Market growth and its drivers

The Australian market for environmental goods and services (EGS) was estimated at A$22 billion (US$18 billion) in 2006 with an annual growth rate of 7 per cent. Exports of goods (excluding services) are around A$2 billion (US$1.7 billion) per year and at least a third of EGS consumed in Australia is imported.

In 2001, the Australian government launched the Environment Industry Action Agenda that aimed to encourage annual sales in excess of A$40 billion (US$33 billion) by 2011. The Agenda set out to remove numerous perceived barriers impeding the industry. These included a lack of understanding of the industry itself and poor data collection; a lack of understanding of the value of the environment and the potential opportunities of environmental protection rather than just the costs; and poor communication between industry, its clients and its suppliers. The Action Agenda was re-evaluated by the Australian Government in 2006, concluding that the remaining actions are now the responsibility of industry and state governments.

The estimated distribution of expenditure in the Australian environmental industry in 2000 is presented in the table below. The largest segments were water and wastewater management (A$6.6 billion or US$5.4 billion) and solid waste management (A$3.3 billion or US$2.7 billion).

Australian national government environmental expenditure rose from A$1.7 billion (US$1.4 billion) in 2001-02 to A$3.2 billion (US$2.6 billion) in 2005-06. The largest contributors to this were the Department of the Environment and Heritage (DEH) and the Department of Agriculture Fisheries and Forestry (DAFF).

Expenditure was primarily targeted on addressing the issues of salinity, water use, recycling, energy use, and natural resource management. The Australian Bureau of Statistics (ABS 2004a) noted that local government environmental protection expenditure was just over A$2.6 billion (US$2.1 billion) in 2002-03, whilst natural resource management expenditure was A$1.9 billion (US$1.6 billion).

Drivers

Australia is in a similar position to many advanced economies, whereby demand for environmental goods and services has been largely driven by regulation and stricter environmental standards.

Growing consumer and community pressures reflect new environmental awareness in Australia and have strengthened demands for coastal and urban pollution reduction. This also coincides with changing business attitudes towards environmental compliance and competitiveness.

International agreements such as the Kyoto Protocol and the UNFCCC have spurred the improvement of Australia’s air pollution monitoring systems in addition to providing further motivation to reduce GHG emissions. Australia’s National Pollution Inventory received A$5.2 million (US$4.3 million) of government funding to upgrade and continue its operation. Localized initiatives are also being taken such as the A$1 million (US$0.8 million) pledged to improve the air quality in the Tamar Valley region of Tasmania.

Australia’s growing population is highly concentrated in a relatively small number of urban areas. As a result, large pressures have been placed on key infrastructure such as water and waste. The recent drought in Australia, combined with old and overworked sewage systems, has put water and wastewater management high up the agenda. Ensuring a safe and constant supply of water is driving demand for water recycling, technologies to detect and repair leaks, and filtration/cleansing equipment.

In addition to this, Australia’s growing solid waste production and very high landfill proportions are also driving demand for improved waste management and waste recovery schemes.

Australia has an established and sophisticated research and development network, led by the Commonwealth Scientific and Industrial Research Organization (CSIRO). CSIRO is a government research body that employs approximately 8,000 workers. It often works with industry in developing and commercializing technologies, in addition to a number of government environmental action plans and public-private centers of excellence seeking solutions to specific problems.

Market segments

The segments with significant current and prospective activity are solid waste management (including hazardous waste), water and wastewater treatment, and air pollution prevention and measurement.

Opportunities 

Solid waste management
In 2003, 1,100 private and public businesses provided waste management services in Australia. These businesses employed 14,000 workers and generated income of A$2.7 billion (US$2.2 billion). The industry grew at an average rate of 11 per cent between 1997 and 2003 and its value added was A$1.3 billion (US$1.1 billion) (2003), contributing the equivalent of 0.2 per cent of Australia’s GDP. Employment also increased from 9,000 in 1997 to 14,000 in 2003. Businesses providing waste management services were predominantly small employers, with 74 per cent of them having one-four employees (Australian Bureau of Statistics, 2004b).

The collection and transport of waste accounted for 59 per cent of the total income and treatment/processing and disposal of waste accounted for 20 per cent of income. While recycling only generated 8 per cent of income, it saw the largest growth, averaging 21 per cent a year over this period.

Around 18 million tonnes (Mt) of solid waste was generated in 2003, almost all of which (96 per cent) was sent to landfill. Only a small amount of the landfill methane is being recovered despite the good opportunities that exist. Nevertheless, a A$60 million (US$49 million) bio-reactor that can handle 400,000 tonnes of municipal waste annually and with a 20 MW electric capacity (enough to power 20,000 homes) recently opened. Statistics showing the current volume of solid waste generation have not yet been published.

Although landfill capacity is not an issue for Australia, the detrimental environmental effects of such a large amount of landfill waste are spurring the development of waste-to-energy processes and more widespread systems for recycling. Using recovered methane from landfill sites to produce energy is a growing industry. The Urban Resource - Reduction, Recovery and Recycling (UR-3R) Process is a public private partnership between an Australian company, Global Renewables, and two Sydney Municipal governments. It is a highly successful waste recycling model - annually saving 210,000 tCO2 and generating A$13 million (US$11 million). Using a unique biological digestion and composting process, the company is turning methane to energy without incineration, and creating 30,000 tonnes of certified organic fertilizer for farmlands.

Hazardous waste
In 2003, hazardous waste accounted for about 8 per cent of the total income generated from solid waste. The collection and transportation of hazardous waste accounts for A$109 million (US$89 million) while its treatment, processing, and disposal contributes A$41 million (US$34 million) to total income. Statistics showing the current volume of hazardous waste generation have not yet been published. However, it is believed that in both Victoria and New South Wales the quantity of hazardous waste generation has been increasing in recent years. In 2002, South Australia collected and disposed of approximately 115,000 tonnes of hazardous waste, a 60 per cent increase in volume against 2000 levels (Australian Bureau of Statistics, 2004b).

Most hazardous waste is still being sent to landfill after treatment. However, these facilities are to be gradually phased out and replaced with long term containment facilities. Currently, the state of Victoria is developing minimum requirements for such facilities. Licensing provisions, controlled by the state-based environmental protection agencies, apply to waste transporters, generators, storers, transferers, separators, processors, reprocessors, treaters, incinerators, mobile waste processors, landfill sites and other waste disposal facilities.

Water and wastewater treatment
Total spending on the water and wastewater treatment sector is estimated at approximately A$4 billion (US$3.3 billion) per year. Current projections suggest this may grow by 5 per cent annually over the next few years. About 70 per cent of this spending relates to water collection and distribution and sewage collection and disposal. The remaining 30 per cent is concerned with product quality and treatment.

Approximately 10 per cent of total spending is translated into the direct purchase of capital and equipment. The demand for water and wastewater treatment equipment is therefore valued at A$400 million (US$330 million) (United States Commercial Services, 2007).

The biggest impact on the water and wastewater sector has come from a severe drought that began in 2002. Economists cite the persistent drought as shaving almost 1 per cent off GDP growth. The drought has affected the farming industry and regional centres and driven numerous farmers across Australia into financial difficulties. Major cities have also been faced with serious concerns over uncertain water supplies.

Governments - at the national, state and local levels - are grappling with policies and strategies aimed at securing Australia’s future water supply.

The National Urban Water and Desalination Plan has funding of A$1 billion (US$0.8 billion) over six years. The plan aims to provide private sector firms, water utilities, and state and territory governments with the opportunity to apply for funds in the form of grants and refundable tax credits. A further A$254.8 million (US$208.9 million) has also been assigned to the National Water Security Plan for Cities and Towns. This is to support governments and local water authorities to minimize water loss, invest in more efficient water infrastructure, refurbish older pipes and water systems, and fund practical projects to save water.

The potential use of recycled water is gaining serious consideration. At present, almost all of Australia’s key industry sectors source water from the same catchment areas used to supply households. Small projects designed to supply water to industries are already in operation or being developed while some major projects are now being considered. As the value of water increases, industries that are major users of water will find it more feasible to treat their own wastewater internally for re-use. There is an opportunity for cost-effective wastewater treatment systems.

The sewerage systems in most of Australia’s major cities are old and in many cases overloaded. There are problems with water leakage and pipeline failure. Trenchless technology for pipeline replacement and non-destructive technology designed to detect and anticipate leakages and failures is becoming more important.

Demand for smart metering technology could expand through the development of third pipe reticulation, designed to allow for the use of recycled water. For the most part, water pricing in Australia has been based on simply covering the costs of production. As more intricate pricing structures begin to develop, it may be important to implement meters that allow for remote measurement as well as peak/off-peak measurement.

Best prospects also exist for: biofiltration systems, presses for conversion of water or sludge waste, new oxidation systems for the removal of chemicals from industrial wastewater, filtration equipment for industrial waste applications, and flow meters for wastewater measurement.

Excerpts from: Market opportunities in environmental goods and services, renewable energy, carbon finance and CATs - Country report: Australia October 2008, UK Trade and Investment Office