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Future changes within the compliance market

By Martin Hyde

The environmental compliance market is set for quite a few changes over the next 5 years, primarily on the back of the Resources and Waste Strategy* and the ongoing consumer shift towards heightened awareness of the environmental credentials of products.

*The government published its long-awaited Resources and Waste Strategy on 18 December 2018. It is a significant document of 146 pages covering a huge range of waste-related issues. Although reform of the Producer Responsibility System for packaging appears to be the headline issue (alongside mandatory food waste collections), progress has been made on other sectors of the waste value chain, and the Circular Economy (or a movement towards a more Circular Economy) is a running theme throughout.

Packaging Compliance

Change to the current packaging producer responsibility legislation is on the horizon.

The current producer responsibility system for packaging has achieved compliance for around 20 years, however the system has been under increasing pressure to change to meet a more demanding waste management system which reflects the change of material consumption we have seen over the last two decades. As a result, the regulations are currently undergoing review.

The review process has been further catalysed by the implementation of the Circular Economy Package. This sets out specific requirements for EPR (Extended Producer Responsibility) regulations, including a minimum of 80% of the full net costs of collection, sorting, recycling and final disposal of packaging waste generated by producers to be covered by producers themselves.

Recycled cardboard

What we know for certain

The government published its Resource and Waste Strategy towards the end of 2018 and a set of consultations are due to follow. These consultations will cover:

• Setting material recycling targets beyond 2020

• Deposit Return Schemes

• Producer Responsibility (the PRN system) Reform

• Potentially the 30% Recycled Content Tax

Any reform to the producer responsibility system is unlikely to come into effect until the start of 2023.

Producer Responsibility Reform – what might change?

Packaging Reform is considered an immediate priority, with legislation to begin in 2021, to be implemented in 2023. There are various aspects that could change, including a potential full overhaul of the system. These changes can be categorised as follows:

Costs – due to the 80% minimum (the government have indicated they are interested in going beyond minimum requirements) net cost requirement, it is highly likely that the costs of the regulations to a producer will increase post regulatory reform.

Data Requirements – depending on if there is a change to the point of compliance in the system (currently the responsibility is shared) and if a new system requires more detailed data, the data submission requirements will likely increase. This could include a full movement away from the currently used “Data Tables”, but could also add requirements for data reporting on end-of-life performance.

Modulated Fees – there is a requirement for some form of modulation as part of the Circular Economy Package, whereby producers’ fees are based on the environmental performance of their product’s packaging. This could include Recycled Content, Recyclability, “Litterability”, how easily sorted an item is, etc.

Reliance on Exports – the current system has been criticised for its reliance on exporting waste, and it is generally accepted that UK recyclers are at a disadvantage over exporters under the current regulations. This could be reviewed as part of regulatory reform.

Heart in hedge

External Changes

Environmental legislation changes outside of the producer responsibility regulations could also have an impact on businesses handling packaging:

Taxes – we have already seen Philip Hammond propose a recycled content tax (October 2018) and there is potential for other taxes to be introduced targeting specific items which don’t conform with the current waste management system.

Bans – there is currently an ongoing consultation around the banning of plastic straws, stirrers and cotton buds. Further specific item bans could be on the horizon for “problematic” material.

Levies – due to the success of the plastic bag levy, the public appear drawn to rolling this concept out to other items. The government has made it clear that implementing a levy on coffee cups is not planned at the moment, but this could still be considered for other packaging / products with low performance in the waste management stream.

Pens and money

Evidence Procurement

PRNs (Packaging Recovery Notes) are the sole evidence of compliance obligations within the Producer Responsibility (Packaging Waste) Regulations. Due to their complex position as a Pseudo Commodity traded by specific parties within the waste management system, they can vary in price significantly. Although the main driver for PRN costs in theory is tied to the recyclability and value of specific materials, the actual price paid will fluctuate based on the perceived supply and demand.

These factors are not always clear due to published data updates on the NPWD not always reflecting the actual supply of PRNs onto the market (monthly data submissions are non-compulsory and quarterly updates have been known to be revised before). This, combined with a relatively significant lag time between “placing on the market” of PRNs and public reporting, can lead to a pricing discourse.

Due to the above and ongoing material-specific issues causing heightened variance in PRN pricing, some examples from 2018 are below:

  • China’s recent “green fencing” policies for plastic and paper
  • Significant supply issues for wood recycling based on a series of competing governmental legislations
  • Rumours of potential market fixing in the aluminium sector (subsequently reported to the Competition and Markets Authority for investigation)

Future changes to the PRN market are likely to consist of price fluctuation and a movement away from reliance on exporting waste as more producers seek to fund the development of the UK recycling industry.

Stock chart

WEEE Compliance

The future of the WEEE regulations is not yet firmly set in stone. The UK has vowed to follow the EU’s movements on eco-design. There is also the possibility that some form of modulation will begin to apply for WEEE; meaning that there may be a shift from “pay for what you replace” towards a system more in line with the “polluter pays” system, whereby WEEE fees are applied based on a product’s direct environmental credentials rather than its predecessor’s.

Whilst changes to the WEEE regulations could have a high impact on the levels of data and method of funding provided by producers into the waste management system, the relationship between compliance schemes, their customers and their suppliers should remain largely unchanged.

Extended Producer Responsibility

Two additional Extended Producer Responsibility Schemes are set to be reviewed and consulted on by DEFRA by 2022. Whilst the specifics of these two schemes are not yet available, they could cover a range of waste management issues such as waste carpet disposal, tyre disposal, chewing gum disposal, litter removal and many others.

Martin Hyde, Policy Researcher, Comply Direct

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