EPR Summit III Overview

THE FUTURE 500 | (415) 294-7775 | www.future500.org

Extended Producer Responsibility Dialogue III

Strategy for Packaging EPR Meeting Overview

Pew Charitable Trusts Washington, DC December 1, 2011


Group Vision

We envision an approach to recycling that will:

Advance energy independence while fighting climate change

Reduce overall volume of waste generated

Help free us from oil addiction

Foster innovation in packaging

Grow domestic manufacturing, creating jobs and profits

Increase domestic/local availability of

recycled material for manufacturing sector

Respond to the changing fiscal climate

Lower municipal costs and shift burden off taxpayers

Internalize environmental costs –

to privatize costs, not just subsidize them with public $


The Objective

―To implement a strategy to develop and promote model

multi-material packaging and printed paper EPR policy in

non-deposit states that will increase the volume of

recyclables collected in a more economically-efficient

manner”


Core (Policy) Principles

To be economically, politically, and environmentally viable, EPR policy needs to reflect three shared principles:

1. Internalize Costs — When pollution and waste costs are externalized, pollution and waste increases. But when the costs are internalized, businesses and consumers implement the most cost-effective means of achieving the desired outcomes.

2. Brand Owner Financing — Because brand owners make front-end design decisions, they are best positioned to pay the external costs, and have the best opportunity and incentive to reduce them.

3. Brand Owner Management — Government may set the performance standards, monitor progress and create a level playing field for EPR, but brand owners are best positioned to design and manage the program to achieve those goals.


Goals

Preliminary goals include (but not limited to):

1. Policy must meet the three core principles: cost internalization, brand-owner financing, and brand-owner management.

2. Address packaging and printed paper. Need mechanisms to build markets for recyclable materials that currently don’t have markets.

3. Achieve high rates and quality, to meet the needs of the materials sector: aluminum (75%), glass, plastic, and paper.

4. Closed loop system – keep enough volume in domestic market to serve as raw materials for new packaging.


Process

The group favors: An action-oriented process focused on implementation

‒ Potential of pilot programs or individual producer responsibility to test EPR for companies – eliminate fear of unknown

Outcomes that provide benefits to all stakeholders ‒ We must make a strong business case ‒ Sort out top-line environmental and public benefits

Draft state-specific legislation using group-produced ―standard‖ or ―model‖ bill

Focus on improving recycling systems and rates

Key barriers: Need more research to prove benefits in order to convince those on

the fence ‒ Modeling benefits and costs could aid outreach

Streamline efforts in this space to optimize gains ‒ Clarity on terminology & basics of EPR for whole group


State Overview

Data Foundation: Paul Gardner’s state analysis

▪ FOUR PRIORITY STATES IDENTIFIED: Maryland, North Carolina, Washington, Minnesota.

BEGAN W/SIX PROSPECTIVE STATES: Maryland, Minnesota, New Jersey, North Carolina, Pennsylvania, and Washington.

FILTERED TO PRIORITY STATES FOR FURTHER RESEARCH: -Pennsylvania was eliminated due to focus on fracking -New Jersey put on the back burner for now because we have a good set of states above, and there are no known local ―heavy lifters‖ interested in advancing EPR

OTHER STATES TO CONSIDER: Rhode Island and Delaware


National Strategy

Key comments from discussion: Advance state strategies while keeping in mind national goals Be mindful of working with local stakeholders: transparent process with

organic stakeholder support Push for EPR at the right time, in the right state Must be replicable in other states Proposed state legislative working group Shouldn’t take our eye off of what is happening in Vermont Lengthy discussion on Voluntary Producer Responsibility (VPR)/pilot

programs in states ‒ Could demonstrate how this would work to business ‒ Help to relationship build at the local level ‒ Bottomline: Means to an end - Pilot/VPR programs can be very

helpful, but not the purpose of this discussion.

Proposed Timeline: 2012: Education, Pilots, study-generating bills/hearings, possible

legislation 2013-2014: Legislation + State-led Campaigns 2015: Materials can begin to flow


Key Takeaways

Draft a ―model‖ or ―standard‖ bill, including definitions, and a brief white paper developing the case for EPR

EPR can reduce net disposal costs, and some of the savings will accrue to businesses – we need to minimize as much as possible burden on brand owners

Explore how we can test EPR and develop a strategic timeline

Continue to engage brand owners and other strategic stakeholders, and to seek commitments to the coalition along with funds and resources

Outreach for funds and resources

Strategic project sub-groups to report back to broader group at next meeting


Group Next Steps

1. Future 500-led team will draft a “model” bill along with fact sheets developing case for EPR to business, govt and individuals

2. Develop research agenda - Evidence of cost-savings to taxpayers from existing programs? - What combination of state laws and/or other aggressive recovery strategies

will it take to get to national 60%/70%/80% packaging recovery rates and maximize economic value

- Harmonizing of policies - Identify EPR best practice cases: Potential lessons from existing systems (esp.

Canadian) - In target states: identify system improvements needed along with likely capital

and operating costs and benefits

3. Identify issue-focused working groups: messaging, research, outreach, legislative, others? -Goals/deliverables -Participant roles and responsibilities & timeline

4. Conference call/webinar

5. Plan Dialogue IV, location TBD

6. Identify if and when to invite other strategic members


Appendix


EPR Dialogue III is the third inner-circle meeting with a wider set of stakeholder participants. The meeting was convened to

further develop:

Vision

Objective

Goals

Core Principles

EPR Legislation/Policy Platform

National Strategy

Next Steps


Group Work to Date: 2011

In-Person Meetings EPR Dialogue I – New York, 6/16 EPR Dialogue II – Atlanta, 8/24 EPR Dialogue III – DC, 12/1

Calls EPR Teleconference -3/23 Policy Webinar – 10/18 State Webinar – 10/20 ---------------------------------- Our group is unique in that we are: 1. Highly transparent 2. Goal: state legislation 3. Bottom up, not top down approach


Discussion Notes:

Policy Options for EPR Legislation


“Standard” Features

Issue 1: Producers pay 100% of EPR costs through material fees

‒ Text revision: Add ―and have management responsibility‖

‒ Explicitly incorporate net recycling costs – not just disposal.

‒ Clarify that the Packaging Recovery Organization (PRO) is not going to

own the commodity. It’s a reimbursement system.

‒ No micro-management by state gov’t – selling point.

‒ Costs vs. fees: How do we determine the net costs? -- Each material

is looked at separately (example: Ontario)

‒ Standards: Under full responsibility, the performance standards must

be met by the service provider, set by the private sector – program

design should address quality control (lower fees for cleaner

materials) while getting politics out of pricing.

‒ Boundary Definition: household versus commercial/industrial

obligations? Household typically gets more buy-in (revisit in

teleconference).


“Standard” Features

Issue 1: Producers pay 100% of EPR costs through material fees

(Cont…)

‒ Messaging: How do we sell this to companies who didn’t pay at all and

now your asking them to pay 100%? We must translate this

language into the language that will appeal to them—i.e., CONTROL is

the key.

‒ Heterogeneity: How are community values taken in to account?

‒ Markets: Many localities are worried that we are creating material to

be manufactured abroad.

‒ Long-term: Are we talking about reconfiguring how the collection

actually happens?

‒ Innovation: System must be adaptable, allowing for new materials.


“Standard” Features Issue 2: Authorize creation of a stewardship organization

‒ Discussion on one or multiple organizations

Let the producers decide (generally agreed)

Case for multiple: We don’t want to stifle innovation

Case against multiple: Extra bureaucracy, increase against free

riders, competitive systems cause difficulties, less efficient

If multiple, set basic principles up front (similar to EU)

‒ Time limits: reauthorization after a number of years.

‒ Independent Producer Responsibility: need to be able to incorporate

this.

‒ Guidelines/Timelines: Require stakeholder input at all stages

‒ Statutory versus stewardship planning organization.

‒ Harmonization: with existing systems at retailer level


“Standard” Features Issue 3: Producers internalize costs

‒ Retailers: Huge need for cost transparency

The increase in price can be seen as the transparency. Free market

principles must include life-cycle costs of product.

‒ Labeling: mandatory versus voluntary.

Retailers should retain the right to publish fees associated with EPR.

‒ Internalization: Effort of calculating the fee on every register is impossible and

retailers will flip out.

‒ Value of visible fees: tells the consumer what they are being charged for—that

generates dialogue among stakeholders.

Government officials prefer to have it invisible

‒ Concern that this becomes a regressive tax: must convince citizens how this

reduces costs they bear for municipal services

‒ Distinction between end of life fee and costs – cost is precise term.

‒ Preference for materials that are already well-recycled? Exemptions?


“Pick One” Features

Issue 1: Prohibit sale of non-compliance brands unless first

importers can be responsible for those brands (note: text

change)

‒ Easier on the retailer: should help with alliance building

‒ If no brand owner in the state, then falls to first importer

‒ Enforcement: Some sort of registration requirement

‒ Once you become a steward, you are good across the system

‒ The state agency should retain oversight responsibility

‒ Defective goods: foreign manufacturers issue

Need legal help on this—who owns waste? Commerce clause

issues/anti-trust issues. This needs to be addressed at a higher

level (teleconference agenda).

Any Constitutional issues must be addressed as well


“Pick One” Features

Issue 2: Measure recovery at curb OR measure recycling that exits the

MRFs

‒ This is a quality control issue

‒ States like California have diversion goals. If you’re diverting, you’re land

filling. We need recyclability. Collection vs. recycling?

Measure this post-Materials Recovery Facility so you know where it goes.

‒ Let the state make the recycling goal—must match state policies.

‒ Members of the TPOs are the highest payers—they are inherently interested

in improving value once parameters are set

‒ Correlation between quality and cost. In Canada, recycling rates are built in,

ie there is a defined economic incentive. Incentives built in to the fee

structure = greater recycling and quality.

‒ Definitions and terminology must be ironed out

‒ If you want industry buy in, you have to convince them that they are going

to get more, clean material.


“Pick One” Features Issue 3: State sets recycling goals by commodity OR state sets one

overall recycling goal?

‒ VT legislation has an overall goal

‒ Overall recycling goals contribute to the recycling to other things with a

better overall profile. Generates environmental benefits.

‒ Minimum/maximum recycling targets embedded in definition

‒ If you set the fees correctly, you get the recycling goals

Does this change design/what is put on the market?

‒ Commodity by commodity would be difficult for the state to set, but are

important.

‒ Fee for the things not recycled – can iron out details later.

Some products just shouldn’t be recycled

‒ Container issue—cost is drastically different from int’l and nat’l

Issue 4: Specify covered products in statute OR specify covered products at agency level

‒ What are our definitions/parameters of packaging and printed paper


Due to time constraints, these issues were not discussed in depth:

Standard Features

Issue 4: Require small payment by consortium to state to administer program – administration fee

Issue 5: Impose penalties for producers that do not participate

Optional Features

Permit anti-trust exemption among producers for EPR

Addressing public sector for stranded assets

Ban disposal of recyclables after system set up

Compensate public sector for stranded assets by grandfathering in

existing contracts at time of implementation

Require consultation process with producers & other stakeholders

Standards of service: Options 1-7 in Menu of Options handout

*These items will be discussed in smaller working groups or on a group webinar


Key Concluding Comments Good discussion and lively, constructive sharing of ideas. Very high-

level conversation.

Size of the group: -Not enough ―key players‖ – retailers and consumer package goods companies (CPGs) -Need to be transparent and open the group up to others -This is too big to be a working group -Could serve as an advisory panel

Streamline the process: Don’t reinvent the wheel -Need more expertise in the room on niche issues -State-specific shallow dives with data that does exist -Use already existing on the ground knowledge

We NEED to get to legislation. Bridging that gap between what we’re saying and what it looks like on paper

Honest discussion of where each member stands, what are their issues and what are the obstacles (Buy-in from people in the room)

Let’s not lose sight of the environmental benefits to EPR, this puts us on the offensive


Key Concluding Comments (cont.)

We need to establish a strategy: game theory political and industry obstacles, define our path going forward.

We need a timeline: model legislation in hand can motivate some laggards.

Urgent Need: messaging for business and state benefits case -States need numbers, figures, defined modeling.

Avoid over-promising to companies, allow them to be constructive participants

Action-oriented approach separates our group from others

Next stage requires more data on how EPR works in practice. This requires funding. Who will step up?

Outreach -Smaller team should splinter off and work on pitches to targeted groups: mills, manufacturers, CPGs, grocers -Must be targeted: pick a state, find the proper coalition -Also labor groups’ benefits: how do we talk to workers about the issue?


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EPR Summit III Overview