Constituent Members AAA Submission to the National Environment Protection Council regarding the

Transcription

1 Constituent Members AAA Submission to the National Environment Protection Council regarding the Draft National Environment Protection (Tyres) Measure and Draft Tyres Product Stewardship Agreement July 2008

2 The Australian Automobile Association (AAA) welcomes the opportunity to make a submission to the NEPC on the proposed measures to deal with end-of-life tyres. The Australian Automobile Association (AAA) supports and coordinates the activities of its constituent motoring clubs and represents the interests of Australian motorists nationally and internationally. The AAA's constituent members include all of Australia's state and territory motoring clubs: National Roads and Motorists' Association Limited Royal Automobile Club of Victoria (RACV) Limited The Royal Automobile Club of Queensland Limited Royal Automobile Association of South Australia Incorporated Royal Automobile Club of Western Australia (Incorporated) Royal Automobile Club of Tasmania Limited Automobile Association of the Northern Territory Incorporated Royal Automobile Club of Australia Proposed National Environment Protection Measure (NEPM) Motorists are becoming increasingly aware of the impact of all elements of vehicle ownership on the environment and the AAA believes there is sympathetic support for schemes that are equitable, efficient and deliver real and sustainable environmental improvement. The AAA supports the adoption of a national approach to dealing with the waste management, environmental, public amenity and resource efficiency issues associated with end-of-life tyres. The national strategy of an NEPM is supported as it ensures more consistent outcomes without the possible exploitation of differences in jurisdictions that might otherwise occur, and also ensures business has a consistent and level playing field in which to operate. Proposed Tyres Product Stewardship Agreement Any implemented stewardship arrangements must be focused on delivering targeted, sustainable and measurable outcomes consistent with addressing the environmental, public amenity and resource efficiency issues associated with end-of-life tyres. Whilst cognisant of the potential financial and administrative impacts on the tyre industry and government bodies, the AAA wishes to see the financial impact on motorists contained as far as possible. Appropriate checks and balances must ensure that only justifiable and necessary costs are passed on to motorists and the environmental objectives are achieved. The AAA believes there would be merit in reviewing schemes for similar automotive waste products (for example, used motor oil) to identify successful aspects of these schemes that could be utilised for end-of-life tyres and to avoid known pitfalls of existing schemes. Page 2 of 7 July 2008

3 Start-Up of the Scheme Businesses planning to take advantage of the proposed tyre product stewardship scheme to implement new technologies, improve collection infrastructure or facilities will need some certainty on price and therefore income on which to base their business model and satisfy financiers of the long term viability of investment in this industry. Any disconnect between collection of fees and payments in the early years of the proposed stewardship scheme may cause volatility in the price of end-of-life tyres and undermine long-term investment in the industry. When the natural price of the tyres has stabilised and the market has dealt with the influx of any stockpiled tyres, mature market mechanisms would be able to operate in the longer term. One solution may be for the government to provide initial funds to the scheme to provide stability at start-up and these funds could be repaid in the longer term. However, this has the disadvantage of diverting taxpayer funds to the stewardship scheme and consumers would fund the scheme through both the ARF and taxation. A further disadvantage would be that this may set a precedent for government funding support for other product stewardship schemes in the future. A more viable solution might be to collect the ARF for a period of time to accumulate sufficient funds before offering benefit payments. The mechanism for dealing with start-up of the scheme must be explicit in the stewardship agreement. Thresholds The AAA understands that thresholds are under consideration whereby importers of small volumes of tyres would be exempt from the proposed product stewardship arrangement. The AAA supports the proposed method of using Equivalent Passenger Units (EPU) to set thresholds, should they be applied, as this takes account of the mass of tyres and therefore the true contribution to the potential waste generated. Based on the analysis by MMA, thresholds appear justified in the proposed stewardship scheme, though the industry position of no thresholds is noted. In the interests of minimising free-riders, sub-threshold contribution to the waste stream, and incentives for gaming, while containing any negative impact of the scheme on small players the AAA believes thresholds toward the lower end of those considered in the study would be justified. The AAA also notes that there are existing mechanisms for collection of excise on tyres and suggests that these mechanisms could be employed to collect the advance recycling fee (ARF) proposed under the stewardship proposal. This would result in little additional administrative burden on tyre importers/producers and would provide an opportunity to include all tyre importers/producers without a threshold for exemption, thereby avoiding the possibility of creative operators attempting to avoid fees. The AAA understands that the proposed stewardship scheme requires producers to become signatories to the scheme, but suitable amendment could avoid this administrative workload (for example, requiring the ARF to be collected on all tyres, but only larger producers bound by the other obligations of the stewardship scheme). Page 3 of 7 July 2008

4 Advance Recycling Fee (ARF) The AAA supports the concept of an ARF or other form of levy being related to the tyre mass such as an EPU or similar, on the basis that it better reflects the potential material contribution to the waste stream. However, any scheme must avoid unreasonable charges to motorists and profiteering disguised under the banner of an environmental fee. As the ARF will be levied on producers in the first instance, it is reasonable to assume that these charges will flow through the supply chain to tyre dealers and ultimately consumers. Hence, control of the ARF to ensure that it is both appropriate and justifiable is absolutely essential as any increase would be borne by consumers. The Consultation RIS (April 2008) discusses the issue of tyre dealer disposal fees and gate fees charged by recyclers both currently and as the proposed scheme progresses. The assumption is that, as market pull-through occurs, gate fees drop and so therefore do dealer disposal fees. It acknowledges (pg 58) that the fee charged to consumers is variable between dealers and is not a true reflection of the disposal cost the dealer incurs. The variance is actually extra profit for the dealer and this is despite the competitive market forces that are often referred to within the RIS as effective means of control. The RIS acknowledges the fee is often the maximum the dealer considers believable, resulting in profiteering. In view of this we contend consumers will be faced with paying the ARF and also the continuance of the maximum disposal fee that the dealer feels the consumer will believe. This is unlikely to vary from the current fees charged. The AAA considers that this additional cost to the motorist amounts to double dipping and we believe this will occur on a widespread scale despite any predicted reduction in the gate fees charged to tyre transporters by recyclers and flow-on in reduced charges to dealers. This must be specifically addressed in the product stewardship proposal and NEPM. We believe it would be reasonable to include a sunset clause that requires the phase out of these dealer disposal fees that aligns with predicted reductions in gate fees to ensure consumers don t pay twice for their end user responsibilities. Planned education campaigns for consumers by the PRO regarding the ARF and Stewardship Scheme should also alert consumers to not accepting such fees by dealers once the ARF is introduced. Elements of the Tyre Track scheme implemented in New Zealand may offer benefits particularly in the area of helping to contain disposal costs to tyre dealers and illegal dumping activity through the use of preferred transporters and through on-line bidding for collection. The Regulatory Impact Statement (RIS) (pg 48) acknowledges that producers signing up to the scheme will face costs beyond collecting the ARF but concludes these will be minimal. Costs are estimated in the RIS in table 5.7, Pg 60 and table 5.13, Pg 81 at around $2000/producer. Given the on-going reporting requirements set out in the NEPM (Part 4, Section 12) and any additional administrative or set-up costs, the AAA is concerned that the extent of costs to producers may have been underestimated. Any additional cost will likely be passed on to consumers and raise the product price by more than the ARF alone. The AAA understands that any increase in the ARF Page 4 of 7 July 2008

5 requires approval from the Tyre Product Stewardship Council (with oversight from the Australian Competition and Consumer Commission). However, under the draft Tyres Product Stewardship Agreement, Appendix 5 states that 6 of the 10 Council members are from the tyre producing and recycling industries and that Council agreement is by majority (greater than 50%). This arrangement calls into question the impartiality of the Council in ensuring that the ARF is both justifiable and reasonable. This issue must be addressed in order to provide appropriate measures to protect consumers from potential profiteering. As an interested party representing motorists, the AAA would be willing to play a part on the Tyres Stakeholders Forum or the Tyre Product Stewardship Council. When more than one product stewardship scheme exists, it is not clear if the ARF or other levy would be the same in schemes that run parallel to one another. This may have an effect on consumers and may result in market distortion. This should be clarified. It is not clear how the proposed ARF will operate for new tyres exported from Australia (as loose tyres or fitted to vehicles exported to international markets). This should be clarified. Retread Tyres The AAA supports the view that retread tyres should be excluded from the scheme. While re-use of tyres for their primary purpose offers certain efficiencies and makes retreading a high order method of treating waste while also delaying disposal, we consider the ARF should only be levied once. Moreover, given the importance of tyres to vehicle safety and the potential for re-used/retreaded tyres to compromise safety, we would discourage measures that provide greater incentive to putting more retreads into the market, particularly for use on passenger and light commercial vehicles. Landfill A ban on disposal to landfill on its own is likely to encourage possible illegal dumping activity. However, with the stewardship scheme in place, a ban on commercial dumping of tyres to landfill in metropolitan and regional areas should be considered. In order to discourage illegal dumping by private persons (ie motorists), they should be permitted to dispose of non-commercial quantities of used tyres at minimal or no cost, which could be accepted at waste management and transfer stations. These tyres could be fed into the recycling system. As noted in the discussion documents, a ban on landfill in more remote areas is unlikely, at least in the short to medium term, to be practical. Stockpiles It may be appropriate to consider the development of a parallel plan specifically designed to address any existing stockpiles of waste tyres to avoid the possibility for these stockpiles to distort the outcomes of the proposed tyre product stewardship scheme. Page 5 of 7 July 2008

6 Targets and Performance Measures The RIS, (Pg 41, Section 5.4.3) discusses targets as set out in the draft agreement and notes that as the scheme is voluntary there are no penalties for failing to meet the targets, though failure might induce government to consider policy changes. The NEPM under Part 3 Sections 7 and 9 appears to make the targets mandatory for those who do not participate in the product stewardship scheme thereby providing a regulatory compulsion, on top of the other economic stimulus, for tyre producers to be part of a scheme. The difficulties of dealing with complex market issues including the need to develop sustainable markets for Tyre Derived Product (TDP) and the consequences for achieving recycling targets are acknowledged. However, under the proposed product stewardship scheme, consumers as end users of the product will be contributing financially to deal with end-of-life tyre waste through the ARF, to be used largely as industry production subsidy. The industry is estimated in the documents to be the recipients of 60 to 80% of the collected funds. From a consumer perspective it seems reasonable to expect the outcomes and targets to be achieved and that there should be some consequence (other than considering policy change) for failure to do so. Unfortunately, penalties for failure to achieve targets and outcomes are likely to be ineffective as they would be unable to be directed towards the consumer or tyre producer, both of whom would have discharged their obligations under the stewardship scheme and the tyre recycling industry has no legal obligation to engage in a recycling business of a particular size. This appears to be a fundamental flaw in the proposed stewardship scheme and needs to be addressed. We note the Agreement has an eleven-year life span and is subject to annual review and public reporting and that EPHC can terminate the agreement if it considers the vision and objectives of the agreement are not being met. However it is reasonable to think that if the scheme falls well short of the recycling targets specified that a substantial percentage of the collected ARF would not have been disbursed to recyclers ie the waste tyres would not have been recycled into TDP and sold to the market with consequent benefit payment. There does not appear to be any information/discussion on how these surplus funds collected from consumers would be dealt with if the agreement were terminated part-way though its nominal life. This issue needs to be addressed. Page 6 of 7 July 2008

7 Non-Participation in the Stewardship Agreement The intent of Federal Chamber of Automotive Industries (FCAI) to support the NEPM, but not sign the TPSA and likely non-participation in the scheme of its members is noted. The AAA also understands that Bridgestone does not support the proposed stewardship scheme. Given the quantity of tyres introduced to the market by FCAI members and Bridgestone, we would expect that they should be responsible for the waste generated and that the regulatory safety net of the NEPM would ensure this. However, as discussed above, the proposal does not seem to contain sufficient regulatory measures to fully address this situation. With reference to section 5.5 under the above heading in the Consultation RIS (April 2008) Sub-option 4 (Pg65) discusses a national excise levy on tyres introduced into Australia by producers not participating in an approved industry scheme as an alternative enforcement of safety net provisions. The benefits to be derived from including this sub-option as discussed in the section appear to outweigh the negatives. However from the discussion we conclude that a producer choosing to pay the levy rather than join a scheme would then absolve themselves of further responsibility under the NEPM. In these circumstances some free riders may choose to pass the levy on to consumers thereby increasing the financial impact on them, but failing to achieve the environmental objectives for the recycling of end-of-life tyres. This is not an appropriate outcome and must be addressed. Conclusion The support of the tyre and recycling industry itself for the proposed scheme is likely to enhance the chances of success of the proposed scheme. According to the current proposal, the additional costs to motorists from end-of-life tyres are in the main fairly benign. However, given the increasing moves to end-oflife product stewardship arrangements for various products, the AAA is keen to see financial impacts on consumers minimised as far as possible. The AAA offers support for the concept of a NEPM as a national approach to dealing with the issues associated with waste tyres and improving resource efficiency. The product stewardship scheme as proposed has qualified support, but certain issues have been identified that need to be addressed or clarified. In the event that there are substantial revisions to the proposed NEPM or product stewardship scheme as a result of submissions received, the AAA would appreciate the opportunity to review these documents and provide further comment. Page 7 of 7 July 2008