No Match Found
Following on from the UK Government’s pledge to achieve net-zero carbon emissions by 2050 and the excitement around the UK hosting COP 26 in Glasgow, the Environment Act 2021 (the “Act”) was granted Royal Assent on 9 November 2021. The Act contains the framework for a new and enhanced extended producer responsibility (“EPR”) regime for the UK, building on existing waste laws.
The key changes are that the new obligations will be placed on producers of certain goods, including the pass through of collection and recycling costs, and that new types of products will be brought into the EPR framework.
Under the proposed EPR plans, to be phased in from 2023, businesses placing certain types of products on the market will be required to pay the full costs associated with the product throughout its lifecycle. Previously, the burden of such costs was borne wholly or in part by local government.
This article summarises the changes to current EPR schemes in the UK, as well as introduction of new EPR schemes and their implications for producers. As the UK’s new EPR framework follows a very similar approach to that taken in many jurisdictions across Europe, we have provided a contrast to French and German EPR changes that have already taken place and (with that experience in mind) we have summarised what businesses could do now to prepare for these costly reforms.
There are already waste frameworks in place which govern packaging, batteries, and waste electronics and electrical equipment (WEEE). As an example, the system of producer responsibility for packaging has been in place in the UK since 1997 and has helped to increase recycling of packaging waste from 25%, 20 years ago to 63.9% in 2017.
The new EPR Framework will include and build on this existing waste framework, and through regulations handed down over the coming months and years, will create a more stringent compliance regime for producers of these items and an increased range of goods.
It is intended that the requirements will be introduced from 2023 and the Act has given the Secretary of State powers to introduce certain measures. These requirements are contained in Part 3 of the Act, which sets out the requirements on producers and national authorities. The resulting regulations are likely to contain the following provisions:
The EPR proposals set out in the Act also include provisions for the reform of the current packaging recovery note (PRN) system and introduction of new schemes to achieve the aim of passing the full net cost of managing the end of life of products on to their producers.
Alongside the Act, there have been a number of conversations in government as to how best achieve these stated aims. The Department for Environment, Food & Rural Affairs (DEFRA) EPR for Packaging Consultation Document considers the introduction of provisions for placing obligations on online retailers and digital marketplaces to comply in relation to the packaging of imported products sold over their platform. The online retailers and marketplaces will also need to be compliant in relation to any shipping packaging applied. This echoes laws in place in France and Germany which require online marketplaces to check the EPR compliance of their sellers or, in certain cases, be required to pay a fee on their behalf, a fine, or remove the goods from sale.
We anticipate that similar provisions will be introduced for both WEEE and batteries to ensure that online platforms do not gain an unfair advantage over highstreet sellers and that a major perceived pathway to “freeriding” is closed off.
In the December 2015 Resources and Waste strategy paper, DEFRA also set out the intention to add up to five new waste schemes to the UK EPR framework before the end of 2025, with the hope at least one will be introduced and consulted on during 2022.
The proposed schemes are:
Interestingly, by way of contrast, new schemes that have been introduced in France include tobacco (in 2021 and in 2022 oils, DIY and garden materials, sports and leisure articles and toys (with building products and materials being deferred by at least a year).
Similar reforms of packaging, batteries and WEEE schemes are taking place across Europe at the same time as in the UK, with France and Germany leading the way. It is clear that there will be a substantial financial impact of these EPR reforms across Europe and the UK, which will be borne by producers.
As an example of the financial impact of a new EPR scheme in the UK, the estimation in the EPR for Packaging Consultation Document is that the costs for packaging producers will increase from £200-300m a year, as currently incurred under the PRN system, to nearly £3bn per year.
Other elements of the EPR reform in the UK that are under consideration (as set out in the Act), are the introduction of charges for consumers in relation to the purchase of single-use plastics, similar to those already in place for plastic bags, and the development of a deposit return scheme for plastic drinks containers. The delivery of a consistent and frequent recycling collection service across England will also be put in place, with the additional funds raised through EPR charges set to fund the entire regime.
Furthermore, in terms of wider context, these changes are coming alongside the introduction of sustainability reporting across the EU and Europe. Failure to comply with this new environmental and sustainability legislation could impact on environmental, social and governance (ESG) metrics and give rise to reputational damage when combined with enforcement by regulators, or more comprehensive ESG reporting.
In 2021 the government conducted consultations covering the amendment of packaging regulation, which concluded in June 2021, and the reforming of electronics and electrical equipment (EEE), which concluded in November 2021. The results of both consultations have yet to be published but are expected in early 2022. A further consultation on battery regulation was due to be carried out before the end of 2021, however this has been delayed.
It is anticipated that the consultation on EEE will cover a wide spectrum of proposed improvements to the framework including the data and reporting systems, how to dissuade and penalise free-riders, the increase in collections and the improvement of EEE product life cycles.
A consultation regarding the introduction of a scheme for batteries is likely to consider matters like the reduction of portable batteries ending up in landfill, batteries used in electric vehicles and the characterisation of lead-acid types.
As mentioned above, France and Germany are ahead of the UK with reform of their EPR regimes.
In France, changes have already been made this year in relation to batteries, WEEE and packaging and in Germany in relation to WEEE, with packaging reforms to come into force in July this year. Additional developments are also taking place in France with inclusion of additional EPR categories, as mentioned above (in New EPR Schemes).
A major feature of the new legislation in both France and Germany is the introduction of obligations on producers selling online, as well as online retailers and digital marketplaces listing products produced by a third party online. From 1 January 2022 in France and 1 July 2022 in Germany, online retailers and online marketplaces will be required to verify the registration status of the producers either selling directly on their platform or supplying the products listed for sale.
Taking France as an example, we know that at the date of writing, the identity of compliance schemes has yet to be confirmed, even though the implementation dates for certain EPR schemes have passed. Furthermore, each different compliance scheme within one EPR category (like packaging) can have a different set of requirements and deadlines (like dates for payment of fees), which could lead to significant administrative difficulties.
Alongside the new obligations for marketplaces in both Germany and France and the extended definition of ‘producer’ in France, both jurisdictions are now placing a greater emphasis on compliance, as well as imposition of penalties for breaches of the law. Regulators are able to issue administrative fines and, in Germany, confiscate products and bar producers from access to the market following non-compliance with EPR requirements. Also, under German competition law, it will also be possible for rival companies and interested third parties to bring actions for non-compliance.
We expect further detail on the EPR frameworks in both France and Germany, as well as the introduction of additional schemes to be announced in the coming months. The developments across the EU will give us some indication as to what we can expect in the UK over the coming years, allowing producers to commence high level preparation for the changes to come.
With the expansion of EPR regulation coming into force across Europe, our legal specialists can help our clients to:
We can work with our clients across all sectors to help prepare them for the changes to the EPR requirements and the increased demands on online marketplaces and retailers, as well as those selling directly online.
Environmental and Sustainability Legal Advisor, PwC United Kingdom
Tel: +44 (0)7870 598098
Senior Manager, Environmental & Sustainability, PwC United Kingdom
Tel: +44 (0)7766 911058
Manager, Environmental & Sustainability, PwC United Kingdom
Tel: +44 (0)7483 326978