Although many businesses and industries are currently implementing pollution prevention projects that will produce a good return on investment (ROI) and reduce various wastestreams, some companies have indicated difficulty with fully evaluating the benefits of pollution prevention-type projects which often have unique considerations. For example, they have difficulty allocating waste treatment costs to specific processes, current and future compliance costs, and future potential liabilities.
There has been some very interesting and constructive work done in this area by both industry and the EPA. One of these economic evaluation procedures is called Total Cost Assessment (TCA).
TCA was developed by the Tellus Institute under the auspices of the EPA and includes the methods and programs developed by General Electric (GE). GE developed its new environmental project analysis method to better select and justify waste management investment decisions that are environmentally sound and should reduce long-term liabilities.[1] The method was designed for use by plant engineers in cooperation with their financial people.
The Tellus project has been finalized and published by the EPA and is presented here in summary form. It is comprised of four elements:
- Expanded cost inventory,
- Direct allocation of costs to processes and products,
- Extended time horizons, and
- The use of long-term financial indicators.
Expanded Cost Inventory requires firms to include indirect costs, liability, and less tangible benefits in the financial analysis. Examples of each of these costs are shown in Figure 1 [provided in source document]. Indirect costs are those usually allocated to overhead rather than to their source. Liability costs depend on the firm's capability to predict future regulatory and environmental costs of current operations. The assessment of liability is subject to a high degree of uncertainty and requires significant research but can provide insight into the unforeseen benefits of pollution prevention projects. Additional benefits include those to which it may prove difficult to apply a dollar value. These less tangible benefits can provide significant incentive to implement pollution prevention activities during this time when environmental concern is a consumer priority. Methods to evaluate these additional costs are discussed in EPA's "Pollution Prevention Benefits Manual."
Direct Allocation of Costs is an important step in expanding the cost inventory. Without direct allocation, businesses tend to lump these expenses into a single overhead account or simply add them to other budget line items where they cannot be segregated easily.[2] As a result, the accounting systems fail in the following respects:
- to identify the products or processes most responsible for environmental costs,
- to assess an investment in the pollution prevention opportunity in relation to the environmental cost of products and processes, and
- to track the financial savings of a selected pollution prevention alternative.
The major steps in direct allocation are:
- to develop a "mass balance" for all materials coming in and going out of the facility and
- attribute the costs of those materials to the proper entity.
The development of a material balance and cost attribution requires information from all department involved in handling and monitoring the materials; for example, production, purchasing, materials management, environment, and research and development staff.[3] Expanded Time Horizon requires firms to allow significantly longer periods for financial benefits to be achieved for some pollution prevention projects. This additional time may be more of a problem for smaller businesses, which usually require shorter payback periods than larger companies. When firms rely on liability costs and less tangible benefits as incentive for investing in a pollution prevention project, a five-year time horizon or more is usually required.
Financial Indicators are financial evaluation tools which encompass all the components discussed including the capability to account for all cash flows during the project and the time value of money. Three such financial indicators are:
- Net Present Value (NPV),
- Internal Rate of Return (IRR), and
- Profitability Index (PI).
EPA's "Pollution Prevention Benefits Manual" provides in-depth discussions of these financial tools and examples of their use.
Because full use of TCA may prove to be a burden for some companies that wish to implement pollution prevention projects, EPA has developed a stepwise method for including elements of the TCA approach into current financial analysis. This tiered approach is depicted in Figure 1 [provided in source document], and a case example is provided in Table 1.
Table 1. Benefit Analysis of Hypothetical Pollution Prevention Alternative
Coding Note: Because of the unreadability of the table provided in the text document, this table would best be viewed in the source document.
Historically, environmental costs have been sufficiently insignificant for most facilities to include these costs as overhead. As environmental costs continue to rise, firms will realize the need for direct allocation of these costs to production operations. Elements of the TCA analysis tools will inevitably be required for those small and large firms that seek an edge in a competitive marketplace.
If you would like additional information on TCA or assistance with using this new evaluation tool, the Pollution Prevention Program of the Office of Waste Reduction will be glad to help you realize benefits of some of your potential pollution prevention projects. Contact Bill Albright or John Burke at (919) 571-4100.
Footnotes:
[1] Spitzer, Martin A. "Calculating the Benefits of Pollution Prevention." Pollution Engineering. September 1, 1991, pp. 33-36.
[2] Facility Pollution Prevention Guide. U.S. Environmental Protection Agency. EPA/600-R-92-088. May 1992. p. 53.
[3] White, Allen L. "Accounting for Pollution Prevention." EPA Journal. July-September 1993.
Sources of Financial Assistance or Tax Relief for Environmental Projects
Businesses and industries frequently ask the Pollution Prevention Program for information on the types of financial assistance available from the State or Federal government for pollution prevention projects. Several forms of assistance are available to businesses and industries from State and Federal agencies. The chart below lists some of the grants, low-interest loans, and tax incentives available. If readers are aware of other sources, public or private, please help us get the word out in future publications by contacting the Office of Waste Reduction at (919) 571-4100 (FAX: (919) 571-4135).
Coding Note: Because of the unreadability of the chart provided in the text document, this chart would best be viewed in the source document.
The Office of Waste Reduction's Pollution Prevention Program provides a variety of assistance to North Carolina businesses and industries in multimedia waste reduction. This technical assistance includes on- and off-site technical assistance, an information clearinghouse, education and training outreach, and Challenge Grants. The following list provides PPP staff contacts for specific concerns in industry- and media-specific categories.
Coding Note: Because of the unreadability of the list provided in the text document, this list would best be viewed in the source document.
Waste Reduction News ...
Pollution Prevention Strategies in DEM's Air Quality Section
The Air Quality Section of the Division of Environmental Management (DEM) has established a "Pollution Prevention Tack Force" as a collaborative effort with the Office of Waste Reduction and the Small Business Ombudsman to integrate pollution prevention in all air programs as the preferred method of achieving compliance. Pollution prevention training is being conducted for all Air Quality Section staff. The training focuses on providing air quality inspectors with the necessary resources to incorporate pollution prevention into inspections. The Pollution Prevention Task Force will target the metal cleaning industry as a pilot to promote pollution prevention in regulatory compliance.
Waste Reduction Assistance Targets Hospital Wastes
Federal and State regulations concerning operating requirements for hospital incinerators have changed and may require the modification or closure of on-site hospital incinerators. Waste reduction techniques such as source reduction, recycling, and reuse will help reduce the amount of medical waste requiring disposal.
The Office of Waste Reduction (OWR) and the Division of Solid Waste Management are working to assist hospitals with waste reduction opportunities. Waste reduction efforts will be coordinated with a newly formed Medical Waste Reduction Council of the North Carolina Recycling Association (NCRA) and the North Carolina Hospital Association. For more information on hospital waste reduction assistance, contact Susan Clarke of OWR at (919) 571-4100.
1994/1995 Pollution Prevention Challenge Grant Awards
Six North Carolina businesses have been awarded Pollution Prevention Challenge Grants for the 1994-1995 grant year. The companies submitted proposals to conduct innovative source reduction or recycling pollution prevention projects that can easily be applied to other industries. The next request for proposals will be made in May 1994. Call the Office of Waste Reduction for more information on these projects or upcoming grants.
| Company | County | Purpose | Challenge Grant Amount |
|---|---|---|---|
| McKay's Dry Cleaners | Wake | Demonstrate multi-process garment cleaning, a combination of wet and dry cleaning. The project will assess the applicability of multi-process cleaning to various fabrics. | $15,000 |
| Sara Lee Knit Products | Forsyth | Demonstrate reusing spent brine solutions from dyeing process. Reuse of spent dyebaths will help eliminate the need for expensive color and salt removal equipment. | $9,422 |
| Sno White Cleaners | Guilford | Install condensation system to recover petroleum solvents currently vented to the atmosphere. As the recovered solvents would be distilled and reused, virgin solvent purchases will be reduced. | $10,000 |
| Nomaco, Inc. | Wake | Construct a facility to grind, melt, redensify, and repelletize plastic foam scrap generated from production operations. The recovered plastic will be returned to the manufacturing process or sold to other users. This reuse would reduce solid waste by 80 percent. | $15,000 |
| ChemEnco, Inc. | Mecklenburg | Demonstrate production of sulfuric acid using spent wastewater from the wastewater from the textile dye industry as a feedstock. This wastewater contains large quantities of dilute sulfuric acid which can be potentially be reclaimed and marketed. | $15,000 |
| Spectrum Recycling, Corp. | Mecklenburg | Expand a pelletizing line for recycling nylon and polyester scrap from the textile industry. This project will convert 8 million pounds of scrap fiber into usable product. | $15,000 |
Mark Your Calendar
| Event | Location | Date(s) | Contact/Information |
|---|---|---|---|
| EPA Pollution Prevention/Waste Minimization Conference for
Hazardous Waste Generators Sponsored by EPA Region IV |
Westin Peachtree Plaza Atlanta, GA |
December 13-15 | Magaret Mearef (800) 575-7131 |
| Compution in Environmental Management Sponsored by A&WMA and EPA Exhibition admission is $15 See computer application at the Office of Waste Reduction booth. |
North Raleigh Hilton Raleigh, NC |
November 30-December 2 | Registration: (412) 232-244; Information on Product Exhibits: |
| Low- and No-VOC Coating Technologies: 2nd Biannual International Conference | Omni Hotel Durham |
March 13-15, 1995 | Ella Darden, RTI (919) 541-7026 |
| NCRA Fifth Annual Conference | Greensboro | April 3-5, 1995 | Bobbi Tousey (919) 851-8444 |
About the North Carolina Office of Waste Reduction
Mission Statement:
The Office of Waste Reduction is the agency responsible for carrying out the State's program of pollution prevention. The goal of the program is to promote the elimination, reduction, or recycling or waste prior to treatment or disposal. This effort addresses air and water quality, solid and hazardous wastes, and toxic chemicals. The goals are accomplished by providing non-regulatory technical assistance, training, policy support, and fiscal support to industries, local governments, and state agencies. The Office has two programs:
- the Pollution Prevention Program, which addresses multimedia industrial waste, and
- the Solid Waste Reduction Program, which addresses reduction and recycling of municipal solid waste.
Notice
Deadline for Proposals for the North Carolina Recycling and Reuse Business Assistance Center (RBAC) Feedstock Conversion Project has been extended!
New Proposal Deadline is January 13, 1995. Deadline for Capacity Expansion Project proposals remains at January 13, 1995.
For more information and/or the RFP, contact RBAC at (919) 571-4100.