THE NATIONAL PACKAGING COVENANT – LESSONS FROM EUROPE

1. THE NATIONAL PACKAGING COVENANT – LESSONS FROM EUROPE Packaging Council of Australia Pennant Hills Golf Club, Beecroft, New South Wales 26 May 2005 David Perchard

2. SETTING TARGETS IN THE ABSENCE OF DATA - 1 Commission proposal for a Packaging & Packaging Waste Directive, July 1991: Within 10 years (i.e. allowing for negotiation and transposition time, by July 2006), • 90% recovery (i.e. recycling ,composting & energy recovery) • 60% recycling • 10% for disposal – but only as a residue from collection & sorting activities (i.e. packaging waste must not be taken directly from the household to the landfill)

3. SETTING TARGETS IN THE ABSENCE OF DATA - 2 The Directive as finally adopted, December 1994: • set targets to be achieved after 5 years (i.e. allowing for transposition into national law, 6½ years) • provided for a review of practical experience over that period, with a view to ‘substantially increasing’ the targets for the next 5-year phase In the event, the second set of targets will only bring the other member states up to the existing recycling rates of the front-runners The European Environment Agency report to the Commission on the effectiveness of packaging waste systems in 5 member states (Jan 2005) concluded that ‘the indications are that recycling is reaching its upper limits in some countries’

4. SETTING TARGETS IN THE ABSENCE OF DATA - 3 • Remember the Commission’s original proposal ! • 90% recovery after 11½ years • 60% recycling after 11½ years

5. SETTING TARGETS IN THE ABSENCE OF DATA - 4 Lessons for Australia: • Don’t be too ambitious before you know the facts • Set medium-term, not long-term targets - don’t lock yourselves into assumptions that might be wrong - remember that priorities may change over time • The initial targets can and should be reviewed in the light of experience, and the bar raised if necessary

6. THE PRACTICAL LIMITS OF PACKAGING RECYCLING - 1 Setting a recycling target requires recognition of the ‘leakage’ at every stage in the process – recycling rates are sensitive to changes at any stage:

7. THE PRACTICAL LIMITS OF PACKAGING RECYCLING - 2 You need to build a set of assumptions for each stage in the process before deciding on a realistic outcome • There is little point trying to recycle flexible plastics, composites, or flimsy or contaminated paper • That might leave rigid packaging as around 65% of household packaging waste • Thus:

8. THE PRACTICAL LIMITS OF PACKAGING RECYCLING - 3 If we assume that • tonnages of sales packaging and of transport packaging are roughly equal • 15% of packaging (by weight) is sales packaging discarded away from home • you collect just 39% of packaging from households for recycling then to achieve an overall 65% collection rate, you would need to collect 79% of commercial & industrial packaging and away-from-home sales packaging Do-able but difficult However, collection isn’t recycling …..

9. WHAT DO WE MEAN BY ‘RECYCLING’ ? - 1 Until 1997, when it was amended to take account of the EU Directive, the German Packaging Ordinance of 1991 had two sets of targets for household packaging: • percentage of each material that had to be collected from 1993, 20%-60%, depending on material from 1995, 80% for all materials • percentage of each collected material sent for reprocessing from 1993, 30%-70%, depending on material from 1995, 80 %-90%, depending on material i.e. for glass, 80% x 90% = 72%, for plastics 80% x 80% = 64% But always input to recycler, not output And the same in the Directive(Commission Decision 97/138 requires member states to report on tonnages sorted for recycling)

10. WHAT DO WE MEAN BY ‘RECYCLING’ ? - 2 • So although the Directive defines recycling as ‘the reprocessing in a production process of the waste materials for the original purpose or for other purposes’, what matters is that the EU only measures input to a recycling plant • The NEPM and Covenant define recycling as to ‘recover the product and use it as a raw material to produce another product’, which implies that Australia is going to measure output • After taking account of moisture, contamination and process losses, you may find a difference of perhaps 30% between input and output (even more if your sorting isn’t great, considering that a lot of material put out for kerbside collection is not packaging)

11. WHAT DO WE MEAN BY ‘RECYCLING’ ? - 3 Therefore, if recycling is to be measured according to output, collection rates have to be increased accordingly: Which starts to look less do-able – or at least, very challenging for a first-stage target

12. WHAT DO WE MEAN BY ‘RECYCLING’ ? - 4 Lessons for Australia: You must do research urgently to test these guesstimates: • What is the approximate split between - sales packaging discarded at home - sales packaging discarded away from home - packaging discarded on commercial, industrial and institutional premises? • What do recyclers say is the difference between input and output?

13. RECYCLE WHAT YOU CAN COLLECT, OR WHAT YOU CAN REPROCESS ? - 1 • First impact of high German recycling targets was export of German packaging waste to neighbouring countries • Collection of German waste was subsidised by DSD, so it was more economic for foreign recyclers to use German material than locally-generated waste • To protect their own collection infrastructure, neighbouring countries set their own recycling targets – the Directive was intended to restore order to the EU Internal Market • National and EU plastics recycling targets were generally regarded as unachievable – a lot was exported to Asia for recycling or surreptitious disposal • Subsequent growth of Chinese economy means that Asian plastics recyclers are now paying high prices for European waste

14. RECYCLE WHAT YOU CAN COLLECT, OR WHAT YOU CAN REPROCESS ? - 2 • As an engineering-based economy, Germany expected to recoup cost of its expensive packaging waste system by developing advanced recycling technology which it could sell worldwide • Hence from 1994 DSD concentrated on developing (and funding) plastics recycling infrastructure in Germany, while other countries looked for the cheapest outlet (which was rarely Germany) • German competition authorities have gradually eroded DSD’s monopoly, and in a competitive situation the preference for recycling within Germany is at an end – and Asian recyclers offer better prices • Europe is a major importer of packaged goods from Asia, so it makes sense for our plastics & board to be recycled there – but what happens when the Asians no longer need European material, and European recyclers have been driven out of business?

15. RECYCLE WHAT YOU CAN COLLECT, OR WHAT YOU CAN REPROCESS ? - 3 The Japanese system works differently – the Law for the Promotion of Sorted Collection and Recycling of Containers and Packaging (1996) aims to balance collection with recycling capacity in Japan: • Each year, the authorities announce amount to be collected & recycled, taking account of previous years and growth in recycling capacity • This ‘recycling obligation’ is set for each type of pack and each product sector • A ‘recycling coefficient’ is calculated by dividing the amount placed on the market by the recycling obligation Recycling obligation = household packaging placed on the market x weight of the pack x recycling coefficient

16. DATA COLLECTION METHODOLOGY - 1

17. DATA COLLECTION METHODOLOGY - 2 Lessons for Australia: • Different methods of calculating ‘packaging placed on the market’ produce very different results • Different figures for ‘packaging placed on the market’ produce very different recycling rates when applied to the same recycled tonnages • We recommend that Australia considers data collection methodologies very carefully

18. DATA COLLECTION METHODOLOGY - 3 • Reliance on national trade statistics has been abandoned (except by Denmark), as these are no longer reliable in the EU Single Market • In member states with ‘Green Dot’ systems, members report through them, and the organisations carry out a ‘reality check’ by benchmarking against other companies and previous years • Some member states (but not all) attempt to estimate the number of free-riders • Some conduct various cross-checks, but this means that when different sources yield conflicting results, subjective judgements have to be made on which data to use and which to ignore

19. DATA COLLECTION METHODOLOGY - 4 • Ireland bases its estimates on sampling the waste stream – this has produced spectacularly high results because of failure to take account of moisture, contamination and seasonal differences (± 20%) • In the Netherlands, companies responsible for about 60% of the Dutch market are sampled: - They report the tonnages they place on the market, their turnover and NACE code (which determines the product sectors they are active in) - Total turnover of companies reporting is compared with total turnover for each sector according to the National Statistical Office, and packaging tonnages scaled up accordingly

20. DATA COLLECTION METHODOLOGY - 5 The pitfalls of calculating household packaging recycling: The reported data - packaging recycled as a proportion of the tonnages licensed by the Green Dot organisations These may exceed 100% because of unlicensed packaging (free riders and non-packaging material)which consumers have put into the Green Dot system (average 25%, but up to 50% in big cities) Also, protocols for %age of packaging in mixed paper collections (range from 25%-50% packaging)

21. POSSIBLE SPECIAL MEASURES FOR BEVERAGE CONTAINERS - 1 The Perchards report for the Commission on the implementation of the Directive and its impact on the EU Internal Market – to be published shortly at http://europa.eu.int/comm/environment/ – concluded that • any form of intervention to protect refillable containers mild enough to avoid (illegal) market distortions is unlikely to achieve its intended goals in the face of powerful market forces such as consumer choice • CDLs do not improve the efficiency of recycling systems – collection arrangements for non-beverage packaging are still needed, and one system is cheaper than two • deposit systems are not necessary for the achievement of high recycling rates –

22. POSSIBLE SPECIAL MEASURES FOR BEVERAGE CONTAINERS - 2 Of the 8 member states which have shown most commitment to packaging waste management policy, the deposit states Denmark, Finland and Sweden have not achieved higher recycling rates than non-deposit states Austria, Belgium, France, Germany and the Netherlands Glass Plastics Metals

23. FUNDING MECHANISMS – WHAT THEY COST AND WHAT THEY’RE WORTH - 1 • In the EU, brandholder-run recovery organisations collect fees (usually-weight-based) from the packaged goods industry and use them to develop collection and sorting infrastructure • Where public policy allows, they have concentrated on non-household packaging, as this is cheaper to collect – but as the higher material-specific targets for 2008 kick in, this will no longer be possible • In 8 of the EU-15 countries – Austria, Belgium, France, Germany, Luxembourg, Portugal, Spain and some extent Sweden – they have always been required to concentrate on household packaging • In Austria, Belgium and Germany, they pay the full cost of household packaging waste management; in most EU-15 countries, they pay the additional cost of segregated collection

24. FUNDING MECHANISMS – WHAT THEY COST AND WHAT THEY’RE WORTH - 2 • These systems have been very successful in providing long-term strategic direction to ensure that collection infrastructure was put in place to meet national and EU targets • We estimate that in 2001 industry bore about € 2.8 bn out of a total cost of packaging recovery in EU-15 of € 4.3 bn ($ 4.8 bn out of $ 7.3 bn) • This represents $12.7 per capita out of a total cost of $19.3 per capita • But it does not include companies’ internal admin costs, which are impossible to quantify but in many cases have been considerable

25. FUNDING MECHANISMS – WHAT THEY COST AND WHAT THEY’RE WORTH - 3 • This $ 4.8 bn per year in 2001 (and rising every year)has been spent on getting towards where Australia already is, with 90% of households served by kerbsidecollection systems • So why would you need it? • The average person probably buys 1500 packaged goods per year We do not believe that an extra $13 on prices over a year (plus the unknown overhead cost that would be passed on) would - serve as a strong price signal to consumers to change their purchasing behaviour, or - justify an administrative edifice to raise and disburse this funding Is it worth arguing over whether Australian should pay 1 cent per item through their local taxes or through product prices?

26. ECO-DESIGN OF PACKAGING - 1 The Covenant talks about designing packaging with the environment in mind, and here the EU does have something to offer: • a set of standards based on a management systems approach • designed to ensure that packaging designers and purchasers - ask themselves the right questions, - implement the answers, - document what they have done for future reference (and for inspection by the enforcement authorities), and - revisit these issues at regular intervals, or whenever there is a significant pack change

27. ECO-DESIGN OF PACKAGING - 2 On packaging minimisation, users must identify the ‘critical area’ governing the achievable limit for source reduction, i.e. if the packaging is reduced further, it will fail to meet the listed performance criteria: • product protection, packaging manufacturing process, packing/filling process, logistics (including transport, warehousing and handling), product presentation and marketing, user/consumer acceptance, information, safety, legislation and any other relevant issues If no critical area is identified, the pack does not comply with the standard and the potential for (further) reduction must be investigated Once the critical area has been identified, the standards user must prepare a statement of conformity

28. ECO-DESIGN OF PACKAGING - 3 The European (CEN) standards: • EN 13427:2004,Packaging – Requirements for the use of European Standards in the field of packaging and packaging waste • EN 13428:2004,Packaging – Requirements specific to manufacturing and composition – Prevention by source reduction • EN 13429:2004,Packaging – Requirements for relevant materials and types of reusable packaging • EN 13430:2004,Packaging – Requirements for packaging recoverable by material recycling • EN 13431:2004,Packaging – Requirements for packaging recoverable in the form of energy recovery, including specification of minimum inferior calorific value • EN 13432:2000,Requirements for packaging recoverable through composting and biodegradation – Test scheme and evaluation criteria for the final acceptance of packaging

29. A MORE HOLISTIC APROACH TO EU PACKAGING POLICY - 1 ‘There is a need to create a consistent policy at Community level to encourage recycling in general. This needs to take account of the various environmental impacts and even trade-offs involved. The aim is to recover and recycle wastes to levels that make sense,i.e. to the point where there is still a net environmental benefit and it is economical and technically feasible.’ ‘Today's environmental problems require that we look beyond a strictly legislative approach and that we take a more strategic approach to introducing the necessary changes in our production and consumption patterns.’ (Commission, 2001)

30. A MORE HOLISTIC APROACH TO EU PACKAGING POLICY - 2 Raw material consumption is no longer considered a major problem, as the market adjusts, but there is a real problem with certain renewable resources, such as fish and clean water. Climate change is the top priority, and this has implications for energy policy. Thus, there is a case for shifting the focus away from the management of solid waste and towards energy conservation. For packaging, that shift inemphasis would make lightweighting important but the spotlight will move away from packaging. As packaging represents such a small proportion of total waste, it will no longer be a priority waste stream but will slot in to broader policies. (Commission, 2004) That sounds rather like the Covenant approach!

31. WHAT AUSTRALIA CAN TEACH EUROPE - 1 • It is ironic that Australia is trying to move in the direction of EU-style policies just when the EU is trying to establish the sort of flexible, integrated approach already enshrined in the Covenant • We looked at how the EU legal framework might be restructured and the Packaging and Packaging Waste Directive repealed to take advantage of the holistic approach now envisaged, but we decided that we would be better off with the status quo: - Member states will not want the funding structures dismantled, so they will keep legislation to ensure that - Danger of losing the protection of EU Internal Market harmonisation and gaining nothing in return - In any case, industry has adjusted to the present arrangements

32. WHAT AUSTRALIA CAN TEACH EUROPE - 2 Thus there is nothing much that Australia can usefully teach Europe, because of where the EU is today The key is to avoid setting up a rigid edifice that cannot easily be adapted to a changing world Up to now Australia has avoided getting itself tied down, and it is important to retain flexibility as far as possible

33. CONTACT DETAILS DAVID PERCHARD Perchards 1 College Street St Albans, AL3 4TA United Kingdom Phone: +44 1727 843227 Fax: +44 1727 843193 E-mail: DavidPerchard@perchards.com Website: www.perchards.com