Reforming EPR: The implications for BBIA June 2019

The reform ambitions – Government & Industry “We are committed to cementing our place as a world leader in resource efficiency, so we can be the first generation to leave our environment in a better state than we inherited it.” - Michael Gove Part 1: The need for reform EPR reform is a great chance to make the system fit for our ambitions to rapidly accelerate recycling, build confidence in the system and enable the innovation we need to meet these goals. The strong ambitions from both Government and business mean fundamental change and the aim of leading the world – designing solutions for Bio-based and biodegradable that work here gives us an effective model to export around the world as legislation and ambitions rise

The challenges with reform Incentivising innovation & rapid scaling up infrastructure Keeping costs low for businesses and consumers Ensuring ease & simplification for citizens Coordination of effective strategy to avoid unintended consequences Key challenges it needs to overcome include: How to incentivise innovation and the rapid construction of infrastructure we need – including the ability to collect and process biobased and biodegradable materials How to keep costs low, so businesses and consumers do not face greater pressures than necessary at a time of general uncertainty Ensuring ease & simplification for citizens – including simplification of recycling labels and inconsistency, and making it easy and intuitive for people to do the right thing (challenge for BBIA when this can mean adding back in more polymers etc.) How to ensure coordination and effective strategy for a major overhaul, and avoid unintended consequences e.g. decreasing packaging but increasing food waste

The Government proposals Option 1: Extension of the current system – competing organisations for compliance Option 2: The whole system is managed by one non-competitive organisation ? ? ? ? Option 3: The system for household waste is managed by one non-competitive organisation and commercial waste is managed by a series of organisations Option 4: Deposit-based scheme that charges up-front deposits from businesses that can be reclaimed when evidence of recycling is shown Part 2: The options on the table There are two certainties in the reforms: ‘Polluter pays’ & ‘full net costs’ – producers will be liable to pay the full costs of disposal, including waste collection, litter collection and consumer education. The principle of ‘modulated fees’ – meaning materials judged unrecyclable or hard to recycle will face higher fees, as they cost more to deal with and have a worse overall impact on the system However the biggest question on the table is how the overall system will work, as that will dictate the success or failure overall. There are 4 options the government has provided for how the EPR system could be reformed, and two that have been suggested by industry in response. Option 1: Extension of the current system – competing organisations for compliance. Pros: Continuity, competitiveness Cons: lack of strategic coordination & oversight, may not create simplest outcome for consumers, unclear how it would incentivise infrastructure & innovation   Option 2: The whole system is managed by one non-competitive organisation Pros: fairness/impartiality, coordination to ensure simplest outcome for citizens Cons: Cost inefficiencies, complex transition, weaker potential on infrastructure since everything would have to be centrally planned – makes it inflexible, in the past led to inefficient systems Option 3: The system for household waste is managed by one non-competitive organisation and commercial waste is managed by a series of organisations Option 4: Deposit-based scheme that charges up-front deposits from businesses that can be reclaimed when evidence of recycling is shown Pros: competitive, potentially encourages new innovation Cons: Complex & untested, lacks oversight, given costs of transitioning to a new untested system, costs may not be saved overall, even though competiveness should support this ? ? ? ? ?

Industry builds Option 1: Hybrid model from Suez – mixing a Deposit based model with stronger oversight Option 6: Hybrid model from Ecosurety/Valpak – mixing a competitive system with stronger oversight ? ? ? ? ? ?  Option 5: Hybrid model from Suez – mixing a Deposit based model with stronger oversight Pros: competitive, potentially encourages new innovation, better oversight here Cons: Complex & untested, given costs of transitioning to a new untested system, costs may not be saved overall, even though competiveness should support this   Option 6: Hybrid model from Ecosurety/Valpak – mixing a competitive system with stronger oversight Pros: competitive, continuity, coordinated oversight Cons: further clarification needed on target setting & transparency

The direction of travel All businesses and governments are aiming for the following. BBIA members should demonstrate how they fit this context. 1. Minimises waste – packaging and product 2. Is 100% recyclable 3. Is 100% recycled Part 3: The implications for the Bio-based and Biodegradable Industry Association Though the options have not yet been decided on, a common challenge we have seen that needs to be raised frequently is this need to facilitate rapid innovation and infrastructure building – which is why we see more potential in the hybrid models proposed, and significant industry opinion is gathering around this. This is particularly important for BBIA as there needs to be space for your innovative products to demonstrate their value and be included in the system, not just be locked out because they weren’t around when the system was designed.   So specific actions for BBIA include fitting with the direction of travel: Everything must have a clear path to being recycled or composted, not just a technical feasibility: If it is bio-based, ensure that it can fit within an existing polymer stream e.g. bio-based PET, not bio-based polystyrene. If it is biodegradable, focus on ensuring there is a path to collection and composting – if customers get over-excited and buy a product they and their consumers cannot compost, it will damage faith in the entire recycling effort Coordinated targets and policies are increasingly important: Ensure you have a clear and strong lifecycle analysis story to prove that it is a more effective solution – the government will be setting modulated fees based on recyclability – if you have a strong carbon story that helps meet the new net zero goals, you will have a stronger chance of securing lower fees and better infrastructure access 4. Maximises recycled content

Where do bio-based & compostables fit? 1. Minimises waste – opportunity to design packaging to reduce product waste Is 100% recyclable – need to demonstrate recyclability, biobased polymers need to be recyclable 2. 3. Is 100% recycled – ensure the infrastructure grows to recycle your material. Compostables could increase the recycling rates on contaminated food packaging (both food & packaging) Part 3: The implications for the Bio-based and Biodegradable Industry Association Though the options have not yet been decided on, a common challenge we have seen that needs to be raised frequently is this need to facilitate rapid innovation and infrastructure building – which is why we see more potential in the hybrid models proposed, and significant industry opinion is gathering around this. This is particularly important for BBIA as there needs to be space for your innovative products to demonstrate their value and be included in the system, not just be locked out because they weren’t around when the system was designed.   So specific actions for BBIA include fitting with the direction of travel: Everything must have a clear path to being recycled or composted, not just a technical feasibility: If it is bio-based, ensure that it can fit within an existing polymer stream e.g. bio-based PET, not bio-based polystyrene. If it is biodegradable, focus on ensuring there is a path to collection and composting – if customers get over-excited and buy a product they and their consumers cannot compost, it will damage faith in the entire recycling effort Coordinated targets and policies are increasingly important: Ensure you have a clear and strong lifecycle analysis story to prove that it is a more effective solution – the government will be setting modulated fees based on recyclability – if you have a strong carbon story that helps meet the new net zero goals, you will have a stronger chance of securing lower fees and better infrastructure access 4. Maximises recycled content – remains largest challenge