A deposit return scheme for Scotland: consultation

System Components

As explained in the introduction, Zero Waste Scotland has carefully examined the individual components that will make up a successful system. We welcome feedback on the individual components and have asked a number of questions associated with each component.

What materials will be collected

This refers to what kind of drinks containers should be included in the scheme in terms of the material they are made of. There are a number of options within this component, reflecting differing levels of ambition and design principles.

It should be noted at the start of this section that 'plastic' is a catch all word for a number of related materials with similar properties. For the drinks containers, the two main materials are PET (polyethylene terephthalate, the normal material for soft drinks and bottled water) and HDPE (high-density polyethylene, primarily used for milk and other dairy-based drinks).

The possible options for materials in scope are broadly:

1. PET plastic only. This is the most basic option, capturing the bulk of soft drink and water containers. There are currently around 690 million PET plastic containers on the Scottish market, which a deposit return scheme has the potential to capture. This option recognises that this is not only a valuable material but that there is significant public interest in reducing the number of these bottles ending up as litter – particularly in the marine environment. Pursuing only this option would, however, mean that large amounts of other valuable and often littered material is not in scope.

2. PET plastic and metal cans only. This would capture the bulk of soft drinks containers and some alcoholic beverages. Glass is a bulky, heavy container material, therefore excluding it would simplify the system and reduce costs, particularly in terms of transport and any Reverse Vending Machines ( RVMs) used to repay deposits. However, it would also lose a material stream that has value – spirit bottlers in particular demand high quality clear recycled glass that could be delivered effectively. If littered and broken, glass is a danger to people and animals. Excluding glass also risks distorting the market if producers chose to move over to packaging in glass to avoid being included in the deposit scheme.

3. PET plastic containers, glass containers, and aluminium and steel cans. There are currently 1.7 billion PET plastic containers, glass containers, and aluminium and steel cans on the Scottish market, which a deposit return scheme has the potential to capture.This is the most usual mix of material included in deposit return schemes globally and constitutes the bulk of drink containers put on the market in Scotland. Plastic and metal containers in particular can be recycled efficiently if they are collected separately and without contamination. This option also captures a wide range of material that can form an unsightly and sometimes dangerous part of litter.

4. Both PET and HDPE plastic containers, glass bottles, and metal cans. There are currently around 1.9 billion PET and HDPE plastic containers, glass containers, and aluminium and steel cans placed on the Scottish market, which a deposit return scheme has the potential to capture.This is very similar to Option 2 but includes HDPE bottles. HDPE can offer value as a recycled material, and through its inclusion the system will capture all dairy products, including fresh milk, flavoured milk and yogurt drinks.

5. PET and HDPE plastic containers, glass bottles, metal cans, cartons and disposable cups. There are currently around 2.5 billion PET and HDPE plastic containers, glass containers, aluminium and steel cans, drinks cartons and disposable cups on the Scottish market, which a deposit return scheme has the potential to capture.This builds on Option 3 with the addition of some types of material that are not included in any other deposit return scheme globally. The inclusion of these materials (cartons and disposable cups) captures the widest possible range of materials. Cartons in particular can be harder to recycle, however the main issue for their recycling is getting sufficient tonnage. Currently, these materials may be collected with paper and card and can therefore contaminate these loads. We recognise the need to change collection methods. A deposit return scheme that collects these materials separately could therefore offer a better recycling rate for these materials and also prevent them ending up as litter or as contaminants in other waste streams. Encouraging the responsible collection of these items could also have an impact on disposal of materials that often come with these containers, like plastic straws and disposable cup lids.

A summary of the total numbers of containers available under each option is included at Table 1.

Table 1

	Estimated number of containers in scope in Scotland (billions of containers) (Source: Kantar World Numbers )
PET plastic containers (Option 1)	0.7
PET plastic containers and metal cans (Option 2)	1.3
PET plastic containers + glass containers + aluminium and steel cans (Option 3)	1.7
PET plastic containers + glass containers + aluminium and steel cans + HDPE plastic containers (Option 4)	1.9
PET plastic containers + glass containers + aluminium and steel cans + cartons + disposable cups (Option 5)	2.5

Table 2 shows the tonnages of these material dealt with by local authorities and the amounts currently captured for recycling by local authorities. These are estimates drawn from various data sources to offer a best estimate.

Table 2: Local authority household collection and recycling of target containers

Material	Tonnes collected annually	% recycled
Glass drinks containers	160,064	59%
Steel drinks containers	3,284	46%
Aluminium drinks containers	13,141	49%
Plastic ( PET) drinks containers	27,320	53%
Plastic ( HDPE) drinks containers	16,376	53%
Cartons	7,239	39%
Disposable cups	unknown	0%

Disposal costs for local authorities are variable but significant. Non-recycled waste, including drinks containers that are not recycled, costs local authorities around £110 per tonne (including landfill tax) to dispose of. A tonne of mixed recyclate is also usually a cost for a local authority, between £14 and £60 depending on the material mix and contracting arrangements. While material collected will have some value, this will usually be more than offset by the costs noted here. Material diverted into a deposit return scheme eliminates these costs for local authorities. It is possible, though, that there will be an increase to the per tonne cost to local authorities of recycling that is left in the dry recyclable kerbside collections.

The scheme could also be designed to allow local authorities, or operators of Material Recovery Facilities ( MRFs), to redeem deposits on any containers that are placed in kerbside recycling or collected as litter. It would be important that any material extracted in this way is uncontaminated when it is presented to the system. A deposit return scheme could therefore offer a further income stream for local authorities.

Local authorities also pay a cost for managing items disposed of in public bins, or irresponsibly disposed of as litter. Plastic, glass, and metal drinks containers are around 22% of litter by weight, or an estimated 40% by volume. These figures would be higher with disposable cups included. Litter on the ground also has significant negative effects on our communities, green spaces, countryside, and beaches. Reducing this component of litter is one of the objectives of this work.

Additional material is dealt with by businesses, both hospitality and catering firms which sell such items, and other business premises where staff bring items on to site. Recycling rates at many venues may be much higher than for local authority kerbside services. However, where customer participation is needed to capture materials, or items are taken off site to be consumed, even the best sites may be failing to capture as much material as they would like. Disposal costs for these businesses can also be significant operational costs.

Another issue to be considered is the possibility of a deposit return scheme having unintended effects in changing producer behaviour. For instance, excluding certain types of material could encourage producers to switch to that material to avoid having their products caught by the deposit return scheme. These risks can be addressed in two ways – through coherent design of the deposit return scheme alongside producer responsibility obligations to ensure that producers and retailers of all types of packaging carry the cost of materials and products they put onto the market; or alternatively by including the widest range of materials within the deposit return scheme itself.

We understand from industry stakeholders that reprocessing capability for cartons and disposable cups already exists in the UK, so if these are included in the scheme they could be dealt with. However, there are risks associated with including materials like this as there is no precedent in other schemes worldwide, meaning we have no practical experience to learn from. One option could be to consider adding these materials once a more limited scheme has been established and is already functioning well.

The most ambitious option includes materials that are not part of any other deposit return scheme internationally, and for which recycling infrastructure is less mature. As such, the deliverability risks of this option are considerably higher. One option would be to introduce a deposit return scheme with a core set of materials but which could be expanded to cover a wider range of materials once it is up and running.

Refillable containers

Many people in Scotland will be familiar with previous deposit return schemes on glass containers for certain soft drinks. These systems were designed to return bottles intact, to be washed out and refilled. Our current work has focused on return for recycling. This is due to a number of factors:

• There are potential environmental downsides from return for refill. Return for refill often requires heavier gauge material, often glass, in order to ensure the containers are returned intact. The environmental impact of return for refill is determined by how often a bottle is actually refilled and how far it has to travel to be refilled.
• There would be significant logistical challenges in ensuring that containers are returned to the right producer. This could be dealt with by ensuring standardised packaging, although this presents significant challenges in itself.
• EU Guidance indicates that a deposit return scheme should not discriminate against imported products (which would be hard to deal with through a return for refill scheme) and should not otherwise distort competition. A deposit return system focused on refillables has the potential to distort competition in this way, particularly for imported products where return for refill would be logistically impossible.

We are aware that a number of return for refill schemes still exist or there is potential interest in reintroducing such schemes. We will therefore work to ensure that our scheme does not interfere with these schemes. It should be noted that exempting refillable bottles from a scheme, though, could incentivise a greater use of refillable containers.

Questions on Materials in Scope

Q1. Which of the options do you prefer? Please choose one or more options from below and explain your reasoning.

PET plastic containers
PET plastic containers and metal cans
PET plastic containers + glass containers + metal cans
PET plastic containers + glass containers + metal cans + HDPE plastic containers PET plastic containers + glass containers + metal cans + cartons + disposable cups

Q2. Do you think the scheme should start with a core set of materials and then be expanded as appropriate? Please pick one.

Yes
No
Don't know

Q2a. If yes, which materials should it start with?

PET plastic
Metal (aluminium and steel)
Glass
HDPE plastic Cartons Disposable cups

Q2b. If yes, which materials do you think should be added later?

PET plastic
Metal (aluminium and steel)
Glass
HDPE plastic
Cartons
Disposable cups

Q3. Are there any materials that you think should not be included? Please explain your reasons.

PET plastic
Metal (aluminium and steel)
Glass
HDPE plastic
Cartons
Disposable cups

Q4. Are there any other materials not already listed that should be included?

Q5. Are you aware of any materials currently in development that should be included? For instance, there is currently a great deal of interest in making 'bioplastics' either from starch derived from plants or food byproduct streams. Whilst these can look and behave like plastic, it is often important to ensure they are kept separate from plastic in the waste stream as they are recycled differently.

Q6. Do you have any views on the cost implications for local authorities?

What types of products will have a deposit on them

What Types of Drinks Should Be Included?

• soft drinks (example: fizzy drinks, bottled water etc.)
• mixers (example: tonic water or diluting juice etc.)
• fruit and vegetable juice
• dairy (example: milk, milk alternatives, milkshakes, yoghurt drinks etc.)
• spirits
• beer, cider and wine
• other (example: tea, coffee, drinks bought on-the-go)

This refers to the nature of the drink in the containers. While the most important issue for consideration when determining what types of container should be in scope is the material it is made from, there may be some product categories that will influence this decision. It should be noted that some product categories are so predominant that excluding them would have a serious impact on the effectiveness of the system.

It should also be noted that the Commission of the European Union, in its Commission Communication 2009/C107/01, advises that any differentiation should in principle be based on the material used for the containers and not on the content of the beverages, for reasons that the content in itself is not related to the environmental performance of the packaging. Therefore any consideration of exempting categories of product should be clearly evidenced on the basis of an overriding harm from including the product.

It is also important to make clear that the purpose of a deposit return scheme is not to influence behaviour in other ways. For instance, a scheme could be used to change buying habits and public health but we are not pursuing that as a goal. We also recognise that it is important not to create incentives for potentially negative behaviour in other areas, perhaps by making a less healthy choice more attractive by exempting it from the system.

An issue often raised in relation to which products should be in scope is whether a deposit return scheme should specifically target some 'on the go' drinks. By this we mean drinks bought and immediately consumed away from the home (for instance small bottles of water and soft drinks). The containers from these can more often end up going into unsegregated street bins or being littered. It should also be noted, though, that some products that are not specifically intended to be consumed away from the home often are and are then improperly disposed of (for instance, alcoholic drinks packaging). It would therefore be difficult to draw a clear distinction between 'on the go' and general consumption.

It is likely that the scheme will capture products in containers up to three litres in size. This is because most RVMs currently available, which are discussed in more detail later in this paper accept bottles up to that size and the vast majority of bottles do not exceed three litres.

The products being considered in particular are:
1. Ready to drink (soft) - All non-alcoholic drinks (still and carbonated) that are ready for the consumer to drink. Includes sports drinks, energy drinks and health drinks.
2. Soft Mixer Products - All products that are mixed with a soft drink (still or carbonated) to make a drink. Includes diluting, cordial, concentrate and syrup products.
3. Bottled water - All still and carbonated water and flavoured waters that are sold in a drink container.
4. Fruit and vegetable juice – All ready to drink fruit and vegetable juice and juice drinks. Also includes fruit and vegetable based smoothies.
5. Dairy - All ready to drink milk and other dairy (fresh and long life), including all dairy alternatives. Includes milkshakes, flavoured milks, milk based smoothies and ready to drink coffee drinks. Also includes ready to drink yogurt and probiotic yogurt drinks.
6. All distilled spirits with an alcohol by volume ( ABV) of higher than 30%.
7. All fermented alcohol products including beer, cider and wine. Also includes non-alcoholic versions of the above.
8. All other alcohol not covered in the "distilled spirits" and "fermented alcohol" categories with a ABV less than 30%. Includes fortified wines, liqueurs and mixer products where spirits, wine or other fermented products have been mixed with a soft drink.
9. All other drinks, not listed above, that can be purchased to drink on the go. Includes all hot drinks such as tea, coffee and hot chocolate, and all other drinks sold 'on the go', for example at fast food outlets – this could include some of the products mentioned above but sold, for instance, in a disposable cup.

Dairy Products

Dairy, as indicated above, is a broad ranging product category with a range of issues associated with it. Evidence suggests that fresh milk is primarily consumed within the home and the packaging targeted by kerbside recycling. This packaging is predominantly HDPE plastic, which is a readily recycled and valuable material. The recycling rate for HDPE containers is estimated to be 53%. Long life milk is consumed within the home, but as this is often in cartons the packaging is harder to tackle.

There has also recently been a rise in doorstep delivery of milk in returnable and refillable glass bottles, and we will seek to design a system that allows this type of return for refill to continue rather than diverting the bottles to recycling.

Dairy is often seen as presenting a hygiene risk if it is included in a deposit return scheme, if containers are returned without being cleaned. Discussion with the Royal Environmental Health Institute of Scotland has suggested that the return and storage of such containers should not be an issue and that any such issues could be easily mitigated. Experience from other systems, such as Norway, suggests that as long as any transport containers are sealed and the material is collected and processed quickly, any hygiene impacts are negligible.

Dairy also covers a range of other products, often consumed directly from the container and on the go, and there is less evidence that these containers are captured for recycling. Furthermore, a number of these products are high in sugar, therefore it is important to consider whether excluding them from a scheme will make them more attractive, as their immediate cost will be lower, leading to undesirable health outcomes.

Questions on Products in Scope

Q7. Do you think the material the container is made from or the product it contains should be the key consideration for deciding the scope of the scheme?

Yes
No
Don't Know

Q7a. Please explain your reasons text box

Q8. Are there any product categories that should be excluded from the scheme? Please explain your reasons.

Ready to drink (soft)
Soft Mixer Products
Bottled water
Fruit and vegetable juice
Dairy
All distilled spirits with an alcohol by volume ( ABV) of higher than 30%
All fermented alcohol products including beer, cider and wine. Also includes non-alcoholic versions of the above
All other alcohol not covered in the "distilled spirits" and "fermented alcohol" categories with a ABV less than 30%
All other drinks, not listed above, that can be purchased to drink on the go

Q9. Are there any product categories listed above that you broadly agree with but think that certain products within them should be excluded? Please give us specific reasons for exempting anything.

Q10. Are there any other products that broadly fall into the category of 'drinks' that we have not included that you think should be?

Q11. Do you think that the deposit return scheme should be limited to "on the go" only? Please explain why.

Yes
No
Don't know

Q11a. Do you agree with how we have defined on the go?

Questions Related to Dairy Issues

Q12. Specifically on dairy products, do you think including dairy carries hygiene or related risks above those posed by other products? Please provide evidence.

Yes
No
Don't know

Q13. Should any dairy products be excluded from the system? Please explain your reasons.

All ready to drink milk and other dairy (fresh and long life)
All dairy alternatives.
Milkshakes
Flavoured milks
Milk based smoothies
Ready to drink coffee and tea drinks.
Ready to drink yogurt and probiotic yogurt drinks.

Where you will be able to get the deposit back

The return location, where people can return their containers and reclaim their deposit, is key to the success of a system. The two basic models (take back to a place of purchase and take back to a dedicated point) are at the heart of the four examples in Part 1.

There are broadly three options for return location:

1. Take back to a place that sells drinks. This is where you would be able to take your drinks containers back to any shop that sells drinks in disposable containers. You would be able to return any container to any shop that sells drinks – you would not have to return specific items to the shops where you bought them. This return option could be in the form of what is called a reverse vending machine, that is an automated system that scans your containers as you return them and issues the refund. Alternatively, retailers may choose to adopt a manual system, accepting containers by hand. In return for providing this service, retailers would receive a handling fee, a sum of money paid for each container they take back.

This option offers the widest coverage of return sites, making the system as accessible as possible for everyone and ensuring that as many items as possible are returned. The main consideration in relation to this option is the requirement it places on retailers in terms of storage and staff time for handling of containers. For sites that would require a reverse vending machine, the cost, location and maintenance of this would need to be considered.

2. Return to designed drop-off points.This is where items are returned to a central collection point, rather than there being lots of smaller ones in shops and public places. This would most often be a reverse vending machine, or a bank of them, in a centralised location. It could be located at a local waste disposal site. This option would minimise the impact on retailers, as their role in it would be to ensure the deposit is charged but they would not be required to take back items. As there would be fewer return points, it would likely mean the system would be less accessible, particularly in sparsely populated areas or for those who cannot take returnable containers any great distance.

3. A mixture of take back to a place of purchase and take back to a dedicated point. In this option, larger retailers in particular would be required to accept returns, probably through hosting automated RVMs. There would also be other return sites, perhaps in shopping centres or other civic amenities, operated by the system administrator. Smaller retailers would be expected to accept returns if there were no other return sites within a reasonable distance.

Online shopping

Online grocery shopping is a popular option for some consumers. Including online delivery vehicles as a return location would increase accessibility, particularly for those who are unable to access shops or other return points.

We will work with retailers and the system administrator to ensure those who shop online are not unfairly disadvantaged by the system. We are aware that a number of European systems already accommodate online shopping or are adapting their systems to do so and will therefore be able to learn from their experience and include measures from the outset of the scheme. One approach could be to require shops that provide delivery to take back items at the same time as delivering goods, with the refunds either being provided electronically or being taken off the next shopping bill.

Questions on Return Location

Q14. Which option for return location do you prefer? Please choose one and explain your reasons.

Take back to a place that sells drinks

Take back to a designated drop-off point

Mixture of take back to a place that sells drinks and designated drop-off points

Q15. In any model involving return to retail, are there any types of retailer that should be excluded? Please explain your reasons.

Yes
No
Don't know

Q16. Do you agree that online retailers should be included in the scheme?

Yes
No
Don't know

Q16a. What provisions do you think should be made to ensure online shopping is included successfully?

How the scheme will be paid for

Operating a deposit return scheme will involve a number of costs and income streams. Costs would be:

• refunding deposits
• providing the return points, including associated handling fees
• logistics, such as moving and sorting the returned material
• infrastructure and staff associated with the system operator

Income streams would be:

• sale of collected material, if the scheme owns it
• producer fees
• unredeemed deposits

In most schemes a core part of the income of the scheme administrator comes from unredeemed deposits. It is likely that some containers, for one reason or the other, will not make it back to the system and the deposit on them will therefore not be returned. Since the scheme is intended to capture as much material as possible – the retention of deposits as an income stream is not a desirable outcome. Depending on the final design, the return rate could be as high as 95%, and therefore unredeemed deposits on their own are unlikely to fund all the costs of the scheme.

This would be particularly true if local authorities and MRF operators were able to extract clean containers from the kerbside or litter streams and redeem deposits on them.

The material collected through the system will also have a value – indeed, a primary purpose of the deposit return scheme for Scotland will be to increase the value achieved from recycling these materials. In most models in Europe, the scheme administrator retains ownership of the material and is able to derive income from selling it. In other examples, such as Germany, the retailers retain ownership of the materials returned to their stores.

Deposit return is often treated in Europe as a form of producer responsibility, defined as a means of transferring costs to those who benefit most from placing products onto the market. In most European systems, this transfer of costs is achieved through producers being required to pay a fee to the scheme administrator to be able to place drinks on the market. As noted previously, we will need to ensure that such producer fees from the deposit return scheme work coherently with wider producer responsibility obligations so that they do not place an unfair burden on producers. European Commission Communication 2009/C107/01 advises that "Member States should avoid arrangements that lead to the unjustified doubling of participation charges at different levels for the same service provided which would risk hampering specifically small businesses".

The scheme administrator will therefore have a combination of three finance streams available. The usual model adopted in Europe is to calculate the income derived from unredeemed deposits and material sales, and adjust producer fees to make up any shortfall to its budget. Zero Waste Scotland's modelling work has demonstrated that revenue from collected material will depend on the model chosen but generally increases over time as the system matures.

Another possible use for unredeemed deposits, or any net profit from the operation of the system, would be to divert it to other environmental or similar purposes. This could be considered within the limitations of powers that are available to Scottish Ministers, though this would also have a knock-on impact on the effectiveness of the system.

Questions on Financing Models

Q17. Do you agree that deposit return should be seen as a form of producer responsibility?

Yes
No
Don't Know

Q17a. If yes, do you think deposit return would impact on other producer responsibility obligations? Please explain your reasoning.

Q18. Do you think it is appropriate for the scheme administrator to maintain ownership and income from sales of the material? Please explain your reasons.

Yes
No
Don't Know

Q19. If the scheme administrator maintains ownership of the material, should it prioritise maximising profit from sales or should it seek to achieve additional benefits?

Maximise profit from sales
Achieve additional benefits

Q19a. If you selected achieve additional benefits which benefit should the administrator pursue?

Q20. Should any excess funding or unredeemed deposits be ringfenced for the continued maintenance or improvement of the system, or do you think it would be appropriate to divert funding to other purposes?

Funding should be ringfenced
Use for other purposes

Q21. How would you define a producer?

How the scheme is communicated so everyone understands it

Consumer participation is another area that will be key to the success of a deposit return scheme. While the incentive of the deposit is intended to encourage customers to return the containers, this will only be effective if the customer knows the item carries a deposit. This is particularly important for situations where someone has some containers that have a deposit paid on them and others that do not.

The approach taken by most European schemes is an on-pack label that includes a distinctive logo or mark that identifies the container as carrying a deposit. This will make it clear to the customer that they will be expected to pay a deposit and be able to reclaim it. An on-pack label will also be helpful in those circumstances where manual return is being done without the possibility of scanning a deposit return barcode. In these instances, the shop assistant will be able to make an assessment of a returned container to ensure it should have a deposit returned on it.

There are a number of considerations in relation to on-pack consumer information. The requirement for a deposit return-related labelling will impact on producers, though this cost will vary greatly. It should be noted that if Scotland was part of a UK-wide approach this disruption would be minimised. There could be a case for producers who are only putting a small number of containers onto the Scottish market to be exempt from the system. This could also be resolved by the scheme providing labels that can be applied to goods that are being imported in small quantities.

There is also the issue of multi-buy packages, such as cans of soft drinks packaged together. Usually the pack will have information on price on the outside. However, each can within the pack could also need some form of label as each one will carry a deposit.

Informing the customer of the amount of the deposit varies between schemes we have studied elsewhere. Some European schemes have on-shelf labels that have the basic price of the item and the deposit amount indicated separately and clearly. Other schemes include the deposit in the price of the product without clearly indicating that there is a deposit. There are some schemes, furthermore, that include information about the deposit level on the label or elsewhere on the packaging. Expert stakeholders generally agree that deposit return information should be clearly presented on containers. The Interim Equalities Impact Assessment also highlights the importance of clear branding and a recognisable logo to act as a visual prompt.

Beyond consumer information directly linked with the packaging, there will also be a need for marketing and branding at a national level to ensure that people are fully informed about the scheme. This could involve a range of media channels as well as in-store information and branding at return sites to make sure there is full awareness of the value of returning containers. The scheme administrator will be expected to fund communications, although the Scottish Government may have a role in the lead up to implementation. After the scheme has settled in, the administrator will be able to determine whether there are particular groups of people who are not participating fully or whether certain materials are not being returned at a high enough rate. This will allow the administrator to use targeted marketing to address any issues.

A consideration here is whether the scheme administrator should be required to dedicate a certain amount of its budget each year to marketing, or whether there should be a requirement to conduct marketing campaigns in response to a drop in returns across the system or for specific materials.

It is important that any communications are as accessible as possible. Marketing should therefore have a heavy visual element and, for instance, symbols should be used on RVMs to explain how they operate.

Questions on Consumer Information

Q22. Do you agree that producers should be required to put deposit return scheme-related information on each container?

Yes
No
Don't Know

Q22a. If yes, should those putting small amounts of material onto the market in Scotland be exempt from this labelling requirement?

Yes
No
Don't Know

Q22b. If so what do you think the limit for this should be?

Q22c. Rather than be exempt, should small importers be required to put a label with deposit return-related information onto the existing packaging?

Yes
No
Don't Know

Q22d. If no, what are your reasons?

How to prevent fraud in the system

There is the possibility that some individuals or groups may seek to commit fraud on the system. This could be done in a number of ways, primarily through trying to 'reclaim' a deposit on a container from outside the system – usually used containers being brought in from outside Scotland or shipments of unused bottles specifically intended to be used for this purpose. It is also possible that theft from return sites may be attempted in order to claim a deposit multiple times.

There is also the possibility that someone may attempt to return containers from outside Scotland accidentally. It may be possible for an automated take back system to accept these containers but not pay out a deposit.

Deliberately attempting to commit fraud could be a criminal activity that could be subject to action by Police Scotland or the system regulator.

Experience from other countries suggests that while fraud may occur, it can be managed and minimised through a number of different measures. The model chosen for system ownership and the level of deposit can both have an impact.

A scheme administered centrally, which requires retailers to report the number of containers they place on the market and monitors the number of deposits reclaimed, will be able to determine where deposit returns are higher than the number of items sold – this will be a good indicator that fraud is occurring and will allow action to be taken.This approach is taken in most European systems to manage fraud effectively. A centrally administered system will also be well placed to identify and deal, in conjunction with regulators, with fraudulent activity on the part of producers and retailers.

The amount of the deposit, combined with the cost of getting around any security measures, will influence how attractive any attempt to defraud the system will be – particularly in terms of any organised attempt at fraud. Zero Waste Scotland modelling has assumed a fraud rate of 1.5% across the examples.

An important decision will be what approach to on-pack labelling to adopt so that both customers and the system know what carries a deposit. There are three options for labelling:

1. No changes to current labelling. This would minimise cost and disruption to industry, as they would not have to have a separate production and distribution system for Scotland. This approach would accept that some containers will be transported from outwith Scotland to be placed into the scheme, which may include deliberate and non-deliberate circumventing of the system. As such, there may be a need for any producer fee (which will be discussed in more detail elsewhere) to be set at a level to compensate for any financial losses through fraud.

2. A specific barcode in the form of a Stock Keeping Unit ( SKU) for containers placed on to the Scottish market that have a deposit attached to them. Such labels would also carry a visual identifier that the product has a deposit attached to it. This would serve as a strong deterrent to fraud, as the system would recognise any items that do not carry the barcode and forging the barcode would involve a cost element. This would potentially involve a certain level of cost for industry to ensure that products going onto the market in Scotland carry the specific bar code and labelling. There could be other costs associated with creating Scotland-specific distribution networks for large retailers and producers.

3. A high security label using specialised inks for containers included in the system. This would be the most secure option. Labelling of this nature could also help customers know whether or not an item carries a deposit. It would place a financial burden on industry to produce containers with this type of labelling.

One of the main routes for both fraud and accidental leakage of material into the system is the borders between Scotland, England and Northern Ireland. Similarly, if the decision is taken to remove DRS obligated containers from the current producer responsibility system, reprocessors could accidentally or deliberately issue evidence on items that should not be counted against producer responsibility obligations i.e. material that has been collected in Scotland through a deposit return scheme could be transported to England for reprocessing.

We recognise that the decision by the UK Government to introduce a deposit return scheme in England will have an impact on the potential for fraud, particularly if a system is introduced in all parts of the UK. We think that systems across the UK that are compatible in terms of deposit level and labelling could help limit the opportunities for fraud.

Questions on Fraud Prevention

Q23. Which option for labelling do you believe offers the best balance between reducing potential for fraud and managing costs to producers and retailers?

No changes to current system
Specific barcode
High security label

Please elaborate

Q24. Are there other security measures we should be considering, for instance heightened security measures at key return locations?

Yes
No
Don't know

How much the deposit should be

The level at which the deposit is set will be key to creating an effective deposit return scheme. The deposit that customers are required to pay for a drink is the incentive for them to return the container to the system. In other parts of Europe, the deposit ranges from EUR 0.10 to EUR 0.40 (between 8p and 35p). There are a number of other considerations linked to the deposit level.

The impact of the deposit level on the return rate cannot be directly modelled as there are a number of variables that affect return rate, including availability of return points and how clear and comprehensive the system is. It is, however, reasonable to assume that a higher deposit level will lead to an increased return rate.

As discussed in the section Fraud Prevention, the level of the deposit affects how attractive the system is to attempted fraud. The higher the deposit level, the more worthwhile attempts to defraud the system will appear. This will lead to significant financial losses to the system, either through money being paid out on containers that have not carried a deposit, or the system administrator having to take other measures to discourage fraud.

The deposit level could also have an impact on those products sold in individual containers but as part of a multi-item package – for instance, soft drinks cans packaged together or crates of beer. The deposit level needs to take into account the overall impact on the costs of such multi- item products.

The level of the deposit also has an important equalities impact. Ideally, nobody should lose money when they buy a container that carries a deposit, as they will have the deposit returned. However, even in the highest performing systems in the world the return rate is not 100%. Furthermore, while the money paid as a deposit should be returned we must keep in mind that for those living on low incomes, cash flow is a significant issue and having to pay the deposit up front – even if it is then returned at a later date–could create an additional one-off burden. These impacts are considered fully through the accompanying interim Equalities Impact Assessment.

The deposit level, therefore, must be set at a high enough level to encourage as much return as possible. At the same time, it should not be so high as to encourage criminal behaviour or to have an unfair impact on people who are unable to return their containers for one reason or another.

As well as the level of the deposit, we must also consider whether different container types should carry different levels of deposit. A 'flat rate' of deposit, that is every container having the same level, would be the most straightforward approach to take for industry, retail and the customer. There are a number of potential issues that a variable deposit could lead to, including an implication of trying to influence consumer choice and leading customers to assume that items that have a lower deposit are worth less, leading them to be less likely to return them. System operators in other parts of Europe have indicated that a variable deposit causes more problems than it solves.

One solution is to have a common deposit level for all containers but to vary the producer responsibility fee to reflect the different level of value recovered from different types of containers.

Questions Related to Deposit Level

Q25. Do you have a preference for what level the deposit should be set at? Please indicate what level you think it should be and explain your reasoning for choosing this level.

Yes
No
Don't know

Q26. Do you think that certain types of drinks containers should carry a different deposit level?

Please explain which ones and why you think the deposit should be varied.

Yes
No
Don't Know

What infrastructure to put in place, and the logistics involved

This refers to the vital physical components required for a deposit return scheme to function. There are three areas within infrastructure and logistics – the method by which people can return their bottles and other containers ( i.e. a reverse vending machine or manual, over the counter take back), counting and bulking, and transport and sorting of returned containers.

Method of Take back

Central to deposit return is the idea that people will bring back items that carry a deposit and have their deposit returned. This paper has already touched on the different options for the return location. Another factor in the return process is how this is done, usually in one of two ways:

1. RVMs – This is sometimes referred to as automated return. Returned containers would be placed in a machine, which then scans the barcode or other identifier. If a deposit was paid on an item, the machine would accept it and return the amount of the deposit to the customer. RVMs could be used in any return setting. In the case of return to retail, machines can be scaled to suit the size of the shop and the number of containers likely to be returned. Retailers would be required to work with the scheme administrator to determine the requirements of their stores. The RVMs could be paid for through a number of models, including direct ownership by the retailer or the scheme administrator or some form of leasing model.

2. Manual/over the counter take back – It is likely that this would primarily be done in smaller retailers and involve customers handing over returned items to a shop attendant to have the deposit returned. This has the benefit for small retailers of a RVM not taking up selling space in the shop and removing any cost implication of acquiring it. It would have an impact on staff time at the counter, which could cause issues at busy times, and would require the storage of used containers in bags behind the counter or in the shop's storage space. The impact on small retailers will vary depending on the scope of the scheme and the size and layout of the store. In a system that allows return to all purchase points, due to the high total number of return points, a very low average take back per day to individual retailers can be assumed. The scheme administrator or an appropriate operator would then be responsible for collecting the bagged containers and transporting them to a counting and sorting site. The contents of the bags will then be checked and the retailer reimbursed for the deposits they have paid out.

3. There will also be a need to provide some form of take back from online shopping. While many people who shop online may choose to return containers to a convenient nearby return point, others may not have the ability to do so. This will likely require some form of take back at the same time as deliveries are made.

It is intended that the retailer will receive a handling fee per container to support the costs they incur in participating in the scheme. This could be a flat rate calculated on the likely average cost for retailers or could be more flexible to take into account the different retail environments.

Counting, Sorting and Bulking Centres

At least one large scale counting centre will be required by the system, particularly for a system that includes manual take back. This centre will be responsible for ensuring that material that has been collected is eligible to have a deposit paid on it, and where appropriate, reimburse retailers for deposits they have paid out manually. This information will be key in detecting and responding to large scale fraud.

Bulking centres may also be required to reduce logistic costs for transport. Material returned through RVMs, which has already been validated by the system, can go straight to a bulking site if it does not need to be counted. Bulking sites will also combine material that has been taken back manually and been through a counting centre with material from RVMs for forward shipment.

These sites may also require some form of sorting equipment. Scotland's Household Recycling Charter notes that plastic and cans can be collected together as they are easy to separate mechanically. A key consideration here is to determine whether it is more efficient to keep the material streams separate during transport, or bulk them together for transport and then separate before sale. The latter would require the installation of separation equipment at key sites in all systems modelled.

As well as being important to the functioning of the system, counting, sorting and bulking centres will provide entry level employment in the areas where they are established, estimated at 12 to 116 jobs depending on the scope of the system.

Logistics

This refers to the process of collecting material from return locations and moving it to the counting or bulking centres. The logistics will depend to some extent on the ownership model selected, and broadly fall into three options:

1. In-house – If the material collected belongs to the system administrator, it could be responsible for directly collecting the material from return locations.

2. Contracted – The system administrator could instead chose to contract the collection of material from return points. This could involve a single contract or a number of small, local contractors collecting in their area and moving the goods to a bulking or counting centre.

3. Backhauling – This could work in conjunction with the above options. This would use the existing retail delivery infrastructure – lorries delivering goods to shops would take away returned material, or in the case of online shopping vehicles making deliveries could be expected to bring back containers. This would then be transported to the delivery depots, where it would be bulked and picked up by the system administrator. This has the advantage of using existing infrastructure and would mean lorries are spending less time driving with no load

As with the counting and bulking centres, the logistics element could generate new employment opportunities, particularly under Options 1 and 2.

Effective infrastructure, particularly in terms of storing and moving returned containers, could be supported by some form of compaction at point of return. This is most often done through a RVM with a compactor built into it. Evidence from other countries indicated that compacted material takes half the space of uncompacted material, which has an environmental and cost benefit for transport and would reduce storage space required by retailers. We will consider how this can be incentivised. There are safety concerns around compacting glass so this would be collected as a separate stream and could be left uncompacted.

Questions on Infrastructure and Logistics

Q27. Which sorts of take back do you think the system should include?

Reverse Vending Machines
Manual take back
Combination of the two

Q28. How should the handling fee paid to retailers be calculated?

Q29. Do you agree with the assessment of the potential job creation of between 12 and 116 jobs? Please explain your reasoning.

How to create additional benefits from the scheme

As identified under other system components, there are potential added benefits that could be derived from a deposit return scheme for Scotland. These include:

1. Donation – Customers may prefer to have the option of donating their deposits to charity rather than have them returned. This could be done through:

• An option on RVMs to donate to a selection of registered charities, as for instance Ikea did during its pilot of a Reverse Vending Machine in its Edinburgh store. The majority of those surveyed at IKEA and Heriot-Watt University in relation to trials carried out at these locations liked the idea of being able to donate to charity rather than redeeming a voucher. In practice, at Heriot-Watt's campus 4.9% of rewards were donated.
• A specific receptacle for people who choose not to return containers to deposit return points – for instance if they are on the go and want to dispose of something quickly – but would like the deposit to go to a good cause. For instance, schools could support extracurricular activities by allowing pupils to 'donate' drinks containers.
• Receptacles on litter bins to enable other people to reclaim deposits without raking through bins to find deposit carrying items.

2. Encourage better product design – As well as recovering and recycling packaging, a key consideration for wider Scottish Government policy is to improve the design of products to limit their environmental impact. In the case of a deposit return scheme on drinks containers, variable producer fees or deposit rates could be used to encourage manufacturers to design for better recyclability or use more recycled content in their products.

Questions on Additional Benefits

Q30. Do you think a deposit return scheme for Scotland should pursue any additional benefits?

Yes
No
Don't Know

Q31. Are there additional benefits we have not covered that you think should be considered?

Who owns the system

System ownership refers to the type of organisation that will be responsible for managing a deposit return scheme. This could include tasks such as organising collection of material and, in a take back to a designated drop-off point system, maintaining the central return points. The exact roles and responsibilities will depend on the system design, and can have an impact on other system components such as fraud prevention.

There is also the task of reconciling the deposits levied and then returned to the customers – that is, making sure that when someone brings an item back they get their deposit returned. In many European systems, this is done through a central clearing system but could be a role for the system owner. In some systems, the owner is also responsible for setting the producer responsibility element of the scheme costs in order to balance the overall finances of the scheme.

Most deposit return schemes in Europe have a single national administrator that takes the form of a not for profit company overseen by a board made up of industry representatives. The options considered for system ownership in Scotland are:

1. Industry operated not-for-profit – Businesses who are participants in the scheme would establish a system operator to run and administer the system. Under this model industry would own and operate the deposit return scheme, with shareholders likely being a combination of producers and retailers. In other European countries the board of the system operator is comprised of retailers and drinks producers, or the associations of these sectors.

2. Privately owned and operated commercial operation – In this model the Scottish Government would issue a tender for the delivery of the scheme. This could potentially lead to an existing company operating the scheme or a new entity forming to fulfil this option. There could also be an opportunity here for a third sector organisation or social enterprise to bid for the tender. There are some cases, such as some of the deposit return schemes in Australia where manufacturers of the RVMs play a role in system ownership.

3. Public ownership – The Scottish Government could chose to operate the system itself, through an existing public body or a new public body. This approach would involve on-going public sector involvement in a number of different ways. This could allow a greater level of control over use of the material to stimulate domestic reprocessing and provide the most assurance that fair work principles are used.

As with other components, there could be some form of hybrid between these options, for instance a combination of public and private ownership or Scottish Government oversight of a privately owned administrator.

Questions on System Ownership

Q32. Which option do you think offers the best system ownership model to ensure the primary goals of a deposit return system are met?

Industry operated not-for-profit
Privately owned and operated commercial operation
Public ownership
A combination of the above. Please provide more details of the combination in the box below.

Q33. How much emphasis should be placed on the system administrator achieving secondary benefits like ensuring Fair Work practices are followed and that the material collected is reprocessed in Scotland?

Q34. What do you see as the main roles for a scheme administrator?

How the system is regulated

A deposit return scheme will require some form of regulation to ensure obligations are being fulfilled.

To ensure the scheme functions, producers will have an important role to play in providing data in terms of the amount and nature of products they are putting onto the market in Scotland. Furthermore, if specific labelling is mandatory to prevent fraud and inform the customer, enforcement of this labelling will be required. If producers voluntarily apply a Scotland specific label a certain amount of regulation will be required to ensure that the label meets required standards. Options for regulating producers are:

1. Regulation by an existing body, most likely Trading Standards or The Scottish Environment Protection Agency ( SEPA)

2. The establishment of a new body to oversee regulation

3. Regulation by the scheme administrator

In some systems, the scheme administrator will have a role in determining whether products that go on the market can be part of the scheme, which can have a role in encouraging better product design. They will often charge a fee for each product that they approve.

Return points for the system, no matter which model is adopted, will also need to be regulated to ensure that empty containers are being accepted and deposits are being returned correctly. Under a scheme that involves some level of take back to a place of purchase this would involve working with a broad range of retailers to ensure they are complying. A take back to a designed drop-off point scheme may be easier to oversee depending on the density of return points. Both options are the same with regard to the regulation of producers.

The infrastructure of a system will require careful regulation. The handling and transport of waste in Scotland are subject to a number of regulatory requirements. Sites under any of the return location models, i.e. those places that will accept the return of containers and store them for pick up, under the new integrated authorisation framework return locations would most likely be regulated via General Binding Rules. This means they do not need a specific environmental license provided they comply with some common rules and standards. This will depend on the timeframe for implementing a deposit return scheme. Similarly, the organisation responsible for moving returned containers from the return point to a bulking or counting centre would need to be registered as waste carriers, and the bulking and counting sites may need to be registered as waste management sites. Where waste management regulations apply, it is likely that SEPA will be responsible for enforcement.

Finally, the system administrator itself will be subject to some form of regulation. This would be particularly important if the administrator was expected to meet statutory recycling targets. In most European systems with a central administrator, the role of regulation is undertaken by the government department responsible for the environment. The key option for regulating the administrator, therefore, is that it should be undertaken by a department of the Scottish Government directly or SEPA.

Questions on Regulation

Q35. Which option for regulating producers do you think is most appropriate? Please explain your reasons.

Regulation by an existing body, most likely Trading Standards or SEPA
The establishment of a new body to oversee regulation
Regulation by the scheme administrator

Q36. Which option for regulating return sites, including retailers, is most appropriate? Please explain your reasons.

Regulation by an existing body, most likely Trading Standards or SEPA
The establishment of a new body to oversee regulation
Regulation by the scheme administrator

Q37. What level of regulatory power do you think is appropriate for the system administrator?

Q38. In particular, do you think the administrator should have a role in approving products that go on sale to make sure they are compatible with the scheme?

Yes
No
Don't Know

Q39. Do you agree that the Scottish Government should be responsible for regulating the system administrator?

Yes
No
Don't Know

Q39a. If yes, should this be done via SEPA?

Yes
No
Don't know

Q39b. If no, what other organisation should undertake this role?