More money and responsibilities for waste management companies
By January 1, 2019, all Russian regions should have selected at least one company as their regional operator for the transport, processing and disposal of municipal household waste. However, most areas were unable to meet the deadline. According to press reports, at the beginning of the year only 16 of the more than 80 Russian regions complied with the requirement. Moscow and St. Petersburg are excluded until 2022, and other regions get a one-year reprieve.
Under the new system, each regional operator negotiates disposal contracts with all producers of municipal waste. There is an obligation to connect and use the system. The plan is to exempt the disposal companies responsible for solid municipal waste from paying VAT. Until now, numerous waste disposal companies have competed in every city, and due to the low profit margin, they were unable to develop modern waste recycling facilities.
The Ministry of the Environment wants to establish a state holding company until the end of 2019, which will coordinate municipal waste reform and prepare demand analyses for landfills and waste processing facilities. In addition, the holding company is to become a public partner for public-private partnership (PPP) projects for the processing and recycling of municipal waste. It will initially be endowed with 1 billion EUR from the central government’s budget, and private investors will contribute an additional 3 billion EUR.
Due to the low waste-handling fees, necessary investments in waste processing, recycling and landfill remediation have hardly paid off thus far. The fees rarely reach a tenth of the level in Germany; in some Russian regions, a family of four in an apartment building pays less than 2 EUR per month for waste collection.
In the future, the regional administration will define a per-capita consumption quantity and set a tariff for it. Early examples show that the fees will be between 500 and 600 rubles (6.50 and 7.80 EUR) per cubic meter. Regional politicians are trying to cap or lower fees for collection and disposal. The waste management companies are, however, resisting, as rising costs and lower subsidies compromise their business model and profitability.
A maximum of 10% of waste generated is recycled
Russia produces 70 million tons of municipal solid waste per year, and 16% of this is generated in the Moscow metropolitan area. Market experts estimate that only 4% of all waste is recycled, with the rest ending up in landfills; the government calculates the recycling rate at 10%. Whatever the number, catch-up demand in the Russian waste industry is enormous.
Russia: Composition of domestic waste in Moscow
|Material||Proportion (in %)|
|Paper and cardboard||17|
|Leaves and twigs||10|
|Leather and rubber||1|
|Paper and cardboard||17|
Presidential Advisor Andrey Belousov is currently working on a list of possible investment projects. These include projects to modernize waste management and rehabilitate landfills. Among others, Gazprom investment company Lider plans to invest 1.3 billion EUR in waste processing, according to a report by RBK Daily. Construction holding company VIS Group also announced investments of 200 million EUR.
As part of the “Clean Land” program (Russian: Chistaja Strana), construction of four waste incineration plants in the Moscow region and one in Tatarstan are planned and projected to cost 2 billion EUR. The aim is to reduce the amount of municipal waste sent to landfills by 7% by 2023. Tatar capital Kazan wants to withdraw completely from the dumping of domestic waste.
One of the key players in implementing the program is the state-owned company Rostec with its subsidiary RT-Invest. Japanese-Swiss Hitachi Zosen Inova was selected for technical planning and supplying the technology, with at least 55% of the equipment for waste incineration plants to be produced in Russia. In December 2018, mechanical engineering company SiO-Podolsk (http://aozio.ru, part of state holding company Rosatom) supplied the first steam boiler components for the incineration plant in the Moscow region.
High investment costs of over 400 million EUR per plant and long amortization periods due to the low waste fees are considered to be crucial factors for thermal waste recycling in Russia. No investor was found in a tender for two planned plants in Sochi and the Stavropol region in the summer of 2018.
Russia: Projects in the waste management industry
|Project||Region||Investment EUR (millions)||Project status||Project operator|
|Waste sorting and processing plants||Yekaterinburg and Nizhny Tagil||66||Planned completion: 2022||Government of the Sverdlovsk Oblast (http://www.midural.ru)|
|Two waste processing plants||Omsk||66||Letter of Intent||OOO Magnit (http://magnit-tko.ru)|
|Ecotechnopark specializing in waste sorting and processing||Rostov-on-Don||53||Under construction, planned completion: 2020||GK Tschistyj Gorod (http://clean-rf.ru)|
|Construction of a waste incineration plant||Republic of Tatarstan||36||Planned completion: 2022||RT-Invest (http://rt-invest.com)|
|Construction of a waste incineration plant||Tambov||35||Declaration of the regional administration, planned completion: 2023||AO Tambowskaja setewaja kompanija (https://oaotsk.ru)|
|Waste sorting, incineration plants, waste processing, landfills||Tomsk Oblast||20||Construction period: 2020 to 2024||Government of Tomsk Oblast (https://tomsk.gov.ru)|
Source: GMI research
Few collection containers for waste separation in large cities
Waste separation and subsequent processing would be more efficient and cost-effective. It is currently prohibited to dump metals, polyethylene, glass, books and magazines, as well as household electronics. In practice, however, such objects end up in landfills because there is little infrastructure for their collection separately.
According to a study by Greenpeace, only 9% of households in Russia’s major cities had access to collection containers in 2017. Leading locations in this regard include Saransk, Mytishchi and Orenburg. The national “Ecology” project envisions 210 municipal waste-processing plants nationwide by 2024.
The Republic of Mordovia (capital: Saransk) is regarded as a model for modern waste treatment. Here, German company Remondis has been responsible for collection and disposal since 2011 and has invested continuously ever since. Upcoming projects include an automatic sorting plant and a landfill with efficient soil sealing and landfill gas processing.
Russia is relying on cooperation with foreign partners to modernize its waste management system. To this end, a Council for International Cooperation in Waste Treatment was established at the beginning of 2019. The board includes representatives of the Ministry of Environment and Economy, the State Environmental Inspectorate, the World Bank, the Environmental Research Institute WNII Ekologija and representatives of domestic and foreign waste-management companies.