The Victorian Government is moving forward on its waste and recycling agenda. The Government's Circular Economy (Waste Reduction and Recycling) Act 2021 (Vic) (Act) has made its way through Parliament, and is expected to be fully operational by 1 December 2023.

The Act follows extensive public consultation that culminated in the release of the Government's Recycling Victoria: A new economy policy in February 2020. In addition, the Victorian waste to energy framework, released in November 2021, lays out a roadmap for a burgeoning waste to energy (WtE) industry. Both the Act and the WtE framework are expected to assist in driving Victoria's transition to a circular economy.

We set out some key features of the Act and the WtE framework below.

Circular Economy (Waste Reduction and Recycling) Act

Following the China Sword policy announcement, and the collapse of SKM Recycling, the fragility of Victoria's waste system was exposed and the need to fundamentally reshape it was clear. The Victorian Government responded by releasing Recycling Victoria: A new economy. This provided an action plan and roadmap to transition Victoria to a circular economy, and reform the waste and recycling system over the next decade. A key part of this reform package is new legislation to ensure the waste and recycling system is more effective, accountable, and consistent with community expectations.

A new regulator

The Act creates a new regulator: Recycling Victoria. The regulator will be tasked with overseeing the waste, recycling, and resource recovery sector, as well as supporting the development of the circular economy. It is expected that the regulator will be established by mid-2022, and sit within the Department of Environment, Land, Water and Planning.

A key focus of the regulator will be to play a market stabilisation role, replacing the current Waste and Resource Recovery Groups, to co-ordinate and facilitate the delivery of waste and recycling across the State. The regulator will primarily do this by enforcing set service standards, to ensure consistency and transparency in how waste and recycling are collected, managed, and disposed of. The regulator has been given an extensive suite of compliance and enforcement powers, including:

• carrying out audits;
• issuing improvement and prohibition notices;
• accepting enforceable undertakings; and
• issuing penalty notices for relevant offences.

In order to anticipate and mitigate risks to the stability of waste and recycling markets, and to increase market transparency, the regulator will also have powers to:

• undertake inquiries into specific or general parts of the waste and recycling sector; and
• receive reports and collect information.

The regulator will have a support and capacity building function, assisting councils in the procurement and contracting of waste and recycling services. It will also administer the container deposit scheme.

Mandatory reporting and information gathering

Under the Act, the regulator will establish and manage a centralised data collection and reporting framework, which is aimed at identifying risks and opportunities in the market and informing responses. As part of this system, periodic mandatory reporting will be required from councils, and other industry participants, to provide transparency and accountability for what happens to our waste. The regulator will have powers to request information on an ad hoc basis from a broad group of entities that will be prescribed by regulations.

The key purpose of these reporting and information gathering requirements and powers, are that better data will enable all levels of government and industry to better predict, plan for, and respond to market failures, as well as other issues faced by the waste sector. The regulator will also be able to publish information from industry participants, in order to improve oversight of the waste and recycling market, and anticipate and respond to market issues.

Four waste stream system

The Act establishes a transition to a four waste stream system – food and garden organics, glass, comingled recyclables and residual waste. Once the Act commences, there will be a staged legislative requirement on councils and alpine resort management boards to provide households with the solid waste and recycling services to accommodate the four streams. This will be subject to a limited number of exceptions.

Service standards

The Minister will be empowered to set service standards for all providers of waste, recycling, or resource recovery services, and for all waste streams – municipal solid waste, commercial and industrial waste, and construction and demolition waste – that must be complied with. The standards will set performance requirements to ensure consistency and transparency in how waste and recycling are collected, managed, and disposed. These are expected to initially focus on how the four waste streams are to be delivered by councils and alpine resort management boards. The standards will be made through subordinate legislation following further consultation.

Container Deposit Scheme (CDS)

The Act introduces a CDS that financially incentivises the return of drink cans, cartons, and bottles. A scheme coordinator will manage the administrative and financial elements of the CDS, while network operators manage the beverage container collection infrastructure. Network operators will be paid on a per-container-collected basis.

The CDS will be funded by the beverage industry. Beverage suppliers deemed to be 'first suppliers' in the Victorian market will be required to pay into the scheme via an in-arears payment model.

Further details surrounding the Act and the full text can be found on the Victorian Legislation website.

Waste to energy Framework (WtE)

The Government has also recently released its Victorian waste to energy framework. The framework describes how the WtE policy laid out in Recycling Victoria: A new economy will work in practise.

WtE technology refers to the suite of technologies that convert waste, that would otherwise go to landfill, into energy sources. In order to promote the WtE industry without creating an overreliance, the policy commits to placing a 1 million tonne per year cap on the amount of waste that can be sent to thermal WtE in Victoria until 2040.

For the purposes of the cap, thermal WtE refers to any thermal process used to:

• recover energy from waste in the form of heat, which may be converted into steam or electricity; and/or
• produce a fuel from waste.

The framework describes how operators of thermal WtE facilities can obtain a 'cap licence', as part of a cap scheme, through a competitive process coordinated by a cap scheme regulator. Some key points to note in relation to the licencing framework are:

• facilities that were operating or had a planning permit as of 28 June 2021 need not fit within the 1 million tonne per year cap, but must hold a cap licence to process permitted wastes. These facilities will not be assessed against the evaluation criteria for the grant of a licence, but instead will automatically be granted a cap licence following receipt of a completed application;
• it is the Victorian Government’s intention that a successful project for the South-east advanced waste procurement (which aims to procure a facility that can take displaced residual waste as a result of anticipated landfill closure in Melbourne's south-east) will be granted a licence, giving access to an allocation under the 1 million tonne cap;
• licences will be subject to a range of conditions that will vary depending on the characteristics of each facility, and will be established in regulations and/or guidance that will be subject to consultation. Types of conditions that are expected relate to matters such as the quantity of waste permitted, deadlines for financial close and commissioning, reporting requirements and expiry conditions; and
• applicants will be required to apply for a cap licence from the cap scheme regulator following an expressions of interest process. Applications will be assessed through a consistent and transparent process, with anticipated assessment criteria being outlined in the WtE framework document.

Legislation to give effect to the framework is forecast to be introduced into Parliament in mid-2022, with the first round of cap licences to be granted in late-2022.

The Act sets the groundwork for a more effective waste industry that is focussed on delivering a circular economy. It brings into play a heightened level of scrutiny over waste and recycling industry participants, including strict compliance with mandatory data reporting and enforceable service standards. Although the Act will not be fully operational until 2023, it is likely that the regulator will be established by mid-2022. We expect supporting regulations and other subordinate instruments to follow, along with further supplementary legislative change – including to enhance state-wide infrastructure planning.

The WtE framework, once operationalised through legislative change, is likely to unleash a slew of project operators keen to secure cap licences. Given the increasing domestic and international focus on WtE opportunities, it is likely that the amount of eligible WtE projects will quickly exceed the cap. We will closely watch and report on how the Government progresses the framework into a legislative model.