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

4.0 Options

38. Alternative policy options have been considered to ensure that an EPR scheme is the correct delivery mechanism for Scotland. These options are aligned with those considered for the rest of UK and must achieve the following strategic objectives:

• 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).

39. The policy intention is to align Scotland (and the UK) with the aims of Article 8a of the amended Waste Framework Directive regarding producer responsibility, as amended by the Circular Economy Package.^[22] The alternative policy options provide additional scenarios for a potential EPR scheme. A non-regulatory option was not appraised, as the aim is to reform the existing regulatory framework.

40. The options considered are:

• Baseline. No policy change: continuation of the existing packaging producer responsibility regime in its current form, adjusted for the introduction of DRS in Scotland (and subsequently for the different DRS in England, Wales and Northern Ireland).
• Option 1. EPR scheme: reform the packaging producer responsibility system so full net costs of household packaging waste are covered by producers and introduce modulated fees on packaging and mandatory recycling labelling.
• Option 2. As Option 1 plus mandatory collection of fibre-based composite cups for recycling.

41. The UK IA sets out an analysis of the costs and benefits of these options at a UK level. The analysis does not set out specific costs for Scotland, but it does reflect the different approaches to DRS: glass included in Scotland and Wales but excluded in England and Northern Ireland.

42. Estimates of the net cost to business and Net Present Value (NPV) at a UK level are presented below. These are taken directly from the UK IA carried out by DEFRA.

43. It is assumed that all the packaging EPR options will affect the same stakeholders, including:

• Raw material manufacturers.
• Packaging designers.
• Packaging manufacturers or converters.
• Product manufacturers or pack fillers.
• Distributors.
• Retailers (food and non-food).
• Wholesalers.
• Waste management organisations; brokers; exporters.
• Reprocessors.
• Brand owners.
• Importers.
• Third sector organisations, including public interest groups.
• Scottish Government.
• Local authorities.
• Regulators.
• Consumers.

44. When calculating full net cost recovery, the value generated from sales of materials are counted as a positive income stream, and disposal costs for packaging in the residual stream as a negative. Supporting measures that require improved data on packaging materials (e.g. tonnes collected and placed on the market) and that encourage better recycling and reduced littering are also counted as costs. Management and administration costs of any compliance scheme are met by obligated businesses.

4.1 No policy change – business as usual

45. This is the baseline against which the costs and benefits of the alternative EPR scheme options are compared. The Single Use Plastics Directive has been transposed and it assumes that the Deposit Return Scheme (DRS) for Scotland is introduced in August 2023, but that there is no change in waste and recycling policy. EPR obligated producers will not be expected to pay for the costs of collecting DRS materials not returned to designated DRS collection points.

46. Owing to a small annual population decrease, a modest downward trend is expected in household (HH) and non-household municipal packaging waste.^[23] However, it is expected that there will be a shift from harder-to-recycle to more widely-recycled packaging materials due to voluntary initiatives such as the UK Plastics pact. Please refer to the UK IA for more information.^[24]

47. The UK IA notes that on-pack recycling labels (OPRLs) already have traction with consumers and are the most widely used labels on packaging in the UK.^[25] It notes that all national supermarkets are members of OPRL Ltd, which reports that 7 in 10 consumers recognise and act on its labels.^[26] Under this Option, a steady increase in the voluntary uptake of OPRL labels and other on-pack labels is assumed.

4.2 Option 1. EPR scheme: reform the packaging producer responsibility system so full net costs of household packaging waste are covered by producers and introduce modulated fees on packaging and mandatory recycling labelling.

48. This option covers household packaging and would see the requirement to pay the full net costs of managing such packaging at the post-use stage (whether placed in kerbside recycling or residual or street bins) placed on producers. It also includes the implementation of modulated fees, which is the mechanism to recover costs of post-use management from producers and reflects the costs of managing different types of packaging in order to incentivise packaging choices that lead to better circular-economy outcomes.

49. Mandatory labelling would be implemented in a manner that supports the wider approach to packaging EPR, whilst minimising additional compliance costs for businesses. The intention is to mandate UK-wide labelling of packaging to provide clear information on the recyclability of any item of packaging and to help consumers dispose of packaging waste appropriately. It is proposed that producers would label their packaging as 'Recycle' or 'Do Not Recycle', informed by the approved list of recyclable packaging materials/formats that would also be used to set modulated fees.

50. Labelling measures would be complemented by producer funding for local and national communications and education initiatives, to advise consumers on how to recycle and the consequences of making the wrong disposal choices. These costs would be included as part of full net cost payments.

51. This option would meet policy objectives in a limited way, as it would drive the increased recyclability of packaging and increased recycling of packaging waste, as well as reducing packaging as a component of residual waste. It is estimated to result in net costs to business of £1,201m and NPV of £12m at the UK level over ten years. Please refer to the UK IA for more details on the elements and expected effects of this option.

4.3 Option 2. As Option 1 plus mandatory collection of fibre-based composite cups for recycling.

52. This option is the same as Option 1 with the addition of mandatory reporting and take back obligations on retailers of filled disposable paper cups - replicating and building on current good practice within the industry.

53. Voluntary industry initiatives to increase the collection and recycling of paper cups have had a positive impact so far, but understandably a relatively small impact compared to levels of ambition. Indeed, in 2019 the UK fibre-based composite cup recycling rate was estimated at 2.8%.^[27] In addition, it is difficult to quantify the impact of voluntary measures with no mandatory reporting in place.

54. It is proposed that sellers of filled disposable cups provide collection points instore or at front of shop and arrange for the collection and recycling of these cups (the requirement will likely depend on the size of the business or store). This will increase the supply of separately collected disposable cups, which in turn could make the recycling of disposable cups (and other fibre-based composite material) more financially viable.

55. Disposable paper cups (and other fibre-based composite material) require more intensive reprocessing – when the supply of fibre-based composite material is low, reprocessors are less likely to run the more costly reprocessing operations or invest in the necessary infrastructure in the first place.

56. This will give government the data necessary to monitor recycling performance and set future recycling targets. In turn this would inform the deployment of further measures by the sector (such as collection points at transport hubs or outside office blocks) that may be necessary to increase recycling rates to meet future targets.

57. This is the preferred option, as it adds the benefits of increased recycling of fibre-based composite cups to those set out in Option 1. It meets the policy objectives. It would result in net costs to business of £1,207m and NPV of £1m at the UK level over ten years

58. Please refer to the UK IA for more details on the elements and effects of this option.

Producer data reporting requirements, and monitoring and enforcement

59. Compared to the current system, producers will be required to report data at a more granular level to inform the cost they will pay and the setting of fee rates on individual packaging types.

Producers in scope

60. Under the current packaging producer responsibility system, a producer is obligated to report data on the packaging it places on the market in a given year if it, or a group of companies it is part of, handles more than 50 tonnes of packaging materials and has a turnover of more than £2 million in that year.^[28] It must buy PRNs or PERNs to demonstrate that it has met its recycling obligations. Under packaging EPR, these "large producers" will be obligated to pay fees to cover disposal costs from 2024 onwards, in addition to purchasing PRNs/PERNs; they will have to report data six-monthly rather than annually from 2023 onwards.

61. A producer below the "large producer" threshold will have to report data on the packaging it places on the market in a given year from 2024 onwards if it, or a group of companies it is part of, handles more than 25 tonnes of packaging materials and has a turnover of more than £1 million in that year. In 2023 these "small producers" are obligated to collect these data to facilitate reporting in 2024. Small producers will remain exempt from the obligation to pay fees to cover disposal costs, or purchase PRNs or PERNs, until at least 2026, at which point this will be reviewed.

62. Table 1 below summarises producers' obligations from 2024 onwards.

63. The types of producers which will be in scope are:

• Brand owners – Businesses whose name, trademark, or other distinctive mark appears on an item of filled packaging.
• Packer/fillers – Businesses who put goods into packaging for which there is no brand owner.
• Importers – These are the producer for filled secondary or tertiary packaging they import, and for other filled packaging they import where: there is no brand owner, the brand owner is not responsible for the packaging being imported, or the brand owner is not a large producer.
• Service providers – Businesses who supply reusable packaging to a user of that packaging where the supply is made by hiring out or lending the packaging. They are the producer for all reusable packaging the first time it is supplied.
• Distributors – Businesses who sell unfilled packaging to producers who are below the large producer obligation threshold and take on the obligation for that packaging.
• Online marketplaces – Businesses registered in the UK who operate a website through which persons based outside of the UK, other than the operator, are able to offer packaging for sale in the UK.
• Sellers – Businesses in the UK who sell any filled packaging to a consumer.

Data reporting obligations

64. Organisations will be required to submit separately the weight of packaging which is likely to end up in household waste streams, and the residual amount likely to end up in non-household waste streams. That is because (subject to review in 2026-27) disposal costs will only be payable in respect of household packaging. All primary packaging or shipment packaging (see definitions below) will be assumed to be household packaging unless the producer can provide evidence that the final user of the packaging was a business which did not supply the packaging to the consumer.

65. Packaging data is separated into four main types:

• Primary – Direct contact with the product sold. Constitutes a sales unit to the final user or consumer at first point of purchase.
• Secondary – Used to group several individual sales units for selling or handling purposes.
• Tertiary – Used to group sales units or secondary packaging units together to facilitate their transport and to protect them while being transported or handled. (But does not include road, rail, ship, and air containers.)
• Shipment – Packaging for shipping single or multiple sales units which have been purchased online or by mail order to customers.

66. Under the new EPR regulations, producers will be required to report on these packaging types separately. For the household waste streams primary and shipment are the only categories required, whereas for non-household primary, secondary, shipment, and tertiary are the categories required.

67. Under the current system, producers report their placed-on-market data in broad terms. Packaging products are categorised into seven categories:

• Plastic
• Paper
• Glass
• Aluminium
• Steel
• Wood
• 'Other'

68. Reporting for 2023 will still be in these categories but once the system is more mature, producers will be required to report on material type in greater detail. While subject to change, this may include packaging dimensions, format, colour, or, for example, different types of polymers. Where a producer supplies packaging under multiple materials that would be categorised as 'other', they must report each weight separately. This will facilitate fee modulation to promote more responsible packaging design choices.

69. The current data reporting requirements provide the information necessary to assess progress on recycling targets, but they do not reflect recyclability or compatibility with waste collection infrastructure. Access to more detailed packaging data will make it easier for businesses to identify materials that are harder to recycle and make effective changes, with the potential benefit of reducing their compliance fees for making better designed packaging which is more easily recyclable.

70. Drinks containers must be reported as a separate packaging type under the new EPR regulations, but packaging that is a scheme article for the purposes of Scotland's DRS (or would be if placed on the market on or after 16 August 2023) is exempt entirely.

71. In addition to packaging waste discarded in household and non-household waste streams, data must also be submitted regarding the weight of packaging likely to end up in street bins. A full description of the range of packaging in-scope for street bin waste is available on guidance from the UK Government on producer responsibilities for packaging waste.^[29]

72. Obligated producers (other than brand owners) must also submit data on the tonnage of packaging in each category they have supplied (or, in the case of an importer, discarded) in each nation of the UK.