Mandatory Deposit on drinkpackages in Estonia – Why and How?

Backgrounds and results

8.12.2008

Peeter EekWaste Department,

Ministry of the Environmentpeeter.eek@envir.ee

Main considerations of Packaging act(2004)

- principle of ‘Complete producer responsibility’- different solutions for the packaging of low-alcohol beverages and soft drinks (deposit) and “other sales packaging”- obligation to collect i.e. the seller of the goods is obliged to take back free of charge from the consumer the sales packages and packaging waste of the goods at the sales point or its immediate vicinity. - The packaging undertakings may transfer this obligation(other than the deposit packaging) by joining Recovery Organisation who is responsible for collection of packaging and packaging waste from the consumers and its recovery or disposal.- Deposit for beverage packaging: deposit value is added to the price of packaging and consumer will get it back if he/she returns the packaging to the collection point. The packaging covered with deposit must have a respective labelling

Producer Responsibility Organisations* Deposit system (1 PRO) for beverage containers (one-

way and refillable glass, PET, Al containers)- Turnover 2007 ca 17 M€* Multi-material/container based collection schemes (2

PROs) for the rest of packaging waste- Turnover on 2007 – ca 8 M€

There is a sharp competition between two container basedcollection schemes (two additional aplications are in

process!)

PRO – 'freedom to chose' for producer, more client orientedapproach by PRO-s, considered to reduce recovery feesCONTRA – neglectance to enlarge collection scheme tothe Rural areas, minimum PR-work !!!(which is extremely important to influence consumers!)Increase of costs due to ovelapping of collections systems

Packaging Excise Duty and Recoverycosts for Producers

The packaging excise duty must be paid only for the amount of packaging material that is missing from the foreseen recovery target.

Material Kroons/kg EUR/kgGlass and ceramics 10 0,64Plastic 40 2,56Metal 40 2,56

20 1,28

Other 20 1,28

Paper and cardboard, incl. layered cardboard

Service fees- ETO 'Green Dot' systemSales packaging EEK/kg EURO/kgGlass and ceramics 1,6 0,1Paper and carton, including beverage carton (for milk) 1,65 0,11Beverage carton 6,4 0,41Plastic 6,4 0,41Metal 4 0,26Wood 0,64 0,04

Transport and group packagingPaper, carton, corrugated board 1,65 0,11Plastic 1,9 0,12Metal 2 0,13Wood 0,64 0,04VAT will be added to the service fees in amount of 18%

Why Deposit system? - Estonian example

own 'strong and positive experience' (until 1990-s)- market-driven take-back system with 60 % recovery target

was difficult to monitor and un-equal for the consumers as offered service on towns and cities only

- as 50 % from population lives in tree bigger City's, then largeCountry-side areas was still 'under the continuous fall of

beverage packaging waste'- fast and strong changes and differentiation in attitudes –

towards more consuming- oriented and less environment oriented behaviour 'We want growth of economy, but not to deal with waste' !

Hesitation on introduction of the Deposit system?

- Yes,as undoubtedly more challenging legally, technically

etc.- high disputes until ECJ on German deposit case until

2004 (14 December 2004, Case C-309/02)- opposition by many market forces (but some were

supportive too)BUTas examples recovery rates up to 90 % in 'other deposit

schemes'- pre-condition to keep refillable's on the market and toavoid packaging waste- expectation by major part of the population, that a'normal situation will be restored and some

money will be paid for bottles again'

EU- Judjements:

In its judgments on deposit systems for non-reusable beverage packaging, the European Court of Justice has stated that as Community Law stands Member States can in principle chose between a deposit and return system, a global packaging-collection system or a combination of the two systems (judgments of 14 December 2004 in case C-309/02 and in case C-463/01).

However, where a Member State opts for a deposit andreturn system, certain conditions have to be met in

order for the system to comply with the provisions of Directive 94/62/EC and Articles 28-30 of the EC Treaty. Those conditions relate to the actual operation of the system as well as the transitional phase between the old and new systems.

Basic Conditions:1)Secure free flow of goods, no distortion of trade2)Avoid cross material subsidy3) Equal terms for all producers – disregarding size

and volume4)Accessible for all producersComply with EU and local anti-trust legislations and

standards5) Retail take back obligation – retail handlingcompensation may be compensated based on pure

cost6) 'Third party' (= non-retailers) take back entities

does not have any legal obligations nor rights7) Nationwide coverage of return points8) Obligation to Producers to build consumer

awareness and trust9) State has to establish enforcement system

Basic Conditions: Estonian packaging Act

Deposit Organisation should be non-profit nature(although a Company)Only Producers (those, who pay) and retailers (those, who have

obligation for take -back) are entitled to establish and control such a organisation

This is a practically only way to ensure effective control over relatively huge turnover of Deposit Company and to build a model, where justified fees for producers on cost-covering compensations for retailers are decided.

According to Estonian packaging act are the retailers obliged to sell deposit packages with deposit – but it's not compulsory to join to system and put the market only packages with label of the Deposit system – practically it's nearly impossible not to participate, but legally it's possible – and this is important!

Deposit levelDeposit level to be set at a 'reasonable level' – shall

not discourage the consumers from buying products, nor driving consumer cost

Fixed deposit level throughout the value chain –including consumer refund (free of charge forConsumers)

Deposit system excludes VAT throughout the whole value chain

Deposit level to be approved by Miniter of the Environment – based on producers’ recommendations

Operation:

No dividend nor profit organization – strictly regulated –

all cash surplus or profit shall remain in the deposit

system for further investments to reduce consumer cost

impact

Unredeemed deposit remains in deposit organization

- Clear definition of obligations and rights to all

stakeholders in the deposit system value chain

(producers, take back points/retailers, consumers)

Definitions

What packages (including size and materials) and

products belong to the deposit system- In Estonia all no- and low alcoholic beverages an

beers, ciders and perrys in plastic and glass bottles

and metal cans are obliged to be sold with deposit.

Roles and functions to be described for producers,

retailers, consumers and deposit organization

Deposit Marking

Deposit rates

1 kroon (0,06 €) for glass, plastic(PET) > 0,5 l

0,5 kroon (0,03 €) metal cans, plastic until 0,5 l incl.

High or Low?Views differentiate, but generally

accepted

Deposit rates adopted by Minister of the Environment based on the proposal of the Producers

Deposit rates II

Should the deposit rate be Higher?

PRO: Higher Deposit rate could

contribute for higher return rate

CON: Higher rates could raise as

well accusation on influence on market

AND

Motivate faking and cross-border traffic,

where possible

Retail handling Fee 2007-2008 (Deposit packaging Take-back compensation for retailers, paid by Deposit Organisation )

EUR0,27 0,017

0,44 0,028

Per unit – 2007-2008Compensation KroonsManualReverse vending machines – RVM

Compencation fees are agreed between Retailers Association, Deposite company and Producers

It's not a task or right of the Government or ministry – involvment to this Question would be 'endless' Higher compensation rate for RVM-s is based on fact, that majority of RVM-s can 'press the packaging', reducing costs for transport and later handling

Retail handling Fee 2009-2010 (Deposit packaging Take-back compensation for retailers, paid by Deposit Organisation )

Euro0,12 0,00770,3 0,0190

0,42 0,02700,4 0,0256

New Retail handling fees for 2009-2010 adopted kroonsmanual take backRVM unpressedRVM pressed over 50 %RVM Refillables

Deposit system – results

Initial Starting investments – ca 4 M€ (counting Centre etc)

ca 200 RVM so far (Reverse Vending Machines) – by Retailers ca 4 M€ - covered with 'take back compensation'

One-way package 2007 actual Requirement by

law 2007

Sales, million units 298

Return, million units 204

Plastic pottle PET return rate 90% 65%

CAN return rate 48% 40%

OWG (one-way glass) return rate 72% 65%

Deposit Company – Eesti Pandipakend* 95% of consumers are aware of the deposit system(81% think, that it is important to return containers)* 65% of consumers return regularly containersto a collection point/retailer* People of 'low-income' are very active to collect alldeposit packages on all setlements – support to thesocial care system?* Producers satisfied with the system, as bydirect costs even cheaper, then container collection* but if the return rate will rise more, then producers fees

will riseComparison (2007 study)* Only 23 % of consumers returns regularly'ordinary packaging waste', 53% does it 'nearlynever'

Packaging Recovery costs for Producers-

Is the Deposit system more expensive for the Producers or not?

Metal 4 0,266,45 0,411,65 0,11

0,000 0 0,02 0 00,240 0,015 0,04 0,03 0,420,240 0,015 0,3 0 0,050,000 0,000 0,300

Multi-material recovery fees per kg for sales packaging in container collection Recovery Organisations

Material Kroons EUR/kg

PlasticGlas

Service fees in Deposite sytem

Type of the Packaging/MaterialKroons per packaging

Servise fee EUR/packaging

Average weight of packaging, kg

Service fee Kroons/kg

Service fee EUR/kg

Metal canPlastic bottle PETOW-glasRefill-glass

Packaging Recovery costs for Producers-Is the Deposit system more expensive for

the Producers or not? II

The costs are subject of changes – of course

To compare the cost is important as well, that the Deposit Company is runned 'totally on own costs', while container collection schemes are benefiting from sorting facilities, financially supported by state, also there are still in use part of containers, which are municipal i.e. not full costs for producers

On Container collector side there is clear lack of collection points and public information- from 2009 there will be higher recovery targets – all those will rise as well costs for container collection never'

Under Discussion- Deposit packagingtake-back....

Take-back obligations needs better regulation and as wellSupervision

Amendments to the Packaging act 2008: will come to force 2009

retailers > 200 m2 take back mandatory on retailer shop area

retailers 200-20 m2 – with the agreement of local municipality could be organised outside

retailers < 20 m2 – no take-back obligationsDeposit value, if change of the currency to EURO (expected

2011-12?)

Discussions about second deposit organisation – opinions differ...

“Take-back obligation is a burden” - Retailers“Why only those packages and not wine etc. bottles or

even juice and milk cartons” ? - Consumers

Counting Center of Deposit system

Counting Center of Deposit system

Material Quality issue – Deposit packaging PET

Material Quality issue – Non-deposit PET

Glas- Deposit system

Mixed glas from containers

Lessons learned – keys to fix

No trusting (unlike Scandinavian culture) – weak controlling gives quick setbacks

Key - efficient controlling to be implemented covering all areas (sales, collection)

Sales reporting – inadequate controlling gives room for fraud (read underreporting)

Key – operative and automated sales and return report to be implemented, regular audits to be conducted

RVM reglementation – if not started with right setting, fraud emergesKey – RVMs and collection points minimum specifications to be fixed

and controlled.

EAN code rules – pan-Baltic code will give massive crossboarder risk

Key – unique (country based) code to be implemented immediately

Some ConclusionsDeposit system is effective, is well understood by

consumers, and is proven in Estonia even ascheaper solution for drink packages

The Non-Profit nature is important, as structure onDeposit Organisation (Company), to take 'on board'all parties involved

Retailers do not welcome deposit system, as take-backin retailers shops is actually unavoidable andthis is not welcomed by Retailers- although byreasonable take-back compensation and normallogistics not a real burden for them

Quality of materials for recovery is remarkably better,as is the recovery rate, in comparison with thecontainer collection

Some Warm AdvicesThe Deposit Company, under the clear ownershipand control of producers and retailers on non-profitprinciple is crucial for success

The implementation of mandatory Deposit could goonly trough the Packaging legislation (transposingEU Packaging Directive) and should be communicated to

EU before adoption

At least 1 y is needed for real implementation

AND Clear political carriage to keep it all under transparent

conditions – the turnover of possible deposit company in Latvia (analogue to Estonian EPP) would be ca 30 MEUR!

Thank You !

peeter.eek@envir.ee