Packaging - extended producer responsibility: Fairer Scotland Duty assessment

Summary of assessment findings

51. This Fairer Scotland Duty Assessment has not identified any definitive negative impacts on those who experience socio-economic disadvantage. It suggests that packaging EPR will have minimal impact of inequalities of outcome. However greater granularity is required to assess the possible impacts of the policy on specific demographics due to the number of variables involved. This could be assessed as part of post-implementation monitoring.

52. It should be noted that there is potential overlap between those with protected characteristics considered within the Equality Impact Assessment who are also experiencing socio-economic disadvantage. This can result in individuals experiencing cumulative impacts from the planned policy proposal. Evidence has not been identified at this current time, but we will continue to monitor this as we move through the implementation stage of packaging EPR.

53. For the purposes of this FSDA we have considered the impacts on the price of groceries and impacts on local-authority funding.

The price of groceries

54. Research carried out by Zero Waste Scotland has indicated that grocery packaging costs the average Scottish household around £250 per year (based on the wholesale price of packaging), 7% of the average annual grocery bill.^[49] This cost is not displayed separately, but the packaging is a component of the product being purchased. Assuming that households of the same size consume a similar volume of groceries (with similar quantities of packaging) but comprising items of differing cost, the cost of packaging will be a higher proportion of grocery bills for lower-income households.

55. This policy will require producers to pay the full net cost of managing their packaging at end-of-life. At present, producers pay approximately 10% of the financial cost in the UK, with local authorities paying the majority of the costs for dealing with household waste.^[50] If producers are required to pay a greater proportion of the costs, they may pass some or all of the additional costs to the consumer in the price of goods (which incorporate the price of packaging).

56. The UK impact assessment published in March 2022 estimated the cost increase at £40.57 per household per year as a result of packaging EPR being introduced. ^[51] This equates to an average increase of 78p per household per week. While this represents a low increase per product, the impact assessment did not make an assessment of relative impact on individual products but assumed that the increases will not be significant enough to change purchasing habits. Similarly, the relative impact of cost pass-through for specific household circumstances, based on purchasing habits, has not been assessed due to the large number of variables which impact on both purchasing habits and the extent to which costs are passed to consumers for individual products.

57. The UK impact assessment is currently being updated, although the estimate of costs to producers is not expected to change significantly. We will monitor the results of the updated impact assessment to consider whether this materially affects the picture of cost pass-through.

58. Households currently pay for the management of packaging waste through local taxation to contribute towards the cost of collection, treatment and disposal services. It is not possible to link tax payments by income band to specific services, as tax payments are not hypothecated in this way.

59. Responsibility for setting the level of the fees that producers must pay will rest with the scheme administrator. The final impacts on individual households will depend on decisions made by the scheme administrator regarding fee modulation for specific packaging formats and materials (whereby less-recyclable packaging incurs higher fees while readily recyclable packaging incurs lower fees), individual producer decisions on specific products and market-wide shifts based on the new fee structure and incentives for recyclability.

60. Several factors should mitigate the impact of cost pass-through to some extent:

• Packaging EPR will incentivise producers to remove or redesign unnecessary packaging, which could reduce the packaging costs for some items.
• Consumer purchasing patterns may change to avoid price increases, for example by changing the goods they choose to purchase or moving to the use of reusable packaging.
• Modulated fees will make some packaging types which are not widely recycled or are non-recyclable subject to higher producer charges, but will also reduce the cost for easy-to-recycle packaging.
• There is likely to be significant variation in cost pass-through within and between product ranges placed on the market by producers subject to market conditions described above.

61. As noted above, lower-income households spend a greater proportion of their incomes on food, and this group could be disproportionately affected by any increase in prices. Those on low incomes in remote rural communities may be particularly adversely affected, due to the already higher cost of living.

62. The final cost pass-through rate for specific packaging, if any, will be influenced by the Scheme Administrator’s decisions on fee modulation, which should take account of impacts on the type, availability and cost of packaging materials. This could be assessed as part of a post-implementation review of the policy.

The impact on local authority funding

63. These proposals mean that producers will be responsible for paying the full net costs of efficient and effective household recycling and waste services for packaging including collection, sorting and disposal. Those costs will include packaging waste collected at the kerbside or deposited at Household Waste Recycling Centres.

64. Local authority payments from the Scheme Administrator will be based on operating efficient and effective services. This will be assessed to take account of an authority’s population, demographics and geography to ensure realistic expectations and appropriate costs are determined.

The impact on jobs

65. Job creation within Scotland as a direct consequence of packaging EPR is expected to be limited. However, job creation could be driven by producers in response to new obligations which incentivise recyclability of packaging, for example product, packaging and material specialists. Similarly, as the scheme is intended to increase the recycling of packaging, and increase domestic recycling and reprocessing capacity at a UK level, this may generate employment at new or upgraded facilities.

66. Conversely, there is a risk that increased fees for non-recyclable packaging could result in some material-specific manufacturers losing business as producers move towards more recyclable packaging. However, the scheme is also intended to encourage improved packaging design, through the modulation of fees.