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

4.0 Options

29. A number of alternative policy options have been considered to ensure that an EPR scheme is the correct delivery mechanism for Scotland. These options are aligned with those considered for the rest of UK, and the scenarios that are set out in the UK IA. The scenarios must achieve the following strategic objectives:

• Increase packaging recycled.
• Increase the recyclability of packaging.
• Reduce unnecessary packaging^[22]
• Improve the environment, including a reduction in litter.
• Increase domestic recycling and reprocessing capacity.
• Enhance data reporting.

30. These objectives are ambitious and will aid Scotland in meeting our circular economy goals. Any option considered as an alternative to an EPR scheme would therefore need to deliver in equal measure on these strategic objectives.

31. The policy intention is to align Scotland (and the UK) with the aims of EU Article 8a of the Waste Framework Directive regarding producer responsibility, as amended by the CEP.^[23] The alternative policy options provide additional scenarios for a potential EPR scheme. A non-regulatory option was not appraised, as the aim is to reform the existing regulatory framework.

32. The options considered are:

• Option 1. No policy change: continuation of the existing packaging producer responsibility regime in its current form, adjusted for DRS.
• Option 2. EPR scheme: full net cost recovery, modulated fees and mandatory labelling.
• Option 3. EPR scheme: full net cost recovery, modulated fees, mandatory labelling and plastic film collection for recycling.
• Option 4.EPR scheme:Full net cost recovery, modulated fees, mandatory labelling, plastic film collection for recycling, plus mandatory reporting and takeback of disposable fibre-based cups.

33. It is important to note here that in the UK IA only variations of the Packaging EPR scheme are numbered as options, while the baseline option is without a number. Therefore, Option 2, Option 3 and Option 4 in this BRIA are Option 1, Option 2 and Option 3 in the UK IA, respectively.

34. In the UK IA, a preliminary analysis of the costs and benefits of the various EPR Options for the UK has already been conducted. The analysis does not, however, set out specific costs for Scotland.

35. Estimates of the net cost to business and Net Present Value (NPV) at a UK level for Options 2-4 are presented below. These are taken directly from the UK IA carried out by DEFRA and should be considered for the purposes of this partial BRIA as indicative only.

36. The final cost-benefit analyses, which will be presented in the final BRIA, will need to take into account the Scottish policy landscape and Scotland-specific developments, for instance regarding the recycling rate. We will work ahead of the final BRIA to understand where costs and benefits in Scotland may differ from a simple proportional share of UK figures, including reflecting fully any interactions with Scotland's DRS.

37. It is assumed that all three packaging EPR options will affect the same stakeholders, including:

• Raw material manufacturers.
• Packaging designers.
• Packaging manufacturers or converters.
• Product manufacturers or pack fillers.
• Distributors.
• Retailers (food and non-food).
• Wholesalers.
• Waste management organisations; brokers; exporters.
• Reprocessors.
• Brand owners.
• Importers.
• Third sector organisations, including public interest groups.
• Scottish Government.
• Local authorities.
• Regulators.
• Consumers.

38. When calculating full net cost recovery, the value generated from sales of materials are counted as a positive income stream, and disposal costs for packaging in the residual stream as a negative. Supporting measures that require improved data on packaging materials (e.g. tonnes collected and placed on the market) and that encourage better recycling and reduced littering are also counted as costs. Management and administration costs of any compliance scheme are met by obligated businesses.

4.1 Option 1. No policy change – business as usual

39. This option is the baseline against which the costs and benefits of the alternative EPR scheme options are compared. It assumes that the Deposit Return Scheme (DRS) for Scotland is introduced and the Single Use Plastics Directive is transposed, but that there is no change in waste and recycling policy. EPR obligated producers will not be obligated to pay for the costs of collecting DRS materials not returned to designated DRS collection points.

40. Owing to a small annual population increase, if no further action is taken via regulation or commercial initiatives, a modest upward trend would be expected in household (HH) and non-household municipal packaging waste.^[24]However, it is expected that there will be some shift from harder-to-recycle to more widely-recycled packaging materials due to voluntary initiatives such as the UK Plastics Pact. Please refer to the UK IA for more information.

41. The UK IA notes that on-pack recycling labels (OPRLs) already have traction with consumers and are the most widely-used labels on packaging in the UK.^[25] It notes that all national supermarkets are members of OPRL Ltd, which reports that 7 in 10 consumers recognise and act on its labels.^[26] Under this Option, a steady increase in the voluntary uptake of OPRL labels and other on-pack labels is assumed.

4.2 Option 2. EPR scheme: full net cost recovery, modulated fees and mandatory labelling.

42. This option covers household and commercial packaging and would see the requirement to pay the full net costs of managing such packaging at the post-use stage placed on producers. This includes the cost of collection, recycling, disposal, the clear-up of littered and fly-tipped packaging, and communications relating to recycling and tackling littering. It would also include the implementation of modulated fees, which is the mechanism to recover costs of post-use management from producers and reflects the costs of managing different types of packaging in order to incentivise packaging choices that lead to better circular-economy outcomes.

43. Mandatory labelling would be implemented in a manner that supports the wider approach to packaging EPR, whilst minimising additional compliance costs for businesses. The intention is to mandate UK-wide labelling of packaging to provide clear information on the recyclability of any item of packaging and to help consumers dispose of packaging waste appropriately. It is proposed that producers would label their packaging as 'Recycle' or 'Do Not Recycle', informed by the approved list of recyclable packaging materials/formats that would also be used to set modulated fees. The labelling may also support messages that direct consumers to dispose of packaging via specific routes, such as front-of-store recycling.

44. Labelling measures would be complemented by producer funding for local and national communications and education initiatives, to advise consumers on how to recycle and the consequences of making the wrong disposal choices. These costs would be included as part of full net cost payments.

45. This option would meet policy objectives, as it would drive the increased recyclability of packaging and increased recycling of packaging waste, as well as reducing packaging as a component of residual waste. It is estimated to result in net costs to business of £1,103.7m and NPV of £157.2m at the UK level over ten years. Please refer to the UK IA for more details on the elements and expected effects of this option.

4.3 Option 3. EPR scheme: full net cost recovery, modulated fees, mandatory labelling and plastic film collection for recycling.

46. Option 3 includes all elements of Option 2 but adds the costs of collecting and sorting plastic film packaging for recycling. This would mean that plastic film was part of the core set of packaging materials to be collected from households and businesses for recycling. Producers would therefore need to pay for the cost of collecting and sorting this material, in line with other packaging materials.

47. Although some plastic film is technically recyclable, services for the collection and sorting of film plastics are poorly developed and to date there has been limited incentive for investment in UK reprocessing capacity. Tonnages collected for recycling from households and the municipal sector are low (estimates are that in the UK only 10% of LAs collect plastic film packaging) and much of this material is of poor quality and hence of low value.

48. This option would meet policy objectives as it would drive the increased recyclability of packaging and increased recycling of packaging waste, as well as reducing packaging as a component of residual waste. An increase in the recycling of plastic film is expected to happen gradually, as the higher quantity and quality of waste film collected drives investment in reprocessing infrastructure. This option is estimated to result in net costs to business of £1,125.1m and NPV of £218.0m at the UK level over ten years. Please refer to the UK IA for more details on the elements and expected effects of this option.

4.4 Option 4. EPR scheme: Full net cost recovery, modulated fees, mandatory labelling, plastic film collection for recycling, plus mandatory reporting and takeback of disposable fibre-based cups.

49. This option is the same as Option 3, with the addition of mandating all retailers of disposable fibre-based cups^[27] to:

i) report what they place on the market and
ii) facilitate their separate collection for recycling.^[28]

50. These producers could have the flexibility to establish their own collection systems and determine how best to maximise the collection and recycling of disposable fibre-based cups or financially support a cup-collection system. It is assumed that retailers would provide disposable cup bins, reprocessors would invest in infrastructure to reprocess this material and finally consumers would dispose of cups in the appropriate bins.

51. The benefits of introducing a mandatory reporting obligation on disposable cup producers, and a requirement on producers to take back used disposable cups for recycling, include:

• Building on existing good practice and tested systems demonstrated in industry voluntary measures.
• Reducing litter and disposable cup waste, by encouraging producers to invest in infrastructure and communication campaigns to influence consumer behaviour.

52. Data on fibre-based cup collection is limited. More information and a firmer policy proposal will be developed through further research and feedback from consultations with the public and businesses. This will be presented in the final UK IA and Scottish BRIA.

53. This is the preferred option, as it includes a material that is not currently recycled and therefore would meet the policy objective to increase packaging that is recycled. It is estimated to result in net costs to business of £1,131.0m and NPV of £275.4m at the UK level over ten years. Please refer to the UK IA for more details on the elements and effects of this option.

54. This should be seen the context of our work to consider how the damage caused by single-use items can be addressed by the introduction of minimum charges. The Scottish Government has committed to take action on a range of single use plastic materials, including a ban on cups made of expanded polystyrene, as well as charges for cups that are wholly or partly made of plastic, as per the requirements of the EU Single Use Plastics Directive. Measures being introduced through EPR to improve takeback and recycling, and improve data provision, should complement charging.