MSW Valorization in Developing Countries - Overview & Outlook

by Scott Kraynak

MSW Valorization in Developing Countries – Overview & Outlook

Executive Summary:

1. Municipal Solid Waste (MSW) generation is expected to increase by 73% from 2.24 tonnes in 2020 to 3.88 billion tonnes in 2050.

2. Negative impacts from MSW disposal:

• Global warming from greenhouse gas emissions (GHG).
• Environmental pollution and disease from dumping in landfills without proper environmental controls.
• Oceanic accumulation of plastic waste and microplastic particle contamination of our food & water supply.

3. For this article, MSW valorization is defined as any process that captures value via creation of a useful resource and/or avoidance of a negative impact from waste disposal.

4. There is a significant opportunity to increase MSW valorization in developing countries – primarily lower-middle income and low-income regions where the majority of waste is dumped and there is very little conversion of waste into useful resources.

5. Two key market trends will accelerate the implementation of MSW valorization projects in developing markets:

• Increasing investment in green projects driven by demand for ESG investments, the desire to get in early on a market with massive growth potential and increasing project ROI due to government incentives.
• Decreasing capital and operating costs for MSW valorization projects as increased adoption in developed markets drive improvements in the core technologies and create economies of scale.

Municipal Solid Waste (MSW) includes solid waste that is typically managed by municipal governments including residential waste, commercial and institutional waste. Other forms of solid waste that aren’t included in MSW are industrial, medical, hazardous, electronic and construction/demolition waste. The largest category of MSW is food and green (yard) waste at 44% followed by paper & cardboard at 14% and plastics at 12%.

MSW generation is growing rapidly - “Around the world, waste generation rates are rising. In 2020, the world was estimated to generate 2.24 billion tonnes of solid waste, amounting to a footprint of 0.79 kilograms per person per day. With rapid population growth and urbanization, annual waste generation is expected to increase by 73% from 2020 levels to 3.88 billion tonnes in 2050.” - per the World Bank report - What a Waste 2.0: A Global Snapshot of Solid Waste Management to 2050

Negative impacts from MSW disposal include the following 3 major issues:

1. Global warming from greenhouse gas emissions (GHG). After MSW arrives in a landfill or a dump, it is buried as new MSW comes in and is dumped on top of it. This results in anaerobic decomposition of the organic material (food, paper, wood and yard waste) producing methane gas which has up to 86 times the global warming impact of CO2 over a 20 year time frame. Methane emissions from food waste in landfills account for 8-10% of global GHG emissions.

2. Environmental pollution and disease from dumping in landfills without proper environmental controls. Airborne pollutants include rotten odors and smoke from burning trash. Per the UN Environmental program, there are “significant adverse effects on the environment and public health. Emissions from open dumping, including dioxins, furans, mercury and other hazardous substances, contribute to air, water and soil pollution. Individuals working at these sites and surrounding communities face a high risk of inhaling and ingesting toxic substances, and there is a threat of diseases spreading due to poor sanitation and the presence of insects and vectors.”

3. Oceanic accumulation of plastic waste and microplastic particle contamination of our food & water supply. A significant amount of plastic waste that is improperly disposed of makes its way into oceans via rivers and other waterways. In 2021, the UN Environment Programme estimated that there was 75 – 199 million tons of plastics in the ocean. Between 9-14 million tons entered aquatic ecosystems in 2016 and this amount is expected to increase to 23-37 million tons per year by 2040 if action isn’t taken. Small microplastic particles from the breakdown of plastic waste in the ocean and microbeads in health and beauty products are accumulating in seafood and showing up in many other categories of food products including drinking water and kitchen salt posing a potential threat to human health.

MSW Valorization is commonly defined as “any process of recycling, reusing, or converting waste materials into resources from waste”. For this article, MSW Valorization is defined as any process that captures value via creation of a useful resource and/or avoidance of a negative impact from waste disposal. This expands the definition to include the collection and proper landfilling of waste which doesn’t create a resource but avoids significant negative impacts from the dumping or burning of waste. Dumping and burning of waste are very common in developing markets.

The EPA has defined a Waste Management Hierarchy that details waste management options from most preferred to least preferred.

There are multiple MSW valorization options at each level of the Waste Management Hierarchy.

1. Source Reduction & Re-Use – Source reduction and re-use avoids all 3 negative impacts from MSW disposal: GHG emissions, environmental pollution / disease and plastic waste.

• Eliminating or reducing the use of packaging
• Avoiding food waste by diverting for human or animal consumption
• Repairing items vs. replacing them

2. Recycling / Composting – Recycling and composting avoids all 3 negative impacts from MSW disposal: GHG emissions, environmental pollution / disease and plastic waste.

• Recycling is separating materials from the waste stream. and incorporating those materials into new products. Commonly recycled materials include metals, glass, paper, wood, plastics, electronics. 6% of waste is recycled in low-income regions, 3.7% in lower middle income regions vs. 29% in high income regions
• Composting is aerobic, biological decomposition of food waste, yard waste or other organic waste into a compost that can be used to enrich soil. Composting if done in with adequate air exposure avoids the methane emissions that occur when organic waste decomposes in a landfill. 0.3% of waste is composted in low-income regions, in lower middle income regions vs. 6% in high income regions

3. Energy Recovery – Energy recovery addresses all 3 negative impacts from MSW disposal reducing GHG emissions and avoiding environmental pollution / disease and plastic waste.

• Incineration is the combustion of MSW to generate steam and electricity. Incineration produces hazardous bottom /fly ash and air emissions – including heavy metals and dioxins & furans. <1% of waste is incinerated in low and lower middle income regions vs. 22% in high income regions.
• Anaerobic Digestion is a biological process where bacteria break down organic waste in the absence of oxygen producing methane. The methane gas produced is collected, purified and either injected into natural gas pipelines or used to generate electricity. Anaerobic digestion requires a purified stream of organic material (food and yard waste). All plastic, paper, metals, glass and other contaminants need to be removed. Anaerobic digestion, gasification, pyrolysis and other energy recovery technologies are applied to <1% of global MSW.
• Gasification is the high temperature (over 700C) conversion of the organic material (food, paper, plastic, wood and yard waste) in MSW into syngas (primarily CO, CO2 and H2). Steam and a limited amount of oxygen are injected into the gasifier. Syngas can by utilized to generate steam or electricity or can be converted into other fuels including hydrogen, natural gas, methanol, diesel and aviation fuel. Gasification processes the full MSW stream and unlike incineration doesn’t produce any hazardous waste or emissions.
• Pyrolysis is the high temperature (400C to 700C) conversion of the organic material (food, paper, plastic, wood and yard waste) in MSW into pyrolysis oil, syngas and char. Pyrolysis oil is used as a fuel or as a feedstock for plastic production. Syngas can be utilized to generate steam and electricity or can be converted into other fuels including hydrogen, natural gas, methanol, diesel and aviation fuel. Char can be used as a fuel, an additive to enrich soil or as an adsorbent for pollution control. Pyrolysis requires a purified stream of MSW with only organic content.

4. Treatment and Disposal

• Landfill gas capture reduces GHG emissions by collecting airborne emissions from a landfill and separating / purifying the methane from the CO2 and other components. The methane gas can be used to generate electricity or injected into a natural gas pipeline. 60% to 90% of the methane emitted from a landfill can be captured.
• Proper collection and disposal minimizes environmental pollution / disease when disposal is in a lined landfill with leachate controls. Plastic waste can be kept out of the ocean if contained in a landfill but it takes a very long time to decompose.

There is a significant opportunity to increase MSW valorization in developing countries – primarily lower-middle income and low-income regions where the majority of waste is dumped and there is very little conversion of waste into useful resources.

? 93% of waste is dumped in low-income regions, 66% in lower middle income regions vs. 2% in high income regions

? 6% of waste is recycled in low-income regions, 3.7% in lower middle income regions vs. 29% in high income regions

? 0.3% of waste is composted in low-income regions, 10% in lower middle income regions vs. 6% in high income regions

? <1% of waste is incinerated in low and lower middle income regions vs. 22% in high income regions

Two key market trends will accelerate the implementation of MSW valorization projects:

1. Increasing investment in green projects driven by demand for ESG investments, the desire to get in early on a market with massive growth potential and increasing project ROI due to government incentives.

2. Decreasing capital and operating costs for MSW valorization projects as increased adoption in developed markets drive improvements in the core technologies and create economies of scale.

Market Trend #1: Increasing investment in green projects driven by demand for ESG investments, the desire to get in early on a market with massive growth potential and increasing project ROI due to government incentives.

According to The Climate Policy Initiative, total climate financing has increased by 130% from $674 billion in 2018 to $1,550 billion in 2023. In order to limit global warming to 1.5 degrees C above pre-industrial levels, this will have to increase almost 5X by 2030 to$ 7,400 billion.

• Climate financing to Emerging Market and Developing Economies (EMDEs) ex China and Least Developed Countries (LDCs) has increased by 60% from $128 Billion in 2018 to $205 Billion in 2022.

• Climate financing to LDCs has increased by 105% from $17 Billion in 2018 to $35 Billion in 2022.

There is a big opportunity for MSW valorization projects that reduce methane emissions to capture a larger share of climate investment as less than 2% of climate financing went towards methane emissions reduction in 2019/2020. While most climate projects are solely focused on reduction of GHG emissions, MSW valorization projects address environmental pollution from waste in addition to GHG emission reduction. MSW valorization projects (including re-use, recycling, incineration, anaerobic digestion, gasification, pyrolysis and landfill gas capture) have a positive ROI on their own and don’t require grants, incentives or carbon credit payments to make them financially viable like carbon capture and sequestration projects. MSW valorization projects produce valuable outputs and tipping fees can turn feedstock into a revenue source instead of a cost.

3 key sources of funding for MSW valorization projects and companies in developing markets are The World Bank, The Green Climate Fund and Breakthrough Energy Ventures.

1. World Bank – committed $146 million across 11 MSW projects in 2023 in four countries, following a peak in 2022 where investments totaled $796 million across nine projects in six countries.

• According to a recent Independent Evaluation Group (IEG) review, “the Bank is, by far, the leader among multilateral development banks in SWM finance and knowledge (World Bank, 2022c)”
• On November 26th 2024 the World Bank committed $250 million to improve Morocco’s MSW management system.

2. Green Climate Fund (GCF)- committed $2.5B to 44 climate related projects in 2024 with a total expected funding over the lifetime of the fund of $16B or $61.5B with co-financing by 2027

• Created as part of the Paris Agreement
• Mandated to help developing countries achieve lower emissions and climate resilience
• Range of financing instruments: GCF can structure its financial support through a flexible combination of grant, concessional debt, guarantees or equity instruments
• Country focal points define investment allocation and public and private entities can participate
• Scope includes MSW valorization projects under the Energy Generation and Access and Infrastructure and Built Environment results areas.

3. Breakthrough Energy- climate VC fund backed by Bill Gates raised $839 million in 2024.

• Largest climate VC raise in 2024
• Invests in companies that can deliver significant GHG emission reduction

Market Trend #2: Decreasing capital and operating cost for MSW valorization projects as increased adoption in developed markets drive improvements in the core technologies and create economies of scale.

Regulations and incentives in the EU, China and US have created a favorable landscape for anaerobic digestion (AD), gasification and landfill gas capture projects in the EU (MSW to bio-methanol), China (MSW to bio-methanol) and US (MSW to Electricity). Developing countries can’t participate in these markets directly as production must be located in the EU, China or US. Increased deployment of these technologies will make them more efficient reducing capex and opex for projects in developing markets.

The Fuel EU Maritime Regulation and the EU ETS (Emissions Trading System) regulations work together to incentivize the production of green methanol in the EU by imposing increasing penalties on the use of fossil fuels for marine transport. In order to avoid penalties, shipping companies can use pure or blended green methanol. Green methanol can come from bio-methanol (produced from biomass – including agricultural / forestry waste, organic waste and MSW) or e-methanol (produced from hydrogen generated from renewable electricity combined with recycled or biogenic CO2). The bio-methanol price based on current FuelEU Maritime and EU ETS penalties is 1,343 Euro/tonne or 1,391 USD/tonne. This is a significant premium to the current 500 USD/tonne contract price in Europe and is incentivizing AD and gasification bio-methanol projects.

GENA is projecting rapid growth of renewable methanol in Europe through 2030.

The Chinese Action Plan for Carbon Dioxide Peaking before 2030 promotes the use of advanced biofuels, sustainable aviation fuel and other alternatives. Additional factors supporting the growth of renewable methanol projects in China include the following:

• Low project capex due to low-cost Chinese equipment manufacturing
• Demand for renewable methanol from the maritime industry including the 500 kta long-term methanol contract between Maersk and Goldwind.
• Availability of Biomass feedstock – almost 1/3 of renewable methanol projects in China will produce bio methanol

GENA is projecting rapid growth in Biomethanol production starting in 2025.

In the US, the Inflation Reduction Act (IRA) section 48E investment tax credit (ITC) provides tax credits that reduce the capital investment by up to 50% for a clean electricity project. 48E goes into effect in 2025 and is scheduled to last at least until 2033. A project has to have zero net negative lifecycle emissions in order to qualify for the ITC. AD and gasification projects that process MSW along with landfill gas collection projects can qualify as avoidance of landfill methane emissions can drive a net negative lifecycle emissions score. The ITC can cover up to 50% of the project's capital cost - 30% for meeting prevailing wage standards, 10% for meeting domestic content requirements, 10% if located in an energy community.