June 2011 Waste LOP Cities

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The Economics of Harnessing Waste

Discussion with delegation from South Africa

July 2011

CONFIDENTIAL AND PROPRIETARYAny use of this material without specific permission of McKinsey & Company is strictly prohibited





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The Economics of Harnessing Waste – Executive Summary

Why harnessing waste? About 10 mio tons of waste are generated per day. 70% of the waste exit the economy intolandfill, leading to leakage of energy, mass and labor out of our economic system. In addition solid waste managementconsumes up to 50% of the budget of municipalities. At the same time resource prices are souring, while improvements intechnology, consumer preferences and public awareness improve the economics of collecting, sorting and recycling.

Why this initiative? Therefore we are convinced that we are at the verge of a fundamental shift in the way that economieswill treat waste and resource productivity. Together with a consortium of different players along the material chain fromproducers of products, retailers, waste management operators, technology providers, design and research institution as wellas municipalities we are working on establishing a unique database and decision support tools, based on these we arebuilding a comprehensive framework to quantify and evaluate different strategies to improve resource productivity.

What does the initiative deliver? The work will focus on four main levers:▪ Shifting from convenience to value – analyze which resources in the current waste stream should be extracted due to

strategic criticality and economic attractiveness (e.g., rare earths) rather than ease of collection and sorting only (e.g.,glass, paper)

▪ Improving efficiency along the waste stream – identifying economically most efficient treatment options to maintaincritical resources in the economic loop and reduce total cost of the waste management

▪ Cradle to cradle transformation – Improvements in design, production processes and logistics systems cansignificantly improve the reuse of components rather than recyclates, which will further reduce the leakage of labor, massand energy

▪ Making it happen – While the economics indicate many self-funding options exist to improve overall efficiency, cross-industry collaboration will be critical to close more loops and regulatory incentivation might be required to fast track scaleand learning curve effects

Why is this unique? Yes, there many obvious opportunities for improving resource productivity to reduce costs, andimprove top-line and investment performance, and some of these are already pursued by innovative institutions, butconsistent tools and superior databases are required – the fundamental assessment of the material economics will createthe foundation for shaping and benefiting from the new area of resource productivity

Why McKinsey? McKinsey & Company has a track record in facilitating the development of such cross-industry agendas

(e.g. climate change, water productivity). We now invite leading and innovative institutions to strengthen our existingconsortium to develop a distinctive and integrated perspective on the future business opportunities in harnessing waste


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Waste generation and its disposal is an increasingly intractable problemglobally and is expected to worsen in the next decades

Source: EPA; UNEP; Financial Times; The Guardian; “The Chinese economy: fighting inflation, deepening reforms”; McKinsey analysisPhoto credits: Alex Hofford/EPA; Alex Brandon/AP

Globally

▪The world generates ~10 million tons of waste per day, nearly 70% of which goesdirectly to landfill destroying economic value and causing environmental damage

▪ The global waste market was around EUR 140bn in 2008

– About 80% in services/ops; in low-income countries collection alone drains 80‐

90% of total waste management budget

– OECD: EUR 90bnMSW market

– Developing countries: 20 50% of recurring municipal budget spent on solid‐

waste management while only 50% of urban population is covered

▪ In the short term, the MSW market keeps growing strongly (8% cagr over 2007-11)

▪ Across the globe, waste volume growth should be at least partially decoupled fromGDP growth by 2025

4

+2%

2025

130

2010

100

Mexico

+3%

2025

750

2010

500

China

+2%

250

2025

350

2010India



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Non-optimized waste disposal leads to 5 types of problems,principally related to landfills

Economic valuedestruction

Environment

Public healthSocial

afflictions

Informal/illegaleconomic

activity

▪ Methane emissionsgenerated in landfills

▪ Leachates percolatinginto aquifers

▪ Contamination of soiland water bodies

▪ Stomach and lungrelated diseasescaused by improper waste disposal

▪ Criminal associationsof informal networksinvolved in the wastecollection anddisposal

▪ A high percentage of

the value chain is nottaxed

▪ Limited capacity of informal networks tomaximize valueextraction

▪ Poorest sections of society depend onwaste and scavengingfor survival

▪ Entire families work inmiserable conditions

▪ Expanding cities haveno space for landfills

▪ Communities do notwant landfills near them since this lowersquality of life andproperty prices

▪ Improper management of thewaste value chaindoes not allow for maximum valueextraction

5



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The time is right to define a new economic model for solid wasteDrivers

Waste taking centrestage in climatedebate

▪ Global emissions from solid waste landfilling amounting to 750Mt CO2e per year in 2005; growing by 0.9% annually

▪ New focus on waste-driven emissions along all product value chains (waste avoidance resulting in less emissions fromthe extracting, transporting, and processing of raw materials)

▪ Waste sector with potential to eliminate its greenhouse gas emissions completely (60% through recycling), on averageat a negative cost

New technologieschanging the game

▪ Relatively new technologies such as mechanical-biological (pre-)treatment (MBT), biomethanation, pyrolisis, andautoclaving (for bio-hazardous waste) changing economics of waste management

▪ Maturing operating concepts, for example around collection and recycling, taking hold across the globe

Demographics-drivengrowth in wastevolumes

▪ 3 billion people entering income brackets with growing waste intensity

▪ Urbanization amplifying personal consumption and waste generation

Growing pressure onlandfill utilization

▪ Exhaustion of mandated landfill capacity (e.g., UK by 2018, Beijing by 2014)▪ Efforts to phase out landfills and illegal littering (e.g., EU Member States restricted to landfilling a maximum of 50%

of the weight of biodegradable municipal waste produced in 1995)

Waste becoming avaluable resource

▪ Surge in commodity and energy markets likely to support much higher reuse/recovery rates (e.g., iron ore quality downto 63% from 65% in 10 y time; more gold in a ton of e-waste than in a ton of gold-bearing rock; Japanese scrap ironprice up by 50% over 3-year period; global potential of energy generation from waste agricultural biomass 50bn toe)

▪ Significant pipeline of investments (e.g., £700 million as PFI credits *for UK municipalities in 2010/11)

Shifting and more

complex economics

▪ Profitability gaining importance: Western European markets maturing quickly and EU legislation on waste transportgiving access to overcapacity in Northern Europe

▪ Recycling programs multiplying fractions reduced in size, requiring strategic and operational adjustments

▪ Compliance requiring cash-strapped municipalities to purchase waste services, providing new opportunities for wastemanagement companies and investors

▪ Increasingly volatile markets requiring ability to play commodity game and better contract design

▪ Favorable economics of distributed solutions (e.g., rural biogas digesters)

Stronger mandate for waste avoidance atsource

▪ European Extended Producer Responsibility regulation for packaging leading to development of 33cl drinks cans with55% less weight and glass bottles that are 66% lighter

▪ Amazon already selling 143 e-books for every 100 hardcover books – a trend that is growing

▪ Design for the Environment programs (EPA, EU, etc) including material reduction guidelines and research funding

*Grant to support a Private Finance Initiative (PFI) with the private sector making capital investments

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Why waste and its management deserves your attention

You can improve your performance on typical city management KPIs byimproving waste management and resource productivity

A considerableamount of your resources arespent on waste

managementThe share of municipalbudgets spent onwastemanagement istypically around5-15 percent

GDP ▪ Recycling and remanufacturing offer higher value add thancollection and land filling

Job creation▪ Recycling is more labor-intensive than landfilling▪ Bringing larger section of population under municipal waste

collection will offer employment to unskilled labor

Stability ▪ Reduced dumping and landfills improve incidence of diseases, odors and related insects and animals

▪ Sound waste management plans minimize disturbance toneighborhoods and inhabitants

Energyefficiency

▪ Recycling reduces dependence on virgin materialsproduction; virgin material production is generally more

energy intensive

GHG reduction▪ Landfill avoidance for organic waste reduces GHG

emissions▪ Using recycled material in the production process usually

saves significant energy and associated greenhouse gases

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Topics for today’s discussion

▪ Why waste is increasingly important part of sustainable development

▪ What city authorities must do to optimize their

waste system

▪ Why our project is an opportunity for you toefficiently learn how to capture the wasteopportunity

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Evaluate and chooseoptions for new waste

2B

Develop collectionand sorting methods to

support options

2C

STEP 1:

Assess city

Assesscurrent MSWsystem

1

STEP 2:

Understand, choose, and evaluate options

STEP 3:

Implement new system

Focus of section

Evaluate andchoose optionsfor existingwaste

2A

Your city can create an integrated waste management systemby following three steps

Develop financingsolutions

3A

Engage stakeholder groups

3B

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The more you know about your current situation,the stronger your solutions are

Rationale for assessmentDimension

▪ Tailoring sectoral policies▪ Assessing need for

regional/national policies

B Generators

▪ Understanding performance of existing infrastructure (in terms of collection coverage, greenhousegas emissions, societal concerns)

▪ Identifying improvement potential

C Current treatment

A Volume and composition ▪ Identify largest problem zones▪ Choosing treatment options that

extract maximum value▪ Prioritize waste

fractions that havehighest impactacross the valuechain

▪ Prioritize actionamong the largestgenerators

▪ Tackle lack of coverage,excessiveenvironmentaleffects, and over-/underspending▪ Assessing financial performance of

waste management system in order to better control wastemanagement improvements

D Current cost

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11Source: MCM Consultores; IBGE

New waste in landfillWaste in existing open landfillWaste in existing closed landfill

What are current and future waste volumes in your city?

06 10 14 18 22 26

0

30

60

90

Municipal solid wasteMillion tons

Rio will produce about 65-80 million tons of waste over the next 20 years

N

ew

wast e

Existing

waste

Waste in existinglandfill

Year

New landfill and other waste managementinitiatives

RIO EXAMPLEA

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Who are the biggest generators?

SOURCE: State of California – Targeted State-wide Waste Characterization Study

California gathered detailed info on its generators …2006, Percentage by weight, pounds per employee

… and was therefore able to tailor its commercial waste programs

▪ E.g., Food stores are typically verylarge waste producers but already

recycle/compost 70 percent of thewaste they generate

▪ Offices currently recycle less than10% of their waste and offer therefore a good segment for atargeted program – CalRecycle hasmade resources available toeducate office managers on waste

avoidance, paper and packagingrecycling programs, purchasingguidelines, etc.

CALIFORNIA EXAMPLEB

5

6

3

3

4

4

4

2

3

2

2

2

2

12

3

5

4

2

2

1

2

1

2

1

0

Public Venues and Events2

5

Large Hotels 5

Full-Service Restaurants 6

Fast-Food Restaurants

4

Retail, Other Stores 4

Building Material & Gardening, Other Stores 5

Durable Wholesale Distributors

00

Large Office Buildings1 20

Other Stores at Shopping Malls1 20

Anchor Stores at Shopping Malls1

7

Non-Durable Wholesale Distributors 7

Retail, Big Box Stores 8

Building Material & Gardening, Big Box Stores 9

Food Stores 17

Recycled, composted

Incinerated, Landfilled

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.8%



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.8%

Population: 8.7 million

Area: 16,847 km2

Total MSW generated daily:6,856 t/day (2010)

Composition of waste: ▪ Organic: 57%▪ Paper: 15%▪ Plastic: 3%▪ Glass: 8%▪ Metal: 3%▪ Textile fiber: 2%

▪ Wood timber: 2%▪ Ash: 4%

Weather: Humid subtropical

Landfill design: Sanitary landfill

Lv Neng450 t/day

Hangzhou

Neng Da800 t/day

Generation Collection Sorting Landfill Incineration

TianzilingPhase I

Landfill closed in

2007 2

Waste management system map Key Hangzhou statistics

1 collectioncontractor

Trucks: 350 (including 54trucks are for

source-

separated MSW 1 )

Tricycles: 1,500

Waste collected

everyday

Starting 2010,there is no

MSW transfer

station in

Hangzhou city

Evaluating current MSW system design and key statistics are necessary to understanding potential interventions, calculatingthe economics, and emission reduction potential of different options to reduce greenhouse gas emissions

TianzilingPhase II

Sorting Landfill (2,328

t/day)

Yu HangJin Jiang800 t/day

Xiao ShanJin Jiang

800 t/day

1 MSW pre-sorting program started in 2009 in 100 communities; usess MSW bags in different colors to identify organic, recycable, dangerous and other 2 Tianziling Landfill Phase I was closed in 2007 when it reached capacity. Between 1991 and 2007 9 million tons of MSW were landfilled in Tianziling Phase I

SOURCE: Hangzhou Environment Report (2010); Zhang et.al, Municipal solid waste management in China: Status,problems and challenges (2010); Zhejiang Statistic Yearbook; Press search; SRP analysis

What does the MSW system look like today? HANGZHOU EXAMPLEC

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C

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TitleUnit of measure

14

What are your financial costs?

SOURCE: UN Habitat

D

Know your system

costs

Understand the costof each activity

Be comprehensive

How?

▪ Aggregate all costs incurred for

the waste management system

▪ Practice activity-based costing

▪ Look at all operating costs, not

only regular cash expenditures▪ Understand the full cost impact

of investments made toimprove the service

▪ Provides transparency and

accountability and helpsplanning future investments

▪ Helps identify expensiveactivities and decide on cost-cutting and resource allocation

▪ Avoids surprises down the road

when full effect of systemchanges kicks in

Why?

Managua (Nicaragua)example

▪ From: only budgeting and reporting the costs designated to the PublicCleansing department at the central municipal level

▪ To: accounting for fuel purchases by a central depot; spare parts and tirespurchased by the procurement unit, protective clothing procured by HR,repairs done by a central municipal workshop, and sweeping and illegaldumping clean-up activities within the municipal district offices

▪ Costs were underestimated by more than 50 percent

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Start measuring the performance of your waste management

Possible performance metrics

Provide adequate

capacity

▪ System must process 12,500 tons of waste per day▪ 90% of the daily organic waste stream needs to be composted

▪ All saleable recyclables must be recycled

Goals

Reduce greenhouse gasemissions

▪ Reduce greenhouse gas emissions from landfill by at least 90% by2010

▪ Reduce waste to landfill by at least 30% by 2012

Minimize social impact ▪ Contractor must maintain the same labor level as it currently existsin sorting and collection

▪ Contractor must offer workers basic healthcare on par withgovernment employees

Allow city to share in

unexpected surplus

▪ Profits in excess of 15% IRR for contractor shall be returned to the

government

Minimize NIMBY effects ▪ Contractor must conduct ambience surveys (e.g., level of smell,noise, traffic) of neighboring residents; results of the surveys willdetermine level of ambience bonus paid to the contractor

ILLUSTRATIVE

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2B

Develop collectionand sorting methods tosupport options

2C

STEP 1:

Assess city


1

STEP 2:


STEP 3:


Focus of section


2A



3A


3B

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Landfill generates methane . . .

▪ Waste in landfill

typically beginsgenerating gas after 6 months, 50% of which is methane

▪ Amount of methanedepends on: – Waste volume – Organic content – Moisture level

– Weather – Landfill design

. . . which is collected . . .

▪ Vertical or horizontalwells in landfillcollect gas and sendit to collectionheader

▪ Operator canmonitor and adjustgas flow

Flare

Generateelectricity

Direct gasuse

A

Description Revenue sources

▪ Carbon credits

▪ Recovered methane iscompressed and sent toan internal combustionengine or gas turbine

▪ Electricity generated andtransferred to power grid

▪ Sale of electricity▪ Carbon credits

▪ Recovered methane iscompressed and cleanedbefore being piped directlyto captive player

▪ Sale of gas

▪ Carbon credits

▪ Recovered gas ignitedin candle (open) or shrouded flare

. . . and can be used in three primary ways

B

C

The climate change impact of existing waste sitting in landfills can begreatly reduced

SOURCE: US EPA

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EBIT Margin ¢/ton waste

Price output2 ¢/ton waste

Carbon credit3 ¢/ton waste

Full cost1 ¢/ton waste

Flare

A

Generateelectricity4

B

Direct gas

use4

C

Annual cost assumptions for 1,500,000 tons of Waste in Place (WIP)

22360-14

3642

38-32

36

57

40-19

Unlevered IRR Percent

23

16

51

Direct gas use is the most profitable option for larger landfills RIO EXAMPLE

1 Full cost includes O&M costs and capital expenditure. Does not include depreciation2 Assuming 6.5¢/kWh for electricity generation and $5/MMBtu for direct gas use3 Assuming a ton of WIP emits 0.032 tCO2e per year for 30 years and all technologies capture the same amount of methane; Carbon credit of

$12/tCO2e4 Includes collection and flaring costs

SOURCE: EPA; UNFCCC

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2B


2C

STEP 1:

Assess city


1

STEP 2:


STEP 3:


Focus of section


2A



3A


3B

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A it i it MSW t b t i th d i t



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Recycling

▪ Recycle raw materials (e.g., metals, paper) for use as inputs in new

production

Composting andanaerobicdigestion

▪ Produce compost through biological process where organic wastebiodegrades

▪ Anaerobic digestion obtains methane through a process wheremicroorganisms break down biodegradable material in the absenceof oxygen

High-priority options

Conventional

incineration

▪ Burn waste to generate electricity through a steam turbine

Gasification

▪ Turn waste into electricity-producing gas by reacting the waste athigh temperatures with a controlled amount of oxygen

Waster-to-Energyoptions

A city can improve its MSW system by capturing methane, reducing waste,and exploring landfill alternatives

A

B

C

D

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A Th 3 b d t f ti



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▪ Regularly turned elongatedorganic waste pile, triangular incross section

▪ Windrows are turned usingspecialized turning machinesto increase porosity,redistribute material, and breakup clumps

▪ Forced aeration can also beused

Options Description Key perspectives

▪ Scalable solution withmedium capital cost

▪ Most tested and commonly

used compostingtechnology

▪ Suitable for municipalitieswith large amounts of usable land

Source: Cornell University; EPA

A There are 3 broad types of composting

Windrow

▪ In-vessel systems are enclosedtechnologies where air flow andtemperature can be controlled(e.g., vertical reactor, horizontalreactor, and rotation drum)

▪ Relatively noveltechnology

▪ Faster but more risky andcapital intensive

▪ Suitable for municipalitieswith limited amounts of usable land, and largewaste budgets

In-vessel

Gore-covered

▪ Gore cover system leverages cover and forced aeration to control thetemperature and moisture of thedecomposition process

▪ Provides in-vessel-like compostingwithout the need for buildings,boxes, or bins

▪ Claims to require no odor treatment

▪ Novel▪ A lower cost alternativeto in-vessel options

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Anaerobic digestion speeds up decomposition and reduces spaceA



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▪ Anaerobic digestion produces enough methane to operate the process with potentialexcess gas for sale

▪ Though anaerobic digestion has higher up-front costs, it reduces land requirementsdownstream, making this option especially attractive for land constrained municipalities

Source: Cornell University; EPA; Tchobanoglous

Methane can be captured andused to operate the process or sold as natural gasFacultative bacteria breaks down

organic materials in theabsence of oxygen and producemethane and carbon dioxide

Output still needs to go throughthe composting process beforebecoming marketable fertilizer,but, the process takessignificantly less time andspace, due to 50-70%reduction in waste volume

during the anaerobic digestionprocess

Organicfraction of MSW

Mixer

Blend tank

High-solidsanaerobicdigester

Plug flow reactor

Aerobiccomposter

Aerobic reactor

Soil amendment

Humus

Thermal energy

Biogas

Air

Anaerobic digestion speeds up decomposition and reduces spacerequirements of composting

A

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Sale of compost carbon credits and potential for waste diversionA



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23Source: Cornell University; EPA

Revenue sources for all technologies

Additional revenue for anaerobic digestion

▪ Demand for compost is determined by – Quality of the compost in comparison to alternatives

– Quantity supply of compost – Price and availability of alternative (e.g., nitrogen fertilizer)

Composting

▪ Methodology (AM0025) exists for composting and anaerobic digestion togenerate carbon credits

▪ The methodology is relatively novel and unproven▪ As the methodology matures, it could become an important revenue stream

for composting operators

Carbon creditsfrom landfillgas prevention

▪ Composting diverts organic waste from landfill, freeing up capacity andextending life of the facility

▪ Excess landfill capacity can be sold to alternative municipality to generateadditional revenue

▪ Ability to capture revenues from waste diversion will depend on who controlsthe landfill, tipping fees, and how tipping fees are determined

Wastediversion

▪ In anaerobic digestion, methane can be captured to power the operation withexcess sold as gas/electricity

▪ A second carbon credit may be available for renewable energy

Methane andcarbon creditsfor renewableenergy

Sale of compost, carbon credits, and potential for waste diversiondrive composting revenue

A

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Two factors drive recycling economics and emissions reductionB



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Paper

Metal

Plastic

Glass

▪ Residential andcommercialwaste isgenerated, pre-sorted andcollected

▪ Waste is sorted

at a transfer center or MaterialsRecoveryFacility (MRF)

Collection and sorting

Collection and sorting methodsdetermine recovery rates andcosts

Different manufacturingfacilities, e.g., paper mills,glass manufacturers, metalpreparing converters

End

product

Market priceDemand for recyclablematerials determined bycost of using recycledmaterials compared withvirgin materials

Two factors drive recycling economics and emissions reductionB

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Factors driving incineration decision making

C



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Factors driving incineration decision-makingC

▪ Costs:

– Include waste separation,capital costs, labor andinvestment in pollution-controlequipment

– If average annual caloric valueof waste is < 7,000 BTU/lb,waste must be supplementedwith fuel to produce electricity

and gas

▪ Revenues: – Electricity generation: Ability to

sell to local power grid or captive end-user

– Heating/cooling: Ability to sellto captive end-user

– Diversion from landfill: Ability to

sell excess landfill capacity

Economics

▪ Burning waste to eliminatewaste, produce energy, andproduce ash

▪ Three incinerationtechnologies:

– Mass burn – Fluidized bed – Modular

Incineration process

Impact

▪ Solid waste volume reduced as much as 90%

▪ Solid waste weight reduced as much as 75%

▪ Bottom and fly ash iscollected and landfilled ashzardous waste

SOURCE: EPA; United Nations Environment Programme, World Bank; EPA

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Incineration reduces waste weight and methane emissionsC



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25%

Waste

100% of weight

Non-incinerable▪ Hazardous

waste▪ Construction

waste▪ Liquids▪ Metal▪ Glass

Incinerator

▪ Three types of incinerators: – Mass burn – Modular – Fluidized bed

Heat fromcombustion

75% of weight

▪ Heating/coolingSteam used for

heating or cooling

▪ Electricity Steamused to run turbine,generating electricity

Toxic waste▪ Bottom ash (toxic, captured

at bottom of incinerator)▪ Fly ash (very toxic, captured

by filtration system)

Landfill▪ Ash ideally disposed of in

special section of landfill▪ Ash monofill can be used

Incineration cutsmethane emissions

by 66% byeliminating30-year emissionlifecycle of waste

Incineration reduces waste weight and methane emissionsC

SOURCE: United Nations Environment Programme; World Bank; EPA

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Toxic incinerator ashes must be controlled

C



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27SOURCE: EPA; United Nations Environment Programme; World Bank; EPA

Toxic incinerator ashes must be controlled

Air pollution control equipment can remove up to:▪ 99% of dioxins and furans▪ 99% of heavy metals, particulate matter and hydrogen chloride▪ 90% of sulfur dioxide▪ 65% of nitrogen oxides

About 25% of total waste volumeremains as two types of toxic ash . . .

▪ 75-85% of total ash withconcentrations of mercury,cadmium, lead and other toxins

. . . which ends up in hazardous landfills and filters

▪ Collects at base of incinerator

▪ Must be landfilled, typically in a hazardous landfill or an ash-only “monofill”

Bottom ash

▪ 15-25% of total ash withconcentrations of mercury,

cadmium, lead, chromium,arsenic, selenium and other toxins

Fly ash

▪ Captured from flue gas by air-pollution control system through – Fabric filters: Cylindrical bags, or “baghouses,” that filter

emissions – Electrostatic precipitators: Draw charged particles tooppositely charged collection plates

– Scrubbers: Neutralize acids using alkaline▪ May be recyclable, most often as aggregate in concrete

C

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The caloric value of waste determines combustibilityC



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`

The caloric value of waste determines combustibility

… and composition of waste type differs by regionEnergy content differs by waste type

0

0

Metal

Glass

Other 1,000

Food 1,800

Yard 4,200

Paper 7,700

Plastic 17,000

Waste energy contentBTU per pound

Solid waste composition100%

▪ If average annual caloric value of waste is less than 7,000 BTU per pound, incinerators must besupplemented with fuel, driving up costs

▪ As population becomes wealthier, the average caloric value of waste stream increases because organics asa percent of total waste decline and paper (packaging) as a percent of total waste increases

▪ Fluidized-bed incineration requires less combustible waste such as paper and wood

50 52

1625

12

1519

26

35

35

6

9

11

3

20

Scotland

12

7

30

Rio

101 3

15

China

10

33

19

Paper

Plastic

Metal

Glass

Other*

USA

11

8

5

Food

29

Europe

1 Yard waste included in other category

SOURCE: World Bank; EPA; Dresden University; SLR

C

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Gasification may be cost competitive with conventional PRELIMINARY

D



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Gasification may be cost competitive with conventionalincineration, but is less proven at commercial scale

Economics and annual emissions prevented per ton of

waste for advanced and conventional technologies

2

67

85

Gasification

Incineration

(mass burner)1

0.9

0.6

EmissionspreventedtCO2e

Tipping fees re-quired for 15% IRR3

USD

1 Incineration creates other pollutants and may be difficult to implement due to public perception. Gasification technology is not yet proven on alarge scale

2 Based on city with 9,000 tons of waste and no sorting, carbon credit is $12/ton, all capex amortized over 20-year project life3 IRR from the cities’ perspective

SOURCE: McKinsey

ESTIMATESD

▪ Advanced technologiesare economicalcompared toconventionalincineration

▪ Lack of commercial-scale experience for gasification maylimit use

▪ Economics depend onwell-sorted incomingstream, high marginalcost of landfill, and

environmental credits

TRACKER

F f ti Your city can create an integrated waste management system



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30


2B


2C

STEP 1:

Assess city


1

STEP 2:


STEP 3:


Focus of section


2A

y g g yby following three steps


3A


3B

TRACKER

Waste separation can occur at two locations



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31

▪ Waste may be sortedby households beforecollection

▪ Sorting beforecollection reduceswaste contamination,

increasing therecovery rate

▪ Priority is to separatedry recyclables fromorganic waste

▪ Waste may be sortedafter collection at atransfer center such as aMaterials RecoveryFacility (MRF)

▪ MRFs range in

complexity from manualhand-sorting toautomated systems suchas magnets, trommelscreens and wetseparators

Before collection

Waste generation Collection

Landfill

MaterialsRecoveryFacility

After collection

Waste

▪ Lower investments incollection (e.g.,single-stream or mixed wastecollection) must be

compensated bymore investments insorting

p

TRACKERMaterials Recovery Facilities separate out recyclables



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32

y p y

▪ “Dirty” MRF” separates recyclables from organic wasteand further into fractions

▪ „Clean MRF“ starts with dry recyclables which itseparates into further fractions

▪ Separation technologies vary and choice depends onwaste being sorted and economics

▪ A typical MRF may process waste using:

Materials Recovery Facility (MRF)

Hand-sortingwith conveyor belts

Magnet toseparatemetals

Screen toseparatecardboard

Baler toprepare wastefor shipping

Sale of recyclables▪ Paper, glass,

metals, plastic

Compost facility

▪ Organic waste

Landfill or incinerator

▪Residue

Waste

▪ Sophisticated MRFs can achieve recyclable recovery rates of 80-85%(~10% lower than pre-sorted rates) at $20 less per ton of waste

▪ Effective pre-sorting requires high household adoption rates

TRACKER Your city can create an integrated waste management system



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33


2B


2C

STEP 1:

Assess city


1

STEP 2:


STEP 3:


Focus of section


2A

by following three steps


3A


3B

TRACKERMunicipal solid waste projects are good investment opportunities



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1 Footnote

SOURCE: Source


34

and should be able to attract investment

▪ Integrated municipal solid waste projects have baseline returns

starting at 9%

▪ These returns can be bolstered by higher carbon credits prices toreach return rates of 25% and higher

▪ MSW projects are based on familiar PPP models

▪ Long term concessions underlie investments

▪ MSW systems are long-lived systems, allowing for long-terminvestments

▪ A portion of returns are fixed (tipping fees) while a portion fluctuatewith the market (compost, recyclable, and CER prices) providing mix

▪ MSW projects can give investors access to potential other investments, such as collection logistics and truck leasing

▪ Projects can be applied in both western and emerging markets

▪ Projects may be located in potentially attractive markets

MSW projectsprovide highpotential returns

Investmentmodels are stable

and familiar

MSW projectscan lead to newinvestmentopportunities

TRACKERRisk drivers for investments in waste management systems



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35

Risk Mitigants

▪ GDP and demographicgrowth

▪ Inflation▪ Real interest rates▪ Currency risks

▪ Raising funding in a foreigncurrency and ensuring contractsmaintain the balance between costsand revenue will mitigate risks tofinancing costs and future revenue

▪ Construction / development

risks▪ Vendor risk

▪ Contract terms are crucial to

mitigating construction anddevelopment risks. For example, afixed price, turn-key constructioncontract will avoid cost overruns or afailure of vendors to perform asexpected

▪ Operations risk

▪ Liability risk▪ Liquidity risk▪ Output quality▪ Liability risk▪ Conversion risk

▪ Insurance and contracts terms thatprovide for damages if operationaltargets are not met will mitigateperformance risks

Country risks

Construction/development risks

Performance risks

TRACKER

f

Potential financiers of solid waste management solutions



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▪ All investors want projects thatare:

– Commercially viable – Able to be financed – Benefit the region

– Provide good returns

▪ International financial institutions(e.g., World Bank) may providefinance for projects unable toobtain full funding from privatesources

ExamplesType of investor

▪ World Bank

▪ IFC

▪ ADB

International

financialinstitutions

▪ Global Environmental Facility

▪ World Wide RecyclingFunds, MLAsand other financial NGOs

▪ US EXIM

▪ KfW of GermanyExport creditagencies

▪ Goldman Sachs, Credit Suisse

▪ Chinese commercial banks, e.g.,Bank of China

Commercial andinvestmentbanks

Private-equityinvestors andcarbon funds

▪ Climate Change Capital

▪ FourWInds Capital Management

TRACKER

U it f

Your city can create an integrated waste management systemb f ll i th t



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1 Footnote

SOURCE: Source


37


2B


2C

STEP 1:

Assess city


1

STEP 2:


STEP 3:


Focus of section


2A

by following three steps

3A Engage stakeholder groups

3B Develop financingsolutions

TRACKER

U it f

What obstacles does your city face in improving its MSW systems?



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38

▪ Articulate the positiveenvironmental impact of the newwaste management system toreduce NIMBY sentiments

▪ Choose technologies that minimizethe effect on manual labor

▪ Identify proven CDMmethodologies to increasepredictability of cash flow

▪ Bundle profitable parts of the valuechain with cost centers to financean integrated waste management

system

▪ Recognize that financiers may bemore reluctant to experiment withunproven technologies

To overcome these obstacles, citiesshould:

▪ NIMBY sentiments could create obstaclesto building new waste management facilities(e.g., landfill, recycling, composting)

▪ Social costs could arise from changes thatnegatively impact formal and informalworkers (e.g., mechanized sorting willdisplace manual sorters)

▪ Limited attractiveness to financing anintegrated waste management system – Financiers will demand predictability of

cash flow despite potential variability inwaste flow and carbon credit revenue

– Certain parts of the value chain are cost

centers (e.g., collection system)

▪ Exist for emerging waste treatmenttechnologies (e.g., gasification)

Potential obstacles facing cities

TRACKER

Unit of measure

Several categories of stakeholders will need to be involved in thedi ti d t t d l t t f



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39

Main success factorsin city:

▪ Start early: beginstakeholder discussionsearly, and maintain constantcontact throughout

▪ Focus on “grass tops”:get 10-15 NGO leaders in aroom on several occasions;then follow up in one-on-onediscussions with key figures

▪ Engage communitygroups through regular town hall style meetings,also discussing other topics

▪ Use press office to handleall press relationships

diagnostic and strategy development process to ensure success of implementation

Executive

Legislative

Operational

Affectedparties

Opinionleaders

Category Stakeholders

▪ Mayor

▪ Deputy Mayor(s)

▪ Sustainability Office

▪ City level

▪ State/national level

▪ Sanitation agency

▪ Private companies

▪ Businesses

▪ Communities

▪ Advisory Board

▪ NGOs▪ Press

Details

▪Mayor’s strongest interest is in topics X and Y

▪ Deputy Mayor X has the strongest interest inwaste-related issues

▪ Will be running the effort

▪ Has to approve all legislation relating to X, Y, Z;person X is particularly involved in waste

▪ Has to approve all legislation relating to A, B, C;

person Z is particularly involved in waste

▪ Need to consult with commercial carters andlarge organic waste generators

▪ Need to engage community leaders onquestions of recycling and gasification

▪ --

▪ NGO X, Y, Z focuses most on waste issues▪ Reporter X, Y, Z would cover this topic at

newspaper A, B, C

▪ Operationally involved with residential collectionand disposal; will need to be consulted on other scenarios

▪ Operationally involved with recycling

TRACKER

Unit of measure

Topics for today’s discussion



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▪ Why waste is increasingly important part of sustainable development

▪ What city authorities must do to optimize their

waste system

▪ Why our project is an opportunity for you toefficiently learn how to capture the wasteopportunity

TRACKER

Unit of measure

We have launched a new multi-stakeholder initiative:The Economics of Harnessing Waste

CONCEPTUAL



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41

The Economics of Harnessing Waste

SOURCE: McKinsey

2010 2020 2030 2040 2050

Solid waste (bn tons)

▪ What are the economics of each transition? – Aggregate and fraction-level benefits/costs

– Investments required

– Incentives required (regulatory interventions)

– (Some) social implications

– Role will private vs. public sector

3

1

The economics of the "three transitions"

Towards “organized wastemanagement” and landscapeprotection

▪ What are economic requirementsfor complete collection?

▪ What are the effects on (in-/formal)employment?

2 Towards landfill avoidance

▪ What are optimum disposal routesfor new waste (plus existinglandfills) per fraction, as function of landfill/ energy/commodity/labor costs?

▪ What value pools will emerge for investors?

▪ What are implications for participating sectors?

Reduction

Recycling/

composting

IncinerationLandfills

Littering

3 Towards the "circular economy"

▪ What are the aggregate economicbenefits?

▪ What are required thresholdincentives for waste generators?

▪ What are effects on “utility” levels?

▪ (How to run the transformation?)

BAU

1

2

TRACKER

Unit of measure

Emerging storyline “zero-waste economy”

PRELIMINARY



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42

1. Global industrial output contains significant material, energetic and strategic value that goes uncaptured(materials perspective)

– The global industrial end-of-pipe paradigm is wasteful and inefficient in financial, social and environmental terms

– It also exposes economies to critical resource bottlenecks

– Overall, the cost of the leakage amounts to x

1. Existing waste systems (with given products) can be rearranged today to recover a significant share of that value (regional perspective)

– Here are 5 regional waste management examples where stringent optimization unleashes significant value

– We identified three archetypes, depending on highest value leap: a) Organized landfill (vs littering, see Delhi), b)Incineration/recycling (vs landfill, see USA), c) Advanced recycling (vs glass, paper, etc only, see Germany)

– The cost/benefit model can be used by operators, generators and regulators to optimize their system

1. To fully capture the resource value of the industrial production, new circular product concepts are required – and possible (product perspective)

– Anecdotal evidence exists for the real step-change that can be brought about by the circular economy – thechallenge is then to measure system-level effects

– We have analyzed [5] indicator products that together represent [75]% of industrial output

– Three product archetypes predominate

– Total circularity effects to the economy are estimated to be approximately [ x] EUR, total non-financial effectsare these

1. Moving towards such a circular economy requires a fundamental transformation which can be attained if aset of guiding principles are followed, e.g.:

– End-of-life considerations are taken into account during the product design phase, and where necessarylightweighting efforts are balanced with the end-of-life impacts these may have

– Individual companies cannot bring about the necessary scale and coordination that is required to build aneconomically attractive circularity model

– For each actor, a discrete, 20-year migration plan can be outlined

SOURCE: McKinsey

TRACKER

Unit of measureExample: US polypropylene demand 2004, Million

1. Much material is leaking from this system, unchecked



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43SOURCE: McKinsey

Example: US polypropylene demand 2004, Milliontonnes

36% injection molding:

Packaging, electronics, lead-acidbattery encasings, caps andclosures, toys, luggage

24% fiber:

Carpet backing, textiles, e.g.,sportswear

13% film and sheet:Packaging, food containers,capacitors, labels, photo apps

1% blow molding: Containers

25% other:Automotive applications, and other

85%we lose track off!

Every year, 6.6 mn tonnes are produced Only 1.1 mn tonnes are recycled

15% is recycled, mostly (90%)from car battery casings

97% of car batterycasings are

recovered andrecycled – proof that

a closed loop is

possible

TRACKER

Unit of measure

1. “Above-ground stocks” are gaining in importance



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44SOURCE: UNEP International Resource Panel – Working Group on the Global Metal Flows; USGS

In-use stocks driven by standard of living

Stocks unlocked through recycling

Landfill stocks growing in significance

China 2010, million tonnes

600

230

30

Sydney CityCenter 2002

Averageindustrializedcountries,200?

Beijing CityCenter 2004

1.0

Productionin largestcopper mine

<0.5

Recoveryin largestmunicipalrecycling park

Copper example

Kg/capita

225

630

Undergroundreserves

Landfillstockpile

Global 2010, million tonnes

TRACKER

Unit of measure ILLUSTRATIVE

1. Criticality : our model is unique, allowing for cost comparisonsof primary and secondary material sources



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45* At 2010 pricesSOURCE: McKinsey

ILLUSTRATIVE

2

of primary and secondary material sourcesExample: Indium, 2020

Marginarbitrage

opportunityPercent

200

0

-200

Demand-

supply gapUSD mn

Decrease unrecovered production waste - high grade

Decrease unrecovered production waste - medium gradeIncrease volume of extraction - highgrade

Increase refining yield - high grade

Increase volume of extraction - mediumgrade

Increase post-consumer recycling – mediumgrade

Increase refining capacity – medium grade

Increase volume of extraction - low

grade

Increase post-consumer recycling - high grade

Decrease unrecoveredproduction waste - lowgrade

Increase refining yield - medium grade

Increase refining

capacity – highgrade

Increase refining capacity – low grade

Increase refining yield - low grade

Increase post-consumer recycling - lowgrade

Resourcesupply*mnUSD

Increase post-consumer recycling

Increase volume of extraction

Increase refining yield

Decrease unrecovered production waste

1

3

45

Increase refining capacity2

TRACKER

Unit of measure

2. Waste management : providing deep insights on optimization across thewaste value chain in terms of cost, landfilled volumes, and GHG emissions



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46

A NAM metropolishad this in mind

▪ Wanted to reduce

health hazardsfrom truck PM2.5emissions byswitching to railand barge

▪ Had only little ideaof potential impacton GHG emissionsand landfill volume

of other wastemanagementoptions

▪ Starting positionwith manyrestrictions, e.g.,using existingsorting facilities

We helped its mayor’s office discover a broader perspective

The city thought…..

-10% -3%

-6% 0%

12%5%

16%4%

55%32%

0%0%

18%16%

5%1%

12% 43%

Transfer wastethroughrail/barge

Increase in cityspend - % of waste budget

Landfill reduction –% of resid. MSWcurrently landfilled

GHG reduction –‘% of wasterelated emissions

Harness waste-to-energyoptions

Increase resid.recyclingcompliance

Also helped think through the associated challenges

▪ Long-term disposal contracts in place offering a disincentive to reduce waste or improve recycling

▪ Waste reduction measures offering benefits throughout the waste value chain, yet most difficult to implement

▪ Negative public perception of waste-to-energy and anaerobic digestion resulting in political barriers

▪ Sub-optimal allocation of responsibilities for dealing with waste in the city’s organizational setup

▪ Environmental trade-offs not always transparent; considerable program and education cost to induce people to accept new plan

Example: Residential municipal solid waste

We helped themayor’s office

unlock the power of a comprehen-sive waste mgmtperspective byassessing thecost, landfillvolume impactand GHG reduc-tion potentialassociated with

11 levers alongthe waste valuechain –identifying for example GHGsavings of at least33%

SOURCE: McKinsey

Example original question

Example new insights

waste value chain in terms of cost, landfilled volumes, and GHG emissions

TRACKER

Unit of measure

2. Example of scenario detail: Disposal cost dynamics of anaerobic digestionwith improved recycling or source separation



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47

p y g p

Situation today: Only 39% of the commercialputrescible waste is recycled, no sorting beforedigestion – anaerobic digestion will be cheaper than

landfill if net processing cost is below $60/ton

SOURCE: Phone interviews with technology providers, team analysis

Total commercialputrescible waste.. m tons

% recycled

39%

% mixed waste

61%

% organics inrefuse47%

% non organicsin refuse53%

Digestate (30-35% of originalweight) -- needs

to be landfilled

Assume norecovery pre or post digestion

Total residue for landfilling69% of inputwaste

Assuming thiscan be landfilledat 50% fee –disposal cost is$33/ton

Total commercialputrescible waste.. m tons

% recycled –

maximumpossible

% mixed waste –

lowest possible

% organics inrefuse- above80%

% non organicsin refuse – below20%

30-35% of thisbecomes digestate –can be used ascompost

Assume most of itcan be screened in

pre/post treatment

Total residue for landfilling~0 of input waste

Zero disposalcost, might benegative if compost can besold

Separate collection of organics or a high-end dirtyMRF – anaerobic digestion will be cheaper thanlandfill if net processing cost is below the landfill

tipping fee

TRACKER

Unit of measure

3. Our Circular Economy work quantifies the potential of both leakagereduction and re-entry optimization and translates these aspirations into a



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48

2. Assess costs and benefits

of improvements

▪ What cost is associated

with the requiredtechnologies?

▪ How much value can berecovered?

y p pworkable system

1. Create baseline

▪ How much waste are wetalking about?

▪ What are the currenttreatment methods?

1

3. Establish recycling andcircularity targets

▪ How far could we driverecycling? Reuse?Recovery? Materialreduction at source?

4. Determine systemrequirements

▪ What changes arerequired in termsof markets, coordination,behavior?

43

2

SOURCE: McKinsey

TRACKER

Unit of measure

3. Building a circular economy with ever-tightening recovery loops meansmore material and energy are kept in the system



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gy p y

SOURCE: McKinsey

Controlled disposal

Recycling

Reuse/circular economy

Raw materialextraction

Partsproduction

Assembly Usage Collection andcontrolled disposal▪ Sanitary landfill▪ Incineration with or

without energy recovery


Partsproduction

Assembly Usage Collection andcontrolled disposal

Recycling


Partsproduction

Assembly Usage

Recycling

Collection andcontrolled disposal

Re-use/remanufacturing

Littering

Raw material

extraction

Parts

production

Assembly Usage Uncontrolled

disposal/littering

Negative effects on healthand environment

+Loss of all embeddedmaterial and energy

Loss of all embeddedmaterial and energy

Loss of manufacturingenergy

Materials, processing-and manufacturingenergy recovered

TRACKER

Unit of measure

3. We apply this methodology to selected signature products that cover all major waste streams and different product characteristics

CONCEPTUAL



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50SOURCE: McKinsey

Glass

The objective is to model the most relevant waste streams with aset of signature products covering typical industrialoutput/consumer demand

Metals

Plastics

Paper

E-waste

C&D

Organics

AutomotiveWhitegoods Furniture

Wood

Consumer electronics Packaging

Processedfood Print

Construc-tion

TRACKER

Unit of measure

2

4. To reach targeted state of circular economy the development of amigration plan will be critical

http://www.google.com/imgres?imgurl=http://www.bostondesign.com/images/u/s_BokharaArmoireS.jpg&imgrefurl=http://www.bostondesign.com/showrooms/icon-group/products/furniture/tables/coffee-cocktail-tables/&usg=__pGiNWeZgjXS6kwp2gFIgkMvinLE=&h=142&w=130&sz=47&hl=en&start=5&zoom=0&itbs=1&tbnid=A9g4TrBV7aJnYM:&tbnh=94&tbnw=86&prev=/search%3Fq%3Darmoire%2Bicon%26hl%3Den%26rlz%3D1I7ADBF_de%26tbm%3Disch&ei=_9uiTZvrEJO5hAer1ZTLDw



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http://findicons.com/icon/438276/canned_food?id=438283

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▪ Contamination

– By design (e.g., paper with certain kinds of printing ink)

– Through inadequate collection process (e.g.,electronics in the recycling bin)

▪ Failing economics

– Imports of low-priced new parts (e.g., car parts) – Low price making it hard to justify expense of

fixing or refurbishing (e.g., toasters)

▪ Lack of demand

– Rapid changes in fashion and technology (e.g.,personal electronics)

– Lack of confidence in quality of remanufacturedproducts (e.g., medical devices)

The redirection of waste streams facesfundamental challenges

We aim to develop a consistent migrationframework for overcoming these hurdles

Describe likely development paths under differentassumptions

Use a rolling-back-the-future approach What do we need to believe in order to make this

come true?

Identify mechanisms to address physicalchallenge of closing the loop

▪ Stimulate Design for the Environment (DfE):

– modular, towards reuse of components – modular, for better separation of materials – reduced use of materials – restricted use of “contaminants”

▪ Build collection systems:

– for reusable modules – for recyclables

▪ Develop markets for reusables and recyclables

Create the basis for a „contract on movingtowards a circular economy“

Where are the incentives in an un-moderatedsystem? Where is regulatory interventionrequired? What policies are most effective?

SOURCE: McKinsey

TRACKER

Unit of measure

Past achievements in the climate change and water arenas indicatewe should indeed aim high



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Highlights of our climate change work Highlights of our water work

▪ Global abatement potentialidentified in industry, power, transport,buildings, forestry, agriculture, and waste

▪ Local cost curves for 24 countriescompleted (incl. Australia, Brazil, China,Germany, Netherlands, Sweden,Switzerland, UK, US), and more to follow

▪ Climate Desk: combining climate economicssimulation models and expert support towardsinsights on economic impact of climate changeregulation on sectors, regions, technologies

▪ Convened Economics of Climate Adaptation working group and developed authoritative report

▪ Global water demand – supply view up to 2020/2030

▪ Global database of water mitigationmeasures (cost/impact)

▪ Regional water studies in5 geographies1

▪ Report presented by Robert Zoellik

at World Bank, November 2009▪ Sponsored by World Bank/IFC, ADB, Nestlé, Coke,

Pepsi, Syngenta, Veolia, Standard Chartered, etc.

▪ Working with leading water utilities to identify what alow-cost 21st century utility looks like and how wecan help to get there

1 India, China, South Africa, Brazil, GCC

SOURCE: McKinsey

TRACKER

Unit of measure

Relevance of our effort – along the entire material chain ROUGH ESTIMATES



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▪ Waste operators – could generate revenues of EUR 55 bn a year by setting up incinerators to treat just 20% of the waste generated in Beijing

▪ Technology providers – have the opportunity to capture the MRF market in US which needs to invest in 381MRFs (new and retrofit); NPV of this investment is $2.1 bn

▪ Basic materials companies – a single German automotive OEM sold ~7.2 mn cars in 2010; if it were able torecover the steel it put into those, it would get its hands on ~EUR 0.9 bn of materials

▪ Packaging companies – an aluminum company can save 90% in labor and energy by recycling aluminum cansrather than producing it from virgin material

▪ Fast moving consumer goods – FMCG companies should have strong motivation to reduce packaging; for beverages for example it makes up 19-21% of COGS; for cosmetics the potential is even higher as packagingmakes up to 25% of COGS and there are less demands on its physical properties

▪ Electronics and white goods companies – Only 2% of cell-phones are currently recycled; this means EUR 600mn is being lost to landfills and incinerators every year, or lost out of sight between its useful life and controlleddisposal

▪ Retailers – A large European retailer could reduce their store labor by an equivalent of thousands of FTE byreducing the packaging it needs to handle by 50%

▪ City governments – NYC could save up to $ 30 mn a year on its waste budget by increasing its residentialrecycling compliance rate

▪ Venture capitalists and PE funds – In emerging and least-developed countries there is potential to createmunicipal solid waste management markets to the tune of EUR 130bn

▪ Funding government bodies – Making simple improvements in solid waste management through landfilling inChina requires investing EUR 0.6bn a year in an urban infrastructure construction program

▪ Foundations with an interest in waste and sanitation – Indian cities need an investment of EUR 12 bn ininvestments over the next 20 years to build solid waste management services

SOURCE: McKinsey

TRACKER

Unit of measure

A consortium approach is required to address resource efficiency andconservation along the value chain

Issues addressed byour effort

O ff ff



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54

Optimization effort

Secondary effects

Extraction Processing Assembly

Distribu-

tion

Consump-

tion Treatment Disposal

E.g., introduction of biodegradable plastics makes recycling difficult

E.g., consumer behavior can change thedynamics of treatment

our effort

E.g., treatment methodaffects volume andtype of disposal

E.g., better recovery rate in the treatment processreduces dependence on virgin material

E.g., creating modular products enhances their reusability

E.g., less hazardous extraction process makes waste processingland-filling easy

E.g., better shrinkage management, optimized secondary packagingand source separation programs reduce burden on treatmentand disposal

E.g., better disposal does not help in any other stage of product development;better landfill management reduces the environmental damage but thisdamage can be avoided to a larger extent by optimizing prior stages

Optimization efforts can have upstream and downstream effectsand cannot be tackled in isolation

SOURCE: McKinsey

TRACKER

Unit of measure

This initiative offers multiple benefits for participating cities



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55SOURCE: McKinsey

▪ The results of this project can be used directly by cities to optimizetheir waste management system: making choices around sourceseparation and collection, whether and how to build up recyclingcapacity , optimizing landfill fees and incentive structures,developing local markets for material resources, etc.

Excellent publicrelation opportunity

Quantitativeassessment of your

closed loop strategy

Access to world-classexpertise

Developing your citynetwork

▪ The project’s corporate consortium partners, together with theFraunhofer Institute – Europe’s largest research group andworldwide renown for its applied research – and McKinsey provideparticipating cities with access to the kind of world-class expertise

that is typically difficult to locate or finance for cities

▪ The project and its outreach activities cities invite city managers toexchange know-how and experiences with peers throughMcKinsey’s global network (NYC, London, Mexico City, KualaLumpur, Chicago, Rio, etc.) and through internal organizations suchas McKinsey’s China Urban Institute

▪ Every year at the world top in Davos, the 5 countries that participatein the Water Resources Group which McKinsey initiated a few yearsago report back on their progress; outreach at a similar level isplanned for the Zero Waste initiative

TRACKER

Unit of measure

What we expect from city participants

McKinsey contribution Participants' contribution



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56

y p

▪ Provide access to city halland waste management

leadership as required bythe project

▪ Share expert input anddata on city-specificquestions

▪Contribute €80k towardsthe development of anoptimized wastemanagement solutionspecifically for your city – Includes expenses – One consultant

working with you on

the ground – Full access to central

team and models

SOURCE: McKinsey

▪ Commit a full team andsignificant leadership time

for the entire duration of theproject

▪ Minimize overall processburden

▪ Heavily leverageglobal network of industry

and functional experts andprovide access to senior management judgment andleadership in relevantsectors

▪ Build a comprehensive

“network" model on waste leveraging McKinsey'sexisting models

▪ Offer significant discount on fees of overall effort

Value Proposition:

▪ Be part of a uniquenetwork of leading globalplayers

▪ Get tailored insights for your specific decisionneeds

▪ Jointly develop a

comprehensive,integrated view of theglobal waste issues

We value your partnershipand believe the answer will

be better if we can jointlydevelop new insights andapply them to your specific

situation

Documents

June 2011 Waste LOP Cities