Single-Use Disposable Beverage Cups Charge: Partial Business and Regulatory Impact Assessment

1. Background

A priority in a more circular economy is to avoid unnecessary waste and use fewer resources. In recent years, there has been a significant increase in the use of single-use disposable beverage cups, and it is estimated that 388.7 million single-use disposable beverage cups were placed on the market in Scotland in 2021-22. This equates to 71 single-use disposable beverage cups per capita per year one of the highest compared to nations in the European Union^[1]. It is estimated that around 62% were used for hot beverages and 38% for cold beverages.

Single-use disposable beverage cups are emblematic of our throwaway culture that does not value materials. The circular economy aims to keep materials in circulation as long as possible in line with the waste hierarchy^[2], with waste prevention and reuse favoured over recycling and landfill. As there are reusable alternatives to single-use disposable beverage cups, their consumption and inevitable waste is entirely avoidable. Therefore, action on their consumption will serve to encourage wider behaviour change related to single-use items and the throwaway culture.

Many single-use disposable beverage cups are littered or placed in residual waste streams. When improperly disposed of, these containers can damage terrestrial or marine ecosystems, and impose direct and indirect costs on society due to litter clean-up costs and the visual disamenity of litter, respectively. The combination of their high consumption numbers, the avoidable waste, and the ecosystem and social impacts of littering and improper disposal combine to make a compelling case to reduce their consumption.

The Circular Economy (Scotland) Bill, passed in July 2024, gives Scottish Ministers new powers to require suppliers of single-use items to charge a minimum amount for such items, through the introduction of a new section 87A into the Climate Change (Scotland) Act 2009^[3], with the policy aim of reducing consumption and therefore reducing the environmental harm caused^[4]. The Scottish Government intends that an early use of such powers will be to introduce a minimum charge on single-use disposable beverage cups.

This approach aligns with the Scottish Government’s commitment to keep pace with or exceed the EU Directive on single-use plastics (Single-Use Plastics (SUP) Directive - Directive (EU) 2019/904) where able to do so and in a manner that contributes towards maintaining and advancing standards^[5]. Article 4 (consumption reduction) of the Directive requires necessary measures to be taken to achieve an ambitious and sustained reduction in the consumption of single-use plastic cups for beverages (and food containers).

Under the Environmental Protection (Single-use Plastic Products) (Scotland) Regulations 2021 a ban on some of the most problematic items, including single-use cups made of expanded polystyrene (EPS), came into force in Scotland in June 2022.

To support the development of a single-use disposable beverage cups charge the Scottish Government established the Single-Use Disposable Cups Charge Advisory Group to provide advice and expertise on development of a minimum charge on single-use disposable beverage cups^[6]. The Group undertook further stakeholder engagement to gain more insight into key issues and commissioned a research paper ‘Consumption of Single-use Disposable Beverage Cups in Scotland'^[7]. The paper was published in June 2023 and lays out the single-use disposable beverage cup usage in Scotland, potential impact of a charge as well as international examples of alternative reusable cup schemes.

This builds on the work of the Expert Panel on Environmental Charging and Other Measures (EPECOM) which reported on single-use disposable beverage cups in 2019^[8]. The Panel concluded that:

“Environmental charges, notably price-based interventions, have been shown to be effective at reducing consumption and should be considered in tandem with other preventative measures. The Panel believes that a charge is more effective at reducing consumption and increasing reusable cup use.”^[9]

Loss aversion theory shows that individuals have a higher sensitivity to potential losses than to gains^[10]. This would mean charging for products has a stronger impact on behaviour change than offering a discount. An example can be seen in the single use carrier bag charge, which has resulted in significant decreases in single use carrier bag usage in all parts of the UK where it has been implemented. In Scotland, an 80% drop was recorded after the first year of the charge^[11].

The market in Scotland for single-use disposable beverage cups encompasses a wide variety of business types, beverage products, and consumer uses. Using Standard Industrial Classification (SIC) codes, the main sectors in scope are:

• 47: Retail trade, except of motor vehicles and motorcycles; and
• 55 to 56: Accommodation and food service activities.

Within each sector shown below in Table 1 is a diverse range of businesses and single-use disposable beverage cup products. It is not possible to distinguish from this data in Table 1 between businesses which sell single-use disposable beverage cups and those which do not, and in what proportion. Nevertheless, an understanding of the potential market is crucial for the final BRIA to assess impact.

It can however be reasonably assumed that there will be certain sectors which rely on single-use disposable beverage cups more than others, such as takeaway restaurants and food shops. The trends of single-use disposable beverage cups within in-scope businesses are discussed below.

There is potentially a large cross-section of Scottish businesses that provide beverages in single-use disposable beverage cups in some capacity. Care must therefore be taken to ensure that only the most appropriate businesses and employees are included in the analysis of the potential impacts of implementing a charge. For example, hospitality businesses may depend on the sale of beverages for a large portion of their revenue.

Other businesses which provide beverages in single-use disposable beverage cups, such as train operators, may have a much less direct connection to such sales in proportion of their total income but will be impacted by the different approaches to the policy aim of reducing the use of single-use disposable beverage cups when travelling across borders between Scotland, England and Wales. As such, these other businesses are not included in this analysis, as the above list (see Table 1) will likely capture the majority of the single-use disposable cup market in Scotland. Including additional sectors is likely to capture a dwindling number of single-use disposable beverage cups in circulation, whilst inflating the number of businesses and employees to unrepresentative levels of the market.

In total, based on the NOMIS data above, the potential number of affected businesses and employees account for 10.9% and 12.7% of the Scottish totals respectively in 2022^[13]. Within this broad grouping taken from NOMIS data from the Business Register and Employment Survey (BRES) and UK Business Counts, there is a similarly broad range of single-use disposable beverage cups which are in scope of the regulation being placed on the market, as shown below in Table 2. These are outlined in the 2022 report ‘Consumption of Single-use Disposable Beverage Cups in Scotland’^[14].

Non fibre composite single-use cups

Fibre composite single-use cups

There has been a noticeable shift in drinks consumption in Scotland in recent years, with the COVID-19 lockdowns being a contributing factor, among others, to these shifts in behaviours and market trends. A 2022 market study by Kantar for Food Standards Scotland highlights the broad trends from 2019 (pre-pandemic) until recently^[15]. In 2021, the out of home (OOH) (all food and drink consumed outside the home, and from takeaways consumed inside and outside the home) market in Scotland increased compared to 2020 but was still lower than 2019 levels. The average number of trips consumers made to OOH premises decreased by 30% over the same period.

There is a socioeconomic disparity, with consumers from social class C2DE (skilled manual occupations, semi-killed, unskilled, and unemployed) visiting OOH premises more frequently than those from ABC1 (higher and intermediate management, professional, supervisory, junior managerial, and administrative). Those in C2DE visit quick service restaurants more frequently, with those in ABC1 visiting coffee shops, cafes, pubs, and bars more frequently.

Social grades in the UK are defined as the following^[16]:

• AB: Higher and intermediate managerial, administrative, and professional occupations;
• C1: Supervisory, clerical, and junior managerial, administrative, and professional occupations;
• C2: Skilled manual occupations; and
• DE: Semi-skilled and unskilled manual occupations; unemployed and lowest grade occupations.

The accompanying Fairer Scotland Duty Assessment discusses the issue of socioeconomic inequalities in greater detail and should be referred to for a fuller assessment of this dimension.

In 2021, quick service restaurants (e.g. McDonald’s, KFC, Burger King) were the only channel to see growth as a subsection of the wider OOH market which declined overall, representative of their ability to pivot to delivery and takeaway during the pandemic restrictions. At the same time, spend for full-service restaurants and pubs and bars reduced by 40%. Coffee remains the top food item purchased most frequently, with the top ten remaining fairly consistent over the three-year period. The number of trips made by consumers to OOH premises selling hot and cold drinks declined by 37% and 39% respectively from 2019 to 2021^[17].

The takeaway (collection/drive through) and delivery market has seen a remarkable level of growth over the pandemic years in Scotland, with an increase of 88% in 2021 compared to 2019. The concurrent growth in food technology such as restaurant apps (e.g. McDonald’s and Starbucks) and aggregators (e.g. Just Eat or Deliveroo) played a key role in the growth of this sector. For the delivery route, coffee increased its market share from 0.8% to 20.9% from 2019 to 2021, and carbonates increased from 11.6% to 19.5%. For the food collection and drive through route, coffee increased from 16.9% to 24.8% and carbonates decreased from 21.9% to 12.9%^[18].

A more recent report published by the Institute for Fiscal Studies (IFS)^[19] indicates that the rise in use of takeaways, meal deliveries, and food-on-the-go seen during the pandemic remained after restrictions were removed, with calories consumed through these OOH channels 50% above pre pandemic levels. This study analysed data up to the first quarter of 2022, before the cost-of-living crisis, meaning it is unclear how these trends have been affected by sharp rises in food prices and less disposable income.

It is difficult to disaggregate in-scope single-use disposable beverage cups from the wider market data as the data does not distinguish between product or containers but the trends within these timeframes show a clear shift in OOH consumption from full-service restaurants, pubs, and bars towards takeaway and delivery services.

It can be reasonably assumed that takeaway and delivery services will provide relatively more single-use disposable beverage cups than compared to other hospitality venues, and as such a shift towards more on-the-go single-use consumption of hot and cold drinks is evident. A shift towards more OOH consumption can be reasonably assumed to increase the use of disposable single-use disposable beverage cups in general, and the associated negative environmental externalities tied to their consumption. While restrictions were still in place in various forms throughout 2021 and the hospitality market was still recovering, this data is the most recently available on pre/post-pandemic hospitality market data trends in Scotland. As such, it should be caveated that this will not necessarily reflect the current state of the market in 2024.

The recent cost-of-living crisis has also shifted consumption habits in general. The three main forces behind this overall cost-of-living crisis are Brexit uncertainty^[20], the war in Ukraine^[21] and constrained opportunities resulting from the pandemic^[22]. As of June 2024, inflation measured by the Consumer Prices Index (CPI) is at 2% for May 2024^[23] (the latest available month of data). There has been a consistent downwards trend since the high of 11.1% in October 2022.

Spending is also constrained by relatively weak growth in regular pay, which, measured in real terms (adjusted for inflation), was 2.3% from February to April 2024^[24]. While technically above the level of current inflation, real regular pay only began to turn positive from June 2023, so many households are still recovering from the cost-of-living crisis. With regards to food and non-alcoholic beverages inflation (which includes beverages sold in single-use disposable beverage cups), that rose to 1.7% in the year to May 2024^[25]. This marks the fifteenth consecutive month of falls in food inflation, down from a high of 19.1% in March 2023^[26]. Furthermore, the rate of inflation for services (including hospitality selling beverages in single-use disposable beverage cups) was 5.7% in May 2024, down from a high of 7.4% in July 2023, but still well above pre-pandemic level of 2.5% in March to February 2020^[27].

Regarding the potential Scottish supply chain to produce single-use disposable beverage cups which would be impacted by the charge, there is little evidence to suggest that there are any domestic manufacturing activities. Single-use disposable beverage cups used within Scotland are mainly manufactured in the UK (in England and Wales), and internationally in Germany, Ireland, Taiwan, China, Cambodia, Indonesia, India, and Spain^[28]. Single-use disposable beverage cups which have recycled content are being sourced from Germany and Belgium^[29]. This evidence indicates that the international supply chain dominates sales of single-use disposable beverage cups consumed in Scotland.