UK packaging producer responsibility system reform: partial business and regulatory impact assessment

2.0 Purpose and intended effect

2.1 Background

4. According to the Scottish Environment Protection Agency (SEPA), more than 10 million tonnes of packaging waste is produced every year in the UK.^[2] Separate information is not available for waste packaging in Scotland. A substantial part of packaging waste ends up in residual waste, two-thirds of which could instead be recovered, resulting in avoidable environmental costs.

5. Extended producer responsibility (EPR) schemes can be implemented to ensure that producers' responsibility for their products is extended to the post-use phase. This includes financial responsibility and can apply to, for example, the environmental or waste management costs of the products they place on the market. This incentivises producers to design for key circular economy outcomes such as reduced consumption of resources, reuse, repair and recycling.

6. The Producer Responsibility Obligations (Packaging Waste) Regulations 2007 (as amended),^[3] hereafter referred to as 'the Packaging Waste Regulations', have been in place since 1997 and operate UK-wide.^[4] Under these regulations, businesses which make or use packaging are obligated to contribute towards the cost of recycling and recovery of a proportionate amount of packaging they have placed on the market. The objectives of this system are to:

• Reduce the amount of packaging produced.
• Reduce the amount of packaging waste going to landfill.
• Increase the amount of packaging waste that is recycled and recovered.

7. The Scottish regulator is SEPA. Along with the environmental regulators in the other nations of the UK, SEPA administers the National Packaging Waste Database and monitors compliance with the regulations.

8. The responsibility to prove that producers have met their recycling obligations is currently fulfilled through the purchase of Packaging Waste Recovery Notes (PRNs) or Packaging Export Recovery Notes (PERNs) which are sold by accredited reprocessors or exporters. Obligated businesses must buy sufficient PRNs to offset their obligations, in line with the 'polluter pays' principle.^[5] PRNs and PERNs act as evidence that an equivalent amount of similar packaging has been recycled.

9. Scotland remains committed to achieving circular economy outcomes. In February 2016, Making things last: A circular economy strategy for Scotland was published.^[6] This overarching strategy integrated the key elements of the Zero waste plan^[7] and Safeguarding Scotland's resources,^[8] and built on Scotland's zero-waste and resource efficiency agendas. The strategy set out how a more circular economy would benefit:

• The environment – cutting waste and carbon emissions and reducing reliance on scarce resources.
• The economy – improving productivity, opening up new markets and improving resilience.
• Communities – more, lower cost options to access the goods we need with opportunities for social enterprise.

10. As part of the commitment to circular economy outcomes, the Scottish Government has acted to address the negative externalities associated with single-use disposable products through the introduction of the single-use carrier bag charge in 2014 and its pending increase; the ban of microbeads in 2018; the ban of plastic-stemmed cotton buds from October 2019; and the pending implementation of legislation introducing restrictions on specific single-use plastic items, in line with Article 5 of the European Union (EU)'s Single Use Plastics Directive. The Scottish Parliament also voted in May 2020 to implement a Scottish Deposit Return Scheme (DRS) from July 2022, to increase recycling rates and reduce littering of single-use drinks containers.^[9]

11. The central aim of extended producer responsibility (EPR) is to ensure that producers bear financial responsibility for the impacts of products they place on the market and are incentivised to reduce these impacts. This provides the opportunity to assess the whole lifecycle of a product – a concept which is central to Scotland's circular economy strategy.

12. Scotland is working jointly with the UK, Welsh and Northern Irish governments on reforming the packaging regulations and expanding the UK-level EPR schemes. The governments of all the nations are working together to ensure that the revised packaging EPR scheme aligns with existing policies as far as possible, and allows some variation based on local needs and priorities. This will help to maximise the influence on producers and the supply chain.

2.2 Objective and rationale

13. The current UK EPR system for packaging has helped the UK meet its national and EU packaging recycling target while keeping the cost to businesses low. However, there are some shortcomings of this system, which suggest a need to strengthen EPR policy:^[10]

• It is estimated that the current system covers only around 10% of the total cost of managing post-use packaging waste,^[11] which means that most of the cost is borne by local authorities, other public authorities and businesses who consume packaged goods. Additionally, there is significant fluctuation of revenue raised through PRNs.
• Concerns over system transparency, including the actual fate of materials and the visibility producers have of how their PRN fees are used.
• Lack of a level playing field for domestic reprocessing, due to an over-reliance on export markets.
• Limited direct consumer communications to encourage packaging recycling.
• Lack of incentive for producers to design for greater recyclability or re-use, as the price of PRNs is not linked to recyclability or environmental impacts of materials. This means that materials are often reprocessed into much lower-value goods, or lost to landfill or incineration after just one use.
• Lack of granularity in data reported by producers, as this currently only includes the type of material and does not include the packaging or polymer type.

It is clear that the current packaging EPR system does not fully align with the polluter pays principle, in that producers do not bear full financial responsibility for the impacts of products they place on the market, and are therefore not strongly incentivised to reduce these impacts.

14. The objectives of reforming the UK packaging EPR system (driven by a number of policy considerations as set out below) are to:

• Increase packaging recycled.
• Increase the recyclability of packaging.
• Reduce unnecessary packaging (not qualified in this BRIA).^[12]
• Improve the environment, including a reduction in litter.
• Increase domestic recycling and reprocessing capacity.
• Enhance data reporting.

15. An amendment to the EU Waste Framework Directive sets out a 70% packaging recycling target for 2030.^[13] DEFRA and the devolved administrations are aiming to meet or exceed this target with the UK-wide packaging EPR scheme. Minimum targets have been proposed for six materials, which, as noted in the consultation, equate to an overall EPR packaging recycling target equivalent to 73% by 2030.

16. The circular economy contributes directly to the Environment and Economy outcomes under the National Performance Framework. Directly applicable National Indicators include:^[14]

• Carbon footprint.
• Natural capital.
• Greenhouse gas emissions.
• Waste generated.
• Clean seas.
• Scotland's reputation.
• Perception of local area.
• Condition of protected nature sites.

17. Resource use and waste generation are recognised as key sources of greenhouse gas generation, and the Scottish Government reports on progress against both territorial and consumption emissions. The reform of UK packaging EPR policy will contribute to objectives set out in the Climate Change (Scotland) Act 2009,^[15] as amended through the Climate Change (Emissions Reduction Targets) (Scotland) Act 2019;^[16] and the Climate change plan: Third report on proposals and policies 2018-2032 (RPP 3).^[17] The legislation establishes a target of achieving net-zero emissions by 2045, while RPP 3 sets out plans to decarbonise the economy in the period to 2032. An update to RPP 3 (Update to the climate change plan 2018-2032), which set out the importance of a green recovery from the pandemic, was published in 2020.^[18]

18. In 2015, the Scottish Government signed up to support 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. An enhanced packaging EPR policy will have a positive impact on a number of these goals, most directly Goal 12: Responsible Consumption and Production.

19. In May 2018 the European Commission's Circular Economy Package (CEP) 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 recovery of net recycling costs from producers. The Scottish Government has committed to meeting or exceeding the EU's environmental standards after leaving the EU.^[19] An enhanced packaging EPR policy will contribute to meeting this commitment.