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06. What we found

Victoria’s recycling resource recovery system is under pressure. Since 2015, the Victorian Government has invested more than $135 million in supporting the recycling and resource recovery sector in Victoria, to ensure continuity of service to Victorians and to minimise the likelihood of otherwise recoverable material being sent to landfill.[23]

Victoria’s recycling and resource recovery sector needs to respond to the immediate challenges facing the sector and deal with upcoming changes in national policy.

Some recyclable material is still being landfilled and some Victorians have become sceptical about the fate of their recycling. In developing our advice, we polled community members and found that a quarter of Victorians we surveyed believe their recycling goes to landfill.[24]

In the past 18 months, Victoria has seen recyclable material being sent to landfill after a major materials recovery operator closed. In Victoria, particularly metropolitan Melbourne, the recovery and processing sector is concentrated, so there is limited competition. Market concentration also means there is little incentive for operators to improve and limited redundancy in the sector. This leaves Victoria vulnerable to commercial or global shifts.

Responding to these challenges requires a combination of short and long-term initiatives. Victoria’s recycling and resource recovery sector needs to respond to the immediate challenges facing the sector and deal with upcoming changes in national policy. At the same time, all Victorians need to take a different approach to waste. Long-term, waste reduction and avoidance will assist to ensure the circumstances of the past 18 months are not repeated.

China National Sword Policy

Like many countries around the world, Victoria has relied on international markets to accept some recovered material. In 2016/17, a significant amount of Victoria’s waste exports –  nearly all plastic exports and 75% of paper and card –  went to China. The introduction of the China National Sword policy placed strict limits on the level of contamination China would accept in recovered materials.

Before China National Sword, many Material Recovery Facilities (MRFs) were paying Victorian councils for recyclables, which subsidised the cost of collecting Municipal Solid Waste (MSW). MRFs then sold these materials to China. After China National Sword, the global price for materials, particularly paper, card and plastics, plummeted. Victorian operators scrambled to find new export destinations for these materials. This was repeated on a global scale, with developed economies looking to redirect collected recyclables to other waste markets throughout Asia.

China National Sword shone a spotlight on the fact that a number of Victoria’s major MRF operators were operating as recovery businesses, not actual recyclers. Their practice of collecting and storing materials to take advantage of economies of scale for recovery led to stockpiles of combustible materials. These posed significant fire risks to the Victorian community as the market for the materials dried up.

[23] Department of Environment, Land, Water and Planning (2020) Recycling Victoria: A new economy

[24] Quantum Market Research (2019) Waste Advice Research, report for Infrastructure Victoria

Improved waste avoidance, recycling and resource recovery are key in a circular economy

Waste is a growing by-product of modern life. A growing population and increasing consumption mean the amount of waste is growing in line with our demand for products and services. Unless Victorians change their approach to waste, the need for recycling and resource recovery infrastructure will also continue to grow to deal with ever-increasing quantities of material.

Recycling, re-use and recovery all lead to positive outcomes and are better than simply disposing of waste to landfill. The waste hierarchy shows the best ways to deal with waste, avoidance being the most preferable. Managing waste in line with the waste hierarchy is legislated in Victoria through the Environment Protection Act 1970 (the EP Act).

Avoidance is at the top of the waste hierarchy. Re-using, recycling, recovering energy and disposing of waste all incur economic and environmental costs. As the scale of these tasks grows, so will the costs. The most cost-effective way to manage waste is to create less in the first place.

A policy approach that prioritises transitioning to a circular economy can support a long-term focus on avoidance, re-use and recycling. A circular economy aims to reduce the environmental impacts of production and consumption, along with more productive use of natural resources.[25]

In February 2020 the Victorian Government released Recycling Victoria: A new economy, which outlines its vision for how materials are used and managed, and provides long-term direction for the sector.

While investment in resource recovery infrastructure is essential for the immediate and medium-term stability of the sector, a circular economy could reduce the significant, growing pressure on the sector by reducing the material it needs to manage.

A circular economy could also improve the quality of recyclable material collected and increase demand for recovered materials.

In this advice, we consider some of the challenges facing the recycling and resource recovery sector in Victoria, focusing on boosting resource recovery rates and promoting use of recycled material. However, many of the solutions proposed will be costly to sustain in the long-term, unless Victorians change their attitudes to waste. Reducing the amount of waste Victorians generate will not only help to manage these costs, but also reduce pressure on finite natural resources and lessen the environmental impacts of production and consumption.

Re-using, recycling, recovering energy and disposing of waste all incur economic and environmental costs. The most cost-effective way to manage waste is to create less in the first place.

[25] Department of Environment, Land, Water and Planning (2019) A circular economy for Victoria –  Creating more value and less waste

Waste generation in Victoria, now and into the future

Victoria’s recycling and resource recovery sector manages increasingly large amounts of waste from three sectors:

  • Municipal Solid Waste (MSW). MSW is waste managed by local governments. Most MSW comes from kerbside bin collection services (predominantly from households, along with some small businesses). MSW tends to be separated into three streams: garbage, commingled recycling and food and garden organics. In 2018, about 3 million tonnes of MSW was generated in Victoria, which is around 21% of the total waste stream.[26]
  • Commercial and Industrial waste (C&I). C&I is waste generated by business and industry. About 4.8 million tonnes of C&I waste was estimated to be generated in Victoria in 2018, which is around 33% of the total waste stream.
  • Construction and Demolition Waste (C&D). C&D waste comes from construction and demolition and can be collected as mixed or segregated streams. C&D is the largest part of the waste stream, making up an estimated 46% of total waste generated in Victoria in 2018 – about 6.6 million tonnes.

Across all three sectors, a total of 14.4 million tonnes of material is estimated to have entered the waste pathway in 2018.

This poses a significant task for the Victorian recycling and resource recovery system. Without changes to the way products are designed, consumed and disposed of, this task is only going to get bigger as our population and economy grows.

Unless Victorians change how they think about waste, the resource recovery sector will need to significantly expand its capacity to deal with different materials, especially if Victoria is to improve its recovery rate and reduce the amount of material going to landfill. In 2018, an estimated 10 million tonnes of material was recovered and 4.4 million tonnes went to landfill –  a recovery rate of about 69%. If Victoria simply maintains the status quo in terms of resource recovery, the sector will need to be able to process over 12.5 million tonnes of material by 2038/39.

The past 18 months have shown that the status quo is unsustainable. More of the materials recovered for recycling are being stockpiled or disposed of in landfill due to lack of an end market, which means the 69% of resources that are recovered are not all being recycled. We have an opportunity to truly recycle these materials for other uses. However, Victoria’s recycling and resource recovery system lacks the capacity and capability required to process recovered materials to a standard that means they can be re-used locally or exported for re-use overseas.

[26] Blue Environment (2019) Victorian waste flows projections, report for Infrastructure Victoria

Each type of material (i.e. paper and cardboard, organics, glass, plastics) will require particular processing with different infrastructure to meet our growing needs, and each will have different end markets. Therefore, it is important to understand the projected growth for each material stream.

These include improving infrastructure capacity and capability for processing, developing end markets, or reducing the amount of these materials entering the recycling and resource recovery system altogether.

Priority materials are plastics, glass, organics, paper and cardboard, tyres and e-waste. The following section looks at each of these materials in more detail. We have identified opportunities to improve the recycling and resource recovery rates for these materials through a mixture of policy and infrastructure responses.

Each type of material (i.e. paper and cardboard, organics, glass, plastics) will require particular processing with different infrastructure to meet our growing needs.

There are six priority materials for the sector to manage

While Victoria’s overall recovery rate is relatively high, the recovery rate for each material varies significantly. This depends on how easy the material is to recover, its quality, and how strong end markets are for that material.

Metals, for example, have a high recovery rate (around 91%). Metals are relatively simple to recover and process and have a relatively high value in end markets. Plastics, on the other hand, have a low recovery rate (around 23%) due to the complexity and cost of recovering and processing them, and weak end markets.

For Victoria to increase its overall recovery rate, we need enough capacity and capability to process increasing amounts of a range of materials. At the same time, the way we process these materials needs to change if Victoria is to meet the policy objectives announced by the Council of Australian Governments (COAG) in March 2020, which progressively bans export waste from 1 July 2020. We also need to change to meet the increasingly high import standards from international markets.

The COAG export ban will require a step-change in recycling and resource recovery in Victoria. The ban will be introduced in phases over the next two years, starting with the export of unprocessed glass, which will be banned by July 2020, followed by mixed waste plastics by July 2021, all whole tyres in December 2021 (except bus, truck and aviation tyres for re-treading), and mixed paper and cardboard, by 1 July 2024. Value-added materials can still be exported under the proposed ban. These include:

  • Plastic: clean plastics sorted to a single resin type and processed ready for further use (e.g. flakes and pellets).
  • Paper: paper pulp and single stream bales.
  • Glass: cullet ready for further use.
  • Tyres: crumb rubber, powder and granules, shredded tyres for tyre-derived fuel or bus, truck and aviation tyres for re-treading.

Victoria has relied heavily on export markets for recovered materials.

Metals have a high recovery rate because they are relatively simple to recover and process and have a high value. Plastics, on the other hand, have a low recovery rate due to the complexity and cost of recovering and processing them, and weak markets.

With the introduction of the ban, Victoria will need to ensure materials can be processed to meet the export standards, and develop local markets for recovered materials.

In our advice, we are focusing on organics, e-waste and the four materials covered by the proposed export ban. These materials either:

  • align with specific elements of the terms of reference for this advice
  • make up a high volume of material entering the recycling and resource recovery stream
  • have low recovery rates
  • represent a high environmental impact
  • have a combination of these factors.

Figure 4 shows a range of materials assessed against these criteria. Materials including masonry, metals and textiles do not meet as many of the criteria and have been excluded from in-depth analysis. The proposed export ban reinforces the need to improve Victoria’s recycling of these materials.

Our analysis of the current infrastructure capacity for these priority materials identifies 430 facilities across Victoria. Figure 5 summarises these facilities.

In addition to the COAG export ban, we have assessed the impact of other policy changes already announced by the Australian and Victorian Governments that focus on improving recycling and resource recovery, specifically the National Waste Policy Action Plan targets. We have modelled the impact of these targets in our analysis and, where relevant, discussed their potential impact on the infrastructure and market development that will be needed.

Here we assess the projected generation and processing capacity for each priority material to show the potential infrastructure required for each to meet the COAG waste ban requirements and particular recovery rates (%RR). The data used in this section are based on future projections, and should be considered approximate only. Figure 6 summarises our analysis, with further details below.

National Packaging Targets and the National Waste Policy Action Plan

The Australian Government and other state and territory governments have adopted targets initially proposed by the Australian Packaging Covenant Organisation (APCO) to greatly improve the management of packaging waste by 2025. The four targets for 2025 are:

  • 100% reusable, recyclable or compostable packaging
  • 70% of plastic being recycled or composted
  • 30% of average recycled content included in packaging
  • phasing out problematic and unnecessary single-use plastics.

In 2018, the Australian Government released the National Waste Policy: Less waste, more resources. The policy was agreed on by Australia’s Environment Ministers and the President of the Australian Local Government Association in December 2018.

The National Waste Policy Action Plan presents targets and actions for its implementation. The Action Plan established a target of 80% average resource recovery from all waste steams following the waste hierarchy and a 50% reduction in food waste by 2030. The plan is intended to complement and support the implementation of the national packaging targets.


Seven different categories of plastics are recovered in Victoria. End-of-life plastics are forecast to increase from 586,300 tonnes in 2018 to more than 735,000 tonnes in 2039.[27]

Around 130,000 tonnes of plastic were recovered in 2018, or 23%. Over half of the plastic recovered comes from MSW. The majority is commercial and industrial packaging material.

Recyclability varies depending on plastic type. Polyethylene terephthalate (PET) and high-density polyethylene (HDPE) tend to have higher recovery rates than other types of plastic. Recovery rates also vary across sectors. Recovery rates of MSW plastics were estimated at around 32% in 2018, with C&I and C&D at 18% and 10% respectively.

Victoria has the capacity to manage end-of-life plastics at current recovery rates until 2022, but the challenges go beyond capacity. Victoria, like many jurisdictions, relies heavily on export markets for plastics, with around 63% of recovered plastics exported for processing offshore. The COAG Waste Export Ban will stop mixed and unprocessed plastics from being exported.

The COAG Waste Export Ban requires that from July 2021, the export of mixed plastics that are not of a single type (i.e. they require further sorting, cleaning, and reprocessing before they can be remanufactured) will be banned.

By June 2022, this will extend to singleresin plastics that have not been reprocessed (e.g. cleaned and baled PET bottles). From July 2022, only clean plastics sorted into a single resin type and processed for further use (e.g. flakes and pellets) will meet the new export requirements. National recovery targets of 70% for plastics by 2025 and 80% overall recovery by 2030 further complicate this, as shown in Figure 8.

Victoria has limited infrastructure to sort or process plastics so they can be used locally or exported. Victoria’s collections systems and MRF sorting infrastructure cannot sort plastics adequately by type (plastics codes 1 to 7) or process these into value-added flakes and pellets for use as plastics feedstocks.

There is an immediate need to plan for investment in plastics reprocessing infrastructure in Victoria. Investment will also be necessary to meet the APCO and National Waste Policy target recovery rates of 70% and 80% in Melbourne and regional Victoria, respectively. Current plastic processing facility capacities range anywhere from 100 to 15,000 tonnes. Most regions generate enough plastic waste to support new infrastructure, as long as there is a market for the recovered material.

There is also a gap in capacity to sort mixed plastics from MRFs, with no market for recovered material. This means material is either being stockpiled or landfilled. Because resource recovery rates for plastics are very low, at 23%, significant change in people’s recycling behaviour is also necessary to complement any infrastructure upgrades.

[27] Brock Baker Environmental Consulting (2020) Waste and Resource Recovery Infrastructure Data and Spatial Analysis, report for Infrastructure Victoria, and Infrastructure Victoria analysis


The amount of end-of-life packaging glass is forecast to increase from 344,000 tonnes in 2018 to more than 442,000 tonnes in 2039.[28]

About 264,000 tonnes of glass were recovered in 2018, around 77%. Of this, MSW recovery rates were 87%. This glass was made up of packaging glass such as jars, bottles and other containers. C&I and C&D make up very little of the material stream — 2% and 0% respectively. Glass recovered from C&I is mostly packaging glass. There is limited data on other glass types generated by C&I, and no data on glass recovery from C&D.

There are two main markets for recovered packaging glass:

  • recycling into new glass packaging, such as bottles and jars
  • recycling into glass sands, aggregates and other uses, such as abrasives, beads and rendering.

The capacity and capability of infrastructure to meet these markets varies. In Victoria, two beneficiation plants recover glass cullet from packaging glass as feedstock for glass manufacturing, and there is only one manufacturer of glass packaging. This reliance on a single manufacturer is a potential risk for future glass reprocessing.

However, recovering glass for use as glass sand is growing in Victoria. There has been significant new investment in resource recovery in this area, supported by changes to construction specifications, which have increased how much recycled glass sand can be used in road and rail construction. Victoria’s infrastructure construction pipeline provides a significant market for these materials.

As Figure 10 shows, across these two uses, there is expected to be enough infrastructure capacity to manage end-of-life glass generation and recovery rates over the next 20 years.

Using materials at their highest value for as long as possible is key in a circular economy.[29]

Turning recycled glass into glass sand rather than back into glass packaging can be seen as `downcycling’. However, with limited domestic demand for glass production, glass sand will be particularly important in resource recovery end markets. Glass sand is also one of the only end-uses for glass fines –  small glass fragments that are difficult to recover with existing MRF and glass beneficiation infrastructure.

Glass sand will play a vital role as virgin sand becomes scarce due to growing demand for infrastructure. Scarcity of virgin sand is leading to significant increases in cost, and in many metropolitan uses, recycled glass sand is very cost competitive. Using glass sand will also reduce the need to quarry for virgin sand. This will support a circular economy in which already extracted natural resources continue to cycle through the economy.

The capacity for packaging glass and glass sand reprocessing only exists in metropolitan Melbourne. There may be opportunities to invest in small-scale glass crushing infrastructure in regional areas, allowing these facilities to process locally collected glass packaging into glass sand for use in local roads. This would require the collection and aggregation of glass in regional hubs.

[28] Brock Baker Environmental Consulting (2020) Waste and Resource Recovery Infrastructure Data and Spatial Analysis, report for Infrastructure Victoria

[29] Department of Environment, Land, Water and Planning (2019) A circular economy for Victoria –  Creating more value and less waste


Organics include food organics (FO), garden organics (GO), mixed food and garden organics (FOGO), timber and biosolids.

Organic material is one of the largest waste streams in Victoria, estimated to make up around 35% of household garbage bins.[30] Given almost all this material can be recovered in some way, this represents a significant opportunity to improve resource recovery.

In 2018, the overall resource recovery rate for organics in Victoria was 43%. The amount of organic waste generated in Victoria is forecast to increase from 2,489,200 tonnes in 2018 to more than 3,128,400 tonnes in 2039.

Organics recovery from MSW was 29% in 2018. This was mainly garden and timber waste. Some food waste is recovered from MSW, but less than garden and timber waste. One reason for this could be the relatively small proportion of councils offering FOGO collection. C&I sector resource recovery rates were 58%, made up of garden, timber and food wastes, while recovery rates in C&D were around 91%, which mainly came from recovered timber construction materials.[31]

One of the biggest opportunities to improve resource recovery is by increasing household food waste recovery.

Currently, a significant proportion of household food waste enters landfill in Victoria because there is no separate collection service, leading to an MSW recovery rate for food of 10.6%.[32] However, more local governments are introducing kerbside FOGO collection, which is expected to increase FOGO recovery over time. Based on current FOGO recovery rates, our analysis suggests there is enough capacity to recover FOGO from households and businesses through to 2022. Beyond 2022, we expect there to be a shortfall, particularly if more local governments introduce kerbside FOGO collection.

Metropolitan Melbourne will need more capacity to manage current and future organics recovery. Given the challenges in processing organics material –  particularly the infrastructure and buffer zones required –  the opportunities for significant new reprocessing in Melbourne will likely be limited and small-scale. A more practical solution is to aggregate and consolidate organic material, with initial processing that reduces weight and volume followed by transport to regional areas for additional processing and use. Regional Victoria will also need more capacity to manage its organic waste.

[30] Sustainability Victoria (2014) Victorian Statewide Garbage Bin Audit 2013

[31] Brock Baker Environmental Consulting (2020) Waste and Resource Recovery Infrastructure Data and Spatial Analysis, report for Infrastructure Victoria

[32] Ibid.

Paper and cardboard

Paper and cardboard includes mixed paper and cardboard, office paper, and newspapers and magazines. End-of-life paper and cardboard is forecast to increase from 1,997,800 tonnes in 2018 to more than 2,491,500 tonnes in 2039.[33] (see Figure 13)

The overall recovery rate for paper and cardboard in Victoria was 74% in 2018. The vast majority of recovered paper and cardboard in Victoria comes from the C&I sector, with a resource recovery rate of 81%. Paper and cardboard collected directly from businesses is a single type (a clean stream) making it easier to process and more valuable. Paper and cardboard from MSW, however, is mostly commingled and has a recovery rate of around 35%.[34] C&D only accounts for a small amount of recovered paper and cardboard.

There is currently enough capacity to manage end-of-life paper and cardboard in Victoria. However, once the COAG export ban comes into effect, there is expected to be a reprocessing shortfall from 2024 onward. The COAG Waste Export Ban requires that by July 2024, all mixed paper and cardboard be banned from export. Paper will need to be pulped or sorted by paper type in order to be exported.

There is an immediate need to plan for future investment in paper and cardboard reprocessing infrastructure in Victoria.

Most paper and cardboard reprocessing in Victoria is located in metropolitan Melbourne with one notable paper mill, Australian Paper, in regional Victoria.

To meet the COAG Waste Export Ban, Victoria will need to invest in more paper pulping or more paper type separation at MRFs.

[33] Brock Baker Environmental Consulting

[34] There are several conflicting data sources in the public domain for paper and cardboard and it is suspected that the MSW recovery rate for paper and cardboard may actually be around 50%.


Tyres are a composite product made from natural and synthetic rubber, steel, carbon, fibre and bonding agents. Tyres are shredded to separate the materials, most of which have markets for recovery. The amount of end-of-life tyres is forecast to increase from 91,700 tonnes in 2018 to more than 113,000 tonnes in 2039.[35]

In 2018, the overall resource recovery rate for tyres in Victoria was 87%. Of this, MSW recovery rates were 100%. This is because only a small proportion of tyres are managed through the MSW sector. These are usually tyres that are disposed of at Resource Recovery Centres and Transfer Stations, or collected through the clean-up of tyres dumped on local government land. Whole tyres are banned from landfill in Victoria, but shredded tyres can be disposed of in landfill.

The vast majority of tyres in Victoria are managed through the C&I sector with a resource recovery rate of 83%. This is because end-of-life tyres are removed at and collected by tyre retailers when new tyres are fitted. A contractor then removes tyres from these premises for processing or export. Data indicates that there are some tyres entering landfill. C&D does not contribute to generating end-of-life tyres.

There are three main pathways for recovered end-of-life tyres:

  • baling of tyres for export as Tyre Derived Fuel or as casings for re-tread/seconds markets
  • shredding of tyres for export as Tyre Derived Fuel
  • further reprocessing into feedstocks such as crumb rubber, granules or powder.

Victorian infrastructure capacity and capability are different for each of these recycling pathways. The COAG Waste Export Ban requires that by December 2021, all whole tyres, including baled tyres, will be banned from export, except for bus, truck and aviation tyres for re-treading. Tyres will need to be shredded for use as tyre derived fuel, or further processed into crumb rubber, granules or powder.

Figure 16 shows there is enough mechanical infrastructure in Victoria to shred or crumb tyres to meet a range of product requirements. There is no immediate need for future investment in tyre reprocessing infrastructure in Victoria.

All major tyre reprocessing in Victoria is located in metropolitan Melbourne. Given the high level of investment mechanical reprocessing of tyres requires to create shred or crumb rubber, it is likely that future investments will continue to be in Melbourne.

There have been several attempts at regional reprocessing through pyrolysis (thermal treatment), but so far none have been successful. In fact, proposed pyrolysis facilities have resulted in notable stockpiles such as those at Stawell and Numurkah, both of which have recently been cleaned up by the EPA and respective local governments, at a cost to Victorian taxpayers.

[35] Brock Baker Environmental Consulting (2020) Waste and Resource Recovery Infrastructure Data and Spatial Analysis, report for Infrastructure Victoria


E-waste covers a wide range of electronic items –  anything with a battery or a plug –  including televisions, computers, mobile phones, kitchen appliances and whitegoods. These items can contain both valuable and hazardous materials. E-waste is forecast to increase from 83,400 tonnes in 2018 to more than 106,500 tonnes in 2039.[36]

In 2018, the overall resource recovery rate for e-waste in Victoria was 79%. Since then, an e-waste landfill ban was introduced in July 2019. As a result, we expect a drop in reported e-waste disposal to landfill. As e-waste is such a broad category it is important to note that approximately one third of e-waste in Victoria is made up of large household appliances, i.e. whitegoods that are predominantly metals.

These materials are largely managed by metals recyclers, not dedicated e-waste recyclers. As Figure 18 shows, based on the best available data, there is enough reprocessing capacity to manage e-waste containing hazardous materials in the short-term, with a small shortfall from 2030 onward.

However, waste projections suggest increasing tonnages of hazardous items that are yet to reach their end of useful life, such as solar photovoltaic panels (PVs), entering the waste stream in future.

E-waste: The waste of the future, today

Future e-waste is likely to look very different from current forecasts due largely to two technologies –  one existing and one emerging –  solar PVs and electric vehicles.

Currently, low volumes of PV system components enter Australia’s waste stream, with minimal impact. However, solar PVs are an emerging e-waste stream. Industry and government are concerned that there will be insufficient options to safely dispose of end-of-life PV system components across Australia, as well as a lack of established reprocessors and recyclers capable of recovering valuable and hazardous resources.

As PV equipment reaches the end of its useful life span, the level of recovery, recycling, re-use and safe disposal becomes important to the environmental benefits of PVs. End-of-life management is also important to protect the environment and human health from the uncontrolled release of hazardous materials.

PV panels and system components have an estimated average life span of approximately 25 years and are expected to enter Australia’s waste stream in significant volumes from around 2023, due to the recent boom in solar installations since 2010. In Victoria alone, it is estimated that by 2035 there will be 22,000 tonnes of PV panel waste requiring disposal.

In addition, automated and zero emissions vehicles are emerging technologies that could also produce significant volumes of e-waste.

In our Advice on automated and zero emissions vehicles infrastructure, we found that if the entire vehicle fleet transitioned to battery electric vehicles, the volume of lithium battery waste and other e-waste generated would exceed current projections and infrastructure plans. We recommended the Victorian Government make changes to the Statewide Waste and Resource Recovery Infrastructure Plan to incorporate the impacts of automated and zero emissions vehicles.

Without proper planning, e-waste could greatly exceed the capacity of waste infrastructure, leading to increased illegal dumping, stockpiling or illegal exporting –  issues that are already a concern for e-waste.

Finally, there is also the potential to develop local industry to handle and reprocess e-waste in a more economically and environmentally viable manner.

[36] Brock Baker Environmental Consulting (2020) Waste and Resource Recovery Infrastructure Data and Spatial Analysis, report for Infrastructure Victoria

Residual waste

Residual waste is material that is unable to be recovered for alternative uses or has otherwise reached its end-of-life. Currently almost all residual material is disposed to landfill.

Disposal is the least preferable outcome on the waste hierarchy, as all remaining value of these materials is lost. There will always be a role for landfill in broader waste management systems and it plays a particularly important role in contingency planning (as shown in the last 18 months). However, there is an alternative to landfill for some residual materials that allows for some of the energy embedded in these materials to be recovered through waste-to-energy processes.

There are a number of residual waste-to-energy infrastructure projects currently proposed for Victoria. These have the potential to further reduce Victoria’s reliance on landfill when combined with waste avoidance and improved resource recovery.

If Victoria continues its current, business-as-usual trajectory, the amount of residual waste going to landfill is projected to increase from 4.4 million tonnes in 2017/18 to 5.7 million tonnes in 2037/38.[37] Alongside developing waste-to-energy projects, Australian and Victorian Governments could reduce this by taking steps to reduce the amount of materials going to landfill. This could include banning organic material from landfill or mandating the use of re-usable, recyclable or compostable packaging.

The amount of residual waste in the future is highly uncertain. We estimate that the combined impact of the two policy interventions above could reduce the amount of material going to landfill in 2038/39 by around 700,000 tonnes each year, with a projected 5 million tonnes of residual material going to landfill. Our analysis suggests that by 2038/39, Victoria will generate 650,000 tonnes per year of residual waste from the six priority materials alone, assuming a 90% recovery rate. Not all of this residual waste will be suitable for waste-to-energy.

The need for waste-to-energy to manage residual waste will be highly dependent on efforts to reduce waste and recycle materials, as well as the planned landfill capacity. The Recycling Victoria policy’s stated capacity cap of one million tonnes per year for waste-to-energy should be regularly reviewed to manage these uncertainties. If combined efforts to reduce waste generation and recycle material are not highly successful then there is a risk that significant amounts of residual waste will remain above the one million tonne waste-to-energy cap and be consigned to landfill.

[37] Blue Environment (2019) Victorian Waste flows projections, report for Infrastructure Victoria

Landfills, waste-to-energy, and the circular economy

Using materials for as long as possible is key to a circular economy. When those materials no longer have a useful role to play, it is often still possible to extract energy as an alternative to disposal.

The waste hierarchy shows that recovery of energy is better than disposal or containment of waste, because this recovers some value, reduces greenhouse gas emissions from organic waste and lessens the long-term environmental impacts of landfills.

As a result, waste-to-energy is a pragmatic approach to managing residual waste, but is less desirable than waste reduction, re-use and recycling. There are some risks associated with waste-to-energy infrastructure while also transitioning to a circular economy.

Waste avoidance and increased recycling and resource recovery can reduce the amount of feedstock for waste-to-energy infrastructure, particularly thermal waste-to-energy plants. Conversely, over-investment in waste-to-energy infrastructure could discourage transition to a circular economy.

The two most common forms of waste-to-energy technologies are thermal and biological. Thermal technologies use heat to release energy from waste, for example through incineration and capture of energy. Biological processes use microorganisms that feed on organic waste to produce heat, energy, biogas and `digestate’. The most common biological process is anaerobic digestion.

Both biological and thermal waste-to-energy facilities could stop some residual waste going to landfill –  particularly organic material –  and recover some energy from the material. The solid residues that remain could be further reused and recycled. For example, digestate from anaerobic digestion processes could be transformed into soil conditioner, while some of the bottom ash from thermal processes could be used in construction.

Landfills will remain part of Victoria’s waste management system. Landfills can assist in residual waste management and sector contingency planning. They may also be the best option in regional areas where there is not enough waste to support an economically viable waste-to-energy facility.

Further, there are some materials for which containment or landfill is the safest and best option.

However, Victoria’s reliance on landfill is expected to decline in the long term as new and better ways to avoid waste and recover materials for reuse are developed. Waste-to-energy can support this by creating ways to reduce the need for new landfills and keeping existing airspace capacity for unrecoverable materials into the future. This aligns with Victorian Government’s planning documents, such as the SWRRIP, which aims to minimise the amount of waste going to landfill.

The Metropolitan Waste and Resource Recovery Implementation Plan, for example, does not plan for new landfills in the metropolitan area.

Victoria’s circular economy policy –  Recycling Victoria: A new economy –  limits the amount of material that can be processed at thermal waste-to energy facilities in Victoria. Limiting the amount of material that can be accepted by these facilities may mean that material that could viably be used for recovery of energy will instead go to landfill.

More resources, less waste

If potentially recoverable resources are not recovered, this is a missed economic opportunity.

Figure 19 shows that based on the amount of waste recovered in Victoria and current commodity prices, the value of materials is $1.21 billion. Metals makes up the largest share, worth $889 million, or 73% of the market. Paper and cardboard and masonry have the next largest market shares, at 8% and 7%, respectively. However, the value of a number of materials (such as plastics and paper) has fallen significantly since the collapse of export markets.

We have found that prices for some recovered materials are higher in South Australia. For example, glass prices are higher due to the cleaner stream of glass recovered from CDS. This shows that there is potential for Victoria to increase the value of its recovered resources from improved resource recovery.

To estimate the potential increase in market value from higher commodity values, we applied South Australian commodity prices to the amount of resources recovered in Victoria and found that they would be worth up to $2 billion.

Recycling can create more jobs than disposal

Increasing the amount of value generated by the sector is also likely to lead to more jobs. Resource recovery activities are higher-value and more productive than disposal, creating new opportunities for employment and industry growth. Victoria will be wellplaced to realise these opportunities, but it will require ongoing evaluation of infrastructure and policy settings.

Evidence suggests that for every 10,000 tonnes of waste recycled, 9.2 jobs are generated compared to 2.8 jobs for landfill.[38] Using this approach, we estimate the number of jobs in the sector could grow to around 13,200 by 2039 if the current recovery rate of 69% is maintained. However, if Victoria increased its recovery rate to 90%, the number of people working in the sector could grow to over 15,600 by 2039 (Figure 20), an additional 2,400 jobs more than `business-as-usual’ and over 5,000 more than today.

[38] Access Economics (2009) Employment in waste management and recycling, report for the Department of the Environment, Water, Heritage and the Arts

Infrastructure is unevenly spread

In identifying challenges and opportunities for Victoria’s regional and rural areas we sought feedback from stakeholders from local regional councils and industry.

Our consultation identified high transportation costs as a barrier to improving recycling and resource recovery. In many cases, it is more economical to use landfill. Several submissions identified a need for more recovery infrastructure in regional areas.

Our analysis shows there are some inconsistencies in infrastructure provision across the state. As Figure 21 shows, the majority of processing infrastructure –  marked in red –  is clustered around metropolitan Melbourne, while recovery infrastructure –  marked in blue –  is spread more evenly across the state.

Many of the recovery infrastructure sites marked in blue are small, local resource recovery centres. These often serve as points of aggregation for materials, with limited actual recovery occurring. Materials will often be transported to another facility for processing. Figure 21 also shows that there is a specific need for MRF infrastructure in the Grampians Central West and Barwon South West WRRG regions, as both these regions lack any mechanical separation and sorting infrastructure.[39]

This means material generated in regional areas often flows to the metropolitan area for processing. Some materials are easier to process in the metropolitan area. Due to the amount of material generated in Melbourne, metropolitan facilities tend to be bigger than regional ones. With size often comes efficiency, meaning it is cheaper and more efficient to transport some materials to the metropolitan area for processing.

On the other hand, some materials require more space for processing, such as organics.

Figure 22 illustrates the flow of materials in Victoria, with each arrow representing a different material type, and the thickness of each arrow representing the volume of the material. It shows, for example, that more organic material flows to regional areas for processing than is processed in the metropolitan area, and that all glass generated in regional areas is processed in Melbourne.

[39] Brock Baker Environmental Consulting (2020) Waste and Resource Recovery Infrastructure Data and Spatial Analysis, report for Infrastructure Victoria

Waste transport

Moving materials is not necessarily a bad thing, depending on the material. High-volume or heavy materials such as masonry and aggregates, or glass, cost more to transport due to their weight.

Organic materials may not necessarily be more expensive to transport, but often don’t have as much value as a reprocessed material such as compost, making them less economical to transport. In these instances, investment in regional recovery and processing facilities could lower transport costs, improve recovery rates and support end markets for these materials. Local recovery and reprocessing can create jobs in regional areas.

Regional and rural areas are more likely to have nearby markets for reprocessed organic products, such as soil conditioner and compost, and facilities to process these materials due to the space available for buffer zones. However, this needs to be weighed against cost of transport and the ability to aggregate enough waste for a viable market.

Overall, transporting waste is not necessarily problematic, as long as it is optimised. As the private sector is largely responsible for providing this infrastructure, the geographic spread of facilities is not optimised to reduce transport costs. Minimising transport costs will be important in improving recycling and resource recovery rates by helping recovered materials become cost competitive with virgin materials. Currently there are dozens of resource recovery centres across Victoria, of varying capacity and capability, that aggregate materials from their local areas for transport and further recovery.

Rationalising our resource recovery centre network and focusing on fewer centres that are more strategically located and better resourced could reduce the costs of transporting materials. This could encourage more aggregation of materials, resulting in fewer trips and better economies of scale in waste transport.

Future infrastructure provision

To identify potential locations for new recycling and resource recovery infrastructure, we considered current and predicted waste generation and reprocessing capacity by material type, proximity to end markets, existing resource recovery hubs of statewide significance, the statewide and regional resource recovery infrastructure plans and stated government priorities to support regional economies in transition (for example, the Latrobe Valley).

Using this methodology, we are proposing 87 new or upgraded facilities, many of which are in regional areas. Shown in Figure 23, these facilities can address identified infrastructure gaps, minimise transport costs, capitalise on existing resource recovery and recycling hubs and maximise the likely economic viability of facilities.

Not investing can be expensive

A number of the recommendations we make may require spending by the Victorian Government, both in upfront capital expenditure and also ongoing operational expenditure. When the Victorian Government decides whether to make particular investments it helps to consider both the cost of investment and the potential costs to Victoria if no investment occurs.

We have already seen what can occur with a weakened market for recyclables and without sufficient infrastructure to process recycling. VAGO noted in its 2019 report that without clear state-level plans for how to manage recyclables in this new environment, stockpiles will likely continue to grow and pose unnecessary risks, and waste to landfills will continue to rise.[40]

We have broken down the potential costs to Victoria of not increasing recycling and resource recovery into four categories, representing other (often unplanned) investments and foregone revenue from poor recycling and resource recovery outcomes.

These are:

  • Emergency and incident response costs
  • Enforcement and regulatory costs
  • Environmental impact and restoration costs
  • Economic impact and business disruption
Emergency and incident response costs

Waste material mismanagement has seen an increase in stockpile fires, waste abandonment and illegal dumping. These can all be costly. Based on events of the past few years, the EPA estimates that it costs Victoria around $193 million per year to respond to avoidable waste management issues. This estimate is made up of $105 million per year to respond to waste stockpile fires, $58 million per year in annual clean-up costs of abandoned waste sites, and $30 million per year in clean-up costs and lost landfill levy revenue from illegal dumping.[41] As an example, the Victorian

Government recently invested $30 million to clean up a stockpile in Lara where the operator has gone into liquidation, which is a job that may take several years.

Stockpile fires also incur significant costs for other agencies. The Ecotec Somerton fire in 2015 cost the CFA alone $2.3 million to respond to. Further costs for other agencies responding to that fire included $242,000 for VicRoads’ emergency response, $295,145 for Melbourne Water impact management costs, $30,000 for Hume City Council, and $1 million for DELWP.[42]

Enforcement and regulatory costs

As well as the costs of responding to specific incidents, there are also ongoing enforcement and regulatory costs, which can increase over time if the scale and frequency of poor waste management practices increase when issues arise in the sector. The 2019/20 Victorian Budget allowed for $204.3 million in statutory activities and environment protection from DELWP.[43]

Environmental impact and restoration costs

Waste stockpile fires cause immediate and long-term environmental damage to the site and surrounding areas. For the 2017 Coolaroo fire alone, DELWP has estimated that approximately $6 million was spent on the management and clean-up of the site. This amount does not include the ongoing management costs and clean-up costs borne by several agencies, particularly the EPA but also Melbourne Water, Yarra Valley Water and Hume City Council.[44]

Economic impact and business disruption

When dangerous incidents happen, the costs to the state can go beyond the cost of the immediate response. There can also be an economic impact on surrounding communities if businesses are disrupted. The impact on the local community and businesses of the 2017 Coolaroo fire was quantified in a recent class action, where over 200 residents of Coolaroo succeeded in a claim against the operator of the Coolaroo site, who was ordered to pay $1.2 million.[45] DELWP separately estimated that the cost of this fire in business disruptions alone amounted to $200,000.[46]

[40] Victorian Auditor-General’s Office (2019), Recovering and Reprocessing Resources from Waste

[41] Deloitte (2019) Regulatory Impact Statement: Proposed environment protection regulations, report for the Department of Environment, Land, Water and Planning and the Environment Protection Authority

[42] Department of Environment, Land, Water and Planning (2018) Management and storage of combustible recyclable and waste material, Policy Impact Assessment

[43] Department of Treasury and Finance (2019) Victorian Budget 19/20 –  Budget Paper No. 3

[44] Department of Environment, Land, Water and Planning (2018) Management and storage of combustible recyclable and waste material, Policy Impact Assessment

[45] 7 News (2019) Class action win for residents affected by Coolaroo recycling plant fire. Available at https://7news., accessed on 7 October 2019

[46] Department of Environment, Land, Water and Planning (2018) Management and storage of combustible recyclable and waste material, Policy Impact Assessment

Supplements to infrastructure investment

The Victorian Government can work with other governments and stakeholders to reduce the amount of material coming into the recycling and resource recovery system. There are multiple approaches the Victorian Government can take to either reduce the amount of material entering the system or increase recyclability of materials.

Product stewardship

Product stewardship, or extended producer responsibility (EPR), is the shared responsibility of manufacturers, retailers and consumers to manage the full lifecycle impacts of products.

Product stewardship schemes aim to ensure that everyone involved in making and using a product shares the burden of what happens to it. This addresses one of the market failures associated with waste, in which neither businesses who create the products that lead to waste or households who consume and dispose of products as waste are exposed to the costs of managing those materials once they have been disposed of.

If businesses and households are exposed to those costs, they are more likely to minimise waste and improve how it is disposed of. In addition, making producers responsible for the disposal of products may encourage them to make products easier to re-use or recycle.

The Australian Government has established a framework for product stewardship through the Product Stewardship Act 2011, a commitment originally made in the 2009 National Waste Policy.

The National Waste Policy was updated in 2018, encouraging the design of products made to last, the use of recoverable materials and minimising waste. The legislation allows for mandatory, voluntary, or co-regulatory schemes. In the eight years since this Act was introduced, no mandatory schemes have been established. Instead, existing product stewardship schemes tend to be voluntary, industry-led schemes, such as those in place for tyres, packaging products and mobile phones.[47]

Product stewardship in Victoria is even less formalised and lacks legislation. However, Sustainability Victoria has undertaken product stewardship partnerships for computers, batteries, paint and compact fluorescent lights.[48] Like the Australian Government’s approach, none of these schemes are mandatory and were effectively delivered as pilot programs.

We looked at approaches to product stewardship around the world and found that national, mandatory schemes are most effective. Mandatory schemes tend to be easier to enforce. Mandatory schemes also enable government to apply more stringent product standards. For example, under a mandatory scheme, the government could introduce product standards to exclude materials from the system that are hard to recycle. Countries that perform well, such as the Netherlands, Germany and Switzerland have mandatory schemes that focus on problematic materials, like electrical equipment and packaging.[49]

Container Deposit Scheme in Victoria

A common example of a product stewardship scheme is a container deposit scheme (CDS).

A CDS allows consumers to take containers to collection points (sometimes in the form of a reverse vending machine) and deposit them in exchange for a refund. CDSs have operated in Australia for some time. South Australia has had a scheme since 1977 and, over time, other Australian jurisdictions have followed suit. Victoria has recently announced an intention to implement one by 2022/23.

One of the key benefits of CDSs is that they can reduce contamination. This is because the different materials are separated at the source and are not commingled –  particularly glass and plastics.

Cleaner material streams can increase their potential for re-use. A CDS can improve the chances that glass containers will be remanufactured into new bottles. With plastics, a CDS allows for separation and remanufacturing of food-grade plastics –  a product with a strong end market.

The introduction of a CDS was commonly identified by stakeholders who provided feedback on our Evidence Base Report as an initiative that could improve Victoria’s waste and resource recovery system. We heard from businesses, local councils and individuals who advocated for the introduction of a CDS in Victoria. We separately undertook polling of Victorians on a range of issues, including a CDS. In total, 92% of people we polled favoured the introduction of a CDS.

The Victorian Parliamentary Budget Office (PBO) recently costed a CDS for the Victorian Parliamentary Inquiry into recycling and waste management. The PBO costed a model where the cost of the scheme is borne by drinks suppliers and the refund for each container was fixed at 10 cents.

The PBO found that a CDS would provide Victoria with $244.5 million from 2019-20 to 2022-23. This is a $253.5 million increase in government revenue due to uncollected deposits from containers not being returned, partially offset by an increase in operating expenses of $9 million to manage the scheme.

Along with financial benefits, a CDS can:

  • act as an `anchor’ in a broader network of recycling infrastructure
  • reduce litter
  • improve community engagement in recycling as consumers benefit when they return containers
  • increase the value of recovered material while reducing collection, transport, processing and landfill costs
  • create employment
  • increase resource recovery.

A CDS has merit in Victoria as part of a suite of reforms to collection and processing to secure cleaner materials streams and improve resource recovery rates. This has been recognised in the Recycling Victoria policy, which commits to the introduction of a CDS.

Further work is needed to identify the best CDS model for Victoria, but we consider the approaches taken in Western Australia and Queensland to be good examples. In the longer term, a nationally consistent approach to CDS should be considered.

Financial incentives

Businesses that manufacture products that are later disposed of by households do not often face the cost of disposal. In the absence of costs that would change their behaviour, this can lead to excessive and unnecessary waste. This market failure can be addressed by putting a price on waste through taxes or levies on virgin materials to encourage greater use of recycled content, or on specific products to disincentivise their production altogether.

The UK Government recently implemented a plastic packaging tax on the production and import of non-recyclable plastic packaging that will come into effect in 2022. This will incentivise the use of more recycled plastics and reduce plastic waste. The tax was a response to high levels of plastic packaging waste, which predominantly came from new plastics.[50]

It is difficult for the Victorian Government to unilaterally impose a similar tax, mostly because Victoria is just one part of a larger market and products can flow across state borders relatively easily, limiting the impact of a state-based tax. However, the Victorian Government can work with the Australian Government to investigate the potential costs and benefits of taxes or levies on specific materials, such as plastics or virgin materials.

Product bans

The most definitive legislative tool the Victorian Government could use to reduce residual waste is a ban on certain materials. Single-use plastics, such as plastic bags, straws and disposable food packaging, are commonly identified due to their high profile in discussions around waste and the visibility of their environmental impact.

In November 2019, the Victorian Government banned the provision of single-use plastic bags through amendments to the Environment Protection Act 1970, with penalties for businesses. A similar approach could be used for other materials. For example, the European Union issued a directive in June 2019 on the impact of certain plastic products on the environment. This included a ban on single-use plastic products such as cotton bud sticks, cutlery, plates, straws, beverage stirrers, balloon sticks, and polystyrene food and beverage containers. The Member States have until 2021 to transpose these bans into national law.

The Victorian Parliamentary Inquiry into recycling and waste management identified difficulties with this approach. Certain industries rely on single use plastics for medical or research purposes. Although this problem could be addressed through exemptions or other ban design considerations, it could be highly problematic to impose a ban on some items.[51] There are alternatives to banning specific materials without creating unintended difficulties, such as product stewardship schemes or minimum recycled content requirements.

[47] Parliament of Victoria Legislative Council Environment and Planning Committee (2019) Inquiry into recycling and waste management –  final report

[48] Ibid.

[49] AlphaBeta (2019) Recycling and resource recovery infrastructure in Victoria: International and Australian comparisons, report for Infrastructure Victoria

[50] AlphaBeta (2019) Recycling and resource recovery infrastructure in Victoria: International and Australian comparisons, report for Infrastructure Victoria

[51] Parliament of Victoria Legislative Council Environment and Planning Committee (2019) Inquiry into recycling and waste management –  final report

Market failures are stopping the sector from performing at its best

Several challenges make the Victorian recycling and resource recovery sector less efficient. In our Evidence Base Report, we described the sector as a decentralised system in which sorting, collecting, processing, reusing and disposing of waste is done by private individuals or businesses. This means it is difficult for government to achieve public policy objectives because the motivations of these businesses do not necessarily align with the objectives of the Victorian Government. Market design approaches can help with this.[52]

At the same time, the market for recovery and reprocessing services in Victoria is dominated by a few large players. This is especially true of MSW recovery. Victoria relies on a relatively small number of MRF operators –  a problem known as `thin markets’ –  which makes the sector less resilient and created problems if one player exits the industry. Victoria’s approach to procuring collection and recovery services has, in part, contributed to this thin market problem. It has led to consolidation in the market as businesses bid for larger and larger numbers of local government contracts to achieve economies of scale.

This has led to a significant power imbalance between firms and the local councils seeking to procure their services.[53] Market dynamics can also impact on the full utilisation of all infrastructure where it may be to one player’s advantage to slow throughput in certain circumstances.

These market failures contribute to poor recycling and resource recovery outcomes. In Victoria’s decentralised waste management sector, where market failures exist across the waste lifecycle, single and centralised solutions are unlikely to be effective. A combination of policies is most likely to succeed in addressing these failures.

Sorting MSW

MSW is made up of a wide range of materials and is mostly generated by households. Although a large proportion of the waste generated could be reused, processed or recycled, only around 39% of MSW was recovered in 2018 with the remaining amount sent to landfill.[54]

There are a number of reasons MSW has a lower recovery rate than C&I and C&D streams. One of the biggest causes is the diversity of the waste stream. Households consume a varied range of products, which flow through to the waste they generate. In some cases, the materials are not suitable for recovery, and rightly become residual waste. However, audits of landfill bins in Victoria have found that a large proportion of material in these bins could be recovered.[55]

Contamination of materials in recycling bins also presents challenges for processors and can have an impact on their recyclability. These are both problems that could be addressed by better source separation and improved sorting.

Sorting is the first step in waste recovery. Households (and businesses) need to invest time and effort to separate residual waste and segregate the remaining items into relatively clean streams suitable for recycling. Failures at this `front-end’ of the system can reverberate through the whole system.

Contamination of one bin can flow through the system and affect the recyclability of a larger amount of material.

Countries that have high rates of resource recovery from MSW tend to have a more consistent approach to sorting and collection. Currently, sorting and collection differs across Victoria’s 79 local councils. Not all councils accept the same materials in recycling due to differences in what some processors will accept. For example, some councils have contracts that allow them to separate soft plastics for recycling, but others consider soft plastics a contaminant. There are also multiple approaches to organics collection, including combining food and garden organics –  19 councils allow residents to put food scraps in their green waste bin –  and some councils do not separate organics at all.

Added to these issues, bin lid colours and meanings differ across local government areas. As Figure 24 shows, nine councils were fully compliant with the Australian Standard for Mobile Waste Containers as at December 2016.

Victorians on their best behaviour

Victorians feel strongly about recycling. In June 2019, we undertook a community survey to understand Victorians’ views on recycling and their willingness to change. 89% of people we surveyed were open to changing the way they sort and dispose of their waste. A big reason for this is that Victorians feel strongly about the environment, and these feelings are a strong driver of how they recycle.

However, the way household collections currently work throws up barriers to good recycling. Differences in bins across councils and sporadic and inconsistent messaging is leading to uncertainty about what can and cannot be recycled. This doubt can lead people to put their recyclables in their landfill bin, to be safe, or to throw everything into their recycling bin to let the system take care of it.

We also ran focus groups to understand what would work for Victorians, and identified three critical factors that would support improved sorting practice:

  • Frictionless – simple to use and understand
  • Clear environmental benefits – a compelling reason, such as reducing material going to landfill
  • Consistently functional – the right bin capacity and collections approach

These findings are promising about the potential success of future efforts by the Victorian Government to affect change in households’ behaviour and provide an insight of what needs to be done. We know that Victorians want to recycle, and are open to ways to do it better, so they do not need much convincing to change.

What they do need, and what the Victorian Government can provide, is the means to do it (easy-to-use, more consistent infrastructure at home), information on how to do it (clear and consistent messaging, with local nuance if needed), and confidence that their efforts are not wasted.

These differences can lead to confusion for households, contamination of material streams, and make it difficult to educate the community about what they can recycle.

In 2017/18, contamination rates in Victorian MSW ranged between 3% and 27%, with an average of 10.4% across all local government areas.[56] Minimising contamination in MSW, which has the lowest recovery rate of the three waste streams, will contribute to improved resource recovery in Victoria.

Consistency in sorting and collection can also make it easier for local governments to provide information on how to recycle. Our polling of Victorians found that a quarter of respondents did not know which bins things should go in, which was a barrier to sorting recyclable waste.[57] This suggests that providing more information to households about which materials can be recycled and how to recycle them can reduce contamination.

Better source separation can also lead to improved resource recovery by providing cleaner materials streams. At a minimum, our analysis suggests that either glass, or paper and cardboard, need to be collected separately from commingled recyclables.

Glass is a key contaminant of other commingled recyclables, particularly paper and cardboard. Separating the collection of these materials could reduce contamination. This should be supplemented by a separate FOGO collection, which could reduce the amount of organic material going into the residual garbage bin and to landfill.

[52] Centre for Market Design (2019) Opportunities to improve infrastructure investment in the Victorian waste economy, report for Infrastructure Victoria

[53] Opportunities to improve infrastructure investment in the Victorian waste economy, report for Infrastructure Victoria

[54] Blue Environment (2019) Victorian Waste Flows, report for Infrastructure Victoria

[55] Sustainability Victoria (2014) Victorian Statewide Garbage Bin Audit 2013

[56] Sustainability Victoria (2019) Victorian Local Government Annual Waste Services Report 2017– 18

[57] Quantum Market Research (2019) Kerbside Collection Deep Dive, report for Infrastructure Victoria

Procurement of waste services

Unlike commercial business waste services, which are contracted, household waste collection and sorting services are procured by local councils. While households could collect and transport wastes themselves, there are obvious cost advantages to coordinating waste collection and transport.

To benefit, households cooperate through their regular collection service and local councils procure these services from the private sector.

A simple tender process is used to price and allocate these contracts. Households pay a flat rate for this service as a component of council rates. To build on economies of scale, some councils have investigated pooling demand for waste collection services across council boundaries.[58] While this can lead to short-term cost savings it can also lead to consolidation in the number of collections services, reducing competition and driving up costs.

To correct this, a new auction approach could be used known as descending simultaneous package smart auctions.[59] [60] These auctions are used by governments and businesses for a range of procurement and allocation problems (e.g. allocation of aquaculture sites in Victoria, and mobile phone frequencies) and can harness competition to minimise costs and allocate contracts efficiently.

In waste collection, this type of auction minimises costs through a decentralised process in which service providers can put together combinations of collection zones through competitive bidding. This approach can reduce costs to households by mitigating the market power of service providers.

[58] Positive network externalities arise because additional participants to a network reduce the cost of providing services to all participants.

[59] Plott, Charles R. and Lee, Hsing-Yang and Maron, Travis (2014). The Continuous Combinatorial Auction Architecture. American Economic Review, 104 (5). pp. 452-456. ISSN 0002-8282

[60] Crampton, P. (2001). Handbook of Telecommunications Economics, Martin Cave, Sumit Majumdar, and Ingo Vogelsang, eds., Amsterdam: Elsevier Science B.V.

Funding of waste processing services

Although markets generally allocate resources efficiently, governments can further increase investment in recycling and resource recovery.

The Victorian Government actively ensures the recycling and resource recovery sector is meeting community needs and government objectives. Grants are widely used to encourage industry initiatives to align with the Government’s strategic objectives.

Although grants can have some competitive elements, they are essentially a form of bi-lateral negotiation between government and industry. In bi-lateral negotiations, a well-informed supplier will often benefit over a less informed buyer. Firms and organisations know their costs of production, and governments often do not. As a result, grants may not always lead to the best outcomes or value. Resource recovery grants have historically been capped at a maximum of $500,000.

The Centre for Market Design at the University of Melbourne identified auctions as an alternative approach that could achieve these goals. Auctions can reveal information needed to efficiently allocate resources. They do this by harnessing competition between competitors to identify who wins and at what price. Well-designed auctions have been shown to achieve a given outcome at lower prices than grants.[61]

In addition, the Victorian Government and other governments throughout Australia and around the world already use a range of other financial support approaches to create policy outcomes. Approaches such as rebates, subsidies or low-interest loans could also improve resource recovery in Victoria by encouraging more competition or new technologies in the market for resource recovery and processing services. One example is the Clean Energy Finance Corporation (CEFC) model.

The CEFC invests in clean energy projects in several sectors including energy, agriculture, manufacturing, property, as well as waste. In 2019, the CEFC established the Australian Recycling Investment Fund to fund recycling projects that use clean energy technologies.

Governance and policy settings in the sector are not quite right

All three tiers of government (Australian, Victorian and local) have important but different roles in recycling and resource recovery. These roles are not always clearly defined in legislation or elsewhere, and often overlap. Significant gaps in legislation and regulation can lead to missed opportunities.[62]

In Victoria, government waste and resource recovery portfolio agencies work together to manage, plan and deliver services for Victoria. These agencies collaborate to reduce waste to landfill by working with local councils, industry and the Australian Government to increase the recovery of resources where possible.

The relevant Victorian Government agencies are the Department of Environment, Land, Water and Planning (DELWP), Environment Protection Authority Victoria (EPA), Sustainability Victoria (SV) and seven Waste and Resource Recovery Groups (WRRGs). In addition to these agencies, local government and private sector operators deliver recycling services to households and businesses. EPA, SV and the WRRGs receive most of their funding from the Municipal and Industrial Landfill Levy.

Victoria’s current recycling and resource recovery system governance does not deliver on the Victorian Government’s waste and recycling objectives. There is a significant opportunity to clarify policy direction and regulatory application and enforcement.

This could ensure that current governance structures do not slow development. Harmonising Victoria’s policy and strategy to improve recycling and resource recovery with applicable legislation and regulation could benefit the state significantly.[63] In addition, a recent VAGO report and feedback from a range of stakeholders shows confusion in the roles and responsibilities of government agencies. This may prevent the sector functioning efficiently.[64]

In 2019, VAGO also found that in the absence of a statewide waste policy, Victorian agencies involved in waste management lack clarity on their priorities and how best to use resources. In its report, VAGO found that existing waste and resource recovery strategies and plans, developed by DELWP, SV and the WRRGs, have a range of objectives and actions that do not provide clear and coherent guidance in place of a statewide policy.

Without an overarching policy, there are no targets for agencies in the Victorian Government to aim for or measure against. Adding to this is the lack of certainty and stability of funding for recycling and resource recovery. This presents a barrier to understanding whether Victorian Government agencies have enough resources to perform their roles and responsibilities.[65]

In looking at jurisdictions with highperforming recycling and resource recovery systems, we found that an overarching policy framework for waste, recycling and resource recovery, supported by specific targets for recycling, is the foundation.[66] Targets can be used to incentivise performance. It is also important to ensure that they have net benefits and do not place additional burdens on households or businesses.

[61] Stoneham et al (2002) Auctions for Conservation Contracts: An Empirical Examination of Victoria’s Bush Tender Trial, Australian Journal of Agricultural and Resource Economics

[62] Victorian Auditor General’s Office (2019) Recovering and Reprocessing Resources from Waste

[63] Infrastructure Victoria (2019) Legislative and regulatory review

[64] Centre for Market Design (2019) Opportunities to improve infrastructure investment in the Victorian waste economy, report for Infrastructure Victoria

[65] Victorian Auditor General’s Office (2019) Recovering and Reprocessing Resources from Waste

[66] AlphaBeta (2019) Recycling and resource recovery infrastructure in Victoria: International and Australian comparisons, report for Infrastructure Victoria

The future of the Landfill Levy

Established under section 70 of the Environment Protection Act 1970, one of the key purposes of the Landfill Levy is to provide an incentive to minimise waste, encourage greater re-use and recycling and promote investment in alternatives to landfill. Given that the amount of waste generated in Victoria is increasing, and is forecast to continue to do so, the landfill levy alone is not providing enough of an incentive to meet these objectives.

As we identified in our Evidence Base Report, this is likely because the cost of the landfill levy is not felt by manufacturers, or directly by households. This suggests that the landfill levy should be considered just one of a suite of policies the Government can use, including regulatory interventions like product stewardship schemes, setting targets, supporting market development and investing in infrastructure.

This aligns with what we have observed in high-performing jurisdictions around the world, where a landfill levy or tax is only part of a broader policy framework applied across the waste lifecycle.

The Landfill Levy can also contribute to poor outcomes. The impact of the levy on landfill gate fees can lead to waste stockpiling or illegal dumping. Also, inconsistencies in landfill levies across state borders can encourage cross-border waste flows to places where costs are lower.

Recognising this challenge, the National Waste Policy Action Plan made Victoria responsible for investigating how to harmonise waste levies across Australia to encourage best practice waste management. This work is ongoing and there have been recent announcements of a Victorian levy increase as part of the Recycling Victoria package.

There is an opportunity to consider Victoria’s Landfill Levy in the broader context of the Victorian Government’s policy objectives for the recycling and resource recovery sector. For example, increases to the Landfill Levy could make alternatives to landfill more cost competitive, including energy recovery through waste-to-energy. Given energy recovery is preferable to disposal, setting the right price is consistent with existing Victorian Government policy and can help transition toward a circular economy. In the longer term, the Landfill Levy could continue to be assessed as the impact of other policies begin to be felt. Any future changes to the levy rate should consider the potential disruption that may be caused by a sudden increase such as disruption to existing commercial arrangements, increased illegal dumping or stockpiling. A phased approach to Landfill Levy changes could minimise this risk.

There is also potential to put the Landfill Levy to greater use. Unspent Landfill Levy is held in the Sustainability Fund (the fund). We heard from a range of stakeholders, both in face-to-face consultation and through submissions, that more of the Landfill Levy should be invested in the recycling and resource recovery sector.

This is supported by the Victorian Government Auditor General’s Office (VAGO) 2019 analysis that Victoria spends less than other jurisdictions on waste and resource recovery, despite managing much higher volumes of waste.

The United Kingdom provides an international example of governance frameworks that could be adopted in Victoria to provide greater clarity.

The role of local governments and the WRRGs

Victorian local governments are, in many ways, the front line of recycling and resource recovery in Victoria. Local governments are responsible for waste collection and recycling services for their residents with support from the Waste and Resource Recovery Groups (WRRGs).

According to the VAGO Delivering Local Government Services Report (September 2018), most council services are not legally mandated, including recycling services. Current legislation gives councils the option to deliver a service, but household recycling and collection is not mandatory for councils. This presents practical barriers to transparency and accountability, and funding of waste collection services. Without clear roles and responsibilities for local governments, it is difficult to measure their delivery over time.

Greater role clarity is likely to be a low-cost fix with wide-ranging benefits to the performance of the sector. This could be achieved through either amendments to the Local Government Act 1989, or the introduction of waste management-specific legislation.

There are seven WRRGs across Victoria The WRRGs are responsible for developing Regional Waste and Resource Recovery Infrastructure Plans (RWRRIPs), supporting local councils to procure waste and recycling services, infrastructure and service planning at a regional level, and educating the community on waste avoidance and reduction. Currently, the WRRGs support councils in procuring recycling and resource recovery services by supporting collaborative procurement processes to achieve economies of scale. However, it is not mandatory for councils to participate in procurement processes run by the WRRGs, which can lead to market power imbalances between individual local governments and recycling and resource recovery service providers.

Some of the roles and responsibilities of the WRRGs, specifically for regional resource recovery infrastructure planning, overlap with SV’s role in statewide resource recovery infrastructure planning. This was identified by VAGO as a cause for confusion among stakeholders in the sector.[67] In addition, VAGO noted that the Metropolitan WRRG (the biggest WRRG covering the greatest number of councils) does not have enough funding to perform its functions. Specifically, MRWWG’s remit was expanded to include C&I and C&D waste, but MWRRG was not given additional ongoing funding to support these responsibilities. As such, MWRRG has reallocated funds internally to deliver a C&I strategy, which may hinder its ability to meet other core objectives.[68]

The United Kingdom provides an international example of governance frameworks that could be adopted in Victoria to provide greater clarity. There, similarly to the EPA in Victoria, the Environmental Agency acts as a regulator; and similarly to DELWP, the UK waste management policies are set by central government. However, the collection and processing of waste and recycling are provided by a Waste Collection Authority (local authorities) and a Waste Disposal Authority.

The UK’s Environmental Protection Act 1990 (the Act) sets out the roles and responsibilities for Waste Collection Authorities (WCAs) and Waste Disposal Authorities (WDAs). It is prescriptive, and very specific when compared to equivalent bodies and legislation in Victoria and separates the responsibility of waste collection and waste processing services into different authorities. A similar approach in Victoria could improve role clarity, supporting greater consistency of service provision and better data collection, and has the potential to address some of the market power imbalances currently seen in the sector by aggregating procurement of processing services.

[67] Victorian Auditor General’s Office (2019) Recovering and Reprocessing Resources from Waste

[68] Ibid.

Data collection and reporting

The availability and use of timely and accurate data will be key to improving Victoria’s recycling and resource recovery. A clearer understanding of the volume and flows of materials will help both the Government and private sector plan and invest in infrastructure. This can ultimately strengthen the end markets for these materials and lead to greater recycling and re-use.

In 2011, VAGO found that a lack of data quality had affected the reliability of performance data and projected performance. VAGO recommended that SV develop a knowledge management system to rationalise data, and to identify and rectify data quality issues along with modelling accuracy. Better data collection can help monitor improvements in performance.[69]

In 2019, VAGO again noted that data quality issues limit the Government’s ability to understand how much waste is being generated and what happens to materials when they are recovered for recycling. This limits the Government’s ability to plan for, or invest in, infrastructure and to develop an overarching waste policy.[70]

The data currently available is collected through voluntary surveys of councils and waste reprocessing operators, which means data is often inaccurate or incomplete.

VAGO noted that without regulatory or legislative requirements for councils or operators to report data, or to monitor the flow of materials segregated for recycling after these are sent to recovery or reprocessing facilities, it is difficult for SV to resolve data limitations and these problems are likely to persist.[71]

[69] Victorian Auditor General’s Office (2011) Municipal Solid Waste Management

[70] Victorian Auditor General’s Office (2019) Recovering and Reprocessing Resources from Waste

[71] Victorian Auditor General’s Office (2019) Recovering and Reprocessing Resources from Waste

The end markets for materials vary greatly

Developing end markets for recycled materials is a challenge for countries all over the world. Even countries that are considered best in the world for recycling and resource recovery with large manufacturing bases, such as South Korea, rely heavily on export markets for some materials, particularly plastic composites.[72]

The lack of strong end markets for recovered materials is stifling the development of Victoria’s recycling and resource recovery sector. If recovered materials are not valued by producers or consumers, there is little to no incentive for businesses to invest in processing infrastructure.

The strength of end markets varies by material type. Figure 25 provides an overview of the performance in resource recovery across a range of indicators for key materials.

There has been a significant focus in Victoria on establishing infrastructure to collect, sort, and to an extent, reprocess recovered resources but the supply of recycled materials has not always been matched by demand. In many cases, there is limited market interest to establish significant, ongoing demand for products made from recycled materials.

Effectively, investment in developing local markets for recycled products or high-quality products for export have been limited. Fostering sustainable end markets for recyclable glass, plastic, paper and organic materials can play a larger role in solving the stockpiling problems Victoria has recently experienced and reducing the state’s reliance on landfill.

[72] AlphaBeta (2019) Recycling and resource recovery infrastructure in Victoria: International and Australian comparisons, report for Infrastructure Victoria

Markets are important

One challenge in developing end markets for recycled materials is the cost of using recycled content in manufacturing. This is especially true of plastics. Recycled plastics manufacturers operate in the same market as virgin plastics producers, and so must compete with virgin producers. The raw feedstocks for most plastics are fossil fuels, which are cheaper to use than recycled materials.

The reasons for the differences between the cost of virgin and recycled materials are two-fold. First, the price of any product reflects the cost of making it. In the case of recycled materials, this includes the cost of collecting, transporting, sorting and processing recovered materials to a point where they are a substitute for virgin material, such as glass cullet, plastic pallets or resin, or pulp for paper and cardboard.

Second, the price of virgin materials tends not to include the full lifecycle costs of these products, such as the environmental impact of extracting them or the costs of disposal, due to regulatory and market failures to ensure all these costs are reflected.

Most producers, seeking to minimise costs in production, will choose the lowest-cost input that serves their needs. Because virgin materials can be cheaper, producers are less likely to use recovered materials, limiting their market.

Another barrier is lack of awareness or concerns about the quality of recycled products. Concerns about contamination of materials, or insufficient information about the potential uses of recovered materials, can mean that consumers and producers are reluctant to buy products containing recycled content. This can be seen with plastics, due to concerns about the potential use of recycled plastics in food packaging.

Multiple stakeholders have raised the importance of standards or certification of recycled materials with us. Creating certification standards for products made from recycled content can address the lack of information and certainty about the quality of recycled products and provide an indicator of quality. This can increase the price of these products, making them more attractive to producers and ultimately strengthening the end market for recycled materials.

For example, the regulatory settings for the management of digestate –  which is the by-product from the anaerobic digestion process –  can be refined. The biggest regulatory issue raised by regional stakeholders is how the digestate is managed and its viability in agricultural use.

For stakeholders running anaerobic digestion plants, the biggest issue was the current regulations. While the EPA’s current regulations do permit the use of digestate in agriculture, the approach requires approval of all individual waste suppliers and digestate consumers, which can be difficult to manage as these change. Widespread adoption of anaerobic digestion in the EU is supported by HACCP regulatory frameworks to ensure the resulting digestate is safe for use in agriculture. HACCP is widely used for food production in Australia. In addition, there is uncertainty around the application of carbon credits to anaerobic digestion, particularly where operators are obliged to reduce carbon emissions through regulation. Standards and specifications should be reviewed and relaxed only where there is no risk of causing harm to human health or the environment.

A lack of demand for recycled material in production, regardless of costs, is also a barrier to developing end markets for recycled materials, particularly mixed materials. Producers want clean, single-stream materials. Recycling becomes far more complex when dealing with products that use composite materials. Composite materials, which use multiple polymers can be difficult to separate during recycling. For example, disposable coffee cups are predominantly made from paper, but an interior lining –  commonly made of polyethylene –  make these cups very difficult to recycle.

Market development approaches

Enabling the use of products containing recycled materials supports the development of markets and improves the sustainability and resilience of the sector by providing a pathway for materials.

Regulation and legislation can be both a barrier and an enabler, and these are prime opportunities for government. Victoria already performs well in this regard – VicRoads is a national leader in the use of recycled products in pavement construction – but we can do more.

Government can support demand for recycled materials by supporting research and development to commercialise the use of recycled products, particularly packaging, manufacturing and agriculture. This provides an evidence base to give people confidence in using recycled products, and shows that recycled products are fit for purpose. The Victorian Government can also provide a supportive environment for using recycled materials by either changing design specifications and procurement standards to encourage or mandate the use of recycled materials.

Recycling Victoria – a new economy includes commitments to increase innovation, prioritise the use of recycled materials in construction and to develop and promote standards, specifications and guidance materials to increase the use of recycled materials. The Commonwealth Government has also made similar recent commitments.

Since 2016, SV has awarded a total of $4.1 million in R&D grants to a total of 29 projects. These grants leverage funding and in-kind contributions from industry and research partners. Small R&D projects typically focus on one line of enquiry, with limited scope of lab testing of materials.

Large R&D projects typically focus on two to three lines of enquiry, with broader scope of lab testing of materials. Demonstration projects and field trials are the opportunity to prove performance in the real world in a controlled manner with associated monitoring and evaluation to allow for specifications to be changed and/or commercialisation to occur.

Funding in recent years has been spread across up to eight materials. Given the trial and error nature of research and development, success cannot be guaranteed. A more ambitious program with a higher chance of commercialisation could be pursued with the following indicative contribution from the Victorian Government, and additional funding and in-kind support provided by the Commonwealth Government, industry and academia.

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