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The OFT today announced a market study, supported by Ofwat, looking at the market for treatment of organic waste. The study will look at whether the market is working effectively to deliver the best outcomes for customers. 

Organic waste has three mains sources: sewage, food scraps discarded as part of household rubbish and waste products from the food and farming industries. There are new opportunities to use advanced technologies for producing energy from this waste. These include techniques like 'anaerobic digestion' which ferment organic waste and produce clean energy. The study will examine whether there are appropriate incentives in place for the efficient use of these technologies.

The OFT decided to launch this study after considering a proposal and request from Ofwat. The OFT will lead on the study and utilise its experience in conducting market studies and of the municipal, commercial and industrial organic waste sectors. It will be closely supported by a team from Ofwat who will provide expertise of the sewerage sector. 

The study will examine a number of themes, including:

• whether price regulation of sewage-sludge treatment, recycling and disposal services remains appropriate,what scope there is to encourage greater competition, and what implications this may have for economic regulation
• whether there are any barriers specific to efficient investment in and use of 'co-treatment' where waste from a variety of different sources is treated at a single facility
• what might be done to encourage efficient investment in advanced treatment techniques across the economy more widely.

Heather Clayton, OFT Senior Director of Infrastructure, said:

'Advanced organic waste treatment techniques like anaerobic digestion offer tremendous opportunities to produce clean energy and reduce unnecessary waste.

'We need to make sure that the conditions are right to maximize the potential for these technologies to benefit the UK.'

Cathryn Ross, Ofwat Director of Markets and Economics said:

'The water and sewerage sectors have an important role because they treat sewage sludge - one of the key sources of organic waste. 20 years ago sludge was a major environmental problem. Now it gives companies the opportunity to engage in new markets. But these opportunities bring challenges in ensuring fairness for water customers and competition across the organic waste sector.

'Looking carefully at how we regulate sludge, is part of our much wider review of how we regulate to deliver a sustainable water and waste water sector that can deliver for customers for decades to come. By sharing best practice and tapping into the OFT's expertise, we will make better informed decisions about how - or even if - we regulate organic waste in the sewerage sector.'

The OFT expects to conclude the study in July 2011 in time for any recommendations to feed into Ofwat's wider review of economic regulation in the water and sewerage sector.

Key parties who wish to comment or make a submission should write to: Organic Waste Market Study, Office of Fair Trading, Level 2, Fleetbank House, 2-6 Salisbury Square, London EC4Y 8JX or email organicwaste@oft.gsi.gov.uk.

NOTES

1. See further Q&A on the market study.
2. OFT market studies are carried out under section 5 of the Enterprise Act 2002 (EA02) which allows a market-wide consideration of both competition and consumer issues.
3. Market studies involve an analysis of a particular market with the aim of identifying and addressing any aspects of market failure from competition issues to consumer detriment and the effect of government regulations. Possible results of market studies include enforcement action by the OFT; a reference of the market to the Competition Commission; recommendations for changes in laws and regulations; recommendations to regulators, self-regulatory bodies and others to consider changes to their rules; recommendations to business; campaigns to promote consumer education and awareness; or a clean bill of health.
4. Ofwat is the economic regulator of water and sewerage companies in England and Wales. It exercises its powers in a way that it judges will protect the interests of consumers, promote value and safeguard future water and sewerage services by allowing efficient companies to carry out their functions properly and finance them. Further information on Ofwat's review of economic regulation in the water and sewerage sectors is available at www.ofwat.gov.uk/future.