Packaging Waste Regulations (cont)
Calculating the Obligations for a Producer
For an obligated Producer their obligation for 2008 is based upon the weight of Packaging handled between 1.1.2007 and 31.12.2007.
The total obligation is the product of: Tonnage handled x Activity Obligation x National Targets
Packaging Recovery Notes (PRN’s) and Packaging Export Recovery Notes (PERN’s)
One of the obligations is for firms to “prove” that they have recovered and recycled packaging by acquiring “evidence”. The only tradeable form of evidence accepted by the Environment Agency (EA) is the PRN or PERN. This is a certificate issued by an “accredited reprocessor or exporter” in relation to a specified tonnage of packaging which they have recovered or recycled. These are issued electronically via the National Packaging Waste Database. Reprocessors can issue a PRN for any quantity and issue it to any obligated Producer or Compliance Scheme provided they have recycled sufficient material to cover the amount, and can prove this to the EA’s satisfaction.
The only way to become accredited is to set up a suitable recycling or recovery operation and then apply to the EA. Acceptable operations would include recycling, composting or incineration, provided the energy is recovered and used to provide heat or power. Land-filling or burning without recovering the energy is not acceptable. Furthermore, you can only issue PRN’s with respect to the quantity of “packaging materials” reprocessed. Therefore if you made 1000 tonnes of compost from 500 tonnes of green waste, 100 tonnes of food waste and 400 tonnes of cardboard boxes you would only be able to issue PRN’s for the 400 tonnes. PRN’s can only be issued in arrears, so you cannot issue PRN’s for material before it is accepted for recycling.
Reprocessors must pay an annual accreditation fee to the Environment Agency who will audit the individual sites to ensure the process, procedures and records are adequate to account for all PRN’s issued. They also have to account for any PRN revenue obtained and show that it is being used to increase recycling and recovery operations. The PRN’s can be to whichever Producer or Compliance Scheme they choose, they can be given away or sold for whatever someone is willing to pay.
The “value” of PRN’s has fluctuated since their introduction in early 1998. Because the trade in PRN’s is left to the free market, the prices vary over time, between different suppliers and customers and between different materials. The main buyers are the various Compliance Schemes which purchase PRN’s on behalf of their members. Between them they account for about 80% of the total market and Valpak is the largest of these. The remaining 20% are companies that have registered individually and retain the responsibility to obtain PRN’s themselves.
Historically the most expensive PRN’s have been Recycled Plastic, Aluminium and Glass, followed by Steel, Paper/Cardboard and Timber. Recovery has the lowest value as it can be substituted with any of the other materials if they are cheaper. It is obviously impractical to compost any of the above materials except paper / cardboard for which you would be able to issue Recycled Paper PRN’s.
As a very crude guide to prices £ per tonne of obligation:
Source: The Environment Exchange.
For current prices please contact Key Waste Solutions
What the above prices reflect are the extreme prices each year, the large price variations are due to a variety of reasons.
In 1998 the packaging quantities and recycling rates were unknown and initial guesstimates were pessimistic, so prices started artificially high and reduced as data became available.
Targets were increased each year, sometimes above the actual recycling rates achieved in the previous year so prices started high but when recyclers increased capacity in response to demand, a new equilibrium was achieved and prices fell.
When PRN prices were high there were cases of fraud (issuing more PRNs than the material actually recycled) which distorted the supply / demand balance and affected prices.
As commodity and raw material prices soared the value of cardboard, steel, aluminium and plastic rose which encouraged more recycling and the PRN revenue became relatively insignificant part of the overall value. This is particularly relevant where packaging is exported to the Far East.
When the EA introduced registration fees for reprocessors and exporters some businesses could not or did not bother to register. The EA has required increasing evidence and audit trails from overseas reprocessors to ensure “equivalence” and this may be difficult to obtain, so the reported recycling rates understate actual rates.
Some packaging is calculated using agreed protocols (eg the proportion of packaging in mixed municipal waste sent to a waste-to-energy plant) and these may be changed which affects the number of PRNs that can be issued.
Future developments
The original EU targets were set for 2001, since then the targets have been progressively increased with different material specific Recycling targets for different material types, the purpose being to encourage continued growth in recycling and to encourage recycling rather than Waste to Energy. There are also many opponents of the PRN system who can cite numerous examples of the legislation aims and actual impact being at odds with each other. We think it unlikely that the whole PRN system will ever be scrapped as it has taken 10 years to evolve and could not be replaced without a further Act of Parliament which is not even under discussion. Alternative systems introduced by other EU countries are in general more expensive, have their own problems and so are not necessarily any better. It is likely that the working system in place will be continually refined with ever increasing targets, tighter enforcement of existing legislation, more onerous “interpretations” by the EA and DEFRA, demands for greater data accuracy and more bureaucracy surrounding annual registrations, site audits and Operational Plans.
Conclusion
The easiest way to describe the PWR is to say that Government legislation requires British businesses in the packaging chain to recycle a proportion of the Packaging they handle. They must either do this themselves or pay others to do it on their behalf. It has been left to market forces to determine how much they pay others and it is immaterial to the Government whether they do this directly or via a Compliance Scheme. The whole process is licensed, monitored and policed by the EA whose costs are paid for by the obligated companies and reprocessors / exporters in the form of annual registration fees. The aim is to meet National Targets set by the EU in 1994, if the UK fails to meet these targets then they could be fined by the EU.
Whilst the PWR legislation is unquestionably an additional financial and administrative burden on British business it was introduced to meet Environmental targets and is unique in that the “tax” is paid by industry to industry and not the Government (except that they benefit from the VAT).
In addition to the environmental aims it may have some beneficial side effects as it forces businesses to review the source, destination, design and quantity of packaging they use. Re-using second hand packaging or reducing overall packaging weights would reduce their obligations as well as packaging purchase costs. The acquisition of packaging data, perhaps as part of a general purchases, sales or stock control database should improve the monitoring and control of stock. It may highlight other inefficiencies throw up accounting anomalies, or raise awkward questions. Any legislation that forces a company to review its existing operation, assumptions and alternatives can, indirectly, produce benefits. Particularly as failure to comply could lead to the Company Directors facing a Criminal Prosecution.