Controversy still surrounds pay-by-weight bin charge system

It is an old cliché: where there’s muck there’s brass. The privatisation of household waste-collection in the last decade helped to develop an industry that – across all its sectors – now turns over more than €645 million a year and employs 4,200 people.

While many operators in it are family-run or owner-managed businesses, the industry has also attracted some big players. The State, through Bord na Móna, owns AES, US vulture fund Cerberus has Greenstar and Middle Eastern giant Averda holds a majority stake in City Bin Co.

Alongside these, operations such as Thorntons, Panda and Greyhound make up the handful of players the top of the industry.

The sector supports about 60 waste businesses overall across the State. Most of them simply collect waste from households and businesses and deliver it for recycling, dumping or export. As one senior figure in the industry puts it, “we are basically specialised transport companies”.

Not surprisingly, it is highly regulated. The Government, the Environmental Protection Agency and local councils all have a say in how it is run and what it can and cannot do.

However, as the Fine Gael-Labour coalition was heading for the polls last February, the then minister for the environment Alan Kelly changed some of those rules. As a result, householders were going to have to pay by weight for the waste they dump into black and brown bins, although not into the green recycling bins.

This would have had the biggest impact in Dublin, where large numbers of householders pay flat fees, meaning they pay the same, irrespective of the quantities of waste that they dump. As a result, those living in those areas pay less. Industry estimates show that the average household in the capital pays €250 a year for waste collection, while those in other regions pay €350 a year.

Kelly claimed that up to 87 per cent of households would save money as a result of a general move to pay by weight. However, even the industry says this is impossible. City Bin Co chief executive Gene Browne, in an e-mail to customers, says the analysis supporting Kelly's assertion does not reflect charges in Dublin. The fact is that those living outside the city's are subsidising those living there.

“With pay by weight, more people outside Dublin will see their charges go down as they current pay markets rates,” he says. “That’s just a fact because prices in Dublin barely reflect the fixed-cost element.”

He cites a range of other costs, such as the fees that collectors pay to get rid of the waste and normal overheads such as labour, fuel, tax and administration, which the industry has to meet from what it charges customers. His company believes that one-third of bills will ultimately go down under pay by weight, a third will increase and for the final third, the bills will stay the same.

As companies moved into what has become a highly competitive Dublin market over the last decade, they began using fixed charges as a one-off way of signing up householders. However, they were then forced to stay with the system in order to retain business and stave off rivals who used similar tactics to try to lure their customers.

Ahead of the proposed introduction of pay by weight next month, a number of companies announced plans to increase fixed charges in anticipation of losses from householders suddenly deciding to get parsimonious with their waste. Consumers’ reaction spooked the new minority Government, forcing it to freeze the charges for 12 months.

The row goes to the heart of how the industry makes its money. Fixed charges actually make this difficult. The system works best when homes do not dump too much waste, as this means less cost to the collectors, but it allows customers the freedom to dump as much as they want.

The evidence suggests that this is what they do. Companies which use both fixed charge and pay by weight have found that the average household on a fixed-charge dumps 354 kg of waste more than one on pay by weight over a year. Spread across large numbers of households – there are about 500,000 in the greater Dublin area alone – it amounts to a huge amount of extra waste.

Before Kelly made his announcement in February, it emerged that the Republic was running out of landfill space required to dump about 600,000 tonnes of household waste a year. This pushed up costs by about €10 a tonne. As, on average, half a tonne of waste from each home in the State ends up in landfill each year, that means companies had to pay an extra €5 for each of their domestic customers.

However, it was not simply a matter of money. The bigger problem was that landfill space was running out. The industry alerted the Department of the Environment to this in December 2015. Initially, the concerns were dismissed. It was not until companies began to put pressure on Government-appointed regional waste co-ordinators that it got a response.

The Irish Waste Management Association says it is now working on a plan with the Government to provide extra capacity at Bord na Móna's landfill in Drehid, Co Kildare, and the possible reopening of Greenstar's dump in east Galway. Alongside that, options include cement manufacturers, whose kilns can burn some waste, and the Indaver incinerator in Co Meath.

Had pay by weight come in as planned next month, the industry believes it would have helped take the pressure off the need for landfill as householders dumped less or diverted more rubbish to their free green bins.

Part of the squeeze on landfill results from the delay in building the Poolbeg incinerator in Dublin. The industry now sees that project, which has been the focus of huge controversy for more than a decade, as the solution to the squeeze on landfill as it will take much of what is now dumped and burn it to generate electricity.

What is not dumped is recycled. Collectors have to pay the Republic’s nine recyclers to take their waste. Those costs vary from month to month and place to place. Generally those in Dublin pay less.

Industry sources say about €25 a tonne would be seen as reasonable in the capital. In the rest of the State, the cost rises to between €40 and €45, partly because the material is transported over a longer distance. Six months ago, Dublin charges were higher, at about €35, but this time last year they were €15 a tonne.

Some of the bigger companies process waste as well as collecting it, either cutting out this charge or paying it to another subsidiary of the same group. Panda operates a recycling facility in Ballymount in Dublin for the city's four councils. AES has a recycling plant in Tullamore, Co Offaly, Thorntons has a number of operations that handle different kinds of waste and Quality Recycling in Carrick-on-Suir, Co Tipperary, also collects and processes.

Global commodity markets determine the returns on this, as recycled waste is exported and used as raw material for manufacturing. Some of those prices have come under pressure, plastic in particular. The most expensive grade of plastic bottles are worth €390 to €440 a tonne on world markets; two years ago they sold for €470 to €535. The cheapest grade now sells for between €65 and €150 a tonne against €156 two years ago.

Plastic is produced from oil, so the prices for waste, which is a substitute raw material, track world crude values, which began falling sharply in the autumn of 2014.

Newspapers and magazines that make up about 70 per cent of green bins have been more stable. In May this year, they were worth about €33 to €48 a tonne; in the same month in 2014, the range was €33 to €43. There are also signs that prices for other materials such as metals are improving. However, these do not make up a huge proportion of what is going into recycling.

In January, insurers also hit waste companies with increases that ranged from 30 per cent to 50 per cent, putting further pressure on their costs. For the moment, the factors pushing up their costs are likely to remain in place, but operators have now found themselves in a bind, as their charges are frozen.