Deposit return scheme consultation: analysis of responses

15 Discussion of example systems (Q40–Q48)

15.1 The consultation paper set out four example deposit return schemes along with the results of a qualitative assessment of each. The four example schemes demonstrated how different scheme components (ownership model, materials accepted, return locations, deposit level etc) might be combined in different ways. Each example was scored against four key weighted measures of: (i) ensuring fairness for all demographic groups; (ii) maximising accessibility for all demographic groups; (iii) creating employment opportunities for socially disadvantaged groups; and (iv) creating opportunities to raise funds for charitable causes. A net present value (NPV) – a measure of the economic impact on the Scottish economy – was also calculated for each example. The evaluation of performance against each of the four measures was combined and considered along with the NPV to give an overall qualitative assessment for each scheme.^[23] 

15.2 A series of eight questions asked respondents to consider the four examples and the results of the assessment exercises carried out, as follows:   

Question 40: Which example do you think best matches the ambition of a deposit return system to increase the rate and quality of recycling and reduce littering? [Example 1 / Example 2 / Example 3 / Example 4]

Question 41: Do you agree with the assessment of Example 1? [Yes / No / Don’t know]

Question 42: Do you agree with the assessment of Example 2? [Yes / No / Don’t know]

Question 43: Do you agree with the assessment of Example 3? [Yes / No / Don’t know]

Question 44: Do you agree with the assessment of Example 4? [Yes / No / Don’t know]

Question 45: How do you think the NPV model could be further developed? What other factors should be included in the models?

Question 46: What economic risks or opportunities do you see in introducing a deposit return scheme in Scotland?

Question 47: Do you see particular risks with any of the examples?

Question 48: What action do you think we could take to maximise the opportunities and minimise the risks of any of the approaches?

15.3 There was a lot of variation in the way respondents approached the answering of this set of questions, and a great deal of overlap in the comments made across the questions. As such, this chapter does not present a question by question analysis. Instead it draws on comments across Question 40 to 48 in presenting (i) overall views on the scheme examples (Question 40); (ii) views on each of the four schemes (Question 41 to 44); (iii) views on the NPV methodology used in assessing each scheme (Question 45); and (iv) views on opportunities and risks presented by the example schemes (Question 46 to 48). 

Overall views on example schemes (Q40)

15.4 Question 40 asked respondents for their views on which of the four example schemes best matched the scheme ambition of increasing the rate and quality of recycling and reducing littering. This was a simple tick-box question, with the responses to the four subsequent questions providing further information on the views of respondents on each scheme. However, it was notable that only around six out of ten organisations (93 out of 159) responded to the closed question, although others provided written comments.  

15.5 Table 15.1 shows that among the respondents who replied to Question 40, there was no clear consensus about which of the four example schemes best matched the ambition for a DRS in Scotland. Overall, 44% thought that Example 4 would be the best type of scheme. However, relatively large proportions also chose Example 2 (28%) and Example 3 (21%). Respondents were least likely to say that Example 1 would be the best type of scheme, with just 7% selecting this option.

15.6 There was a similar pattern of response between organisations and individual respondents in the sense that there was also no clear consensus among either group regarding the four example schemes. However, organisations were less likely than individuals to choose Example 4 (34% vs 44% respectively) or Example 2 (19% vs 29% respectively), but more likely than individuals to select Example 3 (35% vs 20%).

Table 15.1: Q40 – Which example do you think best matches the ambition of a DRS to increase the rate and quality of recycling and reduce littering?

	Example 1		Example 2		Example 3		Example 4		Total
Respondent type	n	%	n	%	n	%	n	%	n	%
Public sector organisations	1	5%	3	15%	13	65%	3	15%	20	100%
Food and drink producers	–	0%	1	13%	6	75%	1	13%	8	100%
Charities	–	0%	–	0%	1	7%	14	93%	15	100%
Retailers	5	36%	3	21%	5	36%	1	7%	14	100%
Recycling / waste mgmt orgs	1	11%	3	33%	5	56%	–	0%	9	100%
Packaging manufacturers	1	25%	–	0%	1	25%	2	50%	4	100%
Community bodies	–	0%	3	43%	–	0%	4	57%	7	100%
Environmental consultancies	1	17%	2	33%	1	17%	2	33%	6	100%
Hospitality and restaurant trade	1	50%	1	50%	–	0%	–	0%	2	100%
DRS companies	–	0%	–	0%	–	0%	2	100%	2	100%
Other organisations	–	0%	2	33%	1	17%	3	50%	6	100%
Total organisations	10	11%	18	19%	33	35%	32	34%	93	100%
Total individuals	79	6%	359	29%	255	20%	555	44%	1,248	100%
Total (organisations and individuals)	89	7%	377	28%	288	21%	587	44%	1,341	100%

Percentages may not total 100% due to rounding
Example 1: Take back to designated drop-off points
Example 2: Take back to dedicated drop-off points and some shops (with cartons and cups)
Example 3: Take back to any place of purchase
Example 4: Take back to any place of purchase (with cartons and cups)

15.7 Question 40 was addressed by the postcard campaign which advised respondents to select ‘Example 4’ as the best scheme for Scotland.

Views on individual example schemes (Q41–Q44)

15.8 Questions 41 to 44 asked in turn whether respondents agreed with the assessments set out in the consultation paper regarding Examples 1, 2, 3 and 4. It was common for respondents to repeat the same comments at each question, or to provide comments of a more general nature only.

15.9 Respondents made one or more of the following types of response at these questions:

• They thought none of the example schemes was suitable for a DRS in Scotland and that the examples offered did not represent ‘a definitive list of options’. Respondents giving this type of answer often went on to (i) describe what they saw as a more suitable scheme, either by referencing a set of principles which should underpin the design of a DRS, or by providing details of the actual scheme they would wish to see implemented and / or (ii) say they did not think the ‘pick and mix’ approach of combining the various components to arrive at example schemes was appropriate. In this latter type of response, respondents said they wanted a well-designed DRS to be specified and fully costed. 
• They restated comments made earlier in the consultation about their preferred type of scheme. In this type of response, respondents did not comment directly on (any of) the specific examples proposed but rather reiterated their views about the type of DRS (in terms of the materials covered, the drop-off locations, the deposit level, ownership of the scheme, the aims of the scheme etc.) they would wish to see introduced in Scotland.  
• They commented on what they saw as the strengths and / or weaknesses of (some aspects of) the example schemes proposed. In general, these comments ‘played back’ the ‘benefits and drawbacks’ which had been set out for each example scheme in the consultation paper (for example: Example 1 minimises impacts on retailers; Examples 3 and 4 offer the best accessibility to drop-off points). These respondents occasionally went on to provide other reflections on the impacts (both positive and negative) of the suggested example scheme.
• They said they did not agree with the assessment. In this type of response, respondents went on to (i) query specific elements of the example scheme(s) under consideration and / or (ii) query specific assumptions which had been made in (or omitted from) the NPV calculations and / or (iii) raise broader methodological issues which they thought were relevant to the assessment.
• They said that (i) there was insufficient information available to allow them to reach a view about whether they agreed with the assessments and / or that (ii) more work needed to carried out in relation to the assessments. In this type of response, respondents sometimes went on to describe in more detail the kind of further information / further work they wished to see.
• They agreed with the assessment of the scheme but were not in favour of the scheme itself. These respondents, like those described in the third bullet point above, sometimes provided more details of why they were not in favour of the example scheme.
• They thought these assessments were technically complex, and difficult for the lay person to understand and / or comment on. This kind of work was ‘best done by others’ or ‘should be left to the experts’. This type of response was generally offered by individuals rather than by organisational respondents.

15.10 In addition, a range of both individual and organisational respondents simply said they agreed with the assessments provided and did not comment further.

15.11 As can be seen from this characterisation of the comments made about the four models, much of the ground covered was also discussed in the context of other consultation questions. This material is not repeated in any detail, and the sections below concentrate on those comments not covered elsewhere. Note, however, that some of the points are elaborated on further at Question 45 which asked directly about how the NPV methodology might be developed.

Availability of information relating to assessment of examples

15.12 A range of respondents – but particularly food and drink producers, environmental consultancies, charities, public sector respondents and packing manufacturers – commented that there was ‘insufficient detail’ in the consultation paper (and the supporting documents) to allow an informed response to the question ‘do you agree with the assessment of Example X?’. These respondents wanted additional information, including the detailed assumptions and rationale underpinning each assessment, so that further discussion about the assessments could take place. 

15.13 A range of respondents highlighted additional information (and assumptions) which would need to be available in order for full impact assessments to be undertaken. This included information and assumptions relating to (i) the impacts on behaviour change (ii) the economic impacts on consumers (iii) the impacts on specific demographic subgroups (iv) the impacts on the various businesses / industries in the supply chain (i.e. producers, wholesalers, retailers, waste management organisations etc.) (v) the costs of including cups and cartons in the DRS (it was noted that no schemes for these types of containers currently exist) and (vi) the impacts on local authorities of running a DRS alongside existing kerbside recycling arrangements. These respondents thought that without this additional information, it was not possible to reach any conclusions on the examples presented and / or the preferred DRS.

15.14 A range of organisational respondents highlighted the supplementary evidence submitted as part of Valpak’s response to the consultation. This included a critique of the economic analysis and NPV assessments of the example schemes presented in the consultation paper. Respondents said they agreed with the assumptions and analysis presented in the Valpak paper.

15.15 A range of organisational respondents (including local authorities) stated that they were currently working with Zero Waste Scotland to consider the impacts of a DRS and to undertake further modelling.

Queries raised in relation to example schemes and their assessment

15.16 Both individual and organisational respondents raised a range of queries in relation to the example schemes and their assessments. Respondents highlighted the uncertainty surrounding some of the contributory factors and noted that changing (any of) the scheme parameters could have a large impact on the NPV assessments (and therefore on the relative merits of the examples and on the viability of the scheme overall). 

15.17 The queries raised most commonly related to:

• Return rates: Respondents often queried the return rates used in the assessment of specific example schemes. Some respondents thought the return rates used in the assessments were too low, especially as they were lower (they said) than rates which were currently being achieved (either in the UK or elsewhere). Others thought that the proposed return rates were too high; specifically, it was suggested that the return rates used might significantly overstate the residual waste capture. 
• Deposit amounts: Respondents queried why the deposit amount used for Examples 3 and 4 was lower than the deposit amount proposed for Examples 1 and 2. Respondents thought the same deposit level should be used for all the examples to aid comparability, particularly given the relationship between the deposit amount and the return rate.  
• Producer costs: Respondents were unclear how producer costs had been calculated, whether these were the same as producer fees, and how these costs were (or were not) reimbursed in the assessment. 
• Retailer costs: Respondents – especially, but not only, retailers – thought the upfront capital costs for Examples 3 and 4 were very high (due, at least in part, to the need to purchase and install RVMs in a large number of locations). They could not see how these ‘return point’ costs had been factored into the NPV calculations.
• Reported benefits of Circular Economy Packaging (CEP) compliance: Respondents asked for more clarity on how the CEP compliance fees had been attributed. They thought these benefits were overstated in the assessments.
• Societal benefits: The way societal benefits (including street cleaning) was valued was thought to be very problematic given the lack of available data on which to base an assessment.  

15.18 Other queries raised focused on (i) valuing material revenues given market fluctuations (ii) estimating levels of unredeemed deposits (iii) the high scheme administrator costs for Examples 1 and 2 compared to Examples 3 and 4 and (iv) the justification for the element of ‘public ownership’ introduced into Examples 3 and 4.

Queries in relation to the assessment methodology

15.19 There were a range of concerns about the methodology underpinning the assessments including that:

• The individual examples combined a wide range of aspects and each scheme differed from the others along a number of different dimensions. This meant it was not possible to isolate the effect of any particular change (e.g. raising the deposit level from 10p to 20p, or extending drop-off points to all retail outlets).
• There should be 5- and / or 10-year NPV assessments in addition to the 25-year assessment. 
• An analysis of return on investment (RoI) was also required.
• The examples did not adequately recognise the potential logistical challenges. Some respondents noted (again) that there is currently a lack of infrastructure for dealing with disposable cups and carton and they pointed out that the costs of including these materials in the scheme could be very high.
• The assessment is too complicated with many ‘moving pieces’.
• Elements that are suggested in the examples don’t operate anywhere else in the world, so it is hard to judge possible success.

15.20 Occasionally, respondents also made the point that the impact of Brexit and the introduction of a reformed EPR – both of which were likely to have a substantial impact on the design of the DRS – had not been factored into the assessments.

Development of the NPV model (Q45)

15.21 Question 45 asked about further development of the NPV model, and additional factors which should be included in the models. The comments made included both highly technical – and very specific – responses as well as those of a more ‘lay’ and general nature. In the main, the technical responses were offered by organisational respondents only. Moreover, the responses from individuals were dominated by comments which (i) described what kind of DRS was required or (ii) indicated that the respondent was not able to answer this question (comments such as ‘don’t know’, ‘unsure’, ‘no idea’ were common).

15.22 The main themes addressed by respondents are covered below under the headings (i) types of economic analysis to be included (ii) additional factors / schemes to be included in NPV modelling (iii) other issues raised about the development of the NPV model.

Types of economic analysis to be included

15.23 There was widespread support among organisations for NPV calculations covering (i) a number of time points and (ii) a shorter period (3, 5,10 and 5–10 years were all specifically mentioned) to be carried out and considered alongside the 25-year calculation set out in the paper. This shorter period was thought to be appropriate, especially in the context of the (it was stated) 5–7 year ‘shelf life’ for an RVM.

15.24 Calculations based on measures of RoI also attracted widespread support.

15.25 Respondents suggested that sensitivity analysis should be carried out, especially in the context of (i) deposit levels and (ii) material prices (which are known to be volatile). An analysis of the economic impacts of a DRS on consumer spending on drinks and a wider economic analysis on consumer spending levels of unredeemed deposits was also called for by a range of organisational sectors (packaging manufacturers, food and drink producers, recycling and waste management organisations, environmental consultancies).

Additional factors / schemes to be included in NPV modelling

15.26 Respondents made a wide range of suggestions about other factors which they thought should be included in the NPV modelling. The main suggestions covered:

• Consumer convenience / inconvenience (including additional travel time and costs)
• Consumer choice (especially for low-income groups) / impacts on consumer spending
• Commercial impacts (job losses across a range of sectors due to reduced product sales of in-scope beverages, loss of floor space and staffing costs for retailers, downstream impacts for recycling organisations etc.)
• Impacts on local authority recylate income and infrastructure / impacts of unredeemed deposits on the kerbside recycling stream (this requires modelling at a local level)
• Environmental benefits / harms (reduced littering, reduced landfill costs, carbon emissions from additional travel, recovered energy etc.)  
• Inclusion / non-inclusion of alcohol products in a DRS and its impact on MUP
• Risk of fraud
• Impact of other policy developments (e.g. Brexit, EPR, plastics tax, etc.).

15.27 Respondents also suggested that the range of modelled examples should be expanded. In particular, respondents wished to see the NPV modelling outcomes for an on the go DRS. They also suggested modelling the ‘Reward4Waste’ solution.^[24]

Other issues raised

15.28 A small number of respondents raised a number of other points as follows:

• They wished to see (i) explicit recognition of the uncertainty in the modelled assessments; (ii) comparisons made with existing schemes in other countries; (iii) assessment of the direct benefits to the Scottish industry of a local supply chain of high-quality raw materials; or (iv) an assessment of the potential secondary benefits / activities (e.g. individuals collecting waste from communal bins).
• They voiced scepticism about the NPV modelling approach which they thought was ‘designed to demonstrate value for money’ in the same way, it was said, that Private Finance Initiatives (PFIs) are. This group argued that the indirect effects of a DRS (e.g. impacts on other recycling activities, impact on retailer footfall, impact on customer loyalty, impacts of a ‘clean culture’ on tourism, etc.) may be significant, but are hard to measure in a robust way. 

Economic risks and opportunities (Q46–Q48)

15.29 Questions 46 to 48 asked about the economic risks and opportunities of a DRS in general, the risks of the specific examples outlined in the consultation paper, and actions to maximise the opportunities and minimise the risks. As with Questions 40 to 45, this section, as far as possible, omits comments which are elaborated in detail elsewhere in this report. 

Opportunities

15.30 There was widespread agreement across both organisational and individual respondents about the opportunities that a DRS in Scotland could provide, if it was well run. To a large extent the opportunities suggested by respondents reflected those set out in the consultation paper. The main opportunities described by respondents covered:

• Improving the environment: Respondents highlighted the benefits of a cleaner, more attractive environment with less litter and less pollution, and a reduced requirement for landfill. This would be a good outcome in itself for local communities, and it would also have the potential to benefit the tourist industry. Some respondents linked this benefit explicitly to introducing an on the go DRS.
• Changing people’s attitudes: Respondents thought the introduction of a DRS could have a significant impact on raising awareness and changing people’s attitudes (and the wider culture) in relation to recycling (and to littering). This would lead to an increased demand for ‘cleaner’ materials.
• Increased employment: Respondents thought a DRS could provide sustainable employment opportunities as a result of the need to build a substantial processing and recycling infrastructure; to invest in anti-fraud measures; to develop new and innovative materials; and to build new design and manufacturing capability. 
• Building the circular economy: There was support for a DRS which could support the Scottish Government ambitions related to building a circular economy. 
• Benefits to retailers: This would result from the increased footfall to retail outlets where return locations were available.
• Benefits to charities: There was the potential for charities to benefit from a DRS if it was designed in a way that enabled consumers to donate their deposits.
• Benefits to individuals who collect litter: Respondents noted the potential economic benefits for anyone who collected and returned items covered by the DRS.

Risks

15.31 The comments in relation to economic risks were more diverse and more divergent than those relating to opportunities. In particular, a range of both organisational and individual respondents emphasised that (some of) the economic risks of a DRS could not be discussed in a general or abstract way; the risks depended on the specific DRS which was adopted. Respondents often went on to discuss how risks could be mitigated. 

15.32 Respondents comments are discussed below under the headings (i) general risks for any / all schemes (ii) risks relating to specific schemes and (iii) actions to maximise opportunities and mitigate risks.

General risks for any / all schemes

15.33 There was a range of general risks identified for any / all schemes as follows:

• Lack of engagement by the public: Respondents thought that there was a risk that the public would not engage with the scheme. This would lead to low return rates which would undermine DRS viability.
• Costs of implementation: There were substantial costs for all industry sectors of setting up a DRS. Respondents questioned whether a suitable level of support for setting up the scheme would be available. 
• Risks to current local authority kerbside recycling: Respondents were concerned about the impact of any DRS on current local authority kerbside recycling arrangements if high-quality material was removed from the local authority income stream. Respondents argued that the scheme should focus on capturing ‘new’ recyclate material, rather than on displacing the collection of material already handled within existing recycling arrangements. 
• Fraud and vandalism: Respondents identified the risk of fraud, especially in relation to cross-border issues, where there was the potential for illegal trading. Vandalism was thought to be a risk in relation to drop-off sites, especially if they were not adequately maintained or supervised.
• Health and safety risks: There was some concern that there could be risks to workers and members of the public in terms of hygiene, and health and safety, if returned items were contaminated (especially with allergens such as dairy) or harmful (e.g. corrosive) substances. 
• Imbalance of supply and demand for recycled materials: It was suggested by a few respondents that the supply of returned material could outstrip the demand for it. This could lead to difficulties in financing the scheme.
• Consumer confusion: Respondents were concerned that consumers might not be fully informed about the DRS and would not know how the scheme worked.
• Increased littering of non-DRS items: Respondents were concerned that any products or materials outwith the scheme would be subject to increased littering.
• Negative impacts on sales / consumer expenditure: Respondents identified the potential for consumers to reduce their expenditure, overall and on in-scope DRS products. This was seen as a particular issue for low-income households.

15.34 It was argued that all these risks, if not properly managed, could lead to job losses.

15.35 In addition, it was common for respondents to make statements such as ‘the risk is not being ambitious enough’, ‘the biggest risk is to do nothing’, ‘there are no risks’, or ‘the benefits outweigh the risks’. By contrast, a few individuals highlighted the risk that a DRS might encourage (over-)consumption by promoting recycling over reducing consumption.

Specific risks linked to scheme design

15.36 Respondents also identified risks associated with specific aspects of scheme design:

• Non-UK-wide DRS / Non-alignment with EPR: Respondents, particularly food and drink producers, packaging manufacturers, and waste and recycling organisations, focused on the risks of running a scheme in Scotland only and / or running a scheme which was not fully aligned with EPR. These respondents thought this would not be financially viable, and would result in duplication of costs and fees, regulatory fragmentation, increased costs for storage, transport and labelling, fraud, confusion for consumers, etc. 
• Schemes involving cartons and cups: Respondents saw schemes involving cartons and cups as important (because of the littering caused by these containers), but also saw the lack of experience to draw on from other countries, and the lack of a suitable infrastructure to deal with these products as a risk.
• Schemes involving glass / HDPE / alcohol: Respondents who were not in favour of glass / HDPE / alcohol being collected set out the perceived financial, hygiene and health and safety risks of doing so, as well as the potential negative impacts on minimum unit pricing. (See paragraph 4.46.)

15.37 Some respondents also highlighted specific risks to small retailers. They thought that, depending on what kind of scheme was selected, small retailers might be exposed to financial risks either because they were required to meet the costs of providing take-back facilities, and / or because they were at risk of losing ‘footfall’ if they were not supported to participate in the scheme. These concerns were raised by a wide range of respondents, but particularly by retailers themselves and individuals.

15.38 In addition, respondents made specific comments in relation to the risks associated with the example schemes presented (e.g. the risks of setting the deposit too low as in Examples 3 and 4; the risks of choosing a scheme that was untested as in Example 4; the risk of choosing a scheme with only a limited range of drop-off points as in Examples 1 and 2; the risk of not including a wide range of materials as in Examples 1, 2 and 3). These kinds of comments are covered at paragraphs 15.8–15.18 above.

15.39 A range of other specific risks were identified related to (i) cashflow challenges, especially for small businesses, (ii) the possibility of reduced investment in Scotland from UK and / or global businesses, (iii) impacts on Scotland’s carbon footprint if schemes were limited to designated drop-off locations, and (iv) reduced income (because of reduced tonnage) for waste companies. 

Actions to maximise opportunities and mitigate risks

15.40 The main actions which were suggested by respondents to maximise opportunities and mitigate risks were to:

• Secure ‘buy-in’ from the general public through awareness raising, education and communication (including advertising).
• Ensure that the scheme was properly resourced and well run, that sufficient time was made available for the scheme to be introduced, and that the scheme was enforced. In particular, respondents reiterated comments made earlier about the perceived high set-up costs for a DRS. For the scheme to be successful, these costs – including the costs of developing a comprehensive recycling infrastructure and (new) markets for recyclate – would have to be met in full. 
• Keep an ongoing dialogue with industry and local communities throughout the development and implementation of the DRS. This would ensure policy coherence, ensure that the incentive structures for the scheme were appropriate, keep industry and local communities ‘on-side’, and ensure fairness.

15.41 Organisational respondents in particular also returned to a point they had made earlier in relation to risks and opportunities: namely that to maximise opportunities and reduce risks the DRS would have to be (i) aligned with other relevant policies (e.g. EPR, Brexit, soft drinks levy, minimum unit pricing etc.) (ii) UK-wide, to ensure that costs were not duplicated or inflated and (iii) complementary to existing recycling services.

15.42 Whilst some respondents asked for pilots to be run, and for the scheme to ‘start small’ and to adapt and develop as learning accumulated, others wished the scheme to be ambitious in its coverage, scope and use of innovative technology from the start. These latter respondents thought that in order to maximise the opportunities, the scheme should be forward looking, and not simply designed around the current drinks market.

15.43 The small number of respondents who were against the introduction of a DRS asked that this work be halted and the funds diverted into other schemes (for example into further development of existing local authority recycling arrangements or into anti-litter projects).