If you survived Part I of this article, you now know that Nova Scotia marked an anniversary last week: it’s been one year since the Nova Scotia solid waste-resource management regional chairs committee presented a proposal for Extended Producer Responsibility for Packaging and Printed Paper (EPR for PPP) to Environment Minister Gordon Wilson.
Having traveled back in time to 1996 and reveled awhile in Nova Scotia’s former reputation as a world leader in solid-waste management, we must now come to grips with the proposal this article is supposedly about: EPR for PPP.
First of all, EPR for PPP is not a new idea — it was first introduced by Germany in 1991 and was soon after adopted across the European Union.
And as I touched on in Part I, it’s not even new in Canada: it was included in the Canadian Council of Ministers of the Environment’s (CCME) Action Plan for Producer Responsibility in 2009.
CCME wanted a “harmonized” approach to EPR but acknowledged that:
Responsibilities for many products and product categories will fall exclusively within the legislative mandates of provinces and territories and under their authorities to manage municipal solid waste. For example packaging and printed papers fall exclusively within the legislative responsibility of provincial governments and territories. In these cases harmonization and consistency will be built around jurisdiction’s working cooperatively together to regulate and manage similar products in a similar way. Industry stewards have a significant capacity to link programs which are regulated by separate jurisdictions through the use of common fee structures, administration functions and promotional activity.
Rather than harmonizing, the provinces have been singing EPR for PPP solos that range from British Columbia’s 100% EPR system (adopted in May 2014) to Nova Scotia’s lack of any system at all. (Nova Scotia doesn’t even have a harmonious approach to PPP within its own borders with different municipalities collecting different materials in their blue bags.)
The EPR for PPP proposal presented by the regional chairs committee is modeled after the program in British Columbia which is the only full EPR program in the country (although Ontario and Quebec are both in the process of shifting towards full EPR).
For a good (if perhaps a tad too rah-rah) explanation of each of the provincial EPR for PPP programs in Canada, see this March 2020 Product Stewardship Institute report on EPR for PPP. For my purposes, I am probably just going to focus on British Columbia, with the help of a rather critical analysis of that system produced for the West Coast Refuse & Recycling Coalition (WCRRC) in 2019 by solid waste consultant Chaz Miller.
I’m also going to look at the proposal in terms of what AECOM, the consulting firm, calls the “Triple Bottom Line,’ which I initially thought was something only drunk accountants could see but which actually refers to “costs, jobs, environment.”
We’ll start with costs.
Incentives
The regional chairs claim that following BC’s example and fully shifting responsibility for recycling PPP to producers will save Nova Scotian municipalities money.
In 2015, Bob Kenney, recycling development officer with the NS Department of the Environment, estimated a full EPR system would provide $14-$17 million per year in value (i.e. revenues and removed municipal costs) based on the value received by municipalities in other provinces with regulated EPR for PPP. (By way of comparison, in its 2019 resolution supporting EPR for PPP, the Nova Scotia Federation of Municipalities estimated its 50 members spent a collective $25 million annually on residential recycling programs.)
If our system follows the British Columbia example, what will happen is that designated producers will form a not-for-profit Producer Responsibility Organization or PRO. (BC allows producers to establish their own plans to collect and recycle their share of PPP, but few have done so — beer packaging is an exception.) BC’s PRO for PPP was initially called Multi-Material British Columbia but is now know as Recycle British Columbia (RBC).
Municipalities will have to adopt a standardized list of recyclable materials. The Nova Scotia proposal states:
Nova Scotians are currently able to recycle a wide variety of waste products including paper, plastic containers, metals, glass, film wrap and much more. Under an EPR for PPP approach, industry should be required to collect and recycle the majority of the products currently handled by municipalities.
The proposal references something called the National Material List, a creation of the Canadian Stewardship Services Alliance (“a national, not-for-profit organization, founded in 2012 to provide efficient administrative and management services that are common to all stewardship programs”) but the link to the list is not functioning.
Next, according to a description of the BC system written by Usman Valiante, who was involved in its design and development:
[L]ocal governments can choose to accept…financial incentives to collect a province-wide standardized list of recyclables from single-family homes, multi-family buildings and depots or they can choose to turn over the entire collection system to [RBC] whereby [RBC] will tender for collection services using private contractors.
Local governments have a third choice – they can choose the status quo whereby they continue to operate their recycling programs without any interaction with [RBC] whatsoever and at the continued expense of their local ratepayers.
Those incentive fees are calculated by the PRO based on what it considers “reasonable costs” and have proved problematic for some BC municipalities, according to Miller. The City of Vancouver, for example, is on the record stating that it turned its collection services over to RBC because “its costs were outpacing RBC payments by $4 million,” and a number of other municipalities that continue to handle their own collection are apparently not happy with the fees. Miller argues this should come as no surprise because:
Producer groups, whether in Europe or North America, don’t cover the “full” cost of a recycling program for a simple reason. They want to keep costs down . As a result, they will decide what a reasonable cost is and pay accordingly.
RBC provides curbside and multi-family residential service to 71% of the British Columbia population and depot access to 98% of the population. According to the EPR for PPP proposal for NS:
Industry must maintain or improve curbside level of service. One hundred per cent of Nova Scotians have access to a curbside collection program and that must continue under an EPR for PPP program.
I’m not sure how industry can improve on 100% curbside access but I’m open to watching them try.
Fees
Funding for BC’s PPP recycling program comes from the fees BC producers pay RBC. These are based on the type and volume of materials the companies generate. Here’s the latest fee schedule from the RBC website:
Some small business, low-volume producers are permitted to pay a flat fee, which means they are not required to keep detailed data on materials:
Others, as we’ll see in a moment, are exempted entirely.
In a typical EPR, according to the CCME, these fees are:
…internalized as a factor of production of the product – i.e., the costs for end-of-life management of products should be treated similarly to other factors of production (such as manufacturing, distribution, marketing and sales) and incorporated into wholesale and retail product prices.
I honestly thought this was a good thing, but Miller sees it as a problem:
Theoretically, consumers will notice higher costs for products under EPR and will change their purchasing decisions to reward products with lower stewardship costs. However, in practice, those costs are simply hidden in the purchase price of the product, making it impossible for consumers to compare environmental costs among different products.
But there’s another twist to this argument that gives ammunition to the regional chairs committee. Miller says that BC residents living in communities receiving insufficient incentive fees are paying twice for recycling — once through their taxes and a second time when they buy the products with these internalized costs.
The regional chairs committee argues that Nova Scotian consumers are doing that already:
Municipal taxpayers are paying twice. 80% of Canadians live in a province with EPR for PPP and producers incorporate their costs into their national product pricing. Nova Scotia consumers are paying for PPP products at the checkout and paying for collection and disposal of these products by way of taxation.
The committee illustrates this with a chart:
One of the most vociferous critics of the EPR for PPP in this province (judging by his letter in the “response from business” section of the proposal), is Sean C. Murray, president and CEO of the Advocate printing company. He takes particular exception to this argument that Nova Scotians are subsidizing recycling elsewhere:
Corporate supply chains and pricing structures are complex with many variables…Having worked with retailers and consumer goods companies for decades, it is obvious that manufacturers and retailers have differing costs by region. In Nova Scotia and Atlantic Canada, our rural nature and distance from most manufacturers impacts logistics and distribution costs for products. For companies with locations in Nova Scotia, our upper quartile municipal taxes, corporate taxes and income taxes also have an effect on the cost to deliver products in Nova Scotia.
So, Walmart is setting the price for Crest toothpaste on a province-by-province basis, and a diagram of the provincial pricing structures would show a variety of complexities and variables, utterly different in British Columbia than in Nova Scotia, and yet, miraculously the end result — the price of a tube of Crest — turns out to be precisely $1.38 everywhere?
I’m not buying it.
Free riders
Most EPR systems recognize that the fees could prove burdensome to small businesses and take steps to accommodate them. The BC Ministry of the Environment has exempted some categories of small business from “the obligation to assume responsibility for the recycling of their packaging and printed paper.”
Four categories of small business can claim exemptions:
- Businesses that have less than $1 million in annual revenues;
- Businesses that supply less than 1,000 kg (one tonne) of packaging and paper product to BC residents; or
- Businesses that operate as a single point of retail sale and are not supplied or operated as part of a franchise, a chain or under a banner; or
- Are a registered charity.
The proposal put forward by the regional chairs for Nova Scotia exempts the following small businesses:
- With revenue under $2 million
- Supplying less than 1 tonne of PPP to Nova Scotia residents annually
- Single storefront in Nova Scotia and are not supplied by or operated as part of a franchise
- Newspapers (not including flyers) and registered charities
The Retail Council of Canada (RCC) has a problem with this, as expressed in a letter attached to the EPR proposal:
[S]ome of the provincial governments with PPP programs do not seem to understand the inherent unfairness involved in offering blanket exemptions from the PPP program to small businesses. These provincial governments have made the misguided decision to exempt businesses from participating in a PPP program based on revenue thresholds which are so high that virtually every business is exempted. Respectfully, your committee has taken a similar approach in proposing an exemption for businesses with revenues under $2 million. Your committee notes that there are over 72,000 businesses in Nova Scotia. Under your committee’s proposal, only 250 of the province’s 72,000 businesses would be forced to pay for the overall costs of Nova Scotia’s PPP program. Under this proposed approach, all other businesses would be ‘free riders’ who would have little incentive to consider their company’s environmental footprint. This approach would be inherently unfair to RCC’s mid/large members. RCC’s mid/large member category consists of the retailers who are primarily responsible for the Nova Scotia retail sector being the number one private sector employer in the province. These retailers are not opposed to paying their fair share in a PPP program but there is no justification for any government to assume that it would be fair for so few businesses to pay for so many.
I should note that the de minimus (a term I just learned) small business revenue policy in Saskatchewan also sets $2 million as the cut-off, as does that in Ontario. In Manitoba, all businesses must register but are exempt from paying if their annual revenues are under $750,000.
The Canadian Federation of Independent Business (CFIB), led by vice-president for Atlantic Canada Jordi Morgan (a former radio and television personality who does not seem ever to have run a small business) apparently has some concerns about EPR for PPP but I can’t tell you what they are because the organization opted to provide comments “directly to government,” rather than submitting them to the committee, so they are not attached to the proposal.
The regional chairs committee acknowledged the potential problem and noted that a lower de minimus would mean fewer free riders “and provide a level playing field” and was “thus strongly encouraged.” The committee said it is “open to further discussion and analysis” of the de minimus threshold.
Environment
The costs associated with packaging and printed paper waste are not just monetary, of course. They include the external, environmental costs associated with their production and disposal — including the costs of landfill, given that, as we discovered in Part I, Nova Scotians continue to send a significant volume of recyclables to landfill sites, which are not just expensive to operate, they are expensive to shut down.
At the time of amalgamation, the CBRM contained six major landfill sites within its boundaries. Two of these were considered to have been closed in the ’90s, but the remaining four — and some smaller sites — continue to figure in the CBRM’s financial statements under “Solid Waste Management Facilities Liabilities.” In its 2018-19 statements, the municipality estimated the cost for “proper monitoring, planning, closure and post closure activities” for these sites at $54 million.
EPR for PPP is being pushed by the NSFM because it will transfer the costs of recycling away from municipalities. But the overarching goal of such programs is supposed to be the creation of a “circular economy” in which plastics and paper are reused and recycled as often as possible before their “final disposition” (often landfill or incineration).
EPR for PPP is supposed to support this in several ways — one, as noted above, is by encouraging consumers to purchase products with lower stewardship costs. Another is by motivating producers to reduce unnecessary packaging and opt for more easily recycled materials.
But Miller, in that 2019 report on British Columbia’s system, says years of EPR for PPP in the European Union has not had this effect, nor, he suggests, will it have the desired effect in BC as long as the current fee structure is in place:
Paper and glass products pay less on a cents per kilogram basis, while plastics pay more. Packages with plastic laminates pay the most. Paper and glass products are likely to pay more on a per unit basis because of their heavier weight. Moreover, given the very lightweight nature of individual plastic products compared to that of printed paper and glass, the difference in total payments is unlikely to cause a switch in products. Countries with packaging EPR programs continue to see increases in flexible packaging with plastic laminates, in spite of the seemingly higher fee. The reality is that savings in production and transportation of those products, along with extended shelf life, easily outweigh the additional costs of EPR fees.
On the other hand, the Canadian Stewardship Services Alliance argues that:
Many of the largest producers that sell products in Nova Scotia are multi-national corporations that have made ambitious global commitments to use only recyclable packaging by 2025; achieve 25% to 30% recycled content in their packaging by 2025; and to support the development of effective/efficient waste management systems. Many of these same businesses are also signatories to ambitious global and national commitments to advance their vision of zero plastic waste/pollution such as most notably The Ellen MacArthur Foundation’s Global Commitment to Eliminate Plastic Pollution at the Source. These producers are dedicated to eliminating unnecessary plastic, ensuring that all plastics are reusable, recyclable or compostable, and recovering and reintegrating plastics in the manufacture of new products
Miller, though, would be quick to point out that it’s in the CSSA’s best interests to be optimistic about the effects of EPR given the extent of its involvement with such programs in this country. In addition to its work with Recycle BC (where it both appoints the board of directors and provides the organization with administrative and technical support worth millions annually):
CSSA also manages the packaging stewardship programs in Manitoba, Ontario and Saskatchewan through its provincial subsidiaries along with an Ontario program for several household hazardous wastes and a national program for oil filters, empty oil containers and antifreeze and empty antifreeze containers.
This is obviously a subject deserving of more consideration and I have to do some additional reading on the latest thinking about EPR for PPP, because there is a factor cited by the regional chairs committee in support of the program that I think is not to be underestimated: public demand to reduce plastic waste — particularly in our oceans.
Nova Scotians, despite our shortcomings as recyclers, have demonstrated an admirable willingness to pay for recycling programs — both through our taxes and through deposit programs — and I can’t imagine we’ll be any less supportive of an EPR for PPP program provided it does what it purports to do.
Next week, then, we’ll look at “Jobs,” I’ll tell you what the province said in answer to my question about the status of the EPR for PPP proposal and I’ll reveal my sources (i.e. I’ll attach some of the documents I’ve relied on for this reporting.)
See you back here on June 24 (which will be, I have just realized, the last regular weekly edition of the Spectator before I go on my bi-weekly summer schedule!)
