EXTENDED PRODUCER RESPONSIBILITY POLICY PAPER ReThink Policy Paper Series

OWMA’s Policy Position:

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Competition & Accountability: Fair, open and competitive markets for all parties including

The OWMA supports Extended Producer

service providers and stewards should be

Responsibility (EPR) as an effective means to

preserved and protected to drive efficiencies.

reduce waste; increase waste diversion; ensure the safe management of waste; and support the

•

Visible Fees: Recycling costs are a cost of doing business and should be considered in the

growth of resource markets.

price of the product, not added at the However, the government should consider the

checkout.

following criteria before pursuing this environmental instrument:

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Roles & Responsibilities: Clarity in the roles and responsibilities of each of the parties under

•

Understand the Market Before Regulating:

an EPR model is essential to ensure the system

Background information is needed in order to

functions properly.

set appropriate outcomes and standards, and to ensure proper oversight and enforcement.

dialogue between affected stakeholders should

functioning markets already exist; what other

be promoted.

interests exist; and how EPR policy will help to achieve objectives.

Enforceable Outcomes & Flexibility: EPR policy should drive outcomes, rather than process. Individual producers should have flexibility in how they achieve these outcomes. Outcomes should be quantifiable and easily measurable. In order to avoid conflict of interests and to assure achievement of outcomes, the government or a third party independent body should set enforceable outcomes and province-wide standards.

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Communication & Consultation: An on-going

The government must understand whether regulations may already apply; what competing

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Background: The term Extended Producer Responsibility (EPR) was first coined by Professor Thomas Lindhqvist in 1990. EPR is an environmental / economic policy approach in which producers of products and packaging bear responsibility for ensuring those products and packages are properly managed at the end of their life-cycle. Lindhqvist set out that EPR could include the allocation of responsibility as liability, economic (financial) responsibility, physical responsibility, informative responsibility and ownership.

OWMA — EPR POLICY PAPER — JUNE 2013

Background continued ...

Today, (extended) producer responsibility is used

dealing with their own products at end of their life

widely by governments in Canada and around the

(EOL)1 Ontario’s pharmaceutical and sharps

world as an environmental instrument for the

program2 and New York’s WEEE programs3 are

management of end-of-life products and wastes. It

types of IPR programs.

shifts responsibility upstream in the product life cycle to the producer and away from the historic tax supported responsibility of municipalities and regional waste authorities. As a policy approach, it provides incentives to producers to incorporate environmental considerations into the design of their products.

The alternative to IPR is Collective Producer Responsibility (CPR), which allocates collective financial responsibility e.g. the costs of collecting and treating mixed brand WEEE arising are shared between producers currently existing on the market, based on their current market share. Critics argue that CPR provides producers no incentive to

Two categories of extended producer responsibility

improve the design of their products in terms of

are often employed by governments – individual

repair, upgrading, reuse or recycling as any

producer responsibility and collective producer

resulting EOL cost benefits are shared between

responsibility.

producers.4 Other concerns have also been raised that CPR programs shield producers from

Under an Individual Producer Responsibility (IPR) system, producers are individually responsible

anticompetitive behaviour and cause undue disruption in the marketplace.

(financially or financially and physically) for their own products at end of life. The allocation of

There is considerable variation in the design and

individual financial responsibility to a producer for

performance of (extended) producer responsibility

his/her own products is intended to create an

(EPR) schemes in Ontario and within the country.

economic and/or commercial incentive for

The variation in these schemes is well documented

producers to adapt the design of their products for

by the Council of Ministers of the Environment

easier repair, upgrading, reuse or recycling and end

(CCME)5 and EPR Canada6.

of life treatment. It implements the polluter pays principle with respect to their products.

Many provinces have product stewardship programs not EPR programs, in which

Each producer does not have to have separate

manufacturers and importers have no direct

take-back systems within an IPR system; collective

responsibility whether as liability, economic

collection channels can still be used and this is an

(financial) responsibility, physical responsibility,

important point. The key focus is the financing

informative responsibility and ownership. This form

mechanism. In an IPR system, the costs borne by

of product stewardship programs is more in line

the producer should relate to the actual costs of

with a form of product/packaging taxation.

OWMA — EPR POLICY PAPER — JUNE 2013

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Implications

Ontario was an early adopter of EPR policy.

and targets (reduction, reuse, recycling and/or

However, the manner by which it was approached

recovery), while ensuring they are rigorously

in the Waste Diversion Act, 2002 (WDA) has been

enforced through administrative penalties. It is

problematic for all stakeholders and for the

unlikely that the Competition Act on its own

government.

will be enough to ensure fairness in the marketplace. This is especially important given

Under the WDA, functioning recycling markets

many Industry Funded Organizations will want

have been disrupted; consumers have been

to reconstitute themselves under a new regime

burdened by eco-fees in some cases unfairly;

and will potentially have a competitive

recycling targets have not been met; and program

advantage.

efficiencies questioned. Concerns with programs under the WDA are well documented. This includes, numerous reports by the Environmental Commissioner of Ontario

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and the Auditor

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General , and within government reports.

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Municipalities – Want to remove the cost of managing products and packaging once they are discarded which is seen as an unfair cost burden to communities and taxpayers. Depending on the material and how programs

Implications The majority of stakeholders involved in Ontario’s Waste Diversion Act Review generally support extended producer responsibility.12 However, there are potential implications to all the stakeholders that need consideration.

are implemented, the move to EPR can impact functioning integrated waste management systems that municipalities have built and are responsible for by law. While not an exhaustive list, the change in structure could have impacts on infrastructure investments; contracts with the private sector or public unions; illegal

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Waste Management Industry – Concerned

dumping; waste water systems; public

about how extended producer responsibility

expectations; servicing levels and local

impacts an existing and functioning

economies. These issues can be offset by

marketplace. The industry wants to ensure a

ensuring the appropriate standards and

fair, open and competitive marketplace is

outcomes are set, overseen and enforced.

preserved, while increasing properly diverted materials from disposal. This can be accomplished by the government establishing clear outcomes including environmental standards (collection, transportation and processing), service standards (accessibility) 3

OWMA — EPR POLICY PAPER — JUNE 2013

Implementation Considerations

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Consumers – Consumers currently have little

Implementation Considerations:

say in how programs are delivered. They are forced to pay fixed visible fees which they have

Government needs to carefully consider several

no control over. Under an IPR structure,

major areas when they implement:

producers would need to engage consumers

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Understand the Market Before Regulating

and provide adequate service to meet the outcomes set. Penalties or fines would be

It is essential for the government to understand the

levied if these outcomes were not met. The

market before they regulate. Background

structure allows for consumer choice and for

information is necessary in order to set appropriate

consumers to potentially impact product

outcomes and standards, and to ensure proper

design through their purchasing power and

oversight and enforcement. The government

incents efficient collection and processing

should understand whether functioning markets

schemes.

already exist; what infrastructure gaps may exist for collection and processing; what end markets

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Producers – Individual stewards would have

are available; what other regulations may already

flexibility to determine how best to meet

apply; what competing interests may exist.

environmental outcomes whether through collectives or individual programs. It also allows

These questions need to be answered to

flexibility to minimize administrative burden

understand what impediments may exist to achieve

and costs by harmonizing how they meet

both environmental and economic outcomes and

obligations across jurisdictions. Measures will

to assess whether EPR is the most effective

be necessary to ensure there are enforced consequences for failure to meet outcomes.

economic instrument to achieve these outcomes. Currently, Ontario does very little to track waste related data to support decision making.

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Ministry of the Environment – Some administrative and enforcement costs would be incurred; however, enforcement and oversight could be funded through a fee per service charged to service providers and stewards.

Some materials like end-of-life vehicles (ELV), white goods or used oil may have a value within the current marketplace, and as a result, collection, reuse and processing of these materials may be robust. For these types of materials, the problem is often the lack of common environmental standards or the lack of enforcement to that standard. EPR regulation for these materials may not be the most effective tool as it could potentially upend functioning markets with little additional benefit.

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Enforceable Outcome & Flexibility

2. Enforceable Outcomes & Flexibility

Standards: Without a common set of environmental standards for processors, collectors

Stewardship programs in Ontario have generally focused on the process of plan development, instead of the performance of programs and outcomes they achieve. Little flexibility has existed in the delivery of stewardship programs. Many have been developed and operated without operational standards or consequences for under performance. This system has not worked in Ontario. The OWMA advocates for an enforceable outcomes based approach. The government should set the outcomes including environmental standards (collection, transportation and processing), service standards (accessibility) and targets (reduction, reuse, recycling and/or recovery), administrative penalties for noncompliance and timelines. After these outcomes are set, the government should allow flexibility as

and transporters, those who have invested in operating to high environmental standards – whether operating as service providers to EPR programs or generally operating in the waste diversion service market – are put at a competitive disadvantage to those that have not made such investments but are still allowed to receive waste (and in some cases simply dispose of that waste while claiming it diverted). Other considerations should include geographic accessibility; standardization of materials; the need for separate targets for separate waste streams (ie IC&I versus residential); maintaining current service levels; minimization of material use; maximizing reuse and recyclability; acknowledgement of highest end uses and elimination of problematic wastes.

to how they are achieved. This allows business to do what they do best – innovate and compete

Enforcement: It is important for the government to underline the regulatory requirements to stewards;

Targets: Diversion targets should be set rationally but strive for continuous improvement. Best efforts should be made to ensure optimal amounts of waste reduction and diversion for a given material or product – i.e. benefits should exceed costs. Of course, waste diversion targets that are set too low and not enforced will result in low waste diversion quantities and little incentive for investment and

ensure that a level playing field exists; and have the required resources in place to oversee and enforce consistent with the regulations. Should the government require additional resources to administer the regulations it may consider introducing a system of fees to cover the costs of enforcing the regulations on producers and their service providers.

innovation in waste reduction or diversion in Ontario. Aggressive waste diversion targets are critical to increasing waste diversion and to be effective they must be enforced. 5

OWMA — EPR POLICY PAPER — JUNE 2013

Competition & Accountability

3. Competition & Accountability

This lack of accountability is not consistent with the concept and principles of EPR as it undercuts

Individual producers, operating in competition with one another, should bear full responsibility for

the incentive to drive waste reduction and environmental protection.

ensuring products and packages are properly managed at the end of their life cycle. Fair, open,

Optimal outcomes can only be assured if

and competitive markets for all parties including

accountability is set on an individual basis. This

service providers and stewards should be

ensures performance irrespective of how a steward

preserved and protected to drive efficiencies.

may choose to meet its waste diversion obligations.

Under Ontario’s current Waste Diversion Act, producers of designated materials are mandated to

Stewards under an IFO are also conferred with

combine into a collective stewardship agency,

market power as monopoly buyers of

otherwise known as an Industry Funded

environmental services. The effects of non-

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Organization (IFO).

Individual stewardship action

competition between producers and their

with regard to designated waste is prohibited until

consumers have dramatic effects on the waste

the collective approach is established.

diversion service marketplace.

By mandating this collective approach, the

In a number of cases where there were pre-existing

government limits program design variability, and

marketplace activities to divert waste, IFO-based

restricts a steward’s ability to consider options for

diversion programs simply ignored existing

waste reduction, collection and diversion of their

relationships and built new economic models that

products. The IFO instead becomes the liable party

have essentially displaced current marketplace

assuming all responsibility for stewards. These

participants and activities.14

stewards have no obligation to divert or reduce waste. Their only obligation rests with the payment of regulatory charges to the IFO.

In a functioning open marketplace, individual buyers of waste diversion services negotiate with individual sellers - service providers. Where there

Essentially stewards become disinterested parties

are many buyers and sellers of waste diversion

with little incentive under the structure to affect

services and buyers are well informed about what

economic and environmental outcomes. In

various service providers can provide, competition

addition, the government and the arms-length

among waste diversion service providers can be

oversight organization, Waste Diversion Ontario

expected to result in the lowest cost to waste

have minimal ability under the current framework

diversion service buyers. Concurrently, service

to hold the IFO accountable.

providers are given strong incentives to create new

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Competition & Accountability continued ...

and innovative services of value to buyers to stay

It is the Association’s view that EPR cannot exist

ahead of competitors.

without competitive marketplaces.

Where either waste diversion service buyers or

Ontario should follow the lead of many other

sellers combine, marketplace distortions lead to

jurisdictions including the United Kingdom,

inefficiencies. Seller monopolies raise costs to

Sweden and Australia that require competition

buyers as sellers demand higher prices.

impact assessments. The guiding principle should

Alternatively, waste service buying monopolies

be that rules and regulations do not restrict

mean buyers can pool demand and artificially

competition unless it can be demonstrated that the

depress prices eliminating the ability for service

benefits outweigh the costs, and objectives can

providers to reinvest and innovate.

only be achieved by restricting competition. The rationale is to foster competitive markets and

In either case, the outcome is less than optimal. In both cases, the solution is to ensure healthy competitive marketplaces. Monopolistic control over the marketplace hinders competition and innovation that would otherwise reduce costs and

promote innovation, which has implications for prices, welfare and economic growth. The OECD Competition Assessment Toolkit 16 provides a comprehensive approach for conducting competition impact assessments.

bring better services and products. EPR policy that ensures individual accountability IFOs also allow producers to pass fixed and visible fees (known as “eco-fees”) onto the consumer. This fixed fee involves externalizing the cost of collection, transportation, processing and administration to the consumer.15 Externalizing this cost, removes any profit motive to induce individual businesses to find ways to reduce costs. As a result, the fee operates as a governmentmandated fee on the consumer. The consumer has no choice but to pay the allotted amount and producers have no incentive to increase program efficiencies.

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and the preservation of competitive markets is being employed in other jurisdictions. The New York 17 State legislative framework for waste electronic equipment assigns accountability to individual producers operating in competition. Ontario’s Regulation 298/12, holds individual producers responsible for managing postconsumer pharmaceutical and sharps waste (i.e. unused/expired medications). While both are illustrative examples of IPR, both are lacking in other areas like standards, oversight and enforcement.

OWMA — EPR POLICY PAPER — JUNE 2013

Visible Fees

4. Visible Fees

Government or an Oversight / Enforcement Authority

The OWMA does not support visible recycling fees, instead it supports the internalization of recycling costs into products or packaging and the use of mechanisms to prohibit them. This does not mean that producers of packaging or products should not explain the cost of recycling but it should not be added at the point of sale.

Government will likely not have the resources to oversee and enforce many of the standards and overcomes set. The OWMA supports the use of alternate forms of service delivery through arm’slength bodies like Delegated Administrative Authorities (DAA), which have successfully delivered regulatory services since the mid-1990s.18

Under an EPR model, recycling is a cost of doing

These bodies operate on a fee per service structure

business. Visible fees do nothing to drive

and have a stringent accountability structure with

innovation, efficiencies or recycling. In Ontario,

the government. They should be responsible for

they have continually destabilized programs.

data management; dispute resolution; oversight of

Instead, when fees are incorporated companies are

standards, outcomes and data; enforcement

motivated and encouraged to reduce both waste

provisions; and the ability to advise government on

and costs.

regulatory provisions, new designated materials, and standards at the Minister’s request.

5. Roles & Responsibilities Producers Clarity in the roles and responsibilities of each of

Producers should be individually responsible for

the parties under an EPR model is essential to

the proper management of their materials at end

ensure the system functions properly. The OWMA

of life. They should neither be allowed to discharge

has promoted the following construct:

their responsibilities, nor liabilities to a collective.

Government The government should be responsible for designating materials under EPR; and for setting enforceable environmental standards (processing, transportation, collection), service standards (accessibility), administrative penalties, and targets

This is not to say that a collective could not help them meet outcomes. The producer should have flexibility on how to achieve outcomes within the parameters government has set. They should be required to report to the Authority and file annual reports.

based on the waste hierarchy (reduction, reuse, recycling and/or recovery).

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Roles & Responsibilites continued ...

Municipalities

All steps should be taken to ensure appropriate

Municipalities will be required to fulfill the

consultation and communication. Stability and

legislative requirements placed on them to manage

transparency are necessary in order to adequately

residential wastes. If they choose to provide

invest in the equipment and competent workforce.

servicing, they would need to meet the environmental standards set by the province.

Competing interests will always be at play and the government needs to ensure proper dispute

Service Providers

resolution mechanisms and appropriate controls

Service providers would be required to meet the

are established.

environmental standards set by the province to provide servicing.

Communication should also include standardized key performance indicators to ensure all stake-

6. Communication & Consultation

holders understand where deficiencies may be.

Not only is it important for government to understand the market, it is also important for the various stakeholders (municipalities, private sector providers, stewards, the public and retailers) when implementing and running these programs to understand where each other is coming from. Many of the issues in Ontario with stewardship programs have related to unrealistic timelines and a lack of consultation and communication between the affected stakeholders. It is important stewards understand what functioning markets may exist for the collection and processing of materials. This will allow them to make educated decisions on how best to harness this market. Evolution most often trumps revolution.

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OWMA — EPR POLICY PAPER — JUNE 2013

APPENDIX

1

IPR Working Group. Waste Electrical and Electronic Equipment (WEEE) Regulations: Individual Producer Responsibility (IPR) in a UK context. Available at http://www.bis.gov.uk/assets/biscore/business-sectors/docs/w/12-1007-waste-electrical-and-electronic-weee-regulations-individual-producer-ipr-responsibility

2

Ontario Regulation 298/12 under Ontario’s Environmental Protection Act. Available at http://www.e-laws.gov.on.ca/html/source/regs/english/2012/elaws_src_regs_r12298_e.htm

3

New York State Electronic Equipment Recycling and Reuse Act. Available at http://www.dec.ny.gov/docs/materials_minerals_pdf/ewastelaw2.pdf

4

IPR Working Group. Waste Electrical and Electronic Equipment (WEEE) Regulations: Individual Producer Responsibility (IPR) in a UK context. Available at http://www.bis.gov.uk/assets/biscore/business-sectors/docs/w/12-1007-waste-electrical-and-electronic-weee-regulations-individual-producer-ipr-responsibility

5

Canadian Council of Ministers of the Environment. Available at http://www.ccme.ca/ourwork/waste.html?category_id=128

6

EPR Canada. Available at http://www.eprcanada.ca/

7

Environment Commissioner of Ontario, 2010-2011 Annual Report. Available at http://www.eco.on.ca/uploads/Reports-Annual/2010_11/Final-English-Bookmarked-2010-AR.pdf

8

Environmental Commissioner of Ontario. Getting it Right: Paying for the Management of Household Hazardous Wastes, 2010. Available at http://www.eco.on.ca/uploads/Reports-special/2010-Eco-Fees/2010-Eco-Fees.pdf

9

Office of the Auditor General of Ontario. 2010 Annual Report - Section 3.09: Non-hazardous Waste Disposal & Diversion. Available at http://www.auditor.on.ca/en/reports_en/en10/309en10.pdf

10

Ontario Ministry of the Environment. From Waste to Worth: The Role of Waste Diversion in the Green Economy, 2009. Available at http://www.downloads.ene.gov.on.ca/envision/env_reg/er/documents/2009/WDA%20Ministers%20Report.pdf

11

Ontario Ministry of the Environment. Toward a Zero Waste Future: Review of Ontario’s Waste Diversion Act – 2008. Available at http://greenmattersfredericton.ca/en/resourcesGeneral/wda-zeroWastePaper.pdf

12

A number of Ontario’s Waste Diversion Act Review submissions are available at http://owma.org/db/newsinfo.asp?mode=vi&it=1&itemid=470

13

S.24 of the WDA mandates that WDO incorporate an IFO unless the Minister directs the use of an existing IFO. Of note, the WDA remains silent as to composition of the IFO. Nevertheless, IFOs are typically comprised of and governed by “brand owners and first importers”.

14

Notable examples include the rejected used oil material program and the approved waste electronics and electrical equipment (WEEE) and the Municipal Hazardous or Special Waste (MHSW) programs.

15

Quebec and New Brunswick have both taken direct steps remove the ability to externalize recycling fees.

16

The OECD Competition Assessment Toolkit is available at http://www.oecd.org/competition/assessment-toolkit.htm

17

New York, Environmental Conservation Law Article 27 Title 26 – Electronic Equipment Recycling and Reuse. Available at http://www.dec.ny.gov/docs/materials_minerals_pdf/ewastelaw2.pdf

18

Commission on the Reform of Ontario's Public Services, Public Services for Ontarians: A Path to Sustainability & Excellence. 2012. Available at http://www.fin.gov.on.ca/en/reformcommission/chapters/report.pdf

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