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Feature: Trading spaces

It might be early days, but nine waste disposal authorities have completed trades as the government's pioneering Landfill Allowance Trading Scheme (LATS) takes shape. The scheme went live on April 1 and represents one of the government's key measures to reduce the amount of biodegradable waste going to landfill. Progressive reductions in the amount of biodegradable municipal waste - such as paper, food and garden waste - that disposal authorities can landfill and the diversion of biodegradable municipal waste from landfill is a key objective. By 2010, biodegradable waste going to landfill must be 75% of the amount disposed in 1995; by 2013 this is reduced to 50% and by 2020 to just 35%.

Local authorities across England have been set limits on the amount of biodegradable municipal waste they can dispose of in landfill sites but these 'landfill allowances' are tradable between them. Authorities can buy more allowances if they expect to landfill more than is permitted by the number of allowances they hold and those with low landfill rates can sell their surplus allowances. Waste disposal authorities can also save unused allowances (banking) or bring forward part of their future allocation (borrowing) from their own allowance allocations.

The model is based heavily and unapologetically on the emissions trading system used in the USA to reduce sulphur dioxide emissions from power stations but is thought to be unique for the waste management sector. The government hopes that through the flexibilities of trading, banking and borrowing, authorities will be able to develop the most cost-effective strategy for meeting their waste targets. That's the carrot. The stick is that disposal authorities that exceed the limit set by the allowances they hold will be fined £150 for every tonne they are over the limit.

English waste disposal authorities (WDAs) have been given allowances for the period up to the year 2020 to provide certainty for long-term planning and Defra has published a list of allocations for all 121 English disposal authorities. Only waste disposal authorities are able to use and trade landfill allowances.

"The scheme is back-end loaded and the initial allowances for this trading year, April 2005 to April 2006, are reasonably generous," says Defra's Andy Doran. "However, they become tighter as each year progresses. Consequently, we had anticipated that the levels of trading would be fairly quiet at this stage as authorities evaluated the situation and watched what others were doing.

"That said, we are into Q2 of the project and there have already been authorities buying and selling and quite a few of them are in reconnaissance mode, looking at the marketplace and the prices."

Trading of landfill allowances is being facilitated by Defra's electronic LATS Register. This is an online system only available to nominated officers within disposal authorities, which acts as a kind of bank account. Each disposal authority has an account showing how many allowances it has available and any transactions are displayed on a password accessed site, including latest prices (though not the prices paid for specific trades). The headline numbers are available on a public access website.

Local authorities are also able effectively to trade with themselves across time. WDAs will be able to bank unused allowances in one year to use in a future year, or borrow allowances from future years where shortages exist. However, Defra says it will only allow 5% of landfill allowances to be borrowed from future years.
Additionally, trading between ye

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