Producer responsibilty and electrical waste: a case of deja vu?
With the impending WEEE Directive have come strong arguments for adopting a consistent approach across all producer responsibility-based legislation. The packaging regime, however, has given rise to a tension between businesses with obligations and those who issue recovery notes. Matt Townsend, senior associate in the Environmental Law Group of Allen & Overy, on picking the best bits.The implementation of the European Commission's Integrated Product Policy continues apace. At the beginning of June the Commission agreed a common position text of the Waste Electrical and Electronic Equipment (WEEE) Directive. The Directive imposes tough re-use and recycling targets on producers of electrical equipment and potentially onerous take-back obligations on distributors.
The central obligations imposed by the Directive fall on 'producers'. This will not only cover manufacturers but also those who resell, under their own brand, equipment produced by other suppliers, together with those who import or export equipment into a European Member State.
At present, it has been left to Member States to allocate specific levels of responsibility between these three categories of producer, which lends itself to establishing a chain of responsibility with apportioned obligations as seen in the packaging regime. In addition, one of the issues which needs clarification is the extent of the obligations to be imposed on manufacturers of component parts of equipment.
The Directive also imposes take-back obligations on distributors of electrical equipment. Whilst this is primarily intended to cover retailers, the definition is wide and has the potential to include a number of sectors which are far removed from waste management activities and for which compliance will be relatively expensive, such as lease or asset financiers.
Businesses should ensure that their views are fully heard on the issue of take-back as it may turn out to be one of the more costly aspects of the new regime. Many of those sectors affected may, for instance, have to train staff and implement environmental health and safety plans to handle the waste equipment delivered to them.
How the different obligations will interrelate also remains to be settled as businesses may be faced with multiple recovery and take-back obligations if they are deemed to be a producer - perhaps as a manufacturer and exporter - or distributor.
The Directive requires the separate collection of four kilograms of WEEE from private households per person per year. At present this target needs to be achieved within 36 months of the Directive coming into force. Most separately collected WEEE will have to be treated prior to its re-use. The responsibility for carrying out the treatment falls on producers and, again, could be one of the more expensive aspects of the new regime. It presumes that producers have the facilities and expertise to undertake these types of operations or will simply absorb the costs of paying someone else to do it.
Earlier drafts of the WEEE Directive included proposals to limit the use of certain hazardous substances in new equipment. These proposals have now been split out and a separate directive prepared, which is progressing alongside the WEEE Directive. This directive would require Member States to ensure that, by January 2007, no new electrical equipment is placed on the market containing substances such as mercury, lead and cadmium, subject to a number of exemptions.
The central theme of the Directive is to increase the recovery and recycling of electrical waste and this is reflected in ambitious targets. There may still be some way to go before the targets are finally settled but Member States need to ensure they are realistic. Producers will be required to meet these targets within forty-six months of the Directive coming into force.
The particular targets depend upon the type of equipment concerned. In particular:
- 80 per cent by average weight of large household appliances must be recovered, with a minimum of 75 per cent by average weight to be re-used and recycled;
- 75 per cent by average weight of IT, telecommunications and consumer equipment must be recovered with a minimum of 65 per cent by average weight to be re-used and recycled;
- 70 per cent by average weight of the other categories of WEEE covered by the Directive must be recovered with a minimum of 50 per cent by average weight to be re-used and recycled; and
- for gas discharge lamps the rate of reuse and recycling should be a minimum of 80 per cent.
Clearly, a number of factors will influence how achievable these targets are for the UK. Industry will wish to avoid the adjustment of domestic targets as witnessed in the packaging regime when it became clear that the UK would fall short of the Directive targets.
In bearing the costs of meeting these targets, equipment producers are permitted to comply individually or through collective schemes. This raises the possibility of a collective industry approach to meeting the obligations as witnessed for the packaging regulations.
The scope for a viable collective approach will be clearer once the DTI indicates whether it proposes to go down the same road as was taken to implement the packaging waste directive where a system of shared responsibility and tradeable notes was adopted. Clearly, existing packaging waste compliance schemes are regarding the WEEE Directive as an opportunity to increase the scope of their existing activities.
One of the most contentious issues arising from these proposals is the potential costs of managing equipment which was on the market prior to the Directive coming into force, termed 'historical WEEE'. The major concern has been the uncertain cost burdens industry may face in relation to equipment which has not been designed to be recovered or recycled, and how those costs are to be allocated between producers.
The Directive states that financial responsibility for historical WEEE shall be "provided by one or more systems to which all producers, existing on the market when the respective costs occur, contribute proportionately". It goes on to state that the costs of managing historical WEEE from producers which are no longer present on the market or which can no longer be identified - an important aspect - shall also be financed by producers existing at the time the costs arise on a proportionate basis.
In short, this means that producers will have to pay for 'orphan WEEE', the costs of which may be significant. The Directive also recognises that financing may be fulfilled individually or through collective schemes and possibly through a visible fee on goods, provided it is compatible with the internal market rules. This will need to be assessed by each Member State and raises the possibility of a number of different approaches throughout the EU.
A separate question arises as to how these costs should be dealt with by businesses affected. For instance, should they be treated as a contingent liability for which a provision in the company's accounts needs to be made? Given the uncertainties surrounding the extent of these costs, there may be a role for insurance in order to cover a certain level of risk arising from historical WEEE or to take these anticipated costs off the balance sheet.
In the UK's packaging waste regime a system has been developed whereby producers comply with their obligations by acquiring packaging waste recovery notes or PRNs. These are tradeable notes issued by an accredited reprocessor carrying out the recovery and recycling operations which state that a specified tonnage of packaging waste has been delivered to the reprocessor for recovery or recycling.
Importantly, this system means that companies with obligations do not themselves have to carry out any reprocessing or actually deliver their packaging waste to a reprocessor. They can simply pay for the correct tonnage of PRNs to discharge their obligations. This system addresses the fact that most producers with obligations do not have the facilities to reprocess packaging waste.
For many in the waste industry, the preferred approach to implementing the WEEE Directive would be a similar collective system. There are certainly strong arguments for adopting a consistent approach to all producer responsibility- based legislation. However, in the packaging regime the approach taken has given rise to a tension between businesses with obligations and those who issue PRNs which needs to be carefully considered before going down the same road.
Under the PRN regime reprocessors are urged to plough back the proceeds of PRN sales into enhancing their capacity. It is, therefore, clearly better for them if the price of PRNs stays high. Producers, on the other hand, wish to keep their compliance costs to a minimum and are keen to see the price of PRNs as low as possible. If this problem is to be avoided, any market-based system will need to balance the relationship between those with obligations and reprocessors.
Once finalised, the WEEE Directive is going to result in significant changes for a number of sectors. The extent of these changes should not be underestimated. Whilst the Directive is unlikely to be adopted before June 2002 at the earliest, industry will have a relatively short time in which to start complying with its requirements.
Whilst there remain opportunities to influence how these proposals develop,
the fact that the Directive has now reached Common Position stage means that
these opportunities will be at national level as Member States start to develop
frameworks for implementation. In so doing it is important that lessons are
learnt from similar regimes which have sought to implement a market-based solution
to producer responsibility obligations.