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Opinion: Is A Packaging Compliance Fee the Best Route For All?

This year has been a difficult one for the packaging industry. With calls for the introduction of a packaging compliance fee to stabilise the market, Packaging Compliance Scheme Manager, Martin Trigg-Knight, questions whether it is the best route for all.

It is fair to say that 2019 has been one of the most volatile that we have experienced in all our years working within the packaging recovery note (PRN) system. And with the verified Q2 data increasing concerns over whether the UK is at risk of failing to meet its plastic target, teamed with an increased national obligation, further calls for the introduction of a compliance fee are likely.

This year has, without doubt, been a difficult one for many in the industry, and packaging producers have faced the stark reality of the increasing cost of compliance. Many have argued that a compliance fee – an alternative to non-compliance – would provide an effective ‘stability mechanism’ that would help the UK to meet its target and reduce volatility.

However, we must not underestimate the significant changes that a compliance fee could bring for the industry, as well as unprecedented uncertainty. And we are yet to be fully convinced that it is the best route for all.

The PRN system is an important tool that enables the industry to invest in the nation’s recycling, driving the circular economy and supporting the growth of responsible packaging recycling. In theory, high prices should enable the PRN system to do the job it was designed to do, but this year’s plastic situation has clearly highlighted the need for enhancements to our PRN system. We must determine whether a compliance fee would effectively address the issues seen in 2019. For us, it continues to raise many questions.

Would a compliance fee end up increasing the cost of compliance for producers? Without knowing the result of the EPR consultations, we are concerned that producers could be faced with huge upfront fees in 2023 while at roughly the same time being billed retrospectively for a compliance fee for the previous year. It is vital that the impact of a fee is considered alongside each of the potential changes to EPR.

What are the possible impacts on the wider market and other materials, such as paper and wood? The high price of wood PRNs at the end of last year, and start of this year, directly led to increased recycling rates – in exactly the way that we would expect of the PRN system. The wood recycling industry has strongly indicated that they believe a compliance fee could de-stabilise PRN prices and this view must be recognised.

Would the introduction of a compliance fee encourage schemes and producers to “plan to fail”? We should consider the message a compliance fee sends to producers and compliance schemes, and whether there is a risk that it would leave those schemes and producers who continue to take their responsibilities seriously and comply year after year at a commercial disadvantage. If a compliance fee is ever deemed necessary by Defra, then it is extremely important to investigate what format this would take, as the effects on the current system, recycling rates, price and incentives to comply could all be extensive.

We believe that other regulatory tweaks should be explored, as some of these could yield more immediate results against price volatility without risking damage to the operation of the current system. With the current rules dictating that producers and schemes ‘must buy’, is there a mechanism to ensure a ‘must sell’ system to balance this out? We would also be keen for discussion over the feasibility of mandatory monthly reporting of data, or expiry dates on the upload of PRNs to the NPWD. These two mechanisms could help balance the system and take effect more immediately.

With the requirement on producers to pay full net costs from 2023, this year has highlighted just how vital it is for businesses to get a head start and prepare for the challenges ahead. We will continue to support our members through that process, helping them to make positive changes for their business, their consumers, and the environment. And while Defra has indicated that the introduction of a compliance fee is not an option for 2019, with the potential for a fee to cause unprecedented uncertainty, we urge careful consideration as to the best way forward for 2020, as well as consideration for the industry as a whole.

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