• Increased operating costs, lack of competition, insufficient supervisory tools available to local governments - these are the main reasons for the increase in prices in waste treatment facilities.
• The solution to these problems can be, inter alia, more active approach of local governments, further increase of facilities' processing capacity, competition boosting mechanisms and/or ensuring price market supervision.
• These are the major conclusions of the report presented by President of UOKiK Tomasz Chróstny.

The waste collection and management market is under close scrutiny of the President of UOKiK. In August 2019, the Office published a report on waste management. The report examines the situation in all the municipalities in Poland and identifies the reasons for the increase in fees that households pay for waste collection. This included, inter alia, the lack of competition due to legal changes of 2013, as well as higher costs of waste treatment at Regional Municipal Waste Treatment Facilities (RIPOKs).

The subsequent stage of the examination covered RIPOKs themselves. President of the Office Tomasz Chróstny examined, inter alia, the status of market competition, the ownership structure of the facilities, the reasons for the increase in waste management prices, and identified possible measures to improve the situation.

“Increased prices for waste reception at treatment facilities impact the fees households pay for waste collection. Therefore, it is important to identify the reasons for these rises. We have identified these factors and accounted for them fairly clearly in the report. These include, inter alia, the insufficient control of local governments over the prices set by RIPOKs, increased operating costs of these facilities or no competition among them. We also recommend solutions that can improve the functioning of this market and bring about lower fees,” says President of UOKiK Tomasz Chróstny.

The examination covered the market situation in 2014-2019 and included all facilities using Poland’s most popular mechanical biological waste treatment method - 171 facilities in total. Most of them are managed by public capital operators, mainly local governments, and about 30% of the companies operating the facilities are private-owned..

It is worth noting that as the report was being drafted, legal regulations concerning RIPOKs changed. Until September 2019, each of them could only operate on a specific area (the Municipal Waste Management Region - RGOK). Companies collecting waste within a given RGOK were obliged to transport it to a dedicated facility. The situation changed in September 2019. The regional breakdown was abolished, RIPOKs were replaced by municipal facilities, and waste collection companies can now transport their waste over longer distances.

Increased costs and underlying reasons

The report has confirmed the observations on the increase in rates. The median of the average annual price of reception of a ton of mixed municipal waste for facilities across the country increased from PLN 230 in 2014 to PLN 315 in the first quarter of 2019. In 2015-2017, the increases were relatively low, approximately 2-3 percent, while in 2018 the increases amounted to 10 percent and in early 2019 to 15 percent.

Prices varied depending on the Municipal Waste Management Regions. The highest prices were set by the facilities operating in Warsaw and its vicinity, where the average price amounted to PLN 524 per ton of waste. They were followed by three regions in the Lubelskie Province, where prices ranged from PLN 450 to 490. The cheapest prices were reported in the Provinces: Lubuskie, Podlaskie, Silesia, Świętokrzyskie, Wielkopolskie and Zachodniopomorskie - in these regions, the price per one ton of waste varied from PLN 174 to PLN 250.

Reasons for increased prices - supervision over facilities

“Our analysis proved that the increased prices were due to higher operating costs rather than higher margins. Another important factor for price increases was the ability of the local government to influence the prices offered by companies and the ownership structure. Where local authorities own the facilities and have more influence on their operation, prices are significantly lower,” says President of UOKiK Tomasz Chróstny.

Differences in the market structure and their impact on prices are best illustrated on the example of two provinces. The Mazovia Province, with private facility owners and with local government having no influence on the prices they set, is the most expensive region. The opposite extreme is the Świętokrzyskie Province. All the facilities belong to local authorities and apply the lowest rates in Poland.

Reasons for increased prices - increased costs

As the Office's report shows, the facilities' operating costs increased by over 30% between 2015 and 2018.  The major reasons were as follows:

• Rising costs of managing the calorific (combustible) fraction, i.e. processed mixed waste to be incinerated in the form of the so-called refuse-derived fuel (RDF). In recent years, facilities have had to pay up to four times more for incinerating this waste than before.
• Increased cost of storage of the so-called subscreen fraction remaining after the recycling of raw materials. This is mainly due to a significant increase in the so-called marshal fee. Its increase was largely driven by EU requirements to reduce the amount of waste deposited in landfills.
• Problems in the market of raw materials to be recycled, mainly paper and plastics. The main reason for this is the drop in the price of secondary raw materials recycled by the facilities, which is due to China's ban on imports of this waste.

Reasons for increased prices - no competition 

According to the report, the entrepreneurs' greater freedom of choice of waste treatment location has not so far brought about price competition between facilities. Transportation of waste over longer distances involves higher costs, which may outweigh the possible benefits of a lower price. That is why few companies use this option. It is only used by some entrepreneurs from provinces with the most expensive facilities.

Yet another reason for the lack of price competition between facilities is the fact that many of them heavily use their production capacity - from 68 percent in the Lower Silesia Province to as much as 98 percent in the Warmińsko-Mazurskie Province. The higher the capacity usage, the lower the willingness to compete on price.

UOKiK’s recommendations

In his report, the President of UOKiK did not limit himself to identifying problems and reasons for the increased prices. He also set out recommendations on how to improve the market performance. In the context of the lack of competition on the market, one idea worth considering is greater supervision of the industry. This would require a market regulator to monitor costs and prices until sufficient and reasonable competition in the waste collection and treatment industry has evolved. This would protect municipalities and residents against uncontrolled increases in prices.

The gminas, i.e. communes, also have an important role to play. They should engage in a more active policy aimed at boosting competition among facilities, following last year's regulatory amendment. Price competition would also be fostered by local government investments in increasing the facilities' production capacity.

The President of the Office also outlined some proposals which, if implemented, would result in lower costs for facilities. The first one is further investment in increasing the potential for managing combustible fractions stored in warehouses. At present this task is it is outsourced to external commercial entities, mainly cement plants, which increases costs significantly. The Office also supports the proposals of the Ministry of Climate to establish a new packaging waste management system and to increase the scale of industry-financed recycling, as well as measures to separate waste at source and the deposit system. This too, should further reduce the facilities' operating costs.

“In less than a year, we have produced two reports which examined the waste market and identified the reasons for the increased prices experienced by consumers. In last year's analysis, we pointed out that it was a mistake to introduce changes seven years ago and to do away with competition. In the most recent report we have shown that high prices are also influenced by an inefficient market of waste treatment facilities. We have made a proposal to remedy this situation. We monitor the industry and will react whenever competition is abused,” says Tomasz Chróstny.

Additional information for the media:

UOKiK Press Office
Pl. Powstańców Warszawy 1, 00-950 Warszawa, Poland
Phone +48 695 902 088, +48 22 55 60 246
E-mail: biuroprasowe@uokik.gov.pl
Twitter: @UOKiKgovPL