At waste management departments across the UK there’s a Tannoy blaring out: “Mind the gap.” It’s a warning, there’s a divide to be bridged, but first we need to know what platform the train is on.

By 2020, we can’t send more than 12.5 million tonnes of waste to landfill, including construction and industrial waste. Last year, the first for European landfill targets, that figure was 26.8 million tonnes. Clearly there’s a major transformation to come.

Councils grappling with the question have found themselves confounded with an array of technologies and practical issues, not least how to pay for the infrastructure required. The UK government’s decision last October to withdraw Private Finance Initiative (PFI) credits for seven local authority proposals came as a surprise to some. It immediately prompted questions; not least: will we have enough alternative capacity and how will we pay for it?

It’s no surprise that local authorities have been eager to win a slice of the PFI credits available. This reduces the direct burden on local taxation. It’s also a sign that Defra is convinced that a plan is sound, making it very bankable in the eyes of investors. No wonder North London Waste Authority and the consortium of Cheshire councils have threatened legal challenges to the loss of credits (though the former has now stepped back from this).

Based on existing plans and built facilities, Defra now believes local authorities will be able to meet their 2020 obligations. Not all appear to agree. In a report published last October, Shanks claims that the UK requires residual treatment capacity for an additional 2.4 million tonnes per year, over and above facilities scheduled. Also, it states, the UK will need an additional 3.6 million tonnes per year for processing organic waste. Recently, the Institution of Civil Engineers also weighed in on the debate, claiming that to meet this demand £10-20 billion investment will be required during this decade.

A lot, it seems, is resting on forecasts about the amount of waste we’ll be producing by the end of the decade. The government, for its part, made its recent forecast based on an expectation that waste arisings will continue to grow. Setting out the basis for changes to the Waste PFI Programme, Defra subscribes to the view that UK household waste will probably grow to between 26.9 and 28.1 million tonnes a year in 2020. This is at odds with the downward trend of the past few years: by June last year, household waste arisings stood at 23.6 million tonnes, falling at a rate of 1.2 per cent.

At the same time, the proportion recycled is rising, currently just over 40 per cent. Again, Defra’s decision framework appears unduly cautious, expecting councils to on average recycle 50 per cent by the end of the decade. Given that many councils already achieve this (see January’s edition of Resource), it will be disappointing if most others fail to benefit from their experience.

One concern is that cautious estimates like this will result in overcapacity for treatment facilities and crowding out. Advocates of PFI projects deny this, but it’s hard to see how once the treatment facilities are built the economic case will not gravitate to operating them close to full capacity.

Let’s consider this at a local level. For instance, inspecting Devon’s PFI, not only is there an expectation that municipal waste will continue to grow, 24 per cent over the next 15 years, but that the treatment capacity should be for half of this. The result will be a 224,000 tonne combined heat and power plant, and financing this is predicated on energy sales and gate fees based on this. Given that at least one partnering authority, Torbay, has successfully introduced separate collection of food waste, which is associated with diversion above 50 per cent and reduced waste arisings, it’s easy to conceive that brakes will be put on recycling in some of the other participating councils.

Potentially, commercial waste might plug the gaps, though again the case for this is far from clear-cut. Westminster City Council’s decision to introduce separate collection of cardboard illustrates that market forces might drive material in other direction. Businesses tend to produce waste in particular streams. As demand for secondary resources rises during the next decade, as well as likely hikes in the price of fuel, commercial waste streams will probably be viewed as valuable commodities.

Examining the debate in the industry, unsurprisingly, it’s those with a vested interest that are banging the drum loudest. The evidence of recent years might suggest we wait. However, the problems associated with planning and project timescales have lead to a clamour for investment now. Senior figures in waste disposal authorities and partnerships are anxious to have their own alternative to landfill, lest they be left paying through the nose.

These problems may well intensify if the current government’s localism agenda translates into legislation, and the planning process potentially becomes even more taxing (see feature on p. 17). Senior figures in waste management companies have expressed concern about the situation, having already experienced the cost of being caught between successful procurement and a motivated group of its residents.

Admittedly, expertise is developing. Project delivery now starts with community engagement from the outset, consulting and engaging all stakeholders in design. It also means loading a year or two on the front end of a project, to avoid adding years to it further down the line.

However, do these risks warrant the kinds of premium that private investors demand for financing waste facilities? According to the TaxPayers’ Alliance, the assets financed through PFI only account for half of the value of PFI credits pledged by the government. It’s no surprise that critics have been particularly vociferous about just how much value for money the public is getting. On the face of it, there does appear to be some irony that the government should increase its borrowing to lend it to the banks, at the same time that financial institutions have demanded higher premiums from the special purpose vehicle commissioned and paid for by the waste authorities.

Indeed, the Committee of Public Accounts published a report in December criticising the fact that in 2009 the cost of financing PFI projects had increased by a third, costing the taxpayer an extra £1 billion. The committee found that the Treasury could have done more to encourage banks to lend at lower rates, and that some projects are locked into high interest repayments for decades to come.

Defra states that its recent decision to withdraw PFI credits will save it £26 million a year in 2017/18. For those authorities affected, the need to find alternatives to landfill will still necessitate borrowing from the private sector, on the promise of delivering waste (and affiliated council taxes) for the long-term.

From some quarters there have been calls for the proposed Green Investment Bank to take a stake here; or, for some of the burgeoning revenues from landfill tax, currently £842 million a year, to be set aside for this purpose. However, much depends on who is driving the issues through government. It’s likely that the Treasury, DECC, Defra and the Department for Business, Innovation and Skills will all see the matter differently.

The changing climate for finance and planning is a challenge and an opportunity. There is a gap in capacity, simply because landfill is no longer the option it was. However, increasingly there is a better case for smaller-scale projects, or those with modularity to scale up. Planning may also prove easier in the process.

While this path might not provide the big fix that many of the current infrastructure projects do, agile councils might find it easier to adapt to the changes ahead. Technologies evolve and so will the value of waste; those that have not yet got on board with large-scale infrastructure need not panic. The gap might not be so large, nor the fare as taxing.