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A National Approach to Waste Tyres

Commonwealth Department of Environment, 2001

4 Reducing Inappropriate Tyre Disposal

This section will be restricted to regulatory approaches to the problem of inappropriate tyre disposal, where the term regulatory is to be interpreted in the sense of imposing restrictions on the regulated community. Other approaches provide financial incentives that encourage waste tyre operators to manage waste tyres in ways that meet community expectations. These approaches may also require regulation (and legislation) to underpin the associated market activities, and will be discussed in a later section.

4.1 The opportunity

Although there is considerable debate about the precise numbers of tyres involved, there is broad agreement that inappropriate disposal (including illegal dumping) is a significant problem. As overviewed in Part I, the major known impacts on the environment, public health and local amenity due to waste tyres arise when they are not properly managed. The associated risks can be substantially reduced if the incidence of inappropriate disposal is minimised.

4.2 The impediments

The impediments to improvements in this area would appear to include commonly held perceptions and attitudes in regard to inappropriate waste tyre disposal. As a general observation, where there is widespread activity that is illegal, then it may be surmised that significant sections of the community condone the activity and consider it ‘harmless’. In the eyes of many, waste tyres are viewed as a relatively benign waste, and it is considered no great crime to leave tyres in various locations provided they are not visible and become an eyesore.

At the heart of the problem is the fact that present financial incentives encourage the waste generator to find the least cost way of disposing waste tyres, and the least cost way is to dump the tyres63. Dumping of tyres can be done by the waste generator acting singly, or in collusion with a waste tyre collector/transporter who also has no financial incentive to do the right thing. The waste generator/tyre collector interface is the weak link in the waste tyre chain. Moves by landfill operators to set gate fees to recover all costs of operation have increased the temptation for inappropriate practices by raising the resulting benefit - the avoided gate fee64.

One of the impediments in the past to effective policing in this area has been a lack of clear definition of the boundary between acceptable and unacceptable practices. Certain practices (such as on-farm applications, erosion control) have been in a regulatory grey area. This problem is now being addressed in most jurisdictions by means of tighter definitions of what constitutes ‘waste’ (thus coming under the waste regulatory umbrella). Options include imposing limits on the numbers of tyres in any application of tyres, or requiring all such activities to be subject to approval on a case-by-case basis.

The existence of waste tyre operators working outside the system takes away market share and puts pressure on profit margins for those operators who comply with the requirements.

4.3 Options for tyre disposal

We consider four options for overcoming these impediments:

4.3.1 Option 1: Tracking scheme

By requiring documentary evidence of all waste tyre movements, as well as introducing audit and enforcement provisions, the opportunities for inappropriate practices are drastically reduced. The purpose of such schemes is to increase the chances of being caught for not complying.

The movement of waste tyres across State and Territory borders currently comes under the NEPM for the movement of Controlled Wastes, where waste tyres are classed as controlled waste. This NEPM is relevant for the options discussed here and a brief description follows.

The NEPM requires the jurisdiction of origin (where the waste originates) to ensure that transport of controlled waste is subject to licence (which is recognised for this purpose by other jurisdictions). All movements of controlled waste are subject to authorisation and the NEPM provides that the jurisdictions, both of origin and destination (where the waste finishes), ensure that the movement is appropriate and that the receiving facility is appropriate to receive that type of waste. Tracking requires information to be supplied by the waste generator, the waste transporter and the receiving facility.

NEPC reports annually on activities under the NEPM, but the quantities of waste tyres are not separately reported, and we have not been able to obtain detailed information on interstate movements of waste tyres from individual jurisdictions.

The model for a tracking scheme is a scheme implemented in South Australia as described below.

The SA EPA aims to ensure that all waste tyres find their way from the waste generator (tyre dealer, transport company, farm or mine site) to a licensed waste facility (retreader, recycler or shredder) using a licensed transporter (who may also be the retreader or recycler, or a specialist casings dealer). The key elements of the tracking system are as follows:

Whole tyres only

The tracking system deals solely with whole tyres - SA EPA does not track tyres that are destined for landfill beyond the shredder. As part of their licence conditions, shredding operations are required to submit an annual return showing how many tyres were shredded and landfilled or recycled. This suggests a combination of the following:

Waste Tracking Form

The WTF is in three sections (denominated A, B and C) and each form comprises four duplicate dockets (green, white, yellow and blue). Note that:

It is often impractical to track specific shipments from generator to waste facility. For example, tyres are typically collected from various sources on a ‘milk run’, classified and grouped on the truck or at some sorting facility, then delivered to various destinations. Tyres that lose their identity in this way are tracked from generator to transporter on one WTF — and then from the transporter to the facility on a second WTF. In the former case the transporter is both transporter and (intermediate) facility and completes sections B and C of the WTF. In the latter case the transporter is both (intermediate) generator and transporter, and completes section A and B.

Audits, education and leadership

The WTF can be circumvented in two ways. First, tyres can be illegally disposed of by the generator or by the generator and transporter acting in concert - without initiating the WTF. Second, the facility can collect the gate fee on deliveries under the WTF but still dispose of the waste illegally - possibly in concert with the transporter to save on transport costs as well. Audits are part of the answer, in that:

But the educational effort is also substantial, particularly to advise waste generators that they are responsible for the eventual disposal of waste tyres - they cannot hide behind a fly-by-night or bankrupt transporter. Other important drivers are:

Once several large retail chains participate in the system, a large part of the waste tyre business, including transporters and receival facilities, would be induced by commercial considerations to adopt the tracking system in order to retain business.

Special provisions for small and one-off transactions

Use of the WTF becomes cumbersome in two situations:

In the first case, the SA EPA obliges the retailer to record the name, address and licence number of the purchaser. In the second case, land-holders are not obliged to register as a waste facility if less than 5 tonnes of tyres are required, but they must obtain SA EPA approval for the intended work and that paperwork must accompany the WTF as a substitute for the blank section C. In other words, the SA EPA aims to have waste generators account for every single waste tyre. They have not achieved that objective but claim to be working steadily towards it.

Further development of the tracking system

SA EPA started to develop its WTF system in February 1996; it is still evolving. For example, discussions have been held for some time regarding the need for a separate waste tracking form solely for tyres. Waste tracking of tyres takes approximately 50%- 60% of the resources of the entire tracking system. More movements of waste tyres are tracked than for any other waste commodity. This means that:

SA EPA has initiated a system of annual returns for waste facilities to provide more detail on the actual disposal of waste tyres, for example, numbers shredded, retreaded, etc.

4.3.2 Option 2: National uniform regulation

The Australian Constitution is silent in respect to protection of the environment. As a consequence, responsibility for the environments resides with the States (and now with the Territories), except for those matters that can only be dealt with on a national basis or where the relevant powers have been expressly referred to the Commonwealth.

Each of the States and Territories already has in place specific government programs and measures to deal with waste tyres. The management of waste tyres is also required to comply with the broader regulatory framework and government policies, particularly those that relate to the protection of the environment and management of waste. The development of a national approach for waste tyres must take into account the excisting instruments at the State and Territory level. However, the possibilities available to the individual jurisdictions and the consequent effectiveness of State-based measures have certain limitations and these are discussed below.

In addition, there already exist a number of broad statutory requirements regarding uniformity across Australia. Section 92 of the Australian Constitution prohibits actions that would restrict trade between States. More recently, the mutual recognition requirements adopted by all jurisdictions state that approvals granted to products in any part of Australia are to be recognised in other jurisdictions.

In the case of the environment, the Inter Government Agreement on the Environment (IGEA) provides that the objectives of the National Environment Protection Council (NEPC) are that (as stated in the NEPC Act 1994):

a) people enjoy the benefit of equivalent protection from air, water or soil pollution and from noise, wherever they live in Australia; and

b) decisions of the business community are not distorted, and markets are not fragmented, by variations between participating jurisdictions in relation to the adoption or implementation of major environment protection measures.

It is notable that the details regarding the implementation of each of the NEPMs are to be decided by each State and Territory, and are not uniform. The powers vested in NEPC are restricted to making NEPMs and assessing and reporting on their operation. The NEPM on the movement of controlled waste does not prescribe the details of licensing for waste transporters. From a perspective external to the NEPM development process, it appears there has been a conscious decision to restrict NEPMs in general to specifying outcomes, leaving it to individual governments to prescribe the detail of how the outcomes are to be achieved in their area of responsibility. This perception is echoed in views that have been expressed in regard to the NEPM on air quality65.

The option to be considered here involves a greater level of uniformity, not just in the framing of regulatory provisions but even in the way that the available powers are used to enforce the requirements. Uniform regulation could be applied to:

A frequent comment has been the lack of enforcement rigour of powers available to regulators. For a nationally uniform regulatory framework to operate as envisaged there must be a uniform approach to the way that the regulations are enforced.

4.3.3 Option 3: Payment at point of delivery

This option involves a guaranteed payment for waste tyres brought to an approved receival facility. The most administratively simple approach would be to set up a centralised facility to accept waste tyres (see Part II.5) which would make the payments.

In the absence of a central facility, the delivery payment would remain constant across all types of receival facility (including landfills), notwithstanding that some end uses may be deemed to be of more value than others. Differences in value could be taken into account in a separate scheme that provides benefits differentiated on the basis of the perceived value of individual waste tyre practices (see Part II.6). Higher levels of benefits could be used to bid for additional tyres.

The delivery payment is meant to provide an incentive to avoid inappropriate disposal only and would be set to cover average costs incurred by the waste tyre collector. The payment would be significantly less than the tyre levy if this option were to be introduced.

4.3.4 Option 4: Environmental rating scheme for tyre dealers

Tyre dealers are located at the point in the tyre chain where the tyre becomes waste, and are generally referred to as waste generators in this report. In view of this, as well as the large number of tyre dealers in Australia, dealers and the arrangements they make with collectors are viewed as the most vulnerable point in terms of inappropriate disposal of waste tyres.

This option would provide for a scheme where dealers were rated according to the attention they paid to good practice in managing waste tyres. The scheme would be similar in concept to energy efficiency star rating schemes. Dealers could use the rating as a selling point, and the preference of environmentally aware tyre purchasers would be to buy tyres from a dealer with good environmental credentials. Thus market forces would provide incentives for dealers to behave in an environmentally responsible manner.

The rating awarded could be based on the destination of waste tyres after leaving the dealer, with the rating ranging from a low for dealers who arranged for inappropriate disposal of waste tyres, to a maximum for dealers who ensured their waste tyres were sent to high value management practices. Alternatively, or in parallel to this, the rating could reflect overall good practice including the provision of advice on tyre maintenance or the offer of tyre checks at regular intervals during the life of the tyre.

4.4 Assessment

4.4.1 Option 1: Tracking scheme

Administrative and compliance costs

The costs for a tracking scheme are estimated first on the experience with the SA scheme and then extrapolated to yield national estimates.

We distinguish between the administrative costs of SA EPA in developing, maintaining, and using the tracking system, and the compliance costs of industry in completing, returning and storing the WTFs. Conservative estimates of these costs are presented and explained in Table 4.1. The total cost of $250,000 is for approximately 1.5 million EPU generated in SA each year, or about 17 cents per tyre.

Table 4.1 Estimated cost of the WTF system in SA (development phase)

Administrative costs
0.1 of an administrative officer @ $75,000 p.a. $7,500
0.75 of an administrative officer @ $55,000 p.a. $41,250
0.4 of a data entry operator @ $30,000 p.a. $12,000
Total salary $60,750
Printing and distribution of forms $15,000
Multiply by 2.0 for overheadsa X 2.0
Total administrative costs approx. $120,000

Compliance costs
Cost per WTF (detailed below) $1.67
Multiply by 40,000 WTFs in a full year in SA X 40,000
Total compliance costs approx. $67,000

Derivation of compliance cost per WTF


Note:
a) Overheads include labour on-costs, office space, materials and equipment, communications and travel costs, and the cost of providing WTFs free of charge to transporters. About 40,000 WTFs will be processed each year when the system is fully developed.

These estimates are likely to overstate the true costs for several reasons. The costs relate to the waste tracking system in its development phase, and the one-off consultative and educational effort has essentially been phased out.

While Table 4.1 represents good estimates of the current administrative costs of the SA EPA (based on discussions with the relevant officers), compliance costs could be much lower than our figure. For example, form-filling is the sort of task that is done while socialising or chatting about business, or while waiting for something else to happen, like the opening of a gate or the arrival of a co-worker. It is not difficult to imagine that WTFs are routinely completed without any impact on the productive capacity of the enterprise.

The paper-based system could be improved, for example, by pre-printing WTFs with the details of routine users. Redesign of the system for greater efficiency is currently in the hands of the industry. There are benefits for industry as well. The WTF is likely, in some cases, to replace other business records, perhaps improving them. And it may save operators time and effort in the event that a tyre dumping incident triggers an investigation of their tyre disposal practices.

On the basis of an estimated all-up average cost of $0.17 per tyre, the aggregate annual cost for Australia (18 million waste tyres per year) is $3.1 million.

The tracking scheme will not be effective unless there is a strong possibility that non-compliance will be detected. Accordingly, the tracking scheme will need to have an effective audit function, as well as educational activities to ensure that waste tyre operators are aware of their responsibilities. In aggregate across all jurisdictions it is assumed that the audit and education activities will require 2 full time equivalent inspectors with a total annual cost of $300,000.

The all-up cost estimate is $3 million per year, or approximately 19 cents per tyre.

Benefits

How effective would such a scheme be in practice? The view of the consultancy team is that with a strong audit function, the number of waste tyre operators willing to take the risk of being apprehended will fall to very low levels, and the numbers of illegally dumped tyres would be reduced proportionally. Anecdotal evidence from industry suggests that the level of inappropriate disposal in SA (the only State that has tracked tyres in the past) is lower than in other jurisdictions, though this may not be due only to the tracking scheme.

Importantly, a tracking scheme, modelled on the SA EPA example, focuses on the arrangements between the waste generator (generally the tyre dealer) and the tyre collector/transporter. This is the weakest link in the chain, where waste tyres can ‘disappear’ from the system. Proposals for a tracking scheme should be designed with this weak point very much in mind.

The tracking scheme will provide ongoing data on the numbers of waste tyres and their destination, which would fill major gaps that the present study has encountered. Such information would be invaluable for policy development.

Suboptions

It has been argued by some stakeholders that waste tyres do not pose risks of such magnitude as would justify the introduction of a comprehensive tracking scheme in the form sketched out above. Moreover, the existence of a tracking scheme might be seen by some as implying that waste tyres are more hazardous than in fact current knowledge indicates.

It is certainly true that information at a level adequate for much policy analysis could be collected at a much lower cost than the estimates indicated above. One example of a simpler scheme is where waste tyre operators would report inventory levels and flows on a regular basis, perhaps annually. This level of data would be expected to generate reliable estimates of the extent, in aggregate, of inappropriate management practices but would not have sufficient detail to identify those who are not complying with the requirements. Nevertheless, the information made available might allow the development of a much better targeted scheme to detect non-compliance (and determine if, in fact, such a scheme is justified). Thus a two-stage process could be considered, with the first stage defining the problem to be addressed by the final version (for example, if tyres become a ‘valuable’ resource there will be a direct financial incentive not to dispose of tyres inappropriately thus possibly doing away with the need for a tracking system).

Another consideration is that a tracking scheme may turn out to be an interim measure while one or other of the options described in later sections are developed and introduced. In that case, it would be sensible to minimise development costs.

4.4.2 Option 2: National uniform regulation

The question of regulatory federalism has underlain much of the political debate in Australia during the last century (and before), and extends well beyond the management of waste tyres or even purely environmental matters.

At the heart of the debate is the trade-off between the benefits from a uniform approach across the nation and the loss of flexibility for individual jurisdictions to tailor systems to take advantage of the particular characteristics within a State or Territory.

Uniformity provides a range of benefits for those firms whose operations span more than one jurisdiction, since it removes the requirements for different practices within each jurisdiction and the associated complexities this imposes on corporate management. For example, under uniform regulations, equipment meeting the same design standards can be used in each State or Territory, and equipment can be moved across borders without the need for expensive redesign or modifications.

Uniformity also provides a level of control in regard to movements of waste tyres across borders. Where numbers of waste tyre generators are concentrated near a border (as is the case with major centres of population such as Canberra and in south east Queensland), there may be opportunities to escape some of the costs of disposal by transporting tyres to the adjoining State or Territory (without complying with the NEPM). Uniform regulation would certainly remove some of the attractiveness of this type of activity but, as we suspect is the case for waste tyres generated in the ACT and then disposed in NSW, the major driving force may be the greater availability of inconspicuous dumping locations rather than a more relaxed regulatory regime.

The other side of the coin is that a national approach by its very nature may fail to take full advantage of the conditions that are peculiar to individual States and Territories, or to allow for specific difficulties and problems. This drawback is likely to be exacerbated if the national scheme relies heavily on a prescriptive rather than a performance-based approach.

Differences between States and Territories may be due to a number of factors, including:

Part I.5 provides an overview of some of the differences in regulatory approach and waste tyre policy across Australia. In the case of Victoria and Queensland, the decision to allow energy recovery from waste tyres appears to have resulted in a more light-handed approach to controls in Victoria, and consideration of total bans on waste tyres to landfill in Queensland. The design of the regulatory framework in the less densely populated States and Territories appears to have been relatively light-handed, perhaps reflecting the lower pressures for finding solutions to waste problems. Finally, jurisdictions with a high representation of remote settlements, and particularly mine sites, have addressed these problems more or less explicitly.

For the rest, the variation in how States and Territories have developed their regulations seems little related to the substantive differences across States and Territories.

A uniform approach would almost certainly impose greater costs on the less densely populated States and Territories while possibly reducing the stringency in some other States. Those States and Territories that might face the greatest rises in dollar costs are likely to be the ones least affected by cross-border movements of waste tyres due to the remoteness of their settlements. While exceptions could be provided for in specific cases, this immediately weakens the case for a uniform approach and the consequent benefits. Also the benefits to industry as a result of working under uniform requirements may be relatively modest in the case of waste tyres.

There is also the question of how standardisation might be achieved. The earlier discussion suggests that the NEPM process in its current form is unlikely to be suitable and in any case the time taken to develop and implement a NEPM is typically of the order of two years. The experience with alternatives such as inter-governmental agreements suggests that they are also time-consuming.

At the end, the real question is: do the problems associated with waste tyres justify such an effort? In view of their relatively low level of environmental impact and the availability of alternatives which are expected to be more effective overall (specifically, with the potential to address intrastate issues), the view of the consultancy team is that the answer is no.

Of course, States and Territories with adjoining borders could still elect to enter into agreements to control cross-border traffic in waste tyres. The avoided ‘transaction’ costs of reaching agreement represent one benefit from national uniform regulation.

Finally there is the question of enforcement rigour. All States and Territories have provisions for imposing penalties for non-compliance. Certainly, there have been some high profile prosecutions in relation to large tyre dumps and presumably there is other activity by the regulators which does not reach court. However, there are anecdotal reports of people getting away with illegal activities, though in many cases it is suspected that the activity is legal though it may not be environmentally sound or represent best practice.

It is our view that higher levels of enforcement would be successful in detecting non-compliance, particularly since many jurisdictions now have the benefit of a tighter regulatory framework. But this work is resource intensive and there are often more environmentally urgent matters vying for the time of inspectors. Given a plausible level of resources and willingness to launch some form of action, it is likely that there would still be substantial numbers of tyres that are disposed of in inappropriate ways.

4.4.3 Option 3: Payment at point of delivery

The benefits of this option in terms of the reduction in inappropriate disposal are provided by direct incentives to bring tyres to designated receival points. Provided the payment is set at an appropriate level, the effectiveness of the option should be very high. Since the ‘payment’ for inappropriate disposal is zero, then any positive payment should be sufficient. If this option were implemented as part of a product stewardship scheme, then the payment would logically cover collection and transport costs.

It can be expected that this option would result in tyres being taken from dumps in order to receive the payment. The reduction in tyre dumps is a benefit in itself, though allowance should be made in the funding arrangements for the increased payments for tyres that may suddenly appear. Of more concern is the possibility that some people, knowing of the imminent introduction of the payment scheme, may hoard tyres. It would be difficult to design the scheme to control directly for this possibility. However, environmental regulations that control the number of tyres that may be stockpiled can be expected to limit the number of tyres involved.

In addition, it would be counter-productive to encourage imports of used tyres by offering payments at the receival facility at the same time as measures are imposed to control the import of used tyres.

4.4.4 Option 4: Environmental rating scheme for tyre dealers

The rating scheme could be administered by the government but it would seem based on current experience that there would be substantial resourcing difficulties. An industry run scheme would not be mandatory. Dealers that choose to remain outside the scheme would be at risk of commercial disadvantage, though this may only be a strong force in larger centres where competition is strong. Some form of auditing would be needed to ensure continuing compliance with the awarded rating, including some form of reporting for firms who do not comply. The chances of success of the scheme would be increased if the support of the major tyre chains could be obtained.

The benefits of the scheme would be the number of waste tyres that are no longer inappropriately disposed as a result of dealers behaving more responsibly. What level of effectiveness could be expected from such a scheme? While surveys have demonstrated that many people have genuine concerns about the environment, this does not always translate into changes in behaviour particularly if it means higher costs. Certainly, to be effective, the scheme needs to be promoted by a high profile public awareness program to explain what the ratings are and how they are intended to lead to better outcomes.

In the end, however, it is the expectation that dealers have as to the weight attached by consumers to the ratings that is important since the benefits will be driven by actions on the part of the dealer rather than the purchaser. Some dealers may expect customers to react to the rating scheme as a measure of overall merit for dealers, rather than restricted to environmental performance, and be swayed to participate in the scheme as a result.

In any case, such a scheme would provide rewards to those dealers that behave responsibly in relation to waste tyres.

4.5 A national approach?

There is no intrinsic reason why individual jurisdictions could not develop a tracking scheme restricted to their own State or Territory. Such schemes could be meshed with the requirements for the NEPM in regard to cross-border movements of waste tyres. Nevertheless, it is to be expected that there could be considerable value in a national arrangement that integrates the tracking schemes from the individual jurisdictions. It would only be necessary for the national arrangement to integrate the cross-border flows: the internal operation of the scheme within each State or Territory could remain a ‘black box’ as far as the other participants were concerned. There should be possibilities for modifying the excisting arrangements under the NEPM to reduce costs for such a national arrangement.

It is the view of the authors that a truly national scheme integrating all States and Territories is not necessary, and that the costs of integrating individual schemes are unlikely to be justified in terms of the relatively small proportion of interstate movements of waste tyres. Certainly in the short term, until there is a better understanding of the number of tyres that are transported across State borders (both legally and illegally) it would seem unwise to commence the process of designing and implementing a national tracking scheme.

The arguments for national uniform regulation stand or fall on the value of a national approach, and these have already been discussed above.

The payments for waste tyres at the point of receival at an approved facility would have to be a national scheme if it was part of product stewardship arrangements. A uniform nationally based scheme would avoid the problem of waste tyres being sent interstate so as to attract the payment.

A national rating scheme for dealers would have advantages if, for example, the major tyre chains were targeted. Also, overall administration of the scheme by a national body would be more effective, though auditing would perhaps best be conducted at a local level.

 


63There is an incentive generated by the risk of a fine or other penalty if detected committing an offence.

64See for example Hayes and Simonovski (1996).

65Morgan (2000).