The 46-page judgment of Lord Reed in the Petition of Scottish Power Generation Ltd (Outer House, Court of Session  Scots CS 272, 22 December 2004) contains perhaps the most extensive examination to date by a British court of the principles determining at what point treated or recycled waste ceases to be waste in law and becomes a product.
In what is perhaps the legal understatement of the year, Lord Reed began his judgment by noting: "The facts of this case and the relevant legal provisions are relatively complex."
The background to the case was Scottish Water’s need for alternative routes for the disposal of sewage sludge following the ending of dumping at sea in 1998. In the Glasgow area, a subsidiary of Scottish Power, SMW, proposed a sludge treatment centre to produce a waste-derived fuel (WDF) for use in Scottish Power’s coal-fired Longannet power station.
In 1998, Scottish Power applied for a variation of Longannet’s existing integrated pollution control (IPC) authorisation for a combustion process to permit WDF burning at a normal ratio of 90% coal and 10% WDF.
It was acknowledged that because the fuel contained impurities, emissions of certain heavy metals and other pollutants would increase, but remain within the authorised limits. The variation was granted by the Scottish Environment Protection Agency, and included further conditions relating to sampling, upper limits on the amount of WDF which could be burned, and various other matters.
The treatment plant was built by SMW at a cost of some £65 million, and a contract made to supply the fuel to Scottish Power. Currently, Longannet is the only power station in the UK burning fuel made from sewage sludge, and disposes of about half of Scotland’s annual sludge arisings.
The legal problems for Scottish Power arose following the adoption of the 2000 Directive on waste incineration. Until then, EU legislation had applied only to incinerators burning municipal or hazardous waste, and sewage sludge clearly fell within the non-hazardous category. But the 2000 Directive removed the distinction between incinerators burning hazardous and non-hazardous waste, and introduced much stricter emission standards.
In 2002, SEPA informed Scottish Power that it considered that the fuel produced by the sludge treatment centre remained waste in law, and that the incineration Directive therefore applied to the power station. It required the company to upgrade the plant to meet the tougher emission standards or cease burning the waste by the end of 2005 (ENDS Report 350, pp 20-21 ).
No-one denied that the original sludge was a waste, but Scottish Power argued as a preliminary point of law that the WDF was no longer waste but a product, and that any proposed variations of the authorisation under the incineration Directive and its implementing regulations were as a consequence unjustified in law.
According to the company, the fuel was produced intentionally for a particular purpose and had a guaranteed market. As such it had "earned a place in the normal commercial cycle or chain of utility", and it was not realistic to talk of Scottish Power "discarding" the fuel in its power station, the underlying concept of waste.
The waste incineration Directive defines a "co-incineration plant" as including any plant "whose main purpose is the generation of energy or production of material products and which uses waste as a regular or additional fuel." The term "waste" is given the same meaning as that in the 1975 waste framework Directive as amended, and the court was therefore obliged to review the extensive case law of the European Court of Justice (ECJ) on the subject, together with a number of British decisions.
The starting point, as always, was the deceptively simple definition of "waste" in Article 1(a) of the waste framework Directive as meaning "any substance or object in the categories set out in Annex I which the holder discards or intends or is required to discard."
Sewage sludge is not expressly listed in Annex I, but since the final class in Annex I includes "any materials, substances or products which are not contained in the above categories," Lord Reed noted succinctly that "Any substance or object may therefore potentially constitute waste."
"Discard" remains a critical term in defining what is or is not waste, but it was apparent from the ECJ’s case law and the structure of the waste framework Directive that it has an extended meaning beyond simple abandonment or dumping.
Annex II of the Directive contains a list of recovery operations which includes "Use principally as a fuel or other means to generate energy" and, according to Lord Reed, "it follows that a person who uses waste as a fuel to generate energy must be regarded as ‘discarding’ the waste within the meaning of Article 1(a)." Furthermore, it was clear that materials could remain waste even if they had an economic value.
This in itself did not resolve the issue, since Scottish Power argued that the sludge had undergone a complete recovery process at the treatment centre.
The question whether a substance which was undoubtedly waste at one time has ceased to be waste has been considered on a number of occasions by the ECJ, but remains one of the most difficult areas of contemporary waste law.
In the 2000 Arco Chemie case, the ECJ was not prepared to accept that a substance which was the result of a complete recovery process in itself was determinative that it was not waste, since the holder might still dispose of it because he could not find a market for the product.
Nevertheless, it was clearly a significant factor, and Lord Reed noted that in this case the ECJ had drawn a distinction between a "complete recovery process", which implied that the substances in question had the same properties and characteristics as the raw materials they replaced, and pre-treatment, which did not transform the material into a product analogous to raw material.
As the ECJ’s Advocate General Jacobs had noted in an earlier case, the question to be asked was whether the substance in question is "wholly interchangeable with another product and requires no additional regulation or supervision beyond that applicable to the product it is replacing."
Although this approach was criticised by the High Court in the 2001 Castle Cement case as lacking certainly (ENDS Report 315, p 58 ), Lord Reed felt that it was correct in principle, and consistent with the environmental and human health protection goals of EU waste legislation: "the material will cease to be waste and the waste controls laid down in the Community will lose their rationale, only if the material has the same characteristics as a primary material and is capable of being used in the same conditions of environmental protection."
Cases concerning the definition of waste are generally fact-sensitive. Applying the principles to the circumstances of the case, Lord Reed concluded that the WDF could not be used under the same conditions of environment protection as the coal that it replaced. It contained a higher concentration of heavy metals, had the potential for greater levels of contamination, and there were also odour issues. These factors were reflected in the extra conditions imposed in the revised authorisation permitting the burning of WDF.
Lord Reed felt that his conclusion were supported by the fact that the sludge treatment process did not fall clearly within any of the recovery processes listed in Annex IIB of the waste framework Directive. Scottish Power had argued that it was included within the class entitled "Recycling/reclamation of organic substances", but Lord Reed was not convinced.
"It is clear," he said, "that the sewage sludge is not recycled; and there is no distinct substance reclaimed from the sludge by extracting moisture from it and forming it into pellets. If one asks what is recovered from the sludge, the answer is energy; and if one asks how it is recovered, the answer is by burning."
The Scottish Power decision does not imply that all WDF remains waste until the point of incineration, and there may well be cases where a process produces a product with the same environmental characteristics as the fuel it replaces.
Nor, as the European Court of Justice has stressed on several occasions, does the fact that it remains waste prevent its authorisation for burning as a fuel, and indeed such a policy is consistent with the promotion of waste recovery.
In the particular case, there remain other legal issues that Scottish Power indicated it may pursue at a subsequent hearing, and an appeal may still be made. But if the decision stands, the need to comply with the strict emission standards of the waste incineration Directive may well shift the economics of sludge incineration as a fuel substitute, particularly where expensive retrofitting of existing plant is involved.
If environmental policy and law were consistently logical, there should in fact be no distinction between the emission standards applied to the burning of waste or raw fuel since the public and the environment suffer the same exposure. But logical waste legislation still remains a challenging goal.
Richard Macrory, Professor of Environmental Law, University College, London