‍Public Private Partnership on Urban Solid Waste Management – Sustainability in Transhipment, Treatment and Final Disposal of Solid Waste in the Belo Horizonte Metropolitan Region‍

Background Information

Solid waste management has always been an issue to cities all around the globe. The Belo Horizonte Metropolitan Region (BHMR) is composed of 48 municipalities, integrating the 34 central cities and other 14 that integrate the collar area. Altogether the BHMR has over five million inhabitants, in one of the most economically dynamic regions in Brazil, generating over 7,000 tons of solid waste every day, almost half of which is disposed in dumpsites. The majority of the cities which compose this area still dispose its waste irregularly, which results in significant problems in terms of public health and environment and affects population’s quality of life. Noticed that, the BHMR started to build a program that could improve this reality by creating the concept and ideal of the Public-Private Partnership (PPP) – Treatment, Transshipment and Final Disposal of Municipal Solid Waste. Taking into account a sustainable development approach, the PPP main goals are not restricted to the sustainable treatment and final disposal of the waste, but also involve a change of paradigm in terms of regional policies focused on solid waste management, reducing costs for the public sector and creating channels of democratic participation of the actors interested. Furthermore, what makes the initiative even more innovative is its social character, involving low income waste pickers cooperatives in the process, avoiding negative effects by the waste management industry. The initiative was initially funded by the British Embassy with a £700,000 contribution, destined to the conception phase of the program. The implementation of the program will be viable via PPP, demanding an investment of around R$3 billion. BHMR also counts with other important partners, such as the State’s Environment Secretary thru the State’s Environment Foundation, Public Ministry of the Minas Gerais State, Sanitation Company of the State, Energy Company of the State and finally the Development State’s Secretary, which all gave a huge contribution in structuring the institutional arrangement involved.

Innovation for the Initiative

As 65 percent of the 48 municipalities that compose the BHMR do not treat and dispose the waste in an environmentally friendly manner yet, the Minas Gerais State Government took the innovative initiative of bringing these actors together and designing a Public Private Partnership Project for the transshipment, treatment and final disposal of all solid waste produced within this region. It is a revolutionary way of solving the problem, be it for the institutional arrangements that were created, or for the fact that Belo Horizonte is becoming the first metropolitan region in the whole Latin America to have 100 percent of its solid waste treated and properly disposed, including resources recovery specifications that will provide energy generation from waste. Initial assessments made throughout the 48 municipalities indicated that only 46 could join the project, as two of them already had long term contracts for properly disposing the solid waste.

Innovation has been applied in all project phases, congregating practices from around the globe and applying them together at the same place and time. In order to provide attractiveness to the PPP Project, the state of Minas Gerais is contracting the private sector through a bidding process, instead of formalizing one contract for each municipality. The state government receives the responsibility for the solid waste treatment, and guarantees the demand for the private sector. Moreover, transactional costs are diminished, as the private partner will deal with only one contractor, instead of dealing with 46.

The private partner will be responsible for providing the proper funds for initial investments, and it will receive a monthly payment from the state according to the amount of solid waste treated and disposed. There are incentives to use new technologies other than landfills, and payments can get higher as the percentage of waste disposed in landfills decreases.

There has been notice of concessions regarding solid waste management, but not through a PPP Project that integrated different municipalities from a metropolitan area, benefiting not only citizens and the environment, but also increasing municipal capabilities, as they will focus on the implementation of waste collection practices.

Outcomes and Assessments

Outcomes achieved are as follows:

The main outcome to be reached with the implementation of this project is related to environmental issues. The BHMR, where more than five million people inhabit, will have 100 percent of its solid waste treated and correctly disposed according to international standards in an environmentally friendly manner and with resources recovery for power generation. This outcome means that our soil will no longer be contaminated from the waste we generate, and that the population who live close to the existing dumps will not be exposed to potential diseases that harm public health.

This project creates the scale demanded for the implementation of new technologies, which would not be possible if each municipality worked by themselves. Efficiency is increased when the amount of waste treated also increase, providing gains of scale and reducing the price paid for ton of waste. Records show that some cities pay over R$ 200,00 for each ton of waste nowadays, and within this project the tariff paid for each ton cannot be more than R$ 90,00, as established in the terms of reference and bidding documents.

Assessments are as follows:

A set of metrics will be established to measure the private partner performance. These metrics will be measured by the state and also by a consultancy as the independent verifier. These metrics include environmental standards, CO2 emissions, time taken to transship, and percentage of waste taken to landfill. Municipalities will be responsible to work alongside with local communities in implementing environmental policies related to selective collection of waste, providing incentives and training, reducing the amount of waste sent to transfer stations and increasing the volume recycled. Moreover, municipalities have the incentive to promote recycling as they will pay a fee according to the amount of waste delivered to the private partner. If they increase the amount of recycled materials, they will consequently reduce the waste delivered and will pay a smaller fee.

In conclusion, the project will elevate the BHMR to international standards in relation to solid waste management. It can be an example to be followed not only in Brazil, but also in other parts of the world.

Benefits to Other Cities

As it has already been seen, the PPP initiative from the BHMR brings many benefits and profits to the region. The solid waste program is seen as a huge step to the sustainable development, giving the waste the right destination, and treating it the right way, without damaging other parts.

The most important point, which was the target of several accolades, is the institutional arrangement of the project, that include many other specifies. This arrangement does not let the responsibility of the solid urban waste to the municipal government, but it brings together different spheres of government, including 46 municipalities, state government and private companies working together with the same objective. Another point that also fits into the institutional arrangement is the formatting of the PPP, via consortium of municipalities, which gains wide demand, reducing the costs significantly. Another factor, which is the most cost reducer in the short term, is the PPP arrangement. Within this partnership, the private partner is responsible for the initial investment, estimated in R$ 750 million in the first five years of contract. This investment could not be made thru public funds as public finances have shown over the last years.

More than disposing the waste properly, the project also forces the use of new technologies that must provide resources recovery and power generation. The definition of this technology will be a decision to be taken by the private partner, as the state thinks that the market should better define the most efficient technology available. Technicians from the state government have gone to other countries to visit solid waste treatment facilities, acquiring the necessary knowledge to specify the use of these technologies.

The recyclable waste generated in the municipalities must be destined to waste pickers’ cooperatives, promoting income generation to people who depend financially from the waste and social inclusion to these parts of the society.

This initiative could easily be applied in many other cities, especially in countries that face an economic and demographic unorganized growth. This can be explained by the fact that the speed of the expected growth is not the same as the development process. By this reason the PPP could be the best alternative to overcome the solid waste treatment challenge. For that reason BHMR is very pleased and is also looking forward to help other parts to provide a better life quality for its citizens.