As with most kinds of human activities, the money side of things plays an important role – more often than not the most important one. In general, the term ‘economic aspects’ is seen on a par with ‘commercial considerations’ i.e. a topic concerned with costs and revenues, in an extended version including technical aspects such as operational reliability. However, the notion of triple bottom line accounting (economic growth, ecological balance, social progress) as promoted by eg. the World Business Council for Sustainable Development is becoming accepted only timidly in the member countries and regional bodies.

In Europe it is common knowledge that in waste management and waste treatment costs – and not revenues - are the predominant economic factor. But even when talking about costs alone one needs to be clear about what ‘cost’ means, or what the various meanings of costs can be: We could be talking about purely financial costs, and there may still be confusion as to whether these apply to the operator of a waste treatment facility, to a waste generator or to a municipality.

In addition, we know of ‘costs’ that are not of an immediate financial nature. These are the costs to the environment (i.e. external costs, costs not accounted for in commercial considerations), costs to future generations (eg. contaminated sites or landfill aftercare necessary in several decades from now) and any social impacts referred to as costs (loss of amenity, social equity etc.).

If we look at the financial essentials for a few minutes, there are the following components:#

The next two chapters deal with the above cost parameters only.

For biowaste treatment systems, the costs and the cost structure generally present themselves as depicted in Fig. 1 (open systems) or Fig. 2 (fully enclosed systems). Of course these are the two extremes, with numerous variations between them. Which system to choose depends largely on the input material: A lot of garden waste with small amounts of kitchen waste can be composted in an open windrow facility; larger amounts of food waste with smaller proportions of garden waste (which is necessary eg to act as a bulking agent) require processing in a fully enclosed facility.

A wealth of information is available on composting systems in Germany. There, about 550 large scale composting facilities are in operation. It is interesting to note that about 50% of the biowaste collected separately is being processed in open composting facilities. The remainder is processed in (partially) enclosed systems. The technologies used have not changed much over the last five to seven years. The market for composting technology, and the technology itself, can be described as mature.

In general, overall processing costs (including capital expenditure) for biowastes are between € 50 and € 90 per tonne input, depending on location, input characteristics, and - last not least - on the country in which the plant is being established and operating. Of course, there are facilities, which operate at or below € 25/t. However, this is usually either garden waste only or the facilities are not operating at a desirable standard.

Capital costs of such facilities are in the order of 20 – 45 % of total costs, with staff costs the second largest item (20 %). It is also worth noting that, in most of Central Europe at least, ‘revenues’ from product sales are actually costs i.e. the distribution of products means paying money and not getting any.

The above describes the cost situation for aerobic biowaste composting systems only. A lack of bulking agent (eg garden waste) or large quantities of wet organics sometimes require an anaerobic processing facility which is capable of handling materials with very high moisture contents. However, more often than not such wet organics are being blended with a bulking agent of some sort (shredded wood residues etc.) so that they can be composted aerobically.

There are not too many anaerobic processing facilities for biowaste in Europe. In Germany, there were about 20 plants in 1996, and around 45 plants in 2000 in operation. About a decade ago, treatment costs were much higher than for composting. At present, average unit costs amount to € 70 –110/t input, about 15 % above costs for aerobic treatment.

In summary, anaerobic plants have not a great share in the biowaste industry. They have been much more successful in other areas such as treatment of organic sludges and agricultural wastes.

Managing biowastes means more than just processing the material. A significant cost of managing biowastes is the (separate) collection of biowastes which is necessary to produce high quality product. Fig. 3 illustrates the proportions between the cost components: Collection costs are generally higher than processing costs. There are cost savings such as avoided landfill costs and reduced garbage collection costs however, these are not sufficient to cover collection and processing costs. The figure also indicates that the annual costs per household are much lower than the costs per tonne as a household generally produces much less than one tonne of biowaste per year.

The above illustrates biowaste management costs from domestic sources. For biowaste from commercial premises, the situation depends on the quantities of material being generated. A relatively small number of businesses generate a large proportion of the commercial biowaste as was demonstrated in a recent study for Southern Sydney (Fig. 4).

For businesses with small quantities of biowaste, the costs are much higher than for large ‘biowaste’ businesses (Fig. 5) due to the fact that the degree of filling in the biowaste bins is very low when emptied. (There is a need to empty bins frequently for hygienic and odour reasons).

Residual waste treatment technologies can be mechanical, biological, thermal or any combinations. With the EU-Landfill Directive, member countries will employ either purely thermal technologies or combinations of mechanical-biological (MBT) and thermal treatment (TT) technologies in the future.

If we look just at the treatment costs (Fig. 6), we see significant differences between MBT and TT, with MBT being less than half as costly as thermal treatment. The major cost component with thermal treatment are the capital costs. With the stringent emission controls in place since several years, the flue gas cleaning system of the average waste-to-energy plant makes up around two thirds of the entire capital expenditure of a plant.

In contrast to MBT plants, there are some revenues (from the sale of power) from thermal waste treatment processes however, these do not make up more than 10 % (max. 15 %) of the overall costs.

It has to be noted that the treatment costs alone do not give the full picture. One important cost component is the issue of residue disposal. Residue disposal costs are much more relevant with MBT processes than with thermal processes for two reasons: 1) The quantity of residues is higher, and 2) the residues require landfills with a higher standard of environmental controls than landfills for slag and bottom ash (the disposal of hazardous fly ash is not as significant as the quantities produced are very small).

Fig. 7 compares disposal costs and treatment costs for a number of scenarios. It also shows how the costs have developed over the past few years. In addition, the graph indicates that landfilling without pre-treatment and MBT without energy recovery from a high calorific fraction are not consistent with the EU policy and legislation in the future.

The situation of residual waste treatment (and disposal) costs in the member countries can be summarised as follows:

Fig. 7: Residual Waste Treatment and Disposal Costs

Some of the above may have given the impression that it is relatively simple to determine costs for the (biological) treatment of waste. However, it generally already proves very difficult to determine costs for one particular plant. It is even more tricky to compare costs between different facilities and locations. The points listed below are factors which are relevant in determining costs. Never are all of these factors the same, nor are they always accounted for in a comparable fashion for different facilities.

In addition to the cost components presented above, there are other issues which play an important role in a wider economic sense. Although often forgotten in debates about waste management, it is essential to consider these aspects with at least the same scrutiny as all other (and often more obvious) costs.

One is the issue of financing existing landfills: Over the past decade, many regions in Europe have invested heavily to establish new landfills or bring existing landfills up to a high environmental standard. Many of these landfills have a residual life span of between 10 and 20 years. With the need to treat residual waste prior to disposal, the quantities of waste requiring landfilling are reducing substantially. If the (annual) input into a landfill is reduced, the life span is increased accordingly. With this, also the payback of loans often requires extending which in turn raises the costs of disposal per tonne. A figure from a case study for the state of Tyrol/Austria indicates the impact of residual waste treatment on landfill life (Fig. 8). It is clearly visible that a thermal treatment of the entire waste stream has the largest impact.

Another relevant issue is the energy generation. If a thermal treatment plant is the only facility for residual waste treatment, energy is being generated as the waste comes in and hence, energy needs to be sold or utilised immediately as it is being generated. In some instances, this leads to undesired dependencies or to sub-optimal commercial arrangements for the sale of energy. With an MBT plant upfront, which basically produces two output streams one of which is a high calorific fraction, this material can be stored until or transported to locations where it is in demand as a substitute fuel. In other words, an MBT plant decouples the function of disposal from the function of energy recovery/generation.

High capital costs increase the commercial risk: The higher the capital costs are on total costs, the more critical is a high utilization rate. With high capital costs, low utilization rates can quickly cause financial bottlenecks.

A significant issue when considering ‘economic aspects’ of biological waste treatment is the environmental impact of different waste management alternatives.

In this context it is important to note that the EU and some of its member countries have commenced to utilise economic tools such as tax exemptions and financial incentives to steer economic activities into an environmentally sustainable direction. In waste management, one of the first such economic incentives are subsidies for greenhouse gas reduction and the entire field of carbon credits and renewable energies.

Although this is a commendable instrument, it appears as though the waste management market is going to become biased. The reason is that the preferential treatment of energy recovery makes other waste treatment options less attractive in a commercial sense. This has, in some instances, already lead to the establishment of facilities for the recovery of energy from clean organic material which could have been used for other purposes such as compost and soil enhancement.

Unfortunately, the environmental benefits of compost application on soils are presently not being acknowledged, or at least not being rewarded in a similar fashion as the energy recovery from renewable fuels. Some organisations have commenced to identify and publish the monetary long-term benefit of compost application through increased crop yields. But there are a few studies which at least touch on the issue of carbon sequestration (and respective crediting) in soils however, almost no work has been done so far on the quantification of other (perhaps even more important) environmental benefits of recycling organic materials back into soils apart from a couple of studies in Australia. One of these studies showed that, in Australia, the environmental benefits of recycling biowaste back into soils have an economic value of over € 30/t.

Other issues presently discussed with some emotions are the current and future standards and policies for the industrial use of substitute fuels. These vary extremely from country to country, and even within member countries there are widely diverging opinions about how and where to use such fuels. Substantial additional work will be required to answer the main questions such as the balance of environmental benefits through energy generation and the environmental costs through release of pollutants through the various industrial combustion processes.

There are numerous parameters determining the economic performance of biological treatment of wastes. When discussing or even comparing costs, these factors need to be identified and applied in a similar fashion.

Composting of biowaste at a high standard incurs financial costs to a waste generator of around € 50 –90 per tonne. Costs for anaerobic digestion (including subsequent composting necessary prior to use of residues) are about 10 to 20 % higher.

Biological treatment of residual waste will only be possible in the EU in combination with thermal treatment. There are advantages of such combinations over a single waste incineration.

A wide range of proven technologies is available for biological treatment of wastes at comparable costs.

Economic incentives for renewable energies currently distort the market place for biological waste treatment. There are no economic incentives available for positive environmental outcomes of compost application (eg. carbon sequestration).

There is an urgent need to establish an overall soil protection strategy in the EU. This would also give support and strengthen biological waste management systems.

Although there are signs of developing awareness of the benefits of recycling organics into soils, there is still a need to promote the use of organic material (humus) as one step towards sustainability.