A deposit return scheme for Scotland: consultation

Introduction

Building a Circular Economy in Scotland

Our ambition is to create in Scotland a society that values the materials that we use and discards as little as possible. This will create a variety of opportunities from making goods that last longer and are ready to be upgraded and repaired, to reducing our need for raw materials and helping us get smarter at recycling. This circular economy is about the environment, the economy, and people.

To help achieve this, as we committed to in A Nation with Ambition, our 2017/18 Programme for Government, we will develop a deposit return scheme designed to increase recycling rates and reduce littering and implement it across Scotland. We will ensure the scheme is tailored to meet Scotland's specific needs and we will work closely with the business community during its design and implementation.

Zero Waste Scotland and the Scottish Government have been working to consider the key questions which need to be addressed to ensure that a scheme delivers for Scotland. This work has been guided by four design principles - that a deposit return scheme should:

• increase the quantity of target materials captured for recycling;
• improve the quality of material captured, to allow for higher value recycling;
• encourage wider behaviour change in the use of materials;
• deliver maximum economic and societal benefit for Scotland.

Quantity and Quality of Materials

More than two billion drinks are sold in Scotland in single-use containers every year, and the recycling rates for drinks containers are not as high as we would like, estimated at around 50% depending on the container. By incentivising their return to a designated collection point, we will ensure that containers are properly recycled, becoming a high value resource rather than being lost through landfill or littering.

Deposit return offers the chance to embed a step change in recycling performance. Other systems in Europe are achieving capture rates of up to 95% for target materials compared with around 50% in Scotland at present.

Furthermore, plastic and metal in particular are very valuable materials. This value is reduced through 'contamination', in other words by being mixed in with other materials of lower value. Deposit return schemes offer a good opportunity to minimise contamination and maximise the value of the collected material. This is because items will be returned to a separate, not co- mingled system and will only be accepted into the system if they are the right kind of material.

This concept is demonstrated in the graphic below.

Changing Behaviours

As the Scottish Environment Protection Agency ( SEPA) notes in its 'One Planet Prosperity' Regulatory Strategy, we would need the resources of three Earths to maintain the current rate of consumption if everyone consumed as much as Scotland. Some societies consume more, others less. However, the need for everyone to change their patterns of consumption is clear. As with the wider climate change agenda, the countries that find solutions and innovate in this area will derive economic benefit from leading the way.

Drinks containers form a highly visible part of the litter stream. As we are becoming increasingly aware, plastic bottles are particularly problematic in our rivers and seas, potentially causing harm around the world. This is not to say that glass and metal items are not a problem when littered. Broken glass and damaged cans can be a danger to people, their domestic and farm animals, and to wildlife. And, of course, items that are littered reduce the attractiveness of local communities and represent resources lost to the economy. Often, if they are recovered, they are too heavily contaminated to be recycled. By attaching a value to these items, in the form of a deposit, we hope to encourage people who would otherwise be careless with their cans and bottles to return them for recycling.

Deposit return is only one component in a wider suite of policies to change behaviours around consumption. Our Programme for Government 2017/18 also committed us to establishing an expert panel to consider how else we can tackle our throwaway culture and reduce our reliance on single use materials. The panel has now been established and the membership, announced on 11 May, draws on a wide range of expertise. The panel will start with a consideration of disposable cups and straws. We will carefully consider the interaction of deposit return with outputs from the expert panel.

We are also working with councils to improve the overall rate of household recycling through the Household Recycling Charter that aims to standardise the kerbside recycling systems across Scotland, making it easier for people to know what they can recycle and making it easier for recyclers to standardise their systems and processes. We will ensure that the Charter and the deposit return scheme will be compatible.

Our Towards a Litter Free Scotland and the Marine Litter Strategy for Scotland documents, both published in 2014, lay out the actions we are taking to prevent litter and the steps that are being taken to clean up the litter that already exists – particularly in the marine environment. A deposit return scheme will support one of the most effective ways to reduce littering – by ensuring it does not happen in the first place. Both of our litter strategies focus on prevention as the solution for litter, and a deposit return scheme can be a highly effective mechanism for discouraging a high volume and expensive litter stream.

The Economic Opportunity of Deposit Return

The Scottish Government is committed to reducing the local and global environmental impact of our production and consumption. An appreciation of our natural environment and the key role it plays in enabling economic activity is at the heart of this. Our actions to limit greenhouse gas emissions and improve the efficiency of how we use materials in our economy are essential to ensuring that economic growth is sustainable and that our children and their children can enjoy the benefits that economic growth can bring. All countries face these challenges and the successful ones in the 21st century will be those which can develop the solutions to doing more with less.

In our existing economy, we "take, make and dispose". We take resources from the ground, air and water; we make them into products and structures; then we dispose of them. This is not sustainable. It is estimated that if everyone in the world lived at the same standard as the average Scot we would need the resources of three planets ( https://www.sepa.org.uk/media/219427/one-planet-prosperity-our-regulatory-strategy.pdf).

In a circular economy, systems are designed to make better use of valuable products and materials - changing the way they are produced and managed to have less impact on finite natural resources, and create greater economic benefit. The following diagram illustrates the concept.

Outline of a Circular Economy Principle

SOURCE: Ellen MacArthur Foundation, SUN, and McKinsey Center for Business and Environment; Drawing from Braungart & McDonough, Cradle to Cradle ( C2C).

The left hand side of the diagram represents the flow of biological materials in a circular economy. The right hand side represents the flow of materials and products such as metals, plastics etc. Similar principles apply to both sides of the diagram, and there are multiple interactions between them.

A deposit return scheme is a key way of ensuring that material which can be productively recycled does not leak from the resource system.

There are significant environmental benefits to a more circular economy: from reducing greenhouse gas emissions, relieving pressure on water resources, virgin materials and habitats, and limiting pollution of air, soils and watercourses. Zero Waste Scotland has estimated a potential greenhouse gas saving of around 11 million tonnes of carbon dioxide equivalent per annum by 2050 from moving to a circular economy.

There is a growing body of evidence on the scale of the economic opportunity from a more circular economy. Analysis by the Ellen MacArthur Foundation and McKinsey suggests there could be a trillion dollar opportunity globally.

The shift in focus from using resources more efficiently towards re-using resources across the economy not only boosts productivity (by reducing demand for and the cost of raw materials) but also stimulates innovation, in terms of product redesign, reuse and remanufacture. This is a key policy priority in leading economies including Denmark, Sweden, Netherlands, Japan and China. Scotland is in a strong position to move quickly and take advantage of our scale and connectedness.

Boosting recycling and reprocessing infrastructure in Scotland

We are aware that many manufacturers of products would like to increase the level of recycled content in their goods but also that they sometimes feel constrained by the availability of recycled material. By introducing a deposit return scheme Scotland will create a new secure resource of high quality material.

We have heard from business that a key challenge to developing the infrastructure to reprocess material in Scotland is the need to obtain a secure supply of material. A deposit return scheme administrator in Scotland is likely to have significant amounts of high quality material which it can make available to the reprocessing industry.

Material reprocessing and its subsequent reuse offers the possibility to create a wide range of employment opportunities. There will be a requirement for drivers and plant operatives but also managers, sales people, scientists, engineers and designers. The opportunities will be created at all ends of the skills distribution, from entry level through to post-graduate, in the case of some aspects of research and development.

Potential jobs in Deposit Return

The Scottish Government will work with investors and recyclers to seek to establish reprocessing plants in Scotland to take advantage of the materials that will be available and to realise the benefits this new industry will generate.

A coherent system

While Scotland has devolved power over environmental issues, we also recognise that many manufacturers and retailers that operate here are part of UK-wide supply chains. It is also of note that the current producer responsibility scheme operates across the UK.

The Scottish Government is working with the other administrations to explore how deposit return and producer responsibility schemes can form a coherent system that incentivises recycling and ensures producers and retailers take responsibility for the materials and products they put onto the market. As part of that, the Scottish Government is open to exploring whether the schemes should be co-ordinated across the UK or whether certain features of them should operate on a UK-wide basis.

Producer responsibility is an important and well established principle. The EU's Circular Economy Strategy sets out that producer responsibility systems should capture 100% of the net economic cost of dealing with packaging waste. As set out in our Making Things Last strategy for a circular economy, we are considering the role producer responsibility can play more widely in improving the design, disposal and recycling of materials including packaging. This is an issue on which the expert panel will be asked to give a view.

The Scottish Government and other administrations across the UK are considering how to reform the producer responsibility system in light of the EU's Circular Economy Strategy.

For drinks containers, we believe this means viewing a well designed deposit return scheme as an efficient and effective way of delivering producer responsibility for those materials covered by the scheme. A number of European countries already use producer responsibility to encourage drinks producers to be part of the deposit return scheme. This can be done through a mechanism that places a levy or fee on material that is not recycled, making being part of a deposit return scheme and using containers subject to the scheme a cheaper alternative for producers.

This is the approach taken, for instance, in Norway, which has established a 95% target for its deposit return system, that works in parallel with an environmental tax system. This is set at NOK 5.70 for cans and NOK 3.44 for recyclable bottles. The environmental tax lessens in line with the return rate, starting with a 25% return rate. At a 95% return rate, the environmental tax ceases completely.

Additional benefits of deposit return

While the primary purpose of a deposit return scheme would be to increase the rate and quality of recycling, we have identified additional benefits that could be derived from the system.

Primarily, it could be a powerful tool to influence product design. This could be achieved by having strict requirements for what can be included in the system, requiring producers to make containers that meet these criteria. Standardised materials and design for recyclability could both be factored into design requirements. This would support the Scottish Government's circular economy ambitions beyond increasing the rate at which material is captured.

Deposit return could also support charitable donation. This could be done at the point of return – particularly if this involves automated take back via a machine – or through simply donating a used container for someone else to return to reclaim the deposit.

Additional benefits are considered further in the paper, and you will be asked questions on how far the scheme should seek to achieve them and what other benefits can be identified.

The underpinning legislation

The Scottish Parliament has devolved competence over the environment. In the case of deposit return, Scottish Ministers have powers under the Climate Change (Scotland) Act 2009 [ http://www.legislation.gov.uk/asp/2009/12/section/84] to introduce a deposit return scheme on any material and its associated packaging. The powers specify that a deposit return scheme should be introduced to increase the recycling rate of targeted material. In this case, we are designing a system to increase the recycling rate of a particular sort of packaging. Where there are issues that interact with areas that are currently reserved, we will work with the UK Government to find a solution.

Running the scheme – the administrator and financial flows

One of the powers provided through the Climate Change (Scotland) Act 2009 is for Scottish Ministers to appoint a scheme administrator to run deposit return in Scotland.

Broadly, the scheme administrator would have responsibility for ensuring that the system operates smoothly from day one of it coming into effect. It is likely that it would be responsible for ensuring the correct flow of money through the system.

This is particularly important for deposits. Deposits would flow through the system in the following fashion:

• The producer pays the deposit amount for each item they place on the market to the system operator
• A wholesaler buys goods directly from the producer and pays the unit price plus deposit
• A retailer buys goods from wholesaler and pays for the unit price plus deposit (or buys directly from the producer)
• A consumer buys goods and pays retail price plus deposit
• The consumer then returns the container and receives the deposit.
  • In a scheme that uses dedicated drop-off points run directly by the system operator, this money is paid directly from the administrator to the customer from the money paid by the producer
  • In a scheme which allows consumers to return items to retailers, the retailer reclaims the deposit plus handling fee from the system operator, paid from the amount provided by the producer.

A key role for the scheme administrator, therefore, will be to ensure that this money is fully accounted for and that retailers, if they are the return points, are promptly reimbursed.

This process means that, when the system is introduced, producers may pay an initial contribution of deposit amount for containers they are putting on the market that will be obligated but will not be refunded to customers for some months.

The administrator will also probably be responsible for ensuring that material that is returned is collected from the drop-off points and processed appropriately. Data on items returned, collected either through automated return points or through counting centres, will enable monitoring of collection rates and help to prevent fraud.

There are a number of options that could be followed on the scheme administrator, and the consultation seeks your views on which would one would be most appropriate.