4Shifting the Financial Burden of Packaging Waste
35.The UK produces 600,000 tonnes of plastic bottle waste a year.55 The EU Waste Framework Directive provides the legislative framework for the collection, transport, recovery and disposal of waste, and includes a common definition of waste. The Directive requires all Member States to ensure waste is recovered or disposed of without endangering human health or environmental harm. It includes permitting, registration and inspection requirements. The Directive also requires Member States to take appropriate measures to encourage: firstly, the prevention or reduction of waste production and its harmfulness, and secondly the recovery of waste by recycling, re-use or reclamation with a view to extracting secondary raw materials, or the use of waste as a energy.
Producer Responsibility Obligations
36.Within the EU Waste Framework Directive there is a Directive on packaging and packaging waste which is implemented in the UK by the Producer Responsibility Obligations Regulation (PRO). The Regulation places a legal obligation on businesses over a certain size which make or use 50 tonnes of packaging a year to ensure that a proportion of the packaging they place on the market is recovered and recycled. Relevant businesses then discharge their responsibilities by purchasing evidence of packaging recycling in the form of a Packaging Recovery Note (PRN) or Packaging Recovery Export Note (PERN). DEFRA’s Deputy Director for Waste and Recycling, Chris Preston, explained how this system applies to producers and users of plastic bottles:
Coffee cup producers and plastic bottle makers, who put things on the market, are required to show that they have recycled through purchasing a PRN, a percentage of the packaging that they have put on the market. It will not necessarily be their plastic bottles, because it is not an individual thing, or their coffee cups, but in terms of the totality of packaging, they will have to show that they have contributed financially, through the PRN system, for some of that to be recovered.56
37.The price of PRNs fluctuates according to the market. The average fee charged to producers per tonne of packaging waste in the UK is around €20 per tonne. Other European countries have an average producer responsibility fee of €150 per tonne.57 Deloitte’s 2014 report on Extended Producer Responsibility shows the average fee charged to packaging producers across Europe58
Fig. 1: EU Producer Responsibility Compliance Fees, Deloitte, 2014
38.Throughout this inquiry we have heard evidence from environmental researchers and local authorities that the UK’s compliance fee contributes less than 10% of the cost of collecting, sorting and disposing of packaging waste. The Local Government Association noted:
The UK’s limited packaging producer compliance scheme generated £111 million of compliance revenue in 2013, only £37 million of which went towards collection. This compares to the £550 million cost to local authorities for collection and sorting of packaging material.59
39.Producer Responsibility Obligations are intended to make producers of packaging (the polluters) responsible for the cost of the disposal of their packaging. On this point, Lee Marshall from the Local Authority Recycling Advisory Service told us “I think at the moment in the UK the producer responsibility scheme fails the Ronseal test. Producers are not responsible in terms of a cost point of view.”60 When asked about raising the UK’s packaging producer compliance fee, Dr Coffey told us that it was an option the Government are considering.61
Reforming Producer Responsibility Obligations
40.The Environmental Services Association have suggested that the PRN system should be reformed to respect the polluter pays principle and to make a system funded to a greater extent by producers.62 Industry bodies, such as the Foodservice Packaging Association, the British Plastics Federation and the British Retail Consortium have been calling for PRN reform for years.63 The Government recently committed to exploring producer responsibility reform to be more resource efficient in the Department for Business, Energy and Industrial Strategy’s October 2017 Clean Growth Strategy.64
41.We have heard that European countries have more robust producer responsibility schemes that give producers more financial responsibility for the kind of packaging they place on the market. Nick Brown from Coca-Cola explained:
Typically in other countries it is a modulated fee structure. There will be a certain contribution for packaging that meets a certain design criteria; there will be a higher contribution for packaging that does not meet that criteria; the same for recycled material usage.65
42.Industry bodies such as the Foodservice Packaging Association, the British Soft Drinks Association and the British Plastics Federation told us that producer responsibility should be reformed to incentivise design for recyclability.66 Alice Ellison, Head of Environment at the British Retail Consortium described the current producer responsibility scheme as a “blunt instrument” that does not encourage responsible packaging decisions.67 Nick Brown from Coca Cola explained:
A good producer responsibility scheme can encourage people to use eco design, design for recyclability principles that people were talking about before; some kind of credit for people who are using easy to recycle packaging.68
43.We asked Dr. Coffey about whether a modulated fee structure will be introduced in the UK. The Minister told us:
I am not saying it is a definite policy, I am just saying that these are some of the ideas that could come through. Then if you have the manufacturers [saying] that they are the only person using a polymer and they have not created a scheme for it to be readily recycled, you might choose to have a higher charge, in effect, to deal with that. These are some of the ideas we are looking at now.69
44.We heard from several industry bodies that the current PRN system incentivises the export of recycling waste over domestic reprocessing, and consequently domestic recycling infrastructure is underfunded.70 The British Soft Drinks Association wrote:
The current Packaging Waste Recovery Note system contains several abnormalities which can provide disincentives to increased recycling–such as the comparatively favourable position of exporting potential feedstock through the Packaging Export Recovery Note (PERN), the limited transparency in the compliance system and the lack of incentives to invest in increasing recycling capacity in the UK.
We have significant concerns on the export of plastic feedstock that could be redeveloped into rPET and increase its use in the UK. The current potential volume and the quality is low in significant part due to the export of these materials–reform in this area is sorely needed.71
45.On 18 July 2017, China notified the World Trade Organization (WTO) Committee on Technical Barriers to Trade that it would be introducing a ban on the import of 24 kinds of solid waste, including plastic, by the end of 2017 citing concerns over contamination. In August, China announced that it would set new standards limiting all imported recycled materials to a maximum contamination level of 0.3 per cent.72 China is the UK’s biggest export destination for waste products. In 2016, 55% of our exported recovered plastics went to China and Hong Kong.73 There are therefore fears that the ban could lead to a glut of waste materials which we are unable to export. Plastics collected for recycling that are not exported could go to energy recovery (incineration), be stockpiled or even end up going to landfill. When asked about the impact of the imminent Chinese ban on waste imports and the preparations that DEFRA is making, the Secretary of State Michael Gove said:
I do not know what impact it will have. It is a very good question and something to which—I will be completely honest—I have not given sufficient thought.74
It has subsequently emerged that DEFRA officials held meetings with the waste industry in September.75 We are alarmed by the Secretary of State’s lack of awareness of this impending threat.
46.Evidence from the regulatory body of the producer responsibility scheme, the Environment Agency, revealed that almost twice as much money is invested in funding collection for plastic waste to be exported abroad than for plastic waste to be reprocessed domestically. Furthermore, over £7 million was invested in “reduction in price and developing end markets” for exported plastic waste, whereas just over £1 million was invested in the same areas for domestic reprocessing of plastic waste.76 This demonstrates that the current incentive to export packaging waste, diverts funding from the UK plastics reprocessing market. Industry bodies and local authorities have called for a greater degree of transparency around how PRN/PERN revenue is spent.77
47.Currently, taxpayers cover around 90% of the costs of packaging waste disposal, indicating that the producer responsibility scheme is not working as it should. The Government’s commitment to explore potential reforms to the UK’s current producer responsibility schemes is long overdue. Industry has been calling for reform for years. In order to make packaging producers more responsible for the type of products they are putting on the market, we recommend that the Government adapts a producer responsibility compliance fee structure that stimulates the use of recycled plastic, rewards design for recyclability, and increases costs for packaging that is difficult to recycle or reuse. This would incentivise producers to use more sustainable packaging, whilst reducing the costs on taxpayers. Additionally we recommend that the Government lower the de minimis packaging handling threshold from 50 tonnes to 1 tonne. This would ensure that all businesses who handle a significant amount of packaging are obligated to recycle.
48.The Environment Agency, which regulates Packaging Recovery Notes, told us they have no regulatory control over how the revenue from Packaging Recovery Notes is spent. Figures show that there is low investment in UK reprocessing facilities compared with waste exportation. This is grossly inefficient. We support industry calls for greater transparency over how recovery note revenue is spent and recommend the Government to require all waste reprocessors to report detailed information on actions funded by recovery notes. Waste reprocessors should be held accountable to the Environment Agency for exactly how they spend packaging recovery revenue, especially if they fund export considerably more than domestic reprocessing. This would provide sustainable investment to boost the UK’s domestic recycling capabilities, as well as greater financial assistance to local authorities. Given the recent Chinese ban on mixed plastic waste from the UK, this investment is both urgent, to avoid a huge increase in landfill, and will save money and create jobs in the long run.
Improving Design for Recyclability
49.The European Commission has adopted the Circular Economy Package, which includes legislative proposals on the design of packaging to stimulate Europe’s transition towards a circular economy. The proposals include “Economic incentives for producers to put greener products on the market and support recovery and recycling schemes.”78 A leaked European Commission Strategy for Plastic in a Circular Economy suggests that the Commission may seek to revise the requirements for packaging, to ensure that by 2030, all plastics packaging placed on the EU market is reusable or easily recyclable. The Secretary of State for Environment, Food and Rural Affairs, Rt Hon Michael Gove MP, told us that the Government intended to adopt elements of the EU Circular Economy Package even after leaving the European Union:
Kerry McCarthy: Can I ask quickly about the EU Circular Economy package? Obviously that is close to being finalised. We will be leaving the EU. Is it the UK Government’s intention to adopt elements of that package or to continue with that sort of work?
Michael Gove: Yes.79
50.Producers of plastic packaging in the UK have no incentive to consider recycling when they design their products as they do not bear the full costs of waste management. Major packaging industry stakeholders, including producers, brands and retailers, have nonetheless signed a voluntary commitment to reduce waste and improve packaging design. The voluntary Courtauld Commitment supports the UK Government’s policy goal of a ‘zero waste economy’ and is managed by resource efficiency charity WRAP (Waste and Resources Action Programme). The third and most recent phase of the Courtauld Commitment includes the following target:
Improve packaging design through the supply chain to maximise recycled content as appropriate, improve recyclability and deliver product protection to reduce food waste, while ensuring there is no increase in the carbon impact of packaging by 2015, from a 2012 baseline.80
51.We heard that manufacturers of plastic bottles have focused on reducing the tonnage of plastic used in their products, rather than on improving design for recyclability. Greenpeace conducted a survey of the top six global soft drinks companies, to examine industry plastic production rates and use of recycled PET. Greenpeace told us that the companies surveyed have focused their efforts on ‘lightweighting’–i.e. making PET bottles thinner to reduce costs, plastic use and carbon emissions–or developing bioplastics which use alternatives to oil as a source material. Greenpeace told us that lightweight bottles still pose a threat to marine environments:
Lighter or bioplastic bottles still pose ingestion and choking hazards to marine life. They also still slowly break down into tiny pieces of plastic which can absorb toxic chemicals and contaminate the ocean food chain. Furthermore, lightweighting efforts have fallen far short of compensating for the huge growth in plastic production.81
52.The Courtauld Commitment makes a specific reference to maximising the use of recycled content. Producing a bottle from recycled polyethylene terephthalate (rPET) uses 75% less energy than producing a bottle from virgin plastic.82 We heard that Coca-Cola have committed to using 50% rPET by 2025, and that Ribena bottles are made only using rPET.83 However, there is a lack of consistency across plastic bottle manufacturers, with no shared target on the use of rPET. When asked about a target, Gavin Partington from the British Soft Drinks Association said:
As soon as absolutely possible. We do not have a date set in mind but it is a very urgent ambition for us as a sector because we want to reuse as much of the materials that we have as possible.84
53.We challenged Barry Turner, Director of Plastics and Flexible Packaging at the British Plastics Federation on whether legislation is required to halt the industry’s continuing use of mixed polymer plastics which make a circular economy more difficult:
Chair: We have wrappings on plastic bottles of unrecyclable polymers, the Lucozade wrapping for example. Why do we need a plastic film wrapping around a plastic bottle?
Barry Turner: The industry does not really dictate what label a manufacturer puts on a bottle.
Q267 Chair: So it is not your problem?
Barry Turner: No, I am not saying it is not our problem. We advocate that they use the right material but we cannot—
Chair: Why aren’t you?
Barry Turner: We cannot dictate to a brand what they choose to use.
Q268 Chair: You just give them anything they want and if it is unrecyclable that is fine?
Barry Turner: With all due respect, it is a commercial world. If we didn’t someone else would.85
54.Following this evidence session, The Times reported that the Lucozade Ribena Suntory bottles had committed to remove plastic films and sleeves on their bottles.86
55.Lucozade Ribena Suntory’s actions indicate that industry can take quick action when pressed in public to do so. The British Plastics Federation’s research shows the need for good regulation to set international standards for sustainable materials. This would ensure that all companies adopt an ever-increasing percentage of recycled and recyclable plastic.
56.We recommend that as part of its reform of PRO the Government phases in a mandated minimum 50% rPET content for the production of new plastic bottles by 2023 at the latest. This would create a UK market for recycled plastic, which struggles against low oil prices which make new plastic cheaper. Introducing this legislation would help create a circular economy by ensuring that plastics are reprocessed. The legislative requirement would be a minimum standard. We expect that the reformed producer responsibility regime set out in the previous section would drive further design innovation.
55 Environmental Services Association (PKG0046A)
56 Q451
57 http://ec.europa.eu/environment/waste/pdf/target_review/Guidance%20on%20EPR%20-%20Final%20Report.pdf
58 As above.
59 Local Government Association (PKG0076A)
60 Q368
61 Q450
62 Environmental Services Association (PKG0046A)
63 Q127, Q128, Foodservice Packaging Association (PKG0067A), British Plastics Federation and Plastics Europe (PKG0106A), British Retail Consortium (PKG0109A)
64 Department for Business, Energy & Industrial Strategy, Clean Growth Strategy (October 2017)
65 Q244
66 Foodservice Packaging Association (PKG0067A), British Soft Drinks Association (PKG0069A), British Plastics Federation and Plastics Europe (PKG0106A)
67 Q299
68 Q243
69 Q424
70 Foodservice Packaging Association (PKG0067A), British Soft Drinks Association (PKG0069A), British Plastics Federation and Plastics Europe (PKG0106A) Coca-Cola European Partners (PKG0061A and PKG0033B)
71 British Soft Drinks Association (PKG0069A)
72 http://www.wrap.org.uk/blog/2017/10/open-letter-chinas-waste-import-restrictions
73 https://www.mrw.co.uk/latest/gove-admits-ignorance-over-impact-of-china-import-ban/10024976.article
74 The Government’s Environmental Policy Inquiry, Environmental Audit Committee, Q114
75 https://www.mrw.co.uk/latest/frustrations-with-defras-response-to-china-ban-revealed/10026265.article
76 Environment Agency (PKG0043B)
77 Foodservice Packaging Association (PKG0067A), British Soft Drinks Association (PKG0069A), British Plastics Federation and Plastics Europe (PKG0106A) Coca-Cola European Partners (PKG0061A and PKG0033B)
78 European Commission, Circular Economy Package
79 Environmental Audit Committee, The Government’s Environmental Policy, Oral Evidence Session (1st November 2017, Q119 – 122)
81 Greenpeace UK (PKG0064A)
82 British Plastics Federation & PlasticsEurope (PKG0106A)
83 Coca-Cola European Partners (PKG0061A and PKG0033B) and British Soft Drinks Association (PKG0069A)
84 Q277
85 Q266, Q267, Q268, See also Q285
20 December 2017