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National Financial Crisis and Sustainability of Waste Management in Lebanon

Lebanon as a small Mediterranean country, with a nominal GDP of 54.9 billion USD (2018), has been experiencing a continuous increase in in public debt since 1990s to reach in November 2019 a Gross Total Debt of approximately 90 Billion US$ and a Net Total Debt of approximately 80 Billion US$ (source: Lebanese Ministry of Finance). This increase in public debt resulted in a financial crisis in Lebanon. This ever growing debt has been attributed to many factors from corruption to poor planning and economic strategies. Furthermore, when looking at the balance sheets one would notice that many public sectors and services are in deficit and contributing to the increase of public debt with the electricity sector leading such services with an estimated annual deficit of 2 billion US$.
The financial deficit of public services, also includes the solid waste sector. Currently, the solid waste sector in Lebanon does not have means of cost recovery, while the biggest chunk of the cost is covered by the government either through a subsidization scheme, or through municipal debt scheme to the central Government that is settling the cost on behalf of municipalities (at the time that most municipalities, do not have the financial means nor tools to settle such debt). Although, there is no clear and unified line entry showing the overall cost and debt resulting from solid waste due to the diversified schemes, it could be safely estimated to be in the range of 200 million US$ per year.

Current Situation and Challenges

During the second half of 2019 the economic situation in Lebanon started a quick deterioration, resulting in a huge recession, which is reflected in the shutdown of several private firms, and decreasing the salaries private sector employees, while few firms are still struggling to survive. On the other hand the Lebanese currency established at least two separate values (official value, and exchange office value). Furthermore, bank sanctions have been imposed to prevent/reduce transferring money abroad and limit cash withdrawals. This also resulted in an increase in prices due to the depreciation of the Lebanese currency at exchange offices. Thus, all of this reflects a reduction in the purchasing power of citizens, which will downsize the national economy and may also potentially reflect in a decrease in the Government tax collection and Government revenues. Thus with the decrease of the Government revenues, it will remain questionable, whether the government will be able to continue funding its regular services including that of the solid waste sector.
To ensure sustainability of the solid waste management in Lebanon, the sector should be able to fund itself and thus become self-sustainable without imposing a financial burden or debt on the government. The most common and practical system to achieve self-sustainability is through implementing the Pay As You Throw (PAYT) concept or the polluter pays concept. However, both concepts will result in imposing direct fees for waste management on citizens, which might not be feasible in light of the reduction in purchasing power. Same applies if indirect fees or taxes on other services or products are introduced to finance the solid waste sector. Thus, the financial sustainability of solid waste management is currently in a vicious cycle.

The Brighter Side of the Crisis

Although the financial sustainability of waste management is at stake and thus the country might end up in a new solid waste crisis along the ongoing financial/economic crisis, there are some positive indicators. Over the last quarter of 2019 (i.e. the quarter during which the financial/economic crisis started), unofficial sources indicate a 15% decrease in solid waste generation. This decrease is correlated tentatively to the recession and decrease in purchasing power. Thus, this decrease will automatically result in a proportional decrease in solid waste management operation cost. Thus, this may be correlated to a decrease in the annual cost of operation by approximately 30 million US$ per year. Furthermore, with the escalation of the financial crisis, further decrease in waste generation will be anticipated, and thus further decrease in annual cost of solid waste management will be anticipated. However, this decrease will not be sufficient to ensure sustainability of the operation of the solid waste sector.

Recommendations

It will be definitely challenging to ensure the financial sustainability of solid waste management within the ongoing economic crisis. However, various tools and techniques may be recommended to reduce the financial pressure points on the sector. Accordingly the following recommendations are encouraged for the upcoming period,

  • Prioritization of the upper part of the solid waste hierarchy (Reduce, Reuse, and Recycle). These interventions shall be implemented at the producer level, and thus with minor additional effort at source, lower quantities of waste will be delivered for SW facility operators and thus annual operation cost will decrease and thus contribute favorably to ensure the financial sustainability of the sector.
  • Prioritize Renewable energy solutions. Since Lebanon in addition to its solid waste challenges is facing a major energy challenge, with the electricity sector being the main contributor to the public debt, it might be advantageous to introduce hybrid solutions between both sectors (solid waste and energy). Thus, as a first step feasibility analysis should be conducted,
  1. To convert from composting to anaerobic digestion. Thus capitalizing on the energy potential of the organic fraction
  2. Producing energy from existing landfills.
  3. Valorization of production of alternative fuels (RDF, SRF, etc…) and their utilization
  4. Potential of introducing other waste to energy schemes
    Based on the output of the above feasibility analysis, existing and new facilities may be customized and optimized.
  • Encourage sorting at source especially of recyclable material, via the following actions
  1. To convert from composting to anaerobic digestion. Thus capitalizing on the energy potential of the organic fraction
  2. Setting a returnable tax/fee on recyclable products and packaging. If the recyclable entity does not have a physical value, thus huge amounts of such projects will have to be collected to become viable. Accordingly, producers might not be incentivized to put the effort and sort the product. Therefore, if on each item a fixed fee/tax is set and this fee/tax is returned to the buyer when he returns the empty packaging, this would create an incentive for the consumer to return the empty packaging, in order to collect his tax, otherwise he will lose his tax, which would then be routed to support the solid waste management sector. As an example a 500ml PET bottle weighs approximately 12 grams. If the price of 1 tonne of PET is 300 US$, then the consumer will have to collect approximately 278 empty bottles of 500ml bottles to earn 1 US$ assuming that the entire value of PET is conveyed to the sorter. However, if a returnable tax/fee is introduced at a value of 0.33 cents on the PET bottles, and irrespectively of the value of PET in the recycling market the consumer will be losing 1 US$ for every 3 bottles he does not return for tax/fee refund. Hence, this returnable fee/tax will not impose an economical burden on citizens as they will be getting refund upon returning the empty package, and will create an incentive for consumers to sort at source and return such products.
  3. Establish an Organic Waste Market (OWM): the objective of the OWM is two main services:
  • Producers of sorted at source organic waste can drop off their organic waste at the OWM in return for a certificate identifying the quantity of Organic Waste delivered. Once a producer delivers a certain amount of organic waste, he/she can either exchange them at the OWM for either organic fertilizers, or organic fruits or vegetables.
  • Exchange services with farmers, organic waste for organic fertilizers, or organic fertilizers for organic fruits or vegetables.

4. Set the legislative framework for Extended Producer responsibility (EPR), and activate its implementation. Thus producer/importers of various products that end up in the waste streams specifically “special waste streams” (tires, e-waste, mechanical waste, etc…), will be responsible of recovering their products and treating in an environmental friendly manner. Thus reducing the quantity of such waste within the Municipal Solid Waste stream; and therefore reducing the overall annual cost of solid waste management.

  • Establish a market for solid waste alternative fuel utilization, including standards, regulations and financial schemes
  • Provide facilitations for recycling industries, to encourage recycling of various products. Facilitations may include reduced taxation, subsidized energy, and simplified permitting procedures.
  • Encourage local and international market of recycled products. Internationally, through treaties to support recycled products (may include reduced custom fees, or bilateral treaties, etc…). Locally, encourage or enforce the utilization of recycled products in bids by public institutes, and private ones if and where possible.
  • Introducing sever financial and legal penalties on dumping, and introduce high taxes on landfilling. This should encourage diverting waste from such practices, and enhance reduction of generation, and recovery of material. In the case of dumping, the penalties will be imposed on the hosting municipality and on the entity committing the violation equally.

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