With waste tyre management, the potential benefits a program can deliver is predicated on what the government, industry and stakeholders of a given region are willing to accept.
The Canadian schemes I visited only accept a comprehensive system that collects all tyres and supports high value recycling applications.
Such programs don’t come cheap, but they’ve been willing to pay what’s required to deliver on community and stakeholder expectations.
However, expectations can change in complex management environments and change is afoot in the Canadian market – particularly Ontario. As such, I was privileged to visit at a critical juncture in the evolution of the Canadian waste tyre market which provided a great perspective on end of life tyre management systems.
On my Canadian tyres odyssey I had the pleasure of visiting 2 prominent schemes:
- The Tyre Stewardship British Columbia (TSBC), based in Vancouver & Vancouver Island where Rosemary Sutton showed me the TSBC ropes
- The Ontario Tyre Stewardship Scheme (OTS) where Andrew Horsman and the team showed me how tyre management works in Toronto and the surrounding territory
But before I get into the tyres stuff, first things first. Some of you may know my highly esteemed colleague at Tyre Stewardship Australia – Jade Barnaby.
Jade talks funny for an Australian because she grew up in Vancouver, which also happened to be my first stop in Canada! Serendipitous alright. I therefore had the great pleasure of staying with David & Kim Barnaby, Jade’s folks, in the basement of their lovely home.
Kim and David looked after me incredibly well. My stay also included a 30 km bike tour of the sights of Vancouver from their place near Hastings Street, to Stanley Point, Granville Island and finally Commercial Road for the Italian Festival. After the ride and indulging in the produce of the Italian Festival, I was totally stuffed!
Kite festival in Vancouver (this reminded me of my wife’s mother Lynn)
Cycling was a great way to get to know the city though – one that I’d love to visit again should circumstances conspire to see me in the area again.
OK. Now for the bit about tyres.
Tyre Stewardship British Columbia
To begin with, I met with Rosemary Sutton of Tyre Stewardship British Columbia (TSBC). Rosemary was a great support for me in planning my journey and went out of her way to provide a great insight into the unique local tyres scene in BC.
TSBC started as a government Scheme in 1991 and remained so until 2006. They then became an Extended Producer Responsibility set-up (EPR – where the original equipment manufacturers take responsibility for the management of the waste stream – a type of model that is prevalent in Europe) in 2007. TSBC is the not for profit company set up to administer the management of the 4.5 million waste tyres generated across BC annually.
Key characteristics of this program are that there are no (direct) disposal fees to consumers. For every new tyre sold, the retailer remits to TSBC an Advance Disposal Fee (ADF), commonly referred to as an eco-fee. This is a fee of $5 per passenger tyre, $9 for medium truck increasing as the tyres increase in size. The eco-fee is then used to pay for tyre collection and to incentivise processing and the consumption of recycled tyre product.
I can hear the recyclers in Australia crying as they read those numbers – what they wouldn’t give for gate fees equivalent to this!!! Coming from Australia where the disposal cost is a ‘market arrangement’ between businesses that can be as little as less than $2 per tyre – the Canadian eco-fee is quite a substantial amount relatively speaking. However, this amount must be viewed in terms of the total waste tyre supply chain support it gives for collection as well as processing and consumption of recycled tyre product.
To learn more about the collection system and the logistics associated with this, Rosemary and I met with Bob Pitre of Western Rubber Products (owned by Liberty Tire Company – a large recycling company who own many sites across the US and Canada).
Bob informed me of the challenges they have with tyre collection in BC. BC is 5 times the size of Texas (which is big apparently) with 3,300 registered ‘generator’ sites. Bob has set up an ingenious ‘reverse logistics’ system where they deliver 15 ton branded trailers regionally. They are then filled over time to be brought back for processing once they’re full. Simple really. And something we should consider for the Australian market given the challenges we face with dispersed tyres and the lack of aggregation in regional areas.
Once returned to the processing site, Bob and the team process tyres into crumb and mulch for products such as matting, safety equipment and sports fields. They process around 45,000 tons annually (which is around 10% of what Australia produces in a year!).
In addition to the substantial amount contributed to subsidise the ‘universal’ collection and transportation system, interestingly, TSBC also pay to incentivise both ‘Processing’ of tyres and the consumption of recycled tyre product via ‘End User’ incentives. These can be as much as $370 per tonne for highly refined ‘powder’ and as low as $69 per tonne for tyre derived aggregate (cue Australian recycler gasps here).
The current TSBC system allows for commercial arrangements for all tyre management to be solely administered by TSBC. TSBC then create contractual arrangements with processor to collect, process and reuse the tyre products the scheme collects. Given that there is a limited feedstock in BC, there are currently a small number of service providers. However, with increasing globalisation in markets, players from other regions may look to expand their businesses into the BC region. Such an eventuation will call for an adjustment in the way in which the system is currently managed in BC. But that’s nothing new. If there’s one thing I’ve learned from my visits to date it is; the one constant is change.
In terms of the incentives TSBC and other Canadian schemes pay, they are a marked philosophical change from the Australian approach. They are also a mechanism which provokes debate in and between some tyre management schemes.
Incentives and subsidies are no doubt effective in paying for collection, processing and delivering the immediate objective of high recycled tyre product consumption. However, some hold that subsidies can be a mechanism that can create ‘false markets’. That is, the value of a product or material can be artificially altered to make it more competitive relative to other competing products through the systematic altering of its value via the imposition of a levy or subsidy on particular transaction points. The argument then goes that once you create altered market conditions, business will then orient to these conditions and invest accordingly. That works well if the subsidies are maintained or altered slowly over a period of time. However, issues can arise should the political or structural orientation of the scheme change (or worse still, the Scheme be closed all together as is case at my next stop in Ontario – described below) and thereby the associated subsidies. In such instances, there can be be dramatic, unforeseen impacts that can create uncertainty and undermine investment and business security. Not to mention unwanted negative environmental impacts in the case of waste management schemes.
Additionally, subsidies are focused on a particular territory or region. With increased globalisation and movement of materials, there is a perception that the benefits that subsidies have in one market can create distortions on those that are neighbouring or somewhat related. A case in point is that one Canadian recycler told me around 80% of what they produce is sold into the US market. Similarly, Australia receives crumb from Portugal cheaper than what it can be produced in Australia.
To counter, it can be argued (quite successfully) that a pure market approach to tyre management doesn’t work. Detrimental impacts occur environmentally if market support mechanisms are not implemented, hence the need for schemes such as TSBC.
It’s a complex discussion without a definitive right or wrong answer. Whatever course is chosen, the implications of each instrument need to be considered strongly to minimise potential detrimental impacts when wielded.
Ontario Tyre Stewardship:
I had an incredibly enlightening time in Ontario, predominantly with with Andrew Horsman (Executive Director), Claudia Hawkins (Director of Promotion and Education) & Steve Gluckowski (Operations Manager). They are a key part of the 30 strong staff at OTS who implement one of the most comprehensive and high performance schemes in the world… for now (more on the impending closure of OTS a little later).
Currently, OTS operate as a ‘sole purchaser’ of waste tyre services in the province. As such:
- OTS collect 140,000 tonnes per year (12 million passenger tyre equivalent).
- %100 percent of what they collect (including the large mining and off the road tyres) goes to Ontario recyclers.
- 98% of the rubber product they produce goes to crumb.
Yes. That’s right – 98% of the rubber they collect goes to crumb! That is a remarkably high number.
One of the most notable aspects of OTS is that they implement their program to ensure that no tyres will go to landfill or be burned as a tyre derived fuel. That is quite a significant statement and ambition for any tyres scheme as most (probably all aside from OTS?) send a large portion of material to be burned as a tyre derived fuel. As such, it achieves the highest value recycling outcomes of any scheme I have visited or am aware of (please feel free to post a comment if you’re aware of any information to the contrary).
The policy directive for the ‘no tyres to tyre derived fuel’ relates to the Ontario province Waste Diversion Act upon which the Scheme is predicated. As such, the ‘Program Request Letter’ from the then Minister initiating the Scheme provides directives of this nature to ensure alignment of the Scheme with government policy.
The Scheme is funded via OTS receiving $3.30 per passenger and per $12.95 per truck tyre paid via the importer ( essentially the last ‘person’ to touch it before it enters Ontario… the old,’you touched it last’ rule!). This creates a significant income of around over $50-60 million that pays for collection and subsidies for processing and consumption in a similar fashion to TSBC.
A great example of where some incentives go to increase consumption of tyre product is in these pictures below taken at a ‘Home Depot’ store (similar to Bunnings in Australia). These pictures illustrate how some of the products become consumer goods once they have been collected, processed into a reusable form (crumb, powder, granule) form and then used as an input for the production of another product. Here the support of OTS has seem companies replace the use of non-recycled materials with tyre derived materials to create products for use in the home.
I was also privileged to get an insight into the most excellent and comprehensive electronic tyre management system Zach Dryman (Chief Computer Nerd) and the OTS team have created called Treadmarks.
Every driver in the OTS program employed by a ‘Hauler’ is provided with an iPad Mini by OTS with the TreadMarks Mobile application pre-installed. Every Collector, Hauler, and Processor is identified by a unique QR Code. The QR code is encrypted and cannot be read by any other device or program. The paperless tire collection documentation process consists of:
- The Hauler arrives at the Collector location
- The Hauler logs into TreadMarks Mobile using their unique participant badge with encrypted QRcode, and begins a new TCR transaction
- The Hauler scans the Collectors QR code, and the Collector’s information is populated in the application
- The Hauler enters the quantity of each tire type he is receiving from the Collector
- The Hauler verifies the tire count entry, and signs the transaction
- The Collector verifies the Hauler’s tire count entry and signs the transaction
- The Hauler completes the transaction confirmation in the app and confirmation is sent to OTS
Treadmarks is exemplary in its scope and detail. Coming from a new organisation that can struggle with efficient reporting, the benefit of such a comprehensive system was not lost on me! As such, I think more schemes from around the world would derive benefit from taking a look at the system Zach and the team have implemented.
The beginning of the end…
Since the inception of OTS in 2009, they have developed an admirable program in terms of the impressive tyre recovery and recycling numbers. However, regardless of these positive outcomes, no scheme operates in isolation and a clear demonstration of this is the fact that OTS are in the process of being closed down.
On February 17 of this year, the Minister asked OTS to submit a plan for closure by the end of October 2017 (this is a transition plan OTS have to write, but they haven’t been told exactly what they’re transitioning to!… That’s a hard plan to write). The Minister then has until March 2018 to approve this plan. All going as expected, OTS will cease to operate as of December 31 2018… One way or another, that will make for a very interesting NYE office party.
Given the impressive systems, team and outcomes they have achieved, many are asking why this is the case (not the least many of the recyclers and alike I visited who have created business models and invested accordingly predicated on the current market conditions).
Despite the stories some may have heard (namely media from a couple of years ago regarding a rogue Chief Financial Officer and a colleague who took ‘liberties’), the primary reason for the closure of OTS is because it is part of an overhaul of the management of all waste streams in Ontario. Despite the fact that OTS has achieved a 100% recycling rate, many other waste streams (organics, construction & demolition and other commercial waste streams) suffer with recovery rates of around 25-30%.
Under the current delivery framework, stewardship organisations like OTS are created to manage waste streams – other programs relate to e-waste, paint and other hazardous municipal materials. ‘Blue Box’ is one such prominent program which is set up for packaging and printed materials. The current legislation for Blue Box requires a 50-50 cost sharing arrangement between local government and industry, with government operating the program. This has lead to many years of disagreement with industry pushing to get more say in how the program is delivered if it is having to share the cost (reportedly around $200 million annually). These annual battles over the management of the Scheme have been public and acrimonious and do not reflect positively on the programs themselves. Therefore, under the new legislation, industry will have to carry 100% of the cost, but, will also get control over the operations of the diversion programs so they can make changes they feel are necessary to improve efficiency.
To this end, on June 9, 2016, Bill 151 – the Waste Free Ontario Act (WFOA) was enacted. This Act means the days of the current legislation (the Waste Diversion Act, 2002) and the Industry Funding Organization’s – such as OTS – are numbered.
Where to from here?
And so it begins. Again. The closure of one program means the creation of (an)other(s). The premise of the impending legislation is that the importers will organise their own Schemes, similar to what is prevalent in Europe with an Extended Producer Responsibility (EPR) model. The prevailing view is that the tyre companies will ‘self organise’ and create their own scheme(s).
To discuss this process from the governments perspective, Andrew Horsman and I visited Camelina Macario, Program Lead, WEEE (Waste Electrical & Electronic Equipment) & Used Tyres with Resource Productivity & Recovery Association (RPRA). The RPRA is a not for profit, non government organisation, set up to ensure producers and associated organisations are meeting their performance and regulatory requirements.
Andrew Horsman (OTS Executive Director) and Carmelina Macario – Program Lead, WEEE & Used Tyres
Carmelina and her team oversee, upon direction from the Minister, the winding up of the old regime and the creation of the new one. It’s a massive undertaking. Her team currently manage 4 programs with 6 staff – soon they will have 30 staff and any number of programs! Each program will need to develop plans, Boards, administrative structures and delivery frameworks in business areas they may have had little previous experience in. Having come from government previously, my head hurts with the immensity of the challenge that lays before them. Particularly as I left government to work setting up a new stewardship scheme with ‘producers’! It’s a massive challenge.
Regardless of what you think of the decision by the Ontario government to wind up OTS and other schemes, you have to give them credit for their willingness to do what they feel is necessary to deliver the best system for stakeholders and the community. The breadth of the current systems they have as well as the desire to achieve the best possible outcomes in future iterations of their programs demonstrates a desire to not accept anything less than full and effective environmental outcomes from waste.
To begin this post, I proposed that with waste tyre management, the potential outcomes a program can achieve is predicated on what the government, industry and stakeholders of a given region are willing to accept.
The Canadian schemes I visited only accept a comprehensive system that collects all tyres and supports high value recycling applications.
The danger of holding such high standards is that when you dismantle the system that underpins it, the coherency of the market structure that has been created and acclimatized to over a period of time is undermined. Such heavy shifts in such a short space of time can devastate business continuity and viability – particularly when investments returns are predicated on factors based on the former regimes framework.
This poses a quandary. The problem with tyres can be viewed as a market failure. If there’s a failure, we need to intervene. Schemes are created to do so to deliver better environmental outcomes. Then the question becomes, how do we intervene and to what extent?
Canada has demonstrated the great things that can be achieved through a strong directive and a system to back that up. However, it also evidences the risks that can occur when this direction changes.