Reforming the UK packaging producer responsibility system: Partial Business and Regulatory Impact Assessment (BRIA)

2.0 Purpose and intended effect

2.1 Background

5. According to the Scottish Environment Protection Agency (SEPA), more than 10 million tonnes of packaging waste is produced every year in the UK.^[3] Separate information is not available for waste packaging in Scotland.

6. Extended producer responsibility (EPR) schemes are a common tool to ensure that producers' responsibility for their products is extended to the post-use phase. This includes financial responsibility and can apply to, for example, the environmental or waste management costs of the products they place on the market. This incentivises producers to design for key circular economy outcomes such as reduced consumption of resources, reuse, repair and recycling.

7. A producer responsibility system for packaging has operated UK-wide since 1997; at present it is governed by the Producer Responsibility Obligations (Packaging Waste) Regulations 2007 (as amended),^[4] hereafter referred to as 'the Packaging Waste Regulations'.^[5] Under these regulations, businesses which make or use packaging are obligated to contribute towards the cost of recycling and recovery of a proportionate amount of packaging they have placed on the market. The objectives of this system are to:

• Reduce the amount of packaging produced;
• Reduce the amount of packaging waste going to landfill;
• Increase the amount of packaging waste that is recycled and recovered.

8. The Scottish regulator is SEPA. Along with the environmental regulators in the other nations in the UK, SEPA administers the National Packaging Waste Database and monitors compliance with the regulations.

9. The responsibility to prove that producers have met their recycling obligations is currently fulfilled through the purchase of Packaging Waste Recycling Notes (PRNs) or Packaging Waste Export Recycling Notes (PERNs) which are sold by accredited reprocessors or exporters. Obligated businesses must buy sufficient PRNs to demonstrate they have met their obligations, in line with the 'polluter pays' principle.^[6] PRNs and PERNs act as evidence that an equivalent amount of similar packaging has been recycled.

10. The central aim of extended producer responsibility (EPR) is to ensure that producers bear financial responsibility for the impacts of products they place on the market and are incentivised to reduce these impacts. This provides the opportunity to assess the whole lifecycle of a product – a concept which is central to Scotland's circular economy strategy.

11. The Scottish Government is working jointly with the UK, Welsh and Northern Irish governments to reform the packaging producer responsibility system, creating genuine Extended Producer Responsibility. The governments of all four nations are working together to ensure that the revised packaging EPR scheme aligns with existing policies, and allows some variation based on local needs and priorities. This will help to maximise the influence on producers and the supply chain.

2.2 Objective and Rationale

12. The current producer responsibility system for packaging has provided a limited degree of producer responsibility while keeping the cost to businesses low. However, the system has significant shortcomings which will be addressed by the introduction of packaging EPR.

13. Most significantly, it is estimated that the current system covers less than 10% of the total cost of managing post-use packaging waste,^[7] which means that most of the cost is borne by local authorities, other public authorities and businesses who consume packaged goods. Additionally, there is significant fluctuation of revenue raised through PRNs.

14. Additional issues include:

• Concerns over system transparency, including the actual fate of materials and the visibility producers have of how their PRN fees are used.
• Lack of a level playing field for domestic reprocessing, due to an over-reliance on export markets.
• Limited direct consumer communications to encourage packaging recycling.
• Lack of incentive for producers to design for greater recyclability or re-use, as the price of PRNs is not linked to recyclability or environmental impacts of materials. This means that materials are often reprocessed into much lower-value goods, or lost to landfill or incineration after just one use.
• Lack of granularity in data reported by producers, as this currently only includes the type of material and does not include the packaging type or, for plastics, polymer type.

15. It is clear that the current packaging producer responsibility system does not fully meet the "polluter pays" principle, in that producers do not bear the full financial responsibility for the impacts of products they place on the market and are therefore not strongly incentivised to reduce these impacts.

16. Voluntary initiatives for recycling labels and fibre-based composite cup recycling exist but are insufficient. Variation in the design and information provided by voluntary labelling is confusing for consumers. Voluntary fibre-based composite cup collection schemes have made some progress in increasing the recycling rate of fibre-based composite cups however, the recycling rate remains low.

17. Placed on the market packaging data for paper cups and other types of fibre-based composite packaging are not reported currently as a separate packaging material stream, nor are accurate data available on recycling and capture rates for cups. Intervention would be required to obtain better data so that government and industry are better able to understand the challenge and scope for improved management of this packaging stream.^[8]

18. The objectives of reforming the UK packaging producer responsibility system are to:

• Avoid unnecessary packaging (packaging not required to protect a product, or excess packaging);
• Replace single-use packaging with reusable or refillable packaging;
• Incentivise design of packaging for recyclability;
• Increase the quantity of packaging recycled;
• Increase the quality of packaging recycled;
• Reduce litter (together with Scotland's Deposit Return Scheme, also an example of extended producer responsibility).

19. An amendment to the EU Waste Framework Directive sets out a 70% packaging recycling target for 2030.^[9] The Scottish Government and the other UK administrations are aiming to exceed this target with the UK-wide packaging EPR scheme. Minimum targets will be set to equate to an overall EPR packaging recycling target equivalent to 76% by 2030.^[10]

20. The circular economy contributes directly to the Environment and Economy outcomes under the National Performance Framework. Directly applicable National Indicators include:^[11]

• Carbon footprint.
• Natural capital.
• Greenhouse gas emissions.
• Waste generated.
• Clean seas.
• Scotland's reputation.
• Perception of local area.
• Condition of protected nature sites.

21. Resource use and waste generated are recognised as key sources of greenhouse gas generation, and the Scottish Government reports on progress against both territorial and consumption emissions. The reform of UK packaging EPR policy will contribute to objectives set out in the Climate Change (Scotland) Act 2009,^[12] as amended by the Climate Change (Emissions Reduction Targets) (Scotland) Act 2019; ^[13] and the Climate Change Plan: Third report on proposals and policies 2018-2032 (RPP 3).^[14] The legislation establishes a target of achieving net-zero emissions by 2045, while RPP 3 sets out plans to decarbonise the economy in the period to 2032. An update to RPP 3 (Update to the climate change plan 2018-2032), which set out the importance of a green recovery from the pandemic, was published in 2020.^[15]

22. In 2015, the Scottish Government signed up to support the United Nations Sustainable Development Goals. 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. An enhanced packaging EPR policy will have a positive impact on a number of these goals, most explicitly Goal 12: Responsible Consumption and Production.^[16]

23. Scotland is transitioning to a circular economy. In February 2016, Making things last: A circular economy strategy for Scotland was published.^[17] The Scottish Government has completed consultations on a Circular Economy Bill and a Waste Route Map. We will bring forward the bill, which will establish the legislative framework to support Scotland's transition to a zero waste and circular economy, significantly increase reuse and recycling rates, and modernise and improve waste and recycling services, before summer recess 2023. The Route Map will also be published in 2023 and will set out how we intend to deliver our system-wide, comprehensive vision for Scotland's circular economy, including product stewardship.

24. The Scottish Government implemented Article 5 of the EU Single-Use Plastics Directive (SUPD) on 1 June 2022. The regulations introduced market restrictions for single-use plastic cutlery, plates, beverage stirrers, straws and balloon sticks as well as single-use food containers and cups made of expanded polystyrene

25. Scotland's Deposit Return Scheme (DRS) will be implemented from 16 August 2023.^[18] Deposit return schemes are examples of extended producer responsibility and Scotland's DRS for drinks containers will be complementary to packaging EPR.