A Deposit Return Scheme for Scotland: Final Business Regulatory Impact Assessment

2. Purpose and Intended Effect

2. Scotland's household recycling rate has increased substantially in the last decade. After a steady increase, the latest figures, published in September 2020 by the Scottish Environment Protection Agency (SEPA), confirm that in 2019 the recycling rate reached 44.9%.^[2] For a third consecutive year, in 2019 there was more Scottish waste recycled (1.1 million tonnes) than landfilled (0.76 million tonnes).

3. This has been driven by substantial investment by central and local government in kerbside collections. The result has been a dramatic increase in the number of households who have access to recycling facilities.

4. The rate of growth has, however, been slowing. Since 2014 and the introduction of a new methodology for calculating recycling rates, it has only increased by 1.9% overall. In 2018, recycling rates dropped (by 0.9%) for the first time since the start of reporting under the current definition of household waste in 2011 but it did recover slightly by 0.2% in 2019. It is, therefore, clear that further interventions are required to stimulate growth in recycling rates in order to achieve national recycling targets: 70% of all waste recycled and a maximum of 5% to landfill by 2025.

5. In September 2017, the Scottish Government announced in the Programme for Government (PfG) that it would move to implement a deposit return scheme (DRS) for Scotland for single-use drinks containers. Protecting Scotland's Future: the Scottish Government's programme for Scotland 2019-20203 reinforced this commitment following public consultation. The views shared via the consultation helped to design an effective system that has been tailored to meet Scotland's specific needs, and with the specific aims of increasing recycling rates and reducing littering. This commitment was reiterated in the September 2021 PfG.^[3]

6. The Scottish Parliament passed the Regulations giving effect to DRS on 13 May 2020. At that time the Scottish Government committed to closely monitoring the impact of the COVID-19 pandemic on implementation of DRS. In line with that commitment, on 8 March 2021 the Scottish Government announced an independent review into the implementation timetable for the scheme. This review has now been completed.

7. On 14 December 2021 the Minister for Green Skills, Circular Economy and Biodiversity announced that the Scottish Government would seek to change the full implementation date for DRS to 16 August 2023 in light of the impact of COVID-19 and EU Exit. This revised final BRIA reflects that change and also the following key provisions of The Deposit and Return Scheme for Scotland Amendment Regulations 2022:

• Quicker ramp-up of scheme targets;
• Clarification of producer responsibility in respect of 'crowlers' and similar containers;
• Additional flexibility for retailers obligated to provide a distance takeback service;
• Additional safeguard against fraud in the 'grey market';
• Other provisions to support enforcement of DRS.

8. The consideration of a DRS is referenced in the Scottish Government's circular economy strategy Making Things Last – A Circular Economy Strategy for Scotland (MTL)^[4] published in February 2016. The strategy sets out the aims of cutting waste and carbon emissions, reducing reliance on scarce resources, increasing productivity and improving resilience.

9. Towards a Litter-Free Scotland^[5] (TLFS), published in June 2014, is Scotland's first national litter strategy with a focus on litter prevention. This is being delivered by encouraging people to take personal responsibility through activities related to infrastructure, information and enforcement. The aim of the strategy is to reduce the estimated £46 million of public money spent removing litter and flytipping from the environment each year and the wider negative impacts of litter; at least a further £361 million in costs on our society and economy. It will also enable the lost value of resources to be recovered; littered material could be worth at least £1.2 million a year.

10. A Marine Litter Strategy for Scotland^[6] (MLSS) was launched in 2014 as a sister document to Towards a Litter-Free Scotland, focused on protecting Scotland's coastal environment as a major resource. This will contribute to collaborations under the OSPAR Convention (Convention for the Protection of the Marine Environment of the North East Atlantic)^[7] and the Marine Strategy Framework Directive.

2.1 Objectives

11. It is proposed that a Scottish DRS will:

• Increase the quantity of target materials collected for recycling.
• Improve the quality of material collected, to allow for higher value recycling.
• Encourage wider behaviour change around materials.
• Deliver maximum economic and societal benefits for Scotland.

12. Achieving these strategic objectives will help Scotland progress towards its 2025 waste targets,^[8] accelerating Scotland's transition from a 'linear' economy which is environmentally unsustainable and energy and resource intensive, to a more resource efficient and sustainable circular economy.

13. Growing global and national populations are expected to increase commodity price volatility and constraints on resources availability, which could lead to adverse social and economic effects. Adoption of circular economy measures like a Scottish DRS should help to provide resilience to such shocks and constraints, and aid in delivering significant environmental benefits and economic opportunities.

14. By placing a financial value on selected single-use drinks containers, a DRS will encourage consumers to return them for recycling, reducing the likelihood that they will end up as litter and increasing the likelihood they will be recycled. This will, in part, help to address a growing global concern about the volume and impact of plastic pollution, particularly in marine landscapes.

15. Separate and material-specific collection of selected packaging materials under a DRS will also generate higher quality, higher value material streams.

16. The fit with Scottish Government policy has already been indicated in the background sections above. The UK Department for Environment and Rural Affairs (DEFRA), Welsh Government and Northern Ireland Executive consulted on a potential DRS for England, Wales and Northern Ireland in 2019.^[9] Enabling provisions were included in the UK Environment Bill which was laid in the UK Parliament in January 2020.

17. The introduction of DRS will clearly have an impact on businesses in Scotland. As a form of producer responsibility, it will require those businesses to take responsibility for the environmental impact of their products and for the costs of managing products at end of life. A system of producer responsibility for packaging has been in place in the UK since 1997 and that system has helped to drive significant increases in recycling. However, the rate of progress suggests further interventions are needed and the European Commission^[10] with reference to its Circular Economy Package, support DRS as an effective response to the challenges faced.

2.2 The Final Scheme Design

18. The final scheme design enables consumers to take single-use containers back to, and redeem a 20p deposit from, any retailer selling drinks covered by the scheme.

19. Businesses that sell drinks to be opened and consumed on-site, such as pubs and restaurants, will not have to charge the deposit to the public and will only be required to return the containers they sell on their own premises.

20. Online retailers will be included in the scheme. This means that those customers who are dependent on online delivery, because for a variety of reasons they are unable to travel to shops, can easily get back the deposits paid on containers.

21. Retailers will be able to apply to Ministers to be exempted from the obligation to operate a return point provided an alternative return point within reasonable proximity has agreed to take back packaging on their behalf, and consumers will still have reasonable access to a return point. Ministers may also grant an exemption where they are satisfied that a retailer cannot accommodate a return point on the premises without significant risk of being in breach of legal obligations relating to:

• food safety,
• health and safety,
• fire safety,
• environmental protection, or
• public health.

22. Non-retail spaces will be able to act as return points. These could include recycling centres, schools or other community hubs. While retailers will be required by legislation to provide a return service, others will be able to apply to opt in.

23. Retailers can choose to install reverse vending machines (RVMs) to collect the bottles and cans and return deposits. Alternatively, they will have the option to return deposits over the counter, collecting the containers manually.

24. The scheme will include plastic bottles made from PET (the most common type of bottle for products such as fizzy drinks and bottled water), aluminium and steel cans and glass bottles.

25. Scotland's DRS will target a return rate of 90%. This is significantly higher than the current capture rates for the materials that are in scope. Having a deposit level which provides a sufficient incentive to return containers, together with provision of high coverage of return points, means that this target is ambitious but achievable.

26. It is important to note that the true national recycling rate for the containers targeted through Scotland's DRS will be slightly higher than the scheme capture rate itself. This is because some items not returned will continue to be returned through other recycling facilities.

27. The schematic in Annex A illustrates the final scheme design for the Scottish DRS.

2.3 Rationale for Government Intervention

28. With reference to the National Performance Framework, the scheme is expected to support the National Outcomes:

• People have a globally competitive, entrepreneurial, inclusive and sustainable economy
• People value, enjoy, protect and enhance their environment

29. The carbon savings derived from the introduction of a DRS in Scotland will also contribute to revised targets set out in the Climate Change (Emissions Reduction Targets) (Scotland) Act 2019, which amends those in the Climate Change (Scotland) Act 2009 to achieve net-zero emissions of all greenhouse gases by 2045 at the latest. The amendment includes interim target reductions of at least 56% by 2020, 75% by 2030, 90% by 2040. This revision follows on from the Scottish Government's declaration of a Climate Emergency in April 2019.

30. The Climate Change Plan: Third Report on Proposals and Policies^[11] (RPP3) was published in February 2018. It sets out plans to achieve decarbonisation of the economy in the period to 2032, with revisions being made to these plans following the tightening of emissions targets.

31. Resource use and waste generation are recognised as key sources of greenhouse gas generation and the Scottish Government reports on progress against both territorial and consumption emissions.

32. United Nations Draft Resolutions on Marine Litter and Microplastics^[12] (2017) and Management of Marine Debris^[13] (2014), both reference the role that DRS can have on preventing the harmful escape of plastics into marine environments.

33. In 2015, the Scottish Government signed up to support the United Nations Sustainable Development Goals.^[14] The ambition behind the goals is to end poverty, protect the planet and ensure prosperity for all as part of a new sustainable development agenda. A DRS will have a positive impact on a number of these goals, most explicitly Goal 12: Responsible Consumption and Production.

34. In May of 2018 the European Commission's Circular Economy Package^[15] was approved. The legislation aims to move supply chains towards a circular economy which maintains the value of products, materials and resources in the economy for as long as possible. This includes more ambitious recycling targets and full cost recovery of recycling costs from producers'.