PUTTING THE CART BEFORE THE HORSE: WHY YOUR JURISDICTION IS NOT READY FOR EPR LEGISLATION

By: Dr. Calvin Lakhan (Faculty of Environmental Studies and Urban Change)

Momentum behind extended producer responsibility for packaging waste has increased markedly in the past year, with many jurisdictions viewing EPR legislation as an inevitability – the issue is seen as not a matter of if, but when. In the past several months, packaging stakeholder groups such as AMERIPEN announced a new policy position which expresses support for state level producer responsibility legislation, a marked shift from what the organization has historically advocated for.

Increasingly, a diverse range of stakeholders including local governments, packaging producers, waste service providers etc. are recognizing the role that producer responsibility can play in promoting recycling and a sustainable waste management system.  Given the conceptual premise of EPR, ensuring that producers who make a product, ultimately bear the financial and/or physical responsibility for managing it at end of life, it is easy to see why EPR is being championed.

However, the adoption of EPR is not without its challenges. While there is a groundswell of support in favor of EPR legislation with many jurisdictions looking to fast track its adoption, it is imperative that we press pause and take the time to understand the pre-requisites for effective EPR implementation.

2.0 Where’s the data?

For the better part of ten years, I have been involved in conversations surrounding EPR with a variety of stakeholders at various levels. Some were strongly in favor of EPR, while others thought it would be the death knell to already struggling industries, but the common thread across these conversations was data, or more specifically “the lack of it”.

Data remains the bedrock of any effective policy – the more data you have, the better informed you are. In many ways, “good data” is a non-negotiable pre-requisite, as it is required to understand the size, scale and scope of the issue. However, data for the waste management sector, particularly surrounding printed paper and packaging, is sparse bordering on non-existent, which makes the fervent push to adopt EPR all the more worrying.

There is a significant disconnect between what policy makers think is a realistic and feasible timeline for EPR, and what is actually possible given the state of sector specific data and overall market conditions. In fact, one can make a fairly compelling argument that advocates of EPR policy fail to understand or appreciate the complexity of what adopting EPR actually entails. In the dogged pursuit of railroading EPR legislation through, they are risking implementing broken and half-baked policies that will ultimately reveal themselves to be neither economically tenable nor environmentally sustainable.

In this article, I will walk through what data is actually required to implement EPR legislation and whether or not we have access to this information. To reiterate, I am *not* an opponent of extended producer responsibility as a concept, but I am deeply concerned about how it is being implemented and what policy makers think they are going to achieve.

2.1 State of data: We don’t have much

In 2019, a report published by Deloitte found that Canada was only recycling 9% of our plastics. This figure was splashed across the headlines of major media outlets and the public was outraged that we were doing so badly – after all, Canadians pride ourselves on being environmentally conscious and engaged. During this time, a number of reporters had reached out to the university and asked for my comment, to which I replied “we have no idea how much we are recycling – 9% is at best an educated guess, or at worst, completely made up”. I will spare you the details of what followed (although I will say that there were many raised eye brows), but I use this anecdote to describe just how little data we have, and how little policy makers know about what data we have.

For the purposes of brevity, I will try and keep this as simple as possible – we do not know how much waste is generated in a given year, for any one jurisdiction. We don’t know what actual recycling rates are, what it costs to manage (on a per material basis), where it comes from (residential or IC&I), where it goes, or what it gets turned into. In short, we don’t know very much – I know this may seem confusing for some. Many municipalities/provinces/states report out very detailed figures on residential recycling programs in their annual reports. In fact, in many of my previous articles (both academic and public) I cite very specific facts and figures, with these numbers serving as the basis for my analysis and recommendations. What we don’t tell you though is that most of these numbers are modeled estimates – outside of a handful of examples, more often than not, the numbers you see are not based on actual measurements.  In the footnotes of some reports, you may find references to “best available data”, data surrogates, data analogs and modeled estimates…. which is basically tantamount to saying “I’m trying to make a really good guess”. In some instances, you would be hard pressed to even say that it is a good guess – you would be shocked and dismayed to know just how much of waste policy is based on faulty or non-existent data.

While I can only speak to my own personal experiences, decision makers are often completely oblivious to what data exists, how to collect it and what information is needed to develop effective waste policy. Ontario, which many consider to be among best in class when it comes to data collection and reporting (with respect to residential waste programs) still suffers from numerous data gaps and a lack of consensus among stakeholders regarding the accuracy of waste sector data.

The province has had a shared producer responsibility model for packaging waste for over 18 years, and affected stakeholders still cannot agree on how much the program actually costs to operate, and who ultimately bares the responsibility for paying for it. In fact, stakeholders can’t agree on much of anything – as noted above, the province has no sense of how much waste is coming from our IC&I sector (or what IC&I diversion numbers are), how much of that waste is being managed as part of residential collection programs, or where that waste is even ending up.  In fact, the Stewardship Ontario Pay In Model (https://stewardshipontario.ca/stewards-bluebox/fees-and-payments/fee-setting-flow-chart/the-pay-in-model/) which serves as the basis for material specific costs and recovery rates for the purposes of fee setting, has been heavily criticized for its lack of accuracy (and transparency when allocating costs to individual material categories).

Both producers and municipalities have expressed significant concern that the numbers reported in the Pay in Model are not indicative of actual recycling system costs, and that the activity based costing methodology that assigns material specific costs is fundamentally flawed. This criticism ultimately lead to the development of an alternative material cost differentiation methodology that was put forward for future consideration. While I can write at length about each of these topics, the point I am trying to make is this: Even in Ontario, which has two decades of experience operating an EPR program for packaging waste, we face significant concerns about the accuracy and availability of data. The most fundamental question: “How much waste does the province generate?” is met with confusion and verbal gymnastics from policy planners who can’t seem to give a straight answer. They can’t answer, because they simply don’t know.

Why this is such a concern, is that EPR fees are premised on knowing how much material is being generated into the market, based on both material type and by brand owner. This information is required in order to properly allocate costs to obligated stewards. It is perhaps easiest to think of waste generation as being the “denominator” in the recycling rate formula – it represents the total amount of material theoretically available for recovery in a given market. However, what few people realize is that waste generation figures are an estimated number, using a combination of reported producer sales and residential waste audits. A description of Ontario’s material generation methodology can be found here: https://stewardshipontario.ca/stewards-bluebox/fees-and-payments/summary-of-changes-to-the-bbpp-steward-fee-setting-methodology/. However, I’m not convinced reading it will provide any meaningful clarity to the issue. The waste generation methodology is both convoluted and confusing, and is based on questionable waste audit data that serves as the basis for the overall generation model.

2.2 Woeful Waste Audits

Waste audits are exactly what they sound like, an audit of the composition and quantities of waste being generated by households during a fixed set out period. Waste audits are intended to capture how locality, demography, infrastructure, seasonality and time potentially affect household waste generation. A correctly conducted waste audit provides valuable insights in household waste behavior, allowing service providers to track how waste generation/recovery differs across regions, and whether programmatic or infrastructural changes have a discernable affect on household waste generation. By comparison, a poorly conducted waste audit doesn’t tell us much of anything…. except that they are both resource and time intensive.

An alarming number of waste audits that I have come across tend towards the latter, often based on a patch work of samples that were collected in a way that were neither representative of the larger jurisdiction, or did not allow for any meaningful time series analysis. In fact, one of the largest municipalities in North America was forced to discard several years of waste audit data collected for multi-residential buildings, as the methodology used to collect the data violated basic tenants of study design and statistical representation. In short, they spent a whole lot of money and time gathering data that could not be used to inform policy or make projections (at least not in any meaningful way). Further exacerbating an already bad situation is that jurisdictions do not like to share their waste audit data with others – the information is highly guarded and considered proprietary, making meaningful dialogue and collaboration to overcome methodological deficiencies all but impossible.

3.0 What data do we need?

While it is easy to be critical of legislators pushing for EPR given the paucity of data and general lack of understanding regarding what is required to implement an effective program, I thought I would close this article by providing an EPR “To Do” check list. While it would be a stretch to describe myself as any sort of EPR expert, but I have been slogging my way through the weeds of producer responsibility for the better part of a decade and have insights into what has worked, what hasn’t, and what is missing (particularly as it pertains to data)

To provide boundaries to this conversation, I am going to be examining the situation through the lens of New York State’s proposed EPR legislation for packaging waste. In many ways, New York State is on the precipice of ushering in unprecedented change for packaging legislation, and will set the tone for many jurisdictions to follow.

EPR is no magic wand or silver bullet that magically cures our waste woes – it requires careful consideration, planning, and baseline data collection to determine whether it is an appropriate solution for a given jurisdiction.

Effective EPR legislation requires clear answers to the following questions:

  • What printed paper and packaging materials does the legislation intend to cover? Does this include “packaging like” materials, which includes flexible packaging, multi-resin plastic packaging and bio-based compostable packaging? (i.e. compostable plastics). Generally speaking, EPR should look to obligate materials that are generated in sufficient quantity within a given jurisdiction and can actually be recovered given existing waste management infrastructure.
  • Do you know the quantities of obligated materials being generated and recovered in your jurisdiction? (Measured in tonnes). If so, how are these figures calculated? (Both on aggregate, and on a material specific basis)? As an example, New York State has proposed that both Polycarbonate and PVC plastics be included as an obligated material, but there are no readily available data source that give you any sense of how much of these materials are actually being generated/recovered in the state.
  • What percentage of obligated materials come from the residential sector, and what percentage of these materials come from the Industrial, Commercial and Institutional (IC&I) sector? Will obligated materials generated by the IC&I sector but managed as part of the residential sector be subject to producer responsibility fees, and if so, how will this obligation be assigned? The blurring of the line between residential and IC&I sector waste has been a significant issue in Ontario, as the province has claimed packaging waste from the IC&I sector is ending up in the residential Blue Box program. As a result, the province has suggested expanding the scope of producer responsibility legislation to include certain IC&I sectors such as schools and retirement facilities. Unfortunately, data for the IC&I sector remains largely unavailable (as is the case in most jurisdictions where IC&I generators traditionally fall outside of the purview of producer responsibility legislation).
  • How is paper and packaging waste currently being collected/sorted in your jurisdiction, and by whom? (I.e. private contractor vs. municipality). Under proposed EPR legislation, will you expect producers to assume both the operational and financial responsibility of managing the residential recycling program, or can existing collection and operational arrangements be honored? Will producers be able to negotiate new service contracts in order to seek out the lowest cost service provider?
  • What reporting requirements should be in place for waste service providers to report out on quantities of material collected, sorted and baled? Who will be responsible for overseeing data collection, and the development of a central data repository? Who will own this data, how will this data be vetted and verified, who will have access to this data and how will it be used for the purposes of determining the producer obligation?
  • At what point do you measure a material as being recycled? (i.e., baled and marketed vs. quantity of materials reprocessed into a secondary good)
  • Do you have data on material specific recycling/diversion costs? (this includes cost of collection, transport and processing/sorting)If so, how were these figures calculated?
  • What methodology is used to allocate recycling system costs to individual material types for the purposes of developing a fee schedule?
  • Do you intend to adopt an eco-modulated fee schedule? (Where fee rates are intended to incent design for the environment and prioritize environmentally preferred materials)
  • What EPR governance model will your jurisdiction use and why? (I.e. EPR schemes managed by one single Producer Responsibility Organization (PRO), EPR schemes managed by several non-competing PROs, EPR schemes managed by several competing PROS etc.). As an anecdote, in a review of 32 jurisdictions with packaging EPR legislation lead by York University, there was no clear evidence that competitive compliance schemes lead to greater cost efficiencies for obligated producers. In fact, all things being equal, the presence of a single PRO monopoly results in a statistically significant reduction in per capital recycling system costs when compared to a competitive PRO system. I highlight this specific finding as there is a general assumption among policy planners that competition leads to cost containment with respect to EPR governance.
  • How will packaging fees be collected and remitted by obligated producers? Who is responsible for fee collection and disbursement?
  • Who will be responsible for data auditing, verification and reconciliation with respect to the data being used to calculate system costs, relative share of system costs based on material type and overall program performance?
  • Will your jurisdiction implement a deminimus exemption for small producers of printed paper and packaging? If so, what threshold will you use and why?

On a material-by-material basis, information on the following elements is necessary:

  • Proportion of Overall Residential Waste Stream
  • Recovery/Recycling Rate %
  • Revenue (per tonne)
  • Gross Recycling Costs Per Tonne
  • Net Recycling Costs Per Tonne
  • Is this material accepted by most municipal recycling programs in your jurisdiction?
  • Is there available recycling and processing infrastructure to readily recycle this material? Is there end market demand for this material?*
  • How much carbon is abated when recycling one tonne of this material?*
  • What are the environmental impacts of having this material go to landfill?*

Regarding the economic impact, information on the following questions needs to be provided:

  • Do you have any data on how both producer and municipal administrative costs change in response to the adoption of EPR legislation? *
  • Do you have any data on whether the adoption of EPR legislation affects the cost of consumer packaged goods?*
  • Do you have any data on whether the adoption of EPR legislation leads to a reduction in the municipal tax base?*
  • Do you have any data to demonstrate that the adoption of EPR legislation will lead to increased recycling rates?*

I have deliberately placed an asterisk beside the last several questions because I wanted to draw attention to what I believe to be the real issue at hand and the crux of the argument both in favor and against EPR for packaging waste. Both the common claims (i.e. EPR will shift costs away from the municipal tax base) and criticisms (EPR will shift costs directly onto consumers and drive up the price of everyday goods and services) have yet to bring us anywhere closer towards a consensus. The relative paucity of studies that do exist reflect site and situation specific circumstances from other jurisdictions, and we have no way of knowing whether the experiences of one jurisdiction, can be readily transposed to another. I have personally authored three studies examining the link between EPR and the cost of consumer packaged goods, and while I have my suspicions, I cannot make any sort of declarative statement that applies to outside of Canada. Almost by necessity, each jurisdiction that is considering EPR legislation needs to do their own analysis to see what the full range of intended and unanticipated impacts of EPR may be in their jurisdictions. Given what is at stake, it is simply not good enough to point to another jurisdiction and make the assumption that the same would occur in your state.

But taking a step back for a moment, we are nowhere near the point of talking about the merits of various EPR governance schemes or the potential impact on the price of consumer packaged goods resulting from producer responsibility. We are in the very earliest stages of a complex and nuanced conversation, and jurisdictions such as New York State need to crawl before they can walk, and walk before they can run. Right now, the emphasis should be on gathering baseline data – rushing EPR legislation for packaging waste will have catastrophic consequences, many of which will be repeated across other states looking to take their cue from New York.

I think the easiest way to capture where we are at with EPR data for packaging waste is with the following anecdote taken from an email exchange I had with a frustrated producer – it’s a bit of an oversimplification, but I think it gets the point across:

“If you can’t tell me how much waste is generated and recovered in your jurisdiction, then you definitely can’t tell me what it will cost to recycle it. If you can’t tell me what it costs to recycle, then I have no idea how you are going to figure out what share of that cost is mine. It is unreasonable to ask me to pay a bill, when neither you nor I have any idea what that bill is going to be. Until someone can explain to me why this is a good idea that actually helps the environment, I think it is just another way for government to put the squeeze on business”

At this juncture, I think focusing on the politicized dimensions of producer responsibility and the merits of mechanical recycling is misguided and a waste of time. Right now, any jurisdiction that is considering the adoption of EPR legislation for packaging waste needs to focus their efforts on gathering baseline data, until we know the size, scale and scope of our waste problems, assigning physical and financial responsibility is a conversation for another day.

Paper Download