Select Committee on European Union Thirty-Third Report


28. In Part 3 we consider the growth in packaging recovery and recycling over the period 1997 to 2001, where this growth has occurred (by material and source), and how and where it has been reprocessed. We do so in the light of how the United Kingdom system is designed to stimulate growth through the PRN mechanism.

Overall recovery

29. The overall target for recycling (25 per cent) was met (43 per cent), as were the minimum 15 per cent recycling levels for individual materials. However the United Kingdom fell just below the 50 per cent overall recovery target, achieving 48 per cent. Data to this effect was released by DEFRA on May 23rd 2002.[23] Packaging recovery increased by 1.46 million tonnes from an estimated level of 3 million tonnes to 4.46 million tonnes. This was 200,000 tonnes below the Directive target (4.65 m tonnes).

Data quality

30. Before 1997 there was no need for collectors or reprocessors separately to identify waste materials as packaging or non-packaging. Figures for 1997 are, therefore, not considered very reliable, and only the total amount has been estimated for that year. A breakdown of the total by material type is available from 1998 onwards.

31. There is also uncertainty about counting tonnages processed in one year and brought forward to the next.[24] Some witnesses[25] suggest that the reprocessors may have included non-packaging recovery and recycling in their returns. There is, however, no proof that this was a substantial problem in 2001.

32. In spite of these uncertainties, we accept that substantial net additional recovery was achieved between 1997 and 2001, but possibly less than the 1.46 million tonnes reported by DEFRA. The figures for growth from 1998 to 2001—1.1 million tonnes—are more reliable.

The Working of the PRN/PERN Market System: 1997 to 2001

33. The overall price level for PRNs has responded to the interim recycling and recovery levels set by DEFRA each year. When interim levels have been perceived to be challenging and difficult, prices have risen. When it has become apparent that the annual targets will be met, prices have fallen occasionally, at year-end, to very low levels.

34. Prices for material-specific PRNs have also responded to the minimum recycling levels set. Recycling levels for plastics have been lower than the minima of the interim targets set by DEFRA resulting in PRN prices for plastics being consistently higher than for other materials.

35. One problem, based on evidence received,[26] has been with the interim target setting by DEFRA. With hindsight, interim targets set in the early years led to a "slack market". Following an initial surge in PRN prices in 1998, the first year the PRN system was operational, prices fell back sharply in 1999 and 2000 as experience demonstrated that recovery and processing capacities could and were able to generate PRN/PERNs in excess of interim target demand.

36. The market position changed in 2001. The interim targets set during 1999 and 2000 had left a considerable gap to be bridged in the final year. Moreover, the proportion of packaging handled by non-obligated businesses (i.e. those businesses that are not obliged to meet recovery and recycling targets[27])was known to be significantly more than the 5 per cent originally expected. This led to an increase in percentage target levels on United Kingdom obligated business (i.e. those companies that were obliged by the Regulations to recover and recycle packaging and packaging waste)—in effect, the United Kingdom recovery target increased from 52 per cent to 56 per cent.

37. PRN/PERN prices responded accordingly and rapid progress in collection growth occurred. Much of the growth tonnage however was exported rather than processed within the United Kingdom.

38. A major compliance scheme operator adopted a route to compliance in 2001 that did not rely solely on PRN purchase (see Box 1). It is argued that had they been active in the market, PRN prices would have risen and pulled through the additional tonnage needed.
Box 1

Wastepack Ltd

On 15 April 2002 the Environment Minister, The Rt Hon Michael Meacher MP, expressed concern that the United Kingdom's second largest compliance operator had failed to meet its recovery and recycling obligations in 2001. The Regulatory Agency, the Scottish Environment Protection Agency (SEPA), announced that they were issuing a formal warning notice.

According to DEFRA's news release, Wastepack had been required to carry out recovery of 415, 000 tonnes of packaging waste—the total of its members' obligations—and to demonstrate compliance with this obligation to SEPA. It discharged only 175,000 tonnes of its recovery obligation, leaving a shortfall of 240,000 tonnes.

Wastepack said that its compliance plan for 2001, which had been lodged with SEPA at the end of 2000, did not envisage meeting its compliance obligations exclusively through the provision of PRN/PERNs.

Wastepack's evidence and SEPA's evidence can be found on pages 81-103.

The Committee did not seek to judge compliance. Our concern was to see where responsibility for compliance lay, given that regulation is a devolved matter. The United Kingdom Government is held accountable by the European Commission. It was not clear to the Committee how or to what extent the devolved Regulatory Agencies were accountable to the United Kingdom Government (see para 113).

39. Further concerns about the United Kingdom system during this period have been expressed by the packaging industry[28] and witnesses from other sectors. In the main they relate to administrative burdens on industry, inspection and policing of the system, data coverage and quality, data handling and timely release.

40. The United Kingdom system is a market-based system and markets need timely information to work effectively. Many of the above problems to which witnesses have drawn our attention can be attributed to the relative novelty of the system and the poor state of the data collection system. Most have been recognised by the regulatory agencies and DEFRA.[29]

The Significance of Specific Materials to Overall Growth

41. Evidence concerning the sources of these materials indicates that, apart from glass and to a lesser extent metals, past levels of waste recycling and new growth in collection have come from industrial and commercial waste flows. Wood packaging waste is dominated by old pallets and crates, packaging paper by cardboard boxes, plastics packaging by shrink wrap, crates and pallets. Although post-consumer cans (steel and aluminium) recovery is progressing, the majority of steel packaging waste is also from commercial sources (larger drums and strapping for bales and pallets).


43. The information needed to assess past growth is given in table 4 below:

Table 4: Packaging Recycled 1998-2001(thousands of tonnes)
Packaging material
Growth 1998-2001
1 Includes NI after 20002 Aluminium protocol introduced 20013 Steel protocol introduced 19994 Wood data uncertain, 98-01 growth based on ~130kt (the average for 98/99)Source: DEFRA's supplementary evidence[30] (minus energy from waste figures).

44. Over 40 per cent of the measured growth in packaging recycling has been contributed by wood packaging. DEFRA estimate ~ 130,000 tonnes was recycled pre-1998, and that 574,000 tonnes was recycled in 2001, an increase of ~440,000 tonnes. This can be compared with estimates of ~ 230,000 tonnes additional glass recovery, and paper and plastic increases of ~ 140,000 tonnes and ~110,000 tonnes for metal packaging (mainly steel).

45. New United Kingdom reprocessing activity can be assessed from the number of accredited reprocessors in the various sectors. In 1998, no accredited reprocessors existed for wood, by 2001, 31 were registered. In the same period, glass has seen an increase from 18 to 36, plastics from 72 to 92. No significant change has been noted for paper, steel or aluminium. Overall the number of United Kingdom accredited reprocessors rose from 190 to 266 with 29 of the new registrations in 2001. We received evidence of investment in new United Kingdom glass reprocessing capacity, and plastics.[31] Glass has developed new processes and markets, for example "Glassphalt" for road surfacing.[32] Progress has also been made in sorting and reprocessing capacity for post-consumer can collection and sorting systems[33]. No specific evidence for industry support for increased packaging or paper-making capacity suited to making use of paper packaging was received. Most of the growth in collection during the period 1998-2001 has been exported.

The Significance of Exports of Unprocessed Packaging Waste

46. Data from DEFRA indicates that 460,000 tonnes of packaging waste was exported in 2001, a four-fold rise from 1998 when the total was estimated to be ~ 115,000 tonnes. Major increases were due to additional export of paper packaging (~179,000 tonnes), plastics (~ 56,000 tonnes) and metals (~ 105,000 tonnes). Conversely, export of glass fell over the period by ~30,000 tonnes (although increases on 1998 levels occurred in 1999 and 2000). No wood packaging was exported during this period.

47. This suggests that little additional waste packaging reprocessing capacity in the United Kingdom has been created for paper and steel in 2001 compared to 1998 and possibly less reprocessing of it. Growth in United Kingdom reprocessing of plastics is also significantly lower than collection growth. Only wood and glass have seen collection growth matched or exceeded by reprocessing within the United Kingdom.

48. The figures for steel and paper does not necessarily mean that the collected packaging could not have been reprocessed in the United Kingdom, it may simply be the case that it was more cost effective to rely on overseas reprocessing capacity.

49. In order to be able to assess what the finance raised by industry through the PRN system has delivered, and the future security of markets for reprocessing United Kingdom packaging waste, we need to differentiate between packaging processed in the United Kingdom compared to exported flows.

50. United Kingdom registrations can be compared with the number of accredited exporters. Over the same period the number rose from 4 to 64. Thirty two of the new registrations occurred in 2001. Registrations by material are consistent with the rise in export volumes. Steel rose from 2 to 13, plastics from 1 to 30, paper from 0 to 13 and aluminium 0 to 6. Accredited glass exporters, in contrast, only rose from 1 to 2.

Possible Distortion of the Market

51. Increased recycling will, in many cases, distort existing markets. Evidence from Timcon,[34] for example, suggests that wood packaging is now the major source of wood chips in the production of processed board products (i.e. chipboard) The wood packaging waste has replaced by-products and waste from the (non-packaging) timber industry. Timcon claims that the PRN revenues for packaging wood waste have affected the viability of the timber industry as it can no longer sell timber waste. Investment (storage, chipping and handling systems) will have been necessary to accommodate this change but is unlikely to be major given the rapidity of the switch-over from timber waste to packaging wood waste. PRN revenues for wood only became available in 2000.

52. It is clear that simple extrapolation from past growth in terms of overall packaging collected and reprocessed does not provide a sound basis for meeting future targets, and we return to this point in Part 4.

23   See supplementary evidence from DEFRA, pp 159-171. Back

24   See the further memorandum from Wastepack, pp 94-95. Back

25   See written evidence from Timcon, pp 231-235; and Biffpack p48, paras 8 & 9. Back

26   QQ 4, 15, 19, & 383. Back

27   Companies whose turnover is less than two million pounds a year, or who put fewer than 50 tonnes of packaging on the market each year are exempted from the obligation to meet existing targets under the 1994 Directive. This is known as the de minimis rule. Back

28   Q 4; written evidence from Biffpack, p 49, para 11; Q 240; written evidence from INCPEN, pp 16-17. Back

29   See the Environment Agency's supplementary memorandum, p 113, para 3.7. Back

30   See pp 159-187. Back

31   Q 15; Q 200; Q 219; Q 453; and supplementary evidence from DEFRA, p 164. Back

32   Q 213. Back

33   See written evidence from Alupro, pp 203-204 and from Corus, pp 208-210. Back

34   See evidence from Timcon, pp 231-235. Back

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