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11. July 2024

Poland – a success with the private sector’s help

How the circular economy is developing in Poland and what role public private partnerships play

Poland was quite a bit ahead of the others when the communist governments of the old Eastern Bloc tumbled, one by one, in the second half of 1989. Tadeusz Mazowiecki had already been appointed prime minister of Poland’s first democratically elected government in August 1989 following the collapse of communism. Ever since then, the country has pursued its ambition to play a pioneering role in Central and Eastern Europe. And it has succeeded – both in matters big and small.

This is also true for the country’s recycling, energy and public sectors. Poland has achieved more than others even if a lack of funds has sometimes forced it to move more slowly than it would like (a situation that continued even after it joined the EU in 2004). Despite this, the country was proud to be able to announce last year that it had achieved the second-highest increase in its recycling rates in the EU over the last decade. Only Slovakia’s recycling rate had grown faster. According to Eurostat, Poland’s recycling rate was 236% higher in 2021 than it had been in 2012. Its current recycling rate of 40% puts the country in a solid midfield position among the EU states. This success is also a reflection of the path Poland is taking, i.e. much has been achieved but they’re not at the finishing line yet. Looking at the 55% minimum recycling rate set by the EU for 2025, the gap that needs to be filled is still pretty big.

With a share of around 10% of the household waste collection and recycling market (including its PPPs), REMONDIS is the biggest player on the Polish recycling market.

Private sector solutions

Private sector companies play a major role in the Polish waste management sector. While around 40% of waste management companies belong to local councils, the majority are privately owned. Approximately half of these privately owned firms are international recycling businesses; the other half are local family-run companies. This means that private sector firms have an important position on this market – both when it comes to the collection and recycling of municipal waste as well as of industrial and hazardous waste, healthcare waste, commercial waste, organic waste and e-waste. One of the key factors driving this development was the long-standing ban on local authorities, cross-subsidies or local budgets being used to keep loss-making municipal firms alive. Councils made a conscious decision to get the finances and know-how they needed from the private sector.

Many local authorities chose, therefore, to set up public private partnerships (PPPs) to achieve this particular goal. REMONDIS alone is involved in eight such PPPs (Poznań, Szczecin, Gliwice, Sosnowiec, Tarnowskie Góry, Krosno, Świdnik, Otwock), its subsidiary SFW Energia in two (Mielec, Gorlice) and REMONDIS Aqua in four (Trzemeszno, Drobin, Wyszogród, Toszek). This is also one of the reasons why REMONDIS generated around 2.7 billion Polish złotys (PLN) or 600 million euros in 2022 – its second-largest turnover after its home market Germany. With a share of around 10% of the household waste collection and recycling market (including its PPPs), REMONDIS is the biggest player on the Polish recycling market.

Incineration rather than landfill

Following the political upheaval, Poland initially set about creating a waste management infrastructure that enabled one single system to collect all the different types of waste and take them to landfill. The two main challenges of this first restructuring stage were upgrading the country’s existing landfills to reflect modern standards and carrying out any renovation work needed. The first big step that they took to modernise waste management was to ensure the waste was pre-treated in mechanical-biological treatment (MBT) facilities before it was sent to landfill. This is still what happens to most of the waste generated in the country today; the figure was put at 90% for 2020. These facilities sort and cut up the waste streams in order to remove individual substances. These recovered materials are then either recycled, transformed into high-calorific fuels (RDF) for the cement industry or incinerated in waste incineration plants (WIP). The organic fraction is processed so that it cannot produce methane gas after it has been landfilled.

Poland has slowly been expanding its network of MBT facilities since the middle of the last decade, some of which have been financed by EU funds. The largest cities in Poland now have such facilities or will have soon. The list of building projects yet to be started is long and some of them will certainly not be realised – not only because of a lack of financing but also of public support for such plants (particularly in smaller districts). And, on top of this, Poland finds itself facing a huge increase in the costs of building materials.

One ongoing problem during the thirty years between 1990 and 2020 was the unreliable data regarding the volumes of waste generated in the country. The central data used to determine the size and need for waste management solutions – for example, the figures reported by the MBT plants – was based on guesstimates for many years. Recyclable materials such as paper, cardboard and scrap metal were and continue to be bought up by so-called Skups (collection points) and then sold on to recycling businesses via brokers. These volumes were never included in the statistics in the past. The country launched a waste database (BDO) at the beginning of 2020 to make the system more transparent and prevent volumes of waste from simply ‘disappearing’. All companies that generate, transport and process waste are now obliged, by law, to register their business at the BDO. Users can only meet their recording and reporting obligations via this electronic system.

REMONDIS in Poland

The RETHMANN Group entered the Polish market in 1992 and has been operating there under the name REMONDIS since 2005. Its first shareholding was a PPP firm with Poznań, Poland’s fifth-largest city. Since then, the company has gradually expanded its presence across the country through organic growth, acquisitions and further partnerships with local authorities.

REMONDIS currently has ca. 4,300 employees in Poland and generated a turnover of approx. PLN 2.7bn (around 600m euros) in 2022. All in all, the company handles ca. 2.2 million tonnes of residual waste and recyclables every year. REMONDIS has around 70 companies and branches throughout the country and operates 32 plants for treating recyclables, producing compost and refuse-derived fuels and processing mixed construction waste as well as its own cogeneration plants to produce heat and electricity.

Separate collection & recycling systems

Besides increasing waste incineration capacities, the Polish recycling sector moved up yet another gear in response to political regulations. After local councils were made responsible for collecting waste in their regions in 2013, a new law came into force in the middle of 2017 that stipulated that waste had to be separated into five fractions according to a set scheme. Paper, glass and plastics – collected separately – had to be recycled and returned to market to grow circularity. At the same time, this meant that less residual waste would end up at MBT plants and WIPs. It was mentioned earlier just how successful Poland has been here. Having said that though, the results differ greatly depending on the material stream. Which is why further individual measures are being introduced (e.g. the mandatory levy on single-use plastic tableware in 2023 and the introduction of a deposit return scheme from 2025 onwards) to push up recycling rates – and meet the relevant EU rules. Retailers and e-waste collection points have also been obliged to accept old electrical and electronic equipment since 01 January 2016.

The problem of financing

Financing municipal collections has proven to be a problem here: when it comes to collecting household waste, Polish councils rely on voluntary information provided by the households about how many people live in the building. In many cases, fewer people are named than actually live there. As a result, the calculations based on the number of local inhabitants often do not cover the actual costs and, paradoxically, mean the costs per head increase disproportionally. The Polish audit office recently reported that companies and consumers had fallen into arrears amounting to around PLN 850m (€200m) in 2022 – a sum that has been rising continuously for many years now.

“The EU grants that will be available in the future for new projects – and that local authorities will be able to apply for – will be nowhere near as attractive as those in the past.”

Torsten Weber, Managing Director of REMONDIS International

This all meant that the majority of councils were unable to finance their system with the fees collected and had to fall back on other funds. Up until a few years ago, Polish law stipulated that the collection and processing of municipal waste must finance itself. This law, however, was changed after many local inhabitants expressed their displeasure at the exponentially increasing costs. Since 2022, councils have been officially allowed to subsidise their waste management systems again.
There has been much opposition to the idea of ‘producer responsibility’ in the packaging recycling sector (i.e. to companies placing packaging on the market having to pay for these materials to be recycled). The reason put forward by the Government in 2022, when it once again stopped such a bill being put to the vote, was that it feared such a move may lead to companies passing on the costs to consumers and pushing up prices even more. Other measures should fix the situation, such as the levies being charged on single-use packaging.

At the moment there is also a lack of funds available to modernise the country’s waste incineration plants and transform them into waste-to-energy (WtE) plants. Experts believe this shortfall to be around PLN 10bn. And Torsten Weber, managing director of REMONDIS International, pointed out a further obstacle: “The EU grants that will be available in the future for new projects – and that local authorities will be able to apply for – will be nowhere near as attractive as those in the past. One main reason here is because the EU is no longer prepared to subsidise WtE plants. Many of the plants built in Poland in the past were financed with the help of such funds. In the future, therefore, there will be a considerable distortion of competition with projects that are built primarily using conventional financing and very few subsidies.”

And then there is the whole question of how the planned deposit return scheme for drinks packaging, which is due to be rolled out in 2025, is to be financed – a question that is yet to be answered.

Five questions for Leszek Pieszczek, Managing Director of REMONDIS Sp. z o.o. in Poland

RE:VIEWS: How do you see the whole question of financing – especially when it comes to helping Poland take the next step towards setting up a circular economy? Are the EU and Poland’s government doing enough to help drive forward this successful story?

Leszek Pieszczek: The primary focus of the EU over the coming years will be on the energy transition. It’s been said that Poland will receive at least 30 billion euros between 2021 and 2027 to support it in this particular area – predominantly to decarbonise its power stations and modernise its wastewater treatment plants. There are also some circular economy programmes but these are primarily being supported with national subsidies. Here at REMONDIS, we are, of course, trying to get as many subsidies as possible. Our goal is to make sure all our plants are equipped with the latest international technology – i.e. BAT standards – as soon as possible.

RE:VIEWS: What are you hoping that the packaging deposit return scheme will bring when it’s launched in 2025? What do you think are the key points that will make it a success?

Leszek Pieszczek: The introduction of a deposit return scheme is not only a great opportunity for Poland to increase its recycling rates but also to adapt its systems in line with modern, eco-friendly European systems and standards. We’re currently working hard on introducing a deposit return solution for our customers, on building counting centres and – together with RE DEPOSIT, our own REMONDIS Group company – on ensuring there are enough reverse vending machines available. We want to be self-sufficient in this area and offer our customers the best possible service.

Leszek Pieszczek – Curriculum Vitae

25 years’ experience of the environment and the circular economy in Poland

COO, REMONDIS Sp. z o.o., Warsaw

Since 2012: Board chair of the Investor Chamber of Commerce in Poland (Izba Przemysłowo-Handlowa Inwestorów w Polsce)

Since 2009: A member of the supervisory board of the Polish Waste Management Chamber PIGO (a member of the FEAD in Brussels)

2001 – 2009 Managing director of EKO-PUNKT, Organizacja Odzysku S.A.

1999 – 2001 Assistant to the Managing Director, Rethmann Recycling Sp. z o.o., Warsaw

1989 – 1999 Employee at Siemens AG, automation technology dept., Nuremberg-Moorenbrunn

2001 – 2006 Master’s course at Lodz International Studies Academy (LISA)

1987 – 1989 University of Education, Studied social education in Częstochowa

RE:VIEWS: Your operations also involve supplying water and treating wastewater. What are the differences for private sector firms in Poland wishing to deliver this particular key public service compared to waste management? Is it easier, more difficult or just different?

Leszek Pieszczek: Having access to a supply of drinking water is a basic human need and so it doesn’t surprise me that local governments play a key role here and rarely allow private capital into this sector. Another reason is because these plants are monopolies and are run using a state-controlled pricing system. All of the sewage treatment plants that we operate are public private partnerships, with the local authority normally owning a majority share.

This is, therefore, not an easy market. The demand is simply not there even though we’d like to invest more. In the past, local authorities primarily financed this sector with EU funds; private money simply wasn’t needed. At the moment we’re modernising our infrastructure, i.e. the wastewater networks and sewage treatment plants in the various districts.

RE:VIEWS: What are your plans for the district heating plants that you purchased from STEAG in 2023? Are you intending to use refuse-derived fuels in them?

Leszek Pieszczek: We are well aware of just how important it is for Poland, and indeed the whole world, to move away from fossil fuels. This will be a very important trend in Poland as well over the coming years. Alternative energy projects were drawn up and developed for the STEAG plants before we took them over.

Our waste-to-energy project team is working hard at the moment to change the fuels being used in the main plants as quickly as possible and to substitute them with alternative fuels.

RE:VIEWS: What role will the private sector and public private partnerships – or PPPs – play in the future? Is there a danger of Poland turning its back on private sector solutions over the long term?

Leszek Pieszczek: That’d be a great loss for the whole of the system and it’s very difficult to picture that happening. Particularly as local authorities in Poland are getting further and further into debt and, at the same time, must pay ever greater sums to central government. The new government has said that it intends to reduce the levies that towns and districts must pay but it’s hard to predict to what extent this will actually happen.

One real challenge for private sector solutions are the many council-owned companies that are given contracts without the work being put out to tender. This is effectively limiting free competition. These public sector firms, however, certainly don’t operate more cost-effectively or more efficiently. Instead, they cost the local authorities a lot of money, which the councillors could put to much better use for other public tasks.

Generally speaking, not working with the private sector and not making use of this private capital benefit no one. It’s not just a question of investment but also of private sector know-how and the many years spent by private sector specialists researching into and developing projects – often international projects involving other international businesses. If the public sector chooses to forego private sector investors, then it is also foregoing its professional experience and know-how that is generally up to date with the latest international standards.

Image credits: image 1, 3: Shutterstock: givaga; image 2, 4: © REMONDIS


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