A recently released report to British Columbia Ministry of the Environment, Competition under Extended Producer Responsibility in British Columbia, Regulating for Environmental Effectiveness and Economic Efficiency, is the latest, and perhaps most thorough, assessment of the importance of economic actors at each stage in a reverse supply chain for collecting and processing materials being free to compete or collaborate in achieving environmental and market outcomes under EPR.
The Limits of Recycling Monopsonies
The report highlights some, though by no means all, of the market distortions and inefficiencies that may result from the waste diversion monopsonies (and their government-approved stewardship plans) created to engender recycling activities for common product wastes such as packaging, batteries, tires, oils/paints, etc. The market distortions cited include:
– blocking new market entrants through abuse of its dominant position;
– relying upon point-of-sale eco fee charges, thereby removing producers from obligations for better designed-for-environment products;
– procurement practices which adversely impact certain service providers (and typically create overall market uncertainty in the market);
– restricting possible secondary market competition with producer’s primary products;
– effective (or at least perceived as in the case of British Columbia) transfer of liability for environmental outcomes from the producers to the monopsony, which, in turn, shields producers from much of the risk.
In short, the report maintains, in principle, that “policies that restrict, or provide market participants with incentives to lessen economic freedom (i.e. lessen competition or thwart emergent collaboration) also result in inefficiency”.
But How Much Producer Freedom is Best For EPR Packaging?
Interestingly, the report describes a regulatory approach that results in more, but not necessarily complete producer freedom in achieving environmental and market ends under EPR, at least for packaging.
The report describes a ‘natural monopoly’ created for the collection of packaging arising from a policy decision to require a common “curbside” collection for a given province and describes an approach that allows producer responsibility organizations (PROs) to share the common collection system in order to run competing reverse supply chains for processing collected materials.
Urges Opt-Out, Not Opt-(Back)-In
Where producers are made individually responsible for packaging resource recovery – as is the case in the Province of Ontario under the Resource Recovery and Circular Economy Act 2016 – they should be free to organize themselves in the most efficient manner to meet their regulatory obligations. For example, while there may be one producer responsibility organization delivering municipal packaging collection producers should remain free to establish parallel collection systems that complement curbside collection.
Producers May Soon Seek Whole Product EPR Solutions
The EPR approach favoured in the report is specific to the existing British Columbia law and likely represents tangible, incremental improvements to the province’s packaging laws. What is also clear to the authors is the coming push by producers for harmonization of their EPR obligations, particularly once some of those responsibilities have transitioned into true circular economy legal obligations under full individual producer responsibility.
As these laws grow, the patchwork of regulation across waste streams and jurisdictions will reasonably compel many producers to seek harmonization strategies focused upon their entire product end-of-life obligations and not merely its packaging. The solution to such concerns may well be industry-segmented, and not waste stream-focused PROs, where all of a producer’s resource recovery can be managed by one organization.
For further information, please contact Jonathan Cocker: