Regulatory impact and compliance cost statement: NES to Control Greenhouse Gas Emissions from Landfills

Date: July 2004

[A more detailed analysis of the costs and benefits of this proposal is contained within the 'Proposed National Environmental Standard to Control Greenhouse Gas Emissions from Landfills: Analysis of the Costs and Benefits' which is available from the Ministry for the Environment Website at www.mfe.govt.nz. This analysis has been undertaken to meet section 32 requirements of the RMA.]

Statement of the nature and magnitude of the problem and the need for government action

Landfill sites are a source of the greenhouse gas methane, produced when rubbish in landfills decomposes. The effective management of methane is important, as it is a potent greenhouse gas with a global warming capability over 21 times that of carbon dioxide. While methane can be destroyed through combustion, there is at present no national requirement for landfill operators to collect and destroy methane. Hence, there is a lack of consistency between regions considering this issue when deciding landfill air discharge consents.

Landfill gas emissions make up 4% of New Zealand's total methane emissions. The Government has committed to reducing New Zealand's greenhouse gas emissions and has accounted for a reduction from the waste sector in the climate change policy package. If reductions are not made, New Zealand could restrict its ability to meet obligations under the Kyoto Protocol.

The recently introduced Resource Management (Energy and Climate Change) Amendment Act 2004 confirms the Government's policy that discharges to air of greenhouse gases will be controlled at a national level. The Act allows for national coordination by removing the power of local government to consider the effect of greenhouse gas emissions on climate change when making rules in regional plans or determining air discharge consents. Therefore, there is no certainty that Regional Council's will continue to place controls on landfill gas emissions (Regional Council's may be able to place some level of control on landfill gas for odour and health and safety concerns, though this is not guaranteed). Under the Act local government can only consider the effects of greenhouse gas emissions when this is necessary to implement a national environmental standard. Due to the extent of greenhouse gas emissions from landfills there is a need to consider what form of national policy is required. The intention of any proposed policy is to ensure existing best-practice that existed prior to the introduction of the Amendment Act continues.

The collection and destruction of landfill gas is technically and financially viable at landfills over 1 million tonnes in capacity. Nineteen of New Zealand's 116 operating landfills exceed the 1 million tonne threshold; all but four of these 19 sites will be collecting and destroying landfill gas in the next 3 years, as is current best practice and often required under resource consents. These 19 sites emit approximately 60% of New Zealand's landfill methane emissions.

As a result of the status quo there is no guarantee that landfill emissions would be controlled in a consistent national manner and there would be a high risk of emissions growth. This may also mean that New Zealand may not be able to meet climate change commitments.

Statement of Public Policy Objectives

The policy objectives are:

  • to assist in meeting New Zealand's obligations under the Kyoto Protocol;
  • to establish national management of greenhouse gas emissions from landfills;
  • to provide a level playing field and certainty for the waste management industry; and
  • to provide an incentive to divert organic waste (e.g. food scraps and garden waste) from landfills.

Statement of feasible options (regulatory and/or non-regulatory) that may constitute viable means for achieving the desired objective(s)

Status quo

Prior to the introduction of the Amendment Act, landfills were often required to collect and destroy landfill gas via resource consent condition. Following the introduction of the Amendment Act this mechanism has been removed. There is now therefore no regulation of methane emissions (other than potentially in relation to odour and health and safety concerns). Therefore, it is no longer appropriate to maintain the status quo, as it does not meet the policy objective of establishing national management of landfill greenhouse gas emissions.

Non-regulatory Options

Continued 'guidance' approach plus climate change projects mechanism

This is similar to the status quo, with the inclusion of climate change incentives [The Government has developed the Projects to Reduce Emissions programme to support projects that will reduce greenhouse gas emissions. Successful projects are awarded Kyoto Protocol emission units or "carbon credits" which can be sold to create revenue. A project is a specific activity that reduces greenhouse gas emissions in the Kyoto Protocol's first commitment period (2008 to 2012). It may involve new technologies and practices that would not be currently economic, or where market barriers exist to prevent them being taken up. An activity can only be a project if it would be uneconomic without payment of the incentive.]. This option is not appropriate as it:

  • May create an incentive for landfill operators to exaggerate estimated emissions and lobby the Government for more credits under the projects mechanism;
  • Will raise the prospect of methane emission growth due to Regional Councils not being able to place controls on methane emissions; and
  • There is no guarantee that the Government will continue to offer carbon credits in the future.

Because of the above points this option does not meet the stated objectives and therefore is not considered further.

Emissions charge

This option would place a tax or charge on landfill gas emissions. Central government would set the emission charge and would also implement and collect the taxes. This option would provide an economic incentive for landfill operators to minimise emissions. However, there are a number of problems with this option:

  • Such a charge would need to be very large (to be more expensive than infrastructure costs) to actually encourage change; and
  • Emissions of methane quantities from landfills are difficult to measure and estimates would have to be used. These estimates would then be used to calculate the emissions charges. This could result in the charges not being accurate enough to change behaviour in the right direction.

These points show that the emissions charge option does not meet the stated objectives and therefore is not an appropriate option.

Regulatory option

Preparation of a National Environmental Standard - preferred option

National environmental standards set a mandatory requirement via regulations developed through sections 43 and 44 of the Resource Management Act (1991). The proposed standard sets a consistent national approach to the management of methane emissions by requiring all operating landfills over 1 million tonnes capacity to collect and destroy landfill gas. Landfills will be required to operate a flare at a minimum temperature of 750 degrees centigrade for a retention time of 0.5 seconds and ensure that surface methane emissions are less than 5000 parts per million. Landfills that contain less than 5% organic matter will be exempt from the standard, as these facilities produce negligible amounts of methane. Landfill consent holders would be able to apply to the Ministry for the Environment (MfE) for an exemption if they are able to demonstrate that the landfill contains less than 5% organic matter; MfE costs associated with an exemption application will not be recovered from applicants.

A three year transitional period will apply to allow time for non-complying sites to finance and design systems. Landfill consent holders will be required to comply with the standard, collect data on methane emissions and report this data to Regional Councils annually or biannually. Regional Councils will then monitor compliance. Enforcement of the proposed standard will be the responsibility of Regional Councils, standard RMA enforcement provisions will apply.

Statement of the net benefit of the proposal, including the total regulatory costs (administrative, compliance and economic costs) and benefits (including non-quantifiable benefits) of the proposal, and other feasible options

Central Government

The proposed standard has the benefit of setting a national policy to control landfill methane emissions, as envisaged during the development of the Resource Management (Energy and Climate Change) Amendment Act 2004, thus achieving the government's policy objectives in this area.

There will be a cost to central government verifying regional council's review of landfill consent holder's compliance with the standard. It is not expected that this cost will exceed 0.25 of a full time equivalent. An estimate of $35,000 per annum has been used in the analysis for this cost. This estimate includes costs associated with assessing applications for exemption from the standard. This cost will come from existing baseline funding.

Regional Councils

Regional councils will incur costs reviewing surface methane emission monitoring data forwarded by landfill consent holders. It has been estimated that this will cost each region around $525 per landfill [This figure is calculated by estimating that each region will have two landfills to report on and it will take about four hours per landfill to review the data (Pers. Comm Glenn Wigley, MfE 2004).] on an annual basis.

Landfill Consent Holders (of sites over one million tonne capacity)

The standard will give consent holders the benefit of a consistent and even application of climate change policy across the landfill industry. The standard will ensure that current best practice of capturing and flaring gas is continued at landfills over 1 million tonnes capacity. The standard is also not likely to prevent new industry entrants as it is highly likely that any new landfill would propose landfill gas collection, as it is considered current best practice.

The cost to landfill consent holders will be kept relatively low as the proposed standard reflects existing best practice. The proposed size threshold of 1 million tonnes is widely accepted in the industry as being the level at which collection of landfill gas is technically and financially viable.

Two landfills will be required to restart their installed landfill gas collection systems that have been decommissioned. One needs to install a whole new system as the current system does not operate efficiently. The combined costs to these two landfills will be initial costs of $1,010,000 and operational costs of $100,000 per annum.

Landfills will also be able to beneficially use collected landfill gas, for example, by converting methane to electricity. There are compliance costs for business arising from this proposal; these are detailed in the Business Compliance Cost Statement.

Society

The key benefit to the whole of society is a reduction in greenhouse gas emissions (measured as carbon dioxide equivalents) of 2.77 million tonnes over the period 2006 to 2016, thereby assisting in reducing the impacts of global warming. This represents 60% of all landfill gas emissions, which equals 2.4% of New Zealand's total methane emissions. These benefits will continue past 2016 but these have not been quantified.

The reduction in greenhouse gas emissions has been measured in terms of the market value of CO2 (as used for permit trading internationally). It is currently predicted that the market price of CO2 will be around US$5 - US$25 ($7.08 - $35.38 NZ) [Source: www.C02e.com, an emissions trading market set up on the internet. Using the exchange rate as at 17/02/04]. Using these figures it has been calculated that the proposed standard option will generate a benefit (over the status quo option) of between NZ$900,000 and NZ$4m per annum (in present values using a discount rate of 10%). Over 10 years the benefits are predicted to be between $9.2m and $46.0m.

Statement of the consultative programme undertaken

In September 2003, MfE held three technical workshops to discuss the proposed standard with industry, local government and consultants. Fifty people attended these workshops.

In October 2003 the Minister for the Environment publicly notified the proposed standard. Submissions were invited over a 6-week period from 25 October to 5 December 2003. During this time MfE undertook a comprehensive road show across New Zealand, holding over 30 meetings in 16 regions, and talking to over 1,000 people. Due to the high-level of interest attracted by he proposed air quality standards notified at the same time, submissions were accepted until 24 December 2003.

Eighteen submissions were received, of which 13 supported or conditionally supported the proposal, one opposed, and four gave no specific comment on their submission. A concern raised in some submissions was that the standard would define "business as usual" (e.g. existing practice), thereby meaning that sites currently collecting and flaring landfill gas will not be eligible for carbon credits via the Ministry for the Environment Climate Change's Project Mechanism Programme. This concern is outside what the standard is trying to achieve.

Business Compliance Cost Statement for the Proposed Landfill Gas Standard

One source of compliance cost is the time taken to interpret the proposed standard. MfE has taken steps to reduce these costs through having information about the proposed standard published on its website and talking with the industry at conferences and meetings. A "plain English" guide outlining the content of implementation of the proposed standard will be produced when the regulations are introduced.

Landfill consent holders will incur compliance costs through monitoring, and reporting compliance with the standard to Regional Councils. This is likely to be in the form of a biannual or annual monitoring report. Two landfill sites will incur costs through having to design gas collection systems.

There will be costs associated with monitoring landfill surface methane emissions; this cost will fall onto landfill consent holders. It is not predicted that the labour cost of this monitoring will be high as some landfills already undertake this testing as a resource consent requirement, or for operational purposes. It has been assumed that all 19 landfills will need to purchase a methane monitor which will, at a conservative estimate [This estimate is extremely conservative as some landfills already monitor surface methane emissions; therefore these costs are likely to be lower.], cost $190,000 ($10,000 per landfill_. It is estimated that a quarter of these sites already undertake surface methane monitoring.

To mitigate the compliance cost of the proposed standard MfE has included a transitional period of three years, so that landfill operators are not required to comply immediately. The proposed standard only applies to landfills over 1 million tonnes, meaning that all of the landfills affected will be of a large size and be able to spread the cost through disposal charges and economies of scale. This also means that small landfills will not be affected by large costs.

Source of Cost Party Affected Estimated Cost
Design of landfill gas management systems Landfill consent holders (2) [Currently two landfills are affected by this cost. Any new landfills over the one million tonne capacity will also incur these costs.] Estimated consultant costs of $100,000 per landfill site.
Interpreting the standard Landfill consent holders (19) Estimated at half a day per landfill site.
Demonstrating compliance with the standard Landfill consent holders (19) The total initial capital cost of $190,000 plus time to measure methane emissions.