STOP THE PRESS – Announcement came down October 12, 2010 – Eco fees scrapped. The article below offers a brief history for reference purposes only. More to come on this issue in our next Update.

Blink and you might have missed it. Within 20 days of implementation, Phase II of Ontario’s Municipal Hazardous or Special Waste [MHSW] Program Plan came and went, and the so-called “eco fees” associated with it were eliminated (at least temporarily), after consumer confusion and backlash forced the retraction of the program while it is re-evaluated.  

As we write this article, consultations are ongoing to see what this means for future implementation of this phase of the MHSW Program Plan, as well as perhaps Phase I and other environmental stewardship efforts in the province. The outcome of these consultations will have implications for manufacturers, retailers, consumers and tax-payers, in terms of this key question: Who will bear the costs for managing environmentally harmful waste from consumer goods?  

BACKGROUND

Phase I – implemented July 1, 2008: In February 2008, the Minister of the Environment approved the first phase of the MHSW Program Plan (also known as Orange Drop). The MHSW Program Plan was developed by Stewardship Ontario in cooperation with Waste Diversion Ontario [“WDO”]. Phase I was implemented on July 1, 2008, as a regime to manage the collection and disposal of household hazardous waste materials, helping to divert them from landfill. Phase I materials included paint, antifreeze, fertilizers and other selected household hazardous wastes.  

Phase II – Extension to Other Household Wastes – implemented July 1, 2010: When July 2008, came around, the Minister requested that WDO amend the MHSW program to include all other household wastes that were designated as hazardous or special. This Phase II expanded list of MHSW included batteries, household cleaners, pharmaceuticals, aerosol containers and portable fire extinguishers. In September 2009, the Minister approved and expanded the MHSW Program Plan, which was to be implemented on July 1, 2010.  

ALL SOUNDS GOOD – SO WHAT HAPPENED?

July 1, 2010 - Phase II is implemented. This is where the wheels fell off. What happened?  

A. Started Same Time as New Harmonized Sales Tax: While consumers and the media were busy bemoaning the new HST regime that came into effect the same day, no one seems to have heard about the implementation of this next phase of the MHSW Program Plan.  

B. “Eco Fee” Line Added to Sales Receipts by Some Retailers: Adding salt to the wound, while they were still complaining about the new tax structure, consumers started to notice that some retailers were adding a separate “eco fee” line to their receipts for the sale of the newly included Phase II products. These “eco fees” are not mandated by the MHSW Program Plan; instead, they were created and imposed by some retailers to recoup the increase in wholesale price that was generated by the environmental stewards responsible for paying their portion of the waste management plan under Phase II. This left consumers confused about an apparent “recycling tax” that was seemingly being applied by some retailers on their purchases of select goods.

C. Announcement Re: End of Collection of Fees: On July 20, 2010 – just under three weeks after it was implemented - Minister Gerretson announced ‘the end of eco fees.’ Well, that is largely what was reported. What he actually announced was the end of the collection of stewardship fees – and therefore eco fees charged by retailers - in respect to Phase II of the MHSW Program Plan. Any fees associated with the 13 consumer products under Phase I would remain intact and the MOE would work with stakeholders over the following 90 days to “develop a new system.”

In the interim, the taxpayers are picking up the $5 million price tag to allow Stewardship Ontario to keep the MHSW Program Plan running in its entirety, allowing for management of both Phase I and Phase II materials.

ECO’S SPECIAL REPORT – OBJECTIVE: CLEAR UP THE CONFUSION!

On July 27, 2010, the Environmental Commissioner of Ontario [ECO] submitted its Special Report, Getting it Right. Paying for the Management of Household Hazardous Waste [Special Report] to the Ontario Legislature. The purpose of the Special Report was to clear up the massive confusion this fiasco had caused, and to look at how such a stewardship program could and should work.

Of particular note, the Special Report clarified what had seemed obvious to many, but had been lost in translation when communicated to the average consumer:  

  • A fee is charged to stewards – not to consumers or retailers. Stewardship Ontario charges stewards (retailers, importers and manufacturers) a fee by unit for products introduced into the Ontario marketplace that require the management of hazardous or special waste when discarded.  
  • The “eco fee” was created by retailers and is not a component of the MHSW Program Plan. The MHSW leaves it up to stewards to either absorb or pass on the fees charged by Stewardship Ontario. Retailers face the same choice. They may either absorb the increase in wholesale price or pass on some or all of the increase to consumers. The government does not require this passing off to consumers.  
  • The “eco fee” is not a tax. Retailers retain money collected. None of the proceeds goes to the government.  
  • Charging manufacturers and importers fees to cover the costs of Ontario’s waste diversion program is nothing new. Phase I began on July 1, 2008. Further, other stewardship efforts continue unabated: The Ontario’s Waste Electrical & Electronic Equipment [WEEE] recycling program has charged fees since April 1, 2009, and Ontario’s Used Tires Program Plan has charged fees since September 1, 2009.

Key recommendations of the Special Report are:  

  • Recommendation #1: That the MOE require the MHSW program to cover all end-of-life management costs, including the costs of disposing of those products not captured by the program.  
  • Recommendation #2: That the MOE implement the phase-in of differential fees based on the full end-of-life management costs of a product’s waste.  

WHAT DOES THIS MEAN FOR THE FUTURE?

Questions remain as to what will result from the current consultations. Will the fee charged to environmental stewards be buried in the ticket price of products? Will retailers be allowed to make the fee transparent on consumer’s receipts? A visible fee helps draw awareness to the MHSW Program Plan and the need to manage these products safely. On the other hand, a visible fee seems to have confused consumers into thinking it is some kind of tax, and there is disparity as to how it is managed from retailer to retailer. And now that consumers think that eco fees are over, there remains confusion about Phase I and other existing stewardship fees that need to be resolved.  

Quebec May Prohibit Charging Eco Fees at Retail

It is worth noting that, in Quebec, legislation is in motion that may prohibit the charging of such eco fees at the retail level. In November 2009, the Quebec government proposed Bill 88, An Act to amend the Environment Quality Act as regards residual materials management and to amend the Regulation respecting compensation for municipal services provided to recover and reclaim residual materials, and three draft regulations regarding the management of residual materials in Quebec. One such regulation, The Draft Regulation Respecting the Recovery and Reclamation of Products by Enterprises, expressly requires that the cost related to the implementation of a recovery and reclamation program may be attributed only to that type of product and must be incorporated into the price charged for the product. This therefore creates an obligation to internalize the cost. For those looking to apply a national standard, then, the decision may be made outside Ontario.

We hope that Ontario’s direction on this will emerge before the end of the year.

SPEAKING OF QUEBEC…DEBATE RAGES ABOUT BOTTLE DEPOSITS

The regulator responsible for enforcement of Quebec’s amended Consumer Protection Act [Quebec CPA], and the parties responsible for administering Quebec’s bottle deposit regime have been at loggerheads about what price to advertise for bottled pop and other bottled or canned beverages. Under the Quebec CPA, no merchant or advertiser may charge a higher price than what is advertised. Further, the total price advertised must include all costs - including, but not limited to, administrative fees, and fees related to the implementation of recovery or reclamation programs. The only amounts that may be excluded from the advertised price are the duties chargeable, under a federal or provincial Act, which must be levied directly to the consumer and remitted to a public authority. An example of the latter would be the duties which must be levied to the consumers upon the sale of new tires.

But what about bottle deposits? The Consumer Protection Office [Office] took the position that bottle deposits required on the sale of beer and soft drink cans and bottles are to be included in the total amount to be advertised. However, it is the view of Boisson Gazeuse Environnement [BGE] and Recyc- Quebec, that such deposit should not be included in the total price. They argue, for example, that Recyc-Quebec is considered a public authority to whom the money is remitted and therefore, the deposit would fall within the exception available to such levies. Furthermore, doesn’t it matter that the consumer gets the deposit back, rather than it being part of the price?

The Office therefore decided to take this thorny issue under consideration and review its original position. At the time of writing, however, no decision had been made.