[POSITION] Let’s introduce extended producer responsibility – but responsibly!

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A European Parliament Directive imposes on Poland an obligation to implement a system of extended producer responsibility for the goods they sell in the environmental context. The draft presented by the Ministry of Climate and Environment plans to introduce a deposit system to facilitate recycling. The Warsaw Enterprise Institute is of the opinion that the proposed changes require far-reaching amendments to adapt them to the specifics of the Polish market. In their current form, they will disrupt the functioning of the market and will not achieve the goal of the Directive. In this position document we present and describe a proposal for appropriate changes.

Laws enacted at the EU level are of a different nature than national laws. In addition to decisions, recommendations and opinions, the European Parliament also issues directives. These are pieces of legislation that set goals that member states must achieve, but they leave room for discretion in the means that will be used.. This process is called implementation. This is no different in the case of extended producer responsibility (hereafter: ROP), which was introduced by Directive (EU) 2018 of the European Parliament and of the Council of 30 May 2018 amending Directive 2008/98/EC on waste. The main points are contained in paragraph 14 of the Directive, which states:

A definition of extended producer responsibility scheme should be introduced to clarify that it means a set of measures taken by Member States requiring producers of products to take financial or financial and organisational responsibility for the management of the life-cycle stage of the product when it becomes waste, including separate collection, sorting and processing. The obligation may also include organizational responsibility and accountability for contributing to the prevention of waste and to increasing the reusability and recyclability of products. Product manufacturers may fulfill their obligations under the extended producer responsibility system individually or collectively.

Over the past two years, the Polish government has taken several initiatives to implement extended producer responsibility.

In August 2021, a draft bill amending the Packaging and Packaging Waste Management Act and certain other acts (UC81) was presented to establish a general framework for the application of extended producer responsibility in Poland. The project has been very negatively received by many participants in the domestic market, according to whom it focuses mainly on the administrative collection and distribution of funds from entities introducing packaged products, marginalizing the purpose for which the ROP concept was created: to establish a legal framework to systemically improve packaging waste management while ensuring that packaging waste material is returned to circulation as much as possible. The provisions of this project will not contribute to positive qualitative changes, primarily in terms of environmental protection, and will only constitute cash transfers from entrepreneurs to the budget. Entrepreneurs responsible for achieving high levels of packaging waste recycling will, according to this model, be deprived of any influence on the way the fees are used and, consequently, on meeting the requirements imposed by law, and will therefore be exposed to high penalties. A number of amendments and objections were raised to the draft during the public consultation.

In January 2022, another draft legislation has emerged to introduce a deposit system in Poland. The draft Act on amending the Act on packaging and packaging waste management and the Act on waste (UC98), establishing a deposit system, was presented by the Ministry of Climate and Environment and is currently under consultation, awaiting further proceedings under the legislative track.

We are pleased to note that the Government has come out with a legislative proposal to introduce a deposit system in Poland. The deposit system is a form of fulfilling entrepreneurs’ obligations under extended producer responsibility. It is most often applied to beverage packaging sold to consumers with a deposit. When returning an empty package, the consumer receives a full refund of the deposit, thus the deposit is an instrument that encourages consumers to return the packaging after consuming the product. The collected packaging is sent for recycling and the resulting recyclate is used to produce new packaging. This is the most efficient way to build a closed loop in the area of beverage packaging. In modern and effective deposit systems, producers not only cover the costs but also organise the optimal functioning of the whole system.

The Warsaw Enterprise Institute believes that the regulations concerning the deposit system proposed in January 2022 need to be amended, drawing on the experience of existing systems in EU countries while adapting them to the specifics of the Polish market. In their current form, the provisions will disrupt the functioning of the market and will not achieve the purpose of the Directive. In this position document we present and describe a proposal for appropriate changes.

The positives of a deposit system for reusable packaging are obvious. A deposit system is only effective and fulfils its purpose if all those introducing products within its scope participate in it – a statutory obligation is worth considering in this context. The number of retail outlets covered by the system is also important. Again, the better the system, the greater the number of retail outlets that are required to participate fully, i.e., both to collect the deposit for the packages and to accept the packages for the return of the deposit. The consumer should be able to return the packaging waste and recover the deposit in the most convenient way possible, which is directly correlated with the distance of the given outlet from the place of residence or workplace. It is therefore essential that universality also applies to all but the smallest retailers, e.g. kiosks, which will not be able to collect the packaging waste collected with the deposit refund.

A similarly important feature from the point of view of success of the system is uniformity – regardless of geographical location or the entity conducting the collection, the system should be de facto the same in each case and at each level. The attempt to diversify it and create “subsystems” may imply unreasonableness of the entire system. Poland should take advantage of the experience of the majority of countries where such systems already function and thus adopt the formula of one representative entity created by introducers or their organisation. The other solution carries a high probability of creating incompatible systems, which from the point of view of the consumer may generate additional problems. The draft presented by the Ministry allows for the possibility of multiple representative entities, which carries the aforementioned risks. It is easy to imagine a situation in which large retail chains, being introducers, will create their own systems, to which they will not allow other introducers, e.g. by not collecting their packaging.

In the discussion on the shape of the system, it is claimed that a system based on a single entity representing it is a monopoly, and that the collection of single-use containers should be subject to market competition mechanisms. It is worth recalling that a deposit system is not set up to generate profit; on the contrary, it should operate to maximise environmental performance by being the most cost-effective. Only the system set up by the introducers meets these criteria – it is the producers who care about maximizing the collection – as those who are obliged to meet the high recycling targets and recyclate content of packaging, and at the same time the most optimal costs, because they are the ones who cover them according to the net cost principle under the extended producer responsibility. Multiple operators, different deposit amounts, having to search for a point where you can return the packaging managed by a particular operator is chaos for the consumer, not a benefit, and for producers, distorted competitive conditions. We absolutely should not go in this direction; it is a recipe for failure for a project that has a great opportunity to radically improve the beverage packaging waste market in Poland and significantly help achieve EU recycling levels. The rules of the deposit system must be as simple, understandable and transparent as possible, because only such rules will benefit the consumers, who are the most important participants in this solution.

Taking into account the above danger, we appeal to the legislator to leave the concept of multiple operators in place and introduce an obligation for them to sign an agreement with each introducer who obviously wishes to do so.

Another important element is the types of packaging that should be covered by the deposit system. The solution that most closely reflects the market situation is to include single-use beverage packaging in the system, excluding dairy beverages. This generates a threefold consequence. Metal cans should be included in the system, as they are in almost all deposit systems in Europe, as this is the most efficient way to ensure a closed loop in the system. Currently, the effectiveness of the system is directly correlated to the price of aluminum itself – considering the potential target of this raw material (90 percent) – it may pose a significant problem in case of its decrease. Therefore, the exclusion of aluminium cans from the system is, in our opinion, unjustified, especially as it may weaken the competitiveness of beverage companies operating in Poland. This assumption also results from the clear separation of the system concerning returnable packaging, e.g. reusable glass bottles. In the presented draft, the two systems are equaled, which is not justified. A returnable glass bottle is the property of the producer and constitutes a durable, full-value packaging used many times in its life cycle. It cannot be treated as waste. This is compounded by the fact that a pro-environmental mechanism for their reuse already exists. Returnable bottles should definitely be excluded from the proposed system, at most the regulations could be modified to promote a solution with such packaging.

It is worth considering whether the producer of returnable packaging should be able to operate the system on his own (without paying a product fee) or whether producers should voluntarily appoint a representative and join the deposit system established by that entity.

As a final point, the need to include in the legislative proposal some guarantees for the producers of packaging and the representative entity created by them. This entity should be the owner of waste in the deposit system for single-use beverage containers. In addition to the deposit not collected by consumers and the payments from producers, the sale of raw materials is one of the sources of funding for the system, in line with the net cost principle introduced in EU legislation and planned in Polish law. The entity representing the system must operate on a non-for-profit basis. Such a solution is possible only if it is created by companies interested in permanent optimization of the system costs, and not in making profits from it. In the packaging waste market, these companies are only introducers who will certainly not be interested in making profits from the system whose activities they finance themselves. In addition, producers should be guaranteed access to secondary raw materials collected through the deposit system in proportion to the weight of packaging introduced by the producer and collected by the producer’s representative. In accordance with the requirements of the SUP Directive, some of them must ensure that a certain level of recycled material is used in PET packaging by 2025 and 2030.

In the case of returnable packaging, the minimum fiscal condition necessary to improve the systems is VAT neutrality of such packaging for retailers. Currently, under certain conditions, the deposit collected becomes income for the retailer, on which he has to pay VAT, and when the customer returns the empty packaging to the retailer, the retailer has to return the deposit and additionally pay tax, resulting in a loss on the whole operation. This is one of the main reasons why retailers are reluctant to accept empty packaging and demand to see receipts to prove that the packaging was given away on deposit in their outlets.

We hope that the implementation of the postulates presented by us will be included in the final draft and thus increase the efficiency of the implemented system. Throughout the Act, we remain available for the proposals we have outlined.

We appreciate that the legislator also noticed the need for changes, which was reflected during the press conference on June 2. Unfortunately, the updated draft, which the whole market is waiting impatiently for, has not yet been presented.

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