Amid talk about bubbles in gold, major
central banks adopting extremely loose monetary
policies that lower yields on nearly every safe
asset, and stock markets hitting historic highs, strategists at
Bank of America Merrill Lynch draw attention to garbage as the
next big investment boom.
Emerging markets, which
are growing faster than developed countries, are the place to
look for opportunities as they will have to deal with the
challenges posed by increasing waste products, the strategists
said in a report headlined "No time to waste."
The waste management market is worth $1 trillion currently,
and it includes municipal solid waste (MSW), industrial waste,
waste-to-energy and sustainable packaging, as well as other
areas, according to the report.
But by 2020, the waste industry's value could be worth $2
trillion, with Europe facing the toughest strategic challenges
and Asia and South America seeing the fastest growth, the
equity strategists estimate.
"We see opportunities across waste management, industrial
treatment, waste-to-energy, wastewater and sewage, E&C
[engineering and consulting], recycling, and sustainable
packaging among other areas," they said.
At a global level, waste production is estimated at between
4 billion and 6 billion tonnes, with the highest levels in
developed countries two or three times more the level in
"However, emerging markets will present the greatest waste
generation and waste management challenges and opportunities
going forward," the strategists said.
With some 70% of global waste ending up in landfills and
only between 25% and 30% being recycled, there is "large scope"
for opportunity, they added.
BRICS TO THE FOREFRONT
The strategists identified "exciting opportunities" in the
In Brazil, the sanitation sector "requires substantial
investment," with coverage levels of 81% in water, 46% in
sewage collection and 38% in sewage treatment.
The country needs to invest $180 billion to reach 100%
coverage, especially in sewage, they estimated, adding that at
the current rate of investment, this would take 60 years to
But the private sector might step in after a sanitation law was
approved in 2007 requiring all sanitation companies in Brazil
to have a tariff regime established and regulated by a
regulatory agency by the end of 2012.
"A regulatory framework that adequately remunerates
investments should provide the key missing element to attract
private investment," the Bank of America Merrill Lynch analysts
China, the world's most populous nation and one of the
fastest-growing economies, has seen municipal waste output
growing from 31 million tonnes in 1980 to more than 210 million
tonnes in 2010, the largest figure of any country in the world,
the report said, quoting data from Norton Rose Group.
The country is expected to produce twice as much waste as
the US by 2030, according to the World Bank.
Under its 12th five-year plan, China is providing tariffs
and subsidies to support the environmental protection industry,
as it is looking to move away from landfill, which now takes up
around 80% of waste, towards greater recycling, specialized
waste management infrastructure and waste to energy, the
strategists pointed out.
The Chinese government has launched "a number of initiatives
to reform the severely under-resourced waste and water sector,"
"Companies that stand to benefit from this deregulation
process present an interesting investment opportunity, in our
In India, there are opportunities in the waste-to-energy
(WtE) sector, with the Ministry of New and Renewable Energy in
the country estimating that municipal solid waste and sewage
offer the potential to generate 1,700 MW of power, "although
the technology is nascent and generation stood at only 100 MW
in January 2013," the Bank of America Merrill Lynch analysts
They noted that "in the 2013 financial budget, the Indian
government said explicitly that it will support municipalities
implementing WtE projects through different means, such as
viability gap funding, repayable grants and low-cost
Waste-to-energy is also an opportunity in Russia, where
municipal solid waste is overwhelmingly sent to landfills.
"The remaining capacity of landfills is estimated to be
30-35%, meaning that Russia will need to double capacity to
accommodate growing volumes of waste by 2025," the strategists
The country has the potential to recover up to 45% of waste
by 2025, especially via waste-to-energy, if it can meet
investment demand of around 40 billion euros, they said quoting
Such an investment could generate additional revenues of 2
billion euros from recoverable materials.
Municipal solid waste is a problem for South Africa as well,
where only 10% of it is recycled. Like for most emerging
markets, the biggest challenge for South Africa is moving away
from land filling, as its relatively low costs makes
alternative technologies and practices seem financially
But the country has a National Waste Management Bill which has
set a national target to cut by 70% before 2022 the amount of
plastics, cans, paper, glass and tires that are sent to
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