by Dominic Hogg
5 minute read
If you were asked to design a policy which was named ‘producer responsibility’, what’s the one thing you would try to make sure you did? The clue, I believe, lies in the name.
How is it, then, that UK policy makers have managed so successfully to limit the extent to which producer responsibility requires producers to be ‘responsible’? The framing EU legislation around packaging, ELVs, WEEE and batteries allows for – and encourages to varying degrees – producers to be made fully financially responsible for the recycling and recovery of the targeted waste streams. But in the UK, the way we have transposed the legislation on consumer packaging could barely be less likely to engender ‘producer responsibility’. Instead of the obligation being placed on producers, we make local authorities pick up the tab.
Just not cricket
Whenever a new Defra report emerges on packaging, just for a fleeting moment, I’m like a child at Christmas. I imagine that I might be given that shiny new, dark, cherry red cricket ball that I’ve been hoping for. I can’t help hoping, time after time, that the penny could finally have dropped that we haven’t made producers responsible. I am, of course, routinely disappointed: sometimes, there’s a rudimentary appraisal of some alternatives, but there’s never been much appetite for change, and a nagging doubt remains that the appraisals are set up to maintain the status quo.
The latest annual report from the Advisory Committee on Packaging (ACP) triggered the same reflex reaction. Now, my first degree was in physics and so I’m used to arcane concepts like anti-matter. But whilst I was prepared, yet again, for the ‘no cricket ball’ scenario, the ‘anti-cricket ball’ that ACP sent down came as a complete googly. What our system of producer responsibility urgently required, they said, was a new statutory obligation on local authorities to act as a supplier of materials to the market, to help producers meet their obligation. This seems to demonstrate a complete lack of confidence from ACP that the our system can do what it was designed to – and I suspect not without some reason.
The UK producer responsibility model is in effect a material-by-material system of tradable compliance credits – PRNs and PERNs – whose value in a given year is determined by the level of demand for them relative to their supply. Theoretically, if demand exceeds supply, higher PRN and PERN prices will stimulate additional collection and sorting.
Three key factors have tended to keep supply ahead of demand:
- Local authorities in England striving to meet recycling targets;
- The landfill tax, encouraging recycling of materials across the board; and
- The relatively slow pace at which recycling obligations have increased.
The first two factors have kept the supply of materials increasing, irrespective of the PRN / PERN system; though difficult to demonstrate conclusively, the latter appears to have played only a very limited role. Consequently, for years producers have seen their obligation discharged while paying only a fraction of the cost of collecting and recycling materials. Especially in the case of household waste, it has been local authorities, and hence taxpayers, that have picked up the tab.
Changing the field
The situation starts to look different, however, when recycling targets disappear for local authorities in England and the landfill tax escalator reaches its top level. It seems reasonable to question whether councils will continue the rapid increases we have seen in the separate collection of packaging waste for recycling. Might we at last see the price of PRNs and PERNs rise to a level where they start to do their job?
Perhaps not. The market-driven PRN / PERN system demands a highly flexible reaction from those collecting and recycling. Local authorities are not easily able to react to a change in the market; many contract out waste collection, typically using contracts of seven or more years, and which cannot quickly be adjusted in reaction to an increase in PRN / PERN values.
Can the UK start to box clever? Photo by Petri Krohn, via Wikimedia Commons.
Furthermore, the PRN / PERN values will drop back to close to zero as soon as supply and demand are in balance, so if an authority were to ramp up its efforts in response, it could be left in the invidious position of running an expanded service it could not afford in the longer term. At a time of heavily constrained budgets, why should they take a risk and pay one additional penny to fund an obligation which is not theirs, but that of producers?
Logically, a more direct and stable system of financial support for local authority services is required. Authorities need predictable funding to cover the costs of (at least) the service enhancements required to meet the targets. So, for example, if producers want to ensure that all local authorities collect a specific range of plastics, then they should simply fund the full implementation of that configuration through a mechanism of direct payments to councils.
This is not a novel suggestion, but it is a blindingly obvious one. It happens in the majority of other EU Member States to a greater or lesser degree, and it is the principal means through which producers are made financially responsible for the collection and recycling of household packaging.
It needn’t be so much revolution as evolution. The logic of the existing system is to fund the marginal increase in packaging collection and recycling required to meet the targets each year. The only difference is that a stable level of support for local authorities, rather than one which disappears as quickly as the required infrastructure comes into being, would be much more effective.
It would not increase the costs of achieving a given target, but would change the way in which those costs are shared. It would require the packaging supply chain (and hence, consumers) to pay more, but offer savings to Council Tax payers. Who knows, if we adopted it, we might even find ourselves moving towards something resembling the polluter pays principle, some fifteen years after producer responsibility was implemented. Perhaps I might get to unwrap my cricket ball at last!
Great to see that Steve Read has been inspired by this piece to expand his comment above into an article in MRW. Subscription only, I’m afraid – but for subscribers, it can be found here:
http://www.mrw.co.uk/8640576.article
Interesting discussion gentlemen!
I think where I agree with Dominic is that the current PRN/PERN system is not fit for purpose for C21, question is whether it was ever a true producer responsibility in the first place! Marginal (but important) growth is still needed in some materials e.g. plastics, laminates etc but elsewhere metals, glass, paper etc – the PRN/PERN is administrative only and as Dominic highlights, perhaps producer funds should be diverted into subsidising local authority collection.
I wonder whether we have become stuck in some closed thinking as options such as 100% of inidividual producer compliance coming from UK PRNs rather than PERNs or a set percentage coming from local authority rather than C&I sources…..are not impossible with the current system.
We are aleady seeing some voluntary extended producer responsibility initiatives (CCE – Ecoplastics for example), but these are in spite of, rather than in support of the current system. Over!
I have been arguing for a number of years now that local authorities have been subsidising the collection of packaging. Arguably this is at least partly their fault in the sense that they have been naive in the way they have sold on the commodities they collect. They are getting smarter and some more sensible deals are being done, helped in part by other market developments like changes in the vertical integration from players like UPM setting up their own sorting capacity and sourcing material direct from local authorities – cutting out other intermediaries.
Local authorities could be helped by setting targets for the PRN system which required a proportion of material come from household collections or to relate to packaging which is mainly found there eg pet bottle. There are administrative issues to resolve and we would need to careful of unintended consequences like damaging – developments in bring banks or “on the go” recycling. But it’s worth thinking about. It could be a a mechanism for funding incremental extensions of recycling collections.
On the cricket ball (or non-ball) there does seem to me to be a separate sort of argument. Local authority duties are still expressed in terms of waste in much the same terms they have been since the 1930’s. The continuation of that plays some part in attitudes which still think that the task is about getting rubbish away from households and moved on somewhere as quickly as possible. That must play some part in the choice of solutions which lead to poor quality materials and a lack of concern about where materials end up. A change in the nature of the duty could affect the way collections are viewed. I have occasionally thrown out the challenge to large local authorities to think about linking with local reprocessors and arranging collections that will provide them with quality feedstock to increase local wealth and jobs. It is not impossible that with the new city deals giving local authorities wider responsibilities that we could see schemes like this emerge eg Leeds or Sheffield changing glass collections to benefit local glass melters.
But we should not rule out the possibility of getting local authorities out of recycling altogether, leaving them dealing just with residual waste. That could fit well with a further restructuring of local government to complete the unitary council structure which Michael Heseltine continues to promote since he first started the process in 1990.
As ever you have written a stimulating article. However I would suggest that you have highlighted a flaw in local authority contracting rather than the PRN system. PRN funds flow down to the material collectors through the increase in material prices paid by reprocessors and exporters, the PRN issuers. The material collectors also benefit from the savings in landfill tax. So a double benefit of landfill tax forgone and enhanced commodity revenue is potentially available to every local authority.
While landfill tax is a certainty, commodity prices are driven by global factors and are unpredictable. The PRN price responds inversely both to dampen the impact of price movements and provide some continuity of income. The situation currently in glass will undoubtedly stress test the system.
What is certain is that if local authorities do not seek alternatives to landfill they will be faced with the cost of landfill tax for years to come to the detriment of their council tax payers. The advantage of entering the commodity markets as an alternative is that a revenue is available rather than a cost – additionally it provides all involved with a ‘feel good’ factor – and the PRN system provides some stability to otherwise volatile markets. The challenge is how the burden of the risk of price falls are shared as much as the single sided argument of who should benefit from the price rises.
The debate about quality is a separate and very important issue. One man’s quality is another man’s rubbish and vice versa. Beware you may find yourself polishing a tennis ball rather than a cricket ball but be assured we are all playing on the same pitch!”
Delighted by the cricket analogy.
Angus
Angus, as someone who has been making the same point as Dominic ad nauseam for a long time I’d like to address two points: Firstly you seem to argue that the general increase in landfill costs (which are mainly a consequence of a tax there ostensibly to compensate for the externality of environmental damage) should continue to be paid by people as citizens (taxpayers) rather than shifting the cost to people as consumers paying at the point of sale. LAs took on waste management at the time of the industrial revolution because it is a public good and would not be provided universally by the market. But we now have more sophisticated means of making the polluter pay. For some reason we can’t do pay as you throw in this country but PR offers an alternative, possibly better way to do this as it should, in the process of deriving competitive advantage, promote waste reduction at source.
The second point is that the total amount raised through Packaging PRNs is paltry. In Somerset it cost us about £20 per household pa to add Plastic and Cardboard to existing kerbside collections. If you divided the maximum total amount raised via PRNs in the UK and apportioned it out per household (assuming that 100% of it went to front line services!!!) it would cover about a tenth of that additional cost. Of course the world of PRNs is not so much murky as completely opaque and, as we learnt recently, open to fraudulent abuse. Quite apart from the undoubted pocketing of PRN revenues somewhere in the system, the administering the system seems to cost more than it raises. The opacity issue was part of the motivation behind M&S’s support to LAs such as Somerset, something which seems to make other producers surprisingly (or maybe not surprisingly given the favourable status quo) cross.
The argument always thrown back at me is the system always meets the targets. As we’ve seen recently with glass, it turns out it hasn’t. But more fundamentally if we want a proper circular economy and we really want to stick with the PRN system we should have set more stretching targets. Governments over the last decade have been pretty easily persuaded not to do this. If LAs have been flawed in anything it’s not speaking loudly enough about this but maybe we are stuck with a C19 attitude to doing our duty.