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Feature: Trading places

The UK's chosen vehicle for delivering the EU Landfill Directive targets to divert biodegradable municipal waste - the Landfill Allowance Trading Scheme (LATS) - came into effect on April 1 this year.

Every English local authority has been set decreasing limits on the amount of waste it can send to landfill until 2020. The allowances for the first year have been based on landfilled amounts in 2001/02. But subsequent limits are based on waste arisings in 2001/02, resulting in an increased allowance for areas which already have landfill alternatives for large amounts of their waste, such as energy from waste (EFW) facilities. These areas are likely to be the main source of spare allowances for trading as the scheme progresses.

Under the LATS scheme, surplus landfill allowances may, in theory, be traded between authorities. But there are many people who doubt the effectiveness of such a scheme and who question the availability of trades.

A local authority that landfills less than its permitted limit may either bank the spare allowances to use in subsequent years or sell them to another local authority. Councils whose landfilled waste will exceed their limit can either buy from another authority or borrow up to 5% of their own allowances for the following year.

The exception to this to-ing and fro-ing is that in the EU's three target years of 2010, 2013 and 2020, no borrowing or banking is permitted.

Councils that exceed their permitted limits but are not able to cover it by buying or borrowing allowances will be fined £150 for each tonne which exceeds their allowance in that year. This means that exceeding the limit by just 10,000 tonnes - a relatively small amount - could result in a fine of £1.5 million, with an inevitable impact on council tax.

An online LATS register will record and monitor trades, plus any banking or borrowing of allowances by authorities. As yet, that register shows empty, although a number of deals are believed to have been done already between authorities. One is Cambridgeshire County Council, which has said that it expects to be selling allowances in the first year.

The Government has pinned its hopes on this trading scheme to enable it to meet the national diversion targets of reducing the landfill of biodegradable municipal waste to 75% of 1995 levels by 2010, 50% by 2013 and 35% by 2020. This last date includes the four-year derogation which countries that landfilled more than 80% of their waste were allowed to claim. The UK and Greece were the only two countries that have asked for the derogation. If we fail as a nation to meet those targets, EU fines of up to £500,000 a day are being threatened.

While the trading scheme is being described by the Government as a financial instrument which breaks new ground in environmental policy terms, others are less positive about the measure. The Local Government Association (LGA) has predicted that the UK will not meet its first diversion target in 2010 and, worse, that there will not be enough allowances available to enable authorities exceeding their limits to buy themselves out of trouble. The LGA also says that in subsequent years the deficit will get worse.

The only area on which there is wide agreement is the urgent need for an expansion of waste processing capacity of all kinds if landfill diversion is to succeed. Kent County Council, one area currently developing new EFW capacity (which should be operational by 2007) has predicted that in 2013 it will have a 100,000-tonne shortfall in allowances despite the EFW plant.

Four EU countr

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