EPR Summit III Overview

Extended Producer Responsibility
Dialogue III

Strategy for Packaging EPR
Meeting Overview

Pew Charitable Trusts
Washington, DC

December 1, 2011

THE FUTURE 500 | (415) 294-7775 | www.future500.org

Group Vision
We envision an approach to recycling that will:
 Advance energy independence while fighting climate change
 Reduce overall volume of waste generated
 Help free us from oil addiction
 Foster innovation in packaging
 Grow domestic manufacturing, creating jobs and profits
 Increase domestic/local availability of
recycled material for manufacturing sector
 Respond to the changing fiscal climate
 Lower municipal costs and shift burden off taxpayers
 Internalize environmental costs –
to privatize costs, not just subsidize them with public $


The Objective

―To implement a strategy to develop and promote model
multi-material packaging and printed paper EPR policy in
non-deposit states that will increase the volume of
recyclables collected in a more economically-efficient
manner”


Core (Policy) Principles

To be economically, politically, and environmentally viable, EPR
policy needs to reflect three shared principles:

1. Internalize Costs — When pollution and waste costs are externalized,
pollution and waste increases. But when the costs are internalized, businesses
and consumers implement the most cost-effective means of achieving the
desired outcomes.

2. Brand Owner Financing — Because brand owners make front-end
design decisions, they are best positioned to pay the external costs, and have
the best opportunity and incentive to reduce them.

3. Brand Owner Management — Government may set the
performance standards, monitor progress and create a level playing field for
EPR, but brand owners are best positioned to design and manage the program
to achieve those goals.


Goals
Preliminary goals include (but not limited to):

1. Policy must meet the three core principles: cost
internalization, brand-owner financing, and brand-owner
management.
2. Address packaging and printed paper. Need
mechanisms to build markets for recyclable materials that
currently don’t have markets.
3. Achieve high rates and quality, to meet the needs of the
materials sector: aluminum (75%), glass, plastic, and
paper.
4. Closed loop system – keep enough volume in domestic
market to serve as raw materials for new packaging.


Process
The group favors:
 An action-oriented process focused on implementation
‒ Potential of pilot programs or individual producer responsibility to
test EPR for companies – eliminate fear of unknown
 Outcomes that provide benefits to all stakeholders
‒ We must make a strong business case
‒ Sort out top-line environmental and public benefits
 Draft state-specific legislation using group-produced ―standard‖ or
―model‖ bill
 Focus on improving recycling systems and rates

Key barriers:
 Need more research to prove benefits in order to convince those on
the fence
‒ Modeling benefits and costs could aid outreach
 Streamline efforts in this space to optimize gains
‒ Clarity on terminology & basics of EPR for whole group


State Overview
Data Foundation: Paul Gardner’s state analysis

▪ FOUR PRIORITY STATES IDENTIFIED: Maryland, North
Carolina, Washington, Minnesota.

 BEGAN W/SIX PROSPECTIVE STATES: Maryland, Minnesota,
New Jersey, North Carolina, Pennsylvania, and Washington.

 FILTERED TO PRIORITY STATES FOR FURTHER RESEARCH:
-Pennsylvania was eliminated due to focus on fracking
-New Jersey put on the back burner for now because we have a
good set of states above, and there are no known local ―heavy
lifters‖ interested in advancing EPR

 OTHER STATES TO CONSIDER: Rhode Island and Delaware


National Strategy
Key comments from discussion:
 Advance state strategies while keeping in mind national goals
 Be mindful of working with local stakeholders: transparent process with
organic stakeholder support
 Push for EPR at the right time, in the right state
 Must be replicable in other states
 Proposed state legislative working group
 Shouldn’t take our eye off of what is happening in Vermont
 Lengthy discussion on Voluntary Producer Responsibility (VPR)/pilot
programs in states
‒ Could demonstrate how this would work to business
‒ Help to relationship build at the local level
‒ Bottomline: Means to an end - Pilot/VPR programs can be very
helpful, but not the purpose of this discussion.
Proposed Timeline:
2012: Education, Pilots, study-generating bills/hearings, possible
legislation
2013-2014: Legislation + State-led Campaigns
2015: Materials can begin to flow

Key Takeaways

 Draft a ―model‖ or ―standard‖ bill, including definitions, and a
brief white paper developing the case for EPR
 EPR can reduce net disposal costs, and some of the savings
will accrue to businesses – we need to minimize as much as
possible burden on brand owners
 Explore how we can test EPR and develop a strategic timeline
 Continue to engage brand owners and other strategic
stakeholders, and to seek commitments to the coalition along
with funds and resources
 Outreach for funds and resources
 Strategic project sub-groups to report back to broader group
at next meeting


Group Next Steps
1. Future 500-led team will draft a “model” bill along with fact sheets
developing case for EPR to business, govt and individuals
2. Develop research agenda
- Evidence of cost-savings to taxpayers from existing programs?
- What combination of state laws and/or other aggressive recovery strategies
will it take to get to national 60%/70%/80% packaging recovery rates and
maximize economic value
- Harmonizing of policies
- Identify EPR best practice cases: Potential lessons from existing systems (esp.
Canadian)
- In target states: identify system improvements needed along with likely capital
and operating costs and benefits
3. Identify issue-focused working groups: messaging, research, outreach,
legislative, others?
-Goals/deliverables
-Participant roles and responsibilities & timeline
4. Conference call/webinar
5. Plan Dialogue IV, location TBD
6. Identify if and when to invite other strategic members


Appendix


EPR Dialogue III is the third inner-circle meeting with a wider
set of stakeholder participants. The meeting was convened to
further develop:

Vision
Objective
Goals
Core Principles
EPR Legislation/Policy Platform
National Strategy
Next Steps


Group Work to Date: 2011

In-Person Meetings
 EPR Dialogue I – New York, 6/16
 EPR Dialogue II – Atlanta, 8/24
 EPR Dialogue III – DC, 12/1
Calls
 EPR Teleconference -3/23
 Policy Webinar – 10/18
 State Webinar – 10/20

----------------------------------
Our group is unique in that we are:
1. Highly transparent
2. Goal: state legislation
3. Bottom up, not top down approach


Discussion Notes:
Policy Options for EPR Legislation


“Standard” Features
Issue 1: Producers pay 100% of EPR costs through material fees
‒ Text revision: Add ―and have management responsibility‖
‒ Explicitly incorporate net recycling costs – not just disposal.
‒ Clarify that the Packaging Recovery Organization (PRO) is not going to
own the commodity. It’s a reimbursement system.
‒ No micro-management by state gov’t – selling point.
‒ Costs vs. fees: How do we determine the net costs? -- Each material
is looked at separately (example: Ontario)
‒ Standards: Under full responsibility, the performance standards must
be met by the service provider, set by the private sector – program
design should address quality control (lower fees for cleaner
materials) while getting politics out of pricing.
‒ Boundary Definition: household versus commercial/industrial
obligations? Household typically gets more buy-in (revisit in
teleconference).


Issue 1: Producers pay 100% of EPR costs through material fees
(Cont…)

‒ Messaging: How do we sell this to companies who didn’t pay at all and
now your asking them to pay 100%? We must translate this
language into the language that will appeal to them—i.e., CONTROL is
the key.
‒ Heterogeneity: How are community values taken in to account?
‒ Markets: Many localities are worried that we are creating material to
be manufactured abroad.
‒ Long-term: Are we talking about reconfiguring how the collection
actually happens?
‒ Innovation: System must be adaptable, allowing for new materials.


Issue 2: Authorize creation of a stewardship organization

‒ Discussion on one or multiple organizations
 Let the producers decide (generally agreed)
 Case for multiple: We don’t want to stifle innovation
 Case against multiple: Extra bureaucracy, increase against free
riders, competitive systems cause difficulties, less efficient
 If multiple, set basic principles up front (similar to EU)
‒ Time limits: reauthorization after a number of years.
‒ Independent Producer Responsibility: need to be able to incorporate
this.
‒ Guidelines/Timelines: Require stakeholder input at all stages
‒ Statutory versus stewardship planning organization.
‒ Harmonization: with existing systems at retailer level


Issue 3: Producers internalize costs

‒ Retailers: Huge need for cost transparency
 The increase in price can be seen as the transparency. Free market
principles must include life-cycle costs of product.
‒ Labeling: mandatory versus voluntary.
 Retailers should retain the right to publish fees associated with EPR.
‒ Internalization: Effort of calculating the fee on every register is impossible and
retailers will flip out.
‒ Value of visible fees: tells the consumer what they are being charged for—that
generates dialogue among stakeholders.
 Government officials prefer to have it invisible
‒ Concern that this becomes a regressive tax: must convince citizens how this
reduces costs they bear for municipal services
‒ Distinction between end of life fee and costs – cost is precise term.
‒ Preference for materials that are already well-recycled? Exemptions?


“Pick One” Features
Issue 1: Prohibit sale of non-compliance brands unless first
importers can be responsible for those brands (note: text
change)

‒ Easier on the retailer: should help with alliance building
‒ If no brand owner in the state, then falls to first importer
‒ Enforcement: Some sort of registration requirement
‒ Once you become a steward, you are good across the system
‒ The state agency should retain oversight responsibility
‒ Defective goods: foreign manufacturers issue
 Need legal help on this—who owns waste? Commerce clause
issues/anti-trust issues. This needs to be addressed at a higher
level (teleconference agenda).
 Any Constitutional issues must be addressed as well


Issue 2: Measure recovery at curb OR measure recycling that exits the
MRFs

‒ This is a quality control issue
‒ States like California have diversion goals. If you’re diverting, you’re land
filling. We need recyclability. Collection vs. recycling?
 Measure this post-Materials Recovery Facility so you know where it goes.
‒ Let the state make the recycling goal—must match state policies.
‒ Members of the TPOs are the highest payers—they are inherently interested
in improving value once parameters are set
‒ Correlation between quality and cost. In Canada, recycling rates are built in,
ie there is a defined economic incentive. Incentives built in to the fee
structure = greater recycling and quality.
‒ Definitions and terminology must be ironed out
‒ If you want industry buy in, you have to convince them that they are going
to get more, clean material.


Issue 3: State sets recycling goals by commodity OR state sets one
overall recycling goal?

‒ VT legislation has an overall goal
‒ Overall recycling goals contribute to the recycling to other things with a
better overall profile. Generates environmental benefits.
‒ Minimum/maximum recycling targets embedded in definition
‒ If you set the fees correctly, you get the recycling goals
 Does this change design/what is put on the market?
‒ Commodity by commodity would be difficult for the state to set, but are
important.
‒ Fee for the things not recycled – can iron out details later.
 Some products just shouldn’t be recycled
‒ Container issue—cost is drastically different from int’l and nat’l

Issue 4: Specify covered products in statute OR specify covered
products at agency level
‒ What are our definitions/parameters of packaging and printed paper


Due to time constraints, these issues were not
discussed in depth:

Standard Features
 Issue 4: Require small payment by consortium to state to
administer program – administration fee
 Issue 5: Impose penalties for producers that do not participate
Optional Features
 Permit anti-trust exemption among producers for EPR
 Addressing public sector for stranded assets
 Ban disposal of recyclables after system set up
 Compensate public sector for stranded assets by grandfathering in
existing contracts at time of implementation
 Require consultation process with producers & other stakeholders
 Standards of service: Options 1-7 in Menu of Options handout

*These items will be discussed in smaller working groups or on a group webinar


Key Concluding Comments
 Good discussion and lively, constructive sharing of ideas. Very high-
level conversation.
 Size of the group:
-Not enough ―key players‖ – retailers and consumer package
goods companies (CPGs)
-Need to be transparent and open the group up to others
-This is too big to be a working group
-Could serve as an advisory panel
 Streamline the process: Don’t reinvent the wheel
-Need more expertise in the room on niche issues
-State-specific shallow dives with data that does exist
-Use already existing on the ground knowledge
 We NEED to get to legislation. Bridging that gap between what we’re
saying and what it looks like on paper
 Honest discussion of where each member stands, what are their
issues and what are the obstacles (Buy-in from people in the room)
 Let’s not lose sight of the environmental benefits to EPR, this puts us
on the offensive


Key Concluding Comments (cont.)
 We need to establish a strategy: game theory political and industry
obstacles, define our path going forward.
 We need a timeline: model legislation in hand can motivate some
laggards.
 Urgent Need: messaging for business and state benefits case
-States need numbers, figures, defined modeling.
 Avoid over-promising to companies, allow them to be constructive
participants
 Action-oriented approach separates our group from others
 Next stage requires more data on how EPR works in practice. This
requires funding. Who will step up?
 Outreach
-Smaller team should splinter off and work on pitches to targeted
groups: mills, manufacturers, CPGs, grocers
-Must be targeted: pick a state, find the proper coalition
-Also labor groups’ benefits: how do we talk to workers about the
issue?


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335 Powell Street, San Francisco, CA 94102
(415) 294-7775 www.future500.org


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