President of Russia Vladimir Putin: Mr Butsayev,
The company was established in 2019. It has a seemingly prosaic mission: to organise the disposal of solid municipal waste. But we all know very well that this is one of our most painful problems, which concerns the quality of life of millions of our people. It is both a social and an economic matter. We have created a system of measures to support all operators in this sphere.
You head a company that is the main operator. Let us talk about its activity, achievements and tasks for the immediate future.
General Director of the Russian Environmental Operator Denis Butsayev: Mr President, thank you very much.
I would like to say that we are a young company, that has been in operation for just three and a half years. It was established by your Executive Order to support the reform the solid municipal waste management system.
The goals of our company coincide with the goals of the reform. First of all, we must improve the quality of our services to the people, reduce the negative human impact of waste on the environment by reducing the volume of landfilling. This is the essence and mission of the company.
To this end, we needed to implement a series of system-wide reforms in the sector, which would allow us to develop consistently for years to come. The priority is to create a new infrastructure, which will enable us to attain the figures set for us in your 2021 Executive Order. In other words, by 2030, we must process all solid waste by sorting it and learn to recycle half of that volume, thereby halving the volume of landfilling from the current figure.
Vladimir Putin: How much waste did we have last year?
Denis Butsayev: Last year, we had about 52 million tonnes. This is an interesting figure if we look at the start of the reform. Speaking about the problems of this sector, which, as you rightly noted are still outstanding and about which I’d like to report to you today, in 2019 we could not even count how much waste we had.
Some said it was 80 million tonnes and others said 100 million tonnes. In 2019, the reference point was provided by reports. This was a fairly casuistic system that did not allow us to monitor precisely and in real time the amount of waste and the sites where it had accumulated because we received statistics only a year after the reporting date.
Vladimir Putin: In this case, it is difficult to determine what is required for its disposal.
Denis Butsayev: Absolutely. Besides, at that time we did not yet understand how much waste we had and where exactly it had accumulated. We required this information to create relevant infrastructure in those areas.
Now we understand all of that. All regions of the Russian Federation have adopted territorial waste management schemes, or so-called waste maps. A map shows the amount of waste, the location of a landfill and, most important, both the existing and potential dumps.
I would like to make a presentation with your permission. As I have already said, in line with your Executive Order No. 474, we are striving for 100 percent processing and a reduction in waste burial. The goal of the reform and the tasks of the campaign are to create infrastructure and professional players in the market. We have regional operators in all regions of the Russian Federation. The drafting of regulations includes the creation of territorial schemes and the federal scheme, which is our direct responsibility.
Naturally, it is a large sector, and I will tell you honestly, it is a complex and not always transparent sector. Managing it is impossible without the digital transformation. We create, among other things, in accordance with your Executive Order, a system that would monitor and, most importantly, allow for making proper managerial decisions at various levels, from the municipalities to the federal level, and also provide our citizens with the opportunity to exercise public control over the system.
Vladimir Putin: Yes, of course. To make it transparent and public.
The digitalisation of which hazardous waste are we talking about?
Denis Butsayev: I am talking about municipal solid waste; it is the third, fourth and fifth hazard classes.
As for the first and second classes, they are under the control of the Federal Environmental Operator, a separate company that was created with the support of Rosatom. It is in charge of overseeing the first and second class waste because there are different requirements regarding its processing and elimination.
You have repeatedly said that awareness raising is what must accompany the reform because the change in behavioural patterns also affects the system a great deal.
(Denis Butsayev provided concrete figures related to waste management and spoke about the creation of relevant infrastructure across Russia.)
Alongside with the work to create the infrastructure, there has been a task to build a system of producing equipment for our sector. In 2019, we started with 20–25 percent of our own equipment; the rest was imported. But the situation has changed radically and now we manufacture over 80 percent of processing equipment locally, and the technology is not imported either.
Vladimir Putin: It is domestically produced.
Denis Butsayev: That is correct. And it turned out that many of these technologies have good export potential. Many of our companies enjoy great demand aboard, both in the former Soviet republics and beyond the CIS.
Mr President, if I may, I would like to turn immediately to the measures of support that have been created in the industry, Here I have mentioned only some of them.
At present, we have several support measures. They mostly affect the economy of the process, that is, they allow investors to receive less expensive financial resources. Government Resolution No. 1727 provides for subsidies up to one third of the level of investment. We have already funded six projects on this basis and are conducting additional work on another four.
We have a new instrument of financial support for the industry – the so-called green bonds. Mr President, I would like to talk about them in more detail. With the Government’s support, we have gained a truly unique instrument that allows us to attract cheap funds. To be more precise, we attract funds from the market and make them cheap. Importantly interest rate subsidies are paid from the federal budget. This allows us to create unique budget leverage, where we attract practically 10 rubles from the market for every budget ruble.
Naturally, substantial funds are needed to fulfil such a large-scale infrastructure task as the creation of a unified waste processing and disposal system. Overall, we estimate that the level of investment should be around 500 billion rubles. To allow us to make better use of such funds with the support of budget co-financing, it was proposed that we place bonds of the Russian Environmental Operator Public Law Company on the market. There is fairly high demand for such investment instruments among our financial institutions. For its part, the budget will subsidise 90 percent of the key interest rate.
Vladimir Putin: How much did you put on the market?
Denis Butsayev: We have registered the issue of bonds for the first 100 billion. Frankly, the demand from financial institutions is very high. According to tentative estimates, it exceeds the funds we need many times over. With the 90-percent subsidy for the key interest rate, we will get an interest rate that is between 4.5 to 5.5 percent of the effective rate for the borrower. Probably, these are the cheapest funds ever received by an industry, if we make a comparison with other industries that were faced with the same tasks.
Vladimir Putin: So, this is going to be a good tool. Maybe it is worth replicating it in other industries.
Denis Butsayev: Absolutely.
I was just going to say that we have received the highest, I would say, an unprecedented number of applications for it from the regions. Naturally, we are mainly working with the regions and their investors.
Mr President, if I may, I’d like to turn right away to the projects for which we received applications this year from the regions of the Russian Federation. Overall, they were sent by 31 regions (29 are already in tenders in terms of documents) to the tune of 166 billion rubles worth of investment but this included the funds co-invested by private businesses. There are 65 projects.
In this way, we will build facilities to process 12 million tonnes of waste, dispose of 4.9 million tonnes and put 6.4 million tonnes in landfills.
If we look at the map, we will see that our goal is to process 28 million tonnes of waste, dispose of 10 million tonnes and put 12 million tonnes in landfills.
Vladimir Putin: Could you please tell me if there is anything that needs to be done in terms of regulatory support in addition to what has already been done?
Denis Butsayev: Mr President, yes, there is such a need and I have been meaning to ask for your support in this regard.
If we look at the results of 2021, we will see that the processing, that is, sorting significantly exceeds the disposal as relates to construction. It is associated with the fact that the source of the return on investment in processing is the tariff we charge households, which pay it diligently. At the moment, the service covers 94 percent with the collection rate of 90 percent. It is 200 billion rubles collected by 181 regional operators.
In waste disposal, the source of the return on investment is the so-called extended producer responsibility, that is, payments that the manufacturer of products subject for disposal has to…
Vladimir Putin: These are mostly industrial facilities.
Denis Butsayev: Mostly industrial facilities, and as relates to municipal solid waste, it is mostly packaging.
The producer has to do it in the form of the environmental fee or by having direct agreements with the disposing company. It is a very good system but is very difficult to enforce through laws.
The Federal Service for Supervision of Natural Resources is currently engaged in its administration. We collect 200 billion rubles from households and only 5 billion rubles in environmental fees. Unfortunately, it directly affects the possibility of recovering the cost of expensive waste disposal facilities.
In 2020, under the leadership of Deputy Prime Minister Viktoria Abramchenko, amendments were developed for the extended producer responsibility that will significantly improve the efficiency of this instrument.
We have suggested that the market abandons certain elements that allow unscrupulous parties to dodge responsibility. It is related, first of all, to the so-called fake disposal acts. That is, there are enterprises that, having a capacity for 50,000 tonnes, process 200 and 300 tonnes, and issue documents that allow them to stop paying in the future.
Vladimir Putin: As if everything has been disposed of.
Denis Butsayev: Exactly.
All of this, naturally, finds itself at our landfills.
To that end, draft amendments to the federal law that will prevent such violations and make the system more understandable, transparent, and, most importantly, efficient for market participants as well have been developed. I will explain why. The environmental fee is not a tax; it is not collected to be distributed for other purposes. It can only be used to pay those market participants who are engaged in waste disposal professionally, for the recovery of capital outlay and the recovery of operating expenses.
This system has proved itself as the best both in the world and in the areas we are currently dealing with.
I would like to ask you to support the amendments to the extended producer responsibility by issuing relevant instructions to the Government.
Vladimir Putin: All right, let’s see.