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COP27: What is EPR and why is it important?

10th Nov, 2022

It’s COP27, and on the circular economy theme, we’re taking a look at Extended Producer Responsibility (EPR) – which the UK Government is planning to implement for packaging waste.

Product lifestyle – Linear Production Models 

A product’s lifecycle takes it from raw materials to manufacture, distribution, sale, use and disposal. Different costs are borne by different actors through these stages, with the producer typically paying for the raw materials and manufacture of their products.

Product design for cheaper raw materials and more efficient manufacture is in the interests of the producer – saving costs means higher margins. Distribution, sale and consumer experience are also in the interests of producers to improve – the more people buy their product, the higher their revenues.

But once the product goes out the consumer’s door, the impact on the producer is minimal. There is no incentive on the producer to design their products for ease of processing at end of life because the costs of processing are borne elsewhere. Even though there is increased consumer awareness of recycling and other environmental issues, this does not yet hold enough influence over producers for large-scale change to product design approaches. Meanwhile, public services and taxpayers bear the costs of collecting waste, and recycling providers must seek to make profits from the sale of recovered material or charges for the processing of waste. No wonder there are issues with waste being transported overseas to locations where processing is cheaper and subject to less stringent safety and environmental impact requirements.

Under this model, a producer could make their products from the most complex and difficult to recycle materials, without having to factor in the costs this poses for actors downstream.

EPR scheme and how they work

EPR schemes intend to change these incentives, placing the costs of collection, sorting and processing waste back onto the producer through fees. Often, these are applied by tonne of material a producer places on the market, and can be designed to recover the net costs imposed on the recycling system by the products.

An additional feature of EPR schemes is fee modulation – the adjustment of fees in order to incentivise or disincentivise certain features of products.

The UK Government is currently in the process of designing an EPR scheme for packaging, to include fee modulation according to the recyclability of the materials.[1] Many European countries have existing schemes; the French scheme, CITEO, uses some of the most detailed criteria for recyclability modulation.[2] Penalties are applied for particular features of packaging that cause disruption or difficulties for recycling, for example, carbon black coloured plastic, glass other than soda-lime glass, the use of mineral oil inks on paper or card, or PET bottles containing aluminium. Bonuses are applied for features the scheme wants to incentivise, for example the integration of recycled materials in plastic packaging.[3] CITEO has been seen to have an impact on the packaging that producers place on the market, with the number of producers receiving penalties decreasing by 49 percentage points between 2012 and 2015. For the specific case of PET bottles containing aluminium, these constituted 2.3% of clear PET bottles in 2012, reducing to 1.1% in 2015.[4]

What are the policy implications of EPR schemes?

The UK EPR scheme for packaging will be a welcome contribution to the recycling system in the UK – which needs to be developed if the UK is serious about dealing with the packaging waste it produces. This is a crucial step towards a circular economy, the impact of which is amplified when combined with other complementary policies, such as consistent recycling collections which will improve the availability and quality of materials for processing. Perhaps in the future, our product packaging could even be recycled in a system such that the same materials continue to package those products in a continual cycle, with no additional waste or raw materials required.

The recycling agenda does, however, need to be balanced with other important objectives, including Net Zero. Thought needs to be given to the design of this policy and others to ensure EPR would not present adverse impacts for carbon dioxide emissions levels (for example by incentivising packaging which is recyclable, but emissions intensive), given the urgent need to mitigate climate change. Some producers have been seen to be changing their packaging with the aim of lowering its carbon footprint, including switching to paper-based drinks cartons[5] – but if recyclability was the driving factor, cartons would be unlikely to be chosen over other typical beverage packaging types such as plastic bottles or cans. The trade-offs between addressing recyclability and carbon emissions represent significant challenges for policy makers but also provide an opportunity to lead with policy design that is holistic and well thought through. An EPR scheme that factors in both recyclability and carbon intensity hasn’t been seen before – but might be an effective solution.

[1] https://www.gov.uk/government/consultations/packaging-and-packaging-waste-introducing-extended-producer-responsibility

[2] https://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=ENV/WKP(2021)16&docLanguage=En

[3] https://bo.citeo.com/sites/default/files/2021-02/20210127-Citeo_Guide_Tarif_2021_anglais.pdf

[4] https://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=ENV/WKP(2021)16&docLanguage=En

[5] https://my.morrisons.com/blog/community/milk-cartons/

Authors

Anna Quincey

Economic Analyst, Low Carbon

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