Defra releases its long awaited Resources and Waste Strategy, setting out ambitions to build on the 25 Year Environment Plan and tackle waste issues. We look at some of the key regulatory aspects.
New waste legislation will be brought forward where the existing legislation cannot match the government's ambition, according to the new Resources and Waste Strategy, published on 18 December 2018. The strategy is full of these bold statements, but what’s the reality? In this, the second of two briefings, we focus on some of the regulatory changes and challenges that will be needed to make the Strategy’s ambitions come to fruition and offer our initial thoughts on the regulation required to deliver these outcomes. To read our first briefing, looking at the strategy as a whole and its impact on the waste sector, click here.
The strategy offers a framework for the preservation of natural capital by 'minimising waste, promoting resource efficiency and moving towards a circular economy'. It is both ambitious and considered but, being in its very nature a broad strategy, it lacks immediacy and nuance in parts, with detail to be finalised at a later date. Real action must follow if it is to be a genuine roadmap for change and not merely Blue-(Planet)-sky thinking to placate the public while kicking the waste can down the road.
Here are our thoughts on the key regulatory aspects of the strategy.
Making the polluter pay
A new Extended Producer Responsibility ('EPR') framework has been promised, enshrining the ‘polluter pays’ principle to ensure that producers pay the full net costs of managing waste at end of life. EPR mechanisms incentivise producers to alter their product designs to more recyclable versions to keep end of life product costs lower. Producer responsibility already exists, or course, but it is limited: for example, through the current Packaging Recovery Note system producers only contribute 10 per cent of these waste management costs. Defra wants to new system to include all of those costs, taking the financial burden away from local authorities and putting it on those who profit from putting the products on the market. Over the coming years EPR measures are planned for a number of other waste streams in addition to packaging, including textiles and bulky furniture. Yes, that might well drive up the costs of consumer goods, but Defra is quick to remind us that the public is already paying for the service through their taxes, and the switch to over-the-counter costs will, it is envisaged, have a greater impact at changing attitudes and use.
Our view is that, as a policy, there is a lot to commend the EPR approach, but as always, the devil is in the detail. On this occasion Defra is right not to rush into legislative measures and to seek further consultation, because unless EPR regimes are well through-through, there is a real risk of failure through both burdensome complexity and the potential for fraud. If business and the public were to lose confidence in complex market-mechanisms, it would be very hard to recover the confidence, and failing schemes are often scrapped rather than reformed. EPR offers a great deal of promise so it is worth Defra taking the time to get it right, and we are encouraging our clients and contacts to get involved in shaping the schemes during the consultation stage.
Driving the market for recycled materials
As trailed in the Autumn Statement, and again subject to consultation, the strategy reiterates the intention to introduce a plastics tax for all packaging containing less than 30 per cent recycled content from 2022. The levy on these so-called ‘virgin plastics' is hoped to stimulate a secondary market in recycled materials.
Again, this is a policy with good intentions, but, as always with market interventions, care is needed in delivery. Plastics, and the monomers from which plastics are made, are manufactured throughout the world. The big question here will be confidence in the supply chain. It might well be possible to create some form of product passport within the UK, but supply chains are global, and auditing supply chains in foreign jurisdictions will be difficult, especially for small and medium enterprises with a UK-only footprint. There is some precedent here however – for example, the requirement under some of the renewable energy subsidy regimes that biomass feedstocks used in qualifying energy generation meet strict sustainability requirements. Further, the system should ensure equal treatment of both mechanical recycling of plastics (physical reuse of plastics, where the chemistry does not change) and chemical recycling (where chemical reactions return plastics back to the monomers, from which new plastics can be made). For the latter, a barrel of feedstock from recycled plastics may be indistinguishable from virgin material produced by the oil and gas sector, and indeed might well be bulked up in the global markets before being used in new production. The feasibility of tracking recycled monomers around the world is yet to be worked through. It may be that, like other product regimes, the certification comes at the point of 'placing on the market' in the UK (take, for example, the restrictions on hazardous substances in electrical and electronic equipment regime, known as RoHS, where it is the responsibility of those placing electronics on the market to ensure the products do not contain hazardous substances such as cadmium or lead above certain thresholds). However, you can test for cadmium or lead. That’s not the case for recycled plastics.
Bans are a last resort
The press headlines often highlight the outright bans, such as the proposals to ban plastic straws and cotton buds. Such bans can serve a useful purpose. However, in our view, such bans can only ever be limited, tackling the problem item by item, and does nothing to address the fact that many plastics serve a useful purpose. Plastics preserve the life of many foodstuffs and prevent contamination, avoiding food waste (another major issue addressed in the strategy), and the lightweight nature of plastics reduces the carbon footprint of the transportation of many goods. The strategy is right to consider avoidable wastes, and that's where the regulatory and policy interventions should focus. Further, some environmentalists fear that headlines around bans confuse the public, who assume something is being done on plastics and switch off again.
The sights are set on waste criminals
The strategy has some tough language for those who profit from illegality in the waste sector, targeting both deliberate organised crime and those whose reckless or negligent poor performance undercuts compliant operators. There will be a joint unit for waste crime, drawing on the experiences of the Environment Agency, the waste industry, HMRC and the police. In addition, the Environment Agency’s powers will be further bolstered through legislation (subject to consultation) to give it a better chance to deal with organised crime in this area. The focus on waste crime is no surprise and indeed this has been a focus of the Environment Agency’s enforcement for a number of years. There is of course a tension between erecting barriers to entry into the market and encouraging competition: the strategy swings towards the former through the proposed use of financial provisions required before operations can commence and an increase in operations that require a permit rather than relying on exemptions. Although well intended, it is important not to shut legitimate new entrants out of the market, especially in a market where the negative value of waste creates an opportunity for irresponsible business, criminal and fraudsters, and it’s important to have low-cost legitimate businesses to provide options for those trying to ‘do the right thing’ on a budget.
Innovation and regulation
Regulatory interventions are good at correcting yesterday’s mistakes, but not so good at encouraging innovation. At its worst, existing regulatory regimes can stifle innovation. Some new technologies at the cutting edge of the waste / new product boundary find themselves subject to permitting requirements designed for the old waste management technologies which can be unnecessarily burdensome. This issue is particularly accute given that much innovation is happening with small start-ups whose financial resources are naturally limited. In Scotland, the CEO of the Scottish Environment Protection Agency has been vocal in encouraging risk-sharing between regulators and innovators to give a safe space for the solutions of the future to come forward. In England, the return of the Environment Agency’s Definition of Waste Services is a useful step forward, and we are actively engaged with the new panel, which is showing promise. However, our experience in working with a number of innovative technologies is that there is still a degree of caution and scepticism about innovations in all parts of the regulatory field, which although understandable in the context of the battle against waste crime described above, and although in line with the precautionary principle, can sometimes frustrate the innovators. There is a balance to be struck and it may be that England should do more to mirror Scotland in promoting a safe space for innovators in the waste and circular economy arena.
Chemicals and waste
One of the issues in managing waste is that on many occasions those dealing with waste products do not know what is in those products. Hazardous chemicals that are safe for the original use of the product might find themselves creating issues if that material is then recycled into other goods. Chemicals that pose no issues during the lifetime of a product might nevertheless create difficulties at the end of life. However, this is not a problem with an easy solution. Bans on certain hazardous substances do exist under current regimes, for example under the EU REACH Regulation, but this is too blunt a tool to provide a complete solution. The strategy raises the concept of 'product passports' where information on the safe dismantling of the product is readily accessible by those dismantling, repairing, recycling or disposing of the product, but there is no detail on how this might be achieved in a global manufacturing economy or how confidential business information could be protected. It is good to see the Strategy acknowledge that this is an international issue and commit to pursuing solutions in collaboration with others. Certainly, this is a matter of great interest to the EU too, and so whatever happens with Brexit this is an area where cooperation is beneficial. We are told to expect more details in the forthcoming Chemicals Strategy, which we hope to receive in 2019.