by Phil Conran
5 minute read
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.
Nota bene
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.
Packaging recovery in action. Photo by Lance Cpl. Zachary Majors.
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.
Bum note
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.
Raise your glass: a huge increase in glass PRN income has done little to drive recycling
- 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.
Sick note
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.
Phil has put his points well but they are misguided. The PRN is not only fit for purpose but also with minor modifications able to resolve future requirements whether that be increasing the collections of household waste (difficult to define, measure and verify) or funding litter collections. It is a fair and equitable system allowing a balance between supply and demand and ensuring that the largest and the smallest have the opportunity to be treated the same.
To respond to the points raised:
1. As Phil knows the PRN system was never predicated on all recycling being reported. A PRN is solely evidence of reprocessing needed by UK producers to use for compliance with the UK packaging producer responsibility obligations. It is a voluntary system for UK reprocessors and exporters. It is up to them whether they wish to join in and if they do not they also forgo the opportunity of generating income from the system. There has been recent speculation that the PRN market has been abused by reprocessors and exporters deliberately withholding timely reporting of tonnage from the National Packaging Waste Database (NPWD) to create an apparent shortfall to stimulate panic buying. If that speculation is correct, it is a market abuse, otherwise known as fraud, which should be resolved by effective regulation assisted by more regular reporting. To state that a system needs to be replaced on account of abuse is an act of desperation akin to leaping out of the frying pan into the fire!
2. If the desire is that all recycling should be reported then this is outwith the remit of the current PRN system and a supplementary system is required, maybe complementary to the NPWD or through the environmental permitting system as suggested. If the UK wishes to gather data for all packaging reprocessed or exported, which has its merits, then accreditation will have to be compulsory and the charging structure revisited to ensure that there is no charge for registering tonnage on the NPWD only a charge for issuing PRNs.
3. Phil suggests that PRN funds have not been distributed to where it is needed and yet as he acknowledges the UK has met its business targets every year. While it is appreciated that the PRN system is part of a portfolio of economic instruments that has delivered this satisfactory result, it also indicates that the necessary funds would appear to be reaching the areas of need to the level required.
4. Transparency is a much abused term. Everyone wishes to know more about another person’s business than they are prepared to reveal about their own. In this Governments are as reluctant as industry. Nevertheless a greater level of knowledge of the use of PRN funds would give all involved a greater reassurance that not only has the system delivered but also where it has delivered. As part of the conditions of accreditation there should be a requirement for accredited exporters and reprocessors to publicly declare retrospectively the total they have received in PRN income in any compliance year and on what those funds have been spent. This could be displayed on the NPWD and the accredited company’s website.
5. Phil is concerned that the lack of PRN price certainty discourages investment. Yet there are opportunities to secure price certainty, using the forward markets on The Environment Exchange is one example, it is those involved in the market that make the decision as to whether that suits them or not. To date the preference in the PRN market as in all other secondary raw material markets is to use spot rather than long-term fixed prices (incidentally fixed prices only look desirable if in the long term you are paying less than or equal to the current spot price or being paid more than or equal to the current spot price and locked all the other variables as well!). So the PRN market reflects the same level of uncertainty as all other markets in which the reprocessing industry is involved and yet that industry has been making investment decisions and expanding infrastructure for centuries. That investment will continue in whichever direction it is pointed. The PRN system has to date only been asked to meet UK business targets to fulfil EU Producer Responsibility Targets for packaging something that it and industry have combined effectively to achieve. If the Government wishes more packaging to be recycled then it should set higher targets and ensure that they are met.
So while Phil is correct in stating that the PRN system without an aim is like firing a blunderbuss at fresh air, he is incorrect in stating that it has no aim. It has a clear aim and it is achieving that aim with the accuracy of a rifle. With a few minor modifications, to continue the firearms analogy, the addition of a bipod or a telescopic sight, the accuracy of the aim will be further improved.
If the Government wish to change the point of aim then the PRN system can adjust to that too. If the Government wishes multiple aims concurrently then more than one rifle is required.
While the Scottish review is an interesting exercise whatever is proposed is additional to the PRN system, which is more than capable of adapting to meet that requirement, and will come at an additional cost and should be identified as such. While different systems could run between Scotland and the remainder of the United Kingdom, it may well result in regulatory arbitrage which would be unlikely to either benefit the environment or achieve the desired outcomes.
Looking forward key issues that need to be addressed to improve the current PRN system above those raised earlier are accuracy of data, the review of plastic and steel packaging placed on the market to compliment the recently completed review of glass packaging are a step in the right direction, and revisiting protocols to more accurately reflect UK and overseas reprocessing capabilities. As always accurate and consistent regulation is a key ingredient in any effective legislation.
Not the first time you have made this argument Phil – but it gets more compelling each time. The PRN system did the job it was designed for – meeting packaging directive targets-tolerably well, but life has moved on. Packaging remains a significant component of the household and commercial waste streams but the focus of policy is no longer EU targets – it should be about getting as much material out of the waste stream at the appropriate point in the waste hierarchy as possible and getting it back into use. We do need new instruments based on analysis of the current barriers to recycling and what steps can overcome them.
It would be good to get the export anomaly sorted in the meantime.
Great to see some original thinking taking place around the whole PRN / PERN saga. I agree with Phil – the legislative instrument is no longer fit for purpose and, in fact, the required purpose has now changed. Time to create a focussed set of legislative instruments which DELIVER the required transition to a circular flow of useful materials and makes sure that the stakeholders involved in that new economic model share the benefits for their own actions. That might mean rewarding brand owners who change pack designs to enable easier recycling, or councils who can extract higher capture rate of the right materials or recyclers who invest in the latest technologies to actually recycle products – and make it happen in the UK. – ReMade in Britain – is a great slogan – so it is time to make ‘Positive Carrots’ which support our growing Resource Economy, and time to ‘delete’ an old counting mechanisms which costs money but does not deliver the desired real outcomes.
Keith Freegard – Director Axion Recycling Ltd