Renewable Matter # 3 / April

EPR - A Building Block of the Circular Economy

by Carlo Pesso

It all started in August 1986 when Germany adopted the “Waste Avoidance and Waste Management Act”, Abfallgesetz, that gave the federal government the power to regulate the flow of packages and products so that they could undergo “environmentally friendly” reprocessing. At first, the government adopted a voluntary approach. By the time Klaus Töpfer, a member of Chancellor Helmut Kohl’s Christian Democrat’s party took office as German Federal Minister for the Environment, Nature Conservation and Nuclear Safety on May 7, 1987, the voluntary approach proved to be a failure. 

In Germany, reaching such a conclusion is a serious business. When Töpfer stepped in – an economist by training – he was determined to apply the polluter pays principle, i.e. the principle that requires that the costs of pollution be borne by those who cause it. The principle would soon lead to the concept of shared or extended producer responsibility that has now spread right across the planet. He achieved this on June 12, 1991 when the German Packaging Ordinance went into effect.

What exactly did he achieve? Economists define any activity whose effects do not entirely benefit or whose consequences do not entirely fall upon their promoter, as being “externalities”. Instead, they end-up affecting society and the environment at large. Some of these effects are positive: by driving an electric vehicle, you are diminishing urban pollution. Perhaps you are running on solar electricity, thus, you are also avoiding CO2 production. The benefits of your investment are reaped by society at large (positive externalities). However, when playing at the “spot the externality” game, negative externalities appear to be much more common than positive ones. Take packaging for instance: the visual polluting effects of discarded packaging are among the most blatant, and that is only the tip of the iceberg.

Then there is the other half of the picture. The costs incurred for recovering discarded packaging generally fall upon the community at territorial level. In the case of packaging, they fall upon local municipalities, which then relay them indistinctly to citizens. Consequently, it becomes very difficult to establish a straightforward link between the amounts of wastes produced, the costs incurred to recover them, and the citizens who pay the bill. There are no incentives to reduce the amounts of waste produced. This stays true until all the participants along the consumption chain (producers, distributors and consumers) take responsibility for what they are contributing to. This is where and when Klaus Töpfer achieved the first huge step towards the circular economy: on the basis of his ground-breaking legislation producers retain responsibility for their packages after consumers have discarded them. In practice, producers incorporate the costs of collection, sorting and recycling, and disposal into the price of their products. Thus, consumers end-up sharing the costs according to the quantity and quality of their consumption. Hence the term: extended producer responsibility (EPR). How this happens is described is some detail in Joachim Quodens’s article “EPR as an Economic and Environmental Instrument”. 

Today, close to 400 schemes operate across the world and about 70% of them initiated after 2001 when the OECD published a Guidance Manual for Governments on Extended Producer Responsibility. Progressively, extended producer responsibility schemes embraced a wider spectrum of products, including: electric and electronic wastes, lead-acid batteries, tires, used oil, paint, chemicals, large appliances, fluorescent light bulbs and pharmaceutical products. Similarly, the number and scope of the schemes widely vary among countries: for instance, France operates a unique scheme for packaging whilst the United Kingdom operates 29 different organisations. Although it is beyond our scope to go into detail, it is interesting to note that schemes may be voluntary or not, that responsibility for waste management may sometimes be organisational or financial, or both. Furthermore, schemes differ by distributing responsibility according to national organisational structures for waste recovery and may even reflect specific territorial conditions (as in the case of smaller islands or seasonal tourist destinations).

25 years down the road, EPR schemes have proved to be highly successful in seeding the notion of circular economy and achieving impressive recycling rates while starting, in some cases, from scratch. This is particularly important when considering that the total volume of material resources exploited worldwide reached nearly 60 billion metric tonnes (Gt) in 2007 (see J. Clark, “Elemental Sustainability”, Renewable Matter, 2, 2015). Furthermore, they have contributed a number of direct benefits by reducing public spending in waste management by curbing overall waste management costs, triggering extensive innovation in recycling technology and supporting the integration environmental concerns in product design (design for the environment). Not to mention the fallout effects: new employment opportunities, material supply diversification, material innovation and, most importantly, the diffusion of a different “cultural” approach. The latter is particularly impressive: today the vast majority of consumers are aware that they are responsible for the waste they produce and, more importantly, that they can take immediate and effective action to minimise waste and favour material recovery. 

Of course, such developments have also raised a number of questions that still need to be resolved. Most of these were identified at the recent OECD “Global Forum on Environment: Promoting Sustainable Materials Management through Extended Producer Responsibility (EPR)” held in Tokyo, Japan on 17-19 June 2014. The Paris-based organisation is now examining how to continue foster “Design for the environment” and how to deal with responsibility for waste packaging generated through internet based international trade, among other pending questions. This is why Renewable Matter magazine will continue to keep track of progress made on extended producer responsibility as a building block of the circular economy.

 

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