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AD outlook in Ellen MacArthur report under fire

An economist working in the waste industry has criticised the Ellen MacArthur Foundation report for overstating the benefits of anaerobic digestion (AD) for local authorities.

The anonymous blogger, who writes a blog titled ‘Rubbish Economics’, was reacting to the content of the circular economy report launched last week at Davos, which says the circular economy is worth $700bn in savings for the consumer goods sector.

The report calls AD a huge opportunity, and highlights that electricity and fertiliser generated from food waste could be worth $1.5bn to the UK each year.

At a more detailed level, the report states: “We estimate that processing food waste with AD instead of landfilling could create an operating profit of up to $172 [£112] per tonne of food waste.”

But the blogger argues that it is “dangerous nonsense to tell local authorities that they can make £112 profit per tonne of food waste processed by AD”, when all of the gains made are from Government intervention in the form of subsidies and avoided landfill costs.  

“In the absence of this intervention, authorities would in fact be faced with higher costs (in the order of £33 per tonne using their assumptions). So, at an aggregate economy-wide level, the real returns are actually negative,” he or she writes.

The blogger claims it is misleading to call the gains from subsidies and avoided tax a profit instead of a lower cost, and adds: “Moving the management of the UK’s wastes up the waste hierarchy will increase local authorities’ waste management costs over time.”

AD in the UK benefits from the Feed-in Tariff subsidy designed to incentivise renewable energy production. Landfill tax in the UK is currently £64 per tonne.

Matt Hindle, policy manager at the Anaerobic Digestion and Biogas Association, told MRW that he could not comment on the figures in MacArthur’s report but pointed out that the WRAP Gate Fees Report has shown that AD offers good value for money compared with other treatment options. He added that AD has been recognised already in Defra’s 2011 waste review as the best treatment option for food waste from an environmental perspective.

The Ellen MacArthur Foundation has responded to the criticisms on the Rubbish Economics blog.

“The model used for the food waste case is based on actual cost data from AD plants in the UK, interviews on waste handling and treatment costs in the UK (WRAP), and UK energy prices. The report looks at the situation as it is today as well as at an “advanced scenario” that takes into account some cost improvements that can be realized from larger operations, such as bulk order discounts of technology if several plants are built at once. These benefits are realized already today in bigger projects, as confirmed for example by Tamar Energy,” the report authors write.

They also say: “Both the cost and revenues are real costs and income, so the full profit of $142 today and $172 in an advanced scenario described in the report would be realized.”

 

 

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