Circular Economy nearing reality as Bill passes through the Victorian Parliament

The Circular Economy (Waste Reduction and Recycling) Bill

What the Bill will do

The Bill aims to give effect to the commitments of Recycling Victoria: A new economy by establishing a legislative framework to:

• Establish Recycling Victoria (to operate from 1 July 2022), which will be a part of the DELWP, will oversee the waste, recycling and resource recovery sector and support the development of a circular economy. It will support the transition of all Councils to the four-bin system by 2030, as well as the introduction of a container deposit scheme (CDS) (from 2023);
• Ensure materials are managed in accordance with the circular economy hierarchy;
• Encourage reuse of recyclable material into new products and uses;
• Ensure waste and recycling services are reliable, consistent and meet community expectations by introducing an obligation on Councils to provide waste and recycling services, and for Councils and industry to comply with service standards;
• Introduce a CDS with Recycling Victoria providing direction and oversight in the role of scheme regulator;
• Provide a range of support to Councils in procurement and contracting of waste and recycling services;
• Require improved data collection from entities in the waste and recycling sector to provide transparency and accountability for what happens to our waste; and
• Abolish the Waste and Resource Recovery Groups established under the Environment Protection Act 2017 (EP Act).

Recycling Victoria

Recycling Victoria to be established by the Bill, will have a broad set of functions and powers (which will be subject to control of the Minister), including:

Functions:

• Administering the CDS;
• Providing strategic planning for waste, recycling or resource recovery services;
• Oversee capacity building for municipal residual waste, recycling or resource recovery service delivery;
• Support best practice procurement; and
• Prepare a Charter of engagement.

Powers:

• Conducting inquiries (which can be of its own initiative or at the Minister’s direction) to better understand market issues and to recommend appropriate action;
• Information gathering powers, including collecting, using, disclosing or publishing any information or data if it is necessary to perform its functions or exercise its powers. This is intended to improve data collection from reporting entities in the waste and resource recovery sectors;
• Create exemptions for classes of reporting entities and specific entities from mandatory reporting obligations as well as from parts of the regulations (to be made under the Bill) and from the service standards;
• Standard setting powers, which allow it to prepare a service standard providing for the quality and performance standards for the delivery of a waste, recycling or resource recovery service (to be reviewed at three yearly intervals);
• Enter into agreements with Councils or Alpine Resort Management Boards to specify the processes by which Councils or Alpine Resort Management Board’s procure waste recycling or resource recovery services;
• Give advice and support to Councils or Alpine Resort Management Boards to enable or facilitate the entry into, or management of, a contract for the procurement of waste, recycling or resource recovery services;
• Issue guidelines relating to the procurement of waste, recycling or resource recovery services by Councils or Alpine Resort Management Boards as well as the CDS;
• Powers to issue prohibition notices where necessary for contraventions of the Bill or where a person has engaged in, or proposes to engage in, an activity that has or is likely to cause:

• failure of waste, recycling or resource recovery services; or
• disruption to waste, recycling or resource recovery services; or
• harm to human health or the environment from pollution or waste.

• Enforcement powers to encourage compliance with new requirements. These include the ability to carry out audits; issue information gathering notices, show cause notices improvement and prohibition notices (which will be enforceable through Recycling Victoria’s ability to seek court orders requiring compliance as well as non-compliances being an offence); accept enforceable undertakings; prosecute and commence civil penalty proceedings and issue penalty infringement notices for relevant offences; publish outcomes of audits and compliance with standards. These powers largely reflect similar powers afforded to the EPA in its regulation of waste under the EP Act.

Duties and requirements for Councils and providers of waste and recycling or resource recovery services

Under the Bill, Councils and providers of waste and recycling or resource recovery services will have certain positive obligations including:

• For Councils, provide certain services including a municipal residual waste service, recycling service including for glass, food and garden organics;
• Prescribed entities will have to comply with pre-sorting and separating of waste or recycling material (the detail of what requirements will apply will be specified in regulations yet to be made).
• For providers of a waste, recycling or resource recovery services:

• A duty on regular reporting entities to give Recycling Victoria prescribed information;
• Any agreement entered into in connection with the provision of their services must incorporate the service standard that applies;
• For providers of essential waste, recycling or resource recovery services, a requirement to minimise the risk of serious failure disruption or hindrance of services so far as reasonably practicable;
• Duties to keep records and information about the service provided, so far as reasonably practicable; and
• Duties to comply with service standards.

• Notably, failure to comply with any of the above obligations by a waste, recycling, or resource recovery service will be an offence, punishable by civil and criminal penalties of up to $454,350 for a body corporate.

That said, the Bill provides “checks and balances” in the form of review mechanisms applying to the numerous powers which Recycling Victoria will be able to exercise. For example, use of the exemption powers and the issuance of information gathering notices, improvement notices and prohibition notices will be reviewable at the Victorian Civil and Administrative Tribunal.

Other reforms

Container deposit scheme

The Bill will create a CDS, for cans and bottle funded by the beverage industry. Under the CDS:

• Beverage suppliers are deemed to be ‘first suppliers’ in the Victorian market and will be required to pay into the CDS via an in-arears payment model;
• Specific details such as refund amounts and which containers are eligible will be prescribed in the regulations and are expected to align with other Australian schemes for harmonisation across the states. This is intended to keep things simple for consumers, and reduce the compliance costs and regulatory burden for beverage suppliers operating across multiple jurisdictions;
• It will be an offence (punishable by civil and criminal penalties) to dispose of a suitable eligible container at landfill if a collection point operator has paid a refund amount in relation to the container. That said, the Minister can grant an exemption to the landfill prohibition where exceptional circumstances exist or it is not reasonably practicable to comply with the landfill prohibition.

The four-bin system

There will be a staged transition to a four bin collection system. All households will have access to services for glass recycling (purple bin) by 2027 and to food organics and garden organics by 2030.

Waste to Energy Framework

DELWP has now released the finalised version of its WtE framework. This framework outlines how the one million tonne per annum cap (Cap) on the amount of waste that can be sent to thermal waste to energy until 2040 will operate. The Cap will be implemented in legislation (we expect amendments will be made to the Bill once it is in in force) and supported by regulations and by guidance issued by Recycling Victoria.

What will the Cap apply to?

For the purposes of the Cap, ‘thermal waste to energy’ refers to any thermal process used:

• To recover energy from waste in the form of heat, which may be converted into steam or electricity; and/or
• To produce a fuel from waste.

There are a number of processes which are expressly excluded from being considered ‘thermal waste to energy’ under the WtE framework, including:

• Advanced recycling;
• Biological waste to energy technologies (such as anaerobic digestion and fermentation);
• Landfill gas collection and combustion;
• Incineration of waste with no energy recover; and
• Thermal processes that recover energy from materials that are not waste.

Importantly, facilities which were operating or had a planning permit on 28 June 2021 will not need to fall within the Cap but will otherwise need to hold a Cap licence to process permitted waste (Existing Permitted Facilities).

Under the WtE framework, waste will be divided into three categories (which will be based on suitability for use as feedstock):

• Permitted waste: waste that can be used for thermal waste to energy under a Cap licence.

• Permitted wastes are:

• residual municipal wastes collected under the kerbside collection system (provided the Council has at least a three bin system) for which no further recycling is possible;
• other municipal residual waste collected in a manner consistent with any regulations;
• commercial waste (both commercial and industrial and construction and demolition) that has been source separated or if no source separation requirements apply or the waste is homogenous, the operator can demonstrate it is not practicable to reuse or recycle, even with additional sorting (which will require consideration of environmental technical and economic considerations).

• Banned waste: waste that cannot be used in any thermal waste to energy process and includes any waste which is not permitted or exempt waste (i.e. it is recyclable or has not been determined if it is permitted waste).
• Exempt waste: waste that can be used for thermal waste to energy outside of a Cap licence and includes:

• those wastes already commonly used for renewable thermal bioenergy production in Victoria, or those which have more important priorities for their management, such as hazardous waste which requires safe management.
• wood waste;
• certain wastes resulting from primary production activities, for example straw, chaff nuts and shells, other waste from agricultural crops, poultry litter or paunch and abattoir wastes;
• specific wastes from manufacturing activities:

• fruit and vegetable processing waste; and
• residues from pulp and paper manufacturing and processing that cannot be recycled into new paper products

• bio solids; and
• hazardous waste.

Licencing requirements

From mid to late 2022, businesses that wish to operate a WtE facility will need to apply for a licence from the cap scheme regulator. It is anticipated that it will be an offence for a WtE operation to operate a WtE facility without a Cap licence or contrary to the conditions placed on the licence.

In this regard, Cap licences will place conditions on how operators can undertake thermal waste to energy activities under the Cap on matters such as quantity of waste permitted, reporting requirements, duration of licence, waste feedstock (if necessary) and financial close and commissioning deadlines. Existing permissions regulating matters such as human health, environment protection and planning requirements are not changed by the WtE framework.

How will the application process work?

Step 1: Call for applications

The Cap regulator will call for expressions of interest (EOI) from prospective WtE operators to apply. The applicant will need to submit an EOI to register interest in accessing a Cap licence, addressing prerequisite information requirements.

Once EOIs have been received, the responses will be reviewed and relevant applications will be invited to submit a full application. Full applications will need to provide pre-requisite information and respond to evaluation criteria.

Step 2: Assessment

The Cap regulator will assess each application against fixed, transparent evaluation criteria (established in regulations and/or guidance published by the Cap regulator). Existing permit Facilities will not be assessed against the evaluation criteria or against other applications.

The criteria includes assessment against how well the facility meets a critical waste infrastructure need, alignment against policy, waste composition, the type of energy it will produce, how well demonstrated the proposed energy recovery technology is, the advancement of securing all relevant permissions and licences, greenhouse gas impacts and community engagement.

Step 3: Grant of licence with conditions

Any licence granted will contain conditions regarding the deadline for financial close and operational requirements. Licences will be granted to operators with the highest-ranked applications until there is no capacity remaining under the Cap.

Step 4: Monitoring until financial close

Following the grant of a licence, the Cap regulator will monitor the operator’s progress towards reaching financial close and commissioning demonstrated by progress made towards securing waste supply contracts, energy agreements and financial contracts. If financial close or commissioning is not achieved in accordance with a licence, the Cap regulator can grant an extension, revoke the licence or reallocate the Cap allocation.

Step 5: Ongoing monitoring, compliance and enforcement

Once a WtE facility is operating, reporting obligations will apply on a quarterly basis. The Cap regulator will be able to enforce non-compliances with licence conditions (we anticipate in a similar way to the EPA which currently has enforcement powers related to matters arising under the EP Act).

What happens next?

Legislation will need to be introduced into the Victorian parliament, we expect amendments to the Circular Economy (Waste Reduction and Recycling) Act 2021, to give the Cap legal effect. Thereafter, there will be public consultation on the regulations which will detail the administration of the Cap with the intention that the new regulator, Recycling Victoria will commence in 2022, giving initial priority to granting the first round of Cap licences.