Scottish Government

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1. Introduction

Status of guidance

This guidance has been made by the Scottish Executive. The Regulations require local authorities as waste disposal authorities exercising functions in relation to waste that is or contains biodegradable municipal waste ( BMW) to have regard to any guidance issued by the Scottish Ministers provided for under regulation 22. This document also contains general guidance to SEPA. The objective of this guidance is to ensure a smooth and transparent operation of the Landfill Allowance Scheme.

The Executive has consulted COSLA representatives and SEPA staff in drawing up this interim guidance. Further discussions will be held with COSLA and SEPA in developing this guidance, and individual local authorities and others can express their views on this guidance. Contact details are given at the end of the document.

Whom guidance is for

This guidance is primarily for local authorities and SEPA. It will also be of interest to private companies who provide waste management services to local authorities, and to landfill operators who will have data reporting obligations.

General operational procedures

The detail of operational procedures will be set out by SEPA, and will be available either as additional documents or as Annexes to this document.

Some important principles of the operational procedures include:-

- a principal named contact, plus an alternative, for SEPA's contacts with each local authority on the operation of the Landfill Allowance Scheme. In addition, SEPA shall need the contact details of the relevant head of department.

- a named contact, plus an alternative, for SEPA's contacts with the Scottish Executive on these Regulations

2. Allowances

2.1 Allocation

Under Section 4 of the Waste and Emissions Trading Act 2003, Ministers are obliged to make an allocation of allowances to local authorities within the allocation of allowances to individual local authorities for each scheme year. The 'Scheme Year Regulations' (The Landfill (Scheme Year and Maximum Landfill Amount) Regulations 2004 S.I. No. 1936) set limits on total allocations in Scotland for each year, and were made with the agreement of Scottish Ministers.

Scottish Ministers have made allocations up to the first scheme year in 2009/10. These are presented in Annex B.

The allocations for the years 2010/11 and beyond will be made when fuller information is available, see section 2.9 below on "Beyond 2010". The Executive is considering setting out reasonable planning assumptions for allowances for the years 2010/11 and beyond, to allow local authorities to plan, and to ensure consistency of approach in grant applications.

2.2 Banking

Banking is provided for in the Regulations (regulation 6). Unused allowances must be banked, without limit, other than in target years and in a scheme year immediately preceding a target year. In order to meet the targets nationally, it is crucial that only allowances allocated for target years are used in target years. Decisions to bank allowances, in line with these rules, must be recorded in the electronic register (see section 2.5).

2.3 Borrowing

Landfill allowances can be brought forward from the following year, subject to limits of 10% in the first three years of the scheme, and 5% thereafter. Borrowing is not allowed in target years or in a scheme year immediately preceding a target year. Prior approval of borrowing proposals is required from SEPA. The procedures for local authorities to submit electronic borrowing requests, and SEPA's consideration of such requests, will be set out when the register is introduced. It is not anticipated that any local authority will wish to make a borrowing request ahead of the electronic register being in place, as the consideration of borrowing will come towards the end of a scheme year.

2.4 Transfer

Regulation 8 which allows transfer of landfill allowances commences on 1 April 2008. This will allow trading, across England and Scotland. If Wales and Northern Ireland decide to introduce trading provisions into their Regulations, their authorities would also be drawn into the trading market.

The regulation specifies that requests to trade should be made to SEPA on a form provided by SEPA, which will be available via the website (on the basis of regulation 4(3)(b))

More information on the process will be inserted here in due course to prepare for the commencement of this regulation.

The regulations require SEPA to maintain a register of the landfill allowances allocated, banked, borrowed or transferred by all local authorities (regulation 16). This register will also record how much biodegradable municipal waste local authorities actually send to landfill, following the final assessment made by SEPA under regulation 15.

An electronic register is being developed for this purpose. This will allow local authorities to view on line their position with respect to allowances, and to make requests for borrowing (and ultimately trading).

The electronic register is planned to be in place by the end of September 2005. This will allow borrowing and banking for the 2005/06 scheme year to be recorded on the system. Before the electronic register is in place, SEPA will keep a simple register of allowances. No actions are expected to be needed with respect to this register.

2.6 The suspension of banking, borrowing and transfer

Regulation 9 sets out the conditions in which the Scottish Ministers may suspend banking, borrowing and transferring allowances for any or all local authorities. These are:

• For years between target years, (ie 2011 and beyond), if there is a risk that Scotland will exceed its allowances for the year; or,
• If there is a need to suspend whilst allowances are reallocated;

It also sets out the conditions under which the Executive may suspend these activities for a particular local authority, if Ministers have reason to believe that the authority:

• is exceeding its allowance limit;
• is not complying with any of the requirements under the Regulations; or,
• if an unauthorised person attempts to make a transaction on behalf of the authority.

Regulation 9 also details the procedures for imposing or lifting a suspension.

If this action is taken by Ministers, the Executive will ensure that the reasons are given to the relevant council(s) within 5 working days so that the council(s) can consider whether they wish to dispute the information or grounds upon which the suspension has been made. If the local authority wishes to dispute such information / those grounds, the Executive shall consider this within 4 weeks.

Where the Executive is considering suspension within a reconciliation period, careful consideration will be given to ensuring the suspension is justified, in regard of the effect of such a suspension on the councils ability to mitigate any excess landfill through borrowing and transfer. If a council disputes the grounds for suspension in these circumstances, the Executive shall make every effort to give promt consideration to the representation.

The Executive does not expect that it will use the powers to suspend banking, borrowing and transfer often.

The first pair of reasons covers the suspension for all authorities. The first of these concerns the years between target years, which cannot occur until 2011/12, and in any case should not happen because of the limits on borrowing. As regards the second i.e. the need to suspend whilst a reallocation of allowances in made, the Executive shall aim to ensure that reallocations are made with adequate notice so that this measure is not necessary.

The second set of reasons concerns the suspension for individual authorities. The suspension for excess landfill is not automatic, so as not to prevent an authority purchasing allowances and borrowing in order to correct the situation. However, if it appears that an authority is taking unjustified actions, such as selling allowances when clearly heading for excess landfill, Ministers will consider suspension. The other requirements of the Regulations would be triggered, for example, if a local authority failed to submit data to SEPA. In such an eventuality, it might be disruptive to allow them to continue to trade when their position with respect to the quantity of landfill was unknown. Finally, there is a provision relating to unauthorised transactions. This should not occur with good practice and the electronic register.

In practice, "reason to believe" is likely in most cases to mean that the Executive has been informed of the situation by SEPA, although it is also possible that the Executive will receive information from other sources, such as the individual local authority itself.

2.7 A trading system through reallocation

Prior to April 2008, the Executive shall consider any reasonable requests from local authorities to reallocate allowances by the agreement of both local authorities. Such arrangements can only cover two Scottish local authorities. The Executive will only fulfil such requests which comply with the conditions on transfer in the Regulations (regulation 8), and it is clear that the authority giving up allowances is able in all likelihood to function effectively without the allowances.

The arrangement would involve equal but opposite adjustments to the allocation of allowances of each authority (for example one authority's allocation falling by 1000 tonnes, and the others rising by 1000 tonnes). It would be for the two authorities to determine what arrangement they should enter into to compensate the authority that was giving up allowances, within their normal financial controls and duties.

This arrangement covers allowances up to the 2007/08 scheme year, and any such requests must be made at least by the end of January of the scheme year to which the allowances relate. On granting such a request, the Executive shall write to both authorities, and at the same time formally notify the reallocation to SEPA so that the change can be reflected in the register. The local authorities shall have to inform SEPA of the price (if any) paid under the arrangement, so that it can fulfil its duty under regulation 16(3) to record the total of such payments at the end of the year.

2.8 Other potential reallocation

In the consultation paper on the Regulations, views were sought on the possibility of reallocating allowances to reflect different authorities success with respect to the strategic waste fund. This will be an issue for Ministers to determine, following further consultation with local authorities, and further advice will be issued in due course.

Factors that Ministers may consider in making allowances for years 2010/11 and beyond:-

• the position of councils with exceptionally high or low biodegradable content in collected waste;
• uneven waste growth and demographic change;
• decisions about the national strategy for meeting the 2013 targets and therefore major infrastructure;
• major differences with respect to commercial waste.

3. Data collection

3.1 Scope - "collected municipal waste"

The Regulations require local authorities to report data for "collected municipal waste." It is this information that forms the basis of the calculation of the amount of biodegradable municipal waste held by the authority.

The definition in regulation 2(1) is:-

"collected municipal waste" means municipal waste which is recovered or disposed of in pursuance of arrangements made by a waste disposal authority or a waste collection authority;

Both waste disposal authorities and waste collection authorities are mentioned here as local authorities may, at times, be acting exclusively under duties as either one of these.

The scope of the data submitted as "collected municipal waste" is to be the same as has been developed for the quarterly return.

Collected municipal waste will be all waste for which the council makes arrangements, with the following exceptions:-

• abandoned vehicles.
• road planings.
• commercial waste that is delivered to council owned or run landfill sites, where the council has no part in the collection or disposal arrangements that have led to this delivery.
• industrial waste, collected from industrial premises and taken for disposal or treatment separately from any other waste.
• construction and demolition waste that is collected and taken for disposal or treatment separately from any other waste. Bricks and rubble taken to CA sites must be included in collected municipal waste.

The Executive is considering whether there is a class of road sweeping collected by HGV road sweepers that should also be an exception. The Executive will also consider whether it is possible to exclude separately collected WEEE where this is collected in containers provided by producers, and this will need to be confirmed once the WEEE arrangements are made.

Industrial waste, construction and demolition waste that is collected with other waste, and all commercial waste that is collected by or on behalf of a council's waste operations should be included in the returns for collected municipal waste. The baseline data on which Scotland's target has been set, and on which individual council's allocations of allowances have been set, includes these wastes. For further information about the interaction of the LAS with local authorities' duties with respect to commercial waste, see section 6.1.

In principle, waste dispatched from council owned premises (such as care homes) to specialist contractors should be counted within the scope of collected municipal waste. However, this waste has not generally been included in the Local Authority Waste Arising Survey, and councils generally will have very limited centrally compiled information on the weights involved. Indeed, the weight of waste picked up from such premises may not be recorded as part of existing contracts. It is accepted that this waste is excluded for the purposes of the Landfill Allowance Scheme.

3.2 Forms and timetable for submission

Initially, the data for monitoring the Landfill Allowance Scheme shall be collected by SEPA on the Landfill Allowance Scheme Quarterly Monitoring Return (former Quarterly Recycling/ Composting Return).

The deadline for the submission of data is 42 days following the end of the quarter. By extending the deadline to 42 days, it is expected that councils will be able to give full and accurate returns.

The Executive considered it disproportionate to make the 42 day deadline the limit in the Regulations that attracts penalties, but it is important that it is observed as the operational limit. SEPA should inform the Executive of problems in obtaining data.

After the end of the scheme year, SEPA has to provide a reconciliation for the year. SEPA and the Executive shall set a final deadline for the inclusion of data, and any variations to data, in consideration of the reconciliation for that scheme year.

3.3 WasteDataFlow

The WasteDataFlow system is planned to replace the quarterly return as the source of data. Further advice will be given if this change is introduced.

3.4 Data Checking and Enquiry

SEPA's Data team will check the data, and look for any anomalous movements or omissions, and seek further explanation. (see next section for issues on establishing the assumptions for the calculation of BMW diversion).

3.5 Data Audit

Local authorities are public bodies, and have general duties to comply with the law and to report accurate data. There is no need for a routine general auditing procedure to be employed in order to obtain data that reflects the council's best understanding of their position.

Local authorities are expected to keep a register of receipts from landfill operators and reprocessors that can be inspected by SEPA.

SEPA may undertake occasional random audits, to ensure the overall validity of the data. SEPA may also undertake an audit of a local authority's data in exceptional circumstances, where there are reasons to believe that systematic and substantial errors have affected the data submission of individual councils.

4. The calculation of BMW landfilled

The framework for the calculation methodology is set out in regulations 13 and 14 of the 2005 Regulations.

The data for the calculation shall be taken from the quarterly returns.

4.1 Calculation of total BMW in collected municipal waste

The first stage of the calculation is to calculate the total amount of BMW in collected municipal waste.

The calculation set out in the regulations applies the figure of 63% of the total collected municipal waste for all authorities ( see section 4.5 on issue of reviewing this figure over time).

4.2 Calculation of BMW diversion

The second stage of the calculation is to subtract from the total amount of BMW in collected municipal waste an estimate of the BMW diverted as a result of waste sent for treatment.

For each element of waste sent for treatment, the calculation requires a weight from the returns, and a figure for the percentage BMW content.

The regulations specify that an amount of separated municipal waste is comprised only of those types of waste which it is the purpose of the process of separation to separate. Implicitly, therefore the waste would otherwise be regarded as mixed waste.

For some separated elements, percentage biodegradable content is given in the Schedule to the Regulations.

Where no figure is given in the Regulations, a figure will have to be assumed by SEPA. The local authority shall have to demonstrate evidence to SEPA of the nature of the material that has been separated, the type of process that has led to its separation, and its biodegradable content. The Regulations give a figure of 100% for "putrescible waste", defined as any animal or vegetable waste (including wood) which is capable of undergoing anaerobic or aerobic decomposition, which would cover, for example, garden waste collected for composting.

4.3 Calculation of BMW reduction when treated material is sent to landfill

Local authority's duty under section 9 of the WET Act is to ensure that the amount of biodegradable municipal waste sent to landfills in that year in pursuance of arrangements made by the waste disposal authority does not exceed the amount authorised by the landfill allowances available to that authority for the year. A landfill is defined in section 22 of the Act as a site for the deposit of waste onto or into land where the site is either a waste disposal site or a site used for the storage of waste, although storage for less than one year prior to disposal or three years prior to recovery or treatment are excluded.

Therefore, where an element of municipal waste, counted as 'diverted' (under the process described above in section 4.2) as it is sent for treatment, is subsequently sent to landfill the quantity of biodegradable waste has to be assessed. This applies to deposits at landfill sites that are waste disposal sites, that is operational, licensed landfill sites. This will, in particular, include material sent to landfill for use as "daily cover". Material that is recovered as it is used for treatment of land using waste, including reclamation that does not count as disposal at closed or capped landfill sites, will not need to be added back as it is diverted from landfill. SEPA is able to advise on when the use of material for reclamation at closed or capped landfill sites has to be regarded as disposal.

The output from Mechanical Biological Treatment plants will be considered to be 100% biodegradable unless local authorities can demonstrate that it contains non-biodegradable material.

For each substance that is sent from treatment to landfill, the calculation requires a weight and a figure for percentage BMW content. It is assumed that all the waste is municipal waste, and so the guiding definition will be that of "biodegradable waste", which means any waste that is capable of undergoing anaerobic or aerobic decomposition. SEPA will need an estimate of the proportion of waste sent from treatment to landfill that is biodegradable, and this will depend on the composition of the waste that was sent for treatment, and the nature of the treatment that it has undergone. The local authority is in the best position to understand and monitor their treatment processes, and therefore it is for the local authority to take measurements and present SEPA with an evidence-backed estimate of the biodegradable content of waste that is being sent from treatment to landfill.

The calculation in the quarterly return spreadsheets presently assume a 63% biodegradable content for mixed waste compost. This is the only viable assumption in the absence of other information, as we cannot from the form know that the figures for the collected amount and the disposed amount refer to the same set of material (that is, some of it may have been diverted for recovery). In most cases, the diversion of BMW will be higher than this assumption. Annex A sets out the additional information that a local authority would need to submit to SEPA in order to demonstrate higher diversion. This information is subject to verification by SEPA.

The provision in the Regulations to add back to the estimate of BMW sent to landfill quantities of material separated for treatment, but subsequently sent to landfill, is not intended to count reject rates at materials reprocessors once the waste has entered the recycling or recovery process. However, the rejection of waste at a pre-treatment stage prior to it entering the full recovery process, and so sent to landfill by the authority or its agent, has to be counted as disposal.

By definition, material sent to an inert landfill site is 0% biodegradable.

4.4 Example calculation

* this figure could be different, see Annex A.

A programme of waste analysis shall be carried out in the next few years. The Scottish Executive needs to have defensible data to support the mass balance calculation for the target year of 2009/10. The Executive also need to gain a greater understanding of the range of BMW percentage in different authorities in order to consider any impacts on allowances beyond 2010.

5. Actions in the event of "excess landfill"

SEPA has a duty under section 10(2)(d) of the WET Act to inform Ministers "without delay" where it appears to them that a local authority is or may be liable to a penalty.

The Executive believes that this duty can be satisfactorily discharged if SEPA informs the named Executive contact within 10 working days of becoming aware that a council appears to be heading for "excess landfill", even if they use their full borrowing potential.

The Executive will give consideration as to whether a suspension of banking and borrowing (and transfer) is appropriate (as set out at 2.6 above). The Executive is also likely to commence a preliminary check for any disputed factors in the measurement or calculation of excess landfill, and, if still in the scheme year in question, to ask the council what measures it is taking to eliminate or minimise its excess landfill.

As set out in the Regulations (regulations 14 and 15), SEPA will carry out its preliminary and final calculation of the amount of landfill of BMW by each authority, and will reconcile this with the allowances available to each authority.

The assessment of a penalty liability will then be carried out by the Executive in accordance with regulation 19.

A penalty does not become payable unless and until it is notified by Ministers and is due one month after the date of such notification (regulation 21) Prior to any such notification, Ministers shall consult the local authority faced with a penalty liability and have regard to any representation made (regulation 21(2)). Following consideration of the representations and other relevant information, Ministers will take their final decision about any penalty to notify.

6. Other issues

6.1 The interaction of the Landfill Allowance Scheme with local authorities duty under section 45 of the EPA

The Landfill Allowance Scheme rests on using local authority waste as a proxy for municipal waste, as defined in the Landfill Directive. This was necessary to make the Directive operational in the UK.

The Executive acknowledges that this creates an incentive for local authorities to reduce their activities in commercial waste, so as to reduce the diversion that they have to demonstrate in order to meet their allowances.

Local authorities have the duty, if requested by the occupier of premises in its area, to offer a commercial waste service, for which they can levy a reasonable charge (section 45(1)(b) EPA).

Local authorities will need their charges under review to ensure that charges reasonably reflect their costs. The Executive would be concerned if local authorities made unrealistically large increases in their commercial waste charges, or otherwise attempted to make a sudden switch from their commercial waste users to private contractors. Local authorities should also be aware that a block transfer of commercial waste customers could be judged to be an arrangement made by the local authority for the purposes of measuring collected municipal waste.

6.2 Procurement and Best Value issues and trading

Guidance shall be inserted here in good time before the start of trading in 2008.

7. Interpretation of the Guidance

There may be circumstances where there are disagreements between SEPA and local authorities over the interpretation of this guidance, or of other matters concerning the operation of the Regulations that are not yet covered by the Regulations. In such circumstances, both SEPA and the local authority may write to the Executive, stating their differing interpretation, and the Executive may provide further clarification. While this consideration is underway, SEPA's decision will remain valid.

In providing further clarification, the Executive may write to SEPA and the local authority, and might consider amending the guidance, in consultation with partners, to remove any ambiguity.

In more fundamental cases, the Executive may consider proposing amendments to Regulations. A final option would be to indicate that a matter could be considered a relevant fact in Ministers' consideration of whether to notify an assessed penalty under regulation 21.

Ultimately, of course, matters could be resolved by court proceedings albeit that it would be in all parties' interests to avoid this happening.

8. Monitoring and Review

The Executive shall monitor the progress of the scheme, including through regular discussions with SEPA and with local authority representatives.

9. Consultation

This interim guidance will form the basis of final guidance on the Scheme. Interested parties are invited to make any comments on the content of the guidance, and on any changes or additions that they would wish to propose.

It would be useful if comments could be sent by the end of August 2005, to allow final guidance to be in place to inform the 2006/07 scheme year.

Please send comments and enquiries to:

Charles Stewart Roper

0131 244 0201
charles.stewart.roper@scotland.gsi.gov.uk

Annex A: Assessing the diversion of biodegradable municipal waste in mixed waste compost

This Annex sets out the additional data that SEPA would need in order to assess the diversion of biodegradable municipal waste in mixed waste compost sent to landfill. The ultimate judgement on the biodegradable diversion is for SEPA, and in certain circumstances this calculation may not apply.

The quarterly return of data collects two figures for mixed municipal waste for composting:-

• Sent to reprocessor for recycling/ composting (tonnes)
• Sent for recycling/ composting but disposed of (tonnes)

By assumption, the BMW content of mixed municipal waste sent for composting is 63% of its weight. In order to estimate the BMW content of the material sent from composting for disposal, information is needed about the progress through treatment of the weight of material originally sent for composting.

Table: estimating the biodegradable content of mixed waste compost sent to landfill

* (x-z-y-v) is the weight loss due to the composting process

A numerical example is given in the next table.

Table: estimating the biodegradable content of mixed waste compost sent to landfill - a simple numerical illustration

* this is a figure purely for illustration, the actual weight of material leaving a system would have to be measured

In this example, all of the compost is disposed of at landfill, with a biodegradable content of (430/800) = 54% BMW

Annex B: The Allocation of Allowances