We learnt about Bill T/13958 ‘to amend certain Acts related to energy and waste management’ from the Hungarian Parliament’s website on 25 November 2020. The Bill proposes, among other measures, to nationalize and then grant a concession for waste management public service activity; moreover, also in the private sector of waste management it would enact extensive nationalization and grant a concession to a single concessionaire, thereby creating artificial monopoly.

In the private waste management sector the Bill proposes to nationalize in general the taking over, collection, transport, pre-treatment, brokering, trade, and handing over for treatment of waste from products falling under the environmental product fee and (in the future) waste from products falling under extended producer responsibility (EPR), including those commercial and industrial wastes. Besides, the brokering tasks related to EPR and the environmental product fee would also be performed by the concessionaire, totally contradicting EU requirements on EPR schemes.

Also in the private sector the Bill proposes to nationalize as regards municipal waste management: a) the taking over of separately collected municipal waste from property users, and the transport, pre-treatment, brokering, trade, and handing over for treatment of the waste taken over; b) the taking over, collection, transport, pre-treatment, brokering, trade, and handing over for treatment of separately collected municipal waste from economic operators, arising in connection with their economic activity.

In addition to the above, the concessionaire would be placed in an artificial state monopoly position also on waste management activities related to waste from the deposit fee system and the brokering tasks related to that system. In parallel, waste owners, i.e. citizens and economic operators would lose their right to dispose of their waste as its owners; however, they would be obliged to finance the activity of the monopoly concessionaire. The concessionaire would be allowed to pick its subcontractors arbitrarily and carry out its activity without substantive control. That could lead to the collapse, without any consideration or compensation, of the private waste management sector which has been built up over the last 30 years, and is currently operating effectively on a market basis, ensuring the attainment of recycling targets.

There has been no public or professional consultation about the plans in question. There has not been any substantive consultation with the associations representing the concerned economic operators or with the economic operators themselves.

According to the justification of the Bill, the purpose of the restructuring of the waste management market is to continue ensuring the level of environmental protection as required by the Fundamental Law of Hungary, to improve the efficiency of waste management public service tasks, and to move towards a circular economy. The nationalization and concession granting proposed by the Bill is unprecedented in the EU and the world, and the aim of moving towards a circular economy definitely does not require such a drastic intervention in the market. The Bill does not refer to any public interest which would justify the abolition of an entire industry and the seizing of wastes with a value.

Furthermore, the Bill does not address the damaging effects of the monopoly which would abolish the competition market: increasing prices, deteriorating efficiency, and a decline of economic activities in general. Nor does it deal with the problem that the state would end up in a situation of dependence.

Concessions may be effective only in areas where there are not enough market operators for carrying out an activity. Currently there are 750 waste traders in Hungary and 1290 operators holding waste collection permits for the entire territory of the country. Those companies operate their countrywide collection logistics and pre-treatment capacities with high efficiency, covering all municipal and other wastes except waste falling under waste management public service. It is estimated that this part of the private waste management sector provides jobs for 30-40,000 people. It is unconceivable that a single concessionaire could efficiently substitute a nationwide free market of multiple operators.

The concessionaire would be allowed to fulfil its duty via subcontractor contracts, according to the Bill. There are not any requirements on the concessionaire’s choice on subcontractors; the concessionaire would be able to pick subcontractors totally arbitrarily, according to its own business interests. The concessionaire could choose not to use any of the existing and permitted domestic collection and pre-treatment capacities, which currently ensure that Hungary meet EU requirements, or choose not to use all of those capacities. Or it could cream off the whole (very small) profit of future subcontractors which actually carry out waste management activities. As a consequence of the planned nationalization and concession granting, both companies left out of the circle of subcontractors and companies which were forced by new circumstances to become subcontractors and were absolutely vulnerable to the concessionaire, could go under.

According to the Bill, due to the possibility of state aid, the concessionaire would perform its activity without any risk. The proposed model is a textbook example of ‘state capture’, where the concessionaire can only win, and would seize almost an entire industrial sector from the market economy for an indefinite period of time. Besides, the concessionaire would enjoy an overwhelmingly dominant economic position and unfair competitive advantage in a drastically shrunk (free) market waste management sector. In addition, via its brokering tasks related to the environmental product fee and later on the EPR system, it could steer its activities regardless of the interests of Hungarian recyclers. The latter, just like the subcontractors, would be completely vulnerable to the concessionaire.

Similarly to earlier proposals JEF/42590/2020-ITM and MKI/1557/2020 of 11 May 2020 on certain measures affecting the waste management sector, which were reported by the press, via the nationalization and granting of concession the Bill intends to solve the financing problems of the waste management public service sector, which problems are the result of earlier state interventions. Also similarly to the previous proposals, the Bill supports the expansion and the capturing of markets of the now single concessionaire.

As opposed to the declared high-sounding purpose of protecting the environment, the Bill serves particularly to reach the economic goals of the state and the future concessionaire. The solution chosen by lawmakers would lead to the unnecessary and disproportionate restriction of the freedom to conduct a business, the freedom of enterprise and of ownership, the free movement of capital, services, and goods, and the freedom of establishment, and is therefore fundamentally unlawful.

Hungarian Waste Management Federation (HOSZ)

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