Armenia SWM Sector Assessment and Reform Plan Gyumri Municipal Waste Management Analysis Report May 2024 Armenia SWM Sector Assessment and Reform Plan Local Level Analysis Report © 2024 The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved. This activity was funded by the City Climate Finance Gap Fund, a Multi-Donor Trust Fund with support from the Governments of Germany and Luxembourg. This work is a product of The World Bank. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. 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Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Attribution—Please cite the work as follows: “World Bank. 2024. Armenia SWM Sector Assessment and Reform Plan. © World Bank.” Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. Cover photo: Authors. Further permission required for reuse. 2 Armenia SWM Sector Assessment and Reform Plan Local Level Analysis Report Content 1. EXECUTIVE SUMMARY .................................................................................................................................. 5 2. INTRODUCTION ............................................................................................................................................ 9 3. CITY OF GYUMRI ........................................................................................................................................... 9 3.1 CITY PROFILE .......................................................................................................................................................... 9 3.1.1 Population ...................................................................................................................................................... 9 3.1.2 Socio-economic profile ................................................................................................................................... 9 3.2 POLICY AND INSTITUTIONAL FRAMEWORK ................................................................................................................. 11 3.2.1 Policy framework .......................................................................................................................................... 11 3.2.2 Institutional set-up ....................................................................................................................................... 12 3.2.3 Relevant initiatives ....................................................................................................................................... 13 3.3 DEMAND ANALYSIS ................................................................................................................................................ 13 3.3.1 Current municipal waste generation ............................................................................................................ 13 3.3.2 Waste forecast.............................................................................................................................................. 14 3.3.3 Waste composition ....................................................................................................................................... 15 3.4 CURRENT WASTE MANAGEMENT OPERATIONS ............................................................................................................ 16 3.4.1 Waste collection ........................................................................................................................................... 16 3.4.2 Source separation and recycling .................................................................................................................. 17 3.4.3 Waste disposal.............................................................................................................................................. 18 3.5 CURRENT COSTS AND FINANCING ............................................................................................................................. 19 3.5.1 Current financing of waste management activities ..................................................................................... 19 3.5.2 Tariff structure for households and commercial sector ................................................................................ 20 3.5.3 Billing and revenue collection systems and rates ......................................................................................... 21 3.5.4 Cost recovery and cross-subsidization .......................................................................................................... 21 3.5.5 Affordability of tariffs ................................................................................................................................... 22 3.5.6 Potential for private sector involvement ...................................................................................................... 23 4. IMPROVED WASTE OPERATIONS AND COST IMPLICATIONS............................................................................24 4.1 IMPROVED WASTE OPERATIONS ............................................................................................................................... 24 4.1.1 Scenario 1. Improved waste collection ......................................................................................................... 24 4.1.2 Scenario 2. Improved waste collection and disposal .................................................................................... 25 4.1.3 Scenario 3. Source separation of dry recyclables ......................................................................................... 26 4.1.4 Scenario 4. Waste recovery system .............................................................................................................. 27 4.2 COST IMPLICATIONS ............................................................................................................................................... 28 5. GREENHOUSE GAS EMISSIONS EFFECTS ........................................................................................................30 6. CONCLUSIONS AND RECOMMENDATIONS ....................................................................................................31 List of Tables TABLE 1. SCENARIOS FOR IMPROVED WASTE MANAGEMENT .............................................................................................................. 6 TABLE 2. COST COMPARISON OF DIFFERENT SCENARIOS, IN USD/TON, NET OF VAT ............................................................................... 7 TABLE 3. FORECAST OF GYUMRI WASTE SERVICE AFFORDABILITY......................................................................................................... 8 TABLE 4. POPULATION OF GYUMRI, 2011-2023 ............................................................................................................................ 9 TABLE 5. GOALS AND MEASURES IN THE SWMDP, 2023-2027 ...................................................................................................... 11 TABLE 6. INVESTMENT COMPONENT OF THE ANNUAL PLANS ........................................................................................................... 12 TABLE 7. ESTIMATED VOLUME OF MSW, 2023 ............................................................................................................................ 14 TABLE 8. POPULATION FORECAST FOR GYUMRI, 2024-2043 .......................................................................................................... 14 TABLE 9. WASTE FORECAST FOR THE CITY OF GYUMRI, TONS ........................................................................................................... 15 TABLE 10. RESULTS OF WASTE COMPOSITION SURVEY IN GYUMRI, 2014 ........................................................................................... 15 3 Armenia SWM Sector Assessment and Reform Plan Local Level Analysis Report TABLE 11. WASTE COMPOSITION RESULTS, 2019.......................................................................................................................... 16 TABLE 12. WASTE COLLECTION EQUIPMENT, GYUMRI .................................................................................................................... 17 TABLE 13. SUMMARY OF WASTE SERVICE OPERATING COSTS, INCLUDING CLEANING, MILLION AMD ........................................................ 19 TABLE 14. COMMUNAL INVESTMENT IN WASTE EQUIPMENT, 2021-2023......................................................................................... 20 TABLE 15. 2024 WASTE FEES FOR HOUSEHOLDS AND LEGAL ENTITIES ................................................................................................ 20 TABLE 16. AVERAGE MONTHLY PER CAPITA INCOME AND EXPENDITURES , 2011 AND 2022 ................................................................... 22 TABLE 17. FORECAST GYUMRI WASTE SERVICE AFFORDABILITY. ........................................................................................................ 23 TABLE 18. SCENARIOS FOR IMPROVED WASTE MANAGEMENT .......................................................................................................... 24 TABLE 19. MAIN PARAMETERS OF SCENARIO 1 ............................................................................................................................. 24 TABLE 20. MAIN PARAMETERS OF SCENARIO 2, WASTE DISPOSAL ..................................................................................................... 25 TABLE 21. MAIN PARAMETERS OF THE SOURCE SEPARATION AND SORTING SYSTEM .............................................................................. 26 TABLE 22. MAIN PARAMETERS OF THE WASTE DISPOSAL SYSTEM, SCENARIO 4 .................................................................................... 27 TABLE 23. MAIN PARAMETERS OF MBT OPERATION ...................................................................................................................... 28 TABLE 24. COST COMPARISON OF DIFFERENT SCENARIOS, IN USD .................................................................................................... 29 TABLE 25: SUMMARY OF GHG IMPACTS BY SCENARIO.................................................................................................................... 30 List of Figures FIGURE 1. BILLING AND REVENUE COLLECTION, 2021-2023, THOUSAND AMD ................................................................................... 6 FIGURE 2. ADMINISTRATIVE AND CAPITAL BUDGET PLANNED EXPENDITURES , 2023, MILLION AMD ........................................................ 10 FIGURE 3. SOURCES OF REVENUE TO THE COMMUNAL BUDGET, 2023 PLAN, MILLION AMD ................................................................. 11 FIGURE 4. ORGANOGRAM OF GYUMRI COMMUNITY...................................................................................................................... 13 FIGURE 5. CONTAINERS CURRENTLY IN USE IN GYUMRI ................................................................................................................... 17 FIGURE 6. TRUCKS CURRENTLY IN USE IN GYUMRI .......................................................................................................................... 17 FIGURE 7.CONTAINER FOR PLASTIC WASTE.................................................................................................................................... 18 FIGURE 8. GYUMRI DISPOSAL SITE .............................................................................................................................................. 18 FIGURE 9. STRUCTURE OF OPERATING COST, WASTE COLLECTION, 2021-2023 ................................................................................... 19 FIGURE 10. PLANNED COST RECOVERY FROM WASTE FEE................................................................................................................. 20 FIGURE 11. BILLING AND REVENUE COLLECTION, 2021-2023, THOUSAND AMD ............................................................................... 21 FIGURE 12. COST RECOVERY OF WASTE COLLECTION OPERATING COSTS .............................................................................................. 22 FIGURE 13: TOTAL EMISSIONS FORECAST BY SCENARIO ................................................................................................................... 30 List of abbreviations AUA American University in Armenia CII Waste commercial/institutional/non-process industrial sources EPR Extended Producer Responsibility EU European Union GDP Gross domestic product MBT Mechanical biological treatment MRF Material recovery facility MTPEF Medium-Term Public Expenditure Framework PPP Public private partnership RDF Refuse derived fuel RA Republic of Armenia SWM Solid Waste Management SWMDP Solid Waste Management Development Program of Gyumri for 2023-2027 4 Armenia SWM Sector Assessment and Reform Plan Local Level Analysis Report 1. Executive summary Waste generation and composition In 2024, quantities of municipal waste exceed 30,000 tons a year. Although it is expected that while the population will continue to decrease, the quantities of municipal waste are expected to remain fairly constant in the next 20 years. Organic waste is the predominant one – about 60%, while recyclables are estimated to be about 20% of the total waste. The remaining waste comprises of textile and inorganic fractions. Current waste operations Waste collection. The current waste management system in Gyumri is based on providing waste collection service to the entire population of the city. In terms of waste collection, the system is in transition. The city is trying to upgrade both the waste containers park and the waste collection fleet, switching to larger volume (1.1m3) containers and larger capacity rear-loading trucks. The positives of this upgrade and the improved efficiency have already been acknowledged by the communal operator. Waste disposal. The waste disposal, however, has not changed much since the 1950s, when the current site started to be used for waste disposal. As already described, the disposal site does not meet any engineering standards and is unsuitable from an environmental point of view. Having already consolidated the waste collection service, the next efforts of the city in improving the waste management system are expected to be directed towards an upgrade of the waste disposal. Source separation and recycling. The city of Gyumri participates in an EU-funded ‘Alliance for Better City Governance’ Project which aims at establishing a plastic recycling system in the city. The city is equipped with 240 blue containers (out of 300 donated) for source separation of plastics. The quantity of collected recyclable plastics are not known. The next phase of the project implementation envisages supply of recycling equipment for production of construction materials which will be used for improvement of public spaces. Costs and financing of costs Polluter pays. Polluter pays principle requires costs of pollution inflicted on the natural environment to be borne by those who cause it. The most obvious (and common) economic instrument used to apply polluter pays principle are waste fees charged upon waste producers, aimed at recovering the cost of building and operating the services and infrastructure required for collection, treatment and disposal of the waste they produce. Waste generators should pay not only for waste collection, but for sanitary disposal and landfill rehabilitation. In general, financial institutions provide grants for (part of) investment that cannot be recovered by revenue from affordable tariffs for the population. Current waste fees are inadequate and require service subsidization. Waste service costs grow even without change in the scope and quality of the service as salaries grow with economic growth and fuel prices rise. Communal provision of the service since 20181 and financing equipment purchases by communal subsidies and grant funding exhausted community’s options to retain service cost low. As a result, in 2023 even legal entities waste fees are not covering their own share of operating costs of a basic collection service and transport to the nearby dumpsite. All investment costs in waste service, cleaning, and disposal cost and 2/3 of 2023 waste collection operating costs, are covered by other revenues of the communal budget. 1 In case the community provides the service, VAT is not due on labour costs. 5 Armenia SWM Sector Assessment and Reform Plan Local Level Analysis Report Structure of collection cost and revenue from waste fees 420 450 369 400 350 113 277 Million AMD 300 100 250 75 176 188 167 200 150 269 307 94 88 89 100 202 50 79 86 95 0 Costs Revenue Costs Revenue Costs Revenue 2021 2022 2023 Residents Legal entities Figure 1. Billing and revenue collection, 2021-2023, thousand AMD Subsidizing waste service deprives the community from the opportunity to use its limited funds to develop and sustain other important communal infrastructures and services. Adequate budgeting for investment. Use of depreciated and inefficient equipment increase the operating costs. Replacement of existent depreciated equipment with more efficient vehicles and bins should become a component of the communal waste management plan. Depreciation costs of the waste collection equipment should be included in budgeting of service cost as a first step towards full cost recognition and sustainable waste service. Affordable and financially sustainable enhanced waste service . Widespread criterion for affordability threshold for waste services for upper-middle income economies as Armenia is 1% of the disposable income or 1% of actual expenditure, the latter being lower. Current tariff in Gyumri represents only 30% of the affordability level, defined as 1% of actual expenditures. Improved waste operations Four different scenarios of an improved waste management system are analyzed in Section 4 of the Report. Table 1. Scenarios for improved waste management Waste activity Scenario 1 Scenario 2 Scenario 3 Scenario 4 Waste collection Upgrade of the Upgrade of the Upgrade of the Upgrade of the existing waste existing waste existing waste existing waste collection system collection system collection system collection system Waste disposal Establishment of Establishment of Establishment of - sanitary landfill sanitary landfill sanitary landfill Source separation of Source separation of Source separation of recyclables - - dry recyclables in 3- dry recyclables in 3- container system container system Sorting of source Sorting of source Sorting of source separated - - separated separated recyclables recyclables recyclables Treatment of mixed Establishment of municipal waste mechanical biological treatment - - - (MBT) plant for treatment of mixed municipal waste 6 Armenia SWM Sector Assessment and Reform Plan Local Level Analysis Report It should be noted that the analysis constitutes a high-level prefeasibility type of assessment and is based on certain assumptions, related to both costs and potential revenue, which have to be verified with more in- depth analysis before investment decisions are taken. The table below shows the discounted total annual costs (in USD per ton of waste) for collection, source separation, sorting, treatment and disposal of the four options for system optimization. Grant financing of assets has not been considered. Table 2. Cost comparison of different scenarios, in USD/ton, net of VAT Components Option 1 basic Option 2 Option 3 Option 4 Waste collection 25.2 25.2 20.9 20.9 Separate waste collection 0.0 0.0 12.1 12.1 Sorting facilities 0.0 0.0 13.0 13.0 MBT 0.0 0.0 0.0 89.6 Landfills 0.0 25.4 24.1 10.3 Sub-total costs 25.2 50.6 70.1 145.9 Revenue from recycling 0.0 0.0 -11.8 -19.2 Net costs 25.2 50.6 58.3 126.8 Affordable service cost, USD/ton 60 60 60 60 Recovery rate, % 0.0% 0.0% 15.0% 75.9% The main conclusions from the analysis of the different scenarios for improvement of the waste operations are the following: • Scenario 1 clearly indicates that there is room for increases in the efficiency of waste collection and transport, by completing the process of reorganization of the system. There are significant efficiency gains from replacing the old containers with new 1.1 m3 ones and replacing the side-loading trucks with rear-loading ones. The upgrade is expected to lower the waste collection costs by 34%. In terms of waste charges, implementation of this scenario would mean establishment of waste fee of 188 AMD/person/month, net of VAT, if the polluter pays principle is observed. • Scenario 2 shows that an overhaul of the current disposal system can be sustained by the revenues from waste charges within the affordability threshold, and without being dependent on subsidy. The new landfill needs to be established in accordance with the highest international standards for environmental protection. The combined waste collection (after upgrade of the system) and waste disposal (new sanitary landfill) costs would be within the defined level of affordable service costs. In terms of waste charges, implementation of this scenario would mean establishment of waste fee of 378 AMD/person/month, net of VAT, if the polluter pays principle is observed. • Scenario 3 shows that introduction of source separation of all dry recyclables and a sorting system would not exceed the affordable service cost threshold. In the short-term, this alternative could be implemented only with certain subsidization, if the Community of Gyumri decides to implement this scenario. Packaging waste, which is a substantial part of the recyclable waste, is typically managed through the Extended Producer Responsibility (EPR) mechanism. At present, EPR legislation in Armenia is under development, which would regulate the management of specific waste streams, including packaging and packaging waste. Therefore, it would make sense for the community to wait for the EPR schemes to become operational, before investing further in scaling up the existing source separation of plastics. In terms of waste charges, implementation of this scenario would mean establishment of waste fee of 436 AMD/person/month, net of VAT, if the polluter pays principle is observed. Although affordable, this option would require an increase of waste management tariff above the legally established threshold of 400 AMD/person/month. This will necessitate either amendments in the national legal framework, or public subsidization of the waste services. If EPR system is in place, this option becomes cheaper than option 2. 7 Armenia SWM Sector Assessment and Reform Plan Local Level Analysis Report • Scenario 4 clearly indicates that at present, the affordability threshold does not allow for extensive treatment technologies to be deployed, due to high investment and operating costs. However, the apparent direction of the waste management sector in the country is towards regionalization of the waste services. All communities and settlements in Shirak Marz, including Gyumri, will benefit from such regionalization, due to economies of scale. From the financial point of view, the services could be provided at more affordable cost if sufficient scale is achieved. Therefore, at a certain point in time, a waste management system as outlined in Scenario 4, could be established for the entire Shirak Marz. In terms of waste charges, implementation of this scenario would mean establishment of waste fee of 947 AMD/person/month, net of VAT.if the polluter pays principle is observed. Like scenario 3, the overall waste management costs could be lowered if the source separation and sorting of municipal waste is implemented through EPR schemes and not financed by the community. Given all considerations described above, pursuing the implementation of Scenario 2 seems the most expedient option for Gyumri. In the short term, priority could be given to completing the optimization of the waste collection system, as outlined in section 4.1.1, by replacing all stationary 0.7 m3 containers with wheeled 1.1 m3 and side-loading trucks with rear-loading ones. Instead of the current 11 trucks in use (8 side- loading and 3 rear-loading), 5 to 6 rear-loading trucks will suffice. Parallel to this, Gyumri should cooperate with the Ministry of Territorial Administration and Infrastructure (MTAI) for the establishment of a fully engineered landfill. The establishment of a sanitary landfill, however, should be put in the context of regionalization of waste management services. Supported by EBRD, the MTAI is currently developing a concept which would outline the different waste management zones in the country, that would be served by a regional landfill. Therefore, the new landfill of Gyumri could be designed and constructed to serve as a regional landfill for the entire Shirak Marz. The implementation of Scenario 2 also offers significant climate co-benefits for Gyumri. The existing annual greenhouse gas (GHG) emissions from Gyumri’s solid waste sector are estimated to be around 34,000 tons of CO2 equivalent. Implementing Scenario 2 in Gyumri is estimated to reduce GHG emissions by almost 429,000 tons cumulatively over 15 years, with a marginal abatement cost of $36 per ton of CO2e. It is to be noted that regionalization of waste treatment and landfill disposal will decrease the indicative unit costs above due to economies of scale. Financial sustainability of continuously improving service requires full cost accounting , separately for each service component, waste collection, treatment and disposal as well as for cleaning. Waste fees are defined to cover the full-service cost, taking into consideration waste quantities to the extent possible and service provided. With annual growth of monetary income, due to inflation and real economic growth, service affordability also grows. Assuming 4.3% annual real income and expenditure growth the following affordability thresholds could be forecasted: Table 3. Forecast of Gyumri waste service affordability Forecast 2024 2030 Monthly affordability threshold, Gyumri, AMD, 1% of per capita expenditures 542 697 Targeted support to vulnerable groups as currently provided by the community is to be maintained. Continuous growth of waste fees could secure the funds required for enhanced waste service, without reliance on other communal revenue. The recommended scenario in Gyumri could be implemented through a set of actions that include: preparing and adopting a communal waste management plan, acquiring improved containers and trucks for more efficient waste collection, planning and investing in a new sanitary landfill that could serve the wider region, closing the existing dumpsite, and moving towards full cost accounting and cost recovery by improving the budgeting system and revising the waste fees. 8 Armenia SWM Sector Assessment and Reform Plan Local Level Analysis Report 2. Introduction The present report presents an analysis of the waste management system of Gyumri city. It investigates the quantities of municipal waste generated and makes a projection of what would be the demand in the next 20-year period of time. It also provides a description of the solid waste management (SWM) system in place in terms of operations, infrastructure and facilities in place, institutional arrangements, and currents costs incurred and financing of the waste management system. Besides, this Report tries to provide a critical overview of the communal waste management sector in the city of Gyumri and outline specific areas for improvement. Four different scenarios of an improved waste management system are analyzed in the report. The analysis points to potential efficiency gains that could be achieved and presents the cost implications of improved waste operations. The Report concludes with recommendations about the steps that could be undertaken by the city to improve the overall performance of the waste management system in the short- and medium-terms. The exchange rate used in the Report is AMD 406 = USD 1. 3. City of Gyumri 3.1 City profile 3.1.1 Population Gyumri is the administrative center of Shirak Marz and is the second largest city in the country after the capital city of Yerevan. The table below presents the population of Gyumri for the period 2011-2023. Table 4. Population of Gyumri, 2011-2023 City 2011 2020 2021 2022 2023 Gyumri 122,000 112,400 112,100 111,200 110,800 Source: Statistical Committee of RA For this period, the population of the city decreased by about 9%. 3.1.2 Socio-economic profile The economy of Gyumri is mainly based on industry2 - production of machinery and equipment, metallurgical industry, extraction of useful minerals, textile and sewing industry, confectionery production, leather and footwear production, food industry. The largest employer in Gyumri is the Gyumri-Beer Brewery. Tourism and banking services are also among the developed sectors in the city. Gyumri is served by the international Shirak Airport, about 5 kilometers (3.1 miles) to the southeast of the city center, developed as a second international airport, when adverse weather conditions require flights to be diverted from Yerevan's airport. The railway junction of Gyumri is the oldest and the largest one in Armenia. Gyumri Railway Station operates regular trips to Yerevan and Batumi. 2 http://gyumri.info/manufacturers 9 Armenia SWM Sector Assessment and Reform Plan Local Level Analysis Report In 2023, the total annual budget of Gyumri community was 6,421 million AMD, or USD 16 million, of which 30% is capital part of the budget, and 70% - administrative part of the budget. 2023 expenditure structure of the administrative and capital budgets is presented on the following diagrams: Administrative budget expenditures, million AMD Education, 757, General public 17% services, 857, 19% Transport, 161, 4% Waste collection Recreation, culture and cleaning, 631, and religion, 1,382, 14% 31% Other , 325, 7% Residential construction and housing, 336, 8% Capital budget expenditures, million AMD 799 33 Residential Other, including waste service construction and 1% housing 34% 1,546 Transport 65% Figure 2. Administrative and capital budget planned expenditures, 2023, million AMD Source: website of Gyumri Community3 In 2023, fiscal transfers from central government form 66% of the revenue to the community budget. State grant represents 85% of the revenue to the capital part of the budget, the other sources are grants from international donors – 7% and transfer from communal reserve fund to the capital budget – 8%. State grant/subsidies represent 56% of the revenue to the administrative part of the budget. Sources of revenue to the administrative part of the communal budget are presented on the following diagram: 3 https://www.gyumricity.am/hy/gyumri-community/community-budget 10 Armenia SWM Sector Assessment and Reform Plan Local Level Analysis Report Administrative budget planned revenue, million AMD property taxes , 1,050, 23% waste fees, 234, 5% State grant, 2,590, 56% other local fees and levies, 699, 15% share of national taxes, 61, 1% Figure 3. Sources of revenue to the communal budget, 2023 plan, million AMD As of 2021, 10,028 families are registered in the family benefits system of Gyumri4, of which 8,108 receive benefits, and the Gyumri Five-Year Development Program 2022-2026 plans to secure support for the remaining 1,900 families. In 2021, the unemployment rate was 6.7% (10,500 people).5 3.2 Policy and institutional framework 3.2.1 Policy framework Solid Waste Management Development Program of Gyumri for 2023-2027 (SWMDP) The SWMDP was developed in 2023 and adopted through a decree of Gyumri Community Council No 21-A from 14.02.2023. The Program was developed within the framework of the “Alliance for Better City Governance” Project, funded by the EU. The SWMDP outlines 4 strategic goals. The table below presents the strategic goals and some key measures envisaged in the Program: Table 5. Goals and measures in the SWMDP, 2023-2027 Strategic goal Key measures Improve the governance and policy • Involvement of private sector in waste management framework for waste management • Signing of long-term contracts with waste collection providers • Regular surveys of waste composition • Promotion of waste sorting • Development of strategy for waste disposal Strengthen waste management • Closure of the existing landfill framework in accordance with waste • Construction of new landfill reduction, recycling, disposal and • Acquisition of waste sorting equipment environmental protection • Establishment of transfer points for separately collected waste • Supply of additional containers for both mixed waste and plastic waste Achieve financial sustainability of waste • Separate accounting for waste management management • Increase of revenue collection from waste fees • Reduction of share of community budget in financing the waste management 4 Approximately 26% of the families, 38236 families in 2020. 5 Gyumri Community Five-year Development Program (2022-2026) 11 Armenia SWM Sector Assessment and Reform Plan Local Level Analysis Report Strategic goal Key measures • Achieving balance between costs and revenues • Enforcement of fines Ensure constant public awareness and • Surveys of consumer satisfaction involvement in the waste management • Promotion of environmental protection education process • Organization of public awareness events and knowledge contests in schools Both the construction of new landfill and closure of the existing one are identified as mid-term measures, to be implemented in the period 2024-2026. Annual working/action plans of Gyumri community The Annual Working Plans of the Community contains both targets and investment component related to waste management. In terms of targets set, the Working Plans for the period 2021-2024 set the following 2 targets: • Increase of waste collection service from 95% (baseline year 2020) to reach 98% in year 2024; • Keep public satisfaction of waste collection service at the normal “good” level. In 2021, 660 waste bins for both mixed municipal waste and separate collection of plastic were procured through the EU-funded ‘Alliance for Better City Governance’ Project. The investment component related to waste management in the Annual Working Plans for the period 2022-2024 is presented in the table below. Table 6. Investment component of the Annual Plans Year Description Community Government Thousand USD Subsidy AMD 2022 Purchase of 2 multifunctional 55% 45% 102,110 251,502 vehicles 2023 Purchase of multifunctional 55% 45% 315,000 775,862 vehicles6 and equipment Purchase of waste collection 45% 55% 164,820 405,961 trucks 2024 Purchase of 200 waste collection 55% 45% 8,000 19,704 bins As prescribed by the legal framework, communities should prepare annual waste collection and sanitary cleaning plan. In Gyumri, the annual waste collection plan is prepared by the communal enterprise for waste collection and sanitary cleaning and approved by the Community Council. 3.2.2 Institutional set-up The current institutional set-up is presented in the figure below: 6 Used for street cleaning 12 Armenia SWM Sector Assessment and Reform Plan Local Level Analysis Report Figure 4. Organogram of Gyumri Community In 2018, the Community of Gyumri established a communal enterprise7, responsible for waste collection and sanitary cleaning on the territory of the city. The total staff of the enterprise is 313 people, who are community employees. Prior to that, waste collection service was tendered to private operators. The main reason for switching to a communal enterprise was reportedly an overall dissatisfaction with the service provided by the private operators. The communal enterprise reports to the Community Council, while its daily operations are supervised by the Department of Housing and Environmental Protection. Apart from supervising the quality of services provided, compliance with waste collection time schedule, etc., the Department of Housing and Environmental Protection used to have the responsibility for drafting of technical specifications for waste collection tenders when the service used to be contracted to private operators. The Budget and Revenue Collection Department is responsible for the collection of waste collection fees. The Department is under direct supervision of the Head of Community. 3.2.3 Relevant initiatives Feasibility Study for Solid Waste Management Improvement in Shirak8 The study was financed by the Asian Development Bank. It was prepared in 2016. The aim was to develop an integrated waste management system for the entire Shirak Region. A site for sanitary regional landfill was identified, near the village of Beniamin. The feasibility study also included: assessment of needed number of collection vehicles, containers and transfer stations during a 20-years planning period; detailed route planning and design of improved waste collection and transportation systems; detailed design for a new regional landfill; source separation of recyclables. The feasibility study was not followed up by an investment project, due to financial restrictions of the Government. 3.3 Demand analysis 3.3.1 Current municipal waste generation 7 The communal enterprise is not registered as a legal entity; it is established as a unit within the community structure 8 https://www.adb.org/sites/default/files/project-documents/45398/45398-003-tcr-en.pdf 13 Armenia SWM Sector Assessment and Reform Plan Local Level Analysis Report Waste is not weighed at the existing dumpsite of Gyumri, due to lack of weighbridge. Estimates of the municipal waste collection enterprise on the volumes of collected waste in 2023 are presented in the table below. Table 7. Estimated volume of MSW, 2023 Households CII sources, range Daily quantities 245 m3 76 - 100 m3 Annual quantities 88,200 m3 28272 - 36000 m3 Source: Communal waste collection enterprise Considering the relatively low compaction rate of the waste collection trucks in use, a conversion factor of 0.250 t/m3 could be used. Applying this conversion factor, it can be estimated that the collected municipal waste in 2023 was in the range of 29,000 - 31,000 tons, which translates into waste generation rates between 263 kg/person/year and 280 kg/person/year. The percentage of commercial/institutional/non-process industrial (CII) generated waste from total municipal waste ranges between 24% and 29%. 3.3.2 Waste forecast 3.3.2.1 Population forecast The population forecast is developed based on the tendency established for the city of Gyumri for the period of 2011-2023. These dynamics are used to make a projection of the population for the next 20-year period. The table below shows the population forecast for the period of 2024-2043. Table 8. Population forecast for Gyumri, 2024-2043 Region 2024 2030 2035 2043 City of Gyumri 109,982 105,201 101,376 95,544 Source: own elaboration According to the forecast, at the end of the 20-year period, the population of Gyumri will decrease by about 13%. 3.3.2.2 Economic growth Economic growth is the second main factor for waste generation growth. The Medium-Term Public Expenditure Framework (MTPEF) of the RA envisages GDP growth of 7% for the period of 2024-2026. The MTPEF outlines the main expenditure directions and priorities of the Government during the next three years and lays a basis for drafting the next year’s Annual Budget. Despite the strong economic growth experienced in 2022-2023, due predominantly to influx of migrants, businesses, and increased capital following Russia's invasion of Ukraine, the World Bank has made a projection that growth will ease and stabilize at the rate of 4.3% in the next two years9. This rate is applied to GDP per capita forecasted growth since population remains almost constant. For the purposes of developing a waste forecast, the projection of the World Bank is used, being more conservative. Growth of municipal waste is assumed to be 0.2% per 1% income growth, according to 9 https://www.worldbank.org/en/country/armenia/overview#3 14 Armenia SWM Sector Assessment and Reform Plan Local Level Analysis Report correlation of waste and income levels drawn in the papers of the World Bank10. At annual income growth of 4.3%, annual waste generation growth of 0.86% is assumed. 3.3.2.3 Waste forecast Waste generation is dependent on two main factors: population and economic growth. The following assumptions are used for developing the waste forecast: • 2023 is the base year; • Population dynamics as established by the Statistical Committee of the RA for the period 2012-2023 and presented in section 3.3.2.1; • GDP per capita is assumed to increase by 4.3% annually until 2035 and by 3% after that; the same percentages are applied to the increase of population income; • Increase of waste generation is defined as 0.2 % of each percent income increase in accordance with the correlation by the World Bank; • Waste generation rate for the city is assumed as 0.75 kg/cap/day or 274 kg/cap/year, based on the established quantities in section 3.3.1 for year 2023. The table below presents the projected quantities of waste for the next 20-year period. Table 9. Waste forecast for the city of Gyumri, tons City 2024 2030 2035 2043 Gyumri 30,367 30,578 30,676 30,328 As seen from the table above, although it is expected that while the population will continue to decrease, the quantities of municipal waste are expected to remain fairly constant. 3.3.3 Waste composition In 2014, a survey of waste composition was conducted at the dumpsite of Gyumri 11. The table below shows the results from the survey. Table 10. Results of waste composition survey in Gyumri, 2014 Waste type Medium weight Paper/cardboard 3.3% Plastic 6.7% Metal 1.5% Glass 3.2% Textile 2.1% Rubber/leather 0.5% Hazardous waste 0.2% WEEE 0.1% Inert waste 0.7% Biodegradable waste 17.7% Mixed and undifferentiated 64.0% Total 100.0% 10 Sandra Cointreau, Urban papers 2, July 2006 Occupational and Environmental Health Issues of Solid Waste Management, table 3, p. 8 11 Extraction from the Protocol of the RA Government Session on the Approval of the Solid Waste Management Concept in Shirak Region of the RA № 38 (07.09.2017) 15 Armenia SWM Sector Assessment and Reform Plan Local Level Analysis Report The results of this survey are not very representative, because of the methodology used and resulting large share of “mixed and undifferentiated” waste category – 64%. Therefore, these results can hardly be used for planning purposes. The most recent waste composition survey of the city of Gyumri was conducted in 2019. The survey was conducted within the framework of a larger Waste Quantity and Composition Study in the Republic of Armenia12. Three samples were taken between 6-8 July covering different type of housing in the city, including commercial objects. The methodology included sorting of municipal solid waste into 22 waste fractions. The average results for Gyumri are presented in the table below, along with the respective quantities of the different waste types. Table 11. Waste composition results, 2019 Waste type Percent Ton Kitchen waste 53.3% 16,194 Garden waste 5.4% 1,651 Other biodegradable 0.3% 93 Newspaper and print 0.6% 185 Corrugated cardboard 2.1% 625 Paper packages 1.4% 434 Other paper 0.8% 255 Soft plastics packaging 8.3% 2,518 Styrofoam 0.1% 20 Dense plastics 1.5% 468 Other plastics 0.9% 282 Glass packaging 2.6% 775 Other glass 0.2% 55 Metal packaging 0.7% 216 Other metals 0.8% 233 All other inorganics 7.1% 2,154 Hazardous waste 0.3% 96 WEEE items 0.3% 77 Wood 0.4% 122 Textiles 8.6% 2,619 Sanitary 3.0% 913 Other 1.3% 382 Total 100% 30,368 3.4 Current waste management operations 3.4.1 Waste collection Waste collection service coverage in Gyumri is 100%. The waste collection company does not provide services to other settlements in the region. The table below shows the present waste collection equipment in the city. 12LL Bolagen. (2020). The RA Waste Quantity and Composition Study. Yerevan: AUA Acopian Center for the Environment and AUA Manoogian-Simone Research Fund, American University of Armenia. 16 Armenia SWM Sector Assessment and Reform Plan Local Level Analysis Report Table 12. Waste collection equipment, Gyumri Size and type Number Year Purchased Collection Frequency 3 218 (600 are available but 100 (2020); 118 (2023) Twice a day 1.1 m Plastic with wheels only 218 are placed) 0.7 m3 750 Most of these need Once a day and twice a Metal w/out wheels replacement day 1.2 m3 101 2023 Twice a day Metal with wheels Commercial establishments are served by both 1.1 m3 (40 units) and 0.7 m3 (130 units) containers. Frequency of collection depends on the type and size of commercial entities. Stationary 0.7 m3 bins Plastic 1.1 m3 containers on wheels Figure 5. Containers currently in use in Gyumri Plastic 1.1 m3 containers are served by 3 MAZ rear-loading trucks with compaction (2X16 m3 and 1X22 m3 capacity). Stationary 0.7 m3 containers are served by 5 MAZ trucks (16-18 m3 capacity) and 3 KAMAZ (20-22 m3 capacity), all being side-loaders. In total, 11 waste collection trucks are used. Waste collection is GPS- based. Common problem is the shortage of workers. Side-loading MAZ truck Rear-loading KAMAZ truck Figure 6. Trucks currently in use in Gyumri Both households and commercial entities sign contracts with the community for the provision of waste collection service. All waste collection containers and trucks are owned by the Community. 3.4.2 Source separation and recycling 17 Armenia SWM Sector Assessment and Reform Plan Local Level Analysis Report The city of Gyumri participates in an EU-funded ‘Alliance for Better City Governance’ Project which aims at establishing a plastic recycling system in the city. The city is equipped with 240 blue containers (out of 300 donated) for source separation of plastics. The collected plastic materials are currently stored at the dumpsite. The quantity of collected recyclable plastics are not known. The next phase of the project implementation envisages supply of recycling equipment for production of construction materials which will be used for improvement of public spaces. The city does not have previous experience with source separation of recyclable materials. Figure 7.Container for plastic waste 3.4.3 Waste disposal Gyumri’s disposal site is located at a distance of 4-5 km north-west from the central area of the city and less than 1 km from the nearest residential areas. It occupies an area of about 12 hectares. It was designated as a waste disposal site in 1953. The disposal site is in fact an open dumpsite with no fencing, no guard post, no water supply and no electricity. Soil covering works are reportedly applied on a regular basis by the communal enterprise for waste management. However, monitoring conducted by the Centre of Hydrometeorology and Monitoring under the Ministry of Environment reported significant traces of past burning in the disposal area. The site is not equipped with any fire protection equipment. Location of Gyumri disposal site Gyumri disposal site (source: http://www.armmonitoring.am/page/860) Figure 8. Gyumri disposal site Monitoring results from 2020 showed that the dumpsite is an active source of accumulation and spread of POPs. It showed high concentrations of aldrin, dieldrin, and endrin in the soil beneath the dumpsite which exceeded the established norms by 37-151 times13. The community is the owner of the dumpsite. The site is not permitted. Reportedly, besides municipal waste, industrial and construction wastes are disposed too, although a site has been designated in the city for construction and demolition waste. 13 http://meteomonitoring.am/page/1034 18 Armenia SWM Sector Assessment and Reform Plan Local Level Analysis Report 3.5 Current costs and financing 3.5.1 Current financing of waste management activities The community provides the waste service through communal unit (enterprise) established in 2018. Due to this organization, operating costs are budgeted and financed through the administrative part, and investments costs through the capital part, of the communal budget. Operating costs The legal framework does not require separate budgeting by cost centres and the total operating costs of the waste service are summarized in the following table: Table 13. Summary of waste service operating costs, including cleaning, million AMD Cost item 2021 2022 2023 Salaries 361 470 534 Fuel 38 59 74 Other costs14 16 24 23 Total operating costs 415 553 631 On the assumption that 1/3 of the above total costs relate to cleaning and cleaning costs are salary costs15, the structure of the operating costs of the collection service in the period 2021-2023 is as follows: Waste collection operating costs 450 420 400 369 23 350 24 74 277 59 300 Million AMD 16 250 38 200 150 323 286 100 223 50 0 2021 2022 2023 Salaries Fuel Other costs Figure 9. Structure of operating cost, waste collection, 2021-2023 By law, the waste fee is envisaged to cover collection and disposal costs. However, in practice the planned revenue from waste fees do not cover the costs of waste collection, as shown in Figure 9 below: 14Maintenance, insurance, clothing, general and communal services. Depreciation is not part of the cost. 15For 2023 cleaning costs are defined as 1/3 of 630.5 = 210.3 million AMD, current waste disposal cost are neglectable. So collection costs are 420 million of which salary costs are 533.6 – 210.3 = 323.3. 2021 and 2022 costs are calculated following the same approach. 19 Armenia SWM Sector Assessment and Reform Plan Local Level Analysis Report Waste collection operating costs vs planned revenue from waste fee 450 400 420 350 369 Million AMD 300 250 277 200 228 229 234 150 100 50 0 2021 2022 2023 Operating costs collection Planned revenue waste fee Figure 10. Planned cost recovery from waste fee While operating costs increased by more than 50% in the period 2021-2023, the planned revenue from the waste fee increased by 3%. Thus, the planned financing of the service from other revenue sources of the communal budget increased from 18% of the costs in 2021 to 44% in 2023. Under the above assumptions 2023 unit collection operating cost is 14000 AMD/t (420 million AMD/30000t) or 35 $/t. Investment costs The table below summarizes communal investment in waste equipment, expenditure of the capital part of the communal budget: Table 14. Communal investment in waste equipment, 2021-2023 Thousand AMD 2021 2022 2023 Administrative equipment 196 208 144 Trucks and other 3,649 1,625 990 Total 3,845 1,833 1,134 3.5.2 Tariff structure for households and commercial sector 2024 waste tariffs are presented in the following table. Table 15. 2024 waste fees for households and legal entities Households/legal entities Gyumri tariff Range in Law Household, per registered resident 150 AMD 50-400 Trade and public catering 75 AMD per m2 50-100 Hotels and rest houses, transport stations (railway stations, airports) 50 AMD per m2 20-50 Recreation centers (children and students), sport facilities- 20 AMD per m2 15-20 Administrative, financial institutions, communications, health care 20 AMD per m2 15-20 Schools, cultural centers, religious, worship, civil defense 10 AMD per m2 3-15 20 Armenia SWM Sector Assessment and Reform Plan Local Level Analysis Report Households/legal entities Gyumri tariff Range in Law Military facilities 8 AMD per m2 3-15 Production, industrial, agricultural buildings (including parking lot) – 10 AMD per m2 5-15 The waste fees for the population are set at a level lower than the average of the range defined in Law. The fees for business are set at a higher level, especially for accommodation facilities and transport stations, aiming on businesses cross-subsidization to the municipal waste collection. 3.5.3 Billing and revenue collection systems and rates The diagram below shows the planned and the actual revenue from waste fees: Planned and actual revenue from waste fee and payment for CDW removal 250 228 229 234 7 8 8 201 187 200 175 13 85 85 12 90 8 Million AMD 150 94 89 88 100 135 135 136 50 86 95 79 0 Plan Fact Plan Fact Plan Fact 2021 2022 2023 Residents waste fee Legal entities waste fee Payment for construction and bulky waste removal Figure 11. Billing and revenue collection, 2021-2023, thousand AMD It is to be noted that: • The annual planned revenue from households’ waste fee was essentially unchanged during the period 2021 to 2023 – corresponding to the constant fee for households, and there is some increase in the household fee collection rate from 58% in 2021 to 70% in 2023. • The actual revenue from waste fee from legal entities is higher than the planned revenue, which can be explained by economic growth and registration of new legal entities. • Actual revenue from waste fee from legal entities was higher than the revenue from households in 2021 and 2022. • Collection rate of total due payments (actual/planned) increased from 77% in 2021 to 86% in 2023. 3.5.4 Cost recovery and cross-subsidization On the assumption that legal entities generate 27% of municipal solid waste (see 3.3.1 Current municipal waste generation) and this is their portion of costs, the following diagram represents the operating collection cost, and the actual revenue from waste fees, split between households and legal entities. 21 Armenia SWM Sector Assessment and Reform Plan Local Level Analysis Report Structure of collection cost and revenue from waste fees 450 420 400 369 350 113 Million AMD 277 100 300 250 75 188 167 176 200 150 307 94 88 269 89 100 202 50 79 86 95 0 Costs Revenue Costs Revenue Costs Revenue 2021 2022 2023 Residents Legal entities Figure 12. Cost recovery of waste collection operating costs It is to be noted that: • While there was some cross-subsidization on behalf of legal entities in 2021a, in 2022 and 2023 the fees set did not cover their share costs (and actual revenue is higher than planned). • The waste fee revenue collected from population, despite the increase of the collection rate, represents less than 1/3 of the current operating costs for waste collection alone. Even at 100% collection rate, the current level of waste fee would cover only 44% of the operating costs for waste collection. 3.5.5 Affordability of tariffs Affordability is the price that customers can afford to pay without jeopardizing their ability to meet other basic needs. Affordability is mainly the ability to pay, which is assessed by analysis of statistical data. The adoption of affordability thresholds is useful for determining the tariff of public services, since it gives an objective assessment of adequate level of payment. Widespread criterion for affordability threshold for waste services for upper-middle income economies is 1% of the disposable income or 1% of actual expenditure, the latter being lower. The ARMSTAT annually publishes the statistical and analytical report “Social Snapshot and Poverty in Armenia”. The data from 2012 and 2023 reports 16 is as follows: Table 16. Average monthly per capita income and expenditures, 2011 and 2022 2011, urban areas, AMD 2022, urban areas, AMD Average monetary per capita income 38,451 79,341 Average monthly per capita consumption 35,041 57,081 While there are variations of the income and expenditures among Marzes, there is no statistical data on the income or expenditures on Marzes level. The Publication “Labour Market in Armenia”, 2023 provides information on the net salary differences among Marzes and the city of Yerevan, and according to the information presented, the level of salaries in Shirak Marz in 2022 represents 85% of the average for the country. As salaries represent 65% of the income and pensions and benefits – 18% of the income, it may be 16 https://armstat.am/file/article/poverty_2012e_3.pdf, https://armstat.am/en/?nid=82&id=2617 22 Armenia SWM Sector Assessment and Reform Plan Local Level Analysis Report assumed that the minimum monthly per capita income and expenditures in Gyumri represent at least 85% of the average for the country, or the monthly person expenditure was 48,520 (85%*57,051). On that basis, it can be estimated that the monthly waste fee per person up to 485 AMD (1%*48,520) was affordable in 2022 in Gyumri, and the actual is 150 AMD, or 30% of that level. It is important to noted that affordability is defined as % of monetary income/expenditures and the actual amount of fee that is affordable increases annually with the increase income/expenditures. As seen from the table above, between 2011 and 2022, average income increased more than two-fold. Average consumption increased by more than 60% in the period, which means annual average growth by 4.5%. Therefore, there is ample room to increase the level of tariffs within the average values defined in 2011 in the Law on waste and sanitary cleaning, while maintaining affordability. Applying the annual real growth rate of 4.3% to annual expenditures in line with the forecasted annual real GDP per capita growth determines the following growth of waste fee affordability, in 2023 prices: Table 17. Forecast Gyumri waste service affordability. Forecast 2024 2030 2035 Monthly affordability threshold, Gyumri, AMD, 1% of per capita expenditures 542 697 861 3.5.6 Potential for private sector involvement Private sector is run with intention to secure profit after recovering costs, including depreciation cost. The constant level of waste fees regardless of inflation and despite the real growth of salaries with economic growth restrains waste service provision within the limited funds allocated from other communal revenue. Communities restrain costs by delaying timely replacement of depreciated equipment. Provision of waste collection service through their own department, does not require including VAT on labour cost, which is the main cost component. Provision of grants for waste collection equipment is another factor that interferes with free competition and reduces the competitiveness of the private sector, and should be limited to small, poor communities, located at greater distances to regional sanitary landfills, that encounter higher unit collection costs. Private companies can be competitive to communal companies in waste collection, as they can easily lease waste trucks or access credits for purchase of trucks and implement requirements related to waste collection in case the term of the contract is long enough and the contract payment high enough to allow for repayment of leased equipment. Separate collection and sorting of waste is recommended to be funded by Extended producer responsibility scheme. Private sector is much more flexible and can more adequately react to market fluctuations and waste sorting and recycling is major potential for private sector involvement. This is valid for other waste recovery facilities as well. In 2020, the Law on Public Private partnership was adopted that established a favourable legal framework for private investment in public infrastructure. State grant support and subsidies are also envisaged as co- funding 17. This could be a good opportunity for construction of sanitary landfills in the country, as investment costs may be comparatively lower. 17 Article 26 of PPP Law Types of state support in PPP programs 23 Armenia SWM Sector Assessment and Reform Plan Local Level Analysis Report Cost advantages can be achieved by engaging the private sector, as private interest is searching for least cost solution for any initiative, and in case of long contract terms, this will be long term least cost solution. 4. Improved waste operations and cost implications This section analyzes what an improved waste management system in Gyumri could look like, and what would be the cost implications of such a system considering the established affordability threshold of waste services. 4.1 Improved waste operations Four different scenarios of an improved waste management system are analyzed in this section. The four scenarios are the following: Table 18. Scenarios for improved waste management Waste management Scenario 1 Scenario 2 Scenario 3 Scenario 4 component Waste collection Upgrade of the Upgrade of the Upgrade of the Upgrade of the existing waste existing waste existing waste existing waste collection system collection system collection system collection system Waste disposal Establishment of Establishment of Establishment of - sanitary landfill sanitary landfill sanitary landfill Source separation of Source separation of Source separation of recyclables - - dry recyclables in 3- dry recyclables in 3- container system container system Sorting of source Sorting of source Sorting of source separated - - separated separated recyclables recyclables recyclables Treatment of mixed Establishment of municipal waste mechanical biological treatment - - - (MBT) plant for treatment of mixed municipal waste Revenues are assumed from the sale of recyclables in scenarios 3 and 4. However, it should be noted that markets for recyclables are highly volatile and sometimes prices could be low or even markets for certain materials may not be available (e.g. the recent situation with metal wastes in Armenia). Moreover, these scenarios assume a high rate of household participation in the source separation, which usually takes time for societies to develop such a level of compliance. These scenarios also assume that the informal sector would not be competing with the formally organized system and may as well be integrated in the separate collection and sorting activities. Lastly, it should be noted that the private sector is much more flexible when it comes to market fluctuations and sale of recyclable than public bodies and utilities. The following selling prices (without VAT) of materials are used for calculating the possible revenue: plastics - 56 AMD/kg; paper – 52AMD/kg; cardboard – 32 AMD/kg; glass and metal – 23 AMD/kg. 4.1.1 Scenario 1. Improved waste collection This scenario envisages upgrading the current waste collection system in Gyumri by switching entirely to rear- loading trucks and 1.1 m3 wheeled containers. The table below presents the main parameters of the waste collection system. Table 19. Main parameters of Scenario 1 24 Armenia SWM Sector Assessment and Reform Plan Local Level Analysis Report Component Unit Value Containers needed № 680 Containers reserve % 5% Trucks needed № 6 Capacity of trucks m3 16 Waste in trucks ton 6.48 Collection frequency days/year 365 CAPEX containers USD 247,715 CAPEX trucks USD 1,080,000 OPEX USD/year 554,000 Cost per ton collected USD/ton 25 Cost per ton collected AMD/ton 10,220 As seen in section 3.5.1, in 2022, the waste management costs, which were in fact predominantly waste collection costs, were AMD 15,428/ton, or USD 38/ton. Switching entirely to 1100-liter wheeled containers and rear-loading trucks with better compaction ratio is expected to reduce waste collection costs to about AMD 10,220/ton, or about USD 25/ton18. The main gains come from: (i) reduced time for servicing a single container; (ii) larger capacity of the wheeled containers compared to the existing ones (0.7 m3); and (iii) higher compaction rate of the rear-loading trucks. 4.1.2 Scenario 2. Improved waste collection and disposal This scenario envisages the same upgrade of the waste collection system as scenario 1, but also significant upgrade of the waste disposal by establishing a sanitary landfill. The landfill should meet the highest requirements in terms of environmental protection, including base sealing, landfill gas collection, and leachate collection and treatment. Basically, the envisaged landfill would meet the requirements of the EU Landfill Directive19. The main parameters of the waste collection system are the same as in scenario 1 and shown in Table 19. The main parameters of the improved waste disposal system are presented in the table below as well as the total operating costs. Table 20. Main parameters of Scenario 2, waste disposal Parameter Unit Value Capacity of cell 1 ton 152,190 Lifetime of cell 1 years 5 Total capacity of landfill ton 579,963 Period of operation years 20 Staff employed № 13 Landfill equipment USD 832,000 Total CAPEX USD 4,600,000 Total OPEX USD/year 213,371 Cost per ton disposed USD/ton 25.4 18 These are discounted values. 19 Council Directive 1999/31/EC of 26 April 1999 on the landfill of waste 25 Armenia SWM Sector Assessment and Reform Plan Local Level Analysis Report The estimated cost per ton landfilled would be AMD 10,317, or about USD 25. Expectedly, improved waste disposal operations bring additional waste management costs, compared to the current system, which incurs costs only for sporadic cover of waste with earth material. Combined with costs of improved waste collection (10,220 AMD/ton), the total waste management costs of Scenario 2 would be 20,537 AMD/ton, or 50.4 USD/ton. 4.1.3 Scenario 3. Source separation of dry recyclables The third scenario envisages the following operations: • Upgrade of the current waste collection system in Gyumri by switching entirely to rear-loading trucks and 1100 liter wheeled containers (like scenarios 1 and 2); • Upgrade of the waste disposal system by establishing an engineered landfill (like scenario 2); • Introduction of source separation of dry recyclable materials; • Establishment of material recovery facility (MRF) for source separated recyclables. The source separation will cover the entire population of the city. Source separation will be based on a 3- container system: 1 container for paper/cardboard; 1 container for plastic and metal; and 1 container for glass. The envisaged containers have capacity of 1100 liters for paper/cardboard and plastic/metal. Glass would be collected in 240-liter bins. This system is based on the one established in Yerevan. There are a variety of options. The different collection methods result in different quantities and quality of collected materials. For instance, a 2-container system with ‘dry’ bin for comingled recyclables and ‘wet’ bin for residual waste usually is less expensive. However, the dry/wet system often results in higher contamination in the dry bin. Selection of the most appropriate system should be made at a feasibility assessment stage. The MRF will process only materials collected in the containers for separate collection. Quantities of mixed municipal waste would be reduced by the quantities collected through source separation. Respectively, the overall costs for waste disposal will be reduced due to the smaller quantities of landfilled waste. The main parameters of source separation and sorting system are presented in the table below. Table 21. Main parameters of the source separation and sorting system Parameter Unit Value Source separation Containers for plastic and metal № 312 Containers for paper/cardboard № 312 Containers for glass № 312 Trucks needed № 5 Capacity of trucks for paper/cardboard m3 16 Capacity of trucks for plastic/metal m3 16 Capacity of trucks for glass m3 10 CAPEX containers USD 239,883 CAPEX trucks USD 660,000 Total OPEX USD/year 230,555 Total costs USD/year 330,825 Collected plastic ton 2,521 Collected metal ton 216 Collected paper ton 435 Collected cardboard ton 625 Collected glass ton 776 26 Armenia SWM Sector Assessment and Reform Plan Local Level Analysis Report Parameter Unit Value Cost per ton collected USD/ton 57 MRF Total capacity of MRF ton 6,000 Staff employed № 18 Total CAPEX USD 1,542,583 Total OPEX USD/year 199,535 Total cost AMD/ton 311,592 Cost per ton sorted USD/ton 54 Revenues from sale of recyclables Revenues from sale of recyclables USD/year 359,063 Costs after revenue Cost per ton collected and sorted USD/ton 62 Cost per ton generated USD/ton 13 The overall recycling costs per tonne generated after revenue from sale of recyclables are about 9 USD/ton, or about 5,400 AMD/ton. The combined costs of improved waste collection (8,500 AMD/ton), waste disposal (9,800 AMD/ton), source separation (4,900 AMD/ton) and sorting of separately collected waste (5,300 AMD/ton) would amount to 23,600 AMD/ton, or 58.3 USD/ton, after revenue from sale of recyclables. The costs for waste collection and disposal are slightly lower than the cost in Scenario 2, due to reduced quantities of mixed waste to be collected and disposed. 4.1.4 Scenario 4. Waste recovery system In November 2017, a Comprehensive and Enhanced Partnership Agreement (CEPA) was signed between the European Union (EU) and the Republic of Armenia (RA). The CEPA entered into force on 1 March 2021. One of the main provisions of CEPA is ensuring that the municipal waste is subject to treatment before landfilling. Scenario 4 envisages fulfillment of this provision. The entire municipal waste generated by the city of Gyumri will be subject to treatment before landfilling. Scenario 4 builds on scenario 3 and envisages the following operations: • Upgrade of the current waste collection system in Gyumri by switching entirely to rear-loading trucks and 1100-liter wheeled containers (like scenarios 1 and 2); • Upgrade of the waste disposal system by establishing an engineered landfill with a significantly lower capacity, compared to scenario 2, due to reduced waste quantities following intensive treatment; • Introduction of source separation of dry recyclable materials and establishment of a MRF for source separated recyclables (like scenario 3); • Establishment of an mechanical biological treatment (MBT) plant for mixed municipal waste with production of refuse derived fuel (RDF). The capacity of landfill needed is estimated at about 7,000 tons a year. Receiving such small quantities means that the landfill could be designed as a 1-cell landfill for the entire planning period. The main parameters of the waste disposal system are presented in the table below as well as the expected total operating costs. Table 22. Main parameters of the waste disposal system, Scenario 4 27 Armenia SWM Sector Assessment and Reform Plan Local Level Analysis Report Parameter Unit Value Total capacity of landfill ton 150,000 Period of operation years 20 Staff employed № 5 Landfill equipment USD 300,000 Total CAPEX USD 1,300,000 Total OPEX USD/year 135,175 Cost per ton disposed USD/ton 10.1 The cost of disposal is estimated at about AMD 4,100/ton, or USD 10/ton. The MBT plant will receive the entire mixed collected municipal waste. The following operations will take place at the MBT: • Sorting of biodegradable fraction (using drum screen) for subsequent decomposition and production of compost-like output; • Sorting of mixed waste for extraction of dry recyclable materials; • Subsequent sorting and extraction of materials suitable for production of RDF; • Transport of residual fraction to landfill. The table below presents the main parameters of the MBT system. Table 23. Main parameters of MBT operation Parameter Unit Value Total capacity of MRF ton 25,000 Staff employed № 27 recyclables recovered % 8% losses during treatment % 30% RDF produced % 29% Waste landfilled % 34% Total CAPEX USD 17,000,000 Total OPEX USD/year 1,220,000 Total costs USD/year 2,300,000 Revenue from sale of recyclables USD/year 230,000 Cost per ton treated after revenue USD/ton 84.1 The cost of treatment is estimated at about AMD 34,100/ton, or about USD 84/ton after revenue from sale of recyclables. Utilization of RDF is assumed to be cost-neutral activity. Sale of RDF is largely dependent on the calorific value of the RDF as well as on the internal energy market. In some countries the RDF producers pay cement industries for the uptake of the material; in other countries sale of RDF is a revenue-generating activity. The costs of improved waste collection, source separation and sorting of separately collected waste are the same as Scenario 3. The total expected costs of Scenario 4 are estimated at about 51,400 AMD/ton, or about 127 USD/ton. 4.2 Cost implications 28 Armenia SWM Sector Assessment and Reform Plan Local Level Analysis Report The table below shows the discounted total annual costs for collection, source separation, sorting, treatment and disposal of the four options for system optimization20. Depreciation of assets, operational and maintenance costs are included in the total costs too. The landfill costs include also future development of the landfill, cells closure, and post-closure aftercare. The table also includes the expected revenues from recycling (presented as negative values/costs) as well as the total recovery/diversion rate associated with each of the options. Table 24. Cost comparison of different scenarios, in USD Components Option 1 basic Option 2 Option 3 Option 4 Waste collection 25.2 25.2 20.9 20.9 Separate waste collection 0.0 0.0 12.1 12.1 Sorting facilities 0.0 0.0 13.0 13.0 MBT 0.0 0.0 0.0 89.6 Landfills 0.0 25.4 24.1 10.3 Sub-total costs 25.2 50.6 70.1 145.9 Revenue from recycling 0.0 0.0 -11.8 -19.2 Net costs 25.2 50.6 58.3 126.8 Affordable service cost, USD/ton 60 60 60 60 Recovery rate, % 0.0% 0.0% 15.0% 75.9% As can be seen from the table above, some of the scenarios are within the established affordable service cost. Scenarios 1 and 2 are well within the threshold of affordable service cost. Scenario 3 is slightly below the affordable service cost, due to introduction of full-scale source separation of dry recyclables and sorting of separately collected recyclables. Scenario 4 would lead to a very high rate of waste recovery – about 76% - which means that only about 24% of the pre-treated municipal waste will be landfilled. Landfill costs would be negligible, due to the reduced quantities of waste for landfill and the diversion of biodegradable waste from landfill, which would significantly reduce the landfill treatment costs. However, Scenario 4 vastly exceeds the affordable service costs, due to the high costs related to treatment of the entire quantities of municipal waste prior to disposal. It should be also noted that in all four scenarios, grant financing of assets has not been considered. Presented costs envisage that the Community of Gyumri would secure the financing of the waste management infrastructure and equipment needed by itself. 20 On the basis of total tons of waste generated 29 Armenia SWM Sector Assessment and Reform Plan Local Level Analysis Report 5. Greenhouse gas emissions effects Each of the proposed scenarios described in the previous section has effects on the greenhouse gas (GHG) emissions produced by the solid waste management sector in Gyumri. Baseline emissions from waste transport vehicles and methane generation from the dumpsite are estimated to be around 34 thousand tons of CO2 equivalent per year in 2024, most of which is from methane. The table below summarizes the GHG emissions impacts of the proposed interventions. Table 25: Summary of GHG impacts by scenarios Scenario Total emissions to Impact Marginal abatement cost 2043 (CO2e tons) Marginal Cumulative ($/ton CO2e) Baseline 717,598 1 715,192 -2,405 -2,405 6,394 2 288,630 -426,562 -428,968 36 3 271,236 -17,394 -446,361 270 4 151,940 -119,296 -565,657 350 Source: World Bank analysis. As the table above shows, the greatest marginal impact occurs with the establishment of a sanitary landfill with landfill gas management. Scenario 1 has little effect because vehicle emissions are less than 3 percent of total emissions in the baseline. Key assumptions informing these estimates include a 50% methane capture rate, a semi-aerobic landfill design, that the current dump is more than 5m deep, operations for all scenarios begin at full capacity in 2027, and refuse-derived fuel produced in Scenario 4 will offset fossil fuels used in cement production at an 86% thermal substitution rate and with emissions reductions of 0.4 tons CO2 equivalent per ton of displaced fossil fuels. For scenario 4, the prevention of methane generation from diversion of degradable carbon to cement kilns is a much greater factor for emissions reduction than the displacement of fossil fuels in cement production. The figure below shows the timing of intervention effects on emissions by scenario. 40,000 35,000 30,000 Baseline emissions 25,000 Scenario 1 emissions CO2e tons 20,000 Scenario 2 emissions 15,000 Scenario 3 emissions 10,000 5,000 Scenario 4 emissions 0 2028 2034 2040 2024 2025 2026 2027 2029 2030 2031 2032 2033 2035 2036 2037 2038 2039 2041 2042 2043 Figure 13: Total emissions forecast by scenario 30 Armenia SWM Sector Assessment and Reform Plan Local Level Analysis Report 6. Conclusions and recommendations Inadequate waste fees and service subsidisation. Waste service costs grow even without change in the scope and quality of the service as salaries grow with economic growth and fuel prices rise. As a result, in 2023 even legal entities waste fees did not cover their own share of operating costs of a basic collection service and transport to the nearby dumpsite. All investment costs in waste service, cleaning, and disposal cost, and 2/3 of 2023 waste collection operating costs, are covered by other revenues of the communal budget. Subsidizing waste service deprives the community from the opportunity to use its limited funds to develop and sustain other important communal infrastructure and services. Adequate budgeting for investment. Use of depreciated and inefficient equipment increase the operating costs. Replacement of existent depreciated equipment with more efficient vehicles and bins should become a component of the communal waste management plan. Depreciation costs of the waste collection equipment should be included in the setting of waste fees as a first step towards sustainable waste service. Polluter pays principle. The polluter pays principle requires costs of pollution inflicted on the natural environment to be borne by those who cause it. Waste generators should pay not only for waste collection, but for sanitary disposal and landfill rehabilitation. Even assuming that the first cell of the sanitary landfill will be constructed with grant funding, sanitary landfill gate fees from the very beginning should cover the higher operating cost and financial security or its equivalent referred to the estimated costs of the closure and after- care of the site for a period of at least 30 years. Financial Institutions provide grants for (part of) investment that cannot be recovered by revenue from affordable tariffs for the population. Current tariff represents only 30% of the affordability level. Waste fees and recycling. Low level of fees charged sends the wrong message to the population on the importance of waste service, on their responsibility as polluters, on the real cost of environmental protection, and about the cost of waste treatment and recovery processes. Low level of charging provides insufficient stimulus for waste generators to reduce waste quantities, compost and recycle. Private sector involvement. Communities need serious investments in waste collection equipment and landfill infrastructure at the lowest possible cost. While loan conditions are more favourable to the governmental bodies than to the commercial sector, communal opportunities to take loans and to receive grants are limited. Cost advantages can be achieved by engaging the private sector in waste management, as private interests would search for least-cost solution for any initiative, and in case of long contract terms, this would be the long term, least cost solution. The ability to recover the costs of the service largely or fully through user fees is a significant factor to enable private sector involvement. Waste collection. The current waste management system in Gyumri is based on providing waste collection service to the entire population of the city. In terms of waste collection, the system is in transition. The city is trying to upgrade both the waste containers park and the waste collection fleet. The positives of this upgrade have already been acknowledged by the communal operator. Waste disposal. Waste disposal in Gyumri has not changed much since the 1950s, when the current site started being used for waste disposal. As already described, the disposal site does not meet any engineering standards and is unsuitable from an environmental point of view. Having already consolidated the waste collection service, the next efforts of the city in improving the waste management system are expected to be directed towards an upgrade of the waste disposal. Scenarios for improved operations . Section 4 outlined several possible scenarios for improved waste management operations, based on different level of ambition. The main conclusions from the analysis of the different scenarios are the following: • Scenario 1 clearly indicates that there is room for increases in the efficiency of waste collection and transport, by completing the process of reorganization of the system. There are significant efficiency 31 Armenia SWM Sector Assessment and Reform Plan Local Level Analysis Report gains from replacing the old containers with new 1.1 m3 ones and replacing the side-loading trucks with rear-loading ones. The upgrade is expected to lower the waste collection costs by 34%. In terms of waste charges, implementation of this scenario would mean establishment of waste fee of 188 AMD/person/month, if the polluter pays principle is observed. • Scenario 2 shows that an overhaul of the current disposal system can be sustained by the revenues from waste charges within the affordability threshold, and without being dependent on subsidy. The existing disposal site cannot be upgraded, due to the topography of the terrain. A new site has to be identified. In 2016, a site for a sanitary regional landfill was identified, near the village of Beniamin, about 12 km south of Gyumri. Notwithstanding the location of the site, the new landfill needs to be established in accordance with the highest international standards for environmental protection. The combined waste collection (after upgrade of the system) and waste disposal (new sanitary landfill) costs would be within the defined level of affordable service costs. In terms of waste charges, implementation of this scenario would mean establishment of waste fee of 378 AMD/person/month, if the polluter pays principle is observed. • Scenario 3 shows that introduction of source separation of all dry recyclables and sorting system would not exceed the affordable service cost threshold. In the short-term, this alternative could be implemented only with certain subsidization, if the Community of Gyumri decides to implement this scenario. Packaging waste, which is a substantial part of the recyclable waste, is typically managed through the Extended Producer Responsibility (EPR) mechanism. At present, EPR legislation in Armenia is under development, which would regulate the management of specific waste streams, including packaging and packaging waste, imposing responsibility on the producers and importers of packaging materials to cover the costs of their subsequent source separation and recycling. Therefore, it would make sense for the community to wait for the EPR schemes to become operational, before investing further in scaling up the existing source separation of plastics. In terms of waste charges, implementation of this scenario would mean establishment of waste fee of 436 AMD/person/month, if the polluter pays principle is observed. Although affordable, this option would require an increase of waste management tariff above the legally established threshold of 400 AMD/person/month. This will necessitate either amendments in the national legal framework, or public subsidization of the waste services. It should be noted that the overall waste management costs could be lowered if the source separation and sorting of municipal waste is implemented through EPR schemes and not financed by the community. • Scenario 4 clearly indicates that at present, the affordability threshold does not allow for extensive treatment technologies to be deployed, due to high investment and operating costs. However, the apparent direction of the waste management sector in the country is towards regionalization of the waste services. All communities and settlements in Shirak Marz, including Gyumri, will benefit from such regionalization, due to economies of scale. From the financial point of view, the services could be provided at more affordable cost if sufficient scale is achieved. Therefore, at a certain point in time, a waste management system as outlined in Scenario 4, could be established for the entire Shirak Marz. In terms of waste charges, implementation of this scenario would mean establishment of waste fee of 947 AMD/person/month, if the polluter pays principle is observed. Like scenario 3, the overall waste management costs could be lowered if the source separation and sorting of municipal waste is implemented through EPR schemes and not financed by the community. Given all considerations described above, pursuing the implementation of Scenario 2 seems the most expedient option for Gyumri. In the short term, priority could be given to completing the optimization of the waste collection system as outlined in section 4.1.1. The establishment of a sanitary landfill, however, should be put in the context of regionalization of waste management services. Supported by EBRD, the MTAI is currently developing a concept which would outline the different waste management zones in the country, that would be served by a regional landfill. Therefore, the new landfill of Gyumri could be designed and constructed to serve as a regional landfill for the entire Shirak Marz. The recommended scenario in Gyumri could be implemented through the following actions: 32 Armenia SWM Sector Assessment and Reform Plan Local Level Analysis Report • Prepare a Communal Waste Management Plan in accordance with the Guidelines for Local Municipal Waste Management; • Implement separate budgeting for waste collection and landfill disposal, in line with annual waste management plans and including waste collection equipment asset depreciation in service cost; • Revise waste fees for residents and legal entities to move towards full cost recovery, with due consideration for affordability including for disadvantaged groups; • Prepare technical specifications for required equipment; • Replace the existing stationary 0.7 m3 containers with wheeled 1.1 m3 containers; • Replace the existing side-loading trucks with rear-loading ones; • Update the Feasibility Study for Solid Waste Management Improvement in Shirak Marz; • Prepare the detailed landfill design and obtain all necessary permits; • Procure works for construction of the new landfill that could serve Shirak Marz (and potentially parts of neighboring marzes); • Prepare and implement the operational plan for the new landfill; • Close the existing dumpsite of Gyumri. 33 Armenia SWM Sector Assessment and Reform Plan Local Level Analysis Report 34