Lecture 4 - Waste Economics (Ch. 1.3 + Martinez-Sanchez et al) Flashcards
Mention the three economic instruments that have the biggest relevance to waste managment.
- Charges for waste disposal and treatment:
a. Landfill taxes and fees (and restrictions/bans to provide context for the charges);
b. Incineration taxes and fees (and restrictions/bans to provide context for the charges); - Pay-as-you-throw (PAYT) schemes;
- Producer responsibility schemes for specific waste streams (notably packaging, WEEE, ELV and batteries).
What is the discount rate used for?
The discount rate is used to convert costs
occurring at different times to equivalent costs at a common point in time.
What are the three context-specific challenges regarding waste economics teached in the lecture?
(1) which type of costs should be assessed (for example private or social costs)
(2) for whom should these costs be assessed (for example facility operators, households, public entities or entire systems)
(3) which cost calculation principles should be applied for the individual waste technologies included in a system?
Waste management systems involve several stakeholders with different interests. Mention these stakeholders.
(1) waste generators (for example households)
waste management service are often paid by the waste generators (either by waste fees or through taxes)
(2) waste facility operators
waste operators are typically involved only in selected parts of the management chain and may consider only costs associated with relevant facilities
(3) waste authorities
authorities, such as local governments, may be interested mainly in the socio-economic aspects of the waste management system
Explain the two types of costs in waste economics.
• Internal costs –> are monetary costs occurring both inside and outside the waste management system –> budget costs and transfer costs
Incurred to waste agents (e.g. waste generatoris and operators)
• external costs (also termed ‘‘externality’’ costs) –> occur outside the economic system (also called ‘‘non-marketed goods/services’’ because they have no direct monetary value in the market) –> externalities costs
Incurred to all members of society
- Typical externalities relevant to waste systems are emissions into air, water and soil which affect human health, disturb natural environments and cause climate problems as well as disamenity impacts (for example nuisance, noise and congestion) caused by waste facilities and transportation.
What is budget costs?
Budget costs represent marketed goods/services incurred by a waste generator/operator and can be either “one-off”, occurring once during the lifetime of a technology (e.g., capital investment or back-end costs) or recurring (e.g., operational and maintenance costs).
Explain what transfers is and list some examples.
Transfers are monetary flows representing the income distribution between stakeholders while not leading to the reallocation of resources such as land and labour or welfare changes in society, e.g., environmental taxes and subsidies or general taxes such as value added tax (VAT).
Examples:
• taxes, subsidies, fees and duties used to distribute income between different agents in society
• Pecuniary externalities –financial losses occurring in existing facilities or industries outside the system boundary
What is externality costs?
List some examples.
Externality costs represent the effects on the welfare of individuals of activities which are not compensated. Externalities can be environmental (e.g., relating to emissions) or non-environmental (e.g., in the form of odourfrom waste facilities or time spent by households on waste sorting).
Examples:
• emissions into air, water and soil which affect human health, disturb natural environments and cause climate problems
• disamenity impacts (for example nuisance, noise and congestion) caused by waste facilities and transportation.
Other externalities:
• such as time spent and space used by households to sort their waste, are often excluded from the assessments due to the uncertainty in quantifying their value.
What is included in the initial investment?
- it includes the capital costs of all the fixed assets (e.g.land, constructions buildings, plant and machinery, equipment, etc.) and
- non-fixed assets(e.g.start up and technical costs such as design/planning, project management and technical assistance, construction supervision, publicity, etc.).
Explain what the residual value is
The residual value reflects the capacity of the remaining service potential of fixed assets whose economic life is not yet completely exhausted. This will be zero or negligible if a time horizon equal to the economic lifetime of the asset has been selected.
Explain annualized capital expenditure.
Investment costs (-residual value) are allocated equally between fixed time periods (years) throughout the economic lifetime of the technologies/assets. This is done by converting the initial investment amount into annuities.
A = I*CRF CRF = q*(1+q)^T/[(1+q)^T-1]
I–Initial investment
CRF-capital recovery factors, which are calculated by using:
- q, representing the interest rate of borrowing capital (or alternative real rate of return) or in other words, q represents
the interest that could have been earned by investing the money in another activity. - T, representing the lifetime of assets
What is operating costs? Give some examples
Operating costs include all the costs to operate and maintain (O&M) a service, installation or system.
Typical O&M costs include:
- labour costs for the employer;
- materials needed for maintenance and repair of assets;
- consumption of raw materials, fuel, energy, and other process consumables;
- services purchased from third parties, rent of buildings or sheds, rental of machinery;
- general management and administration;
- insurance cost;
- quality control;
- waste disposal costs;
- and emission charges (including. environmental taxes, if applicable).
Which types of revenues do we have in waste managment systems?
- Payments for services (e.g.a gate fee)
- Sale of recovered materials
- Sale of produced energy
(Transfers (e.g.subsidies), as well as other financial income (e.g.interests from bank deposits) SHALL NOT be included within the operating revenues.)
Which three types of Life Cycle Costing (LCC) do we have? Explain the major differences
Conventional LCC –> The assessment of all life cycle costs that are directly covered by the main producer or user in the product life cycle
- Defintion of life cycle –> economic lifetime, often excluding EoL.
- Reference unit: Product or project
- Types of costs –> Internal costs of one stakeholder, focusing mainly on acquisition and ownership costs
Environmental LCC –> The assessment of all life cycle costs that are directly covered by all stakeholders connected to the product life cycle
- Defintion of life cycle –> Complete life cycle
- Reference unit: Functional unit
- Types of costs –> Internal costs of stakeholders connected to the life cycle, plus external costs and benefits expected to be internalised such as CO2taxes
Societal LCC –> The assessment of all life cycle costs that are covered by anyone in the society
- Defintion of life cycle –> Complete life cycle
- Reference unit: Functional unit
- Types of costs –> Internal costs of all actors plus external costs, i.e.impacts that production or consumption have on third parties
See slide 18+19
What is the objective of a cost-benefit analysis? Which is used in this analysis?
Objectives:
- To determine if an investment/decision is sound (justification/ feasibility)
- To provide a basis for comparing projects
Methods:
- Discounted cash flow method.
- benefits and costs are expressed in monetary terms, and are adjusted for the time value of money, so that all flows of benefits and flows of project costs over time (which tend to occur at different points in time) are expressed on a common basis in terms of their net present value.
