The article touches upon the expected fees payable, timelines relevant to large packaging producers over the coming year, and includes links to PwC guidance on how to account for pEPR fees for internal financial and account teams.
Modulated Fees for Packaging under Enhanced EPR Framework in the UK
This article notes the current status of UK EPR and captures key information on modulated fees which has just been released by Defra.
Defra is currently having discussions with a wide variety of stakeholders on the topic of modulated fees and how these will be calculated under the new enhanced Extended Producer Responsibility (EPR) scheme in the UK.
These discussions are expected to continue into early 2024, with an aim to:
- design an approach to modulation;
- decide the materials to be modulated upwards and downwards in the early years of the enhanced EPR framework; and
- determine the frequency of changes to modulation.
Current status of EPR
Introduction of the UK’s new enhanced Extended Packaging Responsibility scheme has been very disjointed. So far, Defra has confirmed that:
- Enforcement action with regards to the submission of packaging data has been suspended until 31 May 2024 for businesses registered in England and Scotland;
- Payment obligations for all four nations in the UK have been deferred for a year, from 2024 to 2025; and
- Many Producers are currently subject to dual reporting obligations under the existing Producer Responsibility packaging framework and new EPR framework.
What are ‘modulated fees’?
Starting in the reporting year 2026/2027, EPR fees will be adjusted (i.e. modulated) to incentivise businesses to use materials with a lower environmental impact. More recyclable packaging in each material type will be priced at proportionally less per tonne than less recyclable packaging in the same material type.
In practice, some packaging will receive an increased fee, and other types of packaging will receive a decreased fee. For example, the Government may choose to assign PVC packaging a modulation factor of 1.2. This would mean that PVC packaging would attract a 20% higher fee than the plastic ‘base fee’. Other, more recyclable plastic packaging, would receive a reduced fee.
Defra's EPR team is currently working to create a methodology which Producers can use to calculate their packaging’s recyclability and forecast likely fees.
Which materials will be affected?
Since September 2023, Defra has been capturing input on a shortlist of packaging that could trigger increased fees under the modulation provisions of packaging EPR. More details on this can be found in the next section, on how modulated fees will work.
There are currently 13 shortlisted materials in discussion, although this list may be shortened. The materials include:
- PVC (including non-PVC packaging with PVC components).
- Compostable and degradable plastics.
- Glass with attached ceramics.
- Paper/card with double-sided lamination.
How will modulation work?
The Scheme Administrator for the UK’s new enhanced EPR scheme for packaging has a duty to increase or decrease base fee rates for packaging to reflect the environmental sustainability of different materials and types of packaging. Initially the focus of this modulation will be on the recyclability of the packaging, but Defra has made it clear that the Scheme Administrator can, over time, broaden this criteria to reflect wider environmental impacts, such as:
- Whether the packaging is reusable;
- The extent to which the packaging is reused;
- The environmental impact of creating the packaging;
- The environmental impact of the packaging when it becomes waste; and/or
- The environmental implications of the modulation itself.
The aim of modulation in all cases is to incentivise the use of packaging which has a lesser impact on the environment.
Defra is currently working to create a methodology which Producers can use to make an assessment of their packaging’s ‘recyclability’, via their Recyclability Assessment Methodology (RAM) project, the results of which will be available from mid to late 2024.
A review of materials being considered for higher modulation - conducted by the Waste and Resources Action Programme (WRAP) - highlighted three criteria which may be used to assess ‘recyclability’:
- Availability of collection infrastructure;
- Availability of reprocessing infrastructure; and
- Availability of end markets.
There has been an interesting range of questions raised during recent Defra stakeholder events querying the other factors that might influence modulated fees and the ‘recyclability’ of packaging, including whether a material’s circularity, litterability and/or carbon impact - or the size of some packaging and its inability to be sorted at facilities - will be relevant.
Will modulation affect me?
Modulation of fees applies only to packaging supplied by ‘Large Producers’ under the new enhanced EPR framework, and only to the packaging which is subject to disposal cost fees i.e. household packaging.
Anything that is modulated upwards or downwards will need to be separately reported under the new enhanced EPR Packaging framework.
Eventually, however, all Producers will have to label their packaging ‘Recycle’ or ‘Do Not Recycle’ in accordance with the Recyclability Assessment Methodology.
When will we know more?
In January 2024, it is expected that Defra will share:
- Illustrative base fees for packaging; and
- Advice on which materials will be subject to modulation in the reporting year 2026/27.
How we can help
This an area of rapid change, where the cost implications for businesses across a range of sectors are very significant.
Our legal, commercial and operational team is tracking developments very closely and advising multinational companies on the development of packaging-related regulation in the UK and across Europe.
We are helping clients to consider their pack mix of the future and the circularity of products, bearing in mind relevant commercial considerations and desired progress towards Net Zero goals.
We can help businesses comply and plan for the future by providing:
- Horizon scanning and diagnostics - client-tailored diagnostic services which help you understand, interpret and respond to key circularity trends and themes (e.g. changing regulation, changing consumer demands, circular business models, feasibility studies).
- Compliance mapping and in depth legal advice - we work with local experts to advise in detail on registration, reporting and other legal requirements, as well as broader compliance frameworks.
- Strategy development - understanding your responsibilities as a business and a ‘producer’ of packaging and how these will change in the next 3 to 5 years, which often includes the creation of a bespoke enterprise-wide strategy with circularity at its core.
- Transformation Roadmaps - the development of bespoke action plans (including operational model, technology transformation, project KPIs and governance etc.) used to implement circularity strategy.
- Bespoke staff training and comms - delivering workshops to ensure awareness amongst stakeholders and preparation of detailed training manuals to ensure compliance across your business.
- Data gathering and operational systems - we can provide data gathering technology solutions and operational systems, to help gather the right information from supply chain partners and create efficiencies.
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