Consultant: CMDC Joint Venture How to take into account economy and local conditions in implementation of BAT?

Consultant: CMDC Joint Venture IPPC and economics Economics reflected in ‘available’ element of BAT ‘Available’ techniques shall mean those developed on a scale which allows implementation in the relevant industrial sector, under economically and technically viable conditions, taking into consideration the costs and advantages (Article 2(11) IPPC Directive) Key points  “economically and technically viable”  “taking into account the costs and advantages”  We require sufficient data in order to be able to make a decision

Consultant: CMDC Joint Venture The IPPC Balancing Act BEST AVAILABLE TECHNIQUE Non-Environmental Commercial Pressures Pollution Control Costs Economic Viability Technically Viable Techniques Local Environmental Issues Global Regional Desired Environmental Outcome Advantages Costs

Consultant: CMDC Joint Venture Waste Incineration Plant BEST AVAILABLE TECHNIQUE Non-Enviro. Commercial Pressures Competition Within Sector Power of Suppliers & Buyers Threat of New Entrants & Substitutes Return Expected from Investors Cost of Capital Pollution Control Costs Waste Handling / mixing Furnace configuration FGR / SNCR Electrostatic Precipitator Dry or Wet Scrubber Economic Viability- how much additional cost burden can sector absorb Technically Viable Techniques From Technical Guidance Local NOx, PM10’s Metals Dioxins Furans Odour Noise Health, Amenity CO2 Global Warming Regional SOx, NOx, Acid Rain Desired Environmental Outcome - Operating Techniques and Emission limits AdvantagesCosts

Consultant: CMDC Joint Venture Waste Landfill BEST AVAILABLE TECHNIQUE Non-Env Commercial Pressures Competition Within Sector Power of Suppliers & Buyers Threat of New Entrants & Substitutes Return Expected from Investors Cost of Capital Pollution Control Costs Liner / barrier techniques Capping, leachate treatment Gas Control/ Flare Waste Handling Fencing Monitoring Methods Financial Provision Economic Viability- how much additional cost burden can sector absorb Technically Viable Techniques From Landfill Directive Technical Guidance Local Protection of Local Surface & Groundwater Odour Noise Litter Health, Amenity CH4 Global Warming Regional None? Desired Environmental Outcome - Operating Techniques and Emission limits AdvantagesCosts

Consultant: CMDC Joint Venture When would the Authority need to collect costs / make assessment? In the development of guidance the balancing of these issues is already being addressed at increasingly detailed levels  BREFNational Technical Guidance Individual Permits  Landfill Directive Not in all cases -so don’t worry ! Collection of cost data / specific economic assessment is not required: Where either BAT or the “best environmental option” as per guidance is already proposed by the operator with no specific local environmental issues that require a beyond guidance solution. For a new installation the DETR Practical Guide sets out that the best technique is normally expected to be BAT (as per guidance)

Consultant: CMDC Joint Venture Collecting cost data and economic assessments will however be required: When there are multiple candidate BATs -- and selection of the appropriate one is not clear-cut When the BAT set out in the BREF/TGN is not appropriate, e.g. covering the sub-sector under examination Where local environmental impacts require a “beyond guidance BAT” solution Where there are claims for a “sub BAT” outcome For an existing installation where flexibility might be allowed re scale and timing on the basis of disproportionate costs This list is not exhaustive: costs can be required to make the decision whenever the Authority sees fit

Consultant: CMDC Joint Venture Assessment of costs Step 1: obtain cost estimates from operators Step 2: examine the credibility of the operator’s cost data  are they complete?  are they accurate? Step 3: assess whether the costs are excessive  economically viable  in proportion to the environmental benefits

Consultant: CMDC Joint Venture Step 1: collecting costs Require all costs for the operator resulting from the decision to invest in the technique  capital and operating costs in disaggregated form  cost savings and changes in revenues  assumptions on aggregation (eg discount rate, time horizon) Required for all options examined Operator is responsible for preparing costs Where possible apportion costs to individual pollutants Performance of different options varies therefore require cost represented per unit of pollution abated

Consultant: CMDC Joint Venture Illustrative cost data submission This submission is not sufficient to determine BAT The cost data cannot be assessed on the basis of this break-down

Consultant: CMDC Joint Venture Step 1: total costs

Consultant: CMDC Joint Venture Step 2: examine the credibility of the data Three key questions:  are all the relevant cost components included?  are the costs accurate and reasonable?  are the assumptions for discount rate and economic lifetime of equipment consistent and plausible How to assess (will vary on a case-by-case basis):  probe the operator  expert judgement and internal consultation  control cost database (benchmarking)  economics support

Consultant: CMDC Joint Venture Step 3: assess whether the costs are excessive In IPPC this relates to:  “economic viability” “taking into consideration costs and advantages” =The IPPC balancing Act (see balance diagrams) Economic viability:  implies affordability for average operator to afford the technique; not necessarily for each individual operator.  Work is in progress to maintain an ongoing view by collating business information on the sector from annual reports and the internet. Consideration of Costs and advantages:  implies a cost-benefit comparison: balancing cost (£) v abatement level and associated advantages (usually not expressed in £ terms)  Remains an expert and sometimes negotiated judgement  Work in progress to create a database of costs of abatement techniques

Consultant: CMDC Joint Venture The IPPC Balancing Act BEST AVAILABLE TECHNIQUE Non-Environmental Commercial Pressures Pollution Control Costs Economic Viability Technically Viable Techniques Local Environmental Issues Global Regional Desired Environmental Outcome Advantages Costs

Consultant: CMDC Joint Venture Step 3: determining economic viability- Existing Burdens Financial Resilience of Firms within the Sector Using Ratio Analysis of ‘Average Good Operator’, ‘ best’& ‘Worst’ to gain a measure of:  Liquidity  Solvency  Financial return  Efficiency

Consultant: CMDC Joint Venture Step 3: determining economic viability Implies affordability by the ‘average’ operator not by the individual operator Examine in terms of impact on unit profit margin, eg:  market price: £100 per unit  profit margin: £10 per unit  change in abatement cost: £2 per unit Can realistically request these data from operators but analysis should be undertaken by/with economists Can be very complex and requires extensive sectoral knowledge (eg whether firms can pass through or must absorb cost increases)

Consultant: CMDC Joint Venture Step 3: assessing costs and advantages Costs should not be disproportionate to the environmental benefits, - a useful means to assess is by £s per tonne of pollution abated The control cost database can support by providing such figures But there still remains a need for the Account manager’s expert judgement in selecting the appropriate option