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

20. Annex F: Industry assumptions

1. The final BRIA and FBC Stage 1 Addendum, published on 16 March 2020, represent the Scottish Government's final position on the costs and benefits associated with a DRS for Scotland. As this BRIA (p20) sets out, applying those costs and benefits to the new implementation timetable and taking account of the quicker ramp-up and updated population estimates, continues to show the clear economic case for proceeding with DRS.

2. DRS is a form of extended producer responsibility and it is right that, as industry has taken over leadership of the implementation of DRS, individual businesses including Circularity Scotland Ltd (CSL) as scheme administrator have been developing their own operating models for DRS and investigating potential costs associated with these.

3. The Scottish Government understands that CSL believes the number of drinks containers placed on the market in 2020 to be 2.7bn (compared to the 2.2bn modelled in Table 3 of the main document). In addition, CSL believes the number of return points in Scotland to be approximately 37,000 (compared to the 17,000 modelled in Table 3).

4. There is inevitably a degree of uncertainty attached to these figures. In particular, we consider that the impact of the COVID-19 pandemic means a degree of caution should be attached to numbers relating to 2020. The pandemic saw a shift from out-of-home consumption such as workplaces, pubs, and restaurants to in-home consumption (see Competition Assessment section for details). It is not clear how long-lasting these emerging trends will be and if, or to what extent, consumption patterns will return to those seen pre-pandemic.

5. Therefore, we remain committed to the assumptions set out in Table 3 as our final, and best, estimate of the costs and benefits associated with DRS. However, to provide an additional sensitivity analysis of the economic case for DRS, we have analysed the impact on the 25-year NPV of adopting the two numbers set out above (i.e. 2.7bn containers and 37,000 return points).

Note. The DRS for Scotland is designed to optimise delivery against the four strategic outcomes and to be complementary to any future packaging EPR scheme.

Figures may not sum due to rounding

6. Table 1 shows that modelling the increased container numbers alone results in a slightly higher overall net NPV of £638 million (versus £615 million). This is due to the effect of more containers going to recycling, therefore reducing the use of virgin materials.

Note. The DRS for Scotland is designed to optimise delivery against the four strategic outcomes and to be complementary to any future packaging EPR scheme.

Figures may not sum due to rounding

7. Table 2 shows that the increase in return points offsets the higher net NPV when container numbers are increased. This is due to the additional number of businesses facing DRS related costs including a loss of floor space and any additional manual handling involved in container returns.

8. As Table 2 shows, even if we were to adopt the significantly higher container and return-point numbers suggested by industry, there would continue to be a strong economic case for DRS.