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How to take into account economy and local conditions in implementation of BAT?

How to take into account economy and local conditions in implementation of BAT?

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How to take into account economy and local conditions in implementation of BAT?

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  1. How to take into account economy and local conditions in implementation of BAT?

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

  3. Environmental Issues Non-Environmental Commercial Pressures Pollution Control Costs Local Technically Viable Techniques Global Regional Desired Environmental Outcome Economic Viability BEST AVAILABLE TECHNIQUE The IPPC Balancing Act Costs Advantages

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

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

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

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

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

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

  10. Illustrative cost data submission • This submission is not sufficient to determine BAT • The cost data cannot be assessed on the basis of this break-down

  11. Step 1: total costs

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

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

  14. Environmental Issues Non-Environmental Commercial Pressures Pollution Control Costs Local Technically Viable Techniques Global Regional Desired Environmental Outcome Economic Viability BEST AVAILABLE TECHNIQUE The IPPC Balancing Act Costs Advantages

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

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

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