Managing waste in emerging markets

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Economic growth in emerging economies is bringing prosperity, rising living standards and overdue relief from poverty, but increased consumption typically increases resource use — especially the use of plastics — and waste production. As Exhibit 1 illustrates, the rapid surge in waste volumes since 2007 is straining waste-management systems in many developing countries, with negative effects in economic, health and ecosystem terms. The Philippines is a case in point: it produces 2.7 million metric tons1 of plastic waste per year — 600,000 metric tons in metro Manila alone.

While the country has high waste-collection rates overall (84 percent nationwide), 17 percent of collected plastics is lost into the marine ecosystem after collection because of illegal dumping and poor landfill siting and operating practices.

For uncollected plastics, the ocean-leakage rate is even higher, at 31 percent. The economic losses in tourism, fisheries and healthcare are considerable. We estimate that each metric ton of uncollected mixed waste represents an average loss of approximately $375.3. As Inge Lardinois and Arnold van de Klundert wrote 20 years ago: “By almost any form of evaluation, solid waste management is a growing environmental and financial problem in developing countries. Despite significant efforts in the last decades, the majority of municipalities in the developing countries cannot manage the growing volume of waste produced in their cities.”

While the importance and urgency of protecting the ecosystem is increasingly understood, the cost of the efforts required can be unaffordable for already overstretched municipal budgets. While statistics are still spotty, municipalities in developing countries might be spending 20 to 50 percent of their budgets on solid-waste management. The default solution has been to encourage private-sector waste operators to get involved through concessions or other forms of public-private partnerships. This can take away some of the financial pressure and inject much-needed expertise into local waste-management systems. Our work with municipal waste agencies around the world indicates it does not in itself guarantee any focus on value recovery, since this is usually not an explicit part of the mandate.

From waste streams to income streams

With the right approach, many waste streams can become income streams, yielding economic value with technology available today. Three examples from across the waste spectrum indicate the potential. For instance, pound for pound, there is more gold in electronic scrap than in gold ore. Collecting and selling used polyethylene terephthalate (PET) bottles can earn a waste picker a living ($3.50 a day). And every metric ton of used clothing collected could generate revenue of $1,975, if garments were sold at current secondary-market prices, comfortably outweighing the cost of $680 required to collect and sort each metric ton.

Nevertheless, the value in many waste flows is not being captured today. Even the stable and relatively successful systems of PET-bottle and fiber recovery still extract only 40 to 60 percent of their potential total value. Why is this so? And how could the management of such relatively low-value products and materials be rendered profitable?

Our analysis suggests that the aggregate extractable value from consumer-waste flows is often higher than people think and certainly higher than current recovery rates imply. The challenge that must be addressed to increase rates of recovery and valorization lies in the aggregation of volumes: scale and volume are needed to justify investment in technology and infrastructure that is capable of extracting more value. In other words, the critical challenges are the high degree of dispersion of many consumer materials and products, as well as the lack of an integrated infrastructure and a well-managed — reverse — supply chain operated at scale and based on sound management practices.

Keys to success for waste-management systems in emerging economies are the ability to aggregate waste flows into meaningful volumes around which businesses can be developed and the ability to organize the supply chain professionally at high levels of operational efficiency and environmental and societal effectiveness. Who or what mandates or operates such a system can vary, as long as the parties ramp up and yield results fast — staying on top and preferably ahead, of the large and growing volumes of waste that are developing in emerging economies. Exhibit 2 illustrates the potential positive effect of aggregating flows and providing the necessary scale for high-performing value recovery:

The PET-bottle-collection system that requires the lowest level of aggregation — collecting PET bottles as part of mixed waste — allows for energy recovery via incineration, yet its economic yield is so low as to require a so-called gate fee to cover operations. At the next level, recovering the bottles’ material value via a mixed-recyclables or mixed-plastics stream could yield approximately $150 to $300 per metric ton. The highest values, approximately $350 to $600 per metric ton, require the highest level of aggregation, in the form of a bottle-only collection system.

Similarly, metals are commonly extracted from tires in small backyard operations where tires are burned in open fires — posing great risks to health and environment. Aggregating tires to feed them as fuel into industrial processes (rather than just backyard fires) could increase the value extracted from old tires tenfold. And when initiatives to organize the tire-waste flow cover not only collection but also the processes to recycle specific materials (not just using tires as industrial fuel), the value extraction from tires could see a further doubling.

In the processing of electronic and electrical waste, too, shifting from backyard recycling — harmful to workers and environment — to processing in smelters with strong environmental controls could multiply the value that can be extracted. Currently, the required scale and hence waste-volume aggregation, for smelters is significant and only a few plants are available around the world to produce these high yields. Recently, technology companies have developed hydrometallurgical alternatives, which they claim generate higher yields and can be run profitably with smaller feedstock volumes.

Once commercial installations are fully operational, they might therefore pose an interesting challenge to today’s large-scale paradigm for (precious) metals extraction. These smaller installations would, however, still require incoming materials that have been aggregated into “clean” unmixed waste flows.

Solutions for aggregating and organizing solid-waste flows — increasingly augmented by product stewardship or extended producer-responsibility programs — already exist at the municipal and regional levels, providing some instructive examples.

We will illustrate this with a few examples. Each example provides evidence that volume aggregation can be organized, creates significant economic value and changes the complete material supply chain. Take organic waste. It typically makes up around 30 percent of household waste in developed countries and up to 65 percent in developing ones.

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