A deposit return scheme for Scotland: consultation

Examples of Deposit Return Schemes

In this section we set out a number of example models for how a deposit return scheme could operate, showing how the system components outlined in the previous section could be combined to create a functioning scheme.

These are only four of a large number of potential models that could be created by combining the system components in different ways. These four models have been chosen to illustrate common features of models used in other countries and to present different options for return locations and materials; two of the components likey to be of most interest to stakeholders and the public.

Evaluating Examples

We have made a qualitative assessment of each of the models against the wider social and economic objective we have set for establishing a deposit return scheme. This allows us to test the extent to which each of the models meets the policy objectives that we have established. This was done through a 'weighting and scoring approach' which considered four measures:

• Ensuring fairness for all demographic groups
• Maximising accessibility for all demographic groups
• Creating employment opportunities for socially disadvantaged groups
• Creating opportunities to raise funds for charitable causes

These four measures are not the overall principles against which the system is being developed, but are a way of measuring qualitative issues that will contribute to the whether these principles are met. For instance, ensuring fairness and accessibility will contribute directly to increasing the quantity and quality of recycling.

A representative stakeholder group was asked to score which of the criteria should have the most weight, i.e. which would make the most overall difference to the success of the scheme. System accessibility and fairness were considered the most important factors. Each of the measures was then scored out of ten and the results measured against the weighting. This allows an analysis of how well each example performs against each criteria and, combined, provides a qualitative score for each example system.

We have also calculated a 'net present value' or NPV for each example. The NPV is a measure of what we think the economic impact of a measure on the Scottish economy would be. An expanded explanation of the NPV modelling is being published alongside this consultation paper in the accompanying Outline Business Case ( OBC).

While the NPV model gives an assessment of the economic impact of a measure, it is often not a complete description of that impact. It is easier to place an economic value on some factors than on others, and there are some benefits of introducing a deposit return scheme that are not fully captured within the existing model. For this reason the NPV and weighting and scoring exercise should be considered together with the qualitative exercise above.

Beyond the economic and qualitative factors, there are also other elements that need to be taken into account in making a final selection. A key factor in this regard is deliverability and associated risk. In essence, more novel and ambitious models may be more difficult to deliver or take longer to implement than models that are based on well-established schemes from other countries.

The Base case Used for the NPV Calculations

Her Majesty's Treasury ( HMT) guidance is clear that a base case should reflect the world as it would be without the intervention under consideration, not just the world as it is now. Therefore, the base case against which the NPVs has been calculated takes into account the adoption, in June 2018, of the EU Circular Economy Package. This introduces more ambitious recycling targets for packaging materials and a requirement for 100% cost recovery of recycling costs from producers. Where the tables show savings for industry they are reflecting the relative efficiency of a deposit return system as a mechanism for satisfying these requirements.

This avoided cost (compared with a position where a deposit return system is not available to satisfy these requirements) is noted as a benefit for producers in the NPV calculations.

Example 0 - No scheme is introduced

This is the de-minimis (do minimum base case) example which will enable the assessment of the impact of a deposit return scheme. It is assumed that there are no changes beyond those introduced by the circular economy package and existing public and private collection methods of drinks containers from households, commercial businesses and on the go locations continue in their current form. Not introducing a deposit return scheme would:

• Fail to improve recycling quantity
• Fail to improve recycling quality
• Have no impact on wider behavioural change around materials
• Miss opportunities to support Scotland's transition to a low carbon economy

Example 1 – Take back to Designated Drop-off Points

Example 1 involves containers being taken back to a number of large, dedicated locations, rather than there being lots of smaller return points in shops and public places.

What this example would look like

This system would see deposit return points being placed in towns of a certain size where you can return some types of plastic bottles, aluminium cans, steel cans and glass bottles to get back the deposit you were charged for the container when you bought it. The type of plastic bottles would be ones made of a plastic called PET, which is the most common kind for fizzy drinks and bottled water.

The place where you return things would be similar to a recycling point, where the deposit machines are placed in a range of public locations such as recycling centres or public car parks.

Under this example, shops selling drinks in containers wouldn't have to take the containers back. There would simply be a few drop-off points in most towns where you could choose to return your drinks containers.

Who would run it

In this example, the drinks industry would need to work together to create a non-profit organisation that would run the deposit return system. This organisation would make sure the system runs properly, and some of the money made by the deposit system would pay for staff needed to run the system and the costs involved in running it.

The new organisation would need to run the network of designated drop-off points, collect in the money, ensure retailers are paid to cover the deposits being paid back to people and make sure all the items were collected for recycling.

The effectiveness of these types of systems elsewhere in the world

Systems like this in North America and Australia tend to see around 60% of drinks containers being recycled.

The benefits and drawbacks of the example

While this offers the lowest return rate of the four examples, it minimises impact on retailers and other businesses.

There are drawbacks to this approach. If the designated return points are not located in major shopping areas or are otherwise central, people could find themselves making a special trip to return their containers rather than doing it as part of their normal shopping pattern. This reduces the accessibility of the system, particularly for disabled or elderly people. If the return point is away from a town or city centre, it would also be inaccessible for people without cars and could also lead to increased emissions if people have to drive to it.

This is particularly true for rural areas, as people could find their nearest return point is in a town that is hard for them to get to, particularly if they are transporting a large number of returnable containers. Not being able to access a return point for long periods, if it is hard to reach, will also mean they will have to store a large number of containers at home.

This example has been modelled with a 20p deposit level which reflects the need for a higher deposit rate to compensate for the lower accessibility of the system. However, this may have an impact on the fairness of the system as lower income households may be less able to afford the upfront cost of paying the deposit on a number of containers especially if the return points made take back less accessible to them.

Limited access to the return points might also mean that if someone buys a drink from a retailer and consumes it 'on the go', the container would be more likely to be improperly disposed of – i.e. thrown in a bin or littered.

The estimated likely return rate for container in this example is around 60%, which is only a marginal improvement on current assumed recycling for these materials. It is therefore questionable whether introducing a deposit return scheme on this basis would be justified.

Qualitative Scoring of Example 1: Take Back to Dedicated Drop-Off Points

	Return to Depot (Standard) Plastic, glass and metal
Objective	20p 60% capture rate
	Relevant Parameters	Score (out of 10)	%Weight	Weighted Score
Ensure a fairness for all demographic groups e.g. considering the impacts of the deposit level on households on lower incomes	20p, minimal impacts identified	8	32	25.6
Maximise accessibility to all demographic groups e.g. ensure there is no need to access a private vehicle to redeem deposits	1,058 return points, all towns over 1,000 people, 8am-8pm, 3 depots per FTE	4	38	15.2
Create employment opportunities for socially disadvantaged groups such as the long term unemployed or those with disabilities	526 jobs, 435 internal across all return points, industry owned	5	13	6.5
Create opportunities to raise funds for charitable causes, where use of the money can have wider societal benefits	RVM allows donation	5	17	8.5
TOTAL SCORES				56

The weighted score for Example 1 was 56, which was the lowest of all the examples. A particular concern reflected in the scoring was that return to dedicated points would limit access to return points, which would have a significant impact on both system performance and fairness for people who would be a long way from dedicated return points. It was felt that, aside from this issue, the example system does offer a measure of fairness in how it would impact, for instance, on low income households as long as they have easy access to return points.

The Net Present Value of Example 1: Take Back to dedicated drop-off points

This example assumes that glass bottles, metal cans and PET plastic bottles are the materials in scope, with materials returned to dedicated drop-off points. Example 1 has a deposit level of 20p and 1,058 return locations established across the country, achieving a capture rate of 60%.

The 60% capture rate is assumed to apply equally to both existing residual and recyclate streams, across all sectors. In calculating overall recycling and carbon benefits, remaining recyclate is then also factored in. This may significantly overstate the additionality of this scenario against these criteria, if in fact a greater proportion of DRS capture is diverted from existing recyclate streams, and less from residual.

Based on the assumptions presented in the previous section, the costs and benefits have been calculated for this example DRS. In order to present the costs for this example in a comparable format with the other examples, a 25-year NPV has been calculated. Applying a discount rate of 3.5% in line with HMT Green Book methodology this example generates the following benefits and costs:

Actor name	NPV (£)
	Costs	Benefits	Net benefit
System Operator	-£1,114 million	£2,354 million	£1,240 million
Return Points	£0	£0	£0
Unredeemed Deposits	-£2,150 million	£0	-£2,150 million
Producers	-£132 million	£800 million	£668 million
Local Authorities	£0	£110 million	£110 million
Commercial Premises	£0	£23 million	£23 million
Other Sectors	-£85 million	£85 million	£0.4 million
Value of Public Contribution	-£165 million		-£165 million
Society Benefits		£768 million	£768 million
TOTAL	-£3,646 million	£4,140 million	£494 million

Example 1 has a total net benefit of £494 million over the 25-year NPV.

The System Operator is the National Scheme Administrator of the DRS established by industry on a not for profit basis. The costs (£1,114 million) to the System Operator arise from operating return locations, a central bulking facility, logistics, the cost of fraud, communications and staff employed directly by the scheme. Benefits to the System Operator (£2,354 million) arise from unredeemed deposits and material sales. As income is greater than costs incurred, the System Operator has a net benefit of £1,240 million over the NPV 25-year period under Example 1. The NPV has made no assumptions on how this surplus would be spent.
The unredeemed deposits of £2,150 million over a 25-year period are a result of the consumer choosing not to return their deposit bearing container for exchange of their refundable deposit.

Return points refers to those facilities that are operated by a separate organisation. The cost of return points under Example 1 is therefore £0 million over the 25-year period as the dedicated drop-off points are all operated by the System Operator and as such all costs associated in operation and upkeep of such locations are internalised by the System Operator.

Under a DRS, producers are those companies that put deposit bearing products onto the market. DRS is a form of product stewardship, where producers who benefit from placing material onto the market incur the costs of ensuring appropriate treatment at end of life. As such producers are responsibly for contributing to the scheme. In this example the cost of producer's contribution to this scheme would be £0 million. This is a result of the revenue from unredeemed deposits and sales of material exceeding the running cost for the system.

Under Example 1 producers are expected to incur costs (£132 million) from upfront capital costs and costs associated with changes to labelling. Producers will benefit (£800 million) by avoiding future compliance costs associated with the implementation of the European Commission's Circular Economy package and through reimbursement of these upfront costs. The net benefit to producers under Example 1 is expected to be £668 million.

There are also benefits in sectors not directly involved in the operation of a DRS. These benefits are accrued by Local Authorities and commercial premises who are currently paying for disposal of material that would be collected by the DRS. This is £110 million and £23 million respectively. Under the NPV other sectors are private Waste Management companies and RVM servicing. The net benefit is a result of a small profit, not turnover, within these sectors.

The value of the of public contribution to participate in the scheme has been estimated as £165 million over the NPV 25-year period.

This estimate is identical across for all four examples as there is insufficient data to model this contribution in a more example specific manner. Previous exploration of value for take back to any place of purchase examples suggests this contribution could be valued higher for higher return rates, as more people participate; however, this relationship is unlikely to hold for dedicated drop-off point examples where increased inconvenience for participants is likely to more than offset this effect. Indeed, it could be considered that this may not fully capture the costs for Example 1 given the lower level of return points and therefore greater journey times for consumers to return their containers in comparison to the other examples.

Benefit to society from the introduction of a DRS is valued at £768 million over the 25-year period. The majority of this is the reduced to local neighbourhoods from targeting a highly visible component of the litter stream and the value of avoided carbon emissions.

Example 2 - Take back to dedicated drop-off points and some shops (with cartons and cups included)

Example 2 is a similar system to Example 1 but it would have more return points, as some shops may also have to have deposit return points where there isn't a recycling point style dedicated drop-off point nearby. It would also collect HDPE, which is the kind of plastic that milk bottles are made of and cartons and cups.

What this example looks like

This system would see deposit return machines being placed within a set distance of any shop selling drinks in containers, so that there would be somewhere nearby that people could return the containers to get back the deposit they paid when they bought it.

It would cover more types of plastic bottles than Example 1, as well as aluminium and steel cans, drinks cartons, glass bottles and some single use cups like coffee cups. This example would cover PET plastic, which is the kind that fizzy drinks and bottled water are usually made of, and also a type of plastic called HDPE which is the kind that milk bottles are usually made of.

In this example, shops that sell a high amount of drinks in disposable containers would need to make sure there was a place to get the deposit back within a set distance. If there wasn't a public recycling point within that distance, then the shop would have to have a way to return your deposit to you in the store.

Who would run it

In this example, drinks companies and retailers would need to work together to create an organisation that would run the deposit return system. This organisation would make sure the system runs properly, and some of the money collected by the deposit system would pay for staff needed to run the system and the costs involved in running it. The difference in Example 2 is that some shops would also have a part to play in making sure there is somewhere to get your deposit back nearby.

The new organisation would need to run the network of designated drop-off points, collect in the money, ensure retailers are paid to cover the deposits being paid back to people and make sure all the items were collected for recycling.

The effectiveness of these types of systems elsewhere in the world

Systems like this in California, Maine and British Columbia can see over 80% of drinks containers being recycled. Given Scotland's geography we assumed a slightly lower rate of return than the optimal rates achieved elsewhere in the world.

The benefits and drawbacks of the example

This example offers a higher return rate for drinks containers than Example 1. It also limits the impact on retailers but not to the same extent as Example 1 as some retailers may be required to provide return points or take back in store if there are no return designated drop-off points nearby.

It also goes some way towards solving the problem of accessibility as there would be a larger number of return points, potentially in more convenient locations. This could still limit access to the system for people in rural areas, if their local shops do not sell a high enough volume of drinks to warrant having take back on their premises or close by.

As with Example 1, this example has been modelled with a 20p deposit level which reflects the need for a higher deposit rate to compensate for the lower accessibility of the system.

Qualitative Scoring of Example 2: Take back to dedicated drop off points and some shops (with cartons and cups)

	Return to Depot (Hybrid) All materials
Objective	20p 70% capture rate
	Relevant Parameters	Score (out of 10)	% Weight	Weighted Score
Ensure a fairness for all demographic groups e.g. considering the impacts of the deposit level on households on lower incomes	20p, minimal impacts identified	8	32	25.6
Maximise accessibility to all demographic groups e.g. ensure there is no need to access a private vehicle to redeem deposits	2,009 return points, proximity to retailers, 8am-8pm, 3 depots per staff	6	38	22.8
Create employment opportunities for socially disadvantaged groups such as the long term unemployed or those with disabilities	989 jobs, 816 internal across all return points, industry owned	6	13	7.8
Create opportunities to raise funds for charitable causes, where use of the money can have wider societal benefits	RVM allows donation	5	17	8.5
TOTAL SCORES				65

Example 2 scored 65 overall, the second lowest scoring. Key considerations, again, were fairness and accessibility. While the example scored better on accessibility than Example 1, as there would be more return points, it was felt that it still did not offer a good level of accessibility.

The Net Present Value of Example 2: Take back to dedicated drop-off points and some shops (with cartons and cups)

This example assumes a broad range of materials are in scope; glass bottles, metal cans, plastic bottles, beverage cartons and paper based take-away cups, with materials returned to dedicated drop-off points and some shops. With a deposit level of 20p and 2,009 dedicated drop-off points established, within a proximity of points where drinks containers are purchased, a capture rate of 70% is modelled.

The 70% capture rate is assumed to apply equally to both existing residual and recyclate streams, across all sectors. In calculating overall recycling and carbon benefits, remaining recyclate is then also factored in. This may significantly overstate the additionality of this scenario against these criteria, if in fact a greater proportion of DRS capture is diverted from existing recyclate streams.

Based on the assumptions presented in the previous section, the costs and benefits have been calculated for this example DRS. In order to present the costs for this example in a comparable format with the other examples, a 25-year NPV has been calculated. Applying a discount rate of 3.5% in line with HMT Green Book methodology this example generates the following benefits and costs:

Actor name	NPV (£)
	Costs	Benefits	Net benefit
System Operator	-£2,086 million	£3,013 million	£927 million
Return Points	£0	£0	£0
Unredeemed Deposits	-£2,558 million	£0	-£2,558 million
Producers	-£370 million	£1,214 million	£844 million
Local Authorities	£0	£146 million	£146 million
Commercial Premises	£0	£37 million	£37 million
Other Sectors	-£153 million	£155 million	£2 million
Value of Public Contribution	-£165 million		-£165 million
Society Benefits		£1,119 million	£1,119 million
TOTAL	-£5,332 million	£5,684 million	£352 million

Example 2 has a total net benefit of £352 million over the 25-year NPV.

The System Operator is the National Scheme Administrator of the DRS established by Industry on a Not for Profit basis. The costs (£2,086 million) to the system operator arise from operating return locations, a central bulking facility, logistics, the cost of fraud, communications and staff employed directly by the scheme, while benefits to the system operator (£3,013 million) arise from unredeemed deposits and material sales. As income is greater than costs incurred, the System Operator has a net benefit of £927 million over the NPV 25-year period under Example 2. The NPV has made no assumptions on how this surplus would be spent.

The unredeemed deposits of £2,558 million over a 25-year period are a result of the consumer choosing not to return their deposit bearing container for exchange of their refundable deposit.

Drop-off points refers to those facilities that are operated by a separate organisation. The cost of return points under Example 2 is therefore £0 million over the 25-year period as the dedicated take back points are all operated by the System Operator and as such all costs associated in operation and upkeep of such locations are internalised by the System Operator.

Under a DRS, producers are those companies that put deposit bearing products onto the market. DRS is a form of product stewardship, where producers who benefit from placing material onto the market incur the costs of ensuring appropriate treatment at end of life. As such producers are responsibly for contributing to the scheme. In this example the cost of producer's contribution to this scheme would be £0 million. This is a result of the revenue from unredeemed deposits and sales of material exceeding the running cost for the system.

Under Example 2 producers are expected to incur costs (£370 million) from upfront capital costs and costs associated with changes to labelling. Producers will benefit (£1,214 million) by avoiding future compliance costs associated with the implementation of the European Commission's Circular Economy package and through reimbursement of these upfront costs. The net benefit to producers under Example 2 is expected to be £844 million.

There are also benefits in sectors not directly involved in the operation of a DRS. These benefits are accrued by Local Authorities and commercial premises who are currently paying for disposal of material that would be collected by the DRS. This is £146 million and £37 million respectively. Under the NPV other sectors are private Waste Management companies and RVM servicing. The net benefit is a result of a small profit, not turnover, within the RVM servicing sector.

The value of the public contribution to participate in the scheme and this has been estimated as £165 million over the NPV 25-year period.

This estimate is identical across for all four examples as there is insufficient data to model this contribution in a more example specific manner. Previous exploration of value for return to any place examples suggests this contribution could be valued higher for higher return rates, as more people participate; however, this relationship is unlikely to hold for return to dedicated drop-off point examples where increased inconvenience for participants is likely to more than offset this effect. Indeed, it could be considered that this may not fully capture the costs for Example 2 given the lower level of return points, in comparison to Examples 3 and 4, and therefore increased overall journey times for consumers to return their containers. The increased return rate versus Example 1 offsets the additional distance required in Example 1 to return containers.

Benefit to society from the introduction of a DRS is valued at £1,119 million over the 25-year period. The majority of this is the reduced disamenity to local neighbourhoods from targeting a highly visible component of the litter stream and the value of avoided carbon emissions.

Example 3 – Take back to any place of purchase

Example 3 is an example where you would be able to take your drinks containers back to any retailer that sells drinks in disposable containers.

What this example looks like

This example would mean that any retailer that sells drinks in disposable containers would have to provide a deposit return service so you can get back the deposit you paid on the container when you bought the drink. You would be able to take your container back to any of these retailers – it wouldn't have to be the same one you bought the drink from. It would mean there would be a lot more places where you could claim your deposit back in your local area, compared to Examples 1 and 2.

Bigger retailers may have machines to collect the bottles and cans, and return people's deposits. Smaller retailers with less space could return deposits manually over the counter.

This Example would cover some types of plastic bottles, aluminium cans, steel cans and glass bottles. The type of plastic bottles would be ones made of a plastic called PET, which is the most common kind for fizzy drinks and bottled water.

Who would run it

Similar to Examples 1 and 2, the drinks industry and retailers would need to work together to create an organisation that would run the deposit return system. This organisation would make sure the system runs properly, and some of the money made by the deposit system would pay for staff needed to run the system and the costs involved in running it.

It would need to make sure the retailers paid in the deposits they had taken on drinks they had sold, and also that they received money for all the deposits they returned to customers. It would also arrange for handling fees to be paid to return points and the containers to be regularly collected and recycled.

Retailers that sell drinks in disposable containers would have to provide a system in store to give people back the deposits on any drinks containers covered by the system ( PET plastic, cans and glass bottles).

The effectiveness of these types of systems elsewhere in the world

Systems like this in Scandinavia and the Baltic states are seeing over 85% of drinks containers being recycled.

The benefits and drawbacks of the example

This example offers the highest return rate for containers in scope. As it has the highest return rate, it most closely matches the environmental ambitions of the policy of increasing the recycling rate and reducing littering.

It would have the highest impact on retailers, through either loss of selling space if they install a reverse vending machine or staff time if they take back manually, plus the requirement to store containers until they are collected. The system would offer a ''handling fee" paid per container returned to compensate for this disruption, and support the costs to retailers of operating the scheme.

A return to retail system would also be the most accessible. If every retailer either has a reverse vending machine or takes back over the counter, people will be able to return their containers as part of their normal purchasing routine. Even if customers chose to make a special trip to return their containers, the density of return points means it is likely they will not have to travel far to find one.

Qualitative Scoring of Example 3: Take back to any place of purchase

	Return to Retail (Standard) Plastic, glass and metal
Objective	10p 80% capture rate
	Relevant Parameters	Score (out of 10)	% Weight	Weighted Score
Ensure a fairness for all demographic groups e.g. considering the impacts of the deposit level on households on lower incomes	10p, minimal impacts identified	9	32	28.8
Maximise accessibility to all demographic groups e.g. ensure there is no need to access a private vehicle to redeem deposits	17,407 return points, align with retail opening, staff on site, certain public have access to location	10	38	38
Create employment opportunities for socially disadvantaged groups such as the long term unemployed or those with disabilities	107 jobs, 99 in a single location, industry owned	6	13	7.8
Create opportunities to raise funds for charitable causes, where use of the money can have wider societal benefits	RVM allows donation	5	17	8.5
TOTAL SCORES				83

Example 3 scored 83 overall, the second highest scoring. This is primarily due to the importance placed on the system being as accessible as possible, which is achieved in this system through return points being in all retailers. The system also scored well on fairness.

The Net Present Value of Example 3: Take back to any place of purchase

This example assumes a broad range of materials are in scope; glass bottles, metal cans and PET plastic bottles, with materials returned to any place of purchase. With a deposit level of 10p and 17,407 return locations located at any premise that sells these containers, a capture rate of 80% is achieved.

The 80% capture rate is assumed to apply equally to both existing residual and recyclate streams, across all sectors. In calculating overall recycling and carbon benefits, remaining recyclate is then also factored in. This may slightly overstate the additionality of this scenario against these criteria, if in fact a greater proportion of DRS capture is diverted from existing recyclate streams, and less from residual.

Based on the assumptions presented in the previous section, the costs and benefits have been calculated for this example DRS. In order to present the costs for this example in a comparable format with the other examples, a 25-year NPV has been calculated. Applying a discount rate of 3.5% in line with HMT Green Book methodology this example generates the following benefits and costs:

Actor name	NPV (£)
	Costs	Benefits	Net benefit
System Operator	-£1,304 million	£1,304 million	£0
Return Points	-£859	£859	£0
Unredeemed Deposits	-£545 million	£0	-£545 million
Producers	-£654 million	£890 million	£236 million
Local Authorities	£0	£149 million	£149 million
Commercial Premises	£0	£317 million	£31 million
Other Sectors	-£137 million	£138 million	£1 million
Value of Public Contribution	-£165 million	£0	-£165 million
Society Benefits		£1,038 million	£1,038 million
TOTAL	-£3,664 million	£4,409 million	£745 million

Example 3 has a total net benefit of £745 over the 25-year NPV.

The System Operator is the National Scheme Administrator of the DRS established by Industry on a Not for Profit basis. The costs (£1,304 million) to the system operator arise from operating return locations, a central bulking facility, logistics, the cost of fraud, communications and staff employed directly by the scheme, while benefits to the system operator (£1,304 million) arise from unredeemed deposits and material sales. As income and costs incurred are equal, the System Operator has no net benefit over the NPV 25-year period under Example 3.

The unredeemed deposits of £545 million over a 25-year period are a result of the consumer choosing not to return their deposit bearing container for exchange of their refundable deposit.

Drop-off points refers to those facilities that are operated by a separate organisation. The cost of all 17,407 return points under Example 3 is £859 million over the 25-year period. This cost is incurred from staff time, the value of any lost retail space, miscellaneous supplies, and where an automated solution is used, the cost of maintaining and operating the RVM. The NPV calculates a benefit of £859 million for return points as return locations will be fully reimbursed, leading to no overall net benefit or loss over the 25-year NPV period.

Under a DRS, producers are those companies that put deposit bearing products onto the market. DRS is a form of product stewardship, where producers who benefit from placing material onto the market incur the costs of ensuring appropriate treatment at end of life. As such producers are responsible for contributing to the scheme. This is a result of the operating costs of the scheme exceeding the from revenue from unredeemed deposits and sales of material exceeding. Producers would be required to contribute to cover this shortfall in revenue required to cover system operating costs and return point operating costs.

Under Example 3 producers are anticipated to incur costs (£654 million) from contributing to operating costs, upfront capital costs and costs associated with changes to labelling. Producers will however benefit (£890 million) by avoiding future compliance costs associated with the implementation of the European Commission's Circular Economy package and through reimbursement of these upfront costs. The net benefit to producers under Example 3 is therefore £236 million.

There are also benefits in sectors not directly involved in the operation of a DRS. These benefits are accrued by Local Authorities and commercial premises who are currently paying for disposal of material that would be collected by the DRS. This is £149 million and £31 million respectively. Under the NPV other sectors are private Waste Management companies and RVM servicing. The net benefit is a result of a small profit, not turnover, within the RVM servicing sector.

The value of the public contribution to participate in the scheme and this has been estimated as £165 million over the NPV 25-year period.

This estimate is identical across for all four examples as there is insufficient data to model this contribution in a more example specific manner. There is an increased number of containers being returned in this example, versus Examples 1 and 2, however the increased convenience of those locations and therefore reduced overall distance travelled will at least offset this difference.

Benefit to society from the introduction of a DRS is valued at almost £1,038 million over the 25- year period. The majority of this is the reduced disamenity to local neighbourhoods from targeting a highly visible component of the litter stream and the value of avoided carbon emissions.

Example 4 - Take back to any place of purchase (with cartons and cups)

Example 4 is similar to Example 3, where you would be able to take your drinks containers back to any shop that sells drinks in disposable containers. The difference is that Example 4 would collect a wider range of drinks containers and would be jointly run by a public body and the drinks/retail industry.

What this example looks like

This system is similar to Example 3, and would mean that any shop that sells drinks in disposable containers would have to provide a deposit return service so you can get back the deposit you paid on the container when you bought the drink. You would be able to take your container back to any of these shops – it wouldn't have to be the same one you bought the drink from.

The difference with Example 3 is that it would collect a wider range of drinks containers. It would collect PET plastic, which is the kind that fizzy drinks and bottled water are usually made of, and also a type of plastic called HDPE which is the kind that milk bottles are usually made of. It would also collect aluminium and steel cans, drinks cartons, glass bottles and some single use cups like coffee cups.

Who would run it

This example would see an organisation made up of a public body and leaders from the drinks and retail industries being set up to run the system. This organisation would make sure the system runs properly, and some of the money made by the deposit system would pay for its staff and running costs. It would need to make sure the shops paid in the deposits they had taken on drinks they had sold, and also that they received money for all the deposits they returned to customers. It would also arrange for the containers to be regularly collected and recycled.

Shops that sell drinks in disposable containers would have to provide a system in store to give people back the deposits on any drinks containers covered by the system ( PET and HDPE plastic, cans, drinks cartons, glass bottles and cups).

The effectiveness of these types of systems elsewhere in the world

This would be a uniquely ambitious system for Scotland as nowhere else in the world collects this range of material via a deposit return scheme. This means the system would be collecting a much wider variety of materials at a high rate, offering the highest possible capture rates and litter reduction.

The benefits and drawbacks of the example

As noted above, this would not only achieve a high capture rate for the materials included in Example 3, it is likely it would also help tackle a range of other materials, increasing the rate of recycling and preventing them from becoming litter.

Some of these items are harder to recycle, however one of the main obstacles to these materials being recycled is that they are not available separate to other materials in sufficient amounts to make recycling them cost effective. This would be addressed in a deposit return system. However, greater attention would need to be devoted to ensuring sufficient recycling infrastructure was in place for items that are not currently widely recycled.

As with Example 3, this would also offer the best accessibility due to the high level of return points in both rural and urban locations and the fact that these return points will be where people will be going to shop.

Qualitative Scoring of Example 4: Take back to any place of purchase (with cartons and cups)

	Return to Depot (Enhanced) Plastic, glass and metal
Objective	20p 80% capture rate
	Relevant Parameters	Score (out of 10)	% Weight	Weighted Score
Ensure a fairness for all demographic groups e.g. considering the impacts of the deposit level on households on lower incomes	10p, minimal impacts identified	9	32	28.8
Maximise accessibility to all demographic groups e.g. ensure there is no need to access a private vehicle to redeem deposits	17,407 return points, align with retail opening, staff on site, certain public have access to location	10	38	38
Create employment opportunities for socially disadvantaged groups such as the long term unemployed or those with disabilities	116 jobs, 108 in a single location, public owned	7	13	9.1
Create opportunities to raise funds for charitable causes, where use of the money can have wider societal benefits	RVM allows donation	5	17	8.5
TOTAL SCORES				84

Example 4 scored the highest at 84, but only 1 point more than Example 3. The two Examples scored the same on accessibility, fairness and opportunities to raise funds for charities. It was scored slightly higher for employment opportunities, as the wider range of materials would mean more jobs to handle and reprocess the material.

The Net Present Value of Example 4: Take back to any place of purchase (with cartons and cups)

This example assumes a broad range of materials are in scope; glass bottles, metal cans, plastic bottles, beverage cartons and paper based take-away cups, with materials returned to any place of purchase. With a deposit level of 10p and return locations located at any premise that sells these containers, achieving a capture rate of 80%.

The 80% capture rate is assumed to apply equally to both existing residual and recyclate streams, across all sectors. In calculating overall recycling and carbon benefits, remaining recyclate is then also factored in. This may slightly overstate the additionality of this scenario against these criteria, if in fact a greater proportion of DRS capture is diverted from existing recyclate streams, and less from residual.

Based on the assumptions presented in the previous section, the costs and benefits have been calculated for this example DRS. In order to present the costs for this example in a comparable format with the other examples, a 25-year NPV has been calculated. Applying a discount rate of 3.5% in line with HMT Green Book methodology this example generates the following benefits and costs:

Actor name	NPV (£)
	Costs	Benefits	Net benefit
System Operator	-£1,409 million	£1,409 million	£0
Return Points	-£874 million	£874 million	£0
Unredeemed Deposits	-£860 million	£0	-£860 million
Producers	-£446 million	£965 million	£519 million
Local Authorities	£0	£168 million	£168 million
Commercial Premises	£0	£42 million	£42 million
Other Sectors	-£148 million	£149 million	£1 million
Value of Public Contribution	-£165 million	£0	-£165 million
Society Benefits		£1,2858 million	£1,285 million
TOTAL	-£3,902 million	£4,892 million	£990 million

Example 4 has a total net benefit of £990m over the 25-year NPV.

The System Operator is the National Scheme Administrator of the DRS established by Industry on a Not for Profit basis. The costs (£1,409 million) to the system operator arise from operating return locations, a central bulking facility, logistics, the cost of fraud, communications and staff employed directly by the scheme, while benefits to the system operator (£1,409 million) arise from unredeemed deposits and material sales. As income and costs incurred are equal, the System Operator has no net benefit over the NPV 25-year period under Example 4.

The unredeemed deposits of £860 million over a 25-year period are a result of the consumer choosing not to return their deposit bearing container for exchange of their refundable deposit.

Return points refers to those facilities that are operated by a separate organisation. The cost of all 17,407 return points under Example 4 is £874 million over the 25-year period. This cost is incurred from staff time, the value of any lost retail space, miscellaneous supplies, and where an automated solution is used, the cost of maintaining and operating the RVM. The NPV calculates a benefit of £874 million for return points as return locations will be fully reimbursed, leading to no overall net benefit or loss over the 25-year NPV period.

Under a DRS, producers are those companies that put deposit bearing products onto the market. DRS is a form of product stewardship, where producers who benefit from placing material onto the market incur the costs of ensuring appropriate treatment at end of life. As such producers are responsibly for contributing to the scheme. This is a result of the operating costs of the scheme exceeding that from revenue from unredeemed deposits and sales of material exceeding.
Producers will be required to contribute to cover this shortfall in revenue required to cover system operating costs and return point operating costs.

Under Example 4 producers are expected to incur costs (£446 million) from contributing to operating costs, upfront capital costs and costs associated with changes to labelling. Producers will however benefit (£965 million) by avoiding future compliance costs associated with the implementation of the European Commission's Circular Economy package and through reimbursement of these upfront costs. The net benefit to producers under Example 4 is therefore £519 million.

There are also benefits in sectors not directly involved in the operation of a DRS. These benefits are accrued by Local Authorities and commercial premises who are currently paying for disposal of material that would be collected by the DRS. This is £168 million and £42 million respectively. Under the NPV other sectors are private Waste Management companies and RVM servicing. The small net benefit is a result of profit, not turnover, within the RVM servicing sector.

The value of the public contribution to participate in the scheme and this has been estimated as £165 million over the NPV 25-year period.

This estimate is identical across for all four examples as there is insufficient data to model this contribution in a more example specific manner. Previous exploration of value for return to any place examples suggests this contribution could be valued higher for higher return rates, as more people participate; however, this relationship is unlikely to hold for return to dedicated drop-off point examples where increased inconvenience for participants is likely to more than offset this effect. There is an increased number of containers being returned in this example, versus Examples 1 and 2, however the increased convenience of those locations and therefore reduced overall distance travelled will at least offset this difference.

Benefit to society from the introduction of a DRS is valued at almost £1,285 million over the 25- year period. The majority of this is the reduced disamenity to local neighbourhoods from targeting a highly visible component of the litter stream and the value of avoided carbon emissions.

Questions on Example Systems

Q40. 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 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)

Q41. Do you agree with the assessment of Example 1?

Yes
No
Don't Know

Q42. Do you agree with the assessment of Example 2?

Yes
No
Don't Know

Q43. Do you agree with the assessment of Example 3?

Yes
No
Don't Know

Q44. Do you agree with the assessment of Example 4?

Yes
No
Don't Know

Q45. How do you think the NPV model could be further developed? What other factors should be included in the models?

Q46. What economic risks or opportunities do you see in introducing a deposit return scheme in Scotland?

Q47. Do you see particular risks with any of the examples?

Q48. What action do you think we could take to maximise the opportunities and minimise the risks of any of the approaches?