Memorandum submitted by the Wastepack
Group Ltd
REFINEMENT OF THE PACKAGING WASTE REGULATIONS
INTRODUCTION
1. The Wastepack Group provides environmental
support services in distinct but related market sectors to more
than 700 customers in the UK. We are the leading supplier of independent
waste management services to large and multi-site organisations
through a nation-wide network of designated contractors. Through
our recyclate management activity we extract recyclable material
from our customer waste streams and identify commercially viable
markets for the materials. Companies within the Group also operate
a number of compliance schemes for the packaging waste regulations.
2. During 2002 we submitted evidence to
the House of Lords Select Committee on the European Union and
to the House of Commons Environmental Audit Select Committee commenting
on negative aspects of the packaging waste regulations and proposing
modifications. In view of the criteria established for this inquiry,
we are confining our evidence to refinements which we believe
would enhance the efficiency of the operation of the packaging
waste regulations. Some of these issues also have a broader relevance
to future producer responsibility legislation involving other
product areas.
3. The UK has benefited overall from the
approach adopted for implementation of the Packaging Directive.
It has proved to be relatively low cost. The system has supported
existing recycling activity and achieved some increases. The changes
we propose are broadly in line with the views of many other participants
in the compliance market. They are intended to clear up some of
the anomalies in relatively new legislation which has not so far
been significantly amended. Achieving future targets will be demanding
and require the creation of costly new recycling infrastructure.
Refinement is necessary to facilitate this task.
IMPROVING THE
OPERATION OF
THE MARKET
4. The UK system is based on market forces.
The total demand in the market is established by the combined
obligation of UK businesses to buy Packaging Waste Recovery Notes
(PRNs) from reprocessors and exporters of recyclate. The tonnages
required are determined by the statutory annual recycling targets
set by Parliament. The supply side consists of the total tonnages
of packaging waste accepted for reprocessing by the accredited
reprocessors and exporters. Achieving the future European targets
is generally agreed to be dependent on big increases in the supply
side infrastructure. This task is very different from that of
simply influencing existing purchasers of commodities to choose
recycled raw material rather than virgin material. Investment
in infrastructure will usually take around two years from inception
to actually deliver increased recycling and additional PRNs.
5. In order to achieve this step change
in market dynamics it will be necessary to create a regulatory
framework for long term planning. There must be a high degree
of certainty about the targets for three years ahead so that the
compliance schemes, producers, reprocessors and necessary new
entrants to the sector can plan ahead accordingly and provide
for the costs.
6. Once the targets are set at national
level, the bottom-up system of collecting statutory annual packaging
data from obligated organisations is expected to come up with
a matching total tonnage number. This data system needs refinement
to achieve a much closer match between the national target and
the actual number which emerges from the data process. Otherwise
it is very difficult for the supply side of the compliance process
to deliver the appropriate level of recycling. Whatever route
is taken, suppliers need to know at the beginning of the compliance
year what demand they are expected to meet.
7. The market will function more efficiently
if information about fluctuations in supply and demand is made
available to all participants as soon as it is available. Usually
such information is obtained first by the environmental Agencies
who pass it on to DEFRA. Access to this information assists in
planning compliance and naturally also affects the attitude of
both sides of the market to the price of PRNs. It is therefore
important that this price-sensitive market data is issued promptly
and even-handedly to all participants. The recent initiative by
the Environment Agency to co-ordinate and issue data at quarterly
intervals is a welcome improvement. However the possibility of
making the latest data constantly available at an open Internet
location warrants consideration.
REFINING THE
FINANCIAL SYSTEMS
8. We fully support the PRN system. It is
an efficient method of measuring the volume of reprocessing that
has taken place, provided that there is effective monitoring.
It has functioned well as a method of supporting the existing
recycling activity, for example when secondary materials prices
become uncompetitive versus primary material prices in a fluctuating
market. It is also an effective method of incentivising existing
reprocessors to increase capacity. However other essential tasks
need to be achieved in order to meet the future targets. New entrants
to the reprocessing industries will need to be encouraged, totally
new uses for recycled material must be developed and new collection
infrastructure designed and built. The PRN funding system is likely
to need refinement in order to support these new tasks.
9. UK industry has now paid almost £400
million in packaging compliance levies since 1998. Costs are likely
to reduce in 2003 due to the decision not to increase targets
for this year. However costs are likely to increase significantly
again in future years once the higher targets are set. Our customers
are required to bear these costs, with the added complication
that it has so far been very difficult for them to forecast costs
in their annual budgets. Apart from seeking a greater degree of
certainty about costs, many obligated businesses are pressing
for greater transparency on how these large sums of money are
spent. They are entitled to be given confidence that the money
is being spent effectively and that the profits of all organisations
involved in the various stages of the recycling process are reasonable.
The Agencies monitor and report in very general terms on the application
of PRN funds by accredited reprocessors. It would be beneficial
if all reprocessors made more specific information available as
some do already.
10. A significant proportion of the material
in the UK packaging chain avoids attracting an obligation because
of the structure of the regulations. Packaging handled by smaller
businesses falls into this category as does small amounts of packaging
handled by large businesses. Goods imported directly by individuals,
such as drinks bottles and cans, also avoid an obligation. There
is also an element of obligation evasion. All this means that
the companies caught by the regulations have to achieve a much
higher target than the UK national target. It could require a
target of around 70% for obligated companies in order to meet
a future European target of 60%, for example. Many obligated businesses
would like to see a clear analysis of the unobligated packaging
and an examination of how the differential can be reduced.
CLARIFYING AND
STRENGTHENING THE
REGULATORY PROCESS
11. We fully support the principle of clarifying
and strengthening the regulatory processes. Major national tasks
and large sums of money are involved. An argument for economic
regulation can be developed but it seems unlikely that there would
be an opportunity for primary legislation to establish this in
a viable timescale. Therefore inevitably the task must remain
with the environmental Agencies. Ambiguities in the regulations
need to be clarified and interpretation needs to be consistent.
12. More significance must be attached to
the statutory compliance plans of compliance schemes and individual
compliers. Longer visibility of future targets will enable these
plans to be structured on a longer term basis. The task of meeting
future higher targets will require a more strategic approach than
in the past. This can only be achieved through the way compliance
plans are reviewed, co-ordinated and audited by the environmental
agencies.
13. The surprising increases since 2000
in recycling levels and PRN supply from certain material streams
has caused concern about the possible fraudulent issue of PRNs
within the voluntary accreditation structure. The Compliance Schemes
Working Group (COSWIG), the organisation to which compliance schemes
representing most of the UK's obligation belong, has expressed
great concern about this matter. It recently issued a statement
expressing extreme concern that the UK's ability to meet future
targets is being undermined by the fraudulent issue of PRNs. We
welcome the strong commitments given by DEFRA and the environmental
Agencies that action will be taken on this matter.
14. Tougher recycling targets for packaging
and the extension of producer responsibility into other product
streams will place increasing pressures on the regulatory Agencies.
The registration charges placed on obligated organisations in
2002 to fund the regulatory process amounted to less than 3% of
the total cost of compliance. We should ensure that there is a
sound framework for consistent and effective regulation, even
if this requires some increase in registration fees.
The Wastepack Group Ltd
6 January 2003
| 
