costs so that the inflationary macro-economic impacts are kept to an absolute minimum. Such an approach needs to be holistic and driven by the existing known loadings by geography and sector of origin, underpinned by an assumption that redistributive measures reward the carbon efficient or compensate the socially disadvantaged from such a process.

  Government tax and pricing strategy in past years has been confusing and unfocused. Pricing issues have been nullified by concerns in the social costing arena. The latter areas should be dealt with on a discrete, focused basis by more effective targeting of disadvantaged groups in society. Such support may not take financial forms—the net yield of higher energy prices could be accounted for transparently by funding specific initiatives in free insulation and energy reduction technologies for affected households.

Peter T Jones

Director—Development and External Relations

5 January 1999