EIMPack Economic Impact of the Packaging and Packaging Waste Directive

Transcription

1 EIMPack Economic Impact of the Packaging and Packaging Waste Directive Comparing the Recycling Systems of Portugal, France, Germany, Romania and the UK April 2012

2 Legal notice This report consists of a study based on the information provided by waste management companies from the countries analysed (Portugal, France, Germany, Romania and the UK). It was prepared as part of the work programme of EIMPack - Economic Impact of the Packaging and Packaging Waste Directive, financed by the European Investment Bank. The European Investment Bank or any person or company acting on behalf of the Bank is not responsible for the contents and use that may be made of the information contained in this report. Research team Rui Cunha Marques (Principal Investigator) Nuno Ferreira da Cruz (Researcher) Sandra Faria Ferreira (Research grant) Marta Cabral Pereira (Research grant) Pedro Simões (Research grant)

3 Executive Summary In Europe, in the last decades, the economic development triggered new human consumption patterns resulting in a dramatic increase of waste production. As a consequence the waste was accumulated in (illegal) dump sites, becoming an environmental and public health problem. Then, many countries started to face problems such as the lack of landfill capacity. Moreover, the waste incineration always caused great public discussion due to the inherent air emissions. In order to reduce the environmental impact of packaging and packaging waste (PPW) and to avoid barriers to trade and competition distortions within the Member States (MS) of the European Union (EU), the Directive 94/62/EC on PPW was enacted. This law set ambitious targets in terms of packaging waste recovery and recycling, promoting a reduction in the quantities of waste landfilled. In order to comply with those targets, all MS have been undertaking high investments in selective collection and sorting equipment and infrastructures. Although the objectives imposed by the PPW Directive are similar for all MS, the management strategies adopted vary significantly from country to country. In this sense, the current report analyses the institutional frameworks and recycling systems of five European countries, namely, Portugal, France, Germany, Romania and the UK, which are considered representative of the global reality in the EU. Many countries have publicly owned companies in charge of collection, treatment and final disposal of municipal solid waste (MSW), including packaging waste. To offset the selective collection and sorting activities, the waste management operators usually receive a financial support from the respective green dot company. Therefore, we analyse and compare the economic and financial costs and benefits from the perspective of local public authorities for Portugal, France and Romania. The analysis was performed based on data collected directly from the public companies for the year The German and the British cases were not analysed in the same way since we could not get reliable data due to the competitive nature of their packaging recycling systems. The results obtained for Portugal and France showed that the financial transfers have been providing the (economic) sustainability of their packaging recycling systems. However, from a strictly financial perspective, the green dot companies should increase the support to local public authorities. The Romanian recycling system is not yet economically sustainable. In Germany, the selective collection and sorting costs are fully financed by the industry. The same shall happen in the UK. i

4 Table of Contents Page LIST OF FIGURES... III LIST OF TABLES...V 1. INTRODUCTION THE PACKAGING WASTE PROBLEM AND THE RESPONSE PROVIDED BY EUROPEAN LAW RECYCLING OF PACKAGING WASTE IN NUMBERS INSTITUTIONAL AND REGULATORY FRAMEWORK OF THE CASE-STUDIES France Germany Portugal Romania UK FINANCIAL TRANSFERS Methodology implemented Benefits and costs of recycling Discussion of the results CONCLUDING REMARKS...55 REFERENCES...57 ii

5 List of Figures Figure 1 Packaging waste recycling rates (%) in 1999, 2004 and 2009 in European countries (EU-27)... 6 Figure 2 New waste management hierarchy according to the WFD (2008/98/EC) Figure 3 Municipal waste production in 1995 and 2010 (kg per capita) of the European countries... 9 Figure 4 Municipal waste production (thousands of tonnes) and treatment in Figure 5 GDP and packaging waste production in EU-15 between 1998 and Figure 6 Packaging waste production in Kg per capita in Figure 7 Packaging waste recycling and recovery rates in 2009 and PPW Directive targets...13 Figure 8 Packaging waste recycling rates by material in 2009 and PPW Directive target...14 Figure 9 EPE (% of GDP) in waste management for the case-studies and EU-27 in Figure 10 Model for the application of the FSLA...26 Figure 11 The benefits and cost of recycling in the case studies...35 Figure 12 The benefits and costs of recycling per tonne collected in the case studies..39 Figure 13 The benefits and costs of recycling per tonne taken back in the case studies...39 Figure 14 The benefits and costs of recycling in /inhabitant in the case studies...41 Figure 15 The benefits and costs of recycling per tonne collected in the case studies (PPP adjusted)...42 Figure 16 The costs of recycling per capita in the case studies in euros and PPPadjusted...42 Figure 17 The benefits of recycling per capita in the case studies in euros and PPPadjusted...43 iii

6 Figure 18 Cost coverage for local authorities under 250 inhabitants per km 2 in Portugal and France...44 Figure 19 Cost coverage for local authorities above 250 inhabitants per km 2 in Portugal and France...44 Figure 20 Operational costs of local authorities based on quantities taken back for local authorities under 250 inhabitants per km 2 in Portugal and France...45 Figure 21 Operational costs of local authorities based on quantities taken back for local authorities over 250 inhabitants per km 2 in Portugal and France...45 Figure 22 Economic benefits based on quantities taken back for local authorities under 250 inhabitants per km 2 in Portugal and France...46 Figure 23 Economic benefits based on quantities taken back for local authorities over 250 inhabitants per km 2 in Portugal and France...46 Figure 24 Financial benefits based on quantities taken back for local authorities under 250 inhabitants per km 2 in Portugal and France...47 Figure 25 Financial benefits based on quantities taken back for local authorities over 250 inhabitants per km 2 in Portugal and France...47 Figure 26 Costs of selective collection per flow in Portugal and France...48 Figure 27 Operational cost (collection and sorting) per packaging waste material in Romania...48 Figure 28 Cost of selective collection per tonne collected...49 Figure 29 Cost of sorting per tonne effectively sent for the sorting operation...49 Figure 30 Cost of selective collection per tonne collected (with PPP)...50 Figure 31 Cost of sorting per tonne effectively sent for the sorting operation (with PPP)...50 iv

7 List of Tables Table 1 Waste management European Directives... 5 Table 2 PPW Directive targets (first stage)... 7 Table 3 PPW Directive targets (second stage)... 7 Table 4 Municipal waste production (thousands of tonnes) and treatment in Table 5 Packaging waste production in 2009 (tonnes)...11 Table 6 Packaging waste recycling in 2009 (thousands of tonnes)...13 Table 7 French waste management targets...17 Table 8 Green dot fee for Table 9 Financial support by local authority performance...19 Table 10 Values of the variables to calculate the financial support per material...19 Table 11 German household sales packaging recycling targets...21 Table 12 DSD s licence fees (2010)...22 Table 13 Fees for the use of the trademark Der Grune Punkt by material (2011)...22 Table 14 Green dot fee for household packaging for 2010 ( /tonne)...24 Table 15 Green dot fee for industrial packaging for 2010 ( /tonne)...25 Table 16 FSLA for Table 17 Gradual increase of the Romanian national recycling and recovery obligations...27 Table 18 ERA s Green Dot fees...28 Table 19 ERA s financial support for WMCs...29 Table 20 Average price of each packaging material delivered to recycler/recover, in Table 21 Annual membership fee banding...31 v

8 Table 22 Percentages assigned to each economic operators class for the calculation of the recycling/recovery obligations...31 Table 23 The UK recovery/recycling targets according to packaging waste regulations of Table 24 Average PRN prices for 2010 ( /tonne)...33 Table 25 Variables and values used in the methodology...35 Table 26 Variables used to measure the return on capital employed...37 Table 27 PPP indicators used in Portugal, France and Romania case studies...37 Table 28 Amendments to the FSLA for packaging waste management costs cover...40 Table 29 Cost of collection and transportation of waste in Germany...51 Table 30 Costs of LPW management operations (DSD, Germany)...51 Table 31 Costs and benefits of the packaging waste management operations in the analysed countries in euros per tonne collected...52 Table 32 Costs and benefits of the packaging waste management operations in the analysed countries in PPP-adjusted values per tonne collected...52 vi

9 Acronyms ACRONYMS CSLA Convention of Scottish Local Authorities DSD Duales System Deutschland GmbH DC Declaration of Compliance EGF Empresa Geral de Fomento EAP Environmental Action Programme EPE Environmental Protection Expenditure EPR Extended Producer Responsibility ERA Eco-Rom Ambalaje EU European Union FSLA Financial Support for the Local Authorities GD Government Decision GDP Gross Domestic Product IHK Chambers of Industry and Commerce (Industrie und HandelKammern in Germany) LGA Local Government Association LPW Lightweight Packaging Waste MS Member States MSW Municipal Solid Waste NILGA Northern Ireland Local Government Association PERN Packaging Export Recovery Note PPP Purchasing Power Parity 7

10 Acronyms PPW Packaging and Packaging Waste PRN Packaging Recovery Note PRO Europe Packaging Recovery Organisation Europe SPV Sociedade Ponto Verde WMC Waste Management Companies WFD Waste Framework Directive WLGA Welsh Local Government Association 8

11 1. Introduction 1. Introduction According to the Waste Framework Directive (WFD) 75/442/EEC, waste is any substance or object which the holder disposes of or is required to dispose of. The WFD was last amended in 2008 (Directive 2008/98/CE) although the definition for waste remain the same. The European Union (EU) produces over 200 million tonnes of municipal waste each year, representing more than 400 kg per capita. With the amounts of waste accumulating in dump sites, the European Union (EU) authorities quickly realised that new waste management strategies were required to protect the environmental and the public health. Waste management is a complex issue since it involves many tasks (collection, sorting, storing, treatment and final disposal), a vast array of stakeholders (local authorities, producers, packers, customers, etc.) and different origins (from households, small and medium sized businesses, healthcare premises, public sector bodies, industry and agriculture). The WFD also introduced the concept of waste hierarchy, which became the cornerstone of all the subsequent waste Directives. The concept set out waste prevention as the most favourable option followed by reuse, material and energy recovery and, at last, final disposal. Moreover, a number of key principles have become the basis of waste legislation: principles of Precaution, Proximity, Polluter-Pays and Extended Producer Responsibility (EPR). Over the last decades, the EU legislation on waste has largely developed with the purpose of harmonizing waste policy to prevent any distortion in competition among the Member States (MS). Many waste Directives were published after the WFD, setting guidelines and targets for specific waste streams. The Directive 94/62/EC on Packaging and Packaging Waste (PPW) set targets of recycling and recovery to be attained by all 1

12 1. Introduction MS. With the transposition of the Directive, the MS have implemented the EPR principle, imposing recycling and recovery obligations to the producers of packaging and of packaged products. The Directive 2004/12/EC amended the first directive, setting more ambitious recycling and recovery targets. According to these directives, Packaging is defined as all products made of any material, whatever its nature, used to contain, protect, handle, deliver and present goods from the raw materials to the processed goods, from the producer to the final consumer or user. The directives still added that all disposable items used for the same purpose shall be considered packaging. Furthermore, packaging was categorised as primary (designed to constitute a sales unit in the point of purchase), secondary (designed to group several sales unit) and tertiary (or of transport). In this framework, the PRO Europe (Packaging Recovery Organisation Europe) was founded. PRO Europe is the umbrella organisation for European packaging and packaging waste recovery and recycling through compliance schemes that manage the "Green Dot" symbol. The presence of this symbol on packaging means that a financial contribution has been paid to a national recovery company, licensed according to the principles set in the PPW Directive and the respective national laws. 1 The MS have taken measures to achieve the recycling and recovery targets. In fact, some of them have set more ambitious national objectives regarding the recycling and recovery of packaging waste. The legislation enacted in each MS led to the adoption of different recycling models and strategies, which entail economic-financial costs and benefits for the local authorities in charge of the municipal waste management (collection, treatment and disposal). Therefore, the present report aims to compare the impact of PPW Directive implementation in five MS, namely: Portugal, France, Germany, the UK and Romania. After this introduction, the report is organised as follows. Section 2 provides a short overview of the packaging waste problem and the legislation and policies adopted in the EU. Section 3 presents the packaging waste data reported by the MS regarding waste production, waste management operations and recycling/recovery rates. Section 4 describes the case studies, focusing on the packaging waste regulatory frameworks, 1 Note, however, that the absence of this symbol does not necessarily means that a financial transfer was not carried out. In some countries the marking is not mandatory. 2

13 1. Introduction implemented strategies, current models and respective stakeholders involved in the lifecycle of PPW. The methodology, the results obtained from the countries studied and the discussion of the economic analysis of packaging waste recycling are presented in section 5. Finally, section 6 provides the most relevant concluding remarks. 3

14 2. The packaging waste problem and the response provided by European Law 2. The packaging waste problem and the response provided by European law The European Commission s first Environmental Action Programme (EAP), introduced in November 1973, was an important step in the European environmental policy. The first EAP included basic principles such as the polluter pays principle and the prevention of environmental damage at the source. In 1975, the WFD (Directive 75/442/EEC) was adopted in order to harmonise waste management among the MS. Some years later the Directive on Hazardous Waste (91/689/EEC) established a definition for hazardous waste and its waste management framework. These two Directives and the Regulation on the Supervision and Control of Waste Shipment provided the basis for the European legislation on waste (Hansen et al., 2002). In addition to the WFD, a number of other Directives were published in order to regulate specific waste streams. These included PPW, waste oils, batteries and accumulators, sewage sludge, end-of life vehicles and waste of electrical and electronic equipment. Moreover, a set of Directives were also implemented to regulate waste treatment operations such as the incineration of municipal and hazardous waste and their landfilling. A list of European Directives on waste management is presented in Table 1. During the 1980s several MS realised that the (progressive) increase in waste production was leading to a rise in landfill area at an accelerated rate. Furthermore, the political and social opposition to waste incineration forced to a rapid definition of new management strategies for packaging waste. Germany, the Netherlands, Denmark and Belgium were the first countries to define their policy and legal framework regarding the PPW. The 4

15 2. The packaging waste problem and the response provided by European Law German Packaging Ordinance had special importance in this context (Eichstadt et al., 2000) and it was considered one of the key drivers for the development of the European PPW Directive (see EIMPack, 2011a). Table 1 Waste management European Directives European Legislation WFD 75/442/EEC Introduced the basic principles on the collection, recycling/processing and disposal of waste. Directive 91/689/EEC on hazardous waste Directive 259/93/EEC, Regulation on the supervision and control of transfrontier shipment of waste Directive 2000/52/EC on end-of-life vehicles Directive 91/157/EEC on batteries and accumulators Directive 99/31/EC on the landfill of waste Directive 2000/76/EC on the incineration of waste Directive 94/62/EC on packaging and packaging waste Directive 2002/96/EC on waste electrical and electronic Regulates the management of hazardous waste. Regulates the export of waste out of the EU. The amendment banned hazardous waste destined for final disposal on non-oecd countries, and by January 1998 all exports of hazardous waste destined for recovery on non- OECD countries. The end-of-life vehicles directive sets rising re-use, recycling and recovery targets and restricts the use of hazardous substances in both new vehicles and replacement vehicle parts. Regulates the batteries and accumulators waste management, imposing collection, recycling and recovery targets. Set standards and limits for the emissions of pollution into the air or into groundwater. Set standards for the design of packaging and lays down specific targets for the recycling and recovery of packaging waste. Lays down collection, recycling and recovery targets for electrical and electronic goods. A Directive on containers of liquids for human consumption was discussed in The objective was to encourage the adoption of measures for reducing the environmental impact of packaging waste, the energy and raw materials consumption. The MS should promote the reduction of packaging waste production and the increase of the share of refillable and recyclable packaging in household waste (Eichstadt et al., 2000). In 1994, the Directive 94/62/CE on PPW (first stage) was adopted under the article 100A of the Treaty of Rome. The PPW Directive has three main objectives (Bongaerts and 5

16 2. The packaging waste problem and the response provided by European Law Kemp, 2000): (1) reduce the impact of PPW management on the environment; (2) harmonise national legislation on PPW in order to prevent barriers to trade and market distortions; and (3) ensure free movement of packaged goods. Thereby, the Directive 94/62/EC required that, by 2001, each MS had to: Recover 50% of packaging waste (with maximum 65%); Recycle 25% of packaging waste (with maximum 45%); Recycle at least 15% by weight of each individual packaging material. Figure 1 illustrates the packaging waste recycling rates in 1999, 2004 and 2009 in Europe (EU-27). Figure 1 Packaging waste recycling rates (%) in 1999, 2004 and 2009 in European countries (EU-27) In 2004, the Directive 94/62/EC was updated by the Directive 2004/12/EC (second stage), setting new (and more ambitious) targets for the recovery and recycling of packaging waste. The overall targets of recovering a minimum of 60% (by weight) and recycling 55% (with a maximum of 80%) of packaging waste as well as the specific recycling rates for each packaging waste material (60% for glass and paper/cardboard, 50% for metals, 6

17 2. The packaging waste problem and the response provided by European Law 22,5% for plastics and 15% for wood) should be achieved in 2008 for the most countries 2. The PPW Directives targets for the five countries analysed in this report are summarised in Table 2 (first stage) and in Table 3 (second stage). Table 2 PPW Directive targets (first stage) Country Recovery 50-65% Recycling % 15% 15% 15% 15% 15% Overall glass paper/cardboard metals plastics wood UK Germany France Portugal Romania Table 3 PPW Directive targets (second stage) Country Recovery 60% Recycling % 60% 60% 50% 22,50% 15% Overall glass paper/cardboard metals plastics wood UK Germany France Portugal Romania All countries analysed have transposed the PPW Directive into their national legislation. In fact, in some countries, there was already a national packaging waste legislation in force. Overall, the packaging waste recycling rates have been increasing since the Directive was implemented (see Figure 1). The Sixth Environment Action Programme defined the EU key environmental objectives for the period This programme aimed to decouple waste production from the economic growth through waste prevention initiatives and adopting more sustainable 2 As Portugal, Greece and Ireland were also extended deadlines (until 2011) for achieving the targets imposed by the PPW Directive. Countries like Romania and Bulgaria, which joined the EU more recently, have longer periods (until 2013 and 2014, respectively), as shown later (see Figure 7 in chapter 3). 7

18 2. The packaging waste problem and the response provided by European Law production/consumption patterns. The programme also set targets for reducing the waste production and the quantities sent to final disposal operations (EEA, 2009). More recently, the WFD (2008/98/EC) set new objectives for 2020, e.g. at least 50% (by weight) of waste materials (as paper, glass, metals and plastic from households) must be prepared for re-use or recycling. Moreover, it also established the basic concepts and definitions related to waste management such as definitions of waste, preparing for reuse, recycling and recovery. It also explained the end-of-waste criteria (when waste become a secondary raw material) and clarified the difference between waste and by-product. The new WFD lays down the new waste hierarchy as shown in Figure 2. Figure 2 New waste management hierarchy according to the WFD (2008/98/EC) 8

19 Austria Belgium Bulgaria Cyprus Czech Rep Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Luxembourg Netherlands Norway Poland Portugal Romania Slovakia Slovenia Spain Task 3 Financial Flows 3. Recycling of packaging waste in numbers 3. Recycling of packaging waste in numbers In 2010, the total municipal waste production in the EU-27 reached the amount of 252 million tonnes and each EU-citizen produced on average 503 kg of waste (Figure 3). According to Eurostat data, a decreasing tendency of municipal waste production was observed. In fact, the 2010 value was lower than the ones achieved in 2004 (268 million tonnes) and 2006 (273 million tonnes). As depicted in Figure 3, the production of municipal waste per capita across the European countries is quite variable, ranging from 304 kg/inh. in Latvia up to 778 kg/inh. in Cyprus (see Figure 3). Considering the countries analysed in our economic analysis, the variation is lower, being Romania the country which produces less waste per capita (365 kg/inh.) and Germany the one that produces more (583 kg/inh.) Figure 3 Municipal waste production in 1995 and 2010 (kg per capita) of the European countries

20 3. Recycling of packaging waste in numbers Table 4 shows the total municipal waste production in the MS analysed in this study. The breakdown by treatment option is illustrated in Figure 4. In 2010, a total of 148 million tonnes of municipal waste was disposed of (incinerated and/or landfilled) in the EU-27 (see Table 4). In the same year, 97 million tonnes of municipal waste were recycled representing 38% of the municipal waste production. In the countries studied, Germany achieved the highest recycling rate (62%) and, at the same time, the lowest landfill rate (0,4%, Table 4). Table 4 Municipal waste production (thousands of tonnes) and treatment in 2010 Waste Production Landfill Incineration Recycling EU ,1% ,4% ,3% Germany ,4% ,8% ,8% France ,1% ,0% ,9% Portugal ,6% ,9% ,5% Romania ,4% 0 0,0% 83 1,1% UK ,9% ,6% ,8% Source: Eurostat (2012a) Figure 4 illustrates the percentage of municipal waste sent to disposal and recovery operations, showing that Portugal and Romania have the highest rates of waste landfilled and Romania the smallest recycling rate (only about 1%). Germany France UK Romania Portugal Landfill Incineration Recycling Figure 4 Municipal waste production (thousands of tonnes) and treatment in

21 3. Recycling of packaging waste in numbers Regarding the packaging waste stream, a total of 77 million tonnes of packaging waste were produced in the EU-27, where only about 57 million tonnes were recovered. However, the packaging waste production declined from 2008 to In fact, the highest value of the last 11 years (81 million tonnes) was achieved in Considering the countries studied, in 2009, Germany had the highest packaging waste production followed by France (Table 5). Comparing the Gross Domestic Product (GDP) and packaging waste production, note that the GDP increased 48% between 1998 and 2007 (Eurostat, 2012b) while packaging waste production just increased 16% in the same period. Between 2008 and 2009, both GDP and packaging waste production decreased 6% and 7% (compared to 2007), respectively (Figure 5). Table 5 Packaging waste production in 2009 (tonnes) Packaging % MSW Paper/cardboard Plastic Wood Metals Glass Germany % France % UK % Portugal % Romania % Source: Eurostat (2012b) Figure 5 GDP and packaging waste production in EU-15 between 1998 and

22 3. Recycling of packaging waste in numbers Concerning the packaging waste production per capita (Figure 6), France has the highest value (190 kg/inh.) followed by Germany (184 kg/inh.). Romania obtained the smallest value of 47 kg/inh. In addition, Figure 6 shows that, in the analysed countries, paper/cardboard is the most used packaging material. In Romania, the quantity of plastic is higher than the quantity of paper/cardboard. Figure 7 presents the recycling and recovery rates achieved in 2009 (the most recently data available, since each MS must report the quantities to the European Commission within 18 months) compared to the targets imposed by the Directive France Germany UK Portugal Romania Packaging Paper/cardboard Glass Plastic Wood Metals Figure 6 Packaging waste production in kg per capita in 2009 The European country with the highest recovery and recycling rates (regarding packaging waste) is Denmark, reaching in 2009 the values of 108% and 84%, respectively (see Figure 7). 3 Regarding the countries analysed in this report, Germany has the highest recovery and recycling rates (95% and 74%, respectively).furthermore, Portugal and Romania had already exceeded the overall targets of recycling and recovery in 2010 despite their longer deadlines (2011 and 2013, respectively). 3 Many times the quantities of packaging treated are higher than the quantities actually reported (due to the free riding problem and the import of waste). In addition, some non-packaging waste (mainly) of paper and plastic can be treated as packaging waste since they are collected in the same drop-off container. 12

23 3. Recycling of packaging waste in numbers Figure 7 Packaging waste recycling and recovery rates in 2009 and PPW Directive targets Considering the recycling targets for each material, Germany and the UK have exceeded all of them in 2009, as illustrated in Table 6 and Figure 8. Concerning the wood material, France had a throwback on its recycling rate, i.e., despite having met the specific target in 2008, it failed it in 2009, reaching the smallest recycling rate (13%) of the five countries. Portugal did not meet the target for glass (52%) in However, in 2009, the recycling rate has increased (55%). Romania did not reach the recycling targets for glass and wood, but this is not yet a great concern since the deadline is Table 6 Packaging waste recycling in 2009 (thousands of tonnes) Packaging Paper/ Cardboard Plastic Wood Metallic Glass Germany (73,5%) (91,1%) (48,4%) 650 (30,8%) 742 (91,7%) (82,5%) France (56,4%) (85,6%) 470 (25%) 320 (12,9%) 431 (64,3%) (68,1%) UK (61,8%) (83,9%) 588 (24,1%) 812 (76,9%) 452 (54,9%) (61,7%) Portugal (59,9%) 565 (79,5%) 96 (25,5%) 72 (65,3%) 64 (64,4%) 233 (55,3%) Romania 404 (40,5%) 187 (68,7%) 70 (23,8%) 25 (13,2%) 36 (56,4%) 87 (48,2%) Source: Eurostat (2012b) 13

24 3. Recycling of packaging waste in numbers Figure 8 Packaging waste recycling rates (%) by material in 2009 and PPW Directive target The European snapshot on waste management, made above, reflects the political efforts in adopting environmental protection measures. Nevertheless, the environmental protection, including the waste management activities, is related to an expenditure, which is supported by the public sector, industry and citizens. Therefore, the environmental protection expenditure (EPE) is defined as the money spent (directly or indirectly) on environmental protection activities, such as prevention, reduction and elimination of pollution resulting from the production processes or consumption of goods and services. In fact, the environmental protection has been integrated in many policy fields and the analysis of its expenditure patterns may provide an evaluation of the environmental policies already in force and of the implementation of the polluter pays principle. According to Eurostat (2012), the indicator EPE is the sum of total investments and total current expenditure. In turn, total current expenditure is the sum of internal current expenditure, the fees and other payments for environmental protection services. For the public sector, the EPE includes subsidies and investment grants paid to other sectors for the environmental protection activities. This indicator (expressed in % of GDP) is presented for the five case studies and for the EU-27 concerning the waste management sector in Figure 9. 14

25 3. Recycling of packaging waste in numbers A low level of EPE does not necessarily mean that a country is less effective in protecting the environment. Concerning the waste management expenditure, France reached the lowest level of EPE in 2009, which may even mean that this country was more efficient since it fulfilled the European objectives with fewer resources. 0,45% 0,40% 0,35% 0,30% 0,25% 0,20% 0,15% 0,10% 0,05% 0,00% UK Portugal Germany EU-27 Romania France % GDP Figure 9 EPE (% of GDP) in waste management for the case-studies and EU-27 in

26 4. Institutional and regulatory framework of the case-studies 4.1 France The PPW Directive was transposed into French legislation through two main decrees: Decree no of 1 April 1992 and the Decree no of 13 July The Decree no established that each producer or importer placing packaging and/or packaged goods on the French market must contribute to the recovery of all packaging waste arising from their activities. In order to fulfil their legal obligations, producers have three possibilities: Assume the responsibility for collection through a deposit system; Assume the collection and treatment of their packaging waste by themselves; Transfer their take-back obligation to a compliance scheme. In 2007, the French government started a democratic debate on environmental issues, known as the Grenelle Environment. The Grenelle 1 Act (planning law no adopted on 23 July 2009) was the first output of the Grenelle Environment. This act established a set of solid measures regarding waste management. The Law no of July 12, known as Grenelle 2 Act, added some more measures related to waste management, as presented in Table 7. 16

27 Table 7 French waste management targets Grenelle 1 Act (target 2012) 7% reduction household waste production per capita 75% packaging waste recycling MSW landfilling and incineration reduction to 15% 80% costs of packaging waste collection, sorting and treatment covered by EPR Grenelle 2 Act Limit of 60% MSW treatment in incineration and landfills facilities Modulation of EPR contributions based on the package eco-design The Decree no stated that producers of packaging, for household consumption, have to communicate to the Agency for Environment and Energy Management (ADEME in the French acronym) the quantity of packaging placed on the market and the quantity of packaging waste collected and recovered. According to the national law, the responsibility for packaging waste management can be transferred (by the industry) to an entity duly licensed for this activity (hereafter, compliance scheme). Eco-Emballages 4, the French Green Dot company, is a private nonprofit organisation aimed to fulfil the industry s responsibilities regarding packaging waste recovery and recycling. However, the company only supports the household waste flow through contracts with local authorities (municipalities, inter-municipal communities and associations which are responsible for managing the waste recovery and disposal operations). In 2010, this company established contracts with local authorities representing municipalities. The financial support provided to local authorities relies on the financial contributions of economic operators (i.e. the producers that introduce packaging/packaged goods on the market). The financial contribution (Green Dot value) paid by the producers comprises a variable component (weight fee) and a fixed component (unit fee). The weight fee is determined by multiplying the total weight of each packaging placed on the market by the respective fee (that varies with the type of material, as Table 8 shows). 4 The Eco-Emballages group entails two companies: Eco-Emballages and Adelphe. Adelphe joined the Eco- Emballages after

28 Table 8 Green Dot fee for 2010 Fees by packaging material ( /tonne) Glass 4,5 Plastic 222,2 Paper and cardboard 152,6 Steel 28,2 Aluminium 56,6 Others 152,6 Source: PRO Europe (2011) In 2010, the unit fee depended on the value achieved for the weight fee. For each packaging unit, if the weight fee was greater than or equal to 0,0014, the unit fee was a flat rate of 0,0014. If the contribution on weight was less than 0,0014, the unit fee was equal to the weight contribution and the total fee was twice the weight fee. The contribution of packaging weight to calculate the weight fee is limited to 1 kg. Above this weight, the weight fee is always the same. The unit fee intended to encourage industry to produce more environmentally friendly packages. According to the French system, the Green Dot value, paid by packaging producers, should cover 60% of the costs of collection and treatment services carried out by local authorities until 2010 (Eco-Emballages, 2011). In order to achieve the new national target of 75% of household packaging waste recycling (imposed by the Grenelle Act), a new agreement between Eco-Emballages and local authorities (called Barème E) was established for the financial support given to local authorities (EIMPack, 2011b). This new model (currently in force) in addition to promote an increase on the packaging waste recycling rates, has also the purpose of covering 80% of the net (benchmark) costs of an optimised sorting and collection service (Eco-Emballages, 2011). During 2010, the financial support for local authorities (FSLA) was calculated based on their performance and the take-back quantities for different packaging materials (see Tables 9 and 10). Besides this main support, other complementary supports are paid to local authorities by Eco-Emballages. There is also a third source for financing packaging waste management operations performed by the local authorities: the sale of the sorted material. All these financial supports are described in detail in EIMPack (2012a). 18

29 Table 9 Financial support by local authority performance Level Performance (P) in Kg/inh./year Financial Support (S) in /t 1 P Nb 2 Nb < P Nh 3 Nh < P Np 4 P > Np Where: S p plafond support; S i intermediary support; S b bottom support; N b lower level; N h high level; N p plafond Level. Source: adapted from Eco-Emballages (2010) Table 10 Values of the variables to calculate the financial support per material N b N h N p S b S i S p Steel ,5 80 Aluminium 0,1 0, Paper/Cardboard Plastic 1,6 3, Glass EMR Source: adapted from Eco-Emballages (2010) The non-household packaging waste flow has been supported by packaging recyclers through voluntary base specific structures in order to help enterprises to comply with the legal framework (ADEME, 2008). In 2008, about 63% of the packaging placed on the French market was non-household packaging (and more than 50% was recycled). ADEME (2008) also anticipated that this trend would continue in the following years. 5 Mixture of various qualities of used paper and cardboard packaging, free from newspapers and magazines and liquid packaging cardboard. 6 Mixed recovered paper and board (unsorted paper and board, separated at source). 19

30 4.2 Germany The PPW Directive was introduced into German legislation by the Packaging Ordinance of 21 August However, before this transposition, Germany had already packaging legislation in force (the Ordinance on the Avoidance of Packaging Waste of 12 June 1991). The Packaging Ordinance was amended five times: the first amendment took place in August 2000 and the following dates back to May 2002, May 2005 and December The 4 th Amendment of the Packaging Ordinance (in December 2005) transposed the Directive 2004/12/CE, updating the targets for packaging waste recycling and recovery. The 5th Amendment (the last amendment to the Packaging Ordinance) entered into force in April To promote packaging waste recycling, some legal obligations were introduced by the Packaging Ordinance. As an example, a deposit of 25 Euro cents on non-reusable packaging for beverages is currently in force. This deposit is applied for all nonenvironmentally friendly packaging containing mineral water, beer, soft drinks and alcoholic mixed drinks of size between 0,1 and 3 litres. The Packaging Ordinance defines ecologically advantageous one-way drinks packaging as drinks carton packaging (brick packs, gable-top cartons, cylindrical packaging), drinks packaging in the form of polyethylene bags and stand-up bags. After the ban of non-treated waste landfilling in 2005, other waste treatment options were developed and, consequently, the rate of waste landfilling has decreased. In 2010, the percentage of waste landfilled was only 0,4%. Germany has set higher targets than the ones set by the PPW Directive regarding household sales packaging 7 through the 5 th amendment of the Packaging Ordinance in The minimum recycling targets for each material of household sales packaging are presented in Table Sales packaging is defined in the Packaging Ordinance as the packaging that is made available as a sales unit and arises at the final consumer ( ) shall also include such packaging provided by retailers, restaurants and other service providers as facilitates or supports the transfer of goods to the final consumer. 20

31 Table 11 German household sales packaging recycling targets Household sales packaging recycling targets (%) Paper/cardboard Glass Aluminium Tinplate Plastic Composites All entities responsible for placing sales packaging on the German market have to submit a Declaration of Compliance (DC) to the Chambers of Industry and Commerce (IHK in the German acronym). If the amount of sales packaging is below the threshold quantities, the DC should be submitted only when the authorities responsible for monitoring waste management request it. On the other hand, if the quantities are above the threshold, the producers have to register and declare their packaging production in the IHK s online platform (see EIMPack, 2012b). According to the Packaging Ordinance, packaging manufacturers and distributors are responsible for their waste and have to comply with a system that ensures its recycling and recovery. In this regard, the Der Grüne Punkt Duales System Deutschland GmbH (DSD) was created in 1990, the German Green Dot company. The DSD system, which is 100% financed by the industry, should ensure the collection and recycling of packaging waste. The DSD was the first system of its kind around the world (DSD, 2011). Since it was created, DSD coordinates the packaging waste selective collection in cooperation with the local authorities across the country and is responsible for the sorting and recovery of sales packaging placed in the market by producers (clients). DSD carries out this activity by contracting private and municipal waste management companies (PRO Europe, 2010). Currently, there are a total of nine dual system companies licensed to operate on the packaging waste management market, namely: DSD; Landbell AG für Rückhol-Systeme; Redual GmbH; BellandVision GmbH; Vfw GmbH; EKO-PUNKT GmbH; INTERSEROH Dienstleistungs GmbH; Veolia Umweltservice Dual GmbH; and Zentek GmbH & Co. KG. DSD continues to be the major player with the highest market share of the packaging materials placed on the market (see EIMPack, 2012b). The management of packaging waste is financed by the licence fees paid by the dual systems clients, which are indicated in Table 12. In Germany, the use of the Green Dot symbol is not mandatory and 21

32 the operators which want to use it have to pay a trademark fee (see Table 13) in addition to the licence fee based on the weight and the type of packaging material. Table 12 DSD s licence fees (2010) Material /tonne Glass 74 Paper / cardboard 175 Tinplate 272 Aluminium, other metals 733 Plastic Composites cartons with special acceptance and recycling guarantee 752 Other composites Natural materials 102 Source: PRO Europe (2008) Table 13 Fees for the use of the trademark Der Grune Punkt by material (2011) Material /tonne Glass 1,00 Paper / cardboard 3,00 Plastic 17,00 Composites 13,00 Tinplate 5,00 Aluminium 13,00 Source: PRO Europe, 2011 The dual system companies have to provide the mass flow verification to the state governments, which are responsible for monitoring the system. Regarding the industry and transport packaging 8, these flows are separately managed. Each dual system needs to have the permission of the waste management local authority to organise the collection of the household packaging waste. Currently, there are around 450 local authorities with a particular waste collection system (PRO Europe, 2010). The 8 Transport packaging is defined in the Packaging Ordinance as packaging that facilitates the transport of goods, protects the goods from damage during transport or is used in the interest of transport safety and arises at the distributor. 22

33 packaging waste materials are collected in a kerbside or a bring system. The paper and cardboard packaging waste have the particularity of being collected with the waste paper (non-packaging). Therefore, the municipalities are responsible for collecting the drop-off container of paper and cardboard (packaging and non-packaging), but the costs are shared with the dual system companies (i.e. the dual systems have to pay to the municipalities by the collection of packaging waste). Since 2004, DSD has tendered collection services and organised the collection infrastructure by signing three-year contracts, which have been shared by the remaining dual systems. The costs of the packaging waste collection are allocated based on the respective market shares. After collection, the packaging waste is delivered to each dual system company (being processed in a transfer station), according to the corresponding market share. The costs with containers and with communication are supported by the dual systems, also based on the market share. Germany, as opposed to other countries analysed in this report, transferred all the costs and the responsibility of the packaging waste management to the industry. The waste collection is performed by a private or public company selected by tender. Currently, there is a recent discussion on a new recycling bin where several materials are jointly collected (packaging and non-packaging materials). However, it is not clear yet who should accept the responsibility for their management (see EIMPack, 2012b). 4.3 Portugal In Portugal, the Decree-Law no. 366-A/97 and the article 7 of Ordinance no. 29-B/98 transposed the PPW Directive stating that the economic operators must accept the responsibility for the management of their packaging waste. Decree-Law no. 92/2006 of 25 May replaced Decree-Law no. 366-A/97 of 20 December, previously amended by Decree-Law no. 162/2000 of 27 July. Producers of municipal waste employing more than 10 workers, businesses whose production of waste surpasses litres per day and producers of hazardous waste from agriculture and other origins were required to report the quantities of packaging, placed on the market in SIRER (an internet platform managed by the Environment 23

34 Portuguese Agency APA in the Portuguese acronym). Currently, SIRAPA has replaced SIRER, which is a single portal created for organisations and establishments with legal obligations on regarding environmental issues (including the previous SIRER users). In line with other countries, the economic operators responsibility can be transferred to a licenced company. The Green Dot company (Sociedade Ponto Verde SPV) is a nonprofit private entity, created in November 1996, responsible for managing the packaging waste of its clients. This company was licensed on October 1, 1997, by the Ministers of Economy and the Environment and is the representative of the economic operators for the management of municipal (household) packaging waste or similar. Later on, SPV extended its management scope to the industrial and commercial packaging waste flow. Currently, SPV has responsibility over household and non-household packaging waste arising from the packaging and packaged goods introduced in the market by their clients, which have to pay a Green Dot fee per type (primary, secondary and tertiary) and material of packaging (Tables 14 and 15). However, the Portuguese law states that municipalities are the competent authorities for managing urban waste services. In most cases, selective collection, sorting and treatment activities are performed by regional public companies. The most representative type of management model is the multi-municipal company. These companies consist of partnerships between a public company owned by the central state (Empresa Geral de Fomento EGF) and the municipalities. EGF owns 51% of the shares in these companies while the municipalities hold the remainder (see EIMPack, 2011c). Table 14 Green dot fee for household packaging for 2010 ( /tonne) Packaging material Primary Secondary Tertiary Glass 18,3 Paper/Cardboard 86,3 35,2 7,0 Plastic 228,2 92,3 23,8 Composite Food Packaging 129,4 Steel 96,0 41,7 24,4 Aluminium 164,4 Wood 15,4 14,2 9,1 Others 260,0 260,0 260,0 24

35 Bags Packaging of industrial products; hazardous raw materials Packaging of industrial products and raw materials Task 3 Financial Flows Table 15 Green Dot fee for industrial packaging for 2010 ( /tonne) Packaging material Primary Secondary Tertiary Glass 13,5 Paper/Cardboard 7,0 7,0 7,0 Plastic 23,8 23,8 23,8 Steel 24,4 24,4 24,4 Aluminium 49,4 Wood 9,1 9,1 9,1 Others 55,0 55,0 55,0 Glass 13,5 Paper/Cardboard 7,0 7,0 7,0 Plastic 23,8 23,8 23,8 Steel 24,4 24,4 24,4 Aluminium 49,4 Wood 9,1 Plastic 228,2 Paper/Cardboard 86,3 The FSLA corresponds to the value paid by the SPV to the local authorities. This payment is calculated according to the material and quantity (per capita) of packaging waste selectively collected and sorted by local authorities as shown in Table 16 (SPV, 2010). The FSLA model is implemented by following the scheme shown in Figure 10. X1 represents the national average of waste taken back carried out by local authorities; X2 corresponds to the take-back per capita required to comply with the targets of the PPW Directive; and X3 is the potential market for packaging (total household packaging produced in Portugal divided by the population). In sum, the FSLA is paid based on three levels of local authority s performance corresponding to three different prices for the packaging waste taken-back by SPV. Note that in Portugal, when the SPV pays the FSLA it becomes owner of the waste, as opposed to France (for example). 25

36 Table 16 FSLA for 2010 Material Kg/inh./year /tonne X1 X2 X3 P1 P2 P3 Glass 14,3 24,5 40,8 35,0 48,0 60,0 Paper/cardboard 8,0 10,0 15,0 122,0 136,0 149,0 Plastic 2,1 3,6 15,3 732,0 782,0 832,0 Steel 0,4 0,7 4,1 540,0 580,0 619,0 Aluminium 0,02 0,04 0,86 689,0 914,0 1155,0 Composite Packaging 0,3 1,8 3,0 693,0 741,0 788,0 Figure 10 Model for the application of the FSLA 4.4 Romania In Romania, the PPW Directive began to be implemented in 2005 through the Government Decision (GD) no. 621/2005 (amended by the GD no. 1872/2006 and GD no. 247/2011) on PPW management and through the Order no. 927/2005 on data reporting procedures regarding PPW. According to the GD no. 621/2005, economic agents that place commercial packaging on the market are responsible for these packaging. The recycling and recovery objectives can be achieved individually, through the direct and own collection of packaging waste, or by delegating the responsibilities to an authorised company (licensed by the Ministry of 26

37 Environment and Forests). As stated by GD no. 247/2011, if an economic operator does not fulfil the objectives individually, it is required to transfer its packaging waste management responsibilities to an authorised company in the period of a year. Moreover, economic operators (with individual responsibilities or who joined an authorised company), local authorities and public institutions managing packaging waste must provide annual information on PPW management to the Ministry of Environment and Forests. The latter determines the procedure for reporting such information which is stored in a database managed by the National Environmental Protection Agency. Although the PPW Directive established that recycling and recovery targets have to be accomplished by the year 2013, Romania has national annual targets for the period (see Table 17). Table 17 Gradual increase of the Romanian national recycling and recovery obligations Year Minimum objective of recovery through material recycling (%) Paper/ Plastic Glass Metals Wood Cardboard Recycling objective (%) Recovery objective (%) ) ) ,5 1) 60 1) ) 55 1) 60 1) 1) Directive 94/62/CE targets Currently, there are seven companies licensed for managing this specific waste flow in order to comply with the national and EU recycling and recovery targets, namely: Eco- Rom Ambalaje; Ecologic 3R; Intersemat; Sota Group; Eco X; Eco Pack Management; and Respo Waste. Eco-Rom Ambalaje (ERA) is the Green Dot company operating in Romania, holding the highest market share for managing the household and industrial packaging waste flows. 27

38 ERA has supported the implementation of a selective collection system at the national level, through the three-party agreements established with local authorities and sanitation operators 9. Although local authorities have the exclusive responsibility for managing municipal waste (according to Law no. 101/2006), their sanitation services (including the selective collection of household packaging waste) have been delegated to the public and private operators (EIMPack, 2012c). ERA has also set contracts with private Waste Management Companies (WMCs) that are authorised to collect and recycle industrial and commercial packaging waste. Both WMCs and sanitation operators receive a financial support for performing their waste management services. In exchange, they have to declare all the quantities of packaging waste collected and sent for recycling and recovery. The ERA s compliance scheme is financed by the license fees (also called Green Dot fees) paid by the industry according to the packaging material and weight. The Green Dot fees applied in the year 2010 are presented in Table 18. These fees should partially cover the costs of collection and recycling/recovery services performed by the authorised public and private companies. Therefore, ERA provides a bonus payment to the waste companies. Table 18 ERA s Green Dot fees Packaging Material Green Dot Fees ( /tonne) 2010 Glass 16,29 PET 21,47 Plastics 11,68 Cardboard paper 13,27 Steel 10,27 Aluminium 10,27 Wood 10,53 Source: PRO-Europe (2010) 9 Companies responsible for municipal waste management operations. 28

39 This bonus payment is set annually (in agreement with local authorities and the waste operators) based on the operational costs and the market share of each packaging material. Table 19 presents the financial support per tonne of each packaging waste material in Table 19 ERA s financial support for WMCs Packaging Material Bonus payment ( /tonne) 2010 Glass 23,89 PET 32,40 Plastics 15,39 Cardboard paper 13,67 Steel 13,88 Aluminium 13,89 Wood 10,60 Source: EIMPack (2012c) In addition to the bonus payment, the waste services are also supported by the sale of packaging waste materials (see Table 20). In Romania, the waste companies contract directly with the recycling industry. Table 20 Average price of each packaging material delivered to recycler/recover, in 2010 Packaging Material /tonne Glass 6,9 PET 333,5 Plastics 253,0 Paper and cardboard 126,5 Steel 218,5 Aluminium 977,5 Wood 29,9 Source: WMC,

40 4.5 The United Kingdom The goals of PPW Directive were transposed into British legislation through the Producer Responsibility Obligations (Packaging Waste) Regulations in The Regulations also introduced the concept of shared responsibility by all economic operators involved in the life cycle of packaging. 10 The equivalent legislation for Northern Ireland was introduced by the Producer Responsibility Obligations (Packaging Waste) Regulations (Northern Ireland) in Afterwards, the Directive 2004/12/CE was transposed by the Producer Responsibility Obligations (Packaging Waste) Regulations of These Regulations were replaced by the Producer Responsibility Obligations (Packaging Waste) Regulations of 2007 which were amended in 2008 and In line with to those packaging regulations, the UK set more ambitious targets than the PPW Directive. In addition, all economic operators who have some type of responsibility over packaging have to assume take-back (recycling and recovery) obligations. In order to comply with these obligations, they can register directly with the respective agency, the Environment Agency (EA) of England and Wales, the Scottish Environment Protection Agency (SEPA) or the Northern Ireland Environment Agency (NIEA). However, they can also register through a compliance scheme, i.e. through a company licensed (by the Department for Environment, Food and Rural Affairs, DEFRA) for taking on their legal obligations. The environment agencies manage an online National Packaging Waste Database (NPWD), in which all economic operators (with direct registration or through a compliance scheme) have to submit a proof of compliance and an operational plan. The latter is applicable only to the operators who have recovery and recycling obligations over 50 tonnes of packaging waste in the year preceding the submission. Currently, there are 22 compliance schemes in the UK, where Valpak is the Green Dot company with approximately 50% of market share. 11 The economic operators, who opt to 10 Including importers of packaging, manufacturers of packaging and packaging materials, packers or fillers and retailers. 11 Betapack, Biffpack, Budget Pack, Compliance Link, Comply Direct, Complypak, Kite Environmental Solutions, Paper Collect, Paperpak, Pennine-Pack, Recycle 1st, Recycle-Pak, Recycle Wales, SWS Compak, Synergy Compliance, TaG Pack, Toddpak, Valpak, Valuepack, Veolia Environmental Services, Wastepack and Wespack. 30

41 join the Valpak scheme, have to pay a membership fee (instead of the registration fee in the relevant environment agency) based on their obligation level, as shown in Table 21. In turn, the obligation level is calculated based on the amount of packaging handled multiplied by the recovery/recycling target in force and by the percentage corresponding the one of the activities listed in Table 22. Therefore, the resulting obligations represent the tonnes of packaging waste to be recycled/recovered that should be financed by the respective economic activity. Table 21 Annual membership fee banding Membership Fee a Banding 455,00 Small and medium enterprises (SME) b 568, tonnes 853, tonnes 1.137, tonnes 1.706, tonnes 2.843,73 >4.000 tonnes a Values based on current conversion currency ( 1 = 1,14). b Any operator who has a gross annual turnover of less than 5 million ( 5,69 million) and handles under 50 tonnes of packaging. Source: Valpak, 2011 Table 22 Percentages assigned to each economic operators class for the calculation of the recycling/recovery obligations Manufacturer 6% Convertor 9% Packer/Filler 37% Seller (to the end-user) 48% Service provider 85% The recovery and recycling targets concerning packaging waste for the period from 2010 to 2012 set by The Producer Responsibility Obligations Regulations of 2010 are presented in Table

42 Table 23 The UK recovery/recycling targets according to packaging waste regulations of 2010 Year Packaging recycling targets (%) Paper Glass Aluminium Steel Plastic Wood Total recovery Minimum recycling , , , For small producers, the recycling/recovery obligations are calculated by the (so called) allocation method based on their turnover and on the main material type handled. The current recycling allocation is 29. Thus, the obligation is calculated by the following formula: Economic operator turnover/ x 29 = Operator obligation (in tonnes) The membership fees should cover the registration fees, in the respective environment agency, and the compliance costs, i.e., the costs of packaging waste selective collection and treatment. The compliance costs in the UK are based on a unique system of purchase and sale of packaging recovery notes (PRNs) and packaging exporter recovery notes (PERNs) issued by accredited reprocessors and exporters, respectively. To meet their clients obligations, Valpak establishes partnerships with local authorities who are responsible for managing municipal waste and, consequently, the household packaging waste flow. Local authorities can perform the waste services directly or by contracting out to companies that collect, sort and sale the packaging waste materials to the reprocessors/exporters. In turn, Valpak sets contracts directly with the recycling reprocessors and exporters, purchasing the PRNs/PERNs certificates on behalf their clients (producers). The PRNs/PERNs have a market value which depends on relative supply and demand of packaging materials. Since this value is not proportional to the materials value, the low value materials can be inflated (because the PRN value) in order to meet the recycling targets and the high value materials can retain their own value even if the recycling 32

43 targets have been met. This dynamics promotes the supply increase and, consequently the increase of collection and recycling/recovery rates. The average PRN prices per material paid by Valpak in 2010 are presented in Table 24. Table 24 Average PRN prices for 2010 ( /tonne) Material Average PRN price ( /tonne) Paper 3,80 Plastic 5,00 Glass 23,29 Steel 21,82 Aluminium 16,10 Wood 1,20 Source: PRO-Europe (2010) The use of the Green dot symbol is not mandatory in the UK. However, operators who are members of Valpak can use it free of charge. The operators who are not members of Valpak have to pay an annual license fee of 225 (around 259) for using the trademark on their packaging. 33

44 5.1 Methodology implemented The methodology applied to the five countries analysed is based on an economic-financial model which establishes a balance between the costs and benefits allocated to the activities of selective collection and sorting. Only the household packaging waste flow was considered with exception of Romania where the industrial flow was also included. 12 For the German and British case studies, the model was not applied due to the competitive nature of the recycling schemes, it was impossible to obtain reliable data regarding financial costs and benefits. Figure 11 shows the various variables used in the analysis. The costs and benefits were calculated based on tonnes of packaging waste taken back (quantities that are effectively financed by the compliance schemes). To allow for an international comparison, the analysis was also performed based on tonnes selectively collected. Regarding the benefits, the aspects taken into account were: (1) the FSLA (provided by the compliance schemes); (2) the sale of packaging materials; (3) the sale of nonpackaging materials (as non-packaging paper); and (4) Government grants (when applicable). In an economic perspective, the savings ( other benefits ) attained from the diversion of packaging waste form the refuse collection and waste disposal activities were also considered as an additional benefit. These other benefits or opportunity costs were calculated separately and following equations (1) and (2). 12 Currently, the highest share of packaging managed by the Romanian Green Dot company (ERA). 34

45 Figure 11 The benefits and cost of recycling in the case studies Costs avoided with refuse collection ( /year) = Quantity of waste selectively collected (tonne/year) Unit cost of refuse collection ( /tonne) (1) Costs avoided with waste treatment ( /year) = Quantity of waste taken back (tonne/year) Unit cost of treatment and disposal ( /tonne) (2) The variables and values used to calculate the opportunity costs and the efficiency of the sorting processes are indicated in Table 25. Table 25 Variables and values used in the methodology 35

46 Portugal France Romania Unit costs of refuse collection 49 /tonne 85 /tonne 12 /tonne Unit cost of other treatment (landfill, incineration, etc.) 53,9 /tonne 96 /tonne 15 /tonne Efficiency: Glass 95% 99% 90% Paper/cardboard 93% 95% 45% Other packaging 63% 76-80% 45% Source: EIMPack (2011c), EIMPack( 2012a,c) On the costs side, the operational and maintenance costs (taking into account the costs associated with service provision), the depreciations of fixed assets and the return on capital employed (debt and equity) in the financing of fixed assets allocated to selective collection and sorting were considered. The operational and maintenance costs of selective collection and sorting and the depreciation of the assets allocated to these activities were obtained from the survey results and from the annual account reports of local authorities. In the analysed case studies, the cost of packaging waste rejected during sorting operation was considered as an operational and maintenance cost. The return on capital employed on the investments made on selective collection and sorting equipment and infrastructure was calculated through equations (3) and (4). 13 Return on capital employed ( /year) = (Depreciation-subsidies) ( ) Useful life of the assets (-) WACC (%) (3) WACC (%) = Cost of equity Equity (1-marginal corporate tax) + Cost of debt Debt (4) The values of the variables used to calculate the return on capital are presented in Table WACC Weighted Average Cost of Capital 36

47 Table 26 Variables used to measure the return on capital employed Value Useful life of the assets (years) 9,6 Cost of equity (%) 6,0 Equity in the capital structure (%) 19 Marginal corporate tax (%) - Cost of debt (%) 4,6 Observation This value was achieved considering the assets and their depreciation. This value was weighted by the waste selectively collected. This value takes into account a non-risk (of 3%) and a risk premium (of 3%, related to the German Treasury Bonds). This value was defined taking into account the weight that equity has on the capital structure of the utility (i.e. in relation to the liabilities). This value was weighted by the waste selectively collected. This value varies among the case studies (see EIMPack 2011c and EIMPack 2012a,c) This value was achieved considering the average interests paid for the utilities loans. This value was weighted by the waste selectively collected. In France, a total of 45 local authorities (covering about 20% of the French population) in charge of collection and treatment of household waste, including packaging waste, were analysed (see EIMPack, 2012a). In the Portuguese case-study all the 27 regional authorities responsible for the waste services were considered, covering the entire population (see EIMPack, 2011c). In Romania, the data were obtained from the WMCs belonging to the ERA system (EIMPack, 2012c). In order to perform an international comparison, we took into account the purchasing power parity (PPP) of each country. In this sense, the costs and benefits of recycling were adjusted using the World Bank indicators for 2010, as presented in Table 27. These indicators convert local currencies in international dollars, which should provide a fairer comparison. Table 27 PPP indicators used in Portugal, France and Romania case studies Portugal 0,63 France 0,88 Romania 0,38 Source: World Bank (2012) 37

48 5.2 Benefits and costs of recycling The economic analysis of the case-studies is based on the methodology shown in Figure 11. Among the benefits, the sale of packaging material was not considered in the Portuguese case study (where the only revenue from the packaging waste taken back is the FSLA). The Government grants (subsidies to the investment) were not considered in Romania since the waste management operations are mainly performed by private companies. Moreover, note that in this country most of the packaging waste collected comes from the industrial flow, which does not require the same technology and infrastructure as the household packaging waste. Germany is a special case where the model was not applied due to the fact that the packaging waste management is entirely financed by the industry. In this country, packaging waste management operations are not an exclusive responsibility of local authorities (is open to competition). Likewise, the lack of information also prevents us to carry out a detailed analysis for the UK. Figures 12 and 13 illustrate the balance between the economic-financial costs and benefits of selective collection and sorting activities carried out by local authorities (for the Portuguese and French case studies) and by the waste management companies belonging to the ERA system (in Romania). The results are shown in euros per tonne collected in Figure 12 and per tonne taken back in Figure 13. Adopting an economic perspective (when the opportunity costs are considered), the results show that: 1. The French local authorities benefit (on average) 314 per tonne of packaging waste collected (see Figure 12), being the highest value of the three countries analysed; 2. In Romania, the total benefits are lower than the costs, which are only covered in 87% since opportunity costs are considerable lower than in the other countries; 3. Since the cost coverage is around 128% in Portugal and 135% in France, the FSLA could be reduced in both countries (or even removed in the case of France). Note that, in Portugal, the FSLA internalise the market value of sorted material. 38

49 From a financial perspective (when the costs of avoiding the waste collection and treatment of the mixed waste flow are not taken into account), the cost coverage is only 77% in Portugal, 66% in Romania and 57% in France and thus the FSLA should increase. Figure 12 The benefits and costs of recycling per tonne collected in the case studies Figure 13 The benefits and costs of recycling per tonne taken back in the case studies 39

50 Furthermore, from both previous figures, it was found that (on average) the costs and benefits per tonnes taken back are significantly higher than the ones per tonnes selectively collected. The rejected rates (especially) of plastics and metals during the sorting operation (see Table 25) explain this difference. The Eco-Emballagesʼ goal, to cover 60% of the net efficient benchmark costs, is quite far from the results obtained (35%). However, one should note that the costs of the service obtained and depicted above do not necessarily correspond to the ones defined as benchmark costs. The FSLA is higher in Portugal than in the other countries, although the French and Romanian local authorities also benefit from the sale of packaging waste materials (in addition to the financial support) while the Portuguese FSLA already includes the sale of materials. Even if the FSLAs (paid by Eco-Emballages and Eco-Rom Ambalaje) are added to the sale of packaging material, the values are still lower than the FSLA paid by SPV. In principle, if the industry was to be fully responsible for the packaging waste management costs (financial approach), the financial support would have to increase in all the countries analysed. However, there is the issue of the cost-efficiency of local authorities. Table 28 presents the amendments in the FSLA in each country (excluding the government grants) in order to cover the costs from an economic and financial approach. Table 28 Amendments to the FSLA for packaging waste management costs cover Country Economic Perspective Financial Perspective Portugal -29% +50% France -96% +125% Romania +179% +459% Further analysing the costs and benefits per capita (Figure 14), it is possible to see that France achieved the economic benefit of 19 per inhabitant served. Portugal and Romania obtain 11 and 17 per inhabitant, respectively. Considering just the financial benefits, local authorities receive 6,7 and 8,2 per inhabitant in Portugal and France, respectively. In Romania the value obtained is higher (20 per inhabitant) due to the fact 40

51 that the selective collection system only covered 4 million inhabitants, accounting for about 19% of the total Romanian population (Eco-Rom, 2011). Figure 14 The benefits and costs of recycling in /inhabitant in the case studies The benefits and costs of recycling per tonne collected for the five case studies considering the purchasing power parity (PPP) adjustment are presented in Figure 15. The results indicate that costs per tonne collected are higher in Romania (perhaps due to the inefficiency of the services), followed by Portugal and France. On the other hand, the PPP adjustments of economic benefits are higher in Portugal followed by Romania and, at last, France. Analysing the costs per capita considering the PPP adjusted values (Figure 16), in Romania, the value reaches $52 per inhabitant, which is substantially higher than in France and Portugal ($16 and $14 per inhabitant, respectively). This result may be point out to the greater inefficiency of the Romanian waste management operations, since the selective collection was not yet widely implemented. The economic benefits per capita with the PPP adjustment are presented in Figure 17. As it is possible to see, the economic benefits are higher than the costs in Portugal and in France. 41

52 Figure 15 The benefits and costs of recycling per tonne collected in the case studies (PPP adjusted) Figure 16 The costs of recycling per capita in the case studies in euros and PPPadjusted 42

53 Figure 17 The benefits of recycling per capita in the case studies in euros and PPPadjusted The results were also computed according to the population density of the local authorities in Portugal and France. The categorisation into rural and urban population corresponds to populations under and above (respectively) 250 inhabitants per km 2.. Figures 18 and 19 show graphically the results for each typology. The rural authorities present a better cost coverage than the urban ones, since they have lower unit operational costs, in both countries (Portugal and France). This is depicted in Figures 20 and 21. Note that the weighted average of the operational costs per tonnes taken back is higher for urban authorities. These results can be explained by the need for more investments in the urban areas where the quantity of waste is higher (furthermore, urban utilities often face other problems, such as congestion and sometimes diseconomies of scale). The inefficiency of some waste services provided by urban authorities may also explain the previous results. 43

54 Figure 18 Cost coverage for local authorities under 250 inhabitants per km 2 in Portugal and France Figure 19 Cost coverage for local authorities above 250 inhabitants per km 2 in Portugal and France 44

55 On average, the economic benefits are higher in urban areas, in both countries (Figures 22 and 23). However, in France, the financial benefits are higher in rural areas while in Portugal they are higher in urban ones, as shown in Figures 24 and 25. Figure 20 Operational costs of local authorities based on quantities taken back for local authorities under 250 inhabitants per km 2 in Portugal and France Figure 21 Operational costs of local authorities based on quantities taken back for local authorities over 250 inhabitants per km 2 in Portugal and France 45

56 Figure 22 Economic benefits based on quantities taken back for local authorities under 250 inhabitants per km 2 in Portugal and France Figure 23 Economic benefits based on quantities taken back for local authorities over 250 inhabitants per km 2 in Portugal and France 46

57 Figure 24 Financial benefits based on quantities taken back for local authorities under 250 inhabitants per km 2 in Portugal and France Figure 25 Financial benefits based on quantities taken back for local authorities over 250 inhabitants per km 2 in Portugal and France The unit costs of selective collection per type of household packaging waste flow in Portugal and France are shown in Figure 26. The plastic and metals flow has higher costs 47

58 than the remaining flows (glass and paper/cardboard), reaching the highest value in France (788 per tonnes collected). Figure 27 illustrates the unit operational costs per material of packaging waste in Romania. These costs are lower than in the other countries, most likely, due to the origin of the packaging waste (industrial flow). Figure 26 Costs of selective collection per flow in Portugal and France Figure 27 Operational cost (collection and sorting) per packaging waste material in Romania 48

59 Finally, the service costs were split into the costs of selective collection and sorting of packaging waste, which are represented in Figures 28 and 29. The selective collection costs are 144 per tonne in France, followed by Portugal (132 ) and Romania (82 ). Figure 29 illustrates the costs of sorting per tonne which are effectively sorted (i.e. plastic, metal and paper packaging). The results indicate that France has the highest cost per tonne sorted (143 per tonne sent for sorting). On the other hand, Romania presents the highest costs of selective collection and sorting when the PPP-adjusted values ($217 per tonne selectively collected and $290 per tonne sent for sorting, as shown in Figures 30 and 31) are taken into account. Figure 28 Cost of selective collection per tonne collected Figure 29 Cost of sorting per tonne effectively sent for the sorting operation 49

60 Figure 30 Cost of selective collection per tonne collected (with PPP) Figure 31 Cost of sorting per tonne effectively sent for the sorting operation (with PPP) For comparison reasons, the collection costs in Germany are reported (taking into account existing literature) in Tables 29 and 30. The cost of kerbside collection of dry recyclables should be, on average, 265 per tonne and sorting is around 150 per tonne (see Table 29). In this country, the waste management operation costs have decreased with the increase in market competition (being a fully privatised market). Since 2004, when DSD started to put waste collection services out to tender, the collection costs decreased 30% 50