Financing Waste Management
Through ratifying the Paris Agreement, 189 countries agreed to work together to invest in a low-carbon future, lowering greenhouse gas (GHG) emissions enough to limit the average global temperature increase in this century to 2 ̊C or less. In 2016, 5% of global GHG emissions were generated by solid waste management. This is a small share of overall greenhouse emissions, but the amount of waste generated is increasing faster than population growth.
As national incomes increase, countries generate more waste. Globally, 2.01 billion tonnes of municipal solid waste are generated annually; this is expected to grow to 3.40 billion tonnes by 2050. The World Bank estimates that at least a third of this waste is not managed in an environmentally safe manner. Waste management has traditionally been funded and organized by local municipalities. These local governments do not always have the financial resources, technical expertise, or human resources capacity to do this effectively.
As well as greenhouse gasses, managing municipal solid waste presents other challenges. Improper waste management can result in clogged drains, leading to flooding and water contamination. Improperly stored waste can spread disease. When waste is burned, particles are released into the air. Pollution resulting from poor waste management impacts the health of local citizens and can decrease tourism revenue.
As the need for new and improved waste management systems grows, there is an increasing need for the private sector to become involved. Through business contracts and public-private-partnerships (PPPs), the private sector can bring new technologies, more efficient operations, and, most importantly, financing to waste management.
IFC’s Green Banking Academy (GBAC) is an online knowledge initiative designed to help financial institutions and the private sector in Europe and Central Asia (ECA) learn about green banking and build green portfolios. Waste management is a growing component of green investing. GBAC advisory services are available to help FIs understand the waste management sector, provide advice to clients in the waste management business, and develop new investment tools related to waste management.
“Without good solid waste management, you can’t build a sustainable and livable city.”
Former Senior Director, World Bank’s Social, Urban, Rural and Resilience Global Practice
The Basics of Waste
Waste management includes many types of waste. Municipal solid waste (MSW) is generated by households and other sources such as businesses, offices, and public institutions. Consumer-generated e-waste, disposed electric or electronic devices, is a rapidly growing component of municipal solid waste. Municipal solid waste is managed by or on behalf of municipal authorities.
Waste from industrial, agricultural, construction, or demolition sources is usually handled through separate channels, and the volume of waste generated from these sources varies by location. Globally, the World Bank estimates that agricultural waste production is 4.5 times that of municipal solid waste. Agricultural waste is typically managed outside of the municipal system as it may be used as an input in another activity.
COVID-19 increased waste generation, particularly in the areas of medical, hazardous, and pharmaceutical waste. COVID-19 also changed the distribution of waste production, from industrial and commercial areas to residential areas while people stayed home. An increase in the use of single-use plastic has also been noted, as people continue to dispose of personal protective equipment (PPE), disinfectant bottles, and sanitizer containers.
While there are investment opportunities in all types of waste management, the remainder of this discussion deals with municipal solid waste management. There are opportunities in all areas of MSW. The process generally involves six stages.
- Waste generation. Consumers and households need to dispose of waste.
- Primary collection. Municipal authorities or contracted companies collect waste from households.
- Secondary collection. Waste is taken from local dumpsters and depos to transfer stations.
- Transfer station management. At transfer stations, waste is consolidated and partially sorted for further transport.
- Recycling and treatment. Waste is sorted for recycling and treated where possible.
- Waste that cannot be treated or recycled is taken to a landfill for disposal.
Waste and Income Levels
The composition of solid waste is affected by income level. In low-income countries, over half of the waste generated is food and green waste, with plastic making up only 6% of the total. In high-income countries, food and green waste make up less than a third of the total, with plastic making up 13% of solid waste. Waste is also managed differently according to income levels. In low-income countries, over 90% of waste is often openly dumped and burned. When this occurs, an informal waste management sector may develop, as people earn money through recycling. In developing countries, 1 percent of the urban population survive in this manner.
The majority of the costs of effective solid waste management come from labor and transportation. In low-income countries, costs may be $35/tonne and higher. Because waste is managed more aggressively and safely in high-income countries, costs are significantly higher, at an estimated $100/tonne.
In Europe and Central Asia, about 31% of solid waste materials are recovered through recycling and composting. Overall, one-quarter of waste is taken to some type of landfill. There is significant room for improvement, as much as three-quarters of waste in the region could be recycled or recovered through more efficient management. As compared with other regions, some of the fastest growth in waste management systems is taking place in Europe and Central Asia.
“Recycling the rapidly growing volume of waste to eliminate permanent harm to the environment is crucial to minimize damage to our fragile ecosystems, water bodies, and air quality.”
IFC’s Regional Vice President for the Middle East, Central Asia, Türkiye, Afghanistan, and Pakistan
Sustainable Waste Management
There are many ways to manage waste. A hierarchy of methods has been developed to increase the sustainability of MSW management. Putting this hierarchy into practice lowers the volume of waste that must be disposed of in a landfill. In this hierarchy:
- Waste prevention is prioritized. Consumers are encouraged to purchase fewer products. Manufacturers are encouraged to develop packaging and products that minimize waste.
- Reuse is encouraged. Using products more than once is prioritized over recycling.
- Recycling allows waste products to be diverted from landfills and used in another form.
- Recovery is prioritized where waste cannot be recycled. Recovery includes waste-to-energy processes such as composting, incineration, and anaerobic digestion. Recycling and recovery both support the “circular economy”, where products are used and re-used, to prevent or decrease the amount of mining or production needed to produce new inputs.
- Disposal, typically in landfills, occurs only when all other methods have been considered and rejected.
Technical developments are improving waste management throughout this hierarchy. Digital solutions can improve consumer purchasing decisions, municipal collection logistics, and sorting methods. New technology in waste collection and transportation includes smart waste bins, robotic sorters, and self-driving transport trucks. Several new methods of recycling are in development. For example, a process that uses chemicals to recycle polyester could soon be commercialized. A project funded by the EU is researching a way to recycle tires at the end of their lifespan so they can be used by manufacturers as a complete substitute for virgin rubber.
“There is no such thing as garbage. Just useful stuff in the wrong place.”
Author and foresight consultant
Converting Waste to Energy
Even when the hierarchy of sustainable waste management is well implemented, some solid waste must be diverted to landfills. This can be greatly reduced through the use of waste-to-energy plants. Once recyclable waste is sorted out of MSW, waste-to-energy facilities burn the remaining waste to produce steam, electricity, or hot water, which can be used to reduce reliance on fossil fuels. After waste is burned, metals and minerals can be recovered from the bottom ash, then recycled or re-used as raw material. Overall, waste-to-energy plants can reduce waste volume by about 90% while also providing valuable byproducts. The waste-to-energy sector is highly regulated and monitored to ensure a minimal environmental impact.
In France, a Combined Heat and Power (CHP) waste-to-energy plant operated by SUEZ Group produces energy for 17,700 households and also sends enough steam to nearby greenhouses to produce 6,000 tonnes of tomatoes over 10 hectares annually. As well as reducing the volume of waste in landfills, the Econotre eco-centre avoids the emissions of 6,000 tonnes of CO2 annually.
“Waste-to-Energy goes hand in hand with high-quality recycling. It is an essential and complementary part of a sustainable circular economy and an indispensable part of the solution to waste management.”
Financing Waste Management
Revenues from waste management solutions come from user fees, government subsidies or grants, and the sale of residuals recovered from waste. The private sector can contract with governments to deliver services, or develop public-private partnerships (PPPs) with municipalities responsible for waste management.
The private sector can bring many benefits to the solid waste management sector. Often, the private sector can operate more efficiently than the public sector. The private sector may have expertise with new technology, especially waste-to-energy projects. And most importantly, the private sector can bring financing to the sector.
One successful, large-scale PPP waste management project in the private sector was developed in Serbia in 2019. Beo Čista Energija, a consortium including the French utility company SUEZ, a Japanese conglomerate, and a European equity group formed to make the Vinča landfill more efficient. Before this project, the Vinča landfill was the size of 185 European football fields. With private investment of 373 million Euros, a new combined heat and power facility was built. IFC and the Multilateral Investment Guarantee Agency (MIGA) provided financing and guarantees to this project. Waste that had been stored in the dump will be converted into heat and electricity, and Belgrade will decrease its CO2 emissions by 250,000 tonnes annually.
“This model can be replicated in other emerging countries, in big cities, having the same kind of dumpsite without any treatment.”
Country manager for SUEZ in Serbia and a Managing Director of Beo Čista Energija
IFC’s Work in Waste Management
IFC has expertise and experience in this area. IFC staff are familiar with both the technical and financial aspects of the waste management sector and are ready to help FIs learn more about waste management or analyze potential projects. More information about the basics of waste management can be found in the World Bank Group’s recent publication “What a Waste 2.0: A Global Snapshot of Solid Waste Management to 2050.”
“By 2050, waste production will be 73 percent higher than it was in 2020.”
Start Your Green Journey
For more information about the IFC ECA Green Banking Academy or to schedule further training sessions to discuss waste management financing opportunities in more depth, please email firstname.lastname@example.org to contact a member of our team. We are looking forward to working with you. Stay green!