Unwrapping the packaging regs

The Producer Responsibility Obligations (packaging waste) Regulations 1997 were passed into UK law following the 1994 EU’s Packaging and Packaging Waste Directive. The regulations place a legal requirement on UK businesses of a certain size to recover and recycle packaging to meet the UK’s packaging recycling targets.

Around 9m tonnes of packaging are produced in the UK each year. To address this, the regulations place an obligation to meet recycling targets on companies or groups that have a turnover exceeding £2m and have handled over 50t of packaging material in the previous year.

Sharing the burden

The regulations are based on the concept of shared producer responsibility, to ensure that the burden for recycling is shared between all businesses in the packaging chain.

Each company’s obligation is calculated from three factors: the volume of packaging it handled in the previous year; the activity the company performs; and the UK’s recovery and recycling targets.

Businesses may recycle their own packaging, or ensure that an amount of packaging waste equivalent to their obligation has been recovered and recycled, usually by joining a compliance scheme.

Companies must register with the Environment Agency or a compliance scheme, pay a fee, and provide evidence of payment for the recovery and recycling of a specified proportion of packaging waste each year.

This is achieved by purchasing packaging waste recovery notes (PRNs). A PRN is issued by an accredited reprocessor, and represents a certain tonnage of recycled material. Effectively, PRNs are a subsidy paid for by industry to recyclers, in an attempt to make what was previously an uneconomic activity – recovering and recycling packaging materials – more feasible.

Recycling a material for which there is limited demand is unattractive to commercial recovery and recycling operations, leading to a dearth of PRNs, which will therefore become more valuable to the companies required to obtain them to comply with the packaging regulations.

But when the price for a recycled commodity increases, and recyclers ramp up their activities in response, the availability of PRNs increases, reducing their value.

However, the material-specific requirement and the overall tonnage targets should act as a dampener on wild fluctuations as the value of a PRN of an individual material is not completely dependent on the price of the commodity, but also on general PRN availability.

To facilitate the market in PRNs; trading exchanges, several internet-based, have been launched. Companies such as the Environment Exchange (www.t2e.co.uk) provide an electronic trading facility for PRNS, recyclable commodities themselves and futures contracts.

Practical problems

But while the system works in theory, simply by mimicking a natural market, the road so far has been rocky. The UK failed to meet its targets in 2001 and an investigation was launched this year into accusations that PRNs had been issued inappropriately.

The investigation found “no inappropriate operations of the kind that might warrant criminal proceedings”, but that figures for the recycling of waste wood had been hugely overestimated in 2002, leading to a reduction in the stated amount by 76,400t.

But imperfect as the system may be, it remains in full force, and the Environment Agency, which polices the regulations, is currently targeting companies that have failed to register.

There have been a number of prosecutions and fines are on the rise. Champagne producer Laurent-Perrier recently paid £14,000 after failing to recover and recycle its packaging waste and failing to register.

The Agency has estimated that 450-650 businesses have failed to register and compliance schemes such as WESpack have suggested that the number could be significantly higher. With the regulator on the warpath, those who have ducked their responsibilities through ignorance or confusion can no longer afford to do so.