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EX POST EVALUATION OF INVESTMENT PROJECTS CO-FINANCED BY THE
EUROPEAN REGIONAL DEVELOPMENT FUND (ERDF) OR COHESION FUND
(CF) IN THE PERIOD 1994-1999
URBAN SOLID WASTE MANAGEMENT IN GALICIA
PREPARED BY: CSIL, CENTRE FOR INDUSTRIAL STUDIES, MILAN
PREPARED FOR: EUROPEAN COMMISSION
DIRECTORATE-GENERAL REGIONAL POLICY POLICY DEVELOPMENT
EVALUATION
MILAN, SEPTEMBER 5, 2012
This report is part of a study carried out by a Team selected by the Evaluation Unit, DG Regional Policy,
European Commission, through a call for tenders by open procedure no 2010.CE.16.B.AT.036.
The consortium selected comprises CSIL – Centre for Industrial Studies (lead partner – Milan) and DKM
Economic Consultants (Dublin).
The Core Team comprises:
- Scientific Director: Massimo Florio, CSIL and University of Milan;
- Project Coordinators: Silvia Vignetti and Julie Pellegrin, CSIL;
- External experts: Ginés de Rus (University of Las Palmas, Spain), Per-Olov Johansson (Stockholm School
of Economics, Sweden) and Eduardo Ley (World Bank, Washington, D.C.);
- Senior experts: Ugo Finzi, Mario Genco, Annette Hughes and Marcello Martinez;
- Task managers: John Lawlor, Julie Pellegrin and Davide Sartori;
- Project analysts: Emanuela Sirtori, Gelsomina Catalano and Rory Mc Monagle.
A network of country experts provides the geographical coverage for the field analysis: Roland Blomeyer,
Fernando Santos (Blomeyer and Sanz – Guadalajara), Andrea Moroni (CSIL – Milano), Antonis Moussios,
Panos Liveris (Eurotec - Thessaloniki), Marta Sánchez-Borràs, Mateu Turró (CENIT – Barcelona), Ernestine
Woelger (DKM – Dublin).
The authors of this report are Emanuela Sirtori, Mario Genco and Andrea Moroni of CSIL. Useful research
assistance has been provided by Rosa Carmosino of CSIL.
The authors are grateful for the very helpful comments from the EC staff and particularly to Veronica
Gaffey, José-Luís Calvo de Celis and Kai Stryczynski. They also express their gratitude to all stakeholders
who agreed to respond to the team’s questions and contributed to the realisation of the case study. The
authors are responsible for any remaining errors or omissions.
Quotation is authorised as long as the source is acknowledged.
Cover: Waste piled up in the Sogama plant of Cerceda, picture by Gabriel Tizón (June, 2010).
TABLE OF CONTENTS
EXECUTIVE SUMMARY ....................................................................................................................... 1
1 PROJECT DESCRIPTION ............................................................................................................... 7
1.1 CONTEXT ........................................................................................................................................ 7 1.2 LEGISLATIVE FRAMEWORK ON MUNICIPAL SOLID WASTE ......................................................................... 10 1.3 STRUCTURAL FEATURES ................................................................................................................... 14 1.4 SOGAMA’S ROLE IN THE LIFE-CYCLE OF SOLID WASTE ............................................................................. 19 1.5 CURRENT PERFORMANCE ................................................................................................................. 25
2 ORIGIN AND HISTORY ............................................................................................................... 27
2.1 BACKGROUND ............................................................................................................................... 27 2.2 REVISION OF THE PROJECT DESIGN ..................................................................................................... 28 2.3 FINANCING DECISION AND PROJECT IMPLEMENTATION ........................................................................... 32 2.4 SUSTAINABILITY PROBLEMS OF THE SOLID WASTE MANAGEMENT SYSTEM .................................................. 34 2.5 FUTURE INVESTMENTS .................................................................................................................... 38
3 LONG-TERM DEVELOPMENT EFFECTS ........................................................................................ 41
3.1 KEY FINDINGS ................................................................................................................................ 41 3.2 DIRECT ECONOMIC GROWTH ............................................................................................................ 44 3.3 ENDOGENOUS DYNAMICS ................................................................................................................ 50 3.4 ENVIRONMENTAL EFFECTS ............................................................................................................... 51 3.5 TERRITORIAL COHESION ................................................................................................................... 55 3.6 INSTITUTIONAL QUALITY .................................................................................................................. 56 3.7 SOCIAL HAPPINESS .......................................................................................................................... 57
4 DETERMINANTS OF PROJECT OUTCOMES .................................................................................. 61
4.1 KEY FINDINGS ................................................................................................................................ 61 4.2 PROJECT GOVERNANCE .................................................................................................................... 62 4.3 APPROPRIATENESS TO THE CONTEXT .................................................................................................. 66 4.4 PROJECT DESIGN ............................................................................................................................ 66 4.5 FORECASTING CAPACITY AND MANAGERIAL RESPONSE ........................................................................... 68
5 CONCLUSIONS ........................................................................................................................... 71
ANNEX I. METHODOLOGY OF EVALUATION .................................................................................. 75
ANNEX II. COST-BENEFIT ANALYSIS ............................................................................................... 81
ANNEX III. MAP OF STAKEHOLDERS ............................................................................................. 117
ANNEX IV. GLOSSARY .................................................................................................................. 119
ANNEX V. LIST OF INTERVIEWEES ................................................................................................ 121
ANNEX VI. REFERENCES ............................................................................................................... 123
LIST OF ABBREVIATIONS
CBA Cost-Benefit Analysis
CF Conversion factor
CFB Circulating Fluidised Bed
CO2 Carbon Dioxide
DG Regio Directorate General for Regional Policies
EC European Commission
ECU European Current Unit
ERDF European Regional Development Fund
EU European Union
EUR Euro
GDP Gross Domestic Product
GFMP Galician Federation of Municipalities and Provinces (Federaciόn Galega de Municipios e Provincias – FEGAMP)
GSI Galician Statistics Institute (Istituto Galego de Estadistica)
GWh Gigawatt per hour
HCl Hydrochloric acid
IMS Integrated Management System (Sistema Integrado de Gestiόn)
IRR Internal Rate of Return
MSW Municipal Solid Waste
MWe Megawatt Electrical
NOx Nitrogen oxides
NPV Net Present Value
NSI National Statistics Institute (Istituto Nacional de Estadistica)
NUTS Nomenclature of Territorial Statistical Units
Ptas Pesetas
RDF Refuse Derived Fuel
SOGAMA Galician Society for Environment (Sociedade Gallega do Medio Ambiente)
VAT Value Added Tax
WMP Waste Management Plan
WtE Waste to Energy
1
EXECUTIVE SUMMARY
This case study analyses the implementation of a new urban solid waste management system
in the Spanish Autonomous Community of Galicia. The purpose of the evaluation is to assess
the socio-economic long-term effects generated by the project and to disentangle the possible
determinant factors that may have contributed to producing these effects. More details on the
methodology are recalled in the box below and more extensively in Annex I.
OVERALL APPROACH AND METHODOLOGY
The Conceptual Framework delivered in the First Intermediate Report has been developed from the evaluation questions included in the ToR1, and further specified and organised in accordance with the study team’s understanding. In particular, the Team identified three relevant dimensions of analysis:
a. The object of the evaluation (the ‘WHAT’): this relates to the typologies of long-term contributions that can be observed. Starting from the typologies identified in the ToR (socio-economic development and quality of life) the Team developed the following classification of long-term effects: ‘Economic development’ (including effects on GDP growth and endogenous dynamics) and ‘Quality of life’, taken here to be synonymous with additional social wellbeing, i.e. including effects that are not captured by the economic variables. ‘Quality of life’, in turn, has been divided into: social cohesion, territorial cohesion, institutional learning, environmental effects and social happiness.
b. The timing of the long-term effects (the ‘WHEN’): this dimension relates to the point in the project’s lifetime at which the effects materialise for the first time (short-term dimension) and stabilise (long-term dimension). The proper timing of an evaluation and the role it can have in relation to the project’s implementation is also discussed here.
c. The determinants of the project’s performance (the ‘HOW’): the assumption here is that five aspects of project’s implementation and their interplay are crucial for the project’s final performance. These aspects are: project design, forecasting capacity, governance, context and managerial response. Five Working Hypotheses are related to these dimensions and explain how each of them can influence the generation of the project’s short or long-term effects.
On the basis of this conceptualisation, a set of detailed evaluation questions are developed, which aim to guide the entire study and to support the provision of conclusions and recommendations.
The methodology developed to answer the evaluation questions consists of a combination of quantitative (Cost Benefit Analysis) and qualitative (interviews, surveys, searches of government and newspaper archives, etc.) techniques, integrated in such a way as to produce ten project histories. CBA is an appropriate analytical approach for the ex-post evaluation because it can provide quantification of or indications of some of the long-term effects produced by the project. However, the most important contribution of the CBA exercise is to provide a framework of analysis to identify the most crucial aspects of the projects’ ex-post performance and final outcome. Qualitative analysis on the other had is more focussed on understanding the underlying causes and courses of action of the delivery process. On the basis of the findings of the ten case studies, the Final Report will draw lessons along the key dimensions identified of ‘what’, ‘when’ and ‘how’.
Source: Authors
1 They are the following: What kind of long-term contributions can be identified for different types of investment in the field of
environment and transport infrastructure? How are these long-term contributions generated for different types of investment in the field of environment and transport infrastructure, i.e., what is the causal chain between certain short-term socio-economic returns and long-term returns from investment? What is the minimum and average time needed for a given long-term contribution to materialise and stabilise? What are these time spans for different types of investment in the field of environment and transport infrastructure? What are the existing evaluation methods to capture a given long-term contribution for different types of investment in the field of environment and transport infrastructure?
2
The project consisted of the construction of a set of facilities in the municipality of Cerceda for
the separation of recyclable materials (plastic, tetra pak and metal) and the incineration of
mixed waste with energy recovery2; in addition, a number of transfer stations for receiving the
waste collected at local level by municipalities and transporting it to Cerceda, by truck or rail,
were spread all over the region. The infrastructures were designed and are operated by the
regional public-private company Sogama, of which the Autonomous Community is the major
shareholder (51%).
The construction phase took place between 1997 and 2001 and involved an initial investment
of EUR 206 million3, 47% of which co-financed through the Cohesion Fund and the remaining
through Sogama’s shareholders contributions. No cost overruns and delays occurred in the
construction phase. Sogama undertook additional investments in the following years, including
the construction of additional transfer stations and the upgrading of plants and machineries.
The total investment costs considered in the project under assessment amount to EUR 274.6
million (2011 prices), the majority of which financed by Sogama, while the European
Commission (Cohesion Fund) contributed for about 36% of the total investment costs. A
residual contribution, particularly for the construction of one transfer station, has been
provided by the Municipality of Vigo (see the following Table).
OVERVIEW OF INVESTMENT COSTS AND SOURCES OF FINANCING
Financing period 1997-2010 (CF project 1997-2001)
First year of operation 2001
Total investment costs (2011 prices) EUR 274.6 million 100%
Sources of financing and co-funding rates over the total investment costs
Cohesion Fund EUR 99.6 million 36.3%
European Regional Development Fund EUR 0 0%
European Investment Bank EUR 0 0%
National-regional-local public contribution EUR 1.5 million 0.5%
Private capital (Sogama)* EUR 173 million 63.2%
* Sogama’s financing is provided by its shareholders, including the Government of Galicia, and by private loans.
Sogama collects a tariff from municipalities to cover the waste transport and treatment costs,
which in 2012 amounts to EUR 54.33 per tonne (VAT excluded). This tariff was set in 2004 so as
to ensure the company’s financial sustainability, without pursuing profit maximisation.
However, the increase of personnel costs recorded in the following years, the fall of revenues
from the sale of electric energy produced, because of a decrease of energy prices, and the
arrears that some municipalities are accumulating in paying the treatment tariff is putting
Sogama in financial difficulties. In 2010 its commercial debt amounted to EUR 30.5 million. It is
uncertain how long this situation will continue, since no tariff increase is currently under
discussion.
2 A definition of the technical terms used in the report is included in Annex IV.
3 In constant 2011 prices, corresponding to EUR 147 million in current terms.
3
A crucial feature of the project’s history and its performance regards the fact that in Spain
municipalities have a very high degree of autonomy in the management of public services,
including in the solid waste sector. In accordance with this autonomy, Galician municipalities
were free to decide whether to entrust waste treatment to Sogama or to set up their own
facilities for waste treatment and disposal. In 1997, when Sogama’s plants were designed and
the Region applied for EU financial support, the demand for the Sogama’s facilities was still
unclear. While 18 municipalities out of a total of 315 in the region had already decided not to
be served by Sogama and to build two composting plants (the Nostián and Barbanza plants),
another 150 municipalities chose Sogama’s incineration technology, while the remainder
(representing almost half of the total Galician population) were still unsure about which
technology to adopt.
Since the first years of operation, the number of municipalities served by Sogama has
significantly increased, from 150 (with a total population of 1,100,000) to the current 296 (with
around 2,300,000 inhabitants), representing 82% of the total Galician population. As a
consequence, the volume of waste treated by Sogama has also risen, from less than 500,000
tonnes in 2000 to almost 900,000 tonnes in 2006-20114. In order to cope with this increase,
Sogama’s landfill, built in 1996 as a depository of non-hazardous waste, was enlarged so as to
receive the volume of mixed waste collected by the municipalities of the catchment area in
excess of the capacity of the Cerceda facilities, which is 500,000 tonnes per year. As far as the
recyclable waste is concerned, this is collected in different types of rubbish bags which all go to
Cerceda where the recyclable materials are sorted, compressed and delivered to the
companies charged with their recycling.
This study finds that the project achieved its main objective: the closure of the numerous
illegal landfills operating in the region in the Nineties and the provision of a more
environmentally sustainable waste management system, in compliance with EU Directives and
national legislation. Also because of the poor ex-ante situation, involving high contamination
and no valorisation of waste through recycling or energy generation, the project’s impact on
the environment was immediately positive. Yet, it has to be pointed out that the recovery of
recyclable waste is still far from meeting the recycling targets set by the European Commission
(Directive 94/62/EC) and national legislation (Regulation 252/2006)5.
Relevant effects have been detected also in terms of direct economic growth, through the
generation of direct and indirect employment, the production and sale of electricity, and the
waste separation and treatment activities carried out by Sogama. These effects are quantified
via the ex-post CBA methodology at an economic net present value of EUR 193.07 million and
an economic internal rate of return of 7.19% (at 2011 prices).
In terms of endogenous dynamics of economic growth, the project contributed to the
development of human capital within the region, thanks to the new expertise and capacities in
4 These volumes refer to mixed waste (excluding recyclable materials).
5 Ranging between 55% and 80% of total packaging produced.
4
delivering a range of modern waste management technologies and in regulating them. This
favoured the establishment in Cerceda of other facilities for the solid waste treatment, beside
the Sogama complex: a plant for bulky and electronic waste treatment and a plant for
recovering and disposing of the pharmaceutical waste collected all over Spain. All these
activities paved the way to good economic perspective for the municipality: today Cerceda has
the lowest unemployment rate in Galicia (7%) and it is among the towns with the highest per
capita income in the region.
The Sogama project ensured territorial cohesion within the regional territory. No
municipalities have been excluded in principle from the waste management service offered by
Sogama and a unique tariff to all the subscriber municipalities was applied starting from 2004.
The solidarity purpose of the tariff, which is proportional to the volume of non-recyclable
waste produced but it is not related to the actual distance of each transfer station from
Cerceda and hence to Sogama’s transport costs, particularly benefitted the most distant
towns, which are also the most rural. In this way, the project contributed to reduce the core-
periphery gaps and in preventing any welfare territorial disparities. However, such a tariff
setting is only partially in line with the European “polluter pays” principle applying to the
waste management sector and stated in Directive 2004/35/EC: according to this principle, the
more distant the Sogama client the higher the tariff should be, because of higher
environmental transport costs.
There have been more limited effects on institutional quality. Even if new competencies
concerning the delivery of waste management services were developed both within the
regional and municipal administrations, much more could have been expected. In particular,
municipalities could have made a greater use of different forms of associations (such as
consortia) in order to more efficiently manage transport and collection activities, via
economies of scale and reducing costs. They also could have made much more efforts to
promote waste separation among citizens, so as to maximise the recovery of recyclable
materials.
On the other side, the Government of Galicia did not minimise the main risk affecting the new
regional waste management plan: uncertainty about the number of municipalities deciding to
subscribe to a service contract with Sogama. The size of the Cerceda facilities for treating and
incinerating mixed waste was set according to the number of municipalities that had already
agreed to join the Sogama’s waste treatment model, and it turned to be inadequate when
demand increased. Hence, a much larger amount of waste than was expected has to be
dumped every year in the landfill, losing the opportunity to valorise it. However, some
mechanisms could have been put in place by the Region to more precisely quantify the
potential beneficiaries of the Sogama project, without limiting the autonomy of local
authorities: higher involvement and discussion with municipalities since the early stage of
project conception, in particular, could have helped to give Sogama more definite indications
of the project’s demand.
Although the long-term contributions on economic development, environment and, in general,
quality of life, are significant, people perceptions of the project effectiveness are not
5
particularly high. On one side, people express satisfaction over the closure of all illegal landfills
and the adoption of a more sustainable waste management solution; on the other side, their
perception of wellbeing has been significantly influenced by the environmentalist associations
and, partly, by the press, both of which strongly contrast the incineration technology against
other forms of waste treatment (for instance, compost production). Such opposition and the
lack of an adequate communication strategy by the project sponsors did not allow the public
to perceive in a balance way the benefits brought by the project.
The analysis of the determinant factors of the long-term effects generated by the project
shows that:
The project was highly appropriate to the regional context, as it was the right initiative
to implement in order to achieve a more sustainable waste management model: in
particular, the construction of a number of transfer stations operating in specific areas
of the region as intermediate points along the waste collection process adapts well to
the peculiarities of Galician economic geography, characterised by high population
dispersion.
Sogama’s forecasting capacity was highly constrained by the specific legislative context
and the Government of Galicia’s strategy, that prevented anticipation of actual project
demand.
As a consequence of the limited forecasting possibility, the project design was
particularly rigid and Sogama’s room for manoeuvre was constrained. The incinerator
size was set according to the actual number of subscriber municipalities at the time of
the financing application; when demand increased, Sogama preferred to enlarge the
landfill’s size, while the incinerator’s capacity was not modified: in fact, nothing would
have guaranteed that demand would not have changed again. In any case, the project
design was good, thanks to the adoption of the best incineration technology available
(the Circulating Fluidised bed Combustion), considered more efficient and
environmental friendly, and it positively contributed at the project’s performance.
Sogama did its best to react to the unexpected events, demonstrating good
managerial response, for example when its landfill was enlarged, in order to cope with
the increase volume of waste collected, or when awareness campaigns had to be
organised to reduce the fraction of improper waste among the recyclable materials. By
carrying out these activities, Sogama managed to improve the quality of waste sorting
by households.
The regional project’s governance is the dimension which mostly affected the project’s
performance: in particular, the very high degree of autonomy granted by national law
to municipalities and the Region’s weak role during the planning phase in better
defining ex-ante the service’s demand are the main causes of the under-capacity of
Sogama’s facilities. By not putting in place any mechanism to cope with the
municipalities’ hesitation about which treatment plant to join, the Region did not
6
contributed to limit the uncertainty regarding the demand for the waste management
service delivered by Sogama.
The European Commission’s degree of involvement in the Sogama project was very
limited. Besides covering a share of the investment cost, the Commission did not have
any active role in the project design and, particularly, in supporting the Government of
Galicia in the development of the regional waste management plan and in pointing out
its weaknesses. As a matter of fact, this was outside the Commission’s sphere of
intervention.
Two lessons can be learnt from this project. First, the Sogama project allows to understand to
what extent the institutional context’s characteristics, in this case at regional level, may
negatively influence the design and development of a project. The legislative and institutional
framework should ensure the identification and removal of all constraints that may hamper
the project effectiveness, but this was not the case of the Sogama project. Second, the impact
of an environmental project in the field of solid waste management can be maximised only if a
set of awareness campaigns to the public are organised, in order to promote source separation
practices (thus increasing the recycling rates) and ensure social acceptance of the new waste
management system put in place.
The current waste management plan of the Government of Galicia, covering the period 2010-
2020, is expected to intervene to address the problems that limit the Sogama project’s
effectiveness: awareness campaigns are planned to be organised to further improve citizens’
waste sorting and a new Waste to Energy plant is going be built in Galicia and to enter into
operation in 2018, to ensure the valorisation of all non-recyclable waste collected, which
exceed the capacity of the Sogama incinerator plant. As a consequence of the new regional
strategy and of the investments already programmed for the coming years, the overall
performance of the Sogama project might increase specifically in terms of the economic and
environmental impacts.
Yet, it has to be considered that valorisation of all non-recyclable waste produced in the region
will be achieved only if an appropriate number of municipalities will actually decide to drop off
the Sogama waste management system and start to be served by the new incineration plant,
in compliance with the EU proximity principle. Coordination by the regional administration
may be helpful to guarantee enough demand to both the treatment plants, but the
Government of Galicia still does not have any power in this respect.
7
1 PROJECT DESCRIPTION
1.1 CONTEXT
Galicia is one of the Spanish Autonomous Communities, covering an area of 29,875 km2. It is
situated in the North-West of the country, bounded to the West by the Atlantic Ocean and to
the South by Portugal. It has roughly 2.79 million inhabitants6, divided into four provinces: A
Coruña, where the regional capital Santiago de Compostela is located and having the largest
population (more than 40% of the entire region), Pontevedra, Lugo and Ourense7. From the
population density perspective, Pontevedra is the most densely populated province, with
approximately 241 inhabitants per km2, while Lugo and Ourense share a more rural pattern,
with only 36 and 46 inhabitants per km2 respectively8.
THE GEOGRAPHICAL POSITION OF GALICIA Figure 1.1
Source: Authors’ elaboration based on File:EspañaLoc.svg, de HansenBCN (modified by User:Mutxamel) and http://europa.eu/abc/maps/regions/spain/galicia_it.htm
In the last thirty years, the population of Galicia has declined by 0.5%, in contrast to the overall
national trend, which increased by more than 22% between 1981 and 2010, as shown in Table
1.1. Lugo and Ourense, the most rural provinces, experienced the greatest loss of population,
particularly over the period 1981-19969. More recently, although the population of Galicia has
slightly increased (by approximately 2.4% in the last decade), the growth rate remains below
the national average. The demographic trend is strongly affected by a high gross mortality rate
(around 121% of the national average between 1999 and 2009) and a low gross birth rate
(around 75% of the national average over the same period10), which is even lower in Lugo and
6 In 2011.
7 In more detail, the province of A Coruña has 1.15 million inhabitants (41% of the entire region), Pontevedra 962,000 (34%), Lugo
353,000 (13%) and Ourense 335,000 (12%). Source: National Statistics Institute (NSI) http://www.ine.es. 8 The average population density of Galicia is about 93.4 inhabitants per km
2, in line with the national average, 93.5 inhabitants/
km2 (Galician Statistics Institute - GSI, 2011 data).
9 People moved because they were attracted to more industrialised areas of the region or country.
10 In 2009, for instance, the number of births per 1,000 was 8.23 in Galicia against a national average of 10.75. In the same year the
number of deaths per 1,000 was 11.03 in Galicia against a national average of 8.34 (NSI data).
8
Ourense11. In addition, the unattractive economic prospects of Galicia in the Eighties and
Nineties, with an underdeveloped industrial sector compared to the Spanish average (Guisán
Seijas et al., 2002), drove many inhabitants to emigrate to other Autonomous Communities or
abroad. Mainly thanks to the improvement of the industrial and tourism sectors in the region
since 200012, the migration balance became positive, with immigrants exceeding emigrants13,
which has partly offset the ageing rate of population.
The largest concentration of population is along the coast, with A Coruña in the North-West
and Vigo in the South-West being the two most populous municipalities of the region, with
respectively 297,000 and 246,000 inhabitants14. Their metropolitan areas, together with the
metropolitan areas of Ourense, Santiago de Compostela, Ferrol, Lugo and Pontevedra, account
for about 57% of the Galician population.
Table 1.1 POPULATION TREND IN SPAIN, GALICIA AND ITS PROVINCES (AVERAGE
ANNUAL PERCENTAGE CHANGE)
1981-1996 1996-2001 2001-2005 2005-2010 1981-2010
Spain 3.1 3.6 7.3 6.6 22.2
Galicia -2.5 -0.4 1.1 1.3 -0.5
A Coruña 1.6 -0.2 1.7 1.8 4.9
Lugo -8.6 -1.7 -1.8 -1.2 -12.8
Ourense -19.4 -0.7 -1.5 -1.3 -22.1
Pontevedra 3.6 0.1 2.4 2.6 9.0
Source: Authors’ elaboration based on GSI and NSI data
The urban system, although heavily polarised towards the coast and around these major cities,
is still based on a number of small villages15; Galicia is actually characterised by a high degree
of population dispersion, with 315 municipalities and a much greater number of parishes
(more than 3,70016), territorial divisions without legal status structuring the territory at a lower
level17. Out of all 61,500 villages (isolated urban groups with at least 10 houses) in Spain,
approximately 50% are in Galicia; furthermore, the share of Galicians living in even smaller
villages is 16.5%, against a national average of 4%18.
Such urban configuration strongly affects the public services delivery system. Actually, because
of this diffuse urbanisation pattern, the municipalities and the region have to bear higher costs
for the provision of basic services, related, for instance, to water supply and sewage networks,
11
In terms of number of children per woman, in 2006 the Spanish average was 1.38, in Galicia it was 1.03 and in the provinces of Lugo and Ourense it was 0.88 and 0.93 respectively (Borge, 2005). 12
CIEF, 2006. 13
An average of 94,095 immigrants and 81,385 emigrants per annum between 2000 and 2010 (NSI data). 14
2010 data. Source: NSI. 15
As mentioned in a recent European Investment Bank’s evaluation (2010), the Galician small villages “have historically been the backbone of the region, as centres for commercial exchange, supplemented by regular fairs in smaller towns, such as the centres of judicial districts, offering a wide range of services which have made them key centres within the urban and rural context”. 16
European Investment Bank, 2010. 17
Prada Blanco (2008) offers an accurate analysis of the population density characteristics of Galicia. 18
Source: GSI.
9
public transportation, health system coverage and solid waste management19. The
Government of Galicia estimated that the cost for the public transport of students is 50%
higher in low-density populated areas20 and that a higher per capita expenditure for primary
care is registered in urban areas with less than 20,000 inhabitants21.
POPULATION DENSITY MAP OF GALICIA (2008) Figure 1.2
Source: Authors’ elaboration based on Susana Freixeiro, 200822
Some legislative efforts have been made aimed at centralisation of services and administrative
rationalisation, such as the District Development Act 7/1996 which set up 53 districts
(operating as supra-municipalities bodies) and a regional document proposing to create 12
functional areas grouping together a number of districts23. These interventions would have
helped in rationalising and reducing the higher investments and operational costs
characterising the delivery of public services in rural and sparsely populated areas, thus
allowing a better exploitation of the economies of scale. However, no administrative
modifications were implemented and no further attempts to reduce the level of population
dispersal were made.
19
A recent study by the European Parliament (2010) analysing the delivery of a number of services of general interest across the EU Member States concluded that remote and outermost regions are frequently associated with lower provision of primary services, such as 24-hour access to drinking water, environmentally efficient heating services or effective and safe waste management. 20
http://www.elcorreogallego.es/?idNoticia=281464&idEdicion=836&idMenu=9 21
http://www.medicinatv.com/noticias/galicia-rubio-estima-un-aumento-del-gasto-per-capita-en-hospitalizacion-del-6-5-sobre-el-del-coste-de-servicio-181984 22
Retrieved from http://commons.wikimedia.org/wiki/File:Galicia_densidade_de_poboacion.PNG?uselang=es. 23
The Territorial Model Hypotheses of the Government of Galicia (http://cmati.xunta.es/portal/cidadan/pid/2691), reported by European Investment Bank, 2010.
Number ofinhabitants per square kilometre
0-49
100-299300-599600 +
50-99
10
1.2 LEGISLATIVE FRAMEWORK ON MUNICIPAL SOLID WASTE
The project under analysis concerns the construction of new management and treatment
facilities for the urban solid waste of Galicia. The structural features of the infrastructures are
described starting in Section 1.3; before going into detail, some information about the
legislative framework of the project, i.e. the set of European Directives and national and
regional laws affecting municipal solid waste management, is provided.
The first legal definition of waste at European level is included in the Framework Directive on
Waste (75/442/EC) of 1975, later amended by Directive 91/156/EC. In Article 1, the Directive
defines waste as “any substance or object […] which the holder discards or intends or is
required to discard”. In the following years, a list of the categories of waste has been drawn up
by the European Commission, in order to clarify the types of control and handling required for
each category24. A differentiation between hazardous (mainly industrial) and non-hazardous
waste was introduced in 199125. A further classification of waste typologies was provided in
the European Waste Catalogue, established in 199426. The Catalogue introduces the concept of
Municipal Solid Waste (MSW), defined as “household waste and similar commercial, industrial
and institutional waste, including separately collected fractions, garden and park waste”27.
The basic requirements, definitions and principles regarding waste management in the
European Union are collected in Directive 2008/98/EC (known as the Waste Framework
Directive), that repeals previous Directives on waste (2006/12/EC)28, hazardous waste
(91/689/EC) and waste oils (75/439/EC)29.
The Waste Framework Directive introduces a five-step waste management hierarchy, where
prevention, i.e. reduction of waste generation, is to be considered as the favoured option,
followed by re-use, recycling and other forms of recovery, including energy recovery through
incineration and composting, with disposal to landfill as the last resort management system.
The EU objective is to promote a waste management system across European regions that
moves up the waste management hierarchy (Figure 1.3).
24
See for example Directive 94/904/EC for the Hazardous Waste, Regulation 259/93/EC, the European Waste Catalogue (94/3/EC) and the Basel Convention on the Control of Trans-boundary Movements of Hazardous Wastes and Their Disposal (entered into force on 5 May 1992). 25
Directive 91/689/EC on Hazardous Waste. 26
The first European Waste Catalogue - EWC (Decision 94/3/EC) was in force from 1994 to 2001. In 2002, the Catalogue and the hazardous waste list were merged into a unique document, in accordance with the Commission Decision 2000/532/EC. 27
Another macro-category of waste, beside hazardous and municipal waste, is biomedical and hospital waste, addressed in the Hazardous Waste Directive (2008/98/EC repealing previous Directives), the Landfill Directive (99/31/EC), the Incineration Directive (2000/76/EC) and the International Convention on the Elimination of POPs (Persistent Organic Pollutants). 28
Which consolidated and replaced Directive 75/442/EC. 29
This is designed to create a harmonised system for the collection, treatment, storage and disposal of waste oils, such as lubricant oils for vehicles and engines.
11
THE WASTE MANAGEMENT HIERARCHY Figure 1.3
Source: Authors
The Waste Framework Directive requires Member States to outline specific waste
management plans (WMPs) providing an analysis of the current waste management situation
as well as the measures expected to be adopted to increase re-use, recycling and recovery of
waste. Member States are also asked to design and implement waste prevention
programmes30. This Directive entered into force on 12 December 2008 and it is required to be
transposed into national legislation by 12 December 2010. Additional relevant cornerstones of
EU solid waste legislation, currently in force, are briefly summarised in Box 1.1.
Box 1.1 OTHER PIECES OF EU SOLID WASTE LEGISLATION
Directive 94/62/EC on packaging and packaging waste. It contains provisions on the prevention, re-use, recovery and recycling of packaging waste. It aims at harmonising national measures in order to prevent or reduce the impact of packaging and packaging waste on the environment.
Directive 99/31/EC on landfills. It is intended to prevent or reduce the adverse effects of landfills on the environment, in particular on surface water, groundwater, soil, air and human health. It sets stringent technical requirements for landfill sites, specific requirements for waste acceptance into the sites and introduces landfill categories depending on the waste intended to be disposed of into them.
Directive 2000/76/EC on incineration. It sets standards and methodologies for the practice and technology of waste incineration, in order to prevent or limit as far as practicable negative effects on the environment, in particular pollution by emissions to air, soil, surface water and ground water, and the resulting risks to human health.
EU Directives restricting the use of hazardous substances in electrical and electronic equipment (Directive 2002/95/EC) and promoting the collection and recycling of such equipment (Directive 2002/96/EC). They provide for the creation of collection schemes whereby consumers return their used e-waste free of charge. The objective of these schemes is to increase the recycling and/or re-use of such products.
Source: Authors
In Spain, the national laws 10/1998 (of 21 April) and 22/2011 (of 28 July) on waste and
polluted soils represent the transposition of the Waste Framework Directive, representing the
national legal framework for both domestic and hazardous waste. According to these laws, all
the different levels of the Spanish administration (national, regional and local) have
competence in the waste management sector. At national level, the Ministry of Environment
30
According to Art. 29 of the Waste Framework Directive (2008/98/EC), Member States shall establish national waste prevention programmes not later than 12 December 2013. These programmes shall be integrated either into the waste management plans or into other environmental policy programmes, as appropriate, or shall function as separate programmes.
Prevention
Preparing for re-use
Recycling
Other recovery
Disposal
12
and Rural and Marine Affairs31 is responsible for drafting the national WMP, containing the
general strategy with which regional plans have to comply. The Autonomous Communities
prepare the regional plans for waste management in their territory, in consultation with local
entities. These can prepare their own local WMPs, in compliance with the national and
regional ones: in fact, Spanish municipalities have full autonomy in achieving their objectives,
including those related to the waste management sector, as established by Constitution32 and
law 7/1985, which regulates the local regimes. In particular, Articles 25-28 of this law lay down
the competencies attributed to the municipalities in different fields, among which are
environmental protection: all municipalities are required to deliver a number of basic services,
including waste collection and treatment33. Municipalities can ask the Autonomous
Community to be exempted from delivering these services, only when their provision turns out
to be impossible or particularly difficult. Under these circumstances, the provision of public
services should be ensured by the Autonomous Community, in cooperation with the provincial
administrations.
Box 1.2 OTHER PIECES OF SPANISH SOLID WASTE LEGISLATION
The national legislation applicable to urban solid waste is composed by a set of laws:
Law 10/1998 on Waste defines the different kind of waste, identifies the administrative responsibilities and sets specific rules on the production, treatment and valorisation of waste. Valorisation is defined as the set of operations which aim to return to the economic cycle the resources contained in waste through the recycling process or energy production.
Law 11/1997 on packaging and waste from packaging and the relating Regulation (782/1998), sets objectives on the share of recycling (a minimum of 25% and a maximum of 45% of the packaging produced, with a minimum of 15% for each material) and valorisation of packaging (a minimum of 50% and a maximum of 65% on the total packaging produced). These targets have been increased by Regulation 252/2006: the share of recycling should be between 55% and 80% and at least 60% of total packaging produced should be valorised.
Royal Decree 653/2003 on incineration establishes the measures that incineration activities must comply with, including emissions limits.
Royal Decree 1481/2001 regulating waste disposal in landfills: it establishes a legal and technical framework for the activities of waste disposal by landfill. Their structural characteristics and management are regulated, taking into account the waste management hierarchy, in order to protect human health and the environment.
Law 16/2002 on integrated prevention and control of contamination. It sets up a new approach related to the environment, aimed at strengthening prevention and protection of the environment. The law introduces a new form of administrative environmental authorisation and strengthens the principle of information transparency.
Source: Authors based on Ministry of Environment, 2008
31
In consultation with the Autonomous Communities, local authorities, other ministries concerned and, where appropriate, with other Member States. 32
“The State is territorially organised in municipalities, provinces and Autonomous Communities. All these entities have the autonomy to manage their respective interests” (art. 137 of the Spanish Constitution). 33
Other basic services that should be provided by all municipalities are cemetery, street cleaning, water supply, sewage system, accessibility, public road paving and food and drink control (Art 26, Law 7/1985). The waste treatment service, which is not more precisely defined by law, has to be provided by all municipalities with at least 5,000 inhabitants equivalent.
13
At the present time, the Second Integrated National Plan of Waste 2008-2015 is in force,
succeeding the previous one that covered the years 2000-200634. It provides guidelines and
the main measures to be implemented, which are further specified in thirteen sub-plans for
different types of waste35.
This National Plan (Ministry of Environment, 2008) highlights that in 2006 separate waste
collection accounted for 14% of the total urban waste, while the remaining 86% was collected
without any distinction of material. The facilities installed in Spain to treat and dispose of
waste are listed in Table 1.2. Landfill (often uncontrolled) was the main system to dispose of
waste, used for about 60% of domestic solid waste, followed by waste treatment facilities to
produce compost, and incineration plants. The plants for sorting light packaging36 treated less
than 3% of waste, but if the collection of glass, paper and other recyclable materials (including
voluminous products) are considered37, the recycling rate represents about 10% of the total
urban waste produced in Spain (2006 data).
Table 1.2 TREATMENT AND DISPOSAL OF URBAN SOLID WASTE OF DOMESTIC ORIGIN
IN SPAIN, 2006
Facilities Number of centres Input (tonnes/year)
Share over the total input (%)
Landfills 183 16,007,098 59.38
Plants for packaging separation 90 606,200 2.25
Plants for separation of the organic fraction and composting
59 6,991,541 25.93
Plants for composting the organic fraction (already separated)
18 160,017 0.59
Plants for separation of the organic fraction, bio-methanation and composting
13 1,168,565 4.33
Incineration plants 1038 2,024,586 7.51
TOTAL 26,958,007 100.00
Source: Author’s elaboration based on Ministry of Environment, 2008
As far as Galicia is concerned, in 1997 the Galician Parliament approved the law on urban solid
waste (Law 10/1997, repealed by Law 10/1998 of 3 November), integrating the national
legislation and adopting the terminology, proposals and objectives suggested by EU Directives.
This law identifies the municipalities as the main responsible bodies for the first steps of the
urban waste management process, involving waste collection, transportation, valorisation39
and the promotion of domestic waste separation. The Government of Galicia’s tasks, in turn,
34
Unexpected delays led to the approval of the second Plan in 2008, rather than 2007. 35
Additional laws complete the national regulation framework concerning the management and treatment of waste, namely: the Local Regime Law (Law 7/1985) defining the competencies of municipalities in the waste treatment activities; the Packaging and Packaging waste Law (Law 11/1997), implementing EU Directive 94/62; the Incineration Act (Law 653/2003) implementing EU Directive 2000/76/EC on the incineration of waste; the Act concerning the elimination of waste through landfill (Law 1481/2001) implementing the EU Directive on the landfill of waste. 36
This category includes cans and other light metal products, tetra pak and plastic goods. 37
Which are not treated in any of the above mentioned infrastructures. 38
One in Galicia, Balearic islands, Madrid, Melilla, País Vasco and Cantabria and five in Cataluña. They have been built between 1975 and 2006. 39
Meaning all the operations aimed at re-introducing to the economic cycle the resources of which waste is made.
14
pertain to the planning of regional solid waste management, the coordination of all actions to
achieve the objectives established and the promotion of all measures aimed at minimising
waste production and at achieving adequate waste valorisation and disposal.
In 1999 the Government of Galicia produced a WMP, representing the main coordinating
instrument of all activities related to waste management in the region40. The plan increases
the municipalities’ tasks in the waste management process compared to those envisaged by
the regional law 10/1997: besides their role at the initial stage of the waste life-cycle,
municipalities are free to establish their own waste management systems, in compliance with
the objectives set by the national and regional legislation and subject to the approval by the
Autonomous Community. In other words, the law reduced the Region’s planning function, by
contemporary enlarging the municipalities’ power to decide whether to adhere to the waste
management system proposed by the Government of Galicia or to adopt a different one41. In
fact, this provision is crucial to understanding the story of the project under evaluation and it
will be discussed in more detail in Sections 2.2 and 2.4 of this report, in relation to the history
of the project.
1.3 STRUCTURAL FEATURES
Sogama (the Galician Society for Environment – Sociedade Galega do Medio Ambiente)42 is a
public-private company established in 199243, which provides waste management and
treatment services to the majority of Galician municipalities. It is owned by the Government of
Galicia, which is the majority stakeholders (51%), and by an industrial partner, Socio
Tecnolóxico44, linked to Grupo Gas Natural Fenosa, a Spanish-based energy company (49%).
Sogama is based in the town of Cerceda45 (almost half way between A Coruña and Santiago de
Compostela), where most of its infrastructure is located. Since its foundation, Sogama was
conceived as an operational body of the Galician regional administration, aimed at providing a
long-term solution to the municipal waste management of the region. The Sogama complex in
Cerceda includes a number of facilities built between 1997 and 2001, and slightly modified in
the following years. Sogama carries out, over an area of 665,000 m2, activities to separate the
recyclable materials and to treat and incinerate the remaining waste. These activities and the
plants which comprise the complex (shown in Figure 1.4) are described below.
40
The second WMP was signed in 2011 (Government of Galicia, 2011). 41
In fact, as already explained, the national legislation regulating the local regimes (law 7/1985) assigns the responsibility for waste treatment to municipalities with at least 5,000 population equivalent. 42
http://www.sogama.es/gl 43
On 11 April 1992 by regional law 111/1992. 44
Xeración Peninsular, S.L. 45
Located 30 km from A Coruña and 50 km from Santiago de Compostela, Cerceda has approximately 5,500 inhabitants.
15
POSITION OF PLANTS IN THE SOGAMA COMPLEX OF CERCEDA Figure 1.4
Source: Authors’ elaboration based on Sogama’s picture46
Plant for waste separation. This plant, which covers a surface of 5,000 m2, receives
the rubbish bags containing metal, tetra pak and plastic packaging (yellow-coloured
bags47). Here the bags are opened and the contents are automatically separated into
different materials (iron, aluminium, tetra pak and four different types of plastic48) by
means of optical devices along two independent lines. Waste streams of the same
material are then compressed, in order to reduce their volume, and delivered to
ECOEMBES, the Spanish non-profit company in charge of the collection and recovery
of these materials for subsequent treatment and recycling49.
Plant for processing the Refuse Derived Fuel. This plant receives the black rubbish
bags containing non-recyclable waste (including organic waste, such as tea bags, food
waste etc.). Waste is unloaded from trucks and trains and deposited into two pits of
5,000 m3 each. Waste, picked up by hydraulic arms, enters the treatment process
along two lines planned to treat 40 tonnes of waste each50. After the bags have been
mechanically opened, waste undergoes a preliminary separation depending on size.
Before being grinded, waste bigger than 120 mm2 undergoes a further separation
process to draw out metal materials (iron and aluminium). After that, the small
metallic parts are magnetically separated. On the other side, waste smaller than 120
mm2, which contains a large share of organic material, proceeds directly to the
magnetic separator and afterwards undergoes a drying process: this is carried out by
exploiting the exhaust gases discharged from the cogeneration engines (see below)51.
46
Retrieved from http://www.sogama.es/gl/info/o-complexo-medioambiental. 47
As explained in the following Section, in Galicia municipal waste is mainly sorted in two typologies: recyclable light packaging products (plastic, cans and tetra pak), which are put by citizens into yellow bags, and organic and non-recyclable materials, put into black bags. 48
High and low density polythene (HDPE and LDPE), polyethylene terephthalate (PET) and other plastic. 49
More information on ECOEMBES is given in Section 1.4. 50
A third line is available if needed. 51
The exhaust gases produced are properly purified before being ejected.
1 – Plant for waste separation2 – Plant for processing the RDF3 – Storage plant4 – Cogeneration plant5 – Thermoelectric plant6 – Landfills
1
2
34
5
66
16
The drying section of the plant is equipped with three rotating dryers52, which reduce
the input humidity of the treated fraction of waste53, thus making it suitable for the
process that occurs downstream54. Finally, the dried small-size waste and the
remaining grinded waste are mixed together to form the so-called Refuse Derived Fuel
(RDF)55, which can be conveyed directly to the incinerator or be stored in the storage
building.
Storage facility of waste derived fuel. The RDF which does not need to be immediately
incinerated can be stored in this plant, which has a capacity of about 43,000 m3 of RDF
(corresponding to the amount of waste produced in 16 days). The RDF is continuously
moved from one side to the other of the plant by a machine, thus preventing the
waste from sticking together, which would make the RDF unusable for the incinerator.
Cogeneration plant. Its function is to generate both heat (used to dry the organic
fraction) and electricity by using six engines fed by natural gas, with a total capacity of
21.6 MWe56. The electricity produced is injected into the electricity network.
Waste to Energy (WtE) plant. The RDF is burned in the WtE plant of the complex,
occupying an area of 3,375 m2. This plant is served by two independent lines, each
with an oven-boiler and a gas-cleaning system57. The combustion technology used in
the ovens is Circulating Fluidised Bed combustion, activated by natural gas, which
allows adjustment of the gas emission levels and minimisation of dioxin production
(see Box 1.2 for more details). Each furnace has the capacity to burn more than 23
tonnes of RDF per hour and to produce 100 tonnes/hour of steam; in total, about
500,000 tonnes of waste per year can be incinerated in the Sogama complex. The high-
pressure superheated steam produced by the two furnaces feeds a single turbo
generator with the capacity of 49 MWe. The combustion gases, extracted by means of
ventilators, pass through the purification58 and cooling system. The solid materials
extracted from the gases are re-entered in the fluidised bed, while ashes and salts are
filtered. A continuous system of analysis is installed in order to control the incineration
process and to meet the legal emissions limits.
Plant for animal waste treatment. This is a plant where carcasses of dead animals are
disposed of. It was built when the “mad cow” emergency spread through Europe.
Today it is still in operation but to a much lesser degree than in the years 2002-2005.
52
Two of them in normal operations. 53
From about 50% to 15-20% (source: interviews). 54
Vapours are purified before their discharge into the atmosphere. 55
The Refuse Derived Fuels is made of a mixture of paper, cardboard, plastic, rubber, textile and wood. It is characterised by a moderate calorific value, stable chemical composition and it is odourless. 56
This plant covers an area of 1,734 m2
and it includes a control room and mechanical cooling towers. The cooling towers are provided with six fans of 11 KW each. 57
The plant has also turbine premises, a pump house, facilities for offices, a warehouse and others. 58
Making use of slaked lime and activated carbon.
17
Two landfills. The complex includes two landfills: one is used to store the separated
inert waste taken into the RDF plant, mainly consisting of glass, stone and ceramic
pieces; the other is used as a depository for the fly ash from the combustion of RDF.
Since this is classified as hazardous waste, ash is packed into water-resistant bags for
protection.
Box 1.3 THE TECHNOLOGY OF THE CIRCULATING FLUIDISED BED
COMBUSTION
The Circulating Fluidised Bed (CFB) combustion is a technology developed during the Nineties and still considered the best technology available for waste incineration and energy recovery. The basic functioning principle of this system is that the better the contact between fuel and air, the more efficient the combustion of fuel. While for the traditional incineration technologies59 the RDF lies on a grid and air is blown from below, in the case of the CFB combustion each piece of waste is suspended in a fluidised bed and completely surrounded by air. Inside the furnace, the RDF is burned in a self-mixing suspension of air and solid-bed material, consisting of ash, sand60 and a sorbent61. During the combustion process, RDF are supplied from the bottom of the furnace and set in suspension by inflating air; on contact with the hot sand, RDF instantly ignites. The combustion temperature has to be kept between 800 and 900°C, in order to prevent ash sintering (i.e. compacting) in the bed. At the top of the combustion chamber, an air-cooled cyclone separates the sand and ashes from the combustion products and put them back in the furnace.
Compared to the traditional technologies, the advantage of the CFB combustion system relies on the lower emission of dioxins, because of the higher combustion temperature, and the increased burning rate, the lower amount of ashes generated thanks to their recirculation in the furnace62, and the possibility of removing sulphur pollutants in a relatively simple way, by using limestone as sorbent.
Source: Pollastro, 2001.
These plants are complemented by a controlled landfill for non-hazardous waste placed in
Areosa (less than 10 km far from the Sogama complex, still in the town of Cerceda). The landfill
covers an area of 462,000 m2 and receives between 300,000 and 400,000 tonnes of waste per
year63. It is aimed at the final disposal of the non-recyclable waste that the Cerceda plants are
unable to treat, because the total amount of waste collected in the municipalities of the
catchment area exceed their capacity (as discussed in detail later). The biogas produced by the
decomposition process of waste is captured and feeds three engines with an installed power of
2.2 MW.
The Sogama project under evaluation consisted of the construction not only of the afore-
mentioned infrastructures in Cerceda64, but also of a number of transfer stations spread across
the whole region (see Figure 1.5). Each transfer station is located inside closed premises, in
order to mitigate the noise, and equipped with a hopper, a pusher cylinder and an automatic
mechanism for transferring containers. Trucks operating solid waste collection in the Galician
59
Pulverised fuel combustion, grate combustion and gas combustion. 60
The sand in the fluidised bed, which must have a uniform particle size within narrow dimensional limits, has a high melting temperature (above 1,500 °C). 61
A sorbent is a material used to absorb liquids or gases. 62
Ashes generated by the CFB combustion represent 10% of the RDF burnt, against the 30% produced in traditional thermoelectric plants. 63
Originally the landfill was built over an area of 330,000 m2, but it has recently been enlarged.
64 Not all of them were co-financed by the European Commission (Section 2.3).
18
municipalities (both black and yellow bags, see Section 1.4) travel to these stations to
discharge their loads into hoppers: the waste is compressed65 and then put into closed
containers, which are then transferred to Cerceda (either to Sogama’s plants or to the Areosa
landfill). Road is the prevailing means of transport, with the exception of two transfer stations
(Vigo and Ourense), which are connected to Cerceda by rail. In total, in Galicia there are 37
transfer stations, 20 of which belong to Sogama, while the others are directly managed by local
public authorities.
Today, the Sogama complex receives the waste generated by 296 municipalities,
corresponding to 94% of all Galician municipalities66 and 82% of the population (around
2,300,000 inhabitants67).
65
Density of the waste is typically increased to 0.5 tonnes/m3.
66 Galicia has 315 municipalities.
67 Source: Government of Galicia, 2011.
19
THE WASTE TRANSFER STATIONS Figure 1.5
Source: Sogama website
1.4 SOGAMA’S ROLE IN THE LIFE-CYCLE OF SOLID WASTE
Sogama’s activity is focused on the management of solid waste from the moment it is
deposited at the transfer stations, to the subsequent transport, treatment and valorisation68
activities or landfill disposal. What needs to be highlighted is that this company is involved only
in a part of the overall waste management process, in which other actors intervene at different
stages and with different roles: for instance, citizens are responsible for sorting the waste at
home, municipalities for collecting and taking it to the transfer stations and other companies
are involved in the recovery of the recyclable materials. Moreover, Sogama is not the only
68
The valorisation of waste consists in implementing those activities which allow the generation of value from waste, such as the production of energy.
20
treatment facility in Galicia. A small number of municipalities (18 out of 315) are served by two
public consortia operating plants of Nostián and Barbanza, which use the organic fraction of
waste to produce compost (a service not provided by Sogama). In order to fully understand the
kind of service delivered by Sogama, it is important to investigate what its role is in the so-
called life-cycle of waste, which is the entire process starting from the origin of a consumer
product – its manufacture – to its eventual disposal or recycling.
The life of consumer products begins when they are produced, entailing a dependence on the
natural environment: wood is needed to produce paper, petroleum must be extracted to make
plastic as must other natural resources (water, soil, etc.) and some form of energy is always
required during the processing and production activities. Consumer products can then be
purchased and when they are no longer usable or repairable they become waste. In Galicia
MSW is commonly classified according to the material it is made of: paper, glass, plastic,
metals, some forms of hazardous waste (such as batteries), organic and food and other mixed
materials.
These are collected into specific containers and then picked up by different companies, in the
framework of the so-called Integrated Management System (IMS - Sistema integrado de
Gestiόn). The IMS is implemented through a number of non-profit making companies, financed
by the product manufacturers which take the responsibility for the management of waste
generated from the use of their products; the manufacturers pay the IMS companies a certain
amount for each product or package put into the market, in order to finance its collection. IMS
companies, in turn, compensate the municipalities for each tonne of recyclable waste
collected. It needs to be pointed out that, within the IMS, only the recyclable materials whose
recovery is financed by producers are actually collected: in other terms, if the manufacturer
does not finance the recovery of a specific product, even if made of recyclable materials, the
IMS company is not required to collect it69. Among the IMS companies currently operating in
Spain, and in particular in Galicia, there are ECOVIDRIO70, which manages the collection of
glass, ECOPILAS for batteries, SIGRE for medicines and their packaging71 and ECOEMBES
(already mentioned and more deeply described in Box 1.4) for so-called “light” packaging.
Box 1.4 FOCUS ON ECOEMBES
The Integrated Management System company ECOEMBES (whose full name is Ecoembalajes España S. A.) represents the only Spanish non-profit company dedicated to the recovery and recycling of plastic packaging, cans, tetra pak and paper and cardboard packaging in Spain. Established in 1996, currently ECOEMBES is authorised to operate in all of the Spanish Autonomous Communities. ECOEMBES collaborates with the municipalities in the separate collection of packaging waste, by financing the extra cost this entails.
Its shareholders include 57 companies and groups comprising all the sectors which participate in the management of packaging, from manufacturers to distributors.
69
In Galicia this is the case with the plastic envelopes of newspapers. 70
In Spain ECOVIDRIO collaborates with more than 8,000 municipalities, corresponding to 99% of the population. 71
All Spanish waste related to medicines is separated in the Sigre plant in Cerceda. In this plant the dangerous medicines are separated and sent for controlled disposal, while the remainder is incinerated, with energy recovery. All the packages are also classified according to their material (paper, glass, metal, plastic etc.) in order to be recycled.
21
During 2010 about 1.2 million tonnes of packaging were recycled all over Spain72. By type of material, this represented 83% of cardboard and paper (646,186 tonnes), 45.3% of plastic packaging (323,030 tonnes) and 71.5% of metals (240,710 tonnes).
In total, 66% of the packaging put in the market and recovered by ECOEMBES was recycled during 2010, in compliance with the EU target of 55% set by the European Commission (Directive 94/62/EC).
Source: Ecoembes website73
Citizens separate paper, batteries and glass in specific containers, located on the side of the
street; these are periodically collected by the IMS companies74 and delivered to the recycling
centres in Galicia or other regions of Spain. In another container on the side of the street, a
yellow one75, plastic, cans and bricks are collected, without being separated, and transported
to the Sogama transfer stations distributed all over the region or to other treatment facilities76
by the companies in charge of their collection on behalf of the municipalities. The Sogama
transfer stations also receive the black bags, containing the organic waste as well as the
remaining domestic garbage. At this point, the responsibility for waste management moves to
Sogama, which transports all the yellow bags and about 500,000 tonnes of black bag waste to
the Cerceda complex for treatment77, and the remaining mixed waste, which the Sogama
plants are unable to treat because of their limited capacity, to the Areosa landfill.
Sogama’s role is to incinerate the fuel produced by the mixed and organic waste, but also to
separate the recyclable materials included into the yellow bags. This is a service that the
company carries out on behalf of ECOEMBES and for which it is remunerated. Moreover,
Sogama draws the iron and aluminium products from the black bags and puts them on the
market through competitive tenders. All the remaining waste arriving at the Cerceda complex
is incinerated to produce energy which is sold and put into the electricity network78.
Sogama covers the operating costs related to the services it carries out by collecting a fee from
the municipalities. The current fee was set in 2004 and is subject to yearly appreciation based
on inflation: in 2012 amounts to EUR 54.33 per tonne (VAT excluded)79. It covers not only the
waste treatment cost, but also the waste transport cost from the transfer stations, which is
estimated at approximately EUR 20 per tonne of waste (i.e. about 35-40% of the total tariff)80.
Net of the transport cost, Sogama tariff is below the average treatment tariff of other Spanish
incinerator plants81.
72
This figure does not consider glass, since this material is not managed by ECOEMBES. 73
http://www.ecoembes.com/en/Pages/portada.aspx. 74
Or other companies on behalf of them. 75
The same colour as the bags collected in it. 76
I.e. the Nostián and Barbanza composting plants. 77
In the municipalities served by the Nostián and Barbanza facilities, instead, citizens separate the organic fraction from the rest and waste bags are carried directly to the treatment plants, without using any transfer stations. The reason relies in the shorter distance of these plants, serving only 9 municipalities each. 78
See Box 3.1 in Section 3.2 on the Spanish special regime applying for the production of this type of energy. 79
Corresponding to EUR 58.67 per tonne VAT included. In 2011 the tariff was EUR 53.06 without VAT (EUR 57.30 VAT inclusive). 80
Source: Sogama. 81
Source: Interviews. It was not possible to retrieve the value of tariffs imposed by other WtE plants of Spain net of transport costs, in order to provide a comparison with the Sogama tariff. Greenpeace (2010) and Eunomia Research and Consulting (2001) compare the costs of municipal waste management in the EU; in this basis it is possible to highlight that the EU and Spanish costs
22
The tariff paid by municipalities is proportional to the volume of non-recyclable waste
produced, while no tariff is paid on the volume of recyclable materials collected. On the
contrary, in order to incentivise waste recycling, ECOEMBES compensates the municipalities
for the tonnes of recyclable packaging waste collected82. The proportionality feature of the
tariff is in line with the European “polluter-pays” principle stated in Directive 2004/35/ECC and
requiring the costs of pollution to be borne by those who cause it. However, the “polluter-
pays” principle is only partially enforced if considered that there is no tariff differentiation
based on the distance of municipalities from Cerceda. Since 2004, actually, the same tariff is
applied for all the municipalities regardless from their distance to Cerceda and, thus, from the
environmental transport cost of waste (see Section 3.5).
The current tariff was set by Sogama in consultation with the Galician Federation of
Municipalities and Provinces, which is represented on Sogama’s board of directors as well.
Specifically, it was determined by taking into account all the operational costs related to the
waste management process, but also Sogama’s other sources of revenues, i.e. the
compensation by ECOEMBES for the separation of recyclable materials, the sale of electricity
and, at a minor level, the treatment of animal waste. In other words, the tariff was established
so as to cover Sogama’s operational costs and ensure its financial sustainability, without
pursuing profit maximisation83.
Nowadays, however, such a tariff does not ensure anymore the financial sustainability of the
waste management system. The increase of operating costs84, the reduction of revenues from
the sale of electricity produced (caused by the lowering of the energy prices in the world
economic crisis scenario) and the arrears that many municipalities are accumulating in paying
the Sogama tariff is putting the company in financial difficulties (as also discussed in the next
Section)85.
The life-cycle of waste is closed in different ways: by recycling materials which can be used
again to produce new consumer goods, thus achieving a saving of natural resources; by
producing electricity in substitution for other energy sources; by disposing of the tonnes of
unsorted municipal waste (black bags) that exceed the treatment capacity of the Cerceda
plants into landfills. Moreover, organic waste can be used to produce compost to be sold to
the agricultural sector, but this is a service currently not provided by Sogama.
Figure 1.6 summarises the life-cycle of waste in Galicia and highlights the “borders” of
Sogama’s activities. As already explained, they concern:
of waste incinerator (once inflated) are similar to the Sogama figures. However these sources do not consider the differences in transport cost, which in Sogama are particularly high. 82
Trucks transporting the yellow bags are weighted in the transfer stations. ECOEMBES carries out sampling inspections of municipalities to estimate the share of improper material collected in the yellow containers: if this is higher than a certain amount, the compensation due to the municipality for the collection of recyclable waste is reduced and it becomes a fee if the improper fraction’s share exceeds a threshold value (typically between 30% and 35%). 83
In fact, although Sogama is allowed to generate profits, its corporate mission is fundamentally to deliver a service of general interest (as declared in its statute, see Box 1.5). As Sogama’s balance sheets show, the net revenues between 2002 and 2010 have been around EUR 19 million per year (2011 constant prices). 84
Particularly, the personnel cost of subcontracting companies. 85
See also the profitability indexes of Sogama provided in Annex II.
23
not all Galician municipalities, but the majority of them;
not all the types of waste, but only recyclable materials collected in the yellow bags
(plastic, tetra pak and metal) and the black bags (with the unsorted organic and non-
recyclable waste) deposited by the municipalities in the transfer stations86;
and not the complete life-cycle of these materials, but only their transfer to Cerceda,
the separation of waste contained in the yellow bags, the treatment processes of the
waste contained in the black bags, the incineration with energy production and landfill
disposal. Sogama is not responsible for the urban collection of domestic waste as well
as the production and selling of the recycled products.
Finally, in the following box some relevant information about Sogama contained in its statute
are summarised: they contribute to giving a picture of its role, objectives and corporate
management system.
Box 1.5 SOGAMA’S STATUTE AT A GLANCE
According to its statute, Sogama’s objective is to carry out (Art. 2):
1) all activities related to the design, construction, operation and maintenance of waste transfer, treatment and elimination facilities;
2) the study, development and installation of technologies aimed at obtaining power from alternative energy sources, favouring the protection of the environment;
3) the implementation of works, plans, studies, surveys, projects, consultancies, technical assistance and professional services related to the protection, conservation, cleaning, regeneration and improvement of the environment.
Sogama may carry out these activities directly or indirectly, by means of subcontracting companies with the same or similar corporate mission. In fact, Sogama’s staff is composed of approximately 20 people having administrative and technical management responsibilities, while the rest of the services are provided through subcontractors, with more than 500 employees in total (see Section 3.2).
Sogama is managed by a Board of Directors nominated by the General Assembly of shareholders. Its President is selected from within the Board, but the Government of Galicia has influence over his/her selection87, because of its position as major shareholder88.
According to the statute (Art. 15), the company can generate net profits that are distributed to the shareholders.
Source: Authors
86
Glass, paper and cardboard and hazardous waste are not collected and treated by Sogama. 87
As confirmed by the interviews carried out. 88
In the initial years of Sogama’s activity, Sogama’s president was a member of the Government of Galicia (explain ‘member’).
24
LIFE CYCLE OF MSW IN GALICIA Figure 1.6
Note: The figure summarises the life-cycle of different types of waste from their production till their final disposal in landfill (in case of hazardous waste, treated organic waste that is not sold into the agriculture market and other mixed waste), valorisation through energy recovery or recycling. The red cross represents disposal to landfill. The yellow area indicates Sogama’s field of intervention, related to the light packaging products89, which are separated in the Cerceda complex and then collected by ECOEMBES for their recycling, and the black bags (containing both the organic and the mixed materials), which are collected by Sogama and either treated in the Cerceda plant or disposed in the Areosa landfill.
Source: Authors
89
Sogama treats most of the light packaging waste in Galicia. A small share is managed in the composting plants of Nóstian and Barbanza.
Pa
per
Gla
ss
Pla
stic
Met
al
Ha
zard
ou
s
Org
an
ic
Oth
er
Iron
Aluminium
Tetra pack
Four types of
plastic
COMPOSTING PLANT
Iron
Aluminium
THERMOELECTRIC PLANT
Tetr
a p
ak
25
1.5 CURRENT PERFORMANCE
In 2009 1,010,424 tonnes of waste were generated in all 296 municipalities served by
Sogama90. Out of these, the share of recyclable waste collected – paper and paperboard,
plastic, glass, metals and brick – is 10.1%91 (in line with the Spanish average as shown in
Section 1.2), while the waste contained in the black bags and suitable for incineration
represents 89.9%92. Although over time the fraction of improper waste among the recyclable
materials significantly reduced,93 it has not been eliminated yet. If this is taken into account,
the net amount of recyclable waste collected decreases to 9.2%94. The Government of Galicia
(2011) reports that glass is the material most recovered (45.3% to the total of glass products
put onto the market), followed by paper and cardboard (21.3%) and light packaging (7.7%)95.
«In the first years of activities, there was no distinction at all between the contents of yellow and black bags. The first were full of non-recyclable materials, and the latter of plastic, cans, but also batteries and other hazardous waste. As time passed and a number of awareness campaigns were implemented, the “quality” of waste collected noticeably increased. Yet, the garbage bags reaching the Sogama complex still contains a small part of improper materials».
Source: Interviewee
By performing the separation of light packaging (plastic, metal and tetra-pak), Sogama
contributes to the recovery of recyclable materials in Galicia. Moreover, Sogama recovers the
metals from the black bags arriving in Cerceda, but these contain also other recyclable waste,
improperly separated by citizens. All these materials, instead of being recycled, go to the
incinerator or landfill.
In 2009 the waste separation plant at the Cerceda complex manages 17,464 tonnes of yellow
bag waste, lower than the total design capacity of the plant (which is 23,300 tonnes)96. The
RDF plant and the incinerator, built with a capacity of 500,000 tonnes, managed 527,024
tonnes. These data97 indicate that the WtE plant is operating at the peak of its design capacity.
Actually Sogama receives at its transfer stations around 900,000 tonnes per year, a much
larger amount of waste than its facilities in Cerceda are able to manage. Because of this, at the
transfer stations the black bags are weighed: only the maximum volume of waste that
Sogama’s facilities can treat is sent to Cerceda (about 500,000 - 530,000 tonnes per year),
while the remaining mixed waste (between 300,000 and 400,000 tonnes) are directly disposed
in the Areosa landfill98, thus losing the opportunity to recover the recyclable metals and to
valorise the waste through energy recovery99.
90
In all Galician municipalities 1,241,148 tonnes of waste were generated in the same year (Government of Galicia, 2011). 91
Corresponding to 101,802 tonnes. 92
Corresponding to 908,622 tonnes. 93
Mainly thanks to the awareness campaigns organised by Sogama, as explained in the following Sections. 94
Corresponding to 93,395 tonnes. 95
These shares are net of the improper fraction. 96
Currently the plants operates in two work shifts from Monday to Friday. If demand was higher, the plant could work also in three shifts. 97
Source: Government of Galicia, 2011. 98
These 381,596 tonnes in 2009 (Government of Galicia, 2011). 99
The tariff paid by the municipalities is the same regardless of the actual destination of the black bags.
26
In recent years Sogama has been experiencing financial difficulties, mainly because of the
arrears that many Galician municipalities are accumulating100: today the average payment
period is 190 days, against a contractual deadline of 90 days. Because of this, in 2010 Sogama’s
commercial debt amounted to EUR 30.5 million101. In an instable economic environment such
as the one caused by the current world crisis, many municipalities claim not to be able to
afford the tariff payment for Sogama’s waste management service because of limited
resources. The municipalities facing the biggest problems are the rural and the most dispersed
ones, where the costs related to public services are particularly high (as explained in Section
1.1). Yet, during the field interviews it has been reported that some municipalities had
accumulated debts even before the current crisis, because municipal waste management
tariffs on citizens do not completely cover the service’s costs102. Sogama has initiated
proceedings against several municipalities, which have generally led to the negotiation of
payment postponements. At the same time a reduction in the tariff has been advocated by the
Galician Federation of Municipalities and Provinces (GFMP)103, but, in fact, a change of the
tariff is currently not under discussion. Municipalities’ late payments to Sogama are reflected
in Sogama’s balance sheets in the form of a net working capital104 suffering very high variations
(EUR -2.6 million in 2009 and EUR 5.56 in 2010).
The cost of transporting waste from the transfer stations to Cerceda further adds to Sogama’s
economic problems. The Sogama plants are based in the North of the region, while most of the
waste collected and treated is generated in the South. This can be explained not only by the
peripheral position of Cerceda within the region, but also by the existence of the plants of
Nostián and Barbanza delivering the waste management service to some municipalities of the
North, including the large A Coruña. Almost 45% of the waste managed by Sogama originates
in the two cities of Vigo and Ourense105, 135 and 150 km respectively from Cerceda, and the
distance of the Sogama complex from some municipalities reaches 250 km. The distance
strongly affects transport costs for Sogama, which represent approximately 20% of its total
operating costs106.
More information about the present situation and the regional plans to address the existing problems are presented in the following Section.
100
In 2010 the indebted municipalities numbered 135. 101
Source: Sogama’s balance sheet (2010). 102
As a matter of fact, the Galician law 10/1997 establishes that the costs of the delivery of any service related to urban waste management have to be entirely covered by taxes to the waste producers, in order to guarantee a self-financing mechanisms (Art. 31). 103
Source: field interviews. However, Sogama claimed not to be aware of such request. 104
Net working capital is defined as the difference between current assets and current liabilities. Credit assets include receivables, stocks and cash or other net short-term liquidity; current liabilities include mainly accounts payable to suppliers. In particular, Sogama’s credit assets are composed mainly of receivables, as no stocks and no significant cash are required in the waste treatment process (see Annex I). 105
http://www.twinning-waste-bacau.ro/aspecte-generale/presa-sogama-la-voz-de-galicia 106
Source: Sogama.
27
2 ORIGIN AND HISTORY
2.1 BACKGROUND
According to a study by the Government of Galicia107, in 1996 more than 810 thousand tonnes
of MSW per year were produced in the region, corresponding to approximately 2.2 thousand
tonnes per day108. For a population of 2,800,000 inhabitants, this represents an average of 0.9
kg per day per capita109. Due to improvements in the quality of life and changes in consumer
habits, the trend of waste production had been constantly increasing in the previous years,
although it was still below the national and the European average (respectively 1.5 and 1.3 kg
per day per capita)110.
Up to 1998 the prevailing waste management model in Galicia was disposal to existing
landfills: there were about 300 solid waste dump sites and municipal landfills, i.e. almost one
for each of the 315 municipalities. Of these, only the landfill of Santiago de Compostela was
managed in compliance with legislation, while the remainder were affected by numerous
deficiencies and irregularities, such as no control at the entrance, no coverage and compacting
of garbage, no drainage system, no treatment of leachates and no system of collecting
gases111.
This management model was responsible for environmental contamination and several fires,
beside the negative effects on the landscape. Moreover, no municipal regulations concerning
the collection and disposal of MSW were in place and no municipal waste collection service
was provided in most rural areas.
The unsustainability of this situation, which was negatively affecting the environment in the
long-term, was acknowledged and EU Directives played an important role in stimulating the
adoption of a different waste management system (see Section 1.2). Between 1992 and 1996 a
more efficient and integrated model was put forward, aimed at providing the most
appropriate treatment for the total waste stream produced in Galicia. The establishment of
Sogama on the 11th April 1992112 by the Government of Galicia and Uniόn Fenosa113, a Spanish
company engaged in the production and distribution of gas and electricity, represented the
starting point of this new approach.
Since the beginning, Sogama was conceived as an instrument in the service of Galician
environmental policy. Its foundation was anticipated in January of 1992, when the
Government of Galicia approved its first preliminary MSW management plan. This document
107
Government of Galicia, 1999. 108
The provinces of A Coruña and Pontevedra produce the largest amount of waste, respectively 915 and 716 tonnes per day, followed by Ourense and Lugo, with respectively 307 and 208 tonnes/day. 109
This value is higher in the municipalities with more than 50,000 inhabitants, reaching 1.1 kg/habitant per day and much lower in the areas with dispersed population (0.5 kg/habitant per day). 110
Source: Eurostat. The data for Europe refers to the EU 27 area. 111
Government of Galicia, ibidem. 112
Law 111/1992. 113
Later absorbed by Grupo Gas Natural Fenosa.
28
analysed the situation concerning MSW generation and treatment in the region and envisaged
the introduction of a new management system based on incineration with energy recovery. In
fact, assigning 49% of Sogama’s shares to Uniόn Fenosa guaranteed access to its know-how in
the field of electricity generation114.
In 1995 Sogama set up a committee of experts, including academics and engineers, with the
task of identifying the most appropriate solution and technology for MSW management in
Galicia. As a result of internal discussions and study missions all over the EU, visiting other
countries’ waste management solutions, Sogama designed its first project idea. This envisaged
the construction of a number of transfer stations and a WtE plant with the capacity to treat
one million tonnes of waste per year: this was the forecast yearly amount of non-recyclable
waste expected to be produced by all the municipalities of Galicia in future years. After several
negotiations with the Galician municipalities in order to find a suitable location to build the
incinerator, an agreement was finally made with the town of Cerceda. Interviewees reported
that Cerceda was willing to host the Sogama plants, as it would have represented an important
source of employment for its citizens.
Besides the incinerator, the regional administration also planned to build a facility to produce
compost from organic waste; this was planned to be located in the proximity of Vigo, in the
province of Pontevedra.
Regional law 10/1997 of 22 August represented the main legislative basis of Sogama’s
preliminary project. Within the framework of this law, Sogama’s tasks included all the activities
related to transportation, storage, treatment, valorisation and controlled disposal of waste.
Municipalities were identified as responsible for the collection and transfer of waste to
Sogama’s transfer stations, with the possibility to aggregate on a voluntary basis into consortia
and associations of municipalities, in order to provide a more efficient service. Finally, the
promotion of measures to reduce waste generation, planning, coordination and control of all
regional MSW management processes were assigned to the regional administration.
According to this law and consistent with the national legislation, the municipalities of Galicia
were free115 to adopt the waste treatment system of their choice, providing it complied with
national and regional legislation which was demanding the progressive elimination of the
landfill disposal of waste. The Sogama project was the only solution that had been proposed
up to that moment – and it was supposed to be the only one, according to the Government of
Galicia’s early plans – but the situation changed after 1996.
2.2 REVISION OF THE PROJECT DESIGN
Before applying for EU co-financing, in 1996 the Sogama project as it was originally designed
had to be revised, as a consequence of an unexpected event. In the morning of 10th September
1996, 200,000 m3 of garbage collected in the Bens landfill, in the municipality of A Coruña,
114
This was confirmed by some interviewees. 115
And they still are.
29
rolled down the mountainside into the sea, burying everything in its path (vehicles, houses,
boats) and killing a man, whose body was never found.
The Bens landfill, opened in the late Seventies to receive the waste produced by 400,000
inhabitants of the nearby municipalities, was rising against the valley walls, in a mixture of
litter and soil which was not properly compacted. A collapse of the wall of garbage was a
danger probably acknowledged by the municipality’s mayor, who four years before the
disaster proposed to build a retaining wall in the area116. A fire contributed to destabilising the
landfill, which eventually collapsed.
In 1998 the case was filed by the judicial authorities as an accident and no responsibilities were
ascribed to the municipality or to the company managing the landfill. It was also recognised
that the disaster did not cause any serious environmental effects, either on land or in the
sea117.
Yet, this event had an enormous impact on the public’s and the authorities’ sense of civic
responsibility, as it considerably increased the awareness of the importance of finding a
sustainable solution to the waste management issue. The environmental movement’s pressure
became stronger and the mayor, Francisco Vázquez, promised to launch in A Coruña the most
efficient waste treatment system in Galicia based on recycling.
From that disaster the city pumped up its muscles and […] the idea of Nostián and of recycling emerged. The municipal reaction was fast. The mayor put on the green suit and sought the support of Greenpeace to establish a waste treatment system which was supposed to be "as environmentally friendly as possible". Four years after the catastrophe, the landfill was sealed and the mayor was boasting of the Nostián plant. The future of garbage was no longer black, but green.
Source: Alberto Mahía’s article on “La Voz de Galicia” (2008) http://www.lavozdegalicia.es/coruna/2008/09/21/0003_7159173.htm
A Coruña and other municipalities in its metropolitan area chose to drop out of the Sogama
project118 and to develop a different and alternative waste treatment model, which envisaged
the construction of the Nostián plant for producing compost and recycling waste. This decision
was strongly advocated by the environmental organisations, which are traditionally against
incineration technology and more in favour of recycling and production of compost. In a short
time, the Nostián plant was designed and built, contemporaneously with the construction of
the Sogama infrastructure 30 km away (see the following Section); it commenced operations in
2002. The Nostián project’s investment costs amounted to EUR 46.9 million119, EUR 12 million
of which was provided by the European Union in 2000 (through the Cohesion Fund). It was
designed to treat about 220,000 tonnes of waste per year on a site of 180,000 m2. Soon after
that, other municipalities also launched their alternative plan to the Sogama incinerator. The
Association of Municipalities of Serra do Barbanza, nearby Santiago de Compostela, in 2002
116
Source: http://www.elmundo.es/elmundo/2011/09/09/galicia/1315588078.html. 117
After the disaster the Bens landfill was converted into a large park of 600,000 m2.
118 By not subscribing to the Sogama service contract or by withdrawing their subscription to it.
119 In current terms.
30
started the construction of another recycling and composting plant, which in 2003 became
operational. Box 2.1 gives more details on the two composting plants.
Box 2.1 THE NOSTIÁN AND BARBANZA PLANTS FOR WASTE TREATMENT IN
GALICIA
The waste treatment plant of Nostián was constructed by the municipality of A Coruña and the Marine Consortium (Consorcio das Mariñas), including 8 municipalities of the metropolitan area of A Coruña120, for almost 400,000 inhabitants.
It is composed of three modules. The first is a plant where organic and inorganic waste are separated. In turn, the latter is separated into paper and cardboard, plastics and glass, which are then delivered to the IMS companies in charge of their recycling.
A second plant treats the organic waste and puts it into a bio digester, along with water and microorganisms, where it undergoes anaerobic fermentation for 1 month at 35°C. In the decomposition process, the organic waste produces biogas which is used as a source of energy to activate five engines for a total capacity of 6 MWe.
Afterwards, the organic matter is dewatered and transferred to the plant for aerobic composting, where it remains for 40 days. The resulting compost can be sold in the market, mainly to the agriculture sector.
The technology chosen is a mix of the traditional aerobic composting solution and an innovative solution, i.e. the anaerobic formation of organic waste, which reduces bad odours, needs less space and gives a better quality compost.
Today the plant of Nostián treats about 185,000 tonnes of waste (45,000 of which is organic) against a maximum capacity of 220,000. The plant was opened in January 2002, but five months later one of the bio digesters exploded, probably because the structure could not stand the pressure. In December 2002 the facility was rebuilt and the whole plant began operations again.
As far as the Barbanza plant is concerned, operational since 2003, this was constructed to treat the waste generated by 9 municipalities121 assembled into the Serra do Barbanza Association, catering for about 70,000 inhabitants. Every year it treats about 25,000 tonnes of waste, against a maximum capacity of 30,000 tonnes. The plant carries out the separation of inorganic waste (as in the Nostián facility) and the production of compost from the organic fraction, using only aerobic technology. Once matured and stabilised, the compost is supposed to be used for the agriculture. In the Barbanza plant no energy recovery system is in place.
According to the interviews carried out, the compost produced, which in principle should be allocated in the agriculture sector as fertiliser, in fact does not meet the required quality for such a use. The poor compost quality is imputed to the poor sorting of waste by citizens. As a consequence, today a large part of the compost is deposited in landfills and used as a covering material for waste.
Source: http://www.coruna.es/medioambiente/030105plant.jsp, http://cera.es.tl/Cronolog%EDa.htm and Government of Galicia, 2011.
The decision of A Coruña and subsequently of the Serra do Barbanza municipalities strongly
affected the Sogama project as previously designed. In a legal framework whereby the Galician
municipalities were free to autonomously decide which waste treatment solution to subscribe
to, and in a period in which strong environmentalist winds were blowing across the region,
many other municipalities decided to drop out of the incinerator project promoted by Sogama,
with a view to designing a waste management model perceived as more “environmentally
friendly”.
120
These are Abegondo, Gallery, Betanzos, Cambre, Carral, Bergondo and Oleiros. 121
These are Lousame, Brión, Porto do Son, Ames, Rois, Carnota, Muros, Pontecesures and Noia.
31
The regional WMP covering the period 1998-2009 (Government of Galicia, 1999), stemmed
from the on-going situation and aimed at providing clear and consistent rules and objectives to
all Galician municipalities. The Plan122 identified the Sogama waste treatment system as the
preferred option, that would guarantee an integrated and effective solution to the regional
waste management issue; however, it also gave the municipalities the right to decide whether
to subscribe to it or not and, if not, to define their own local WMP.
The Government of Galicia […] supports an integrated waste management system, through Sogama and the facilities it designs and builds, offering a common MSW treatment model for those municipalities which wish to adhere to it, although with the maximum respect of their autonomy. Therefore, municipalities which wish not to join the Sogama management system can implement other systems, provided they are consistent with the principles set out in this Plan and included in the following revisions of the Plan.
Source: Government of Galicia, 1999, p. 58.
The approval of the local WMPs was subject to their compliance with the existing legislation
and to the main goals defined in the regional Plan123, i.e. improving the quality of life of
Galician citizens and achieving a higher level of environmental protection, to be pursued
through a number of interventions. These included:
Actions to minimise waste production, through awareness campaigns aimed at both
citizens and industry;
Actions to promote the reuse of packaging and other MSW;
Actions to carry out waste separation124 and recycling;
Actions fostering the valorisation of non-recyclable MSW to produce energy, in order
to avoid it disposal to landfill;
Actions leading to the closure of all illegal landfills and the regeneration of degraded
areas125.
In 1997 the expected amount of waste to be treated by Sogama was much lower than the
initial expectations, since only 150 municipalities (corresponding to 47% of total municipalities
and approximately 1,100,000 beneficiaries)126 adhered to the Sogama project, by subscribing
to a service contract. Therefore, the preliminary project was revised according to the
established catchment area, by halving the incineration capacity (from one million tonnes to
500,000 tonne per year).
122
The regional plan relies on four guiding principles: i) localness, as it is specific to the environmental and political features of Galicia; ii) completeness, as it addresses the entire waste management process, from collection to treatment and disposal; iii) flexibility and iv) openness, as the plan is open to adopting new treatment processes. 123
The whole regional Plan was expected to cost Ptas 49,378 million (excluded VAT), corresponding to EUR 296.77 million (in current terms). 124
On the basis of this programme, a series of community recycling depots was installed starting from 2001 over a period of three years. The depot areas were endowed with containers for glass, paper and plastics, as well as for batteries and other toxic waste. 125
The programme of closing all illegal landfills led to an investment of EUR 68.5 million, with 249 interventions to date. The Government is currently involved in the closure of the last four landfills, three of which are already non-operational. The expected cost is EUR 740,000. 126
Source: Annex V “Relacion de municipios adheridos a la fecha 31.03.1997”, attached to the project’s application form (Sogama, 1997).
32
Contemporaneously, the Autonomous Community’s proposal to establish a plant to produce
compost close to Vigo was rejected by the local municipalities. The Region, then, decided no
longer to ask municipalities to separate the organic from the inorganic fraction, both of which
could be used by Sogama to produce fuel. In order to make it suitable to be transformed into
RDF, a specific drying system to reduce the humidity of the waste was then included in the
project (see Section 1.3).
2.3 FINANCING DECISION AND PROJECT IMPLEMENTATION
Following the revision of the Sogama project, the European Commission’s financial support
was required to improve the deficient solid waste treatment management infrastructure of
Galicia, through the co-financing of a part of the facilities to be operated by Sogama. In March
1997 the Government of Galicia submitted an application for EU funds. In particular, support
was requested for the following components of the project:
Nine transfer stations127;
Both the waste separation and RDF production plants;
The co-generation plant, producing energy for the Cerceda complex and whose
exhausts are used to dry the waste;
The WtE plant.
The total investment cost was EUR 147 million (current prices) and in May 1998 the
Commission decided to finance 47%, i.e. EUR 72 million128. The remaining cost was covered by
Sogama shareholder contributions. The general goal of the project was to contribute to the
protection of human health and environmental quality in the region, which was supposed to
be achieved via other secondary goals:
Centralisation of waste separation and treatment activities, in order to take
advantage of economies of scale;
Recycling of metal and plastic materials by means of the separation129 of large-size
waste;
Valorisation of non-recyclable waste to produce electricity.
The expected socio-economic benefits were very high, and an internal rate of return of 31.59%
and a Net Present Value of EUR 624 million were estimated130. These values result from the
quantification of a number of positive effects, such as i) the saving of raw materials, natural
resources and energy thanks to recycling, ii) the saving of costs related to the land and water
pollution from landfills, ii) recovery of land for alternative use, as a consequence of the closure
127
In deciding the location of the transfer stations, technical, environmental and social factors were considered. Each plant had to have an area of at least 3,500 m
2, had to be located as close as possible to the major waste production centres, in order to
optimise transport costs, but not too close to urban centres, to avoid any nuisance from truck traffic.
128 Decision C(98) 1273 of 7 May 1998.
129 The waste separation was at first manual, and then mechanised.
130 Source: Sogama, 1997.
33
of landfills, and iv) the fuel saving thanks to the use of RDF. For more details on the costs and
benefits considered, refer to Box I.3 in Annex I.
Before these infrastructures were finalised, some further revisions were adopted131. One of
the nine transfer station132 co-financed by the EU was not built133; however, Sogama financed
seven additional stations, without resorting to EU co-financing, thus bringing to fifteen the
total number of transfer stations operational in 2001. It was then decided to install an
additional plant in the complex dedicated to the separation of the recyclable packaging waste
to be delivered to ECOEMBES, while only the separation of metals though magnets was
retained in the RDF plant.
The whole project was completed in 2000 and became completely operational in 2001 after a
test period. Investment continued however, as significant further investments were made by
Sogama in the following years. These included the mechanisation of the recyclable waste
separation system and new and more effective fire prevention systems. Moreover, the
infrastructures were complemented by another five transfer stations financed by Sogama and
others financed by the Region and by the province of Ourense. During the “mad cow” disease
episode, which spread all over Europe from 2001, a plant for the destruction and disposal of
cattle carcasses was built in the complex of Cerceda. Today this facility is still used for the
processing of animal waste.
The Bens landfill disaster and the consequent decision of many municipalities to drop out of
the Sogama plan were not the only unforeseen events that Sogama had to face. Subsequently,
while the infrastructures were still under construction, a number of municipalities which at
first had refused to adopt the Sogama waste management model, finally decided to join it. This
caused an increase in the population to be served by Sogama, from approximately 1,100,000
to 1,800,000 between 2000 and 2001. Consequently, the amount of waste collected for
treatment in the Cerceda complex grew, so that the incinerator’s capacity was already
inadequate in 2001. In order to cope with this situation, Sogama decided to expand the Areosa
landfill, Sogama’s landfill for non-hazardous waste in operation since 1996.
In the following years other municipalities subscribed to the Sogama model and the amount of
waste recovered steadily increased (see Figure 2.1). Today Sogama is involved in the
management of about 900,000 tonnes of mixed waste per year (collected in the black bags), of
which only 500,000 can be valorised via incineration and energy recovery at the Cerceda
complex. The remainder is disposed of in the Areosa landfill, whose useful life is rapidly being
used up134.
131
Decision C(2001) 1257 of 30 May 2001. 132
The transfer station in Vilaboa. 133
The reason is probably the lack of political consensus concerning its localisation, as stated by some interviewees. 134
A new enlargement has been approved in 2010 to extend the landfill useful life by 8 years.
34
TREND OF MIXED-WASTE MANAGED BY SOGAMA AND OF POPULATION Figure 2.1
SERVED
Source: Sogama, http://www.cep.es/webSite/index.php?action=downloadFieldFile&idField=8&idContent=3205&attachment=1
The uncertainty surrounding the number of municipalities that Sogama would serve derives
from the large degree of autonomy given by the Government of Galicia to local administrations
in deciding whether or not to adhere to the Sogama waste management system (WMP 1998-
2009) and from the lack of any legislative or regulatory mechanism to reduce their hesitation
and forecast the project’s demand. Actually, since no deadline for subscribing to the Sogama
project was set by the Region, the late requests by the municipalities to join the project could
not be rejected. The implications of their autonomy on the project’s design and effects are
deeply explored in Section 4.
2.4 SUSTAINABILITY PROBLEMS OF THE SOLID WASTE MANAGEMENT
SYSTEM
The Sogama project, consisting of the construction of the facilities described in Section 1.3 and
of the delivery of the services presented in Section 1.4, is the main subject of this evaluation.
However, as already pointed out, it is important to take into account that the project
represents only a part of the waste management system adopted by the Region. The
effectiveness of the Sogama project is certainly necessary for the whole system to be effective,
but other actors also play a role in this sense, in particular citizens, municipalities, the regional
administration and the other treatment plants (the Nostián and Barbanza composting plants),
which are the exclusive responsibility of the municipalities that designed and operate them.
The long-term sustainability of the waste management system currently adopted in Galicia,
focused on the reduction of landfill disposal and on the promotion of waste recycling and
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
2000 2001 2002 2003 2004 2005 2006 2007 2008
Mixed waste managed Population served
Ton
s o
f w
aste P
op
ulatio
n
35
valorisation, is undermined by a number of weaknesses and structural problems, not all of
them strictly related to the Sogama project.
i. All the waste treatment plants are operating at the peak of their capacity. As
described in the previous Section, the Sogama WtE plant is inadequate to cope with
the amount of waste collected, but also the Nostián and Barbanza plants are very close
to their limit and even exceed it in the summer months, as reported in the WMP 2010-
2020 of the Region135.
ii. The collection of recyclable materials is not proceeding as expected and the recycling
market is still underdeveloped. According to the project’s final implementation
report, in 2001 the expectations of the Autonomous Community were to successfully
comply with the targets set by the national legislation136 and by the WMP 1998-2009 of
Galicia137 on the share of waste separated and recycled. Yet, the actual results
reported in the new WMP 2010-2020 for the municipalities are not particularly
positive. With the exception of glass, the recovery of light packaging and paper is still
far from meeting the national targets set in 2001 (in line with EU Directive 94/62/EC).
It has to be considered, moreover, that these targets have been increased in 2006:
with EU Directive 2004/12/EC, the European Commission required EU Member States
to recycle a much higher share of packaging waste, from 15% to 55% - 80% (see Box
2.2). It is clear that currently Galicia is not complying with the EU relevant legislation
concerning the recycling rate of waste.
Table 2.1 SHARE OF RECYCLABLE MATERIALS EXPECTED TO BE RECOVERED AND
ACTUALLY RECOVERED IN 2009
Waste by material Galician target
(2001)138
Spanish and EU target
(2001)
Share expected to be recovered in 2001 by the Government of Galicia
Average share recovered in
2009139
Packaging
25% 15%
25% (plastic)
7.7% 33% (metals)
24% (bricks)
Glass 27% 15% 47% 45.3%
Paper 27% 15% 50% 21.3%
Note: The share is expressed over the total of recyclable waste by material produces. The table is referred only to municipalities incorporated into the Sogama’s project, because the shares expected to be recovered in the remaining 18 municipalities are not available.
Source: Authors’ elaboration based on Sogama (2002) and Government of Galicia (2011).
135
Government of Galicia, 2011, p. 23. 136
Law on packaging waste. 137
In the framework of the financial decision, the European Commission stressed the importance of achieving these targets. 138
Galician targets were in fact higher than the Spanish mandatory targets. Actually the Autonomous Community were free to set higher targets on recycling rate. 139
Net of the improper fraction.
36
Box 2.2 EU CURRENT TARGETS ON THE RECOVERY AND RECYCLING OF
PACKAGING WASTE
The EU Directive 94/62/EC on packaging and packaging waste, amended by Directive 2004/12/EC, set specific targets for Member States on the recovery and recycling share of packaging waste. These are:
1. No later than 30 June 2001 between 50% as a minimum and 65% as a maximum by weight of packaging waste will be recovered or incinerated at waste incineration plants with energy recovery;
2. No later than 31 December 2008 60% as a minimum by weight of packaging waste will be recovered or incinerated at waste incineration plants with the energy recovery;
3. No later than 30 June 2001 between 25% as a minimum and 45% as a maximum by weight of the totality of packaging materials contained in packaging waste will be recycled with a minimum of 15% by weight for each packaging material;
4. No later than 31 December 2008 between 55% as a minimum and 80% as a maximum by weight of packaging will be recycled;
5. No later than 31 December 2008 the following minimum recycling targets for materials contained in packaging waste will be attained: 60% by weight for glass; 60% by weight for paper and board; 50% by weight for metals; 22.5% by weight for plastics, counting exclusively material that is recycled back into plastics; 15% by weight for wood.
Source: Authors based on Directive 94/62/EC
In order to improve the quality of waste separation carried out by citizens and to
reduce the improper fraction contained both in the yellow and black bags, in the past
years Sogama and, to a much lesser extent, some municipalities140, have been
promoting several awareness campaigns. All interviewees agreed that thanks to these
efforts, the recyclable packaging collected actually increased, but the regional targets
are still far from being reached.
Finally, most interviewees are doubtful about the real recycling rate of products
recovered by the IMS companies, as the market of recycling products is still
underdeveloped. This argument will be expanded on in Section 3.2.
iii. The recovery and valorisation of organic waste in Galicia is very limited. According to
data provided by the Government of Galicia141, today approximately 42% of the
amount of recyclable or recoverable waste generated in the region is made up of
organic and biodegradable waste. However, the recovery of the organic fraction is
occurring in only 18 municipalities, those incorporated into the Nostián and Barbanza
treatment structures. By contrast, no separation of the organic and inorganic waste is
made in all the remaining municipalities, those served by Sogama: the Cerceda
infrastructures do not incorporate the production of compost, but the drying of the
organic fraction, before its incineration with the rest of mixed waste.
It has to be recorded that the quality of the organic waste collected is very poor (the
average share of the improper waste collected is higher than 25% of the total organic
waste collected142), so that it cannot be fully transformed into good-quality compost
140
Especially the largest ones. 141
Government of Galicia, 2011. Data are referred to 2009. 142
Estimation of the Government of Galicia, 2011.
37
suitable to be sold in the agriculture market. This contributes to further reducing the
share of organic waste actually recycled.
iv. The waste bags still contain a relevant fraction of improper waste. Although the
responsibility for improving waste separation is by law with the municipalities and the
regional administration, Sogama has made significant efforts to reduce the improper
fraction of the waste arriving at its facilities. Despite that, in 2011 the improper
fraction in the yellow bags treated in Cerceda is still very high, i.e. 31.57%143.
v. The amount of waste dumped in landfills could be further reduced. In the last decade
the Government of Galicia pursued the closure of the illegal landfills and discouraged
the practice of leaving waste by the roadside or in isolated sites. Despite the progress
achieved, landfill still represents a necessity for the disposal of a large share of waste.
In 2010 the Region approved an enlargement of the Areosa landfill144, which will
extend its service life by 8 years. This decision was required to remedy the under-
capacity of the Cerceda plants, but is supposed to be only a temporary solution. The
cost of enlarging the landfill, undertaken by Sogama itself in 2010, amounted
approximately to EUR 10-12 million145.
On the other hand, the Nostián and Barbanza plants require complementary landfills
in which to dump the non-recyclable and inorganic waste, which amount respectively
to 64% and 59% of the total waste collected. In February 2003 two dumps were
created closed to the Nostián plant and a third one was opened in 2007 as the others
were reaching capacity. Unlike the Areosa case, these landfills are necessitated by the
characteristics of the composting plants, which do not provide for any valorisation of
non-recyclable materials.
vi. The Sogama complex location is not optimal. The site of Cerceda does not minimise
the distance from the transfer stations spread across the regional territory and the
treatment facilities146. This results in high transport costs, as Section 1.5 has already
indicated. Furthermore, only two transfer stations are currently connected to Cerceda
by train, while for the remaining ones road transport remains the only means of
access, causing some negative environmental effects, related to traffic noise and
pollution147. Hence, building the Sogama infrastructures in Cerceda turned out not to
be the best strategy; but this was probably the only possible solution: as confirmed by
all the interviewees, it would have been particularly difficult, if not impossible, to find
another municipality willing to host the incinerator plant.
143
Source: Sogama. 144
http://www.lavozdegalicia.es/galicia/2011/09/16/0003_201109G16P4993.htm and other press. 145
Source: Sogama. 146
The EU “proximity principle” (set out by Directive 75/442/CE) requires waste to be treated as close as possible to where it arises. 147
These costs have been quantified in the ex-post CBA (see Annex II).
38
2.5 FUTURE INVESTMENTS
The problems highlighted in the previous Section have been addressed by the new Galician
plan for MSW management, covering the period 2010-2020, which sets the basis for pushing
urban solid waste management towards a new and more sustainable scenario.
The plan is based on four main pillars. Firstly, the recovery of recyclable materials improperly
put into the black bags, which today are mainly destined for incineration, is fostered.
Approximately EUR 8 million will be invested in the Cerceda complex148 to modify the RDF
plant, in order to allow the separation of light packaging improperly put in the non-recyclable
waste, thus increasing the amount of recyclable materials recovered.
Secondly, the Region has approved the enlargement and improvement of the already existent
composting plants149, and the construction of nine additional composting plants and a number
of local micro-plants. These interventions are aimed at guaranteeing adequate final treatment
– through composting – of the organic fraction, whose separation and recovery must be
instituted and carried out in all municipalities, in compliance with national legislation150. In
total, the 11 composting plants will be able to treat approximately 154,754 tonnes of organic
waste each year, compared to the 70,000 currently managed. In order to guarantee the
production of good quality compost, suitable to be used in the agricultural sector, new systems
for the separation of the improper fraction will be installed in both the existing and new
plants.
Thirdly, another infrastructure complex with a waste separation facility and a WtE plant will be
built in the South of Galicia, probably on the border between the provinces of Pontevedra and
Ourense. It should enter operation in 2018 and it will have the capacity to treat 310,000
tonnes of black bag waste: after separated the recyclable packaging improperly put by citizens
into the black bags, about 290,000 tonnes per year are expected to be valorised through
incineration. In parallel, because part of the current Sogama’s demand will be catered for by
the new WtE plant, the amount of waste to be transformed into RDF in the Cerceda complex is
expected to decrease from the current 527,000 (in 2009) to 366,000 tonnes per year151. A
plant for recyclable materials separation will be also built in this new complex, with a capacity
of 16,000 tonnes of waste per year. The investments cost for the plant is expected to be
approximately EUR 240-260 million. Even if citizens have already named the new waste
treatment complex “South Sogama”, who will operate it is still uncertain: as disclosed by some
interviewees, this plant might not belong to Sogama or the Region, but may be completely
privately-owned.
148
It is planned to install three lines for the separation of packaging from the black bags, each one managing 16 tonnes per hour and provided with ballistic, magnetic and optical separators, tools to spear plastic bottles and conveyors. Other interventions cover the costs for the provision of new fire prevention systems, bio-filters and other minor works. In total, EUR 15 million is expected to be invested to improve the Cerceda complex. 149
The capacity of the Nostián and Barbanza plants are planned to become 112,500 and 11,000 tonnes per year respectively. 150
Law 10/1998. 151
This is not expected to influence the functioning of the thermoelectric plant, whose capacity remains unchanged.
39
This new facility will allow for the treatment and valorisation of the entire amount of mixed
and non-recyclable waste generated, net of the improper and the organic fractions, thus
eliminating the share currently dumped in the Areosa landfill (with the exception of ashes and
other materials that cannot be valorised). In addition, since it is supposed to treat the waste
generated in the Southern municipalities, in future the transport costs of waste to Cerceda
should decrease. The achievement of these objectives, however, strongly relies on the
municipalities closer to the new plant actually deciding to use it: if Sogama’s waste treatment
demand, and in particular the demand generated in the South of Galicia, does not decline,
transport costs are unlikely to drop and, most importantly, the share of waste destined to the
Areosa landfill will not substantially reduce. The degree of autonomy of municipalities in this
respect is very high, since the Government of Galicia has not envisaged any measure to push
municipalities to select a given waste management plant. For this reason, it is very difficult to
predict how the situation will develop.
Finally, a communication programme involving the launch of a set of awareness campaigns will
be implemented in the coming years. These campaign, aimed at both citizens (children
included) and producers, have different specific objectives:
i. improving the quality of recyclable waste separation (especially packaging, paper and
the organic fraction152), thus reducing the share of improper waste. This intervention is
crucial to guaranteeing the effectiveness of the whole waste management system,
from the moment the waste is produced to its disposal or recycling.
ii. Fostering the use of recycled materials and promoting the minimisation of waste
through the re-use of products. The objective of the regional administration in this
respect is to attain a reduction of per capita waste production of 10% in 2020,
compared to the volume registered in 2009153.
In short, the new plan envisages a regional integrated approach for waste management,
covering the whole life cycle of waste: having recognised the main weaknesses affecting the
current waste management system, the regional administration has developed a differentiated
strategy, including, on one hand, the construction of new facilities capable of treating all
recyclable materials and ensuring the valorisation of all waste produced, and on the other
hand the organisation of a number of awareness campaigns addressed to citizens and aimed at
improving the quality of waste separation, strengthening the market of recyclable products
and minimising the production of waste. The Government of Galicia estimates that almost EUR
510 million will be invested in attaining all the measures contained in the Plan 2010-2010, to
be financed by different actors, both public and private154.
152
The recovery of glass is already very high so this is not a priority of the awareness campaigns. 153
This target has been considered in the future scenario of the ex-post CBA and the sensitivity of results to it has been assessed (Annex I). 154
More specifically, 84% of the investment costs will be covered by private sources of financing (they will cover especially the cost for the new waste management infrastructures), 6% by the Galicia Region, 4% by the IGS companies, 3% by the European Union, 1% by the Spanish State and 1% by the local authorities.
40
Box 2.3 AN ALTERNATIVE PROPOSAL FOR SOLID WASTE MANAGEMENT
In the analysis of the interventions planned by the Government of Galicia to find a long-term and sustainable solution to solid waste management of the Region, it has to be pointed out that a different management option has been advanced by the environmental movement (e.g. Greenpeace, 2009) and more scientifically supported also by some academic experts (e.g. from the University of A Coruña). For sake of completeness, their position is reported in this Box155.
This alternative proposal is based on the idea that the only solution to stop the occurrence of negative environmental and health effects caused by waste and its disposal is the eradication of waste at source, meaning at the very start of its life cycle. Contamination can be substantially reduced only by preventing it: from this perspective, not producing waste is considered much better than using any kind of technology to treat and dispose of it.
The reduction of waste at source, jointly with the maximisation of reuse and recycling are the methods to be pursued to cut the volume of waste produced. Disposal in controlled landfills is accepted as a residual and last resort solution, suitable only to toxic and dangerous products, while the incineration option is considered unnecessary. It is recognised that this vision, consistent with the waste treatment hierarchy proposed by the European Commission and formally embraced by the Member States, could be achieved only through an adequate legislative intervention and strong awareness campaigns to producers and consumers of goods.
The environmental benefits generated by such a strategy, estimated by FEG – Ecologist Federation of Galicia (Quintela Sabarís, 2008), and the University of A Coruña (Soto and Vega, 2011), are in terms of reduction of waste weight and volume, toxic waste produced, emission of gases and heavy metals and waste water generation.
Source: Authors
155
How realistic it would be for a region to adopt it and what the costs would be is not discussed in this report.
41
3 LONG-TERM DEVELOPMENT
EFFECTS
3.1 KEY FINDINGS
A summary of the long-term effects produced by the Sogama project is presented below.
Evidence collected shows that the Sogama project produced significant positive effects on
economic growth and environment. The impact on direct economic growth is particularly
strong and it mostly affects the companies operating in the waste management industry,
including Sogama, other companies providing services in this sector and the operators involved
in the recycling activities at national scale. The improvement in environmental quality,
achieved by the closure of all illegal landfills spread across the region and by the provision of a
more sustainable waste management system, has benefitted Galician citizens.
The results of the ex-post CBA support these findings. The quantified benefits relate to
Sogama’s MSW treatment and sorting activities, energy generation, positive externalities from
the production of electricity through biomass and co-generation and from the closure of illegal
landfills existing before the project’s implementation. The latter benefit is included also in the
without-the-project scenario: as an alternative to the Sogama’s project, it is assumed that the
Government of Galicia would have created a number of legally managed municipal landfills
over the Galician territory in which to dump all MSW, without sorting the recyclable materials
and without energy generation. The economic net present value and internal rate of return of
the project, net of the costs and benefits of the counterfactual case, are positive: EUR 193.07
million156 and 7.19% respectively.
However, the positive impact on the environment would have been higher if i) the Cerceda
complex had been built with sufficient capacity to address all the waste treatment demand,
and ii) the quality of waste separation by citizens had been higher. The analysis shows that
these two factors played the most relevant role in limiting the environmental positive effects
of the project.
The project also influenced the endogenous dynamics of economic growth, by contributing to
the development of human capital and technological progress and by improving the
organisational efficiency of the waste management service within Galicia.
At the same time the project benefitted regional territorial cohesion by offering (starting from
2004) all the municipalities the same service at the same tariff regardless of their distance
from Cerceda. This had positive effects in limiting centre-periphery disparities. However, it is
not the most economically and environmental efficient solution, because it entails additional
156
2011 prices.
42
transport costs. No relevant long-term effect on social cohesion is recorded, as the project
does not specifically and significantly addresses the needs of particular social groups157.
Greater effects could have been expected in terms of institutional quality: although new
competences were generated within the municipalities and the regional public administration
thanks to the project, much more could have been expected. In particular, municipalities could
have taken the opportunity to aggregate into consortia (a possibility envisaged by the regional
law 10/1997) or other forms of institutional association, to more efficiently manage public
waste management services, thus reducing costs. The Region could have played some role in
supporting Sogama’s waste management system among the municipalities, in order to reduce
their uncertainty about which plan to join.
Finally, subjective perceptions of satisfaction and wellbeing have been affected by the Sogama
project, as analysed by reference to the residual category of effects that has been defined as
“social happiness”. People express satisfaction over the closure of all illegal landfills and the
adoption of an integrated waste management solution, allowing a better valorisation of waste.
Yet, their perception of wellbeing has been significantly influenced by the environmentalist
groups and, partly, by the press, both of which contrast incineration technology against other
forms of waste treatment. This, jointly with a low level of public awareness of the whole waste
cycle and of Sogama’s role and area of responsibility, did not allow the public to completely
enjoy the benefits brought by the project.
Table 3.1 SUMMARY OF NATURE AND STRENGTH OF IMPACTS
Strength*
(-5 to +5)
Level Quantitative analysis (CBA)
Qualitative analysis
1. Direct economic growth +4 Local, regional, national
√ √
2. Endogenous dynamics +2 Local, regional √
3. Social cohesion 0
4. Environmental effects +4 Local, regional, national
√ √
5. Territorial cohesion +3 Regional √
6. Institutional quality +1 Local, regional √
7. Social happiness +1 Local, regional √
*-5 = very strong negative effect; 0 = no effect; 5 = very strong positive effect (The criteria considered to assign the scores are presented in Annex I).
157
In this evaluation study, social cohesion is defined as the capacity to reduce inequality among different socio-economic groups, included vulnerable ones such as women, the elderly or migrants (see the First Intermediate Report and Annex I of this report).
43
Table 3.2 IMPACTS* ON DIFFERENT STAKEHOLDERS
EFFECTS Infrastructure operators (Sogama and subcontractors)
Other operators of the waste management sector
ECOEMBES Government and citizens
Local (Cerceda)
Regional National
1. Direct economic growth
+5 +2 +2 +5 +3 +1
2. Endogenous dynamic
+5 +2 -1 +3
3. Social cohesion
4. Environmental effects
+3158 +4 +2
5. Territorial cohesion
+3
6. Institutional quality
+1 +1
7. Social happiness +1 +1
*-5 = very strong negative effect; 0 = no effect; 5 = very strong positive effect (The criteria considered to assign the scores are presented in Annex I).
From a time dimension perspective, the nature of the long-term effects analysed has already
stabilised and no significant changes or additional effects are expected in the future years;
what may change is the strength of these effects. For instance, the impact on direct economic
growth is expected to slightly increase in the future, as the market for recycled products
strengthens and waste separation at source improves; environmental quality will also improve
once the capacity problems are solved. The impact on the social happiness, which has been
mixed in recent years, could be enhanced if actions are taken to give citizens a complete and
objective perception of the project’s effects. Even if these actions have been foreseen in the
current regional WMP, there is no assurance that they will actually affect social acceptance of
the project.
Further evidence and discussion about the main effects generated is presented in the
following Sections.
158
This effect is lower because of contamination problems related to the Areosa landfill.
44
Table 3.3 TEMPORAL DYNAMICS OF THE EFFECTS*
Effect Short run (years 1-5)
Long run (years 6- 10)
Future years
Comments
1. Direct economic growth
+ ++ +++ The benefits from direct and indirect employment generated in the short run rose as a consequence of the additional economic opportunities in the waste management sector generated by Sogama. In the future the contribution to the market of recycled products is expected to increase, especially if the quality of the separated waste collected in the municipalities improves.
2. Endogenous dynamics
+ ++ ++ Positive effect reinforced and mostly stabilised.
3. Social cohesion No effect.
4. Environmental effects + ++ +++ Environmental quality, affected by the incinerator’s under capacity and the poor quality of waste separation , is expected to improve by means of the new regional plan 2010-2020.
5. Territorial cohesion + ++ ++ Positive and stable effect, maximised by the introduction in 2004 of a unique tariff for all municipalities.
6. Institutional quality + + + Missed opportunity in the long-run, where effects could have been greater. No change is expected in future years.
7. Social happiness +/- + +/- Mixed effect, which might not stabilise in the future.
*+ = slight positive, ++ = positive, +++ = strongly positive, +/- = mixed effect (the meaning of these symbols is more extensively described in Annex I).
3.2 DIRECT ECONOMIC GROWTH
The contribution by the Sogama waste management project to direct economic growth is
overall positive compared to a without-the-project scenario consisting of fully decentralised
MSW management, based on waste disposal into legal landfills, without waste separation,
recycling or energy generation. As explained in Annex I, this scenario corresponds to a do-
minimum option, in which the Government of Galicia undertakes some investments to retrofit
the existing landfills in compliance with legal requirements159. The positive economic effects of
the project are quantified via the ex-post CBA methodology at an economic net present value
of EUR 193.07 million and an economic internal rate of return of 7.19%.
The counterfactual approach adopted in the CBA allows us to point out that the main
economic benefit produced by the Sogama project is in terms of the saving in investment and
operating costs that the Region would have undertaken in the without-the-project case. These
costs have been valued on the basis of the historical costs incurred by Sogama to build and
159
In the counterfactual scenario it is assumed that biogas is flared without energy recovery.
45
manage the Areosa landfill. In the counterfactual scenario, it has been estimated that the total
investment costs for municipal landfill would have amounted to EUR 24.54 million (at 2011
prices) and the operating costs, which depend on the volume of waste managed, would have
been EUR 731.97 million over the entire time horizon (an average of EUR 23.61 million per
year). The present value of the municipal landfill cost saving is EUR 864.75 million, being
approximately 37% of the total project benefits quantified in the CBA.
In addition to the saving in landfill costs, the project generated a benefit through the provision
of an adequate treatment process for non-recyclable waste. This service includes the transport
of the urban solid waste to the Cerceda complex and the valorisation of non-recyclable urban
waste. The economic value of such a service is estimated in the CBA by applying the standard
conversion factor160 to the revenues collected through the tariff paid by municipalities. Its net
present value is EUR 124 million, i.e. 6% of the total project’s benefits.
The project affects economic growth via other four factors, more extensively described in this
Section, i.e.:
i. direct and indirect employment;
ii. contribution to the market of recycled products;
iii. energy generation.
Another very minor and undocumented effect to which Sogama may have contributed
concerns the economic benefits deriving from the closure of illegal landfills, which facilitate
area regeneration, thus increasing land’s economic value. This effect is not included in the
CBA, not only because it was not confirmed by the interviewees, but because it is assumed
that the closure of all illegal landfills would have been implemented also in the without-the-
project scenario161.
DIRECT AND INDIRECT EMPLOYMENT When Sogama applied for EU co-financing, its expectations about the project were to generate
approximately 100 direct and 500 indirect employees162. In fact, when the Cerceda complex
commenced operations in 2001, staff numbers directly working in the waste treatment
process already amounted to 375. This increase was mainly due to the construction of the
waste separation plant163, originally not foreseen. According to the information collected164,
today almost 500 employees are directly involved in the Sogama activities and approximately
the same number are involved in connected activities. Out of the employees involved in the
waste collection and treatment services, more than 300 work in the facilities at the Cerceda
160
0.997. 161
According to Greenpeace (2010), the project and, in general all incinerators, have also a potential negative economic impact on the landscape, this affecting the tourism sector of the area. However, neither the documents analysed not the interviewees reported this effect. In addition, the area of Cerceda is not appointed as an area particularly suited to tourism. 162
Sogama, 1997. 163
At the beginning waste separation was undertaken manually. 164
From interviewees and the press (http://www.galiciae.com/nova/63189.html).
46
complex (i.e. the recyclable materials separation plant and the plants for the production and
incineration of RDF), to which about 30 staff, dedicated to security, cleaning and gardening
services, have to be added. About 55 people work at the Areosa landfill, another 40 are in
charge of the tasks performed in Sogama’s 20 transfer stations, and almost 70 people are
involved in the road transport of waste. Finally, Sogama’s management staff is composed of
around 20 people (engineers, economists, law graduates and professional educators). A large
number of additional temporary jobs (other 500) are generated each year in the month of May
when maintenance and cleaning activities are carried out.
With the exception of the management staff, all the remaining workers are not employed by
Sogama itself, but by its subcontracting companies, to which Sogama entrusts the delivery of
specific services in the different phases of the waste treatment process. For instance, the
Areosa landfill is managed by the consortium between Viviendas y Obras Civiles, Sociedad
Anónima de Gestión de Servicios y Conservación – Geseco - and Abonos Orgánicos Ibéricos;
Cespa is in charge of managing recyclable waste separation plant; and the consortium of
Geseco, Viviendas, Obras Civiles and Perfis 2000 has been appointed to manage the RDF
production plant165.
While qualified workers tend to be recruited on a regional level, non-qualified positions are
generally covered by residents of Cerceda, because of an agreement signed by the mayor of
Cerceda and Sogama: according to it, the Cerceda labour force should be preferred by Sogama
for the non-qualified jobs available. In this way, a high employment rate has been ensured at
local level, but there is also a negative aspect, as highlighted by one interviewee. Because of
the unqualified skills characterising the Cerceda workers employed in the waste management
sector, it has been said that in fact they have few chances to develop higher-level
competences suitable for other industrial sectors. This aspect makes the inhabitants of
Cerceda strongly dependent on Sogama’s industrial activity.
The shadow wages of Sogama’s employees (both direct and subcontractor companies’ staff166)
have been estimated and included in the ex-post CBA, by using a conversion factor of 0.85.
This factor, drawn from Del Bo et al. (2011), was calculated by taking into account the specific
peculiarities of the regional labour market, which, in the case of Galicia, does not significantly
differ from the national average167.
Besides the employment generated to run Sogama’s infrastructures, the project had additional
positive external effects on local development. For a long time Cerceda has been a place with
well-established industrial activity, mainly based on the Meirama coal-fired thermoelectric
plant, operational since the first half of the 1900s’. In order to counteract the depletion of the
165
It has been contracted by Sogama starting from 1st January 2011 for 4 years. The plant was previously managed by Urbaser.
166 In Sogama’s balance sheets (which have been used to compile the CBA tables), the labour cost of Sogama’s subcontractor
companies are included in the cost item referred to the services purchased by Sogama (see Annex I). The conversion factor has been applied to this cost item. 167
The national average shadow wages for Galicia and Spain are EUR 21,277 and EUR 23,455 per annum respectively and the conversion factor is the same (0.85).
47
lignite reserves at the end of the Nineties and the consequent closing of the plant168, Cerceda
underwent a process of industrial diversification, in which the waste management sector took
prominence. Locating the Sogama complex in Cerceda was only the first step of this process, as
other companies operating in the same sector were later attracted to Cerceda, with positive
effects on employment. At present in the municipality of Cerceda there is a plant for bulky and
electronic waste treatment169 and the SIGRE facility for the recovery and disposal of the
pharmaceutical waste collected from all over Spain. This is the only plant in Spain treating this
type of waste170. All these activities paved the way for very good economic perspectives for the
municipality: today Cerceda has the lowest unemployment rate in Galicia (7%171) and it is
among the counties with the highest per capita income in the region.
These additional wider effects on local employment and growth have not been considered in
the CBA exercise since the project’s contribution to them is only indirect and difficult to
quantify.
CONTRIBUTION TO THE MARKET FOR RECYCLED PRODUCTS Sogama plays a role in the production and sale of recycled products, although this is a limited
role, shared with residents, municipalities and the IMS companies (particularly ECOEMBES). By
providing the service of separating metals and all recyclable light packaging waste by material,
a contribution is made to the process leading to their recycling and, in general terms, to the
overall development of the market for recycled products. Each year Sogama separates
approximately 9-10,000 tonnes of light packaging, which are then all collected by ECOEMBES.
As pointed out by the interviewees, the high share of improper waste collected among the
recyclable materials prevents the production of material of the desired quality. For this reason,
this effect cannot be considered particularly significant at the moment, but it will probably
improve in the future when the waste separation by residents improves, thus allowing the
recovery of a larger amount of recyclable material.
«The recycling market is not fully exploited because right now the critical mass for waste recovery and valorisation is still not enough […]. I am very optimistic that in future the recycling industry will become a reality in Galicia».
Source: Quotation from an interview with José Alvarez Díaz, Sogama’s former president, 27.03.2009, published on the newspaper La Voz de Galicia172
The recycling activity has implications, albeit indirect, for energy saving. Harvesting, extracting
and processing the raw materials to manufacture new products are energy-intensive activities:
168
Recently the plant, which is managed by Grupo Gas Natural Fenosa, returned to operations using coal imported from Russia and Indonesia (source: press review).
http://www.laopinioncoruna.es/secciones/noticia.jsp?pRef=2009071900_4_305070__Galicia-Fenosa-retoma-queima-carbon-termica-Meirama-tras-paron). 169
Collection of bulky waste is carried out once a month. In this plant the treatment of electric and electronic equipment also takes place. 170
Non-hazardous medical waste is safely treated and valorised (with energy production), the hazardous drugs are properly deposited into sealed airtight containers and then moved for controlled disposal, and packaging (glass, paper, cardboard, metal and plastic) are recovered for recycling. 171
http://www.galiciae.com/nova/63189.html; http://www.lavozdegalicia.es/carballo/2009/10/13/0003_8032883.htm. 172
http://www.twinning-waste-bacau.ro/aspecte-generale/presa-sogama-la-voz-de-galicia.
48
recycling reduces the need for these processes, thus achieving energy savings. Recycling
results in some energy saving for all types of material, although the amount of energy saving173
differs by material: in particular, recycling aluminium cans involves the highest energy saving,
amounting to approximately 90-95%174. Recycling is an economically efficient activity which
not only entails saving of energy, but also of raw materials (woods, oil and others), thus
generating a positive effect on the environment; this effect is more deeply analysed in Section
3.5. If the effect on employment is at a local level, the contribution to the market of recycled
products is on a regional, national or even wider scale: actually, recycled products can be sold
to companies located in Galician, other Autonomous Communities of Spain or foreign
countries.
Sogama’s contribution to the recycling market is reflected in the CBA by a conversion factor
close to 1 applied to the revenues deriving from the waste separation service175 (more
specifically, the standard conversion factor for Spain has been used176). In other words, the
price paid by ECOEMBES for the separation of recyclable packaging by material is considered
equivalent to the opportunity cost of the service provided by Sogama. It can be calculated that
the present value of the socio-economic benefit of Sogama’s sorting service is about EUR 359
million177 over the entire time horizon of the analysis.
ENERGY GENERATION Sogama also contributes to economic output and therefore growth by generating energy from
waste incineration (310,638 MWh in 2010, which represents 66% of the total electric energy
produced by Sogama) and through the co-generation plant (139,682 MWh, about 23% of the
total energy produced in 2010). A small amount of energy is produced also by the combustion
of landfill gas at the Areosa landfill178. In total in 2010 Sogama produced and sold 459,882
MWh of energy179, which provides an average of 40% of Sogama’s revenues (approximately
EUR 30 million per year180). This is the second most important source of revenues for Sogama,
after the municipal tariff for waste treatment. Energy production from biomass and co-
generation is favoured in Spain by a special legal framework, which establishes monetary
incentives for these energy sources and contributes by making energy sale profitable for
Sogama. More details on the energy market in Galicia and Spain are presented in Box 3.1.
173
The difference between the energy required to manufacture products from virgin compared to recycled raw materials. 174
Refer for instance to Forsell Stauffer (1988), Coate et al. (2005) and the United States Environmental Protection Agency (http://www.epa.gov/epawaste/conserve/rrr/recycle.htm). 175
I.e. the service paid for by ECOEMBES. 176
Amounting to 0.997. 177
2011 prices. It corresponds to approximately 17% of the total benefits quantified in the CBA. 178
For a review of how energy affects economic growth, see Stern and Cleveland (2004). 179
Source: Sogama. 180
Average between 2002 and 2011 (current prices).
49
Table 3.4 SOGAMA PRODUCTION OF ELECTRICAL ENERGY (2010)
Energy source Installed power (MWe) Energy generated (MWh) %
Refuse Derived Fuel 50 310,638 67.55
Co-generation 21.26 139,682 22.93
Biogas 2.2 9,562 2.04
Total 73.46 459,882 100
Source: Sogama
In the ex-post CBA exercise, the shadow price of energy sales has been estimated as the
average selling price of electricity in the Iberian market (including the integrated energy
markets of Spain and Portugal), which is assumed equal to long-run production costs. This unit
shadow price has been multiplied by the amount of energy produced by Sogama181 to obtain
the economic value of Sogama’s revenues from energy production. The net present value of
the benefit of energy production amounts to EUR 665 million and it accounts for 32% of the
total project’s benefit quantified in the CBA182.
Moreover, the production of electricity from waste generates positive externalities, consisting
in the saving of environmental costs that would have been produced by alternative energy
sources relying on fossil fuels and the saving of alternative combustible materials. At the same
time, waste combustion generates atmospheric emissions, representing a negative externality.
Both these positive and negative externalities have been quantified in the CBA, by valuing the
emissions produced by Sogama compared to the average energy production mix of the Iberian
market. This effect is discussed in Section 3.4 dealing with the project’s impact on environment
and the methodology applied for its economic quantification is described in Annex II.
Box 3.1 ENERGY FROM WASTE INCINERATION AND OTHER ENERGY SOURCES
SUBJECT TO THE SPANISH SPECIAL REGIME
In Spain electricity generated by incineration of solid waste is subject to a special legal framework. This special regime was introduced in Spain during the Eighties, with Law 82/1980 concerning energy conservation, industry efficiency and reduction of energy imports. The law was aimed at addressing the weaknesses in the energy sector emerged during the world oil crises, related to the lack of energy diversification. Some years later, the National Energy Plan 1991-2000 established a set of incentives for co-generation and energy production by renewable sources: the declared objective was to increase their share to the overall electricity production from 4.5% in 1990 to 10% in 2000.
The special regime applies to those plants with an installed power of 50 MWe or less183, including hydroelectric, wind power, solar, biomass, co-generation plants and waste incinerators. These facilities can sell the energy produced to distributors at a favourable price. According to law 54/1997184, energy producers subject to the special regime185, can choose between:
a) Receiving the final average tariff paid by consumers for energy, plus a premium;
181
Source: Sogama’s balance sheets. 182
It is the second largest economic benefit, behind the benefit from the saving of investment and operating costs of municipal landfills, envisaged in the do-minimum scenario. 183
Sogama thermoelectric plant’s installed power is 50 MWe. 184
Dated 27 November 1997. 185
Construction and operation of plants and production of energy under the special regime are subject to a permit granted by the Regional Administrations. Electric power facilities in the special regime must be registered in the Administrative Registry of the Facilities Producing Electric Power (Registro Administrativo de Instalaciones de Produccion de Energia Electrica).
50
b) Receiving the marginal hour price plus a remuneration weighted by the power capacity and service guaranteed.
The first of these turned out to be the preferred strategy chosen by energy producers. This tariff contributed to increasing the trend of energy produced by these sources186.
In Spain the volume of electricity from all sources subject to the special regime amounts to one third of the total electricity supply in 2010 and the share of electricity generated by waste incineration represents 2.6%187. Galicia records a higher proportion of renewable electricity, at 42%, but a lower value for incineration, i.e. 1.5%. The major expansion since 1998 is attributable to wind power, from 12.6% in 1998 to 66.1% in 2009, while over the same period hydroelectric decreased from 26.6% to 14% and cogeneration from 58.7% to 13.2%. The role of waste incineration has remained minimal over the years, growing from 0.6% in 2001 to 1.55% in 2009, but maintaining a regular increasing trend.
The inclusion of the incineration technology among the other renewable sources favoured by the special regime is strongly objected to by environmental organisations: because of the greenhouses gases generated by incineration, they refuse to consider this technology to be a source of green electricity.
Source: Authors’ elaboration based on data from IGE and the National Commission on Energy
3.3 ENDOGENOUS DYNAMICS
In terms of endogenous dynamics of economic growth, the project under evaluation
succeeded in improving local knowledge and expertise regarding waste treatment and the
organisational efficiency of the Galician waste management system. These aspects are only
qualitatively described and not included in the CBA, as it would be particularly difficult to
quantify them.
As far as the technological progress is concerned, Sogama relied on the latest and most
innovative technologies available in the Nineties, both in the design phase (e.g. with the
adoption of the Circulating Fluidised Bed combustion technology for the incinerator) and in
subsequent investments (e.g. the introduction of optical devices for waste separation). This
was aimed at guaranteeing high technological standards and at providing the most effective
186
National Committee for Energy (CNE) data. 187
Source: GSI and National Commission on Energy data (http://bipartisanpolicy.org/projects/national-commission-energy-policy).
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Composition (%) and total amount (GWh) of energy produced in Galicia
subject to the special regime
Residuos
Biomass
Hydroelectric
Eolic
Solar
Co-generation
Total energy sold
51
service. Improvement of the technological level is also achieved by Sogama by taking an active
part in various research, development and innovation projects188 in the field of waste
management189. The project Red-Genera190, implemented in collaboration with the Portuguese
region Norte, has the objective of strengthening waste management by Small and Medium
Enterprises by making waste reduction more effective, promoting the re-use of materials in
different industrial processes and stimulating recycling and energy valorisation, and by
identifying the materials which may have greater market value. Another project in which
Sogama participates is based on research studying the possibility of reusing the ash generated
during the incineration process in the construction sector191.
The advanced technologies implemented influence the quality of human capital involved in the
project, since new expertise and capacities in delivering a range of modern waste management
technologies, and in regulating them, are developed. Sogama has signed collaboration
agreements with three universities in Galicia, to ensure a high-level educated labour force for
the waste management industry. This feeds a virtuous circle which contributes to developing
the waste sector in Galicia, thus increasing employment (see the previous Section).
Sogama’s project also produced efficiency improvements related to the waste management
system. The construction of a number of transfer stations operating in specific areas of the
region as intermediate points along the waste collection process adapts well to the
peculiarities of the Galician population, characterised by high dispersion, and they guarantee
optimisation of MSW transfer. Moreover, the waste management model put in place by
Sogama – and promoted by the regional WMP 1998-2009 – is integrated, in the sense that it
implements in the same complex the processes of waste reduction, recycling, treatment and
valorisation. The simultaneous dispersion of Sogama’s activities – through the collection
services provided in the transfer stations – and their centralisation and integration in the
Cerceda complex contribute to making the waste management system more effective and
efficient. However, most interviewees stressed that these gains could have been higher if
Sogama’s facilities had been built on a different location that would have minimised the
distance from all the transfer stations and reduced the total cost of transport192.
3.4 ENVIRONMENTAL EFFECTS
The project improved environmental quality and sustainability, by providing a more efficient
and integrated solution to the region’s waste management issues. As part of a plan involving
the closure of all illegal landfills in the region, Sogama played a significant, although indirect,
role in the elimination of environmental externalities related to landfills, including the
substantial reduction in hazardous waste leaching from landfills, release of methane, bad
188
In some cases co-financed by the European Union. 189
These activities are identified as one of Sogama’s main tasks, as stated in its statute. 190
http://www.redgenera.org/. 191
This project is led by the Galician company Recinor (Reciclaje de Inertes de Noroeste), in collaboration with the Government of Galicia and a number of universities and research centres. More than EUR 188,000 has been invested in this project in the years 2011-2012 (http://www.sogama.es/gl/info/proxecto-de-investigacion-de-escouras-para-sua-utilizacion-no-eido-da-construcion). 192
This weakness will be addressed through the construction of a new plant to treat the waste collected in the transfer stations, and located in the South of the region (see Section 2.4).
52
odours and negative visual impact on the landscape193 (a review of the incinerator’s impacts is
included in European Commission, 2000). This positive effect has not been quantified in the
CBA: since it would have also occurred in the without-the-project scenario, its value would be
not relevant from an incremental perspective.
Other project benefits affecting the environment, already presented in Section 3.2, whose
economic value has been estimated in the CBA, are briefly recalled here: they mainly relate to
recycling and energy generation activities. Recycling brings large benefits to the environment
thanks to the saving of raw materials and resources that would have been exploited in
manufacturing new products, such as wood and oil; the importance of saving raw materials is
increasingly stressed by environmental organisations and some political movements, as the
world reserves are being rapidly depleted. Moreover recycling allows energy savings, which
has not only economic, but also environmental effects, by reducing the amount of carbon
emissions. Energy savings are achieved also through the energy valorisation of non-recyclable
waste and co-generation of heat and power.
Despite the positive effects highlighted, environmental benefits could have been larger, if the
share of improper materials collected was lower and if the project incorporated the separation
of organic waste. Indeed, through composting, a higher share of waste would have been
valorised. This represents a missed potential benefit and the WMP 2010-2020 of Galicia tackles
this deficiency by planning the construction of a series of composting plants all over the
region194.
The project generates environmental costs related to MSW transport from the transfer
stations to Cerceda. The negative externalities produced by the 45 trucks195 transporting waste
and travelling more than 738,000 km each month196 (costs for the accidents, noise, air
pollution and greenhouse gas emission) have been monetised197 and included in the economic
analysis of the CBA. The distance travelled every year by Sogama’s trucks was considered and
shadow prices were applied to take the negative externalities into account. The present value
of this environmental cost is EUR 21 million, only 1% of the total costs198 of the project
included in the CBA over the thirty-year period 1997-2027. These costs would have been
higher if Sogama had not decided to complement road transport with railway connections
between Cerceda and the transfer stations of Vigo and Ourense, two cities in the South of
Galicia where about 40-45% of waste treated is produced199.
193
It has been argued also that incinerators are visually undesirable, especially because they usually require a visually intrusive chimney stack. An interviewee reported that “This effect has been minimised by Sogama, through the construction of a squared-size and relatively low chimney, that appear different than other traditional circular and higher chimneys”. 194
It has to be pointed out that the actual use of the compost as fertilizer or soil conditioner strongly depends on the quality of the separate urban waste collection. In addition, the energy content of the organic fraction of waste is recovered only if the composting facilities are completed with co-generation by biogas. 195
Belonging to the company Transportes Pellejero. 196
Approximately 75 containers of waste are loaded each day by Sogama’s trucks, corresponding to a total of 1,500 tons of waste. 197
The INFRAS/IWW (1999) approach was used. 198
The investment and operation costs of the project (see Annex I). 199
The railway transportation from Ourense started in 2004.
53
Additional effects on the environment highlighted by interviewees and the press relate to the
incinerator’s air emission impact on human health and climate change. In general
environmental organisations are strongly against incinerators for not being an effective and
desirable solution for waste management, because of the negative externalities they entail. A
recent study by Greenpeace (2010) lists all the environmental costs generated by incinerators:
atmospheric emissions, effluent liquids, generation of secondary solid refuses (ashes and slags,
which could be classified as hazardous), fires, noise and visual impacts. Concerns have also
been expressed in relation to the impact that polluting emissions (dioxins and furans and other
fossil fuel-derived CO2 released per unit energy produced) may have on human health and
climate change (ICF, 2005 and Hogg, 2006).
Recent scientific studies200, however, recognise that “modern and well-managed incinerators
make only a small contribution to local concentrations of air pollutants. It is possible that such
small additions could have an impact on health but such effects, if they exist, are likely to be
very small and not detectable”201. The Scottish Environmental Protection Agency202 could not
find in the existing literature any conclusive evidence of effects on health, although it points
out that small but important effects might be virtually impossible to detect. In any case,
Sogama’s localised emissions are monitored and are below limits and no real effect on human
health from the Sogama incinerator has been detected so far.
In modern incinerators the potential pollution deriving from solid ash residues and cooling
water tend to be effectively handled, by using specifically designed strong bags for ash disposal
and providing the incineration plants with adequate waste water treatment systems.
Significant advances in emission control designs have been developed over the years, fostered
by very stringent European and national Directives and regulations, aimed at achieving a large
reduction of the amount of emissions from waste incineration.
Sogama’s WtE plant was designed to comply with the existing legislation203; moreover, the
technology adopted (Circulating Fluidised Bed combustion204) greatly reduces the amount of
dioxin emissions, compared to other traditional incinerators. As far as the other emissions are
concerned, a monitoring system was put in place in order to control the incineration process
and to guarantee meeting current limits. Results of emissions are transmitted real-time to the
Region205, but they are also publicly available, since they are published on Sogama’s website
and can be transmitted by Sogama upon request (Table 3.5 shows for example the recorded
200
E.g. HPA, 2009 and UK National Emissions Inventory data (www.naei.org.uk). 201
HPA, 2009, p.1. 202
IDEA, 2006. 203
The final implementation report of the project lists the EU Directives that Sogama was required to fulfil:
84/360/EC in relation to the control of air pollution deriving from industrial facilities;
85/230/EC in relation to air quality and nitrogen dioxide;
80/779/EC in relation to the value limits to ensure the quality of the atmosphere and in relation to sulphur dioxide and suspended particles;
88/609/EC in relation to emission limits of certain atmospheric pollutants deriving from large combustion plants;
89/369/EC in relation to the prevention of air pollution from the new municipal wastes incinerators;
93/76/EC in relation to the limitation of carbon dioxide emissions to improve energy efficiency. 204
Described in Box 1.2. 205
Via fibre optic connections. The dioxin emissions are measured every three months.
54
emissions measured in the first six months of 2011 and the volume of emissions produced).
The quality of air in the local area is controlled by four monitoring stations located in different
directions from the Cerceda complex206, to ensure monitoring regardless of wind direction.
Table 3.5 AVERAGE OF EMISSIONS REGISTERED IN THE FIRST SEMESTER 2011 IN THE
TWO BOILERS (A AND B) OF SOGAMA’S INCINERATOR
Emissions (Boiler A) Unit of measure
Legal limit
Emissions of the boiler A
Emissions of the boiler B
Particles mg/Nm3 30 2.27 1.89
NOx mg/Nm3 400 84.2 77.51
SO2 mg/Nm3 200 3.72 3.49
CO mg/Nm3 100 11.37 10.20
COT mg C/Nm3 20 1.17 1.15
Dioxins and furans ng ITEQ/Nm3 0,1 0.01 0.01
HCl mg/Nm3 60 4.18 4.45
HF mg/Nm3 4 1.00 1.00
Cd+Tl mg/Nm3 0,05 0.02 0.02
Hg mg/Nm3 0,05 0.01 0.01
Sb+As+Pb+Cr+Co+Cu+Mn+Ni+V mg/Nm3 0,5 0.01 0.06
Source: Sogama website207
In analysing the possible impact that the incinerator’s emissions may have on human health
and climate effect, it is important to compare the emissions released into the atmosphere to
produce electricity from Refuse Derived Fuel with those that would have been generated by
alternative energy sources. Actually, all powergen plants emit a certain amount of gas into the
atmosphere, included recyclable energy sources208. With this perspective, the incinerator’s
emissions for the production of a given quantity of energy may be lower than those generated
by an alternative energy source, such as a coal-fired plant. In the ex-post CBA, the production
mix of electricity in the Iberian market (including nuclear, coal, gas, wind, hydraulic and other
energy sources) has been considered as alternative to the Sogama energy production mode209.
The emissions generated by the alternative mix and by Sogama for the same amount of energy
have been valued and the difference between the two is positive: in other words, by producing
electricity through incineration, the project in fact produces a benefit, thanks to the relatively
lower volume of emissions released into the atmosphere210.
Finally, for the sake of completeness it has to be reported that negative environmental effects
may have been produced by the Areosa landfill. In 2009 the Department of Natural Protection
of the Civil Guard of A Coruña accused Danigal (Sogama subsidiary company managing the
landfill between 1998 and 2009) and Sogama of “deliberate and repeated” discharges of
206
With an angular distance between each of them of about 90 degrees. 207
http://www.sogama.es/gl/info/emisions-atmosfera. 208
In valuing the emissions produced by a powergen plant, it is necessary to consider not only the emissions from the operational phase, but also those generated during the construction and dismantling process and by the fuel used. 209
Mainly based on waste incinerator but also on co-generation and combustion of landfill gas. 210
This benefit is valued EUR 51 million (in real terms) and represents 2.5% of the total benefits quantified in the CBA.
55
contaminant water in the nearby Lengüelle river211. Following the discovery of hundreds of
dead fish212 in the riverbed in October 2008, more accurate analysis and studies have been
carried out: investigation is still ongoing and a sentence determining the responsibilities for
such event has not yet been pronounced. From its side, Sogama rejects any charge, ensuring
that proper measures were taken during the construction phase to avoid any contact between
waste infiltration and soil and ground waters and to properly treat leachate liquid213.
While the gas emissions generated by the landfill214 have been considered in the ex-post CBA
and included in the calculus of the air emissions produced to generate energy215, the costs for
the other forms of water and soil pollution that could have been caused by the Areosa landfill
are quantified, since they have not been ascertained.
To sum up, if the whole Sogama project is considered and compared to the ex-ante situation,
an overall positive impact on the environment can be identified. What most significantly
constrains the environmental effects is the structural under-capacity of the Cerceda facilities
and the poor quality of waste separation, which prevented the maximisation of the benefits
from the waste valorisation and recycling.
3.5 TERRITORIAL COHESION
The provision of a common waste management service to most Galician municipalities ensures
territorial cohesion within the region and prevents any welfare disparities. No municipalities
have been excluded in principle from the Sogama’s project, including the most distant and the
less densely populated areas. Consequently, today the large majority of urban entities entrusts
Sogama with the treatment of their waste, with the exception of a few municipalities which
autonomously decided not to be part of the Sogama’s project.
The project had an effect on regional territorial cohesion also by means of the application of a
unique tariff to all the subscriber municipalities, i.e. not related to the actual distance of each
transfer station from Cerceda and hence to Sogama’s transport costs. This arrangement led to
the determination of an average price for each tonne of waste to be treated which was to be
applied to all municipalities.
The solidarity purpose of the tariff particularly benefitted the most distant towns, which are
also the most rural ones, thus further contributing to reducing the core-periphery gap216. At
211
The analyses on the river’s water show that the contamination had been continuous and repeated over time http://www.laopinioncoruna.es/secciones/noticia.jsp?pRef=2009021100_4_259817__Galicia-Seprona-acusa-gestor-residuos-Sogama-vertidos-voluntarios-reiterados. 212
http://www.laopinioncoruna.es/secciones/noticia.jsp?pRef=2009021100_4_259817__Galicia-Seprona-acusa-gestor-residuos-Sogama-vertidos-voluntarios-reiterados 213
Different insulating and drainage layers are put in place to avoid the risk of infiltration of leachate into the soil. The drainage is completed by a network of pipes of high density polyethylene that end in a storage raft for leachate of 2,000 m
3, before being
treated in a proper facility. 214
Only those that escape from the capture process are actually emitted into the atmosphere. 215
The landfill gas in Areosa is flared and energy is recovered. 216
During the interviews carried out, some difficulties in delivering an effective waste collection service in most of the rural and dispersed urban agglomerations has been reported, but Sogama does not have any responsibility for this. The municipalities are responsible for the local waste collection service.
56
the beginning a group of municipalities close to Cerceda was against the adoption of a unique
average tariff, but in 2004 an agreement, strongly supported by the Government of Galicia,
was finally reached on this.
Such a tariff setting, despite favouring the less well-off population and ensuring territorial
cohesion in the region, is not in line with European “polluter-pays” principle applying to the
waste management sector and stated in Directive 2004/35/ECC217. The principle requires the
costs of pollution be borne by those who cause it: hence, the more distant the Sogama client
the higher the tariff should be, because of higher environmental transport costs.
3.6 INSTITUTIONAL QUALITY
A great effort on the part of the Autonomous Community’s administration was required to
design the Sogama waste management system. Since the creation of the Department of
Environment in the Government of Galicia at the end of 1997 and the strengthening of social
environmentalist pressure, the importance attributed to environmental protection and waste
valorisation has been increasing. The progressive abandonment of landfill disposal in favour of
new management models significantly contributed to the development of specific
environmental quality departments at different levels of the public administration, with
qualified staff for planning and administering issues in the waste sector. At municipal level, this
entailed a major management challenge, along with a high economic burden. Today many
municipalities, particularly the largest ones, have trained technicians and ad-hoc departments
for waste management: they take care of urban cleaning and waste collection services and are
in charge of organising awareness campaigns to stimulate recycling and support the
development of the recycled products market. Such an evolution has encouraged collaboration
between the public and private spheres (also through public-private partnerships),
entrepreneurial development, the provision of new equipment and higher participation by
citizens218.
In carrying out these activities, the regional law 10/1997219 (repealed by law 10/1998)
envisaged the possibility for municipalities to aggregate into consortia, aimed at managing the
waste sector in a coordinated and collaborative way. Consortia could be set up on the initiative
of municipalities or of the regional administration: their specific function is to guarantee the
adequate implementation of the tasks assigned by law to municipalities. While the
municipalities served by the Nostián and the Barbanza plants decided to aggregate into the ‘As
Mariña’ Consortium and the ‘Mancomunidade de municipios Serra do Barbanza’ respectively,
the municipalities served by Sogama generally did not establish associations or consortia
among themselves220. Yet, such a service delivery system could have enabled more effective
217
According to the ”polluter pays” principle, stated in Directive 2004/35/CE, the operator whose activity has caused the environmental damage or the imminent threat of such damage is to be held financially liable. The objective of this principle is to induce operators to adopt measures and develop practices to minimise the risks of environmental damage so that their exposure to financial liabilities is reduced. 218
This information has been collected during the interviews on the ground. 219
Article 28. 220
There are few exceptions, such as the Association of Municipalities in the district of Ourense, established in 2011 and in charge of waste transport within the participant municipalities.
57
and efficient working, thanks to economies of scale which allow to reduce the cost for service
provision and ensure service coverage even to the outermost urban settlements. In this way,
the creation of consortia could have been one of the possible solutions to the high arrears
accumulated by the municipalities, which are negatively affecting Sogama’s financial
performance (see Section 1.5)221.
A missed opportunity in terms of institutional development could be highlighted also at the
regional-level administration. As stressed by all interviewees and anticipated in Section 2.3, a
difficulty faced by Sogama, which greatly affected its project design, was the lack of any scope
to bind the municipalities in their decision about which waste management model to adopt.
This led first to an unexpected low number of subscribers to the Sogama’s plan and finally,
when the facilities had already been built, to their joining the system, thus unexpectedly
increasing demand. In the name of their autonomy, municipalities were provided by law with
the opportunity to adopt any plan for waste management they preferred222, without any
deadline and penalties in the case of late subscription to Sogama’s service contract.
The negative effect that this specific legislative requirement had on the Sogama project should
have been better recognised by the Autonomous Community and some actions could have
been undertaken, in compliance with the national legislation. In the Spanish region of
Cataluña, for instance, once the decision to build a waste treatment plant is taken by the
regional administration, a deep discussion with municipalities is started in order to jointly
design the project: this consultation process gives some indications about the actual demand
to be served.
Over time, the Region recognised the weaknesses affecting the current waste management
system and elaborated a new strategy to address them. The success of the future plan strongly
relies on the assumption that both the incinerators plants available in Galicia (the Sogama
plant and the new one expected to be built in the South of the region) will have adequate
capacity to valorise the entire amount of non-recyclable waste produced. This is a particularly
strong assumption, verified only if municipalities choose to be served by the closest plant, in
compliance with the EU “proximity principle”.
In summary, the project has had some positive, although not particularly large, effects on local
and regional institutional quality. More could have been achieved on foot of the project, but it
has to be recognised that Sogama’s role was very limited in this respect and much was in the
hand of the public administration.
3.7 SOCIAL HAPPINESS
Significant and positive economic and environmental benefits have been generated by the
project and this had positive effects on the satisfaction level of people. The improvement in
waste management and treatment is evident compared to the ex-ante situation and it is
221
Other solutions suggested either by Sogama or by the Galician Federation of Municipalities GFMP are presented in Section 4.2. 222
In compliance with national and regional regulation.
58
acknowledged by all interviewees: thanks to the closure of unregulated landfills people can
enjoy new regenerated areas and a cleaner and healthier environment. Moreover, Cerceda
inhabitants are said to be overall satisfied with the work opportunities provided by the Sogama
complex, although there are some complaints about the low qualified professional profile
characterising most of the local labour force, and although at first, when it was decided to
build the infrastructures in Cerceda, local people were disappointed at not being involved in
the decision process.
Yet, a general opposition to the project, and in general to the incinerator technology,
expressed by environmentalist organisations and other movements promoted by ecologically-
minded citizens, has also been detected during the interviews and in most of the press
analysed, which affects citizens’ satisfaction and, in general, people perceptions. These parties
accuse Sogama of various faults, among which:
the lack of valorisation of a large amount of waste that is instead dumped in the
Areosa landfill;
the lack of separation of plastic and tetra pak products improperly included by the
content of the black bags223;
the lack of compost production;
the contamination caused by the Areosa landfill, which in 2008 had negative
environmental effects on the nearby river.
Even if Sogama is not directly responsible for all these issues (as explained in Section 2.4), they
are continuously remarked on by the press and the ecologist organisations, thus affecting the
subjective perception of people’s wellbeing and contributing to transforming Sogama into the
“monster of waste”, as they call it. Blaming Sogama for all the weaknesses affecting the
current waste management system of Galicia is a behaviour mainly aimed at discrediting
incineration technology compared to other forms of waste treatment. Composting plants are
promoted by the ecological movements as the best solution from an environmental point of
view, even if in fact the very high initial positive expectations and enthusiasm for these waste
treatment systems were not met: actually a large amount of waste going to the Nostián and
Barbanza plants cannot be valorised and the facilities are not able to produce good quality
compost for the agriculture sector because waste separation is not of the best quality.
The importance of ensuring certain qualities and properties for compost, in order to make it
usable, is widely acknowledged. Many studies224 provide evidence that poor waste separation
and handling standards will most likely result in large and unacceptable increases in
concentration of undesirable and hazardous ingredients, including dioxins and heavy metals as
well as glass, plastic and other physical inert materials, thus making the compost generated
unusable and even harmful to the agriculture sector.
223
Sogama collects from the black bags content only the metal products. 224
Such as Vogtman et al. (1989), Mullet (1992), Sepa (1997) and Brinton (2000).
59
«The Sogama incinerator plant had many problems: economic ones, accusations of corruption, contamination around the Areosa landfill. It was supposed to be the treatment system addressing the waste management issues of whole Galicia, but instead it was revealed to be a huge failure».
Source: Field interview
«Sogama does not have anything to hide […]. Real lies have been said about Sogama and many people define it as the “monster of waste”. If you do not know the system it is normal that everything looks horrible».
Source: Quotation from an interview with Sogama’s president225
In reaction, Sogama is striving to improve its corporate image, by ensuring a high level of
transparency in its activities carried out and results achieved. Its website is particularly rich in
information and data about the infrastructures and emissions; visiting tours for children,
university students and academics, residents’ associations and others are continuously
organised in the complex to explain how waste is treated and the importance of carrying out
good separation at home226. It seems, however, that these efforts are not enough to change
the perception of most people.
Environmentalists’ hostility to incinerators is not likely to decrease in the future, especially
since a new WtE plant has been planned in the South of the region. This will probably
contribute to fostering strong opposition among citizens concerning its site decision. What
could play a major role in limiting the influence of politicised interests and in improving social
happiness related to the Sogama project is a better awareness on the part of people of the
whole waste life cycle: in particular, citizens need to understand, first of all, the importance of
improving waste separation for any treatment system to successfully work, regardless of the
type of technology used to treat waste. If the current regional WMP manages to improve
waste separation, by means of awareness campaigns, and to explain to citizens the relative
importance of each stage along the waste life-cycle, more complete and objective
understanding of the benefits brought about by Sogama will be achieved: this, in turn, will
positively affect social happiness with regard to the analysed project.
«Some time ago, a citizen of A Coruña warned Sogama that, if the company did not collect the waste in front of his house within one week, he would cause a scandal. Yet, he was probably not aware that Sogama is not responsible for municipal waste collection, and that the municipality of A Coruña is not served by Sogama».
Source: Interview
The determinants of the highlighted long-term effects are more accurately described and
structured in the following Sections.
225
http://www.lavozdegalicia.es/galicia/2011/09/16/0003_201109G16P56991.htm. 226
The Sogama complex welcomes about 8,000 visitors each year (source: press review. http://www.twinning-waste-bacau.ro/aspecte-generale/presa-sogama-la-voz-de-galicia).
60
61
4 DETERMINANTS OF PROJECT
OUTCOMES
4.1 KEY FINDINGS
Table 4.1 IMPACT OF KEY DETERMINANTS ON PROJECT’S PERFORMANCE
Strength*
1. Appropriateness to the context +4
2. Project design +2
3. Forecasting capacity -4
4. Project governance -4
5. Managerial response +3
*-5 = very strong negative effect; 0 = no effect; 5 = very strong positive effect (see in Annex I the criteria adopted to assign these scores).
The observed performance of the Sogama project for urban solid waste treatment in Galicia is
the result of the interplay of five determinant factors. Among these, the project’s governance
is the key determinant: the way the institutional actors (mainly the regional Government and
municipalities) played their roles within the national legislative framework, which gives
municipalities a very high degree of autonomy in selecting their waste management system, is
crucial to understanding how certain effects materialised and others did not. In the evaluator’s
opinion, the Government of Galicia could have initiated more discussion among the local
administration to help in identifying ex-ante the service demand and limit the uncertainty
caused by municipalities’ hesitation about whether or not to join the Sogama waste
management system.
As a consequence, notwithstanding that the project made use of the best technology available
(considered under the ‘project design’ determinant) and it took due account of the pre-existing
waste management situation and the urban characteristics of Galicia (‘appropriateness to the
context’), the positive effects were in fact limited by the impossibility of predicting the actual
amount of waste that the Cerceda plants would receive (‘forecasting capacity’). It has to be
recognised that, even if the limited forecasting capacity narrowed Sogama’s room for
manoeuvre in designing the infrastructures227, its managerial response was effective in the
situations which were more under its control, such as when the landfill was promptly enlarged
so as to receive the increased volume of waste.
Other aspects characterising the project’s governance influenced the generation and strength
of some of the project’s long-term effects: among these, i) the municipalities’ reluctance to
increase taxes to cover waste management costs reduced the overall economic impact of the
project, by putting at risk Sogama’s financial sustainability; ii) municipalities’ limited efforts in
227
In particular, in setting their capacity.
62
promoting better waste sorting by citizens, and the lack of incentivisation and motivation by
the Government of Galicia to municipalities in this respect affected the recycling results; iii)
doubts and conflicts concerning the tariff setting, generated hostility and suspicion towards
the project and Sogama itself, thus further distorting the perception of the effects generated
by the project and limiting its contribution to social happiness.
Each of these determinants is explored in the following Sections.
4.2 PROJECT GOVERNANCE
PROJECT GOVERNANCE STRUCTURE Figure 4.1
Legend: Continuous lines represent the delivery of a certain service; broken lines represent the payment of the tariff or other compensations; red dotted lines indicate an influence or power.
Source: Authors
CITIZENS
MUNICIPALITIES
ECOEMBES
SOGAMA
Subcontractor1
Subcontractor2
Subcontractorn
Wastecollection
Wastecollection and
treatment
Separation ofrecyclablematerials
SOGAMA’S WASTE MANAGEMENT SYSTEM
GOVERNMENT OF GALICIA
EU and NATIONAL LEGISLATION
REGIONAL LEGISLATIVE FRAMEWORK
OTHER TREATMENT PLANTS
(NOSTIÁN and BARBANZA)
63
Roles and responsibilities in Sogama’s waste treatment and separation plants were clear since
the initial phase of the project, as they were defined in the regional laws 10/1997, 10/1998
and in the subsequent strategic plans. As analysed in Section 1.4 and summarised in Figure 4.1,
citizens are responsible for waste separation at home and pay the municipality a tariff for the
collection and treatment of all waste228. The municipalities, in turn, carry out waste collection
in their areas of competence, through municipal companies or by means of private
subcontractors, and deliver the yellow and black bags to the transfer stations: for each tonne
of yellow bags deposited, municipalities receive compensation from ECOEMBES229, and for
each tonne of black bags they pay a tariff to Sogama for their treatment. Sogama transfers the
bags to the Cerceda complex where a number of services are provided through different
subcontractors. Sogama collects the treatment tariff from municipalities and the selection
tariff from ECOEMBES for the service of separating recyclable materials.
Within this governance structure the aspect which determined the largest problems for the
project, thus affecting its long-term performance, was the distribution of power between the
local and regional level and, in particular, the high degree of autonomy granted by the national
and regional government to municipalities. This issue, which has been mentioned in several
occasions throughout the case study, is better discussed in this Section, given its relevant
determinant role in the project’s story and performance. The autonomy of local
administrations is allowed by the national legislative framework230: in compliance with law
7/1985, the Galician WMP 1998-2009 allowed municipalities freedom to decide how to ensure
proper urban solid waste management and treatment, and whether or not to entrust the
service to Sogama. As described in Section 2.3, the lack of any kind of intervention by the
Government of Galicia to cope with the hesitation of municipalities about which treatment
plant to join prevented from clearly identifying the project’s demand before the
infrastructures’ financing and building, thus determining the current capacity problems of the
Sogama facilities.
Municipalities’ autonomy, however, did not only manifest itself at the initial financing and
operational stage of the project, but also in the subsequent years: their degree of autonomy
clearly emerges from the service contract signed by municipalities and Sogama. Actually,
municipalities have no contractual obligations to deliver their waste only to Sogama or to
ensure a minimum amount of waste delivered; invoices are issued per tonne of waste
delivered by municipalities to the transfer stations. This means that they can freely decide to
bring waste to other treatment plants, even if a contract has been stipulated with Sogama231.
Since the contract does not establish any penalty for municipalities that decide to entrust the
service to other companies, Sogama has virtually no scope to more strongly bind its clients.
228
Paper, glass and the waste collected in the yellow and black bags. 229
Depending also on the share of improper waste detected in the yellow bags by ECOEMBES, which carries out random controls in the municipalities. 230
Section 1.2. 231
This is the case, for instance, of the town of Ames, which, after signing a contract with Sogama on 22 May 2002, joined the consortium of municipalities served by the Barbanza composting plant.
64
Hence, Galician municipalities were not only set free to decide if and when to subscribe to
Sogama’s service contract, but also, once the contract had been signed, to decide whether or
not to deliver their waste to Sogama. This contributed to increasing Sogama’s uncertainty
about the project’s demand and sustainability. National legislation (Real Decree-Law 3/2011 of
4 November, articles 286-288) has recently provided the scope for requiring the
administrations to pay possible damages and compensate for lost profits in the case of
unexpected cancellation of administrative contracts for public services. This law could give
Sogama stronger contractual power, although any decision to sanction municipalities will have
to be approved by the Region (which, we recall, is Sogama’s major shareholder).
To sum up, the project’s evaluation shows that giving municipalities such a large amount of
freedom in waste management issues has turned out not to be effective. The evaluator argues
that the Region could have made more efforts in trying to anticipate the local demand for the
new infrastructures, for example, by involving in a consultation process all the municipalities
since the early stage of the project design (a practice which is commonly undertaken by the
Region of Cataluña). This could have helped to forecast actual demand for the treatment
facilities to be financed232 and to identify a longer-term solution for the MSW treatment
system of Galicia.
New infrastructures, foreseen in the WMP 2010-2020, are now needed to solve Sogama’s
capacity limits and coordination by the Government will be necessary. In order to guarantee
the best allocation of municipalities between Sogama and the new treatment complex to be
built in the South of Galicia, so as to optimise the use of all facilities and ensure adherence to
the EU “proximity principle” of waste management, the Region should take a much more
active role than heretofore. Since it is unsure whether the municipalities will decide to be
served by the closest treatment complex, some kind of coordination mechanism should be
identified by the Region: active discussion and participation of municipalities since the
planning phase could be helpful.
As far as the European Commission is concerned, apart from providing a financial contribution
through the Cohesion Fund, it did not play any role both in the project design and operation
phases. Since the regional waste management planning is outside its sphere of influence, the
Commission was not in the position to foresee the problems related to the municipalities’
uncertain demand and to give the Government of Galicia some recommendations in order to
improve the project’s effectiveness.
The Government of Galicia could also have a stronger role during the operational phase of the
project, making more efforts to promote waste separation by municipalities and citizens.
Because most of the municipalities, especially the smallest ones, did not promote sufficient
awareness campaigns aimed at households and because no adequate incentives were
provided by the Region in this regard, Sogama had to intervene by organising its own
awareness campaigns. The weak coordinating role of the Government of Galicia has been also
232
See Section 4.2.
65
recognized by the regional administration itself, although it is attributed specifically to the
previous government233.
Other problems to be discussed in this Section are related to Sogama’s treatment tariff, which
is considered too high by the municipalities and the Galician Federation of Municipalities and
Provinces (GFMP). Both in past years and today, many municipalities delay their payments,
thus risking the project’s financial sustainability.
Municipalities blame Sogama for having set too high a tariff in order to maximise its profit and
without having properly consulted the stakeholders, primarily GFMP. Yet, Sogama and other
interviewees assert that the tariff was set by Sogama in agreement with GFMP234, with the sole
purpose of ensuring financial sustainability, net of other revenues235 (as explained in Section
1.4). This misunderstanding probably derives from some lack of transparency and
communication concerning the tariff setting (by Sogama or GFMP or the Government of
Galicia) and it contributes today to generating confusion among citizens, as well as to
increasing hostility towards Sogama and to worsening its corporate image.
Since the current tariff (slightly over EUR 54 per tonne of waste, plus VAT) is already below the
average in Spain when transport cost are considered236, the municipalities’ affordability
problems are more probably related to inadequate fees imposed on citizens to cover the costs
of waste collection, transport and treatment. An increase in municipal fees is however a highly
unpopular intervention that municipalities are generally unwilling to undertake. On the other
hand, reducing the tariff or stopping the provision of waste treatment services to
municipalities are considered unfeasible by Sogama. The company has initiated proceedings
against many municipalities, in order to have the arrears paid: these interventions managed to
reduce the average payment time to 190 days, which however is still twice that was agreed in
Sogama’s service contract237. As already anticipated throughout this report, some interviewees
stated that establishing consortia and associations of municipalities could have represented a
way to increase the efficiency of the service delivery, allowing a reduction in costs. Yet, even if
this arrangement was envisaged by the regional law 10/1997, very few municipalities in fact
chose to adopt this solution238.
233
Source: field interviews. 234
GFMP is also represented on Sogama’s board of directors, even if it only has observer status, without voting power. 235
From the sale of electricity, the service on behalf of ECOEMBES and the disposal of animal carcasses. 236
The tariff paid in Palma de Mallorca for the Tirme plant is almost EUR 140 per tonne. This tariff is higher than Sogama’s , notwithstanding that Palma de Mallorca is an island with no major problems of population dispersal (Sogama website, published on 16.09.2011 and Greenpeace, 2010). 237
Directive 2011/7/EU of the European Parliament and of the Council of 16 February 2011 on combating late payment in commercial transactions introduces specific rules regarding commercial transactions for the supply of goods and services to public authorities. Contracts should provide for payment periods normally not exceeding 30 calendar days, unless otherwise expressly agreed. In any event, the payment periods should not exceed 60 calendar days. This Directive is expected to contribute to reducing the average payment time of municipalities to Sogama and it is taken into account in the future scenario of the ex-post CBA (Annex I). 238
See Section 3.6 on institutional quality.
66
Journalist: «Have you ever thought to stop providing service to delinquent municipalities?» Sogama’s president: «Legally, it would be possible, but that is a hypothesis which we ask, because we’re a public company and we work to find solutions, not to create problems».
Source: Quotation from an interview to Luis Lama Novo, Sogama’s president. Published on “La Voz de Galicia” on 16.09.2011239
4.3 APPROPRIATENESS TO THE CONTEXT
Each project is immersed in an institutional, economic, social and cultural context that plays a
role on its performance240. Using Hirschman’s concepts (1967)241, on one hand the project can
influence the context, by contributing at shaping its traits; and on the other hand, the project
can adapt to certain of the context’s unchangeable characteristics that may be crucial to its
success.
The Sogama project proved to be highly appropriate to the regional context, thus adding
positive effects to the project’s long-term performance. The interventions analysed succeeded
in addressing an urgent problem affecting the whole region at the beginning of the Nineties:
the unsustainability of the waste management system previously in place, based on the
disposal of all waste to illegal landfills spread all over the regional territory. The Sogama
project was the right initiative to implement, which achieved the objective of closing all illegal
landfills and providing a different solution to waste management, in compliance with EU and
national legislative requirements.
The project adapted also to another feature of the context, which concerns the low population
density of the region. The idea of building a number of intermediate transfer stations
throughout the region was motivated by the need to address the high level of urban dispersal
characterising Galicia and to optimise the waste collection service. This was the best solution
to guarantee a centralised and integrated service, and to address, in the meantime, the
specific urban configuration of the region.
Yet, even if the project was good at adapting to the context’s features, it did not have the
chance to influence the context’s characteristic that would have most significantly influenced
its performance, that is the legislative framework granting the municipalities a high degree of
autonomy in the waste management sector. This constraint has been discussed in the previous
Section and is further explored in the next one.
4.4 PROJECT DESIGN
The project design of the Sogama waste thermal-valorisation and separation plant resulted
from an accurate analysis of the needs to be addressed, of the context characteristics and of
the available alternative technologies for waste treatment. A number of experts were
consulted and visits to other already existing European waste treatment plants were arranged
239
http://www.lavozdegalicia.es/galicia/2011/09/16/0003_201109G16P56991.htm 240
A literature review on the role of project context is given in the First interim Report of this evaluation study. 241
“The decision which traits to ‘take’, that is, to accept (because they are considered unchangeable) and which ones to ‘make’ (by changing existing or creating new traits) is crucial to project design and success” (Hirschman, 1967, p. 131).
67
in order to identify the peculiarities of different technological options. The best technological
solution was chosen through a public tender procedure242. In the alternative option analysis,
Sogama resisted lobbies pushing for the selection of a Galician company, which was proposing
the traditional incineration technology243; Sogama selected instead the incineration option
based on Circulating Fluidised Bed combustion since this was considered more efficient and
environmentally friendly.
The Sogama project, however, was affected by a very low level of flexibility, which prevented it
from adapting to any unforeseen events. Its rigidity derived from various factors. First of all,
the project was site-bound, in the sense that flexibility regarding project location was limited.
As indicated by the interviewees, no Galician municipalities were in favour of building an
incinerator in their territory, with the exception of Cerceda, which accepted because of its
particular historical and industrial context244. This made it impossible to find another location
for the Sogama complex when it was realised that Cerceda would have been no longer
optimal, i.e. when it was clear that the largest demand for Sogama’s services would be
generated in the South of the region245.
Furthermore, the project was subject to a particularly stringent legislative framework that
reduced Sogama’s room for manoeuvre in designing its project. The “laissez-faire” approach of
the Region to the municipalities as far as the selection of waste management system was
concerned, represented an insurmountable obstacle for Sogama, as it caused large uncertainty
about the demand for its services. Given this persistent uncertainty, the incinerator size was
set according to the actual number of subscriber municipalities at the time of the financing
application and it was decided not to increase it246: even if additional investments had been
financed to increase its capacity, nothing would have guaranteed that demand would not have
changed again. In fact, the number of subscriber municipalities continued to grow until 2008
(Figure 2.2), but in principle it could have also decreased, given the lack of any binding clause
preventing municipalities from dropping out of the contract at any time. Because of this,
enlarging the landfill’s size turned out to be a much easier and less risky solution.
To sum up, the project design was good, but characterised by very strong regulatory and
locational discipline and limited latitude, using Hirschman’s words (1967)247, resulting in the
difficulty to “slip” the project in one or another direction during its history. The constraints to
which Sogama was subject significantly narrowed the managerial response of the planner and
operators of the infrastructure (as explained in the next Section).
242
The Norwegian company KVAERNER was selected. 243
Some representatives of the European Parliament “green” group (GUE/NGL) addressed a written interrogation to the European Commission on 26 October 1998 (1999/C/297/077): in this it was pointed out that, since Galicia was one of the European regions with the highest level of unemployment, selecting a Galician company to build the Sogama thermoelectric plant would have been advisable. 244
The Meirama thermal plant and the lignite mine in Cerceda were about to be closed and the municipality took Sogama’s plan as an important opportunity for the local labour market. 245
As described in Section 2.2. 246
See Section 4.2. 247
“Latitude [is the] characteristic of a project [...] that permits the project planner and operator to mould it, or to let it slip, in one direction or another [...]. Some projects are so structured that latitude is severely restricted or completely absent: in these cases I shall speak of lack of latitude, or, positively, of the presence of ‘discipline’ imparted by the project” Hirschman, 1967, p. 86-87.
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4.5 FORECASTING CAPACITY AND MANAGERIAL RESPONSE
Good forecasting capacity regarding the total amount of waste to be treated in the WtE plant
was prevented by the municipalities’ uncertainty about whether or not to subscribe to the
Sogama’s waste management system and by the weak coordinating role played by the
Government of Galicia in this respect, as assessed in Section 4.3. Notwithstanding that Sogama
proved to be able to identify ex-ante the most appropriate capacity of its plants on the basis of
the number of subscriber municipalities (one million tonnes when all 315 municipalities were
expected to join the project and 500,000 tonnes when they decreased to 150), external
constraints prevented it from anticipating the actual demand that its facilities would face after
their construction.
With relation to this limitation, the company did not have much scope to minimise the related
risk ex-ante. In any case, what good managerial response did enable was to promptly
intervene when additional municipalities joined the plan, by enlarging the Areosa landfill. It
was acknowledged that this additional investment was only a temporary solution, pending a
new plan by the Government of Galicia that would have provided a more sustainable and long-
term answer to the capacity problem of the Sogama facilities.
Forecasting capacity was limited also as far as the quality of waste separation by citizens is
concerned. Sogama overestimated the amount of recyclable material that would be recovered
in the separation plant, because it did not expect such a large share of improper waste248. Also
in this case, its managerial response was effective: Sogama reacted to the citizen’s lack of
knowledge about how recyclable materials should be properly separated and their lack of
motivation to do so, by directly organising awareness campaigns. It is also worth pointing out
that in carrying out these activities, Sogama took charge of a task for which the municipalities
and the Region249 were responsible. In this way, Sogama managed to improve the quality of
waste sorting by households and to reduce the share of improper fraction included in the
waste bags. As already mentioned, this was not enough to achieve the targets set by the
European Commission on the recycling share of waste.
The project’s managerial response can be appreciated also from other perspectives, for
example when, in reaction to the impossibility of building a composting plant in Vigo (as
originally envisaged by the Region250) the complex was provided with the technology to dry
organic waste, thus allowing its incineration with the rest of the mixed waste. Or again, when
Sogama reacted to the strong and continuous environmentalist lobby towards citizens and
municipalities, aimed at discrediting incineration technology and Sogama itself. To counteract
this, Sogama frequently organises information campaigns and visits in the Cerceda complex,
aimed at favouring the circulation of ideas and information about how waste is treated and the
way in which the company contributes to the recovery and valorisation of waste within its life-
248
When Sogama started operations, the content of the mixed waste bags and of the recyclable waste bags was almost the same. Today the fraction of improper waste in Cerceda is around 31% (see Section 2.4). 249
With a co-financing and promotional role. 250
Section 2.2.
69
cycle. Yet, these efforts have not yet been enough to improve peoples’ perception of the
project’s effects, as shown in Section 3.7.
70
71
5 CONCLUSIONS
The project analysed in this case study, concerning the construction of a set of facilities to
treat, valorise and dispose of the urban solid waste in Galicia, achieved its objective: providing
the population with an environmentally sustainable waste management system, replacing the
pre-existing numerous illegal landfills and in compliance with the EU and national
requirements. Positive long-term effects on economic growth and quality of life have been
generated, mainly related to the waste treatment activities implemented by Sogama, involving
energy production and recovery of recyclable materials: the benefits produced by the project
are briefly summarised in this concluding Section.
The Sogama project for urban solid waste treatment in Galicia is an example of an
infrastructural project subject to the strong external constraints, which have influenced its
design and development over the years.
Because of the large degree of autonomy enjoyed by local administrations in the solid waste
management field and the lack of effective coordination mechanisms by the Government of
Galicia, Sogama could not foresee ex-ante the number of municipalities that would be served
by its facilities and, thus, the volume of waste to be treated. The power of municipalities to
autonomously choose their own waste management plan resulted, at first, in their limited
subscription to the project promoted by Sogama, and later (after the Cerceda complex had
been built) to an unexpected increase in the number of subscribers. As a consequence, today,
a much larger amount of waste than expected is managed by Sogama, but its infrastructures
do not have the capacity to valorise it all and about 300-400,000 tonnes of waste have to be
disposed of to landfill every year.
Contemporaneously, the project suffered from strong opposition from environmental
organisations and the public. Such opposition represented the main force that influenced the
municipalities in their decision about which waste management plan to adopt, thus playing a
role in increasing the uncertainty about the demand for the project.
Compared to the previous waste management situation of the region, characterised by
numerous illegal landfills and no systems to promote and implement waste recycling and
valorisation, the Sogama project managed to generate relevant positive effects on economic
growth and environmental quality and sustainability: the production of electricity from waste
incineration, the contribution to the recycling of various materials and, in general, the
provision of a more environmentally sustainable waste management solution than landfill
disposal, are the main benefits of the project. The environmentally positive effects could have
been larger if the quality of waste sorting by citizens had been higher and if no capacity
problems of Sogama’s treatment plants compared to actual demand had arisen.
Similarly, the project had some positive effects in terms of institutional quality (of both the
municipalities and the regional public administration), but more could have been achieved.
The most relevant missed opportunity refers to the lack of the development of a strategic
72
vision at the regional level: when the project was designed, on one hand it was aimed at
implementing a unique and integrated waste management model for all Galicia – the Sogama
model; on the other hand, it gave municipalities the possibility to autonomously subscribe to
the Sogama’s project or to develop other local waste management plans. The consequence
that these two contrasting objectives had on the project had not been properly identified by
the Government of Galicia and no remedial action was undertaken during the years of the
project’s implementation.
As far as the European Commission is concerned, it cannot be considered an influencing actor
in the development of this project. Its involvement in the Sogama project was very limited. The
Commission intervened as mere funding provider, but it did not have any active role in
supporting the Region in the development of its waste management plan and in pointing out
its weaknesses. As a matter of fact, this is outside the Commission’s sphere of intervention:
neither recommendations could be provided or conditions could be set on funding in order to
favour the attainment of a sustainable solution to waste management and the implementation
of the best project option.
To sum up, the project has had an overall positive impact because the ex-ante situation was
particularly negative. The project’s results, however, have been strongly limited by the under-
capacity of the plant and the poor quality of waste separation, caused by low environmental
awareness among citizens.
The importance of environmental awareness emerges also in other similar projects recently
analysed by the European Commission (2010). In the evaluation of the project “Facilities for
solid waste management and recycling in Greece”251, including a recycling plant, a composting
plant and landfill cells on the island of Crete, the factor imputed to having hindered the
realisation of benefits is poor waste separation by citizens:
“Ideally, only a fraction [...] of the total 65 thousand tonnes of waste handled
every year should end up in the landfill. In reality, due to lack of optimal sorting
both at the level of the households and at the plant sorting belt, up to 60 per cent
of the total amount of waste ends up in the landfill. Lack of education of citizens to
sort household waste into the three different types of waste streams (blue bins for
paper, cardboard, plastic, tetra pak and cans, the yellow bins for glass, and finally
green bins for the remaining waste) remains a problem. As a result, the blue bins
and the green bins contain nearly the same type of waste.” (European
Commission, 2010)
On the contrary, the Portuguese project “LIPOR – Municipal Solid Waste Integrated
Management”252, analysed in the same evaluation study and including recycling, composting,
and energy recovery facilities turned out to be more successful thanks to the implementation
251
2000GR16CPE001. 252
2002PT16CPE002.
73
of a set of awareness campaigns in various media to promote source separation practices by
the public.
The new WMP 2010-2020 is expected to address the problems that still limit Sogama’s project
effectiveness. Particularly, the effects on direct economic growth and environment may
further improve if the planned investments aimed at raising recycling rates and at reducing the
volume of waste dumped in the Areosa landfill (via the construction of a new WtE plant in the
South of the region) proves to be effective. This will be achieved only if the regional
administration is able to:
i) balance the municipalities’ autonomy with the general public interest, by better
coordination among the stakeholders in deciding which waste management system to
subscribe to;
ii) raise public awareness of the importance of every step along the waste life-cycle and,
particularly, of properly sorting waste at source.
Should these conditions be met, the overall performance of the Sogama project might
increase, specifically with regard to the economic and environmental impacts.
74
75
ANNEX I. METHODOLOGY OF
EVALUATION
The present Annex summarises the methodological approach undertaken for carrying out the
project case studies and presented in the First Intermediate Report of this evaluation study.
Moreover, the Annex further elaborates on and specifies the definition of long-term effects
considered throughout the case study and the typology of determinant mechanisms analysed
in interpreting the project outcomes. The main objective is to provide the reader with a set of
information describing how the project evaluation was conducted and to enable him/her to
replicate this methodology.253
The Annex is divided into three parts: in the first one, the overall conceptual framework of the
evaluation study is recalled and the definition of long-terms effects and project determinants
are laid out; in the second one, the methodology of analysis followed to implement the ex-post
evaluation is discussed; finally, the structure of the case study reports and the tools used to
standardise them is described in the third part.
CONCEPTUAL BASIS
The Conceptual Framework of this evaluation study is based on three dimensions of analysis:
the object of the evaluation (the ‘What’), the timing of the long-term effects (the ‘When) and
the determinants of the project’s outcomes (the ‘How’).
The ‘What’ dimension
The Team developed a classification of long-term effects, with the aim of identifying all the
possible impacts of public investments on social welfare. A broad distinction of project effects
is among effects on ‘Economic development’ or ‘Quality of life’. Investment projects can foster
economic development, which is generally quantifiable by aggregate indicators, such as the
Gross Domestic Product; although economic development is not disconnected from the
wellbeing of society, it is acknowledged that there are a number of other factors that may
affect public welfare, that are not captured by the traditional economic indicators254. For the
purpose of this study, the notion of quality of life255 refer to the factors that affect social
development, the level of social satisfaction, the perception of social reality and other
dimensions which are outside the conventional economic dimension. Under these two broad
categories, a taxonomy of more specific long-term development effects of investment projects
has been developed. The definition of each type of effect is provided in Table I.1.
253
Specific recommendations which may enable application of the same evaluation methodology to future projects are discussed in the Final Report of this evaluation study. 254
Dasgupta, 2011 and Stiglitz et al., 2009. 255
Used also as synonymous with wellbeing, as mentioned in the ToR.
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Table I.1 TAXONOMY OF LONG-TERM DEVELOPMENT EFFECTS
Effects Definition Checklist
Economic development
Direct economic growth
Following the traditional growth theory256
, both public and private investment contribute to increasing the stock of capital and thus economic growth. The direct contribution of a project to economic growth, in terms not only of real growth of GDP, but also, more generally, on economic welfare is discussed within this category of effect.
Did the project have effects on the endowment of labour or capital production factors? Did it contribute to employment creation? Did it attract new investments? Did it create new business opportunities? Did it produce time savings for business trips? Did it produce decreases in travel costs?
Endogenous dynamics
Endogenous dynamics comprise all the factors that have an indirect effect on economic growth, by improving the productivity of inputs: the increase of the stock of competences and knowledge of human capital
257, the introduction of a more advanced
technology258
and changes in the organisational model of economic actors, making them more efficient
259, are analysed insofar they contribute to
increasing the production function.
Did the project contribute to the improvement of the productivity of the economic system? Have social behaviours changed as a result of the project? Did the project provide new/improved skills, R&D investment, organisational changes that translated into an increase in labour productivity?
Quality of life
Social cohesion
Public investment can affect social cohesion, by minimising disparities, avoiding social marginalisation and reducing income inequalities across different socio-economic, gender or ethnic groups.
Did the project promote social inclusion? Did it improve the conditions of specific segments of the population (e.g. elderly, migrants)? Did it improve the affordability of services?
Environmental effects
Polluting emissions, biodiversity loss and depletion of natural resources caused by large infrastructural projects can affect social wellbeing of both the present and future generations.
Did the project improve the quality of the natural environment? Did it alter wildlife habitats? Did it affect the ecosystem? Were there any environmental issues related to project implementation?
Territorial cohesion
The project can contribute to reducing welfare disparities caused by unequal distribution of resources and opportunities among regions and their population. The focus, in particular, is on core-periphery and urban/rural differences.
Did the project improve the territorial cohesion of the region/country? Did it play any role in urban-rural or core/periphery or cross-border dynamics? Did it expand the territorial coverage of the delivery of a basic service?
Institutional learning
Investment projects can bring wide spill-over effects to the quality of Public Administration and other institutions at national, regional or local level. Institutional quality is strongly related to economic growth
260, but it can also affect the quality of life of
people, because of the intrinsic value that individuals can attribute to a well-ordered society
261.
Did the project induce any institutional learning at regional administrative level? Did it raise political awareness regarding a specific theme? Did it have effects on the level of corruption?
Social happiness
This category encompasses all those variables which may affect the subjective perception of people’s wellbeing, and have to do with their psychology, family context, religion and cultural traits.
Are the project beneficiaries overall satisfied with the project’s implementation and outcomes? Did the project have any effect on the perception of quality of life? Did it affect the sense of security of the target population?
In researching all the possible long-term effects of project investments, it is acknowledged that
there is a risk of duplication and double-counting: for example, a project for water treatment
clearly has effects on environment, which may contribute to the development of new
economic activities that foster economic growth.
256
Solow, 1956. 257
Becker, 1962. 258
Griliches, 1992 and Griffith, 2000. 259
Tomer, 1982 and Martinez, 2009. 260
See, for instance, Easterly et al., 2006. 261
Sen, 1987.
77
The ‘When’ dimension
The temporal dimension of analysis relates to the point in the project’s lifetime at which the
effects materialise for the first time, how they develop over time and whether they have
already stabilised or are still evolving. A clear distinction emerges between short-term and
long-term effects, with the former being the first contributions made by the project and
enjoyed by society after a relatively short time following project completion (about 1-5 years);
the latter, on the other hand, become visible after a longer period of time and tend to stabilise
over many years. It is acknowledged that, given the varying timeframe for different effects to
appear and stabilise, the choice of the time horizon and the timeframe at which the ex-post
evaluation is carried out can significantly affect the results of the evaluation.
The ‘How’ dimension
Project outcomes, i.e. the way projects affect the generation of certain effects and the varying
timeframe for effects to appear and stabilise, are not certain, but result from a non-
deterministic combination of different and interrelated factors. Five stylised determinants of
project outcomes have been identified: appropriateness to the context, project design,
forecasting capacity, project governance and managerial response. Five Working Hypotheses
are related to these dimensions and explain how each of them can influence the generation of
the project’s short or long-term effects (see Table I.2).
The three dimension of analysis are logically interconnected and by combining the ‘What’,
‘When’ and ‘How’ dimensions the evaluator can disentangle the causal chain between the
project’s inputs and the outputs.
METHODOLOGY OF ANALYSIS
The methodology developed to answer the evaluation questions consists of a combination of
quantitative (Cost Benefit Analysis) and qualitative (personal interviews, surveys, searches of
government and newspaper archives, etc.) techniques. Qualitative techniques are probably
better at determining why certain effects are generated, along what dimensions, and
underlying causes and courses of action of the delivery process. The media (including websites
or blogs), in particular, have proved to be an excellent source of evidence identifying or
revealing both objective information and perceptions about the project, thus concurring to
assess the project’s impact on social happiness. At the same time, quantitative data can
provide an important support to test and validate certain findings derived from interviews and
other sources. The most important contribution of the CBA exercise is to provide a framework
of analysis to identify the most crucial aspects of the projects’ ex-post performance and final
outcome262.
262
More details on the approach adopted to carry out the ex-post CBA exercise and, in particular, indications on project identification, time horizon, conversion factors and other features are extensively described in the First Intermediate Report of this evaluation study.
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Table I.1 KEY DETERMINANTS OF PROJECT OUTCOMES CONSIDERED
Determinant Definition Working Hypothesis Questions to be answered
Appropriateness to the context
Includes the consideration of institutional, cultural, social and economic environment into which the project is inserted.
Context traits can be more or less favourable for project performance and deserve early and careful consideration about which to take or to make.
The terminology of context traits that can be either ‘taken’ (that is, accepted, as they are considered unchangeable) or ‘made’ (by changing existing or creating new traits) is drawn from Hirschman (1967).
Has the (political, cultural, socio-economic, institutional, regulatory) context played a role in influencing the attainment of long-term effects?
Were there any political, social, cultural, economic, regulatory, or institutional constraints to project implementation and performance?
Was the project ‘trait taking’ or ‘trait making’ in its nature? If it was intended to be trait making, did it succeed?
Project design Refers to the technical capacity to design the infrastructure project and to select the best project option.
The technical and engineering capacity to design an infrastructure and to provide the appropriate mechanism for its financial sustainability should be sufficiently disciplined to reduce future risks; at the same time it should leave some degrees of ‘latitude’ to enable adjustments for unforeseen circumstances.
Following Hirschman, latitude is the characteristic of a project that permits the project planner and operator to mould it, or to let it ‘slip’, in one direction or another. Some projects are so structured that latitude is severely restricted or completely absent: in these cases, the project is considered highly ‘disciplined’.
To what extent and in what way did the technical, structural and financial features of the project influence its performance?
Did the option selection process lead to the implementation of the most promising project idea?
Was project design capacity a relevant factor in determining the observed ex-post performance of the project?
Was the project design flexible enough to be adjusted, if needed, to external and unexpected constraints?
Forecasting capacity
Relates to the feasibility and capacity to predict future variables, such as the demand level.
A good initial investment in building the forecasting capacity does not eliminate risks, but it increases the knowledge of the context, improves the project design and optimises the distribution of responsibilities without lowering the commitment to performance.
Were the ex-ante forecasts based on a sound methodology and a comprehensive set of information?
Were some important factors not sufficiently considered ex-ante?
Was the forecasting capacity a relevant factor in determining the observed ex-post performance of the project?
Project governance
Concerns the number and type of stakeholders involved throughout the project cycle and how responsibilities are attributed and shared.
High stakeholder involvement, well-defined roles and responsibilities and incentive mechanisms require commitment of resources and increase the complexity of the decision-making process, which may be subject to particular pressures, but they can favour the project performance and its sustainability over time.
What are the interests and motives of different actors and incentives for decision-making? How did they change over the time-span considered?
Was the ownership of the project clearly identified?
Did contractual arrangements improve the co-ordination of different stakeholders towards achievement-oriented results?
Was project visibility a relevant political incentive to foster proper project implementation? Was the project subject to political or other forms of pressure?
Managerial response
Defined as the managerial and professional ability to react to unforeseen events.
Unpredicted events that occur and undermine the sustainability of the project and its capacity to lead to expected benefits can be overcome by prompt and adequate response from the decision-makers and project managers, driven either by professionalism and experience or by creativity and imagination.
How did the project react to exogenous, unpredictable, events?
What remedial actions were put in place? What mechanisms were used to incentivise proactive responses?
Why were these events unexpected? Was it due to their purely exogenous and ex-ante unpredictable nature? Or, was it due to poor planning capacity?
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STRUCTURE OF CASE STUDIES AND STANDARD TABLES OF RESULTS
Qualitative and quantitative findings are integrated in a narrative way, in order to develop ten
project ‘histories’ and to isolate and depict the main aspects behind their long-term
performance. All case study reports share the same outline, presented in the following Table:
Table I.2 OUTLINE OF THE CASE STUDY REPORT
SECTION CONTENT
Projects description
The first section provides a brief sketch of the unit of analysis. It describes the key structural features of the infrastructure and the service delivered, the context in which it takes place, the target population and the current performance of the project.
Origin and history This section describes the background in which the decision to initiate the project was taken, the need and objectives expected be met and the key stakeholders involved and their role. The section should present a brief chronicle of the main developments after the construction phase and the most recent facts.
Description of long-term development effects
This section should describe the main long-term development effects provided by the project. The seven categories of effects should be considered and for each of them an assessment of the contribution of the project to that specific effect, and the timing of their materialisation and evolution, should be given.
Determinants of project outcomes
The main drivers influencing the performance observed are described and elaborated here. The evaluators should provide their own assessment for each of the five key determinants of project outcomes identified in the conceptual framework.
Conclusions The key messages in terms of lessons learnt are developed here.
Annexes Ex-post cost-benefit analysis report, list of interviewees, other ad hoc analysis if relevant (such as stakeholder mapping).
In order to maintain the structure of all the case study reports as similar as possible, and
facilitate the cross-project analysis of findings, a set of standard tables is used to summarise
the main evaluation results related to three dimensions of analysis (‘What’, ‘When’ and ‘How’).
Section 3 and 4 of each case study include standardised tables in which scores are assigned to
each type of long-term effect and each determinant. Scores ranging from -5 to +5 are given in
order to intuitively highlight which are the most important effects generated for each case
study and which are the most relevant determinants explaining the project outcomes. In other
words, scores are used to rank the effects and determinants, showing which ones are the most
relevant. Moreover, the plus or minus signs indicate the nature of the effects produced by the
project (was the impact positive or negative?) and of the determinant of project performance
(did the determinant positively or negatively contribute to the project outcome?).
The same scores are used to disentangle the project’s impacts on different stakeholders. This
table allows one to better interpret the aggregated score given to each effect, by
understanding on which actor the project impacted the most: for example, a +3 score to
“Direct economic growth” may be reflected by a very high positive effect on the infrastructure
operator (valued, for instance, +5) and a slightly negative effect on other actors (valued -2). As
shown by this example, the aggregate score of each effect and the scores related to different
stakeholders should be consistent with each other and should results from a sort of weighted
average of the impacts on individual stakeholders: an aggregate positive score is inconsistent
with negative impact scores on all the different stakeholders involved.
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Table I.3 SCORES ON PROJECT’S IMPACT AND DETERMINANTS OF PROJECT OUTCOMES
Score Meaning
+5 Given the existing constraints, the highest positive effects have been generated.
+4 Given the existing constraints, high positive effects have been generated, but more could have been achieved under certain conditions.
+3 Moderate positive effects have been generated, with large scope for further improvement.
+2 Some positive effects have been produced.
+1 Very little, almost negligible, positive effects have been generated.
0 No effects have been generated.
-1 Very little, almost negligible, negative effects have been generated.
-2 Minor negative effects have been produced.
-3 Moderate negative effects have been generated, but they could have been worse.
-4 Highly negative effects have been generated.
-5 The highest negative effects have been generated.
Note: The same scores have been used for assessing both the project’s impacts and determinants. In the first case, they have to be interpreted as the nature and strength of effect generated by the project; in the latter, they indicate the strength of each determinant factor in influencing the project outcomes.
The ‘When’ dimensions results are synthetically presented by means of another table: for each
kind of effect, a score is given to explain how the nature and strength of the impact evolved
over the years, by focusing in particular, on the short-run (approximately 1-5 years after the
project’s completion), the long-run (6-10 years after the project’s completion) and the future
period. The Table contains information that allows the reader to immediately understand
whether the project impacts have already stabilised or not. The meaning of the symbols used
and an example of their application is presented in the following two Tables.
Table I.4 SYMBOLS USED TO DESCRIBE THE TEMPORAL DYNAMICS OF THE EFFECTS
Symbol Meaning
+ or - Positive or negative effect.
++ or -- Positive or negative effects reinforced (in positive or negative direction) with respect to the previous stage.
+++ or --- Positive or negative effects further reinforced (in positive or negative direction) with respect to the previous stage.
+/- Mixed effect, it is not possible to assess whether the impact was positive or negative.
Table I.5 EXAMPLES OF TEMPORAL DYNAMICS OF THE EFFECTS
Short run (years 1-5)
Long run (years 6- 10)
Future years
Comments
+ + + The positive effect stabilised in the short-run.
+ ++ ++ The positive effect stabilised in the long-run.
+ ++ +++ The effect has grown over the years and will increase also in the future.
- + ++ The effect was at first negative; after some years it turned positive and it is still not stabilised yet.
+/- + ++ Effects have been mixed in the initial stage, became positive in the long-run and are expected to further increase in the future.
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ANNEX II. COST-BENEFIT ANALYSIS
The present annex illustrates the ex-post CBA of the ”Proyecto Sogama para la gestion de
residues solidos urbanos de Galicia” (Sogama’s project for the urban solid waste management
of Galicia), undertaken to quantitatively assess the performance of the project. The
methodology applied is in line with the technical note provided in the First Interim Report and,
more generally, with the EC Guide (European Commission, 2008). This annex presents in more
detail the assumptions, results of the CBA and the scenario analysis for the project.
METHODOLOGY, ASSUMPTIONS AND DATA GATHERING
The ex post CBA has been based on the following assumptions:
Project identification
The unit of analysis comprises all the activities carried out by Sogama, including: the
transport of Municipal Solid Waste (MSW, including organic, plastic, tetra pak, metal
and non-recyclable materials) from the transfer stations to Sogama’s facilities in
Cerceda), the differentiation of plastic, tetra pak and metals, the production of
electricity from non-differentiable waste and the disposal to landfills of combustion
residues. The project is not involved in the recycling of glass, paper and special waste.
The following activities are carried out in the Cerceda complex: a plant for waste
separation, a plant for processing RDF, a storage plant, a WtE plant and a co-
generation plant. Sogama also deals with the disposal to the landfill of Areosa of
unsorted waste that cannot be valorised (because it exceeds the treatment capacity of
the Cerceda facilities)263.
The set of activities for which European funding was requested is more limited,
because some works were carried out later, such as the construction of the animal
waste treatment plant, or because of a specific choice by the applicant, who chose to
finance other investments (such as some transfer stations) through its own resources.
Moreover, the land on which the Cerceda complex is located had already been
acquired by Sogama before applying for EU funds. Since it would be virtually
impossible, from an accounting point of view, to detect the specific impact of EU
funds, the whole complex of activities carried out by Sogama has been considered as
the object of our analysis.
Time horizon
The time horizon has been set at 30 years for all the project case studies of this
evaluation. This means that the timeframe for the CBA of the Sogama project spans
from 1997 (year zero), the year in which the first financing application was submitted
263
See Section 1.3 for more details.
82
and the construction works started, to 2027. Since the point of view is today (2011),
the analysis presents a mix of historical data and forecasts: data from 1997 to
December 2010 are historical (corresponding to 13 years) and from January 2011
onwards (covering 17 years) estimates are applied.
Constant price
The analysis is carried out at constant prices: data from 2012 onwards are estimated in
real terms (2011 prices, no inflation), while available data up to 2011 are historical and
therefore expressed in nominal terms in the official documents and sources of
information: they have been reflated so as to convert them to prices at 2011 Euro264.
Discount rates
Consistent with the choice of using constant prices for inflows and outflows, both the
financial and social discount rates used are real. The financial discount rate is 5.0% for
both the backward and forward period of analysis, as suggested in the current EC
Guide. In the economic analysis, specific social discount rates for Spain for the past and
the future periods have been calculated (see the First Intermediate Report of this
evaluation study for details). A real backward social discount rate of 5.4% and a real
forward social discount rate of 3.3% have been used.
Without-the-project scenario
All cash flows are incremental against a without-the-project scenario, consisting in a
fully decentralized management of MSW265, based on the use of fully legal municipal
landfills, without waste separation and without electric energy production. It is
important to note that this scenario corresponds to a do-minimum compared with the
situation before the project, particularly regarding the retrofitting of landfills. This
choice was made in view of the fact that the do-nothing would correspond to
perpetuating an unacceptable situation of illegality and unsustainable environmental
risk. The alternative scenario we consider requires that the municipalities create new
municipal landfills in compliance with existing rules, which, for simplicity of analysis,
are assumed to be located where the current 20 transfer stations managed by Sogama
are placed. Because of this assumption, no additional municipal transport costs have
to be hypothesized in this scenario, compared to the do-project case.
It has to be pointed out that this counterfactual scenario does not take into account
any possible fine imposed by the European Commission for non compliance with the
targets on waste recycling. As a matter of fact, the counterfactual scenario is identified
with the sole purpose to have a physically feasible basis for comparison of costs
264
For inflation, the average percentage variation of consumer prices provided by the International Monetary Fund was used, consistent with the other case studies. 265
Unsorted waste includes organic, plastic, brick and metal and other mixed waste.
83
benefits of the option adopted, rather than present a fully realisable alternative
project per se.
Data source
Primary data have been gathered from Sogama’s balance sheets integrated with data
and information provided on request directly by Sogama, the Waste Management Plan
2010-2020 (“Plan de Gestiόn de Residuos Urbanos de Galicia 2010-2020”)266, opinions
and information of the stakeholders and experts interviewed, a literature review and
the press.
FUTURE SCENARIO
This CBA is neither an ex-ante nor a pure ex-post analysis, since the time horizon covers 13
years in the past, for which historical data are available, and 17 years into the future. Hence
some hypotheses have to be made on the future trend of variables.
In particular, future costs and revenues were estimated by taking into account the current
trends related to population growth, per capita production of waste, the amount of recycling
and its quality (recycling collection net of the improper share). In forecasting the future,
regional targets for the production and composition of MSW included in the current WMP and
expected to be reached by 2020 have been considered.
i. Population growth: According to the Galician Statistics Institute (GSI) the population
of Galicia in 2009 was 2,796,089 inhabitants, with an overall growth in the last 10
years of 2.41%, corresponding to an annual growth of 0.24%. We have hypothesised
that this trend remains unchanged in the coming years.
ii. Per capita MSW production: In 2009 1,241,148 tonnes of MSW were produced in
Galicia, amounting to 1.22 kg per capita per day. In general, production per capita has
increased over the past 10 years; from 2008 the per capita consumption of products
has reduced as a consequence of the economic crisis, and the production of waste has
decreased accordingly (as explained also in the WMP). The Government of Galicia
(2011) foresees that the per capita MSW production will remain stable till 2012.
Thereafter the volume of waste produced is expected to decrease by approximately
1.3% each year (as a consequence of the awareness campaigns promoted by the
Region to improve waste reduction among population), thus achieving a total per
capita reduction of 10% over the period 2009-2020. The future scenario used in this
CBA assumes that the per capita waste production in the period 2010-2020 will match
the expectations of the Government of Galicia. From 2020 onwards we have assumed,
for sake of prudence, that the per capita waste production will remain constant at the
2020 level.
266
Government of Galicia, 2011.
84
iii. Total MSW production: Based on the assumptions concerning population growth and
the per capita production of waste, the total production of MSW over the horizon
period was predicted. It is interesting to note that the total amount of MSW produced
is expected to increase until 2012, and then to suffer a decline until 2020, because of
the decreasing per capita MSW production and the growing population. Afterwards
MSW production should increase again as a result of population growth.
Figure II.1 MSW TOTAL (TONNES) AND PER CAPITA (KG) PRODUCTION (2002-2027)
Source: Author’s elaboration based on Government of Galicia, 2011
iv. MSW composition: In our analysis, consistent with the WMP, the composition of
waste, i.e. the relative share of each type of waste (organic, paper, glass, plastic, metal
and mixed) in the total waste produced, is assumed to remain constant. This is
equivalent to assuming that the population consumption model will remain
unchanged. Consistent with this, the calorific value per tonne of MSW valorised is also
considered constant: this means that the amount of energy obtained by burning a
given quantity of MSW will not change over time.
360.00
370.00
380.00
390.00
400.00
410.00
420.00
430.00
440.00
450.00
460.00
900,000
950,000
1,000,000
1,050,000
1,100,000
1,150,000
1,200,000
1,250,000
1,300,000
MSW
tota
l pro
du
ctio
n (t
on
ne
s)
MSW total (Tonnes) Per capita MSW (Kg)
Pe
r capita M
SW p
rod
uctio
n (K
g)
85
Figure II.2 COMPOSITION OF MSW PRODUCED (2009)
Source: Author’s elaboration based on Government of Galicia, 2011
v. Population served and waste treated by Sogama: Consistent with the WMP, the
population served by Sogama, amounting to 2,307,508 inhabitants in 2009, i.e. 82.5%
of the population of Galicia267, is expected to remain unchanged until 2013. Thereafter,
the Government of Galicia estimates that the population served by Sogama will
decrease to 65% as a consequence of the establishment of a new WtE plant in the
South of the region serving some of the municipalities now covered by Sogama. The
volume of MSW to be valorised by Sogama will partially reduce, while the volume of
waste dumped in the Areosa landfill is expected to be eliminated. Moreover,
improvements in the quality of waste sorting by citizens will increase the amount of
recyclable materials recovered by Sogama. To date, no information is available on the
actual number of municipalities that will be served by Sogama or by the other
treatment plant, especially because individual municipalities are by law free to choose
which service to join. We share the regional administration’s expectations, assuming a
rational division of municipalities, aimed at filling the capacity of both plants and at
eliminating the volume of MSW disposed of in the Areosa landfill.
267
Government of Galicia, 2011. Data are referred to 2009.
Mixed, 2% Metal, 3%
Glass, 6%
Plastic, 10%
Paper and cardboard, 18%
Others, 19%
Organic, 42%
86
Figure II.3 RECYCLABLE AND NON-RECYCLABLE MSW TREATED BY SOGAMA (TONNES)
– 2010-2027
Source: Authors’ elaboration based on Government of Galicia, 2011
FINANCIAL ANALYSIS
Project investments
The investments made to create the Cerceda complex, the transfer stations and to initiate
activities, incurred between 1997 and 2008, are the following:
Planning268;
Land;
Building and construction;
Plant and machinery;
Start-up costs;
Net working capital;
Contingencies.
Sogama’s balance sheets have recorded a very high value of working capital in the past years,
which is due to the slow payment of Sogama’s tariff by the municipalities: the average time for
payment is 190 days. In addition, further delay is due to legal proceedings initiated by Sogama
against a number of insolvent municipalities. We hypothesized that the proceedings will be
resolved and the municipalities will pay all their debts within 5 years; after that the timing of
payments is assumed to remain constant at 60 days, which is the maximum payment time
268
This activity includes: design, planning and management of tenders.
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
20
22
20
23
20
24
20
25
20
26
20
27
MSW used for energy recovery Untreated MSW dumped into the landfill
Recyclable materials recovered
No
nre
cycl
able
MSW
Re
cyclable
MSW
87
allowed by the recent European Directive 2011/7/EU concerning the payments of public
administrations.
Even when the facilities became operational in 2001, Sogama continued to invest in order to
increase the number of transfer stations and to improve the facilities (in particular, the MSW
separation plant has been automated). Additional investments (amounting to approximately
EUR 15.3 million269) in the Cerceda facilities have been planned by the Regional Administration
(as described in the WMP 2010-2020): since no evidence is provided by the WMP about how
these investments will affect Sogama’s treatment capacity, they have not been included in the
ex-post CBA270.
At the end of the time horizon, the residual value of land and buildings is assumed to be equal
to 100% and 20% of the expenditures respectively.
269
Eight million Euros of which covers the cost for installing three new separation lines for recyclable materials from the black bag waste, in order to recover plastic, tetra pak and metal. 270
The calorific value of waste is not expected to change.
88
Table II.1 PROJECT INVESTMENTS (EUR THOUSAND, 2011 PRICES)
Project Year TOT 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14
Calendar Year 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Planning 12,773 8,543 1,655 2,562 13 0 0 0 0 0 0 0 0 0 0 0
Land 12,926 3,910 0 0 5,227 289 186 15 618 568 924 532 145 208 304 0
Building and construction 33,166 0 8,374 15,328 6,096 3,103 51 9 28 4 0 14 1 158 0 0
Plant and machinery 145,684 0 38,373 59,921 23,959 0 582 8,199 1,388 2,945 2,196 926 3,069 470 257 200
Start-up costs 35,508 0 15,181 18,633 1,694 0 0 0 0 0 0 0 0 0 0 0
Net working capital 26,610 0 0 0 28,530 13,637 3,785 13,176 -1,255 8,726 2,354 -1,820 566 -2,644 5,672 -22,655
Contingencies 7,902 0 637 2,128 5,137 0 0 0 0 0 0 0 0 0 0 0
Total residual value -14,625
Total investment 259,944 12,453 64,221 98,571 70,655 17,029 4,604 21,398 779 12,243 5,474 -348 3,781 -1,808 6,233 -22,455
Project Year TOT 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Calendar Year 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Planning 12,773 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Land 12,926 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Building and construction 33,166 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Plant and machinery 145,684 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200 200
Start-up costs 35,508 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Net working capital 26,610 -4,701 -4,802 -5,794 -531 -142 -143 -3,061 -178 -1,924 -45 -15 -19 -22 -25 -28 -31
Contingencies 7,902 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Total residual value -14,625 -14,625
Total investment 259,944 -4,501 -4,602 -5,594 -331 58 57 -2,861 22 -1,724 155 185 181 178 175 172 -14,456
89
Sources of financing
According to the project’s completion report (Sogama, 2002), the European Commission co-
financed 47% of the public investment costs incurred between 1997 and 2003, amounting to
EUR 71.84 million (in current terms); the remaining 53%, over the period to 2008, was covered
by Sogama shareholders’ contributions (the Government of Galicia and private parties). All
additional investments undertaken in the following years were financed through Sogama
resources; the Government of Galicia and the municipality of Vigo also contributed to the
construction of two local transfer stations. Sogama’s financing was provided both by its
shareholders and by private financial institutes. A simplified overview of total investment costs
and sources of financing by each stakeholders is shown in the following Table.
Table II.2 OVERVIEW OF INVESTMENT COSTS AND SOURCES OF FINANCING
Total investment costs (2011 prices) EUR 274.6 million 100%
Sources of financing and co-funding rates over the total investment costs
Cohesion Fund EUR 99.6 million 36.3%
Government of Galicia and Municipality of Vigo
EUR 1.5 million 0.5%
Sogama shareholders’ contribution and loans
EUR 173 million 63.2%
Operating costs and revenues
The project began its operational phase in 2001. The operating costs include the following
items:
Human resources;
Services;
Consumables.
The most relevant cost item corresponds to services, since Sogama carries out waste
management activities via subcontractor companies: in 2010 the cost for services represented
97% of the total operating costs of Sogama. Sogama costs for human resources are by contrast
much more limited, as Sogama has only approximately 20 employees; all the remaining
workers carrying out waste management activities are employed by its subcontractors and
therefore their cost is included within the costs for services. Costs from 2001 to 2010 are
historical data obtained from Sogama’s balance sheets, while those from 2011 onwards have
been estimated based on the amount of MSW managed.
The revenues include the following items:
Tariff for the MSW treatment;
Compensation by ECOEMBES for the separation of recyclable waste;
Sale of the electricity generated;
Tariff for the Animal Waste treatment.
90
Revenues from 2001 to 2010 are likewise historical data obtained from Sogama’s balance
sheets, whereas those from 2011 onwards have been estimated based on the amount of MSW
managed and valorised and the amount of plastic, brick and metal sorted in the complex. The
highest revenues come from the MSW treatment service (in 2010 representing 53.3% of the
total), followed by energy sales (41%), while revenues from packaging separation and from
animal waste treatment are much less relevant (equal to 5.5% and 0.1% respectively).
Electrical energy is mainly produced by the MSW valorisation process, followed by the co-
generation plant and the combustion of biogas generated in the Areosa landfill.
Table II.3 SOGAMA PRODUCTION OF ELECTRICAL ENERGY (2010)
Energy source Installed power (MWe) Energy generated (MWh) %
Biomass 49 392,000 67.31
Co-generation 21.6 172,800 22.36
Biogas 2.2 17,600 2.93
Total 582,400 100
Source: Sogama
91
Table II.4 OPERATING COST AND REVENUES (EUR THOUSAND, 2011 PRICES)
Project Year TOT 0 1 2 3 4 5 6 7 8 9
Calendar Year 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Human resources 36,368 872 991 940 1,007 915 1,119 1,402
Services 1,446,070 20,088 35,300 51,351 56,754 60,398 64,561 70,317
Consumables 20,144 0 0 0 0 328 2,612 2,478
Total operating costs 1,502,582 0 0 0 20,960 36,290 52,292 57,761 61,642 68,293 74,198
MSW treatment 928,738 24,148 29,550 29,548 40,379 43,065 46,939
Waste sorting 379,760 16,283 8,516 7,906 10,979 12,756 12,874 9,405
Animal waste treatment 8,624 974 2,157 2,234 1,325 134
Energy sale 834,996 14,577 22,923 25,303 27,154 42,035 39,512
Total operating revenues 2,152,118 0 0 0 16,283 47,241 61,352 67,987 82,523 99,299 95,990
Net operating revenues 649,536 0 0 0 -4,678 10,951 9,061 10,226 20,882 31,006 21,792
Project Year TOT 10 11 12 13 14 15 16 17 18 19
Calendar Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Human resources 36,368 1,496 1,395 1,415 1,379 1,379 1,379 1,379 1,379 1,379 1,379
Services 1,446,070 68,721 72,960 63,971 73,228 71,133 71,228 70,379 60,278 59,531 58,779
Consumables 20,144 931 1,613 978 790 916 917 906 776 767 757
Total operating costs 1,502,582 71,148 75,968 66,365 75,397 73,427 73,524 72,664 62,433 61,676 60,915
MSW treatment 928,738 48,644 51,588 44,440 44,788 46,252 46,314 45,762 39,194 38,708 38,219
Waste sorting 379,760 6,405 4,341 4,234 4,695 4,539 4,546 4,552 4,498 30,585 30,206
Animal waste treatment 8,624 100 96 79 85 85 85 85 85 85 85
Energy sale 834,996 32,199 41,134 31,599 34,397 32,401 32,401 32,401 32,401 32,401 32,401
Total operating revenues 2,152,118 87,348 97,159 80,352 83,964 83,277 83,346 82,800 76,178 101,779 100,911
Net operating revenues 649,536 16,200 21,191 13,987 8,568 9,850 9,822 10,136 13,745 40,103 39,997
92
Project Year TOT 20 21 22 23 24 25 26 27 28 29 30
Calendar Year 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Human resources 36,368 1,379 1,379 1,379 1,379 1,379 1,379 1,379 1,379 1,379 1,379 1,379
Services 1,446,070 58,022 35,020 36,669 36,143 36,101 36,049 35,985 35,911 35,827 35,734 35,633
Consumables 20,144 747 451 472 466 465 464 463 463 461 460 459
Total operating costs 1,502,582 60,148 36,850 38,519 37,987 37,945 37,891 37,827 37,752 37,667 37,573 37,471
MSW treatment 928,738 37,727 22,771 23,843 23,501 23,474 23,439 23,398 23,350 23,295 23,235 23,169
Waste sorting 379,760 29,825 29,440 25,912 14,908 14,694 14,677 14,656 14,630 14,600 14,566 14,528
Animal waste treatment 8,624 85 85 85 85 85 85 85 85 85 85 85
Energy sale 834,996 32,401 29,001 30,366 29,931 29,896 29,853 29,800 29,738 29,669 29,592 29,509
Total operating revenues 2,152,118 100,037 81,297 80,206 68,425 68,149 68,054 67,939 67,803 67,649 67,478 67,291
Net operating revenues 649,536 39,890 44,447 41,686 30,437 30,204 30,163 30,112 30,051 29,982 29,905 29,820
93
Return on Investment and Capital
From 2004, Sogama’s return of equity (ROE)271 and the return on investment (ROI)272 have
been positive, indicating a certain financial profitability of the investment. In 2010, however,
the performance ratios turned negative, as a consequence of the financial crisis in Spain273.
Table II.5 PROFITABILITY INDEXES OF SOGAMA
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
ROI -0.17% -1.25% -2.52% 0.67% 1.20% 2.20% 1.01% 2.01% 0.47% -3.44%
ROE -1.40% -11.30% -27.61% 5.97% 8.69% 14.43% 3.34% 6.20% 1.41% -11.39%
Source: Authors’ elaboration based on Sogama’s balance sheets
Using the cost-benefit methodology, the Financial Net Present Value of the investment –
financial NPV(C) – is positive, amounting to EUR 34.2 million, with a financial rate of return –
financial IRR(C) - of 5.5. The Financial Rate of Return on national capital – financial IRR(K) – is
higher, at 28.10%, and the Financial Net Present Value – financial NPV(K) – amounts to EUR
252.56 million, because of the impact of EU funding.
ECONOMIC ANALYSIS: DO-MINIMUM SCENARIO
The counterfactual case consists of the construction of 20 modern landfills receiving all types
of MSW (both recyclable and non-recyclable and the organic fraction) instead of the Sogama
incinerator and sorting plants. Methane is collected and flared, in compliance with the
requirements of Directive 1999/31/EC274, without energy generation. The leachate is collected
and treated before being discharged.
This scenario represents a do-minimum case as respect to the project, as some investments
should have been undertaken by the Region to retrofit or close the old uncontrolled landfills
and open new municipal landfills. The investment costs are estimated on the basis of the costs
occurred to build the Areosa landfill275.
The investment has been spread over 20 years, between 1997 and 2017: actually, landfills are
usually enlarged gradually, as soon as higher capacity is needed to receive the total volume of
waste. Operating these landfills entail costs which are estimated on the basis of the Areosa
landfill operating costs. No additional transport costs arise in this scenario, because for sake of
simplicity it is assumed that the landfills are built where the Sogama transfer stations of the
do-project scenario are located. It is assumed that each landfill is managed by a company
271
The Return of Equity measures the rate of return on the shareholders' equity of the common stock owners. 272
The Return on Investment index provides a snapshot of profitability adjusted for the size of the investment assets tied up in the enterprise. 273
In 2010 Sogama’s net income was EUR -7 million. 274
“Landfill gas shall be collected from all landfills receiving biodegradable waste and the landfill gas must be treated and used. If the gas collected cannot be used to produce energy, it must be flared” (Council Directive 1999/31/EC of 26 April 1999 on the landfill of waste). 275
It is recognised that the costs of creating and managing a single very large landfill are probably lower than those related to 20 smaller landfills, but for sake of simplicity it is assumed that the investments cost would be the same. This assumption makes de fact investment costs independent on the number of landfills.
94
collecting a tariff from the municipalities, which entirely covers the operating and investment
costs of the service of waste disposal276. In order to keep the counterfactual case simple, we
assumed that investments were entirely undertaken by the Region or Municipalities, without
either grant aid from the EU277 or loans from other sources.
Landfills produce negative externalities. A review of the environmental costs of landfills is
carried out by the European Commission (2000). The anaerobic decomposition of
biodegradable waste generates gas, whose quantity and quality vary over time. Landfill gas is
composed of methane (for about 55%) and carbon dioxide – CO2 – (for about 45%)278. In legally
managed landfills, biogas is collected and used to recover energy or at least flared, so as to
reduce the volume of gas actually emitted in the atmosphere. In the combustion process
methane is oxidised to water and CO2279. Both the documents analysed and the experts
consulted confirmed that even in well managed landfills a share of landfill gas is not captured
and escapes to the atmosphere. The European Commission’s study (2000) mentions that the
recovery efficiency of methane ranges from 40% (White et al., 1995 quoted in European
Commission, 2000) to 90% (Huber and Wohnlich, 1999; Rodríguez-Iglesias et al., 2005). As far
as the CO2 emissions are concerned, Wenzel and Hauschild (1997) distinguish between
biogenic CO2 and fossil CO2. To use their words: “From a life-cycle perspective, only emissions
that result in net contributions of CO2 should be included in the assessment [of landfill
emissions to air]. Carbon dioxide from non-renewable resources ('fossil' carbon) increases the
net amount of CO2 in the atmosphere, whereas CO2 emissions from renewable sources
('biogenic' carbon) can be considered as neutral emissions [...]. Non-renewable carbon includes
plastics and other oil-based waste, and renewable carbon is all biodegradable organic waste
such as food and garden waste”. Hence, on the basis of this consideration, not all CO2 released
in the air from the biogas combustion should be valued, but only the share deriving from non-
renewable materials. Yet, more recent studies280 generally disregard all the CO2 emissions, by
considering that they all derive from biogenic carbon and assuming that waste including fossil
carbon decompose only in the long-period (higher than 50 years)281. Although this issue should
certainly deserve much wider analysis, for the purpose of this CBA an approach consistent with
most of the literature is applied: CO2 emissions are not valued, while the damage cost of
methane is quantified: it is assumed that the recovery efficiency of biogas is 60%, a sort of
average of the rates highlighted in the literature. In other words, it is assumed that only 40% of
the methane generated in landfills escapes to the atmosphere.
276
The net cash flow of the financial analysis would equal zero each year of the considered period. 277
This assumption is considered reasonable, because the EU would be unlikely to fund such a solution. 278
The landfill gas contains also a small percentage of trace gases. 279
Very low levels of pollutants not previously present in the biogas are also formed, such as dioxins, HCl and NOx. 280
European Commission, 2000; European Commission, 2001; Hyder Consulting, 2009; USEPA http://www.epa.gov/climatechange/emissions/co2.html. 281
Moreover, in analysing the landfills externalities, CSERGE (1993) does not distinguish between biogenic and fossil carbon emissions, sustaining that this assumption does not significantly alter the final results.
95
The environmental damage produced by the methane emitted, whose amount depends on the
volume of waste collected in the landfill282, is valued by considering the unit cost of EUR 550283
per tonne of methane. Since no standard cost for this kind of emission exists, different sources
have been consulted and an average value has been selected284.
Landfills also produce other kinds of externalities, such as the emissions to soil and water. It is
assumed that in modern landfills these emissions are successfully eliminated with appropriate
leachate collection and treatment systems. Other negative externalities usually considered are
in terms of the use of land, disamenity impacts as a result of the presence of noise, dust, litter
and odours close285 to the dumping sites, and the risk of accidents. The same costs, however,
could be attributed to the thermoelectric plants and therefore they are not included in the
analysis.
In this scenario, positive externalities are also produced: the construction of modern landfills
avoids the damages to the environment (air, water and soil) and health produced by the
previously existing uncontrolled dumping sites. Since this benefit is included also in the do-
project scenario, it is not necessary to quantify it for the purpose of the CBA exercise.
The economic net present value of the counterfactual project is negative (EUR -22.99 million),
reflecting the pollution costs produced by the landfills and included in the analysis.
282
The volume of methane as respect to the waste volume has been estimated on the basis of Greiner (2005) and of expert opinions. 283
2011 prices. 284
According to European Commission (2001), for example, the damage cost of the methane ranges between EUR 528 per tonne to EUR 867.5 per tonne. 285
Another externality, very difficult to evaluate is the undesirable wildlife close to landfills , such as rats and birds.
96
Table II.6 ECONOMIC ANALYSIS OF THE DO-MINIMUM CASE (EUR THOUSAND, 2011)
Project Year Conversion Factor 0 1 2 3 4 5 6 7 8 9
Calendar Year 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Operating costs of the municipal landifills
16,420 16,118 15,838 15,562 23,005 27,296 27,228 28,121 29,595 31,146
Total operating costs 731,973 16,420 16,118 15,838 15,562 23,005 27,296 27,228 28,121 29,595 31,146
Investment costs of the municipal landifills
24,535 1,534 1,506 1,480 1,448 1,399 1,360 1,313 1,274 1,236 1,196
Total investment cost 24,535 1,534 1,506 1,480 1,448 1,399 1,360 1,313 1,274 1,236 1,196
Environmental cost for the emissions due to the landfilds
29,061 138 138 138 138 212 258 267 284 308 335
Total external cost 29,061 138 138 138 138 212 258 267 284 308 335
Total outflows 785,569 18,092 17,762 17,456 17,148 24,616 28,914 28,808 29,679 31,139 32,677
Operating revenues 17,955 17,624 17,318 17,010 24,404 28,656 28,541 29,395 30,831 32,342
Total operating revenues 756,508 17,955 17,624 17,318 17,010 24,404 28,656 28,541 29,395 30,831 32,342
Total inflows 756,508 17,955 17,624 17,318 17,010 24,404 28,656 28,541 29,395 30,831 32,342
Net cash flow -29,061 -138 -138 -138 -138 -212 -258 -267 -284 -308 -335
Discounted net cash flow -288 -273 -259 -247 -358 -415 -406 -411 -423 -436
97
Project Year Conversion Factor 10 11 12 13 14 15 16 17 18 19
Calendar Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Operating costs of the municipal landifills
30,367 29,123 27,492 27,319 27,843 27,880 27,548 23,594 23,301 23,007
Total operating costs 731,973 30,367 29,123 27,492 27,319 27,843 27,880 27,548 23,594 23,301 23,007
Investment costs of the municipal landifills
24,535 1,154 1,123 1,078 1,081 1,059 1,059 1,059 1,059 1,059 1,059
Total investment cost 24,535 1,154 1,123 1,078 1,081 1,059 1,059 1,059 1,059 1,059 1,059
Environmental cost for the emissions due to the landfilds
29,061 339 334 328 814 846 847 837 717 708 699
Total external cost 29,061 339 334 328 814 846 847 837 717 708 699
Total outflows 785,569 31,860 30,580 28,898 29,213 29,747 29,786 29,444 25,370 25,068 24,765
Operating revenues 31,522 30,246 28,570 28,400 28,901 28,939 28,606 24,653 24,360 24,066
Total operating revenues 756,508 31,522 30,246 28,570 28,400 28,901 28,939 28,606 24,653 24,360 24,066
Total inflows 756,508 31,522 30,246 28,570 28,400 28,901 28,939 28,606 24,653 24,360 24,066
Net cash flow -29,061 -339 -334 -328 -814 -846 -847 -837 -717 -708 -699
Discounted net cash flow -418 -391 -365 -857 -846 -820 -784 -650 -622 -594
98
Project Year Conversion Factor 20 21 22 23 24 25 26 27 28 29 30
Calendar Year 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Operating costs of the municipal landfills
22,711 21,006 21,551 21,242 21,217 21,187 21,149 21,106 21,056 21,002 20,942
Total operating costs 731,973 22,711 21,006 21,551 21,242 21,217 21,187 21,149 21,106 21,056 21,002 20,942
Investment costs of the municipal landfills
24,535 0
Total investment cost 24,535 0 0 0 0 0 0 0 0 0 0 0
Environmental cost for the emissions due to the landfills
29,061 690 638 655 1,033 1,032 1,030 1,028 1,026 1,024 1,021 11,200
Total external cost 29,061 690 638 655 1,033 1,032 1,030 1,028 1,026 1,024 1,021 11,200
Total outflows 785,569 23,401 21,644 22,206 22,275 22,249 22,217 22,177 22,132 22,080 22,023 32,143
Operating revenues 22,711 21,006 21,551 21,242 21,217 21,187 21,149 21,106 21,056 21,002 20,942
Total operating revenues 756,508 22,711 21,006 21,551 21,242 21,217 21,187 21,149 21,106 21,056 21,002 20,942
Total inflows 756,508 22,711 21,006 21,551 21,242 21,217 21,187 21,149 21,106 21,056 21,002 20,942
Net cash flow -29,061 -690 -638 -655 -1,033 -1,032 -1,030 -1,028 -1,026 -1,024 -1,021 -11,200
Discounted net cash flow -568 -509 -505 -771 -746 -721 -696 -673 -650 -627 -6,662
99
ECONOMIC ANALYSIS: DO-PROJECT SCENARIO
Benefits considered and methodology applied for their quantification
The benefits produced by the project are:
Service of recyclable waste sorting: the revenues deriving from the compensation
paid by ECOEMBES for the service of waste sorting are considered cost-reflective and
therefore used as shadow price, by applying the standard conversion factor for Spain
(0.997).
Service of non-recyclable waste treatment (both MSW and animal waste): as above,
the total revenues from the tariff paid by municipalities reflect the benefits derived
from the service of waste treatment, after applying the standard conversion factor.
Benefit of the production of electricity. In order to estimate the shadow price of
Sogama’s energy sales, the best solution would be to consider the long-term marginal
costs of energy production in the Iberian marker (the Spanish and Portuguese energy
markets are integrated) of the energy source that is “displaced” by the electricity
generated by Sogama. It is reasonable to work on the basis that the electricity
produced by incinerators does not substitute any specific source but rather a mix of
sources; hence, the long-term marginal costs should be identified for all the energy
sources and applied to the typical production mix for the Iberian Peninsula. However,
given the difficulty of finding the data on electricity generation costs for Spain and
Portugal, another method has been applied. The 2011 price of electricity in Spain and
Portugal was considered, assuming that the energy sale price is equal to the
production cost286. A weighted average of the energy prices has been computed, by
considering the different shares of energy production of each country in the Iberian
market287. Hence, the shadow price of the Sogama energy production considered in
this CBA is EUR 52.89 per KWh.
Saving of emissions that would have been generated by an alternative mix of energy
sources. Emissions are produced in the process of energy generation: they derive from
the WtE plant, from the co-generation and biogas combustion plants. By producing
energy the project enables the saving of emissions that would have been produced by
an alternative mix of energy sources. This benefit is included in the analysis: the energy
production mix of the Iberian market (considering Portugal and Spain) has been
calculated and the corresponding emissions for the amount of energy produced by
286
The latest data are available for the period January-September 2011 (source: Quarterly Reports on European Electricity Markets of the European Commission http://ec.europa.eu/energy/observatory/electricity/electricity_en.htm). 287
Approximately 85% for Spain and 15% for Portugal.
100
Sogama are quantified288. Different sources were used to obtain the damage cost per
kg of emission into the air, as reported in the following Table.
Table II.7 DAMAGE COST OF POLLUTANT EMISSIONS AND SOURCES
Gases 2011 EUR price per kg Source
Non biogenic CO2
0.011 before 2009;
0.028 between 2010 and 2019;
0.045 after 2020
European Commission, 2008
CH4 - methane 0.259 before 2009;
0.649 between 2010 and 2019;
1.038 after 2020
Computed on the basis of European Commission, 2001 (The unit damage cost of methane is estimated to be 23 times the damage cost of CO2)
SO2 – sulphur dioxide
10.04 OECD: http://www.oecd.org/dataoecd/32/41/2053990.pdf
Particulates 11.50 OECD: http://www.oecd.org/dataoecd/32/41/2053990.pdf
NOx - nitrogen oxides
13.63 OECD: http://www.oecd.org/dataoecd/32/41/2053990.pdf
Hg - mercury 39 thousand European Commission: http://ec.europa.eu/environment/waste/studies/pdf/ econ_eva_landfill_report.pdf
Dioxins 23 million European Commission: http://ec.europa.eu/environment/waste/studies/pdf/ econ_eva_landfill_report.pdf
Costs considered and methodology applied for their quantification
In addition to the financial investment and operating costs, three external costs have been
considered in the economic analysis
Emissions generated for the energy production. Although on one hand the project
saves the emissions that would have been produced by the alternative energy mix, on
the other hand the Sogama plants producing energy also emit a certain amount of
emissions to the air. The environmental damage produced by the biogas combustion
process implemented in the Areosa landfill is represented by the cost of methane that
escapes collection. Its evaluation is consistent with the do-minimum scenario.
According to the regional WMP, the Areosa landfill should be closed from 2018, thanks
to the full valorisation of waste allowed by the second WtE plant to be built in the
South of Galicia. It is assumed that the methane emissions will continue for a further
10 years: thus their residual value is included at the end of the time horizon (i.e. year
2027). The total emissions from the thermoelectric and the cogeneration plants are
estimated on the basis of the total energy produced in the Cerceda complex and the
total volume of waste valorised: this variable is taken as a proxy for Sogama activity
and it allows us to correlate future energy production with the forecast of waste to be
treated. The Cerceda complex is provided also with a waste water treatment plant.
288
The Spanish and Portuguese production mix has been estimated on the basis of Red (comment: ‘Rede’?)Eléctrica de España (2010) and Rede Eléctrica Nacional (2010). The source for the emissions for each powergen plant is the Database on life cycle emissions for electricity and heat generation technologies (updated to 2008) CASES, 2008.
101
The damage produced by the water emissions is not valued for two reasons: i) its
effect would be particularly small and ii), as stated by the European Commission
(2000), the literature lacks robust results for valuation of incinerators’ emissions to soil
and water.
External costs of MSW transportation. The transport emissions generated by the
service of transporting waste from the local transfer stations to the central treatment
complex or the Areosa landfill are included in the analysis. Using the INFRAS - IWW
approach for the monetisation of the external costs of transport, we considered the
costs related to accidents, noise, air pollution and greenhouse gas emissions (CO2).
According to Sogama’s calculations, about 7,500,000 kilometres were travelled by
Sogama’s trucks transporting MSW in 2011. The distance travelled every year by heavy
vehicles have been estimated on the basis of the amount of MSW transported each
year, net of the share transported by train. Using the standard costs provided by
INFRAS - IWW related to 2011, we estimated the yearly external costs of transport.
Box II.1METHODOLOGY ADOPTED IN THE EX-ANTE CBA OF THE SOGAMA PROJECT
Although going into the details of the CBA methodology adopted ex-ante is outside the scope of this case study, for the sake of completion it is nevertheless presented in brief. The ex-ante CBA (Sogama, 1997) considered the following items:
Costs:
Investments: transfer stations, plants for waste recycling, treatment and production of combustible materials, incinerator, management and quality control;
Cost of maintenance and operations.
Benefits:
Revenues from the sale of recycled products and sub-products (paper, glass, energy, etc.)289;
Saving of raw materials, natural resources and energy thanks to recycling;
Cost savings in waste management thanks to the project;
Savings of costs related to the management of land and water pollution from landfills;
Recovery of lands for alternative use, as a consequence of the closure of landfills;
Savings of energy because of production though cogeneration;
Savings of combustible materials thanks to the use of urban solid waste;
Savings of environmental costs thanks to reduced emissions.
Other benefits were identified but not included in the CBA. These are: improvements in the quality of life, creation of employment, landscape improvements because of the closure of landfills, total elimination of methane emissions from the landfills and others.
The results of the profitability analysis, based on a time horizon of 28 years (3 years of investment and 25 years of operations) are:
Financial rate of return (without grant) = -2.49%
Financial rate of return (with grant)= 1.52%
Economic rate of return = 31.59%
B/C Ratio= 2.26
The externalities quantified in the ex-ante CBA differ from the methodology adopted in this ex-post analysis. As far as the two benefits resulting from the recycling activities are concerned (revenues from
289
According to the application form the energy is sold at Ptas 10 for kilowatt-hour.
102
the sale of recycled products and saving of raw materials), Sogama contributes to the recycling process of metal, plastic and tetra pak by providing the separation service to ECOEMBES; yet, citizens and municipalities also play a role in the recycling process. Hence, the total benefit of recycling, which undoubtedly exists, should be apportioned among all the stakeholders and not fully attributed to Sogama, as was done in the ex-ante CBA. In our analysis, it was decided not to quantify these contributions, but to simply apply a conversion factor of 1 to Sogama’s revenues deriving from the recyclable material separation.
The recovery of lands for alternative use was not included among the benefits in the ex-post CBA, since the alternative scenario assumes that the pre-existing municipal landfills would be closed in any case, even without the project.
Finally, the benefits related to the production of electricity from renewable sources were also considered ex-ante, but a different methodology to quantify them was adopted.
Source: Authors
Economic performance of the do-project scenario
In the economic analysis all input data are converted from financial to shadow prices, in order
to reflect their opportunity costs. The conversion factors defined in the First Interim Report
have been applied.
The economic performance of the project – Economic Net Present Value (NPV) and Economic
Rate of Return (IRR) – has been calculated by applying a 5.4% real discount factor for the
period 1997-2011 and 3.3% for the years 2012-2027.
The economic NPV is estimated to be EUR 170.08 million and the economic IRR 6.90%.
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Table II.8 ECONOMIC ANALYSIS OF THE DO-PROJECT CASE (EUR THOUSAND, 2011)
Project Year Conversion factor 0 1 2 3 4 5 6 7 8 9
Calendar Year 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Human resources 0.85 0 0 0 741 842 799 856 778 951 1,192
Services 0.85 0 0 0 17,075 30,005 43,648 48,241 51,338 54,877 59,770
Consumables 1 0 0 0 0 0 0 0 328 2,612 2,478
Total operating costs 1,280,216 0 0 0 17,816 30,847 44,448 49,097 52,445 58,441 63,440
Planning 0.997 8,517 1,650 2,554 13 0 0 0 0 0 0
Land 1.3 5,083 0 0 6,795 376 242 19 804 739 1,201
Buildings and constructions 0.9 0 7,537 13,795 5,486 2,793 46 8 25 3 0
Plants and machineries 0.997 0 38,257 59,741 23,887 0 580 8,174 1,384 2,936 2,189
Start-up costs 0.997 0 15,136 18,577 1,689 0 0 0 0 0 0
Net working capital 0.997 0 0 0 28,444 13,596 3,773 13,136 -1,251 8,700 2,347
Contingencies 0.997 0 635 2,122 5,122 0 0 0 0 0 0
Total residual value 1.169 0 0 0 0 0 0 0 0 0 0
Total investment cost 257,345 13,600 63,216 96,789 71,436 16,765 4,642 21,337 962 12,378 5,737
Environmental cost for the emissions due to the transportation of MSW
20,544 0 0 0 363 555 677 700 745 808 879
Environmental cost for the emissions due to the valorisation of MSW (incinerator and cogeneration)
165,206 0 0 0 0 2,469 4,222 4,984 5,039 4,892 4,769
Environmental cost for emission from the landfill of Areosa
6,849 0 0 0 138 119 100 80 96 125 157
Total external costs 192,599 0 0 0 501 3,143 5,000 5,764 5,879 5,825 5,805
Total outflows 1,730,160 13,600 63,216 96,789 89,753 50,755 54,089 76,198 59,286 76,644 74,982
104
MSW treatment 0.997 0 0 0 0 24,075 29,462 29,460 40,258 42,935 46,798
Waste sorting 0.997 0 0 0 16,234 8,491 7,882 10,946 12,718 12,836 9,377
Animal waste treatment 0.997 0 0 0 0 0 971 2,150 2,227 1,321 134
Energy sale 0 0 0 0 16,104 26,787 30,523 29,929 28,196 26,588
Total operating revenues 1,973,755 0 0 0 16,234 48,671 65,102 73,079 85,132 85,288 82,897
Saved environmental cost of the alternative energy production mix
226,272 0 0 0 0 3,401 5,817 6,866 6,941 6,739 6,569
Total External benefit 226,272 0 0 0 0 3,401 5,817 6,866 6,941 6,739 6,569
Total inflows 2,200,027 0 0 0 16,234 52,072 70,918 79,945 92,073 92,027 89,466
Net cash flow 469,867 -13,600 -63,216 -96,789 -73,519 1,317 16,829 3,747 32,787 15,383 14,484
Discounted net cash flow -28,399 -125,243 -181,933 -131,114 2,228 27,016 5,707 47,379 21,091 18,841
105
Project Year Conversion factor 10 11 12 13 14 15 16 17 18 19
Calendar Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Human resources 0.85 1,271 1,186 1,203 1,172 1,172 1,172 1,172 1,172 1,172 1,172
Services 0.85 58,413 62,016 54,376 62,244 60,463 60,544 59,822 51,236 50,601 49,962
Consumables 1 931 1,613 978 790 916 917 906 776 767 757
Total operating costs 1,280,216 60,616 64,815 56,557 64,206 62,551 62,633 61,900 53,184 52,540 51,891
Planning 0.997 0 0 0 0 0 0 0 0 0 0
Land 1.3 692 189 270 395 0 0 0 0 0 0
Buildings and constructions 0.9 13 1 142 0 0 0 0 0 0 0
Plants and machineries 0.997 923 3,060 469 256 199 199 199 199 199 199
Start-up costs 0.997 0 0 0 0 0 0 0 0 0 0
Net working capital 0.997 -1,814 564 -2,636 5,655 -22,587 -4,687 -4,787 -5,777 -530 -141
Contingencies 0.997 0 0 0 0 0 0 0 0 0 0
Total residual value 1.169 0 0 0 0 0 0 0 0 0 0
Total investment cost 257,345 -187 3,814 -1,755 6,306 -22,387 -4,488 -4,588 -5,578 -330 58
Environmental cost for the emissions due to the transportation of MSW
20,544 888 875 860 853 887 888 878 752 742 733
Environmental cost for the emissions due to the valorisation of MSW (incinerator and cogeneration)
165,206 5,312 4,798 5,245 6,462 6,529 6,529 6,529 6,529 6,529 6,529
Environmental cost for emission from the landfill of Areosa
6,849 140 154 132 353 381 382 372 252 243 234
Total external costs 192,599 6,340 5,827 6,238 7,668 7,796 7,799 7,778 7,532 7,514 7,495
Total outflows 1,730,160 66,768 74,456 61,040 78,179 47,960 65,944 65,090 55,139 59,723 59,444
MSW treatment 0.997 48,498 51,433 44,307 44,653 46,113 46,175 45,624 39,076 38,592 38,105
Waste sorting 0.997 6,386 4,328 4,221 4,681 4,526 4,533 4,539 4,485 30,493 30,116
106
Animal waste treatment 0.997 100 96 79 84 84 84 84 84 84 84
Energy sale 28,599 25,114 26,369 24,820 24,575 24,575 24,575 24,575 24,575 24,575
Total operating revenues 1,973,755 83,583 80,972 74,976 74,239 75,298 75,367 74,822 68,220 93,745 92,879
Saved environmental cost of the alternative energy production mix
226,272 7,318 6,609 7,226 8,849 8,940 8,940 8,940 8,940 8,940 8,940
Total External benefit 226,272 7,318 6,609 7,226 8,849 8,940 8,940 8,940 8,940 8,940 8,940
Total inflows 2,200,027 90,901 87,581 82,202 83,087 84,238 84,307 83,762 77,160 102,685 101,819
Net cash flow 469,867 24,133 13,125 21,163 4,908 36,278 18,363 18,672 22,021 42,961 42,375
Discounted net cash flow 29,783 15,368 23,510 5,173 36,278 17,776 17,498 19,978 37,729 36,025
107
Project Year Conversion factor 20 21 22 23 24 25 26 27 28 29 30
Calendar Year 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Human resources 0.85 1,172 1,172 1,172 1,172 1,172 1,172 1,172 1,172 1,172 1,172 1,172
Services 0.85 49,318 29,767 31,168 30,722 30,686 30,641 30,587 30,524 30,453 30,374 30,288
Consumables 1 747 451 472 466 465 464 463 463 461 460 459
Total operating costs 1,280,216 51,238 31,390 32,812 32,359 32,323 32,277 32,222 32,158 32,086 32,006 31,919
Planning 0.997 0 0 0 0 0 0 0 0 0 0 0
Land 1.3 0 0 0 0 0 0 0 0 0 0 0
Buildings and constructions 0.9 0 0 0 0 0 0 0 0 0 0 0
Plants and machineries 0.997 199 199 199 199 199 199 199 199 199 199 199
Start-up costs 0.997 0 0 0 0 0 0 0 0 0 0 0
Net working capital 0.997 -142 -3,052 -178 -1,918 -45 -15 -19 -22 -25 -28 -30
Contingencies 0.997 0 0 0 0 0 0 0 0 0 0 0
Total residual value 1.169 0 0 0 0 0 0 0 0 0 0 -17,100
Total investment cost 257,345 57 -2,852 22 -1,719 155 184 181 177 174 171 -16,931
Environmental cost for the emissions due to the transportation of MSW
20,544 724 669 687 677 676 675 674 672 671 669 667
Environmental cost for the emissions due to the valorisation of MSW (incinerator and cogeneration)
165,206 6,529 5,843 6,118 7,465 7,456 7,445 7,432 7,417 7,399 7,380 7,359
Environmental cost for emission from the landfill of Areosa
6,849 225 214 202 306 288 270 252 234 216 198 989
Total external costs 192,599 7,477 6,726 7,007 8,447 8,420 8,390 8,357 8,323 8,286 8,247 9,015
Total outflows 1,730,160 58,772 35,264 39,842 39,087 40,897 40,851 40,760 40,659 40,547 40,425 24,003
MSW treatment 0.997 37,614 22,702 23,771 23,430 23,403 23,369 23,328 23,280 23,226 23,165 23,100
Waste sorting 0.997 29,735 29,352 25,835 14,863 14,650 14,633 14,612 14,586 14,556 14,522 14,485
108
Animal waste treatment 0.997 84 84 84 84 84 84 84 84 84 84 84
Energy sale 24,575 21,996 23,031 22,701 22,675 22,642 22,602 22,555 22,503 22,444 22,381
Total operating revenues 1,973,755 92,008 74,135 72,721 61,079 60,813 60,729 60,626 60,506 60,369 60,216 60,050
Saved environmental cost of the alternative energy production mix
226,272 8,940 8,002 8,379 10,184 10,172 10,158 10,140 10,119 10,095 10,069 10,040
Total External benefit 226,272 8,940 8,002 8,379 10,184 10,172 10,158 10,140 10,119 10,095 10,069 10,040
Total inflows 2,200,027 100,948 82,137 81,100 71,264 70,985 70,886 70,766 70,624 70,464 70,285 70,090
Net cash flow 469,867 42,177 46,873 41,258 32,177 30,088 30,035 30,005 29,966 29,917 29,861 46,087
Discounted net cash flow 34,711 37,344 31,821 24,024 21,747 21,015 20,323 19,648 18,990 18,348 27,414
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INCREMENTAL ECONOMIC ANALYSIS
The costs and benefits of the project should be assessed in incremental terms. The difference
between the cash flows of the do-minimum and do-project scenarios has been computed and
the economic performance indicators have been estimated using the resulting net cash flow.
The project’s net present value is EUR 193.07 million and the internal rate of return is 7.19%:
these results, computed by taking into account the counterfactual case, are slightly higher than
that estimated in the do-project case.
The interpretation for these results is straightforward: although the project itself would have
already generated positive effects, these are higher when compared to the without-the-
project situation.
In particular, the total value of benefits, discounted to 2011, is EUR 2,064 million, higher than
the total costs, EUR 1,871 million. The two most significant benefits are in terms of saved
investment and operating costs related to municipal landfill and the benefits of energy
production: they are respectively 41.9% and 32.2% of the total quantified benefits. The
benefits resulting from Sogama’s waste treatment and waste sorting services amount to 6.0%
and 17.4% respectively. Finally, the benefit from the saving of emissions deriving from the
production of electricity from incineration, co-generation and biogas energy recovery
compared to an alternative energy mix represents 2.5% of the total benefits.
Table II.9 NET PRESENT VALUE AND WEIGHT OF THE ECONOMIC BENEFITS OF THE
PROJECT (EUR THOUSAND, 2011 PRICES)
Weights of the benefits EUR Thousand Share
Saved costs of municipal landfills 864,758 41.9%
Saved environmental costs of electricity produced 51,039 2.5%
Benefit of final waste disposal 124,203 6.0%
Benefit of electricity produced 665,729 32.2%
Saving of raw materials for recycling (Sogama share) 358,952 17.4%
Total benefits 2,064,682 100.0%
The main item of cost is related to the waste treatment operation costs, equal to 71.3%. The
other cost items are: the project investment costs, being 27.6%, and the environmental costs
of waste transportation, equal to 1.1%. It has to be stressed that the latter is not the only
environmental cost produced by the project: there is also the environmental cost of emissions
into the atmosphere due to waste incineration, which are taken into account in estimating the
net emissions saving from electricity generation (see previous Table).
110
Table II.10 NET PRESENT VALUE AND WEIGHT OF THE ECONOMIC COSTS OF THE
PROJECT (EUR THOUSAND, 2011 PRICES)
Weights of the costs EUR Thousand Share
Environmental costs of waste transportation 20,824 1.1%
Waste treatment operation costs 1,333,947 71.3%
Project investment costs 516,845 27.6%
Total costs 1,871,615 100.0%
SENSITIVITY, SCENARIO AND UNCERTAINTY ANALYSIS
A simplified sensitivity analysis has been made on key variables, in order to observe the extent
to which certain variations of these variables affect the economic performance indicators. The
authors tested the sensitivity of a number of variables, for which the future forecast are
considered the most critical. The variables that are made vary in the scenario analysis and the
ranges of variation are the following:
Population growth. Population growth from 2010 onwards has been assumed to
follow the same pattern of the previous ten years. The CBA is re-run when the growth
rate decreases by 10% and when it increases by 10%.
Future production of waste. The Government of Galicia foresees that the per capita
production of waste in the period 2013-2020 will decrease. After that year, it is
assumed to remain constant at the 2020 level. These forecasts rely on the optimistic
assumption that the awareness campaigns organised by the Government of Galicia will
succeed at reducing the amount of waste produced by households. In a more
pessimistic scenario, the production of waste can be assumed to have the same trend
recorded over the years 2002-2009.
Future recycling share. The recycling share of the organic waste, paper, glass and
recyclable packaging (plastic, metal and tetra pak) is expected to increase between the
period 2014-2017, according to the objectives of the Waste Management Plan 2010-
2010 and as a consequence of the awareness campaigns organised by the Region. In a
more pessimistic scenario, the same recycling rates of the current period are applied.
Efficiency of biogas capture from landfills. Both in the do-minimum and in the project
case, it has been assumed that 60% of the biogas produced by the decomposition
process of waste is captured and flamed, while 40% escapes to the atmosphere. This
value has been derived from the literature and it represents an average of the values
of recovery efficiency of methane of different studies. The efficiency of biogas capture
is made vary from 50% to 90%, two extreme values highlighted in the literature. The
emissions of methane released in the atmosphere vary accordingly, ranging from 50%
to 10%.
111
Methane production. According to Greiner (2005), the volume of methane produced
from a tonne of waste in one year is 5 m3. The robustness of the CBA results to
variations of this variable is tested by letting it vary from 3 to 7.
Energy price of the Iberian market. The shadow price of energy is the average market
price of energy over the Spanish and Portuguese markets: it amounts to EUR 52.89 per
MWh. This price, which influences Sogama’s revenues, is made vary by ± 10%.
The results that are generated when each variable varies and all the others are kept constant
are summarized in the table below.
Table II.11 VARIATION OF SELECTED INDICATORS
Variable Base assumption in the CBA
Hypothesis Economic NPV
(EUR thousand):
base case EUR 193,066 th.
Economic IRR
(%):
base case 7.19%
Population growth
IGS forecasts -10% 193,032 7.19
+10% 193,101 7.19
Future production of waste
Expected values of the WMP 2010-2000
Expected values of the WMP 2010-2000
193,066 7.19
Same trend of the period 2002-2009
259,530 7.72
Future recycling share
Expected values of the WMP 2010-2000
Expected values of the WMP 2010-2000
193,066 7.19
Actual values of 2009 210,745 7.29
Efficiency of biogas capture
60% 50% 197,273 7.23
90% 180,446 7.06
Methane production
5 m3/tonne*year 3 m3/tonne*year 186,336 7.12
7 m3/tonne*year 199,797 7.26
Energy price of the Iberian market
EUR 52.89 -10% 126,493 6.34
+10% 259,639 8.02
The scenario analysis can be implemented by constructing two paths concerning future
variable trend: an optimistic and a pessimistic scenario, where all the optimistic and
pessimistic hypotheses made in the sensitivity analysis are respectively considered.
The hypotheses of the two scenario are presented in the following table:
112
Table II.12 HYPOTHESES FOR THE SCENARIO ANALYSIS
Optimistic scenario Pessimistic scenario
Population decreases by 10% Population increases by 10%
Future production of waste matching the WMP 2010-2020 expectations (as in the base case)
Future production of waste following the same trend of the period 2002-2009
Future recycling shares matching the WMP 2010-2020 expectations (as in the base case)
Future recycling shares are the same as the 2009 shares
90% of landfill biogas is captured 50% of landfill biogas is captured
The volume of methane produced in landfills is 3 m3 per tonne of waste per year
The volume of methane produced in landfills is 7 m3 per tonne of waste per year
The shadow price of energy increases by 10% The shadow price of energy decreases by 10%
The results of the scenario analysis show that the positive economic performance indicators
are robust to the variation of the most significant variables:
i. In the optimistic scenario, the economic NPV would be EUR 245.3 million, with an
economic rate of return of 7.89%.
ii. In the pessimistic scenario, the NPV would be EUR 228.1 million with an economic rate
of return of 7.18%.
In addition to the sensitivity and scenario analysis, the authors aim to test also the elasticity of
results to the social discount rate used in the analysis, as a sort of test of the methodology. The
social discount rate was estimated at 5.4% for the backward period and 3.3% for the forward
period: however, the social opportunity cost of capital, i.e. the return that can be generated on
the marginal project in the private sector290, is equivalent to a 5% real rate, as recommended
by the EC Guide. When this rate of return is used in both the past and future periods, the CBA
NPV does not significantly change, amounting to EUR 157.43 million. Therefore it is possible to
state that the sensitivity of results to the discount rate used is very low.
RISK ANALYSIS
The risk assessment has been conducted on the six variables on which the sensitivity analysis
was previously performed: Total efficiency of biogas capture, Methane production (volume),
Energy price of the Iberian market, Population growth, Future production of waste and Future
recycling share. For the sake of simplicity, it was assumed that the probability distribution of
each of the first four variables is triangular, with the value with the highest probability being
the reference one – that is, the “base value” adopted for carrying out the CBA – and the lower
and upper bounds being the “pessimistic” and “optimistic” values defined in the Scenario
analysis. Instead, with respect to Future production of waste and Future recycling share, they
have been modelled according to a discrete probability distribution taking two values only, 0
290
In a closed economy with perfect information, no distortions and no externalities the social discount rate and the social opportunity cost of capital are equivalent.
113
and 1, with the same probability 0.5 each291 (Bernoulli distribution, with p-value = 0.5). For
both the variables, the value 0 corresponds to the pessimistic value as defined in the Scenario
analysis, while the value 1 to the base value adopted in the CBA assessment.
The analysis has been elaborated through an experimental Monte Carlo simulation292 with
1,000 random repetitions. In a nutshell, at each iteration it is randomly extracted a value from
the distribution of each of the independent variables. The extracted values are adopted for
computing the economic NVP and IRR, and the output results are then stored. Finally, the
Monte Carlo numerical algorithm approximates the probability distribution of the two outputs.
In synthesis, the risk analysis procedure shows that the expected value of the NPV is equal to
EUR 235 million (higher than the reference case), and that the expected value of the IRR is
7.49% (against a reference case of 7.19%). The ERR, in particular, is never lower than 3.3%, the
real forward social discount rate assumed within the analyses. Furthermore, the probability
that the ENVP is lower than 0 is negligible, but, conversely there is a very high probability
(higher than 75-80%) that the CBA results are higher than the reference case. Hence, the CBA
carried out appears to underestimate to future possible results deriving from any joint
variations in the key variables. These results indicate that the risk of the project over the
remaining years of the time horizon is very low.
Table II.13 RESULTS OF THE RISK ANALYSIS ON THE ECONOMIC NET PRESENT VALUE
(EUR THOUSAND, 2011)
Reference value of the ENPV 193,066
Mean 235,138.961
Median 230,473.066
Standard deviation 46,933.008
Minimum value 119,690.751
Central value 239,118.967
Maximum value 358,547.184
Probability of the ENPV being not higher than the reference value 0.199
Probability of the ENPV being higher than the reference value 0.801
Probability of the ENPV being lower than zero < 0.000
Source: Authors
291
The choice of the same probability for the two possible values is motivated by the fact that we do not have enough information for assuming a higher probability for one of the two events against the other. 292
A proprietary software has been used.
114
Figure II.4 PROBABILISTIC DISTRIBUTION OF THE ECONOMIC NET PRESENT VALUE
(EUR THOUSAND, 2011)
Source: Authors
Figure II.5 PROBABILISTIC DISTRIBUTION OF THE ECONOMIC NET PRESENT VALUE
(EUR THOUSAND, 2011)
Source: Authors
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
110,000 160,000 210,000 260,000 310,000 360,000
Punctual probabilityCumulated probabilityReference valueMinimum
Central
Maximum
Mean
SD low
SD upp
Median
0.00
0.02
0.04
0.06
0.08
0.10
0.12
12
5,6
62
13
7,6
05
14
9,5
48
16
1,4
91
17
3,4
33
18
5,3
76
19
7,3
19
20
9,2
62
22
1,2
05
23
3,1
48
24
5,0
90
25
7,0
33
26
8,9
76
28
0,9
19
29
2,8
62
30
4,8
04
31
6,7
47
32
8,6
90
34
0,6
33
35
2,5
76
115
Table II.14 RESULTS OF THE RISK ANALYSIS ON THE ECONOMIC INTERNAL RATE OF
RETURN
Reference value of the ERR 7.19%
Mean 7.49%
Median 7.46%
Standard deviation 0.43%
Minimum value 6.27%
Central value 7.45%
Maximum value 8.63%
Probability of the ERR being not higher than the reference value 0.247
Probability of the ERR being higher than the reference value 0.753
Probability of the ERR being lower than the reference discount rate (3.3 %) < 0.000
Source: Authors
Figure II.6 PROBABILISTIC DISTRIBUTION OF THE ECONOMIC INTERNAL RATE OF
RETURN
Source: Authors
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
6.2% 6.7% 7.2% 7.7% 8.2% 8.7%
Punctual probabilityCumulated probabilityReference value
Minimum
Central
Maximum
Mean
SD low
SD upp
Median
116
Figure II.7 PROBABILISTIC DISTRIBUTION OF THE ECONOMIC INTERNAL RATE OF
RETURN
Source: Authors
0.00
0.02
0.04
0.06
0.08
0.10
0.12
6.3% 6.6% 6.8% 7.0% 7.3% 7.5% 7.7% 8.0% 8.2% 8.4%
117
ANNEX III. MAP OF STAKEHOLDERS
Actor Role Level Degree of interest in the project
Association for the ecologic defence of Galicia (Asociación para a Defensa Ecolóxica de Galiza - ADEGA)
Independent non-governmental association active in the environmental field for 25 years. It is part of the Federación Ecoloxista Galega (FEG).
In the 1980s it promoted a campaign in favour of reduction of waste at source and recycling.
In 1997 it expressed its negative opinion in respect of the Sogama project; it provided supporting documentation for the purpose of the Environmental Impact Assessment.
Regional High and against the project and, in general, to incinerators
Government of Galicia
Responsibility for supervising and approving projects, and for facilitating their implementation (for example by releasing the necessary authorizations).
It formulated the Environmental Impact Assessment and proposed modifications to the original Sogama plan.
It formulated the Plan for the management of urban solid waste in Galicia (Law 10/1997, hereafter ‘the Plan’). Its role is to plan and coordinate the activities to achieve the objectives of the Plan, to collaborate with the local administrations and to support and promote the minimisation of waste generation, the valorisation of urban solid waste and its treatment.
Regional Very high
Consortium for the management of urban solid waste
Public body foreseen in law 10/1997(art. 28) to carry out the activities related to the management of urban solid waste which the municipalities may decide to delegate. It was never established.
Local - Regional
Low, only indirect involvement
ECOEMBES National non-profit company in charge of the recovery and recycling of light packaging (plastic, cans and bricks) since 1996.
It compensates Sogama for the separation of the recyclable waste collected in the yellow bags, which the company carries out in its infrastructures in Cerceda.
National Medium
European Commission Co-financing of 44% of total investment costs occurred between 1997 and 2001 (amounting at EUR 71 million out of a total cost of EUR 162 million)
European High: compliance with EU Directives on solid waste management
Federation of municipalities and provinces of Galicia
Body composed of 315 municipalities, 4 provinces and 9 minor entities located in the Autonomous Community of Galicia. It was set up on 7 October 1988. It represents the Galician local public administrations.
In 2004 it was consulted by Sogama regarding tariff setting.
Regional Medium: it is represented on the Sogama board of directors, although it does not have voting power
Greenpeace International non-governmental organisation for the protection of the environment and nature.
In 1997 it expressed its negative opinion in respect of the Sogama project; it provided supporting documentation for the purpose of the Environmental Impact Assessment.
In July 2010 it published a socio-economic analysis of incinerators in Spain, including the Sogama’s, in
National and international
High and against the project and, in general, to incinerators
118
Actor Role Level Degree of interest in the project
order to prove their negative effects.
Municipalities of Galicia
Sogama located transfer stations in 20 Galician municipalities.
Municipalities in Galicia are responsible for the collection, recovery and transport of urban waste in their municipality area to the transfer stations. They can elaborate local plans for waste collection and treatment, consistent with the WMP of Galicia
The press highlights that long debates took place between 1993 and 1995 in order to select the place where the transfer stations would be placed.
Local Very high
National Association of enterprises of automatic production of glass bottles - ANFEVI
On 13 February 1997 ANFEVI and Sogama signed a collaboration agreement for the collection of glass, lasting for 25 years.
The municipalities pay ANFEVI for glass collection at a mutually agreed price. The glass is then transported by ANFEVI to one of its treatment plants.
National Low
Provinces According to law 10/1997, the provincial authorities are in charge for providing the municipalities with the necessary technical assistance and subsidies to carry out solid waste management activities.
Local Low, only indirect involvement
SOGAMA – Galician Society of Environment (Sociedade Gallega do Medio Ambiente)
Independent public enterprise, established in 1992 by Law 111/1992 of the Board of Galicia. It represents the operative instrument of the Department of Environment, Land and Infrastructure of the Board of Galicia. It is 51% owned by the Board of Galicia and 49% owned by Unión Fenosa (Spanish electric company of natural gas)
Its main activity is the management and treatment of urban waste produced in the Galicia territory. According to Art. 29 of Law 10/1997, Sogama is responsible for the management of urban solid waste from the transfer stations to the final treatment plant in Cerceda.
It benefitted from EU co-financing for the project ‘Gestiόn de Residuos Sόlides Urbanos de Galicia’, approved in 1998 and modified in 2001.
According to the press, in 2010 it registered a debt amounting to 20 million of Euro, which became 24 million in 2011. This debt is imputed to the fact that the municipalities omitted to pay the tariff to Sogama and because of the low price at which its electricity is sold. The balance sheets confirm this negative situation, with an EBIT in 2010 of EUR -4.35 million and a net income of EUR -7.9 million.
Regional Very high
Spanish Ministry of Economy -General Director of analysis and budget planning (Direcciόn General de Anàlisis y Programaciόn Presupuestaria)
Body responsible for the application for EU Funds in March 1997.
National Low and of a more formal than substantial nature, since Galicia has a high degree of autonomy from the central government
119
ANNEX IV. GLOSSARY
In this Annex the definitions of a number of terms related to the solid waste management field
and mentioned in the case study are detailed for sake of clarity.
DEFINITION Aerobic digestion It is the process of oxidising and decomposing the organic part of the waste by micro-
organisms, carried out in the presence of oxygen. Anaerobic digestion It is a method of processing biological waste, by means of microorganisms breaking down
biodegradable materials in the absence of oxygen. The process generates compost and methane, which can be used to produce power and heat.
Cogeneration plant A combined heat and power plant generating both electricity and heat. The heat can then be used to heat houses or businesses or industrial processes, as long as there is a demand, or to produce electricity.
Compost It is an organic material derived from recycled organic waste. It can be used as a fertiliser and soil amendment.
Composting plant It is an infrastructure where the organic fraction of municipal solid waste and waste of biodegradable industrial and agricultural production are transformed into compost, by using aerobic or anaerobic digestion (or a combination of the two).
Energy recovery It refers to a wide range of technologies that convert waste energy, generally through some sort of combustion process, into steam. It can apply to thermoelectric plants, so that the heat produced during the incineration of waste is reused to activate a turbine, which in turn generates electricity.
Hazardous waste It is waste, mainly generated in the industrial sector (but including also commonly used batteries), that poses substantial or potential threats to public health or the environment.
Incinerator or thermoelectric plant
An incinerator is a plant that combusts refuse derived fuel (RDF) in a controlled environment, and may include an energy recovery system.
Landfill It is a site for the disposal of waste materials. Here municipal solid waste and other waste from human activities (construction debris, industrial waste, etc.), that are not recycled or treated in other ways, are deposited and allowed to decay.
Landfill leachate It is a liquid material that drains from stockpiled materials and waste. It is caused principally by rain percolating through the waste deposited in a landfill. It can contain both dissolved and suspended material and it is highly polluting.
Mechanical-Biological Treatment
It is a kind of technology that combines a sorting facility (separation of waste into different materials) with a form of biological treatment, such as composting.
Non-recyclable waste
Waste made of materials that cannot be recovered or recycled.
Organic fraction/waste
It is the part of MSW that can be transformed into compost. It includes food waste in general and also paper and cardboard
Recyclable waste Waste made of materials that can be reused to produce new products. They include paper and cardboard, glass, some types of plastics and metals, tetra pak and the organic fraction of waste.
Recycling It is the process that allows the reusing waste materials to produce new products. Refuse Derived Fuel (RDF)
Fuel material produced from waste (having undergone some treatment process) and incinerated in thermoelectric plants and other industrial furnaces such as cement plants.
Residual waste It is the waste that remains after reuse, recycling and composting. It can be used to produce Refuse Derived Fuel.
Bulky waste Consumer goods for domestic use that require a special collection because of their size or weight.
Waste reduction The set of actions and measures aimed at minimising the production of waste. Waste treatment The activity or set of activities to be undertaken to achieve a change in the physical,
chemical or biological characteristics of waste. It may be aimed at reducing or disposing of the hazardous materials contained in the waste, recovering the recyclable material, facilitating its use as an energy source or enabling its deposit in landfills.
Waste valorisation The set of operations which aim to bring back into the economic cycle the resources contained in waste through the recycling process or the energy production.
Source: Authors
120
121
ANNEX V. LIST OF INTERVIEWEES
Interviews and correspondence were undertaken with the following individuals. We would like
to thank them for their assistance in compiling our report.
Interviewee Affiliation Position Date and place
Julio Barrea Greenpeace Responsible of the pollution campaign 7 November 2011, Madrid
Ma Carmen Hernández Martín
Ministry of Economics - General Directory of Communitarian Funds
General sub-director of Cohesion Funds and European Territorial Cooperation
7 November 2011, Madrid
María Gorriti Gutiérrez-Cortines
Ministry of Economics - General Directory of Communitarian Funds
Adjunct deputy director for Territorial programming and evaluation of Community programs
7 November 2011, Madrid
Manuel Soto University of A Coruña
Professor of chemistry and member of the managing committee of ADEGA
8 November 2011, A Coruña
Ramón Pérez Mariño
SOGAMA Chief of the technical area 8 November 2011, Cerceda
Francisco Silva Castaño
SOGAMA General Director 8 November 2011, Cerceda
Asunción Villa Álvarez
SOGAMA Chief of the economic area 8 November 2011, Cerceda
Luis Lamas Novo SOGAMA Executive president 8 November 2011, Cerceda
Jesus Palmou Lorenzo
SOGAMA Former executive president 9 November 2011, Santiago de Compostela
Eduardo Ramonde Rodríguez
GFMP (FEGAMP) General Secretary 9 November 2011, Santiago de Compostela
Lucia Gonzáles Louro
GFMP (FEGAMP) Technician of environment and solid waste
9 November 2011,
Santiago de Compostela
María José Echevarría Moreno
Board of Galicia - Directorate of Environment, territory and infrastructures
General sub-director of environmental coordination
9 November 2011,
Santiago de Compostela
Alvaro Crespo Municipality of Vigo Director 'Area Fomento' 11 November 2011, Vigo
Alberto Sanchez Municipality of Vigo Resident of Cerceda 2 December 2011, telephone interview
Andrea Lodolo Hydrotech S.r.l. General manager - expert for solid waste management
Written opinion provided on 2 February 2012
Amalia Cerdà and Leticia Hevia Cortés
Spanish Association of Companies of Waste Energetic Valorisation - AEVERSU
Technical Directory and Department of Institutional Relations and Communication
Various dates in April-May 2012, telephone interviews and written opinion
Jordu Macarro I Canal
Agency of Waste of Cataluña
Directorate of Information and Participation Area
14-22 May 2012, telephone interview and written opinion
122
123
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