Deposit and Return Scheme for Scotland Regulations 2020 (as amended): business and regulatory impact assessment

Section 1: Background, aims and options

27. The Scottish Government is committed to creating a more circular economy where products and materials are kept in a high-value state of use for as long as possible – maximising resources to benefit the economy and the environment. Material consumption and waste are primary drivers of nearly every environmental problem Scotland currently faces, from water scarcity to habitat and species loss.

28. A circular economy, based on sustainable consumption and production, is essential to power Scotland’s transition to a fair, green and sustainable economy, and critical to meeting our obligations to tackle the twin climate and nature emergencies.

29. It is recognised that fresh interventions are needed to bring about the systemic and behavioural change necessary to fulfil these aspirations. The Deposit and Return Scheme for Scotland Regulations 2020, as amended by the Deposit and Return Scheme for Scotland Amendment Regulations 2025 and the Deposit and Return Scheme for Scotland (Designation of Scheme Administrator) Order 2025 (hereafter referred to as the DRS legislation), will help to support these changes.

30. A DRS will support Scotland’s resource efficiency and circular economy goals by increasing the quality and quantity of recycling for select single-use drink containers. In so doing, the DRS will contribute to the achievement of Scotland’s existing circular economy and waste policies and targets, and will also help to reduce single-use drinks container litter in Scotland’s terrestrial and marine environments.

31. By applying a deposit to drinks containers using common single-use packaging, the scheme will encourage people to return that packaging to specified return points. When these containers are returned to return points, consumers will be able to reclaim the deposit.

32. The materials in scope of the scheme are polyethylene terephthalate (PET) plastic, aluminium and steel. The introduction of a DRS should result in more of these containers being collected for recycling; collected in bulk to facilitate economies of scale; and collected separately to other materials – meaning they can be more readily recycled, encouraging closed-loop recycling and circularity.

33. In a Joint Policy Statement published in April 2024, the Scottish Government alongside the UK Government, Welsh Government and the Department of Agriculture, Environment and Rural Affairs (DAERA) in Northern Ireland, committed to working together to introduce Deposit Return Schemes across the UK in October 2027.^[2] In November 2024 the Welsh Government announced that they would not be proceeding with the four nation joint DRS process.^[3] However, the Scottish Government, alongside the UK Government and DAERA have agreed to proceed with DRS on a three-nation basis. There is a shared ambition to increase recycling rates of single-use drinks containers to at least 90%, to significantly cut littering, and to expand opportunities to collect and reprocess high quality materials.

34. The responsibility for waste and recycling is within devolved competence in Scotland. There will be two legally distinct deposit return schemes in the UK: one in Scotland and one covering England and Northern Ireland. The three nations are committed to delivering DRSs that are as interoperable and as simple as possible for consumers and businesses, whilst achieving the economic and environmental goals of the scheme. As such, the three nations have agreed to jointly launch the DRSs in October 2027. The Welsh Government continues to develop its approach to DRS.

35. Interoperability means the Scottish DRS will have the same scope as the DRS for England and Northern Ireland. It should also have the same deposit value as the designated SA must endeavour to reach agreement with any other scheme administrator on setting the amount of deposit. The Scottish Government will designate an industry-led Scheme Administrator (SA) which will be responsible for the operation of the Scottish DRS; the UK Government and DAERA will appoint a Deposit Management Organisation (DMO) for the English and Northern Irish DRS.^[4] It is preferred, but not a requirement, that the two schemes will have the same SA/DMO. If different SA/DMOs are selected, they will be expected to work together to develop a single registration and reporting process. Consumers will be able to return deposit-bearing containers bought in Scotland to a return point in England or Northern Ireland to claim a deposit refund. Equally, deposit-bearing containers bought in England or Northern Ireland could be returned to a Scottish return point for a refund.

36. In 2018 the Scottish Government held a public consultation on the design of a DRS for single-use drinks containers.^[5] It ran between 27 June – 25 September and received 3,215 responses. This comprised responses from 159 organisations, 2,008 individuals and 1,048 campaign respondents. There was widespread agreement amongst both organisational and individual respondents that a well-run and appropriately targeted DRS could provide opportunities in relation to improving the environment, changing people’s attitudes to recycling and littering, and building the circular economy. The full consultation analysis was published in February 2019.^[6]

37. A 2021 consultation was also undertaken by Defra on behalf of England, Wales and Northern Ireland.^[7] Responses to this consultation continued to show support for the introduction of a DRS in the UK. Supporting those consultation findings, a polling exercise TOMRA Collection in 2024 also highlighted strong support for the introduction of DRS across the UK.^[8] Since both consultations, the design of the previously proposed scheme in Scotland, and DRS proposed in the rest of UK have changed, reflecting the DRS Joint Policy Statement.

What are the current policies/ regulations/ frameworks in place already?

38. At present, Scotland utilises a combination of municipal and commercial waste management systems to manage drinks containers. These include kerbside recycling, public recycling points, landfill, and incineration. For household collections, all local authorities offer kerbside recycling services for DRS drinks containers that cover most households in Scotland. These services, free at the point of use, typically accept common drinks containers such as, PET plastic bottles, and aluminium and steel cans. Local recycling performance for all waste arisings varies significantly in Scotland – from 21% to 58% in 2022.^[9] There are also significant issues with cross-contamination with non-recyclable materials, and DRS drinks containers are still commonly disposed of in general waste bins and consequently end up in landfill and incineration.

39. In addition to kerbside collections, local authorities also provide recycling bin facilities for ‘on-the-go’ disposal of drinks containers. While this provides extra coverage and convenience, contamination of the material collected is often an issue. The Local Authority Recycling Advisory Committee (LARAC) noted that quality of material from ‘on-the-go’, or street bin recycling schemes is very low.^[10]

40. Businesses in the forms of pubs, restaurants, cafes, other hospitality venues, and retail generate large volumes of drinks container waste. Businesses are required by the Environmental Protection Act 1990 to arrange for the recycling of drinks containers as part of their commercial waste management.^[11] Businesses also have a ‘duty of care’ under the Environmental Protection Act 1990 to manage their waste responsibly.^[12] This duty includes ensuring that waste is stored securely, transferred to authorized persons, and accompanied by appropriate documentation.

What other policy development is being taken forwards (within SG or by UKG) that may be relevant to the policy area?

41. Extended Producer Responsibility for packaging (packaging EPR) was introduced from April 2025 across the four nations following the UK wide regulations coming fully into force in January 2025.^[13] These aim to shift the financial burden of managing packaging waste from taxpayers to producers in line with the polluter pays principle. Key features of the new packaging EPR system (packaging EPR) include full net cost recovery of collecting, sorting, recycling, and disposing of household packaging waste paid to local authorities; increased recycling targets to encourage the use of recyclable and sustainable materials; new data reporting obligations to make reporting more granular and detailed to ensure transparency and accurate allocation of costs; and the introduction of modulated fees that producers will pay based on the recyclability of their packaging, incentivising eco-friendly packaging designs.

42. DRS is a complementary initiative being developed in parallel to packaging EPR. Drinks containers in scope of the DRS will be exempt from packaging EPR obligations, provided a DRS is operational by 1st January 2028.^[14] This will prevent obligated producers paying for the same containers in different schemes. Glass drinks containers will be in scope of packaging EPR.

43. Obligations are, however, distinct in what parts of the packaging waste stream are being targeted. Packaging EPR covers packaging across household waste streams. DRS focuses specifically on beverage containers, a subset of overall packaging waste.

44. The analysis presented in this BRIA considers a baseline scenario of the continuation of business-as-usual, with no new interventions assumed to be introduced as an alternative to DRS. The baseline reflects the existing PRN system, rather than packaging EPR, as the new packaging EPR regulations only came into force in January 2025.

What policy proposals, if any, have been explored previously?

45. The design of the DRS which will be launched in October 2027, differs to the scheme design previously consulted on in Scotland, which had been intended to be introduced in March 2024. However, there is agreement between the three nations to move forward with an aligned scheme, which requires some modification to the existing Scottish DRS legislation. The scheme design has been amended in discussion with the other administrations to ensure interoperability. Changes to the scheme are:

• DRS launch date moved from October 2025 to October 2027.
• Change to scheme articles. Glass drinks containers are no longer in-scope.
• Mandatory takeback obligations for scheme articles purchased online are removed.
• Minimum size of container has increased to 150ml from 100ml.
• The designated Scheme Administrator^[15] (SA) will be responsible for determining the amount of the deposit, which may be a variable or flat rate depending on the size of the container.
• Producer registration and reporting. Producers will register with the SA rather than with SEPA, and will pay registration fees for each scheme article placed on the market, instead of an annual registration fee. The SA will recover costs – including costs charged by SEPA as regulators – from registered producers.
  • i. The SA will publish and maintain a register of Producers.
  • ii. Producers will be required to report to the SA on the volumes of the containers placed on the market.
• Return point operators, including voluntary return points, must be registered.
• Labelling. The SA will issue a logo and machine-readable code to allow scheme articles to be recognised by consumers and reverse vending machines. The SA may also issue a logo to identify multipacks containing scheme articles. Scheme articles must carry any logo issued by the SA.
• Return points: Groceries retailers such as supermarkets and convenience stores will be required to host return points, unless their premises are less than 100m² and in an urban area.^[16],[17]
• Groceries retailers may apply for a return point exemption if they cannot host a return point or are in close proximity to another return point.

Why is a new or different action being considered?

46. The scheme is intended to allow for interoperability between the three UK nations. Industry have been supportive of interoperable DRSs across the UK.^[18] In April 2024, the UK government, DAERA in Northern Ireland, the Scottish Government, and the Welsh Government published a joint policy statement on the scheme design.^[19] In November 2024 Wales announced they would not be proceeding with the implementation of the scheme, however they remain committed to developing a DRS that works for Wales.^[20] The changes from the initial Scottish scheme design are outlined in the preceding section.

47. The sharing of compliance and other costs among businesses across Scotland, England and Northern Ireland may also serve to spread the individual costs of compliance for businesses in Scotland. The planned start date for the UK-wide DRS in October 2027 also gives businesses more time to prepare for implementation.

Purpose/ aim of action and desired effect

What change or other outcome is desired?

48. The main policy driver for the DRS legislation is to promote and secure an increase in recycling of materials, forming part of the Scottish Government’s response to the global climate emergency, by ensuring the targeted materials are collected in larger quantities and separately to other materials.

49. The primary objectives of a DRS are:

i. Reduce littering of drinks containers.

ii. Increase recycling rates of drinks containers.

iii. Increase the quality of recycled material to encourage closed loop recycling and circularity to ensure materials remain in use for as long as possible.

i. Reduce littering of drinks containers

50. A DRS targets consumers’ behaviour rather than solely producers or delivery bodies. It instigates wider behaviour change which could have broader effects on society in terms of environmental awareness. A DRS adds a monetary value to the packaging of drinks containers which is proven to reduce littering of drinks containers in nations which have introduced a DRS.

51. The DRS will complement wider policy initiatives to tackle litter in Scotland. The National Litter and Flytipping Strategy^[21] sets out a refreshed approach to tackling litter and flytipping in order to protect and enhance Scotland’s environment; ensure safer and cleaner communities and contribute to a thriving circular economy for Scotland. The recent update in October, the National litter and flytipping strategy: update and year 2 action plan sets our actions for the next year of the strategy. ^[22] This includes rolling out an education programme nationally, targeted behaviour-based interventions and continuously improved data collection.

52. The first legislated deposit system, established in British Columbia (Canada) in 1970, began as “The Litter Act”^[23] and was aimed at encouraging consumers to recycle beverage cans and bottles instead of tossing them to the side of the road. Many other DRSs introduced in the 1970s and 1980s were also mainly passed as anti-litter laws. These include those in South Australia, Oregon, Vermont, and California. California’s legislation is aptly titled the 'Beverage Container Recycling and Litter Reduction Act’.^[24]

ii. Increase recycling rates of drinks containers

53. In Scotland the estimated recycling rate for aluminium and steel cans in Scotland is around 74%, and 65% for PET. ^[25] Across the UK recycling rates of single-use drinks container materials are estimated at around 65-82%^[26] which leaves approximately 4bn plastic bottles and 2.5bn cans not recycled every year. A DRS is an important policy tool to improve the perceived value of the material, helping to raise the recycling rate and preventing improper disposal (littering) of in-scope drinks containers.

54. Scotland is committed to reducing the impact of plastic waste. Scotland is a signatory to the Ellen MacArthur Foundation's New Plastics Economy global commitment^[27] to end plastic pollution, both as part of the wider UK and also in its own right as the Scottish Government.

55. The Circular Economy (Scotland) Act 2024^[28] introduced new powers for Scottish Ministers to strengthen Scotland’s transition towards a circular economy. The Act requires Scottish Ministers to prepare a circular economy strategy and set targets for waste reduction and recycling. DRS will play a role in achieving our circular economy ambitions.

iii. Increase the quality of recycled material to encourage closed loop recycling and circularity to ensure materials remain in use for as long as possible

56. A DRS will ensure that material collected is of a high enough quality to be reprocessed. If scheme containers are returned that do not meet the required quality (i.e. they were contaminated or were not empty) they will not be accepted. This would be the case for both Reverse Vending Machine’s (RVM) and manual return points. The consumer would risk losing their deposit until the item was presented meeting quality standards.

57. A DRS enables the separate sorting of drinks containers at source by material as opposed to them being collected as part of kerbside services where materials streams are often mixed. This will reduce the level of contamination from the residue on other materials and packaging types, and the amount of recycling that is subsequently rejected.

58. Previous estimations of operational contamination rates at UK reprocessors were about 5.85% (2012). ^[29] With the cost impact of poor and inconsistent quality of recyclate £51m annually (across nine UK reprocessors), representing an average cost per tonne of £15.67.^[29]Increased costs disincentivise investment in reprocessing infrastructure. Moreover, contamination of materials means that they cannot be recycled to the highest quality and may be down-cycled to make other products like textiles rather than keeping the same materials in use as drinks containers.

59. A DRS also addresses current market failures. Introducing a refundable deposit on drinks containers helps to reflect the social and environmental cost of disposal. Whilst the level of the deposit is not necessarily set to equal actual environmental costs and negative externalities, it provides a financial signal towards consumers’ responsibility for mitigating the environmental and social costs associated with their consumption behaviours.

60. DRS infrastructure provides consumers with a clear and easy method to responsibly dispose of drinks containers. A dedicated return point network ensures that there is a segregated waste stream which ensures the product can be recycled into secondary raw materials, creating a circular economy network for drinks container materials.

61. Recycled materials can replace virgin materials in production, thereby reducing the greenhouse gas emissions associated with creating new products.^[30] In addition, recycling minimises the waste going to landfill and incineration plants, avoiding further greenhouse gas emissions that would have been emitted through these disposal methods. This is particularly significant when considering the incineration of highly polluting materials such as plastic. Increasing recycling and encouraging the use of recyclable and recycled materials in production also helps to move towards a circular economy, keeping resources in use for as long as possible and extracting the maximum value from them.

62. Collecting material via a DRS also allows for a high-quality, well-defined stream of material for provision to secondary reprocessing markets. Drinks containers collected in this way should no longer be contaminated with non-target materials, in comparison to collecting the material via a mixed recycling kerbside collection. They won’t come in to contact with residues on other types of packaging (such as food). The quality of the products entering the DRS are also ascertained by the Reverse Vending Machine (RVM) itself since it will only accept containers with intact labels on empty containers. This stable provision of high-quality waste materials has the potential to stimulate domestic reprocessing markets.

63. The monetary deposit reduces the likelihood of drinks containers being littered or encourages them to be promptly collected, with littering concerns typically a primary reason for deposit return schemes being introduced globally.^[31] Reducing the number of drinks containers littered has significant wider and indirect environmental benefits. Material that is littered tends to end up in black bin waste once collected and is unlikely to be recycled due to high levels of contamination. If it is not collected, litter can harm wildlife or enter the water system and cause a serious problem as marine pollution. For example, a study of roadside litter in the UK for Keep Britain Tidy found that more than 8% of bottles and nearly 5% of cans contained the remains of animals.^[32] Globally, it has been estimated that 6-10% of PET bottles placed on the market enter the aquatic environment.^[33] There is more information on the impacts of marine litter in the Strategic Environmental Assessment for the previous Scottish DRS.^[34] By increasing the collection rate and reducing littering of deposit-bearing drinks containers, the DRS should help to reduce these negative externalities.

64. There is a significant amount of research which highlights the problem of drinks container litter in the UK. A Litter Composition Analysis Summary Report conducted by Keep Britain Tidy (KBT) and published in March 2020 found that, by volume, plastic drinks containers were 29% of litter and cans a further 26%.^[35]

65. Attempting to determine a value for litter disamenity is a complex and under-researched area. The disamenity of litter is monetised in this BRIA by looking at the amount that people would be willing to pay in increased council tax to reduce litter (estimated at £67 per household per year for an 85% reduction). This primarily captures the disamenity to the individual or households, and it is likely that many people would include environmental factors in this decision making. This analysis uses Defra’s impact assessment results, which have been informed by a “stated preference” methodology undertaken by the environmental consultancy, Eftec.^[36] Defra’s results are adjusted for the number of households in Scotland, relative to the number of households in England and Northern Ireland.

66. A DRS has clear benefits for reductions in the visual disamenity of litter. The previously published BRIA for the Scottish DRS scheme contained evidence on the potential for litter reduction, based on modelling.^[37] Defra’s modelling, the basis for this new BRIA, assumes an 85% reduction in drinks container litter.

67. Whilst localised efforts arise to try to increase people’s awareness, experience has shown that at the national level these are unable to bring about a long-term solution to the problem. Separate, disparate voluntary initiatives across the industry and local authorities lack coordination thereby limiting interoperability between fragmented systems creating inconvenience for customers. Without firm guarantees that all sections of the industry would be actively involved, the resultant gaps in provision together with the lack of consumer engagement would make it very likely that voluntary approaches would not be sufficient to achieve the wider policy objectives in this area, to increase the recycling rates of the targeted drinks containers and to significantly reduce litter.

68. Reducing litter would also reduce the burden on Local Authorities, and ultimately the taxpayer, of collecting and disposing of this material, at the expense of other local services.^[38] Responses to the HM Treasury Call for Evidence on single-use plastics also highlighted the negative impacts (disamenity) of litter on public spaces.^[39] Living in a littered environment can have negative consequences on people’s mental and physical health, creating further strain on local services.^[40] Poor local environmental quality can also discourage inward investment and may suppress property prices, damaging local economic growth.^[41]

69. Therefore, to establish consumer and industry confidence and obtain the full efficiencies from a properly synchronised system, a policy intervention is necessary to achieve the ambitious policy goals effectively and consistently over time.

Final Scheme Design

70. The scheme will include plastic bottles made from PET plastic (the most common type of bottle for products such as fizzy drinks and bottled water), aluminium and steel cans.

71. The scheme will be run by an industry-led Scheme Administrator (SA), designated by the Scottish Ministers by an Order which must be approved by the Scottish Parliament. The SA will be responsible for the overall operation of the scheme, including:

• managing the scheme data and finances;
• setting the deposit level;
• setting the handling payments;
• issuing a scheme logo;
• maintaining registers of producers, return points and return point exemptions; and
• collecting the used containers from return points for processing and recycling.

72. The DRS will target a return rate of 90% by year 3 of implementation. This is significantly higher than the current capture rates for the materials that are in scope.^[42] Having a deposit level which provides a sufficient incentive to return containers, together with provision of high coverage of return points, means that this target is ambitious but achievable.

73. It is important to note that the true national recycling rate for the containers targeted through Scotland's DRS will be slightly higher than the scheme capture rate itself. This is because some items not returned will continue to be returned through other recycling facilities, such as kerbside collection services.

74. The final scheme design enables consumers to take single-use containers back to, and redeem their deposit from, registered return points (hosted by groceries retailers such as supermarkets and convenience stores). Groceries retailers in urban areas with a sales space smaller than 100m² will be exempt automatically from the obligation to operate a return point; other groceries retailers will be able to apply to the SA to be exempted provided there is an alternative return point within reasonable proximity or their premises do not permit the operation of a return point.

75. Return points can choose to install reverse vending machines (RVMs) to collect the bottles and cans and return deposits. Alternatively, they will have the option to return deposits over the counter, collecting the containers manually.

76. Return points will not be required to accept containers that are broken, soiled or not empty. Where a retailer does not sell a type or types of drinks due to religious belief, they will not be required to accept returns of empty containers for such type or types of drinks.

77. Businesses that sell drinks to be opened and consumed on-site only, such as pubs and restaurants, will not have to charge the deposit to their customers and will only be required to handle the containers they sell on their own premises.

78. The SA must review the operation of return point network at appropriate intervals, including:

• the number of return points,
• the location of the return points, and in particular whether consumers have reasonable access to at least one return point
• the numbers of items of scheme packaging and returnable packaging that are returned
• the costs involved in the operation of the return points,
• the likely impact on the number of items of scheme packaging and returnable packaging returned through return points if the number of return points were to be increased or decreased or the location of return points changed without increasing or decreasing the number of those return points,
• the likely impact on the costs incurred in the operation of, or income derived from, the Deposit and Return Scheme if the number of return points were to be increased or decreased or the location of return points changed without increasing or decreasing the number of return points,
• any information as to general litter levels and the levels of containers in litter,
• any information as to footfall of return points,
• whether there is sufficient access to return points for persons living in villages and rural and areas and on islands.

79. On completion of that review, the SA may either decrease or increase the number of return points as deemed necessary. For example, the SA could increase the number of return points to improve consumer access to the scheme in any part of Scotland.

80. As part of the Joint Policy Statement published in April 2024, the Scottish Government agreed to move forward without a mandatory requirement for groceries retailers to provide an online takeback scheme. However, deposits will be applied to online purchases of scheme articles. The Scottish Government will monitor the development of voluntary online takeback services in Scotland.

81. Any persons or organisations will be able to apply to be registered by the SA to act as voluntary return points. These could include recycling centres, schools, hospitality premises or other community hubs. While some retailers^[43] will be required by legislation to provide a return service, others will be able to apply to register to operate a voluntary return point.

How does this help meet Scottish Government’s strategic aims and objectives?

82. The circular economy contributes directly to the Environment and Economy outcomes under the National Performance Framework.^[44] Directly applicable National Indicators include:

• Carbon footprint
• Natural capital
• Greenhouse gas emissions
• Waste generated
• Marine environment
• Biodiversity
• Scotland’s reputation
• Perception of local area
• Condition of protected nature sites

83. Resource use and waste generated are recognised as key sources of greenhouse gas generation, and the Scottish Government reports on progress against both territorial and consumption emissions. DRS will contribute to objectives set out in the Climate Change (Scotland) Act 2009,^[45] as amended through the Climate Change (Emissions Reduction Targets) (Scotland) Act 2019,^[46] and the Climate Change Plan Update 2018-2032.^[47] The legislation establishes a target of achieving net-zero emissions by 2045.

84. In 2015, the Scottish Government committed to the United Nations Sustainable Development Goals. The ambition behind the goals is to end poverty, protect the planet and ensure prosperity for all as part of a new sustainable development agenda. DRS will have a positive impact on a number of these goals, most explicitly Goal 12: Responsible Consumption and Production.^[48]

85. Scotland is transitioning to a circular economy. In February 2016, “Making Things Last: A circular economy strategy for Scotland” was published.^[49] This overarching strategy integrated the key elements of the Zero Waste Plan^[50] and Safeguarding Scotland’s resources^[51] report and built on Scotland’s zero-waste and resource efficiency agendas. Preventing waste arising, reusing and recycling products and materials were central requirements to accelerating a circular economy. DRS will directly contribute to the goals of this strategy.

86. The Scottish Government implemented Article 5 of the EU Single-Use Plastics Directive (SUPD) on 1st June 2022. The regulations introduced market restrictions for single-use plastic cutlery, plates, beverage stirrers, straws and balloon stick as well as single-use food containers and cups made of expanded polystyrene. DRS will complement these market restrictions by further reducing the negative externalities posed by problematic single-use plastic bottles which are commonly littered.

87. The Circular Economy (Scotland) Act^[52] received Royal Assent on 8 August 2024. The Act aims to support Scotland’s transition to a zero waste and circular economy, significantly increase reuse and recycling rates, and modernise and improve waste and recycling services. The Act is complementary to the circular economy aims of DRS.

88. In May 2018, the European Commission’s Circular Economy Package was approved. The legislation aims to move supply chains towards a circular economy maintaining the value of products, materials and resources in the economy for as long as possible. This includes more ambitious recycling targets and full cost recovery of recycling costs from producers. The Scottish Government has committed to meeting or exceeding the EU’s environmental standards after leaving the EU.^[53] Similar to the Circular Economy (Scotland) Act 2024, this suite of measures aligns with many of the objectives of DRS.

89. The Circular Economy and Waste Route Map to 2030 was published in December 2024^[54]. The Route Map is designed to drive progress in three key areas:

• Setting the strategic direction and laying foundations for delivering a system-wide, comprehensive vision for Scotland’s circular economy to 2030.
• Setting out priority actions from now to 2030 to accelerate more sustainable use of resources across the waste hierarchy.
• Reducing emissions associated with resources and waste.^[55]

90. In 2022, the UK Government implemented a new tax on businesses that produce or import plastic packaging with less than 30% recycled content.^[56] This aims to incentivise businesses to use recycled materials in the production of plastic packaging, which will create greater demand for recycled inputs and in turn stimulate increased levels of recycling and collection of plastic waste. The Plastic Packaging Tax should complement DRS in providing businesses with incentives to design and use plastic packaging that is easier to recycle, driving the overall development of more-sustainable packaging.

91. Scotland's National Strategy for Economic Transformation (NSET) sets out the priorities for Scotland’s economy as well as the actions needed to maximise the opportunities to 2032 to achieve the vision of a wellbeing economy.^[57] Its vision for a Wellbeing Economy: Thriving across economic, social and environmental dimensions is supported by three ambitions, including ‘Greener: Demonstrating global leadership in delivering a just transition to a net zero, nature-positive economy, and rebuilding natural capital’. DRS not only delivers environmental but economic and social benefits that should contribute towards the realisation of these goals.

92. Scotland’s Biodiversity Strategy to 2045: tackling the nature emergency^[58] recognises the need to ensure the range of actions we are undertaking are both complementary and coordinated as part of our overall efforts to tackle the twin crises of climate change and biodiversity loss. As DRS schemes have been proven to significantly reduce littering, the impact of plastic pollution on ecosystems and biodiversity should be eased through the introduction of DRS.

93. The Scottish Material Flow Accounts (MFA)^[59] show that the estimated material footprint (Raw Material Consumption) is 19.3 tonnes per capita, significantly higher than the amount experts suggest is sustainable (8 tonnes per person per year). The introduction of a DRS with its positive impacts on recyclate quantity and quality should serve to help reduce this material footprint in Scotland.

What would happen if SG/ other stakeholders did not take any action?

94. If the Scottish Government were to take no action, the previously identified negative externalities associated with the improper disposal of in-scope drinks containers would persist and likely increase into the future.

95. If a DRS system were not to be introduced, the in-scope drinks containers would be subsumed into a wider reformed packaging EPR system from January 2028. While this new producer responsibility system for packaging materials is designed to overcome many of the failings of the current system, its lack of specificity is likely to lead to lower intended outcomes for drinks containers. As previously detailed, DRSs have been well established in many countries and administrative regions for decades and have a proven track record of reducing many of the negative impacts of drinks container consumption in a targeted and efficient manner.

What is the ideal outcome/ result and what would be a ‘necessary minimum’ acceptable outcome?

96. The ideal outcome or result from the DRS scheme in terms of quantifiable targets falls under three main principles:

• Reduce littering of in-scope drinks containers.
• Increase recycling rates of in-scope drinks containers, to 90% in year three of the scheme.
• Increase the quality of recycled materials to encourage closed loop recycling and circularity to ensure materials remain in use for as long as possible. For example, the operational contamination rates at UK reprocessors are about 5.85% (2012), with the cost impact of poor and inconsistent quality of recyclate for a group of 9 UK reprocessors was £51m annually, representing an average cost per tonne of £15.67.^[60]

97. There are also agreed principles for co-operation across the UK on a DRS:

• Seek consumer behaviour change to deliver both a step change in the capture for recycling of empty drinks containers and reduce litter.
• A DRS should form part of a coherent system for improving recycling and reducing use of virgin materials, alongside producer responsibility obligations, kerbside collection and consideration of other appropriate fiscal measures. These measures should work effectively together in a way that is understandable and fair for consumers and industry.
• Schemes should be underpinned by legislation to maximise their effectiveness.
• The system should be clear and understandable for consumers and provide convenient means of returning drinks containers and reclaiming deposits.
• There should be a clear definition of materials to be included within the schemes.
• The design of schemes should take into account the need to effectively serve both urban and remote and rural communities, and disabled people, and should also address other access challenges to make it as fair and equitable as possible.
• Schemes should ensure producers of products take responsibility for the material they put onto the market, while not creating unfair or unreasonable costs of compliance.
• Schemes should be underpinned by strong measures to promote compliance and limit the opportunities for fraud.

How will outcomes be measured?

98. When the scheme is operational the Scheme Administrator (SA) will be responsible for managing the overall operation of the scheme as well as ensuring the collection targets set out in the DRS legislation are met. The SA will be an independent industry-led, not-for-profit private organisation.

99. In Scotland, the SA will be designated in an Order made by the Scottish Ministers subject to approval by the Scottish Parliament; it will be regulated by SEPA. In making an application to be the SA, the applicant organisation will be required to detail an operational plan, setting out how it intends to deliver the scheme and comply with their legal obligations. If successful, they will be required to act in accordance with their approved operational plan and submit annual reports to SEPA and Ministers, demonstrating how it has done so.

100. It is in this regard that the SA will play a key role in measuring the outcomes of DRS. Specifically, they will have to demonstrate that they are:

• Meeting collection targets.
• Setting the deposit level to incentivise return of containers.
• Tracking and managing the flow of deposits, materials and broader financial flows.
• Paying handling payments to return point operators.
• Managing the collection and processing of returned containers, whether itself or through a contracted logistics partner.
• Setting out labelling requirements for containers.
• Running communication campaigns.
• Co-operating with the SA in England and Northern Ireland to ensure schemes are interoperable.

101. The wider outcomes will be derived from information gathered from these operational metrics and immediate impacts. This will likely be done through evaluation of DRS once sufficient data has been collected and enough time has given to assess key trends and more qualitative impacts.

Options (considered so far/ still open)

102. The two options considered in this BRIA are:

• Baseline: No policy change. There is no DRS and all drinks containers are managed in the existing waste management system. This includes the packaging waste regulations, which require businesses handling over 50 tonnes of packaging and with a turnover over £2 million annually to meet a share of UK packaging waste recycling targets, using Packaging Recovery Notes. This is the PRN system for producer responsibility, not the new packaging EPR system that introduces full net cost recovery.
• Option 1: DRS. Legislation mandates a DRS for aluminium and steel drinks cans and PET drinks bottles. Producers must register with the SA and scheme articles will be exempt from the packaging EPR scheme. This is the preferred option. In line with the five principles of Scottish Government’s Better Regulation Approach, the option is considered to be transparent, accountable, proportionate, consistent and appropriately targeted.

103. Defra’s Impact Assessment (IA) for England and Northern Ireland, which provides the basis for much of the analysis in this BRIA, presents four options.^[61] In addition to the two options considered here, these include a DRS for plastic bottles, cans, and glass bottles; and an “on the go” DRS for drinks containers up to 750ml in size and sold in single format containers. A range of non-regulatory options were considered as part of the long list of approaches. While these additional options have been used to justify the preferred option (option 1 above), they are not analysed in detail in this BRIA. Reference can be made to Defra’s IA for further details. Option 1 above is the preferred policy option (option 2 in Defra’s IA).

104. An “on the go DRS” for containers up to 750ml and not sold in multi-packs is not an approach used for existing DRSs in other countries. It would capture less material than Option 1, meaning the benefits in terms of litter reduction and high-quality material collected for recycling are likely to be lower with an “on the go DRS”. It is also thought that this option could risk consumer confusion.

105. As set out above, there are a number of changes relating to the operation of the DRS since the previous full BRIA for the Scottish DRS in December 2021. The main option that has been discounted at this stage is a DRS covering PET, metal and glass. In order to move the scheme forward, the Scottish Government agreed to align with the UK Government and DAERA approach. The Joint Policy Statement sets out to achieve maximum alignment across the schemes and make them as simple as possible for consumers and businesses across England, Northern Ireland and Scotland.^[62]

106. The minimum size of scheme articles has been increased from 100ml to 150ml. Given potential challenges in labelling small bottles and possible complications with reverse vending machines, this is intended to improve the efficiency and effectiveness of the returns process. Across the UK, it is estimated that around 0.5% of plastic and metal drinks containers are smaller than 150ml.^[63]

107. A new packaging EPR scheme came into effect with the Producer Responsibility Obligations (Packaging and Packaging Waste) Regulations 2024. The packaging EPR system is not included in this BRIA.^[64]

Sectors/ Groups affected

Which Business/ sectors are likely to be affected by a DRS?

108. The main businesses involved in a DRS are:

• Drinks producers (manufactures, brand owners, importers)
• Drinks retailers
• Drinks wholesalers
• The hospitality sector (HORECA businesses)

109. Producers will be required to provide information to the SA about the scheme articles which they market, offer for sale or sell in Scotland, and their sales numbers of those products.; they must ensure that their drinks containers comply with any requirements specified by the SA and that container labels include the relevant scheme logo and code. Producers will be responsible for initiating the deposit by charging it to their customers and paying it to the SA, along with the relevant producer registration fees (which will be set by the SA, and not refundable). The deposit is then passed along the supply chain to the final consumer, except where the drink is opened and consumed on site at HORECA premises. Consumers will be able to claim a full refund of the deposit by taking their used container, with the scheme logo and code intact, to a registered return point. The SA will then arrange for returned containers to be collected and transported to one of their counting and/ or bulking centres, before eventually selling the containers to a reprocessor for recycling. The SA will retain the material revenues, along with unredeemed deposits, to part-fund the scheme; the net costs are paid by producers with a producer registration fee for each scheme article they place on the market. The SA reimburses return points for deposit refunds and pays an additional handling payment for each container the return point takes back.

110. The main operational differences in a DRS, compared to the baseline scenario, are:

• The application of the deposit.
• The introduction of container labelling requirements.
• Producers registering the number of units placed on the market by stock-keeping unit (SKU), rather than aggregate tonnages.
• In line with extended producer responsibility, producers paying producer registration fees set by the SA to cover the full net costs of managing their waste drinks containers, rather than buying PRNs.
• The SA’s incentive to ensure the material is of the highest quality to maximise material revenues and reduce producer fees.
• Return point obligations for groceries retailers such as supermarkets and convenience stores.
• The option for consumers to take their empty container to a registered return point to claim a full deposit refund. Consumers will still have the option to dispose of their containers via the existing kerbside system or using public bins, but they would forego their deposit.
• The transfer of the responsibility for managing the majority of in-scope drinks containers from local authorities and material recovery facilities (MRFs) to the SA.

111. The application of a fully refundable deposit is not expected to affect drinks sales. Providing the consumer is able to, and chooses to, return their used container to a registered return point, the deposit does not represent a cost to anyone, but it will affect cash-flow along the value chain from producer to consumer.

112. The DRS will be implemented under Scottish legislation that affects producers and retailers operating across Scotland, including importers of international products, drinks producers based in other countries of the UK but placing drinks on the market in Scotland, and online retailers (who will have to charge a deposit at the point of sale, but not take back used containers).

113. Whisky contributes almost 90% of the drinks industry’s gross value added (GVA), with international exports valued at £5.35 billion.^[65] However, as whisky is predominantly sold in glass bottles, these will not be affected by DRS and remain subject to packaging EPR legislation. As shown in Table 1, there are approximately 405 drinks producers in Scotland. 245 (60.5%) of these are manufacturers of spirits, which tend to be sold in glass bottles. It should, however, be noted that the manufacture of spirits may be their principal activity and that some of these producers will additionally manufacture other drinks that are within the scope of the DRS. This leaves 160 drinks producers in Scotland whose primary activity is the manufacture of ciders, beers, soft drinks and waters; they employ approximately 4,280 people.

Table 1: Number of producers and number of employees in Scotland by drink and employment size band (2023)

Size Band & Drink Type	Micro (0-9)	Small (10-49)	Medium (50-249)	Large (250+)	Total number of enterprises	Total number of employees
Spirits	190	35	10	10	245	10,000
Cider & other fruit wines	5	0	0	0	5	30
Beer	100	20	5	5	125	2,500
Malt	0	0	0	0	0	250
Soft drinks & Bottled waters	25	5	0	0	30	1,500
Total	320	60	15	15	405	15,000

Source: ONS. SIC Codes: 1101; 1103; 1105; 1106; 1107; 11. Manufacture of wine from grape and manufacture of non-distilled fermented beverages not shown as 0 enterprises listed. Totals do not always add up as figures have been rounded to avoid disclosure; this includes rounding down to zero, so all zeros are not necessarily true zeros. Totals across tables may differ due to the disclosure methods used.

114. Table 2 indicates there are approximately 470 wholesalers that may stock drinks that are within the scope of the DRS, and 3,105 retailers.^[66] These represent 25.6% of all retailers in Scotland (excluding motor vehicles and motorcycles). The retailers and wholesalers employ approximately 97,250 people, accounting for 43.6% of employees in the Scottish retail trade. Only groceries retailers will be required to operate a return point unless their retail space is less than 100m² and in an urban area. The HORECA sector (hospitality: Hotels, Restaurants, Cafes) is not listed because these establishments will not have a return point obligation and are expected to operate a closed-loop system within which scheme articles will not have a deposit paid by the consumer. Take-back obligations will not apply to wholesalers either, but they will be passing on the deposit to their customers.

Table 2: Number of drinks retailers in Scotland by employment size band and number of employees (2023)

Size Band & Beverage Trade	Micro (0-9)	Small (10-49)	Medium (50-249)	Large (250+)	Total number of enterprises	Total number of employees
Wholesale of beverages	240	25	10	0	275	2,500
Non-specialised wholesale of food, beverages & tobacco	135	45	10	0	195	6,000
Retail sale with food, beverages or tobacco predominating	2,490	335	10	5	2,840	87,000
Retail sale of beverages in specialised stores	240	20	0	0	265	1,750
Total	3,105	425	30	5	3,575	97,250

Source: ONS. SIC Codes: 4634; 4639; 4711; 4725. Figures and totals are approximate. Totals do not always add up as figures have been rounded to avoid disclosure; this includes rounding down to zero, so all zeros are not necessarily true zeros. Totals across tables may differ due to the disclosure methods used.

115. The Defra IA used data from the Institute of Grocery Distribution for the number of supermarkets over 3,000 square feet in the UK. This was scaled by population for England and Northern Ireland, and the same approach has been used to estimate the number of supermarkets in Scotland. For smaller retailers, Defra took data from the Association of Convenience Stores (ACS), which covers Great Britain, and scaled this by population to include Northern Ireland.^[67] The Defra IA included an estimate for the total number of convenience stores in Scotland, so this total is used here, with the Scottish breakdown by size calculated by scaling by population Defra’s figures for England and Northern Ireland. The estimated numbers are shown in Table 3.

Table 3: Estimated Number of Retailers in Scotland by Sales Space

Number of points by return type

Manual (convenience store): 2,256

Small RVM (convenience store): 749

Medium RVM (supermarket): 468

Large RVM (supermarket): 287

Total: 3,760

Exempt convenience stores: 965

Source: Defra IA, adjusted for Scottish population.

116. The ACS reports that 36% of the 48,590 convenience stores in mainland UK are in rural areas. Using additional data in the ACS Rural Shop report, and 1,000 square feet as an approximation for the 100m² exemption, Defra has discounted shops under 1,000 square feet in rural areas to estimate the number of retailers that will be exempt in urban areas.^[68] The same approach is used here for consistency, but it is not possible to determine at this stage exactly how many retailers will be exempt. In Scotland, groceries retailers with retail space under 100m² in Large Urban Areas and Other Urban Areas will be exempt. The modelling gives an estimated total of 3,760 groceries retailers in Scotland being required to operate a return point.

117. Other sectors that are, or can be, affected by a DRS include:

• Local authorities because there will be less waste to collect at the kerbside. This provides opportunities for efficiency savings but also means a reduced income from aluminium and PET recycling. However, local authority net costs of running an efficient and effective service for packaging will be reimbursed by the new packaging EPR scheme, and the development of a DRS was factored into the packaging EPR BRIA.^[69] The DRS is also likely to mean fewer drinks containers are littered or deposited in public bins. Local authorities may also sell scheme articles from premises or operate return points for the collection of single-use drinks containers.
• Waste management organisations will be affected by some household, municipal and commercial waste being diverted to the DRS, as outlined with local authorities. Overall, there should be higher volumes of waste to recycle in Scotland due to increased capture of materials via DRS, but impacts on specific waste management organisations will depend on contractual arrangements and any decisions by the SA to contract waste collectors and recyclers.
• The UK Government is currently consulting on adding energy from waste facilities and waste incineration to the UK Emissions Trading Scheme in 2028. The DRS should reduce the amount of plastic in residual waste that is sent to these facilities and could, therefore, reduce the carbon emissions. The impact of this for local authorities and waste processors will depend on contractual arrangements.
• Following the implementation of the DRS in Lithuania, surveys indicated that the DRS encouraged consumers to recycle more of their non-beverage waste.^[70] While Lithuania’s pre-existing waste management system was different to Scotland’s kerbside system, it is nevertheless possible that a DRS could support a wider behaviour change and increase recycling rates for other types of waste. This would have implications for local authorities and existing waste management services that will operate alongside the DRS.
• Consumers will have to pay a deposit for each scheme article at the point of purchase. While the deposit is fully refundable, it will affect consumer cash-flow to varying degrees and will be more of a concern to low-income groups. How convenient it is to claim a refund of the deposit will depend on the return system and decisions of the SA, which are discussed later. There are also potential positive impacts for consumers, particularly for those who are concerned about the environment; other countries report high approval ratings for their DRS after implementation. Polling in the UK has reported that 69% of the public support the implementation of a DRS.^[71] Another poll in 2021 indicated that 88% of Scottish adults are concerned about plastic pollution, an issue the DRS aims to address by increasing the capture rate and reducing littering of plastic drinks bottles.^[72] Consumers are considered in more detail in the Fairer Scotland Duty Assessment^[73] and the Equalities Impact Assessment.^[74]
• Other members of the public can collect unwanted used drink containers to claim the deposit. In some countries with a DRS, consumers can leave their deposit-bearing containers near public bins, enabling someone else to claim a refund.^[75]
• Reprocessors. There will be an increased and reliable supply of high-quality PET and aluminium. The SA is likely to invite bids from recyclers for the material. Recyclers in Scotland will have the advantage of proximity, which could reduce transport costs.
• Drinks container and label designers/ manufacturers may be commissioned by producers to support compliance with the scheme rules. Labels, for instance, will need to be modified to incorporate the scheme logo and code. There may also be guidance about the types of glue and materials that can be used, and on acceptable dimensions for bottles to ensure they are compatible with RVMs. The DRS could mean it is easier for plastic bottle manufacturers to procure food-grade rPET.
• Regulators. SEPA will be responsible for enforcing the obligations of producers, retailers and the SA. While SEPA will have to ensure they have the capacity to do this, producer registration fees, if charged by the SA, can include a regulatory component to recover SEPA’s regulatory costs.
• Voluntary organisations and charities may have the opportunity to raise funds via the DRS. For instance, RVMs can be equipped to invite consumers to donate their deposit refund to a charity. Local groups and charities could also provide special bins for consumers to donate their deposit-bearing containers. In its first year, the Irish DRS raised €90,000 (approximately £75,000) through its ‘Return for Children’ initiative and over 2,000 schools, clubs and community organisations registered their own fundraising activities.^[76]
• Wider supply chain: DRS will indirectly affect other businesses and markets in the wider supply chain for drinks and drinks containers. This includes, plastic, aluminium, and steel production, for instance by increasing the availability of recycled material that could replace virgin material.

Supply chain description

118. The following section sets out the mechanism of the supply chain for aluminium and plastic drinks containers in Scotland. This encompasses several main stages: raw material extraction and processing, manufacturing, logistics (including domestic distribution and importing foreign brands), wholesale, retail, and final consumption by consumers. While there are nuances for each brand and type of container, understanding the general workings of the supply chain for the in-scope drinks industry is important in gaining a further understanding of what impacts a DRS will have on the functioning of this system.

119. Raw materials for production of containers are generally sourced out with Scotland. Mined bauxite ore is refined to produce alumina, which is then smelted to produce aluminium for cans. Mining is primarily in countries such as Australia, China, Guinea, Brazil, and India.^[77]

120. Plastic bottles, commonly made from polyethylene terephthalate (PET) are derived from petrochemical feedstocks, primarily crude oil and gas. The raw materials then undergo a polymerization process which converts raw hydrocarbons into PET resin, which is then moulded into bottles. The top producers and exporters of PET are China, South Korea, India, Vietnam and Oman.^[78] Scotland does have an established oil and gas industry, so theoretically oil and gas produced in Scotland which is sold on the global market could be used for PET drinks container production which ends up in Scotland, but this would be impossible to know exactly.

121. There are also secondary recycled materials which are used to produce aluminium and plastic drinks containers. Scottish local authorities operate kerbside collections for household and business recycling. These materials are collected, taken to Household Recycling Centres, and then sold to reprocessors in material markets. The recyclate could be used for a variety of purposes and by a range of industries. The extent to which recyclate reprocessed in Scotland is used for the manufacture of new drinks containers depends on a range of factors. Material market prices dictate which reprocessor recyclate is sold to, including both domestic and foreign organisations. This is at the discretion of businesses in the recycling sector. However, as much manufacturing of containers takes place abroad, the proportion of containers produced entirely in Scotland from recyclate may be low. It should also be noted that there are regulations governing the use of recycled plastic in contact with food, so the source of the rPET will affect its possible end uses.^[79]

122. Scotland does have facilities which can reprocess secondary materials. A notable example is the Alvance aluminium smelter in Lochaber^[80], which is powered by hydroelectricity, providing a low carbon method of recycling. Global market forces however hold significant sway over the destination and reprocessing of recyclate in Scotland for new drinks containers.

123. Regarding the production of finished containers for filling by drinks producers, Scotland’s domestic supply varies by container type and is subject to much of the same global market forces as the production of the raw materials for the containers. Containers may be produced domestically, but it is more likely that larger suppliers in the rest of the UK and globally which benefit from economies of scale will be used to purchase empty containers by drinks producers.

124. Concerning the distribution of filled drinks containers, the three sources are from domestic production, production within the rest of the UK, and importing from abroad. Scotland has a well-established food and beverage industry that supplies a wide range of alcoholic and non-alcoholic drinks.^[81] The remainder of the domestic market is supplied from the rest of the UK and abroad. Goods imported from the rest of the UK are likely done so through road and rail freight, whereas international supply chains are more complicated and will involve shipping and customs clearance based on a range of factors.

125. Wholesalers purchase goods from producers or importers in bulk and distribute them to retail, hospitality, and a range of other buyers. Wholesalers ensure a constant supply of goods which benefit businesses through economies of scale allowing for lower unit costs.

126. These filled drinks containers are then sold to final consumers through a wide range of means. Indicatively, this may include retail, hospitality (restaurants, cafes, pubs etc), and vending machines. Once the filled drink container is consumed, the empty containers enter the waste stream through a variety of means detailed above. Indicatively again, this may include recycling, residual waste, or ground litter.