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Producer Responsibility Obligations (Packaging Waste) Regulations 1997 (As amended)

CHAPTER TWO

RECOVERY AND RECYCLING TARGETS 2004-2008

This chapter discusses the Directive target options currently under discussion in the Council, European Parliament and the European Commission; and business target scenarios for the Regulations and the information that underlies the target scenarios.

2.1 The EC Directive on Packaging and Packaging Waste 94/62/EC applies to all packaging placed on the market in the European Community and all packaging waste, whether arising in the household, commercial, industrial or other (e.g. agricultural) waste stream. The recovery and recycling targets in the Directive are expressed as percentages, by weight, of the packaging in the waste stream. In terms of implementation in the UK, regulation 3(6) shows that the Directive targets are intended to be achieved by placing producer responsibility obligations on businesses who are 'producers' under the Regulations. Regulation 3(6) says "The recovery and recycling obligations of producers are to enable the United Kingdom to attain the recovery and recycling targets for Member States set out in article 6(1) of Directive 94/62/EC".

2.2 Under the Directive, by 2001, at least half of all packaging flowing into the UK waste stream, had to be recovered, at least 25% had to be recycled, and at least 15% of each material had to be recycled. Table 1 shows recovery achieved 1999-2002. These figures update the provisional figures for 2002. Some issues connected with particular materials are discussed in Chapter 3.

Table 1: Recovery and Recycling 1999-2002

Table 1a: UK Packaging Waste Recovery and Recycling 2002

* includes 35,241 tonnes of alternative evidence

^# includes 25,000 tonnes of ''other'' packaging

** recycling of packaging wood waste actually increased by 193,279 tonnes, from 573,951t (2001) to 767,230t (2002), but because of the increase of wood packaging in the waste stream, a decrease in the percentage recycled is shown.

EC Directive targets

2.3 In accordance with Article 6(3) of the Directive, discussions between the Commission, Member States and the European Parliament have been taking place since December 2001 with a view to amending the Directive recovery and recycling targets to be achieved over the next 5-year period. Political agreement on a Common Position was reached at the Environment Council in October 2002. This was as follows:

Common Position

A minimum of 60% recovery;
Recycling of between 55% and 80%;
Differentiated material-specific recycling targets of

Paper 60%
Glass 60%
Metals 50%
Plastic 22.5%
Wood 15%

A deadline of 31 December 2008

2.4 The European Parliament (EP) vote at second reading in July 2003 was in favour of the targets and deadline in the Common Position. Agreement has still to be reached on the totality of the EP's position but the 2008 deadline and the 60% recovery and 55% recycling, together with the material-specific recycling targets for each material, now seem very likely indeed to be in the final agreement. Thus, in this consultation paper, we have discussed UK business targets on the assumption that the business targets set will have to enable the UK to reach the Common Position targets by the 2008 deadline.

Assessing what the UK interim business targets should be

2.5 To assess and show business targets and the expected result in terms of national achievement against the Directive targets, we need information on:

i. the likely amount of packaging flowing into the waste stream in the years 2004-2008, by material;

ii. the likely amount of obligated packaging in those years, by material and the likely 'starting point', i.e. the level of recovery/recycling expected to be achieved in the UK in 2003;

iii. any additional tonnages of obligated packaging resulting from other changes proposed in this consultation paper.

(i) Tonnage flows into the UK waste stream

2.6 Table 2 shows the estimates for the tonnages of packaging waste flowing into the UK waste stream in 2003-2008.

Table 2: Estimated total tonnage of packaging flowing into UK waste stream 2003-2008

Derived from figures and growth rates in material-specific text and flow charts in Chapter 1 of the Report of the ACP Task Force Nov 2001. Wood figures from 2003 revised by Timcon May 2003. From 2004, Aluminium figures revised by May/June 2003 but see footnote 12. Steel includes 11,500 t of small containers used for hazardous packaging and excluded from ACP report; 'other' figures from 2004 revised by Defra May 2003 to bring obligated/as percentage of total into line with other materials. Years after 2004 changed according to MO estimates

(ii) Obligated packaging

2.7 Table 3 shows the actual level of obligated packaging in 2002 and the estimated level of obligated packaging in 2003. The figures for 2003 are based on the 2002 figures except where the figure already reported (in June 2003) is higher. The estimated levels of obligated packaging for 2004-2008 are then based on the estimated obligated tonnage in 2003 adjusted by the additional obligated tonnages expected to be derived from the leased and internal supply packaging proposals discussed in Chapter Five, i.e.

steel: 4,888 t;
wood 526,150 t;
plastic: 135,150 t;
paper: 3,400 t.

A reduction or addition is then made to the total to allow for the projected annual change in obligation (i.e. reduction of 0.75% per annum to steel; increase of 3% per annum for plastic; reduction of circa 1% per annum for wood).

Table 3: estimated obligated packaging 2002-2008

2002 actual figures.

** "assumed 2003" is the figures for 2002 except where the 2003 reported figure is already higher

*** "assumed 2004" figures are those for "assumed 2003" plus the additions referred to in para2.7 above.

2.8 Table 4 below shows the revised figures for recovery and recycling achieved in 2002 and the expected results in 2003-

Table 4: Recovery and Recycling in 2002 and expected result in 2003

* provisional outturn figures
** includes 1,158 tonnes composting
# includes 35,241 t alt. Evidence
y mid-point shown in final column

iii. Additional obligated tonnages resulting from changes proposed in this consultation paper

2.9 Changes have been proposed which would bring in additional obligation in relation to internal supply and leased packaging. This would be only on the annual tonnage on its first trip, and the obligations expected to be picked up are the pack/filling and selling, which are currently being avoided. The raw material manufacturing 6% and the converting 9% are being picked up already. Packaging that is being reused will continue to be excluded from obligation but see also paragraph 3.54 in Chapter Three.

2.10 Chapter Five discusses in detail the implications of the proposals relating to internal supply and leased packaging. The resulting tonnages are significant - overall, the additional obligated tonnage that would be brought into the Regulations through the proposed changes is around 670,000 tonnes. The tonnage implications of these proposed changes have been taken into account in the figures used in exemplifying targets.

Differentiated material-specific recycling targets

2.11 Currently, both the Common Position and the European Parliament's Second Reading vote envisage differentiated material-specific recycling targets. It seems virtually certain therefore that these targets will appear in the final Directive. If so, the Government, supported by the recommendation from the Advisory Committee on Packaging, believes there is a strong argument for introducing interim differentiated targets in 2004 for the period up to the Directive deadline. The uplift needed in some materials in particular is such that, if the Directive target is to be met, planning for gradual increases year-on-year will be needed.

2.12 Industry has frequently emphasised to the Government that they want to have forward targets set down, at least for the next three years but preferably for the period up to the Directive deadline, so that they have a basis upon which to develop their business and operational plans. The Government agrees that, if the UK is to have any chance of meeting these targets, particularly in glass (where an uplift is needed from 34% to 60%) but also in aluminium, we need to start now, so that obligated parties, in particular, working with the materials organisations, local authorities and the reprocessing industry can plan and set in place the necessary investment to deliver the required increases in performance on time.

2.13 Moving from our present level of just over 50% recovery (end 2002), to a level of 60% recovery in 2008 will also be challenging, largely because the additional waste packaging needed in a number of materials will have to come from the more expensive household waste stream and because materials will need to deliver a little above the amount needed to meet material-specific recycling targets in order for the UK to meet the overall recovery target. There are developments in relation to the status of energy recovery for the purposes of the packaging Directive targets that affect the levels of recycling required too. This is discussed in paragraph 1.16 in the Introduction and in more detail in paragraph 2.23 below.

2.14 Moving to higher, and differentiated, recycling targets for each material as proposed would mean that businesses obligated under the Regulations would be less able to use the market for residual recovery (the amount needed to meet the overall recovery target after minimum recycling targets have been met). The UK needs to make as early a start as possible on the task of ensuring that the capacity is going to be there for the additional 1.3 million tonnes of packaging waste to be collected and recycled.

2.15 The ACP has therefore made recommendations to Ministers about the pattern of targets starting in 2004 and going through to 2008. The Government understands industry's point about the importance of being able to have a basis for forward planning, and agrees that this is likely to be the best approach.

Q1: Do you agree that targets should be set for the full period 2004-2008 ? If not, why not ?

2.16 The Committee has also suggested that a combined "metals" target be considered rather than the present separate targets for aluminium and steel. The present separate targets for aluminium and steel are a result of consultation when the Regulations were originally drafted. In considering whether a 'metals' target is appropriate, as opposed to targets for each material designed to achieve the metals target, account needs to be taken of the fact that the system is a market system which relates the costs of recycling a particular material to its performance. This allows competition between materials, but it must also attempt to avoid cross-subsidy of one material by another. At present, it would appear that the competition between the aluminium and steel sectors is quite balanced, although the Government would welcome views on this point. The Government would want to avoid taking a course that resulted in a cost swing in either one material or the other and so, if we are to have separate targets for each material, we need levels for each which place a similar level of demand on them particularly since both are likely to have to extract increasing amounts of material from the household waste stream. If we are to have a joint "metals" target, this needs to be set so as to ensure that the result is not more effort going into one material than into the other. At the same time, we are looking for a system which is in the interest of UK compliance as a whole.

2.17 There are a number of options for targets in the metals sectors. These appear to be -

i. a target for aluminium and another target for steel, the results of which are designed to meet the 50% level in 2008;

ii. a target of 50% for aluminium and a target of 50% for steel;

iii. a metals target - i.e. "x% for metals" which can be met through either steel or aluminium PRNs except perhaps for a specified minimum, eg. 8%, to be achieved in each material.

2.18 Option (iii) above is more complex to apply, particularly given the fact that the calculations are anyway more complex with material-specific recycling targets. Option (ii) would appear to be the fairest since it applies the same target to each material. However, the two materials are not starting from the same point and, taking the level of achievement in 2002 as the starting point, these targets would mean a far greater requirement would be placed on aluminium than on steel The Government is inclined to think that the most straightforward approach is option (i) above, particularly since this would mean retaining the present system. Pending the outcome of this consultation, this is the approach that has been used in exemplifying targets.

2.19 The real priority for both aluminium and steel is for more packaging waste to be collected from the household waste stream for recycling. This is because, in the case of aluminium, the vast majority of it arises in the household stream and in the case of steel, recycling of the tonnages of packaging waste arising in the commercial/industrial stream is already at a high level; targets can therefore only be achieved by increasing recycling of packaging waste from the household waste stream. A target is therefore needed which in effect means that both materials have to achieve a similar rate of increase. This will also allow the existing co-operation between the two metals sectors to be built on in an effort to extract metal packaging waste from the household stream. The targets in the scenarios in this Chapter attempt to achieve equality of approach, but the views of stakeholders are invited on this point.

Q2: Do you think there should be -

a. one material-specific recycling target for aluminium and one material-specific recycling target for steel (i) above, which together achieve 50% for metals ?

b. a target of 50% for steel and a target of 50% for aluminium ?

c a "metals" target - which could be met by recycling either steel or aluminium ?

2.20 The ACP also proposed that the difference between the business target, set in the Regulations, and the national achievement expected to be delivered by that target, should not exceed 10% (para. 6.2 of ACP advice at Appendix 1). This is, however, a matter that is determined by the figures needed to meet the Directive obligations in 2008. In 2008, if a 60% recovery rate has to be met, targets will be modelled that deliver that required achievement in that year. It may be that, in some materials, it will be possible to keep the gap to 10% or below; the targets scenarios in this Chapter show what business targets appear necessary to achieve the levels of recovery and recycling required under the Directive. At the end of the day, the producer responsibility obligations are to enable the UK to attain the Directive targets, and the Government must set targets which are expected to deliver these legally binding Directive obligations.

2.21 If targets are set for the full 5 years, it is possible that, at some stage over the period, the underlying data on which targets are based will change. Even so, it might be desirable to have fixed targets in place, at least for, say, three years, in order to provide stability to underpin investment, and to review the targets for the later years to take account of any changes in underlying data. The targets in place would, however, very probably be the minimum the targets would be. The Government might, therefore, -

i. set targets for the years 2004-2008;

ii. leave the targets for 2004, 2005 and 2006 unchanged (unless events clearly dictate otherwise), and, in the course of 2006, review the targets for 2007 and 2008 in order to ensure that the UK is still on course to meet the target levels required in the Directive.

This would mean that there would be a clear expectation that there would be a review of targets in the course of 2006.

Q3: do you think it would be helpful in terms of supporting investment to have targets unchanged for two or three years, followed by a review to take account of any changes in the underlying data ? What are the advantages or disadvantages in terms of benefits and costs ? What would you suggest instead ?

Business targets and expected achievement

2.22 In all targets exemplifications two sets of figures are shown: the first table shows the business targets, which are the targets that would appear in the Regulations to be used by producers to calculate their obligations each year. The second table shows the national level of recovery achievement expected to be delivered by the business targets (this level of national recycling achievement expected from business targets is described as "national targets" in the ACP's proposals in Appendix 1). In all cases, business targets are set with a view to achieving the level of recycling and recovery required under the Directive.

Energy from Waste

2.23 Given the likely recovery and recycling targets, only a small amount of recovery through Energy from Waste (EfW) would be possible in future ¹³ and the UK would have to reduce the amount of packaging waste recovery that is achieved through EfW in order to meet the recycling 55% and recovery 60% target. In assessing the business targets for 2004-2008, the Government has assumed no more EfW than around 500,000 tonnes in 2008, because this level of EfW would allow us to be sure to meet the overall recycling target within the recovery target. In 2002, some 584,000 tonnes of EfW was carried out. This would therefore have to be gradually reduced in order to carry out the requisite amount of recycling to meet the targets, as indicated below. Additional energy recovery can, of course, be carried out but no more than the amount indicated can be used as evidence of compliance with the requirements of the Regulations.

This means that, under present conditions, of a producer's total overall recovery obligation, recycling (including material-specific recycling) would have to make up at least 91% in 2004 and 2005 and at least 92% in 2006, 2007 and 2008.

European Court of Justice judgments on waste incineration

2.24 However, there is also the possibility that recovery through incineration of MSW and clinical waste incineration will no longer be allowed to count towards the packaging Directive targets. This is because three recent European Court of Justice (ECJ) rulings have sought to clarify the conditions under which waste incineration should be regarded under EU law either as a recovery or a disposal operation. Further information is given in Chapter One (paragraph 1.16).

2.25 If the position in the Commission's communication is confirmed, the UK would have to find additional recycling capacity to replace the recovery currently carried out through MSW and clinical incineration (the tonnage of these carried out in 2002 was some 533,000 tonnes) unless additional RDF and co-incineration with energy recovery (EfW) capacity is found up to the 500,000 tonnes or so of energy recovery that would allow us to meet the Directive recovery and recycling targets. The energy recovery we achieve through Refuse Derived Fuel (RDF) and co-incineration with energy recovery (EfW) would be allowed, but is currently a very small tonnage - some 51,700 tonnes, but see below.

2.26 Whatever the rules on incineration, the maximum we can use towards the recovery targets would be around 500,000 tonnes - far in excess of the amounts of RDF and EfW currently used or expected to be used over the next 5 years.

2.27 Over the years 1999-2002 we have seen the tonnages of co-incineration EfW rise from 4,273 tonnes in 1999 to 32,827 in 2002. We might therefore be justified in expecting a continued rise between 2004-2008. The average of the year on year increases is some 9,500 tonnes, and one way of estimating the increase is to take into account an increase of this much each year from 2004-2008 for EfW.

2.28 The amounts of RDF have varied from some 26,000 tonnes in1999 to 23,000 in 2000, 13,000 in 2001 and 18,888 in 2002. It appears that the number of reprocessors accredited for RDF has also fallen, and it would seem to be risky to assume even the same amount of RDF in future as there was in 2002; half as much is therefore assumed for the years up to 2008. Taking RDF and EfW together on this basis suggests that we could plan on discharging residual recovery in 2004-2008 through tonnages of co-incineration of packaging waste with energy recovery as follows -

Table 5: EfW tonnages contributing to targets

2.29 Where steel or aluminium cans are recycled in a steel furnace after they have gone through an incinerator, this is, and will continue to be, counted as recycling.

Material-specific recycling target for wood

2.30 The wood recycling industry in the UK has proposed to the Government that wood should have a minimum recycling target in the same way as other materials do in the Regulations. They have said that the absence of such a target alongside the minimum target for paper, plastic, glass, aluminium and steel, has stifled investment and there appear to be examples of investment that could have been put in had there been greater certainty about the level of wood recycling being aimed for. The Government is sympathetic to the industry in its wish to see wood treated in the same way as other packaging materials, and participate in the PRN market in the same way, i.e. on the basis of a minimum target level to be met, plus residual recovery. Given the European Parliament's Second Reading vote, the new Directive targets are very likely to include a 15% material-specific recycling target for wood. There would therefore be a material-specific business recycling target for wood in the UK Regulations too.

2.31 However, the level of wood business recycling target to be set in the Regulations needs to be discussed. In 2002, wood packaging waste recycling reached approximately 54% ¹⁴; the target currently in the Common Position is 15% presumably to take account of the fact that some other Member States have low wood recycling rates. However, the UK figure in 2002 is the point of departure for the next set of interim targets leading up to the Directive requirements to be met in 2008. Here, it needs to be remembered that in addition to the material-specific recycling targets, there is an overall recovery figure that will also be challenging. The current estimates for the tonnage of wood packaging waste arising in the waste stream are shown below:

Table 6: wood packaging arising in UK waste stream 2002-2008

2.32 Although the wood recycling target in the Common Position is set at 15%, the UK industry have proposed a target for 2008 of 60%-65% given the fact that this level of target for wood can clearly be easily met from the present 54%. This will be seen as gold-plating the Directive. However, the industry feel that having this level of target could be met with modest investment and that there are significant environmental benefits to be derived from this level of wood packaging waste recycling. Wood packaging is renewable, recyclable and comes from sustainably managed sources; and wood, and the recycling of wood, is a carbon sink.

2.33 The recycling of wood packaging waste into board products (the majority of wood packaging waste recycling is carried out in this way) requires less energy than the conversion of virgin wood and thus an increase in recycling reduces the fossil fuel consumption and CO2 emissions. In addition, the process residues from the recycling process are readily combusted and the energy recovered, markedly reducing fossil fuel consumption and hence greenhouse gas emissions, when compared with the use of virgin wood in the board making process.

2.34 A specific target for wood at around the same level as the other materials would be beneficial in terms of putting wood on the same level as other packaging materials in the PRN market, tightening the market and increasing PRN prices to the level necessary to drive the next level of investment. Without market stimulation low PRN prices for wood will stifle investment, and growth of any significance will not occur. This points to a target which is above the present level of 54% recycling. The Government thinks that a 60% target for 2008 seems a reasonable target for wood packaging waste recycling but would welcome views on this.

Q4: (i) what do you think of the proposed 60% wood packaging waste recycling target for 2008 ?

TARGETS

2.35 Interim targets can be set in a number of ways from 2004 up to 2008. The ACP proposals appear to envisage almost equal increases year on year for each material, with any slight differences probably accounted for by rounding (see Appendix 1). Their wood and, particularly, plastic business targets for 2004 are, however, based on the assumption that the provisional figures for the 2002 achievement were correct. However, the Government's target scenarios take account of adjusted figures as discussed earlier in this chapter. Appendix 3 shows the targets proposed by the ACP applied to the Department's model which is using updated data, including expected additional obligated tonnages from leased and internal supply packaging.

2.36 In the Department's model, the starting point for exemplifying targets is the present level of achievement in each material, and the targets scenarios are designed to achieve the Common Position Directive targets in 2008. There are a number of examples set down below which show various ways of getting from present levels of recycling to those required in 2008. Generally, the business target for 2008 will be dictated by what is necessary to achieve the specified Directive target level; the business target in 2004 will be indicated by what is necessary to stimulate the market but not place too great a requirement on the material in question in 2004. The main area where different approaches are possible will be in the year on year increases between 2004 and 2008.

2.37 Table E1 shows possible business targets and national outcome in terms of the levels of recovery and recycling delivered by these business targets. These assume present levels of energy recovery operations. The scenario in E1 assumes 550,000 tonnes of Energy from Waste in 2004 - ie. a reduction from 2002 and probably also 2003. If the rules on including all methods of incineration were to remain as they are now, and if the overall 55% recycling target is to be met, we can use only some 500,000 tonnes in 2008. We need, therefore to use diminishing amounts in subsequent years as follows - a maximum of 530,000 t in 2005; of 510,000 t in 2006; and of 506,000 t in 2007 and 2008. This means that of a producer's total overall recovery obligation, recycling must make up at least 91% in 2004 and 2005 and 92% in 2006, 2007 and 2008.

Table E1- Business targets - Common Position targets and 2008 deadline.

* these targets deliver the 50% target - 50.9%

This scenario delivers 53,191 tonnes of aluminium recycling and 360,388 tonnes of steel recycling which together deliver 413,579 tonnes or 50.9% against the metals target of 50%.

2.38 Glass targets are difficult to set, because the increase to be achieved is so significant and there are arguments in favour of a relatively easy start in order to get the necessary infrastructure in place. There is one example in Table E1 which takes this approach. However, glass targets could be set differently - see those shown in Table E1a below which start with a slightly higher target in 2004, and then follow with business targets which deliver relatively even increases year on year (in 2004-2008 these are +5.5%/ +5.15%/+6%/+5.15%/+5.15%).

Table E1a - glass

2.39 It is also possible to vary the targets on aluminium and steel provided that both together achieve the 50% metals target. The example in Table E1 allows the UK to achieve just over the target level (50.9%) but this may not be the best distribution as between steel and aluminium in relation to extracting waste from the household waste stream.

2.40 A different approach is shown in Table E1b . The Government would welcome views on the fairest way of apportioning business targets as between aluminium and steel so that both together achieve the required 50% in 2008.

Table E1b aluminium and steel

Achieves 51% for metals

2.41 In the above exemplifications, the following are the amounts of EfW assumed to be used to contribute to the achievement of the recovery targets -

2.42 A further table, E2, is shown below which also aims for the Common Position targets in 2008, but it assumes that the rules have changed in terms of what incineration operations can be used as recovery operations to meet the packaging Directive recovery targets. This scenario assumes the EfW figures in Table 5 at paragraph 2.28 above (and repeated below) because we can at this stage only assume a limited amount of growth in the permitted recovery operations. However, the Government would welcome comments on this assumption in growth of RDF and co-incineration with energy recovery.

2.43 The main difference the change in approach to incineration operations would make is to the proportion of the overall recovery obligation that has to be discharged through recycling - in this exemplification in table E2 , 99% of the recovery obligation would have to be done through recycling since we are assuming only some 89,000 tonnes of EfW and RDF in 2008. There will also, therefore, be concomitant differences in the costs of compliance since there is a reduction in the incineration that can be used towards meeting targets. The cost implications are shown in the accompanying mini-Regulatory Impact Assessment on the targets.

Table E2 - business targets - to meet 2008 deadline, 60% recovery, 55% recycling Directive targets

* these targets deliver the 50% target - 50%

2.44 Although the target for recycling in the Directive is 55%, if the Commission's new ruling on energy recovery came into effect in 2004, and given the likely available amount of permitted energy recovery operations, we would have to do around 99% of the recovery obligation each year including 2008 through recycling, hence the figure of 59.7% recycling in 2008 for example in the penultimate row in the second table above. The amounts of EfW and RDF assumed to contribute to the recovery target in this exemplification are those shown in paragraph 2.42 above.

Q5: views are invited on the targets scenarios shown above, in particular, on the pattern of year-on-year increase to meet the final year achievement (for which the business target shown is likely to be fixed).

Q5A: views are also invited on the targets which might have to be set if the changes to what is permissible in terms of energy recovery were to come into force (i.e.Table E2 above).

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