European Investment Bank (EIB)

EIB financing of EU municipal waste management projects


Source: European Investment Bank (EIB)

Within the last 8 years period (2000-2007), the EIB signed loans of around EUR 1,5 billion dedicated to investments in municipal waste management facilities. Nearly EUR 1 billion of the signed amount involves incineration. This represents some 0. 3% of total signed loans of EIB during that period. The projects are located mainly in EU-15, notably FR, DK, IT, NL, UK and often involve efficient combined heat and power plants. The average loan size amounts to ~ EUR 45 million and targets mainly medium sized cities.

EIB Financing of waste management facilities is eligible under Art. 267c) of the Treaty. As part of EU environmental policy, promoting sustainable use of natural resources and managing waste is a common interest shared by all Member States. Improving waste management facilities is part of the Environment Action Programmes of the Community and is reflected in particular in Sixth Environment Action Programme (6th EAP). In convergence regions, such investments additionally strengthens regional competitiveness through basic infrastructure potential.

Municipal Waste incinerators are also eligible under energy considerations along two dimensions;

EU legislation considers the biodegradable fraction of municipal waste (in general ~50% of the input) as a renewable energy source and its incineration can thus partly contribute to tackling climate change. Further, the non-renewable portion of municipal waste may in some regions contribute to security of energy supply.
Municipal waste incineration can involve combined power and heat, which is line with the EU’s directive on promotion of cogeneration, and contributing to the goal of enhanced energy efficiency. Several of the waste incineration projects financed by the Bank generate power and heat.

Legislative framework
Investments in waste management facilities have to comply with a vast array of complex EU directives, of which the Waste Framework Directive (WFD) lays down requirements for all types of waste unless they are specifically regulated by other directives. The WFD in particular requires Member States and their competent authorities to draw up one or more waste management plans (national, regional, local) in accordance with relevant EU directives. As such, waste management planning has become a permanent element in public planning efforts in all EU Member States and is subject to public consultation procedures.

Waste management plans have to consider the EU principles of waste management, which are prevention, precaution, proximity and the polluter pays principle. In addition, the plans need to consider the “waste hierarchy” which gives highest priority to prevention, followed by recovery, and finally disposal. These hierarchical steps are not exclusive, but depend on each other, linked by physical-chemical characteristics of waste streams.

Incineration plants financed by the Bank are always part of such waste management plans. Projects financed by the Bank have thus undergone an in-depth strategic analysis by the corresponding authorities, including public consultation considering the prioritisation of waste management options. If a waste management plan includes the development of incineration capacity, this decision should not crowd out other investments upstream in the waste hierarchy. All waste projects to be financed by the Bank are carefully screened in the context of their waste management plans. They are also subject to due diligence carried out with respect to relevant EU Directives. In particular, waste plants are also covered by the EIA Directive, and where an EIA is required, EIB requires it be completed to the satisfaction of the Bank before financing of a project is released. Plants may also be conditioned by the requirements of other cross cutting legislation such as the Habitats and Birds Directive.

Waste hierarchy
Facilities at the top of the waste hierarchy, such as prevention, separate collection, sorting, recycling and composting are less capital intensive than those downstream. They are in a number of cases financed by EU grants (e.g. ERDF, Cohesion Fund). Complemented by appropriate awareness campaigns these grant-financed waste management infrastructures will assist the relevant authorities to achieve recycling targets as set out in EU directives. Grant-financed schemes are in some cases co-financed by an EIB loan to balance the financial structure. One benefit of such grants is to lower the rate of the cost recovery tariffs, in part reflecting the public good characteristics of waste management activities.

Capital intensive waste management facilities
The increasing complexity of waste issues and the standards set by EU directives entail increased requirements in terms of the suitability of treatment plants. In many cases, this means larger and more complex plants for waste treatment, which involves the co-operation of several regional units on the establishment and operation of the plants. In order to enjoy the benefits of large-scale operation covering a larger region, the service is often provided by either inter-municipal units or by private enterprises. This makes sense, especially for waste streams or waste treatment methods requiring expensive large-scale equipment, e.g. incineration plants. Capital intensive infrastructure projects by their nature require significant outside finance, which the EIB can provide directly to project promoters, be they public or private, beside the Bank’s support of smaller upstream sector investments through other mechanisms (e.g. global loans, co-financing).

Environmental aspects of waste incinerators
Incinerators are often accused of being highly polluting to the environment. However, as proper management of waste is an important EU priority, and the EU rightly expects high standards to be met today’s waste management facilities have to comply with the requirements of the IPPC (Integrated Pollution Prevention and Control) Directive and notably the associated Best Available Technologies (BAT) requirements. The Bank role in this sector is thus also to encourage promoters to apply as a minimum, the adoption of the best approaches. In conjunction with the strict emission limits of the Incineration Directive and tougher air quality standards in general, highly sophisticated air pollution abatement systems have been developed; for instance, toxic components can be bound into solid residues (ash) eliminating the risk that these toxic components might leach into the environment.

Future developments
Work on the revision of the Waste Directive started in 2006 and is being carefully followed by the Bank. However, EIB’s approach in this sector already anticipates most of the proposed changes, in particular by fostering high levels of energy efficiency, and clearly recognising the benefits of resource recovery as opposed to final disposal.

The development and preparation of a new lending policy concerning the municipal solid waste management sector is part of the Bank’s Corporate Operational Plan (COP) and will be announced in due course. This lending policy will address measures to support investments in the sector, as well as measures to promote waste avoidance in other sectors/investments financed by the EIB.

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