March 21st, 2014
by Phil Conran
When the Packaging Waste Regulations started in 1997, the Packaging Recovery Notes and Packaging Export Recovery Note (PRN) were conceived as pull tools to meet demand when there was a risk of recycling targets not being met. Reacting to supply/demand situations, the PRN enabled money to be targeted where it was needed at producer’s expense. The Government’s view was – and still is – that the EU targets should be met in the cheapest way possible and that the PRN should not favour UK recycling or export nor should it favour household waste or C&I.
The system was predicated on:
- all recycling being reported; and
- money filtering down to the point where it was needed, be that collection or reprocessing capacity.
Those that advocate the PRN system point to the UK’s low cost in meeting EU targets compared to other Member States and to the fact that business targets have always been able to be met even though on occasions, the EU targets have not.
However, the last couple of years have exposed the deep flaws in the PRN system that even its most ardent admirers have to accept have left the UK reprocessing industry deeply exposed.
So what are the PRN’s benefits? Its key one must surely be that it can very rapidly create the economic incentive to recycle when market conditions would otherwise act as a constraint. In 2009 for instance, the global commodity downturn saw a collapse in UK steel reprocessing and without the sharp rise in PRN prices subsidising exports, 60k tonnes of cans would not have found a home. And then when targets are being easily met, PRN prices fall to next to nothing and producers get extremely cheap compliance.
In contrast, the dis-benefits of the PRN system are numerous and growing.
- In theory, the PRN ensures that UK recycling activities are measured. But when prices are low, small reprocessors in particular tend not to go through the voluntary accreditation process. Even when prices are high, there is no guarantee that all reprocessors and exporters will register. The PRN accreditation system does not, therefore, reflect the full extent of UK recycling and yet it is used as the metric to measure the UK’s recycling performance.
- The PRN puts the money into the hands of the reprocessors and exporters yet provides no obligation on them to disseminate it to where it is needed. Indeed, it creates a disincentive to growth as the cost is applied to all recycling regardless of whether it needs additional subsidy or not. Why expand recycling if it simply brings down the price of the PRN? Glass provides a clear example of market manipulation. Since 2005, demand has been static and since 2009, there has been no growth in recycling. And yet, from 2009-2013, over £200m of PRN subsidy has gone into the glass recycling industry. Where is the accountability for that? Some might argue that without that subsidy, the UK would have seen recycling rates fall, but why should they have? The PRN price has remained artificially high because the PRN market is dominated by a small number of players with very large market shares. The PRN is the commodity, not the material. This cannot be why the PRN system was set up.
- The PRN provides no long term investment opportunity. Indeed, many see it as a disincentive to invest in the UK recycling as high PRN prices tend to suck material overseas. How can any business use it for anything other than to increase the value of the business through retrospective investment? Creating new opportunities requires a guaranteed long term price subsidy that fluctuating PRNs cannot deliver.
- The PRN is not a transparent mechanism. A constant complaint from producers is that they have no idea where their money goes and from local authorities, that they never see any of it. In total, the PRN and its export equivalent, the PERN, have raised over £1bn in subsidy. How much of that has actually been used to create additional recycling is impossible to calculate as much of the growth in recycling has happened though other factors – Landfill Tax, environmental pressures, PR, local authority targets etc. The UK has plucked the low hanging fruit and to achieve real growth demands investment in less economically attractive collection and processing.
The PRN mechanism must surely therefore be on its death bed. If we want recycling growth, it is clearly not the mechanism to achieve it. If we want measurement, it only measures what is reported. If we want producer responsibility, well then surely that must come with some transparency and clear objectives. Producer responsibility for what? Once you decide what you want to achieve, then the answer surely emanates from that objective. If you want sustainable growth, then you need clear targets and a predictable funding mechanism for investment. If you want producers to pay for that, then producers should be charged an equitable fee on a level playing field. If you want to target household packaging waste, then give local authorities the money with clear targets to expand collections. If we want to track how much packaging is recycled, then link the reporting to environmental permits. But continuing with the PRN system with no apparent aim in mind is like aiming a blunderbuss at fresh air.
Thankfully, there is an opportunity to explore a change of direction, and a path away from the PRN. Scotland is currently considering an alternative system to increase packaging recycling up to the levels of the rest of the UK. This cannot be achieved by an extension of the current UK system without lots of vested interests creating short term benefits at the expense of long term growth. Surely this is the chance for some radical thinking, following the path set by the Zero Waste regime, to fundamentally change the way that packaging recycling is managed in Scotland and to finally see the Packaging Regulations achieve some real sustainable benefit.