Good product, bad product? Making the case for product levies

good product, bad product?

good product, bad product? making the case for product levies

good product, bad product? making the case for product levies

good product, bad product?

Julie Hill, Hannah Hislop and Anne-Emmanuelle Bégin Published by Green Alliance, February 2008 Designed by Hyperkit © Green Alliance 2008 ISBN 978-1-905869-11-4 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, without the prior permission in writing of Green Alliance. Within the UK, exceptions are allowed in respect of any fair dealing for the purposes of private research or study, or criticism or review, as permitted under the Copyright, Design and Patents Act 1998, or in the case of reprographic reproduction in accordance with the terms of the licenses issued by the Copyright Licensing Agency.

Green Alliance Green Alliance is an independent charity. Our mission is to promote sustainable development by ensuring that environmental solutions are a priority in British and European politics. We work with representatives from the three main political parties, government, business and the NGO sector to encourage new ideas, facilitate dialogue and develop constructive solutions to environmental challenges.

Green Alliance 36 Buckingham Palace Road, London SW1W 0RE tel: 020 7233 7433 fax: 020 7233 9033 web: www.green-alliance.org.uk Green Alliance is a registered charity number 1045395 Company limited by guarantee, registered number 3037633

Acknowledgements Our thanks go to Matilda Bark, David Fitzsimons, Stephen Hale, Russell Marsh, Faye Scott, Ben Shaw, David Skyrme, Stephen Tindale and Michael Warhurst for their input.

We are grateful to Friends of the Earth for their support of this work.

Many of the ideas in this report have been explored and developed through the course of Green Alliance’s Closing the Loop project and we would like to acknowledge the support the project has received from: Biffa, Boots, Defra’s Environmental Action Fund, the Eden Project, the Environmental Services Association, Greenpeace, INCPEN, Interface Europe, Johnson Matthey, Marks and Spencer, Sainsbury’s, Skanska and Willmott Dixon. The views and recommendations in this report are put forward by Green Alliance and do not necessarily represent the views of project partners.

contents executive summary

2

1. product levies as a tool for product policy

4

2. experience from other countries

13

3. what should we be considering in the UK?

19

annexes a. case studies of product levies

23

b. deposit refund schemes – summary of advantages and disadvantages

57

c. summary of key conclusions of the Ecotec report on environmental taxes and charges in the EU

61

notes and references

63

good product, bad product?

executive summary

good product, bad product?

The way in which products are designed determines a large part of how we use energy, water and resources, and how much we waste. The products around us also shape our view of ourselves – few people would dispute that the products that have delivered so much wealth in the post-war era have also turned us into a ‘throwaway’ society. Do we want to continue living with stuff which conflicts with our new sense of trying to be stewards of the planet, or do we want to consume in ways that are smart, pleasurable, but are also helping to repair the damage?

To date, very little of government policy has been directed at changing the nature of products in ways that are radical enough to meet the environmental challenges we face. The market still brings forward products that demonstrably conflict with stated environmental goals, from appliances that cannot be taken off standby to packaging that is clever but cannot be recycled.

A growing body of experience from other countries suggests that price signals have a crucial part to play in changing products and systems, alongside regulatory and voluntary approaches. The complexity of 21st century supply chains, embedded as they are in the global economy, argues for instruments that work with the market to deliver change and let the people in the market place figure out the best solution. That is not to say that there is not a role for regulation, but that without price signals, opportunities will surely be missed.

This report argues for a radical change to the way we tax goods, replacing VAT with a goods tax that is graduated according to the environmental impact of products, with full exemption for those products deemed to be the best performers. This is likely to be a long road – at present it is not even legal under EU tax law, but we look to the prime minister to seek support in Europe from like-minded premiers to agree the necessary changes. If a company like Tesco believes that it can label every product with an indication of its carbon footprint then it must be possible to consider environmental impacts as part of the tax system.

We can and must start concentrating on products and materials with the biggest environmental impact: from materials that cannot presently be recycled, to the worst-performing products for energy and water use, and construct a price signal that will stimulate innovation. A levy could be used to prompt the development of smarter materials that perform well across the board – on energy and water efficiency, resource efficiency and recyclability.

Packaging is the obvious place to start this kind of thinking since to many people it epitomises our disposable culture. It is no coincidence that most international examples of levies seem to focus on packaging, or our other iconic bête noire, the disposable plastic bag. This may not be fair in the sense that plenty of other products have qualities similar to packaging in terms of the way they use materials, but the development of an intellectual model to improve packaging could well be extended to other products. A levy could also, we argue, be used to prompt redesign on whole classes of products like batteries, where a new approach to delivering dispersed energy is needed.

No one likes taxes, but the idea of a shift from taxing goods to taxing bads, without an increase in the overall tax burden, is gaining political acceptance.

This report will, we hope, turn that acceptance into some real world propositions.

good product, bad product?

We also recommend a rethink on deposit refund systems ‑ long dismissed by government as not relevant to modern distribution and consumption systems, but in our view such systems have strong potential to solve the problems of recovering packaging from drinks consumed outside the home.

1. product levies as a tool for product policy

good product, bad product?

Introduction

“there can be no getting away from the fact that some products have greater environmental impacts than others”

The government now takes its cues from the Stern report, seeking to work with the grain of markets and price environmental ‘bads’ where practicable.

There can be no getting away from the fact that some products have greater environmental impacts than others, and generally this is not reflected in the way they are priced or consumed in the market place. It therefore seems a matter of logic that pricing instruments for products are the next important set of measures to explore, alongside regulatory and voluntary initiatives.

“green taxation is back on the political agenda”

This report makes the case for considering various types of levies (taxes or charges) on products with the aim of reducing their environmental impact.

It argues that these fiscal instruments are a crucial part of the armoury of measures that the government should deploy in the fight against climate change and environmental degradation, alongside regulatory and voluntary instruments, and that other countries have successfully done so for some years. It uses case study material from other countries in Europe to show that, particularly for packaging and batteries, there are a number of examples of different types of levy in place, and some interesting lessons to be learned.

Packaging and batteries are not only the areas where the most examples are to be found, but also offer useful models for the way we think about materials and products more broadly.

Two important bodies have put green taxation back on the political agenda recently. The Green Fiscal Commission,1 launched in January 2008, argues that the proportion of UK revenue from green taxes has fallen since Labour came to power, and is now lower than in 1993,2 making the government’s promise of a shift from taxing ‘goods’ to ‘bads’ sound hollow. The Commission is seeking cross-party consensus on the areas in which green taxes could boost revenue at the same time as addressing the urgent problems of climate change and unsustainable resource use. A couple of months earlier, the Commission on Environmental Markets and Economic Performance (CEMEP)3 highlighted the need for strong environmental policy to drive innovation (rather than relying on innovation support), which could include new price mechanisms.

The time is right to give detailed consideration to all the options.

Recycling is not enough In a recent survey of public attitudes and behaviours in relation to the environment,4 most people thought that recycling had the biggest impact on climate change, and was the most often cited ‘environmental’ activity.

In terms of behaviour change policy, household recycling is a success story, thanks to the convenience of increasing kerbside collections and the establishment of social norms through the visibility of the recycling box outside the house.

To those close to the waste and resources policy debate, however, this result is slightly confusing. Recycling is seen as a good thing to do for the environment, but public understanding of the waste and climate implications of our purchasing decisions is not nearly as well developed. Policymakers are increasingly emphasising the climate imperative for tackling our throwaway culture, but making the link between what goes in our bins and our

At a macro level, a number of authoritative and far-reaching assessments have told us that our current levels of consumption are unsustainable. The Millennium Ecosystem Assessment warned that human demands for resources has resulted in a “substantial and largely irreversible loss in diversity of life on Earth” while the latest Global Environment Outlook, GEO4, said that “it is well established that if the products and services established by biodiversity are not managed effectively, future options will become ever more restricted, for rich and poor people alike”.5 A number of attempts have been made to quantify global demand for resources in the broadest sense through a number of measures, the most well known being the ecological footprint, which is defined as a tool that measures our natural resource consumption and our global environmental impact.

The ecological footprint concept measures the total quantity of land and sea area required to produce the food, fibre and minerals we consume, absorb the waste we produce (including carbon dioxide emissions), and provide the space for our infrastructure. As we consume resources and ecological services from all over the world, so our footprint (measured in global hectares) is a sum of those areas, wherever they are on the planet. Ecological footprinting allows us to assess whether our consumption of natural resources is within the planet’s overall environmental limits.6 If a country’s footprint is larger than its available land area, it means that it is relying on someone else’s ecological resources to satisfy its levels of consumption. No individual country has to live entirely within its environmental means, but the planet as a whole does.

If, collectively, our levels of consumption exceed what Earth has available, we begin to run down our life supporting natural assets. Because ecosystems under stress behave unpredictably, it is often impossible to know when a system under stress will crash if we take more than can naturally regenerate.7

Product policy is becoming urgent The ecological budget concept is a very useful one, both in terms of quantifying and communicating the overall problem. However it gives us no real idea of what the best and worst consumption decisions are from a policymaker or a consumer perspective. We currently have no coherent way of understanding or communicating the natural resource impacts of products.

Which material resources are causing the worst environmental impacts in their extraction, transport, manufacture, use and disposal? Which renewable resources are most seriously depleted, and where? And which finite resources should we be most worried about (bearing in mind that market prices tend to lag behind availability and so market scarcity may not be a good proxy for absolute scarcity)? These are not easy questions to answer, not least due to the increasingly global nature of our supply chains: the Intergovernmental Panel on Climate Change (IPCC) recently pointed out that 23 per cent of China’s carbon emissions come from the manufacture of goods exported to Western consumers – the equivalent of more than double the UK’s emissions or all of Japan’s.8

“policymakers are increasingly emphasising the climate imperative for tackling our throwaway culture”

good product, bad product?

unsustainable use of global resources, both renewable and finite, is much harder. At the same time, consumers are increasingly keen for governments and businesses to give them clear guidance on the climate and other environmental implications of their purchasing, so that they can improve the impact of their choices.

good product, bad product?

“to-date the way we have dealt with products has been distinctly end-ofpipe”

“products will need to become more durable, more reusable, more recoverable, and more recyclable”

To-date the way we have dealt with products has been distinctly end-of-pipe – concerned only with mitigating the impacts of their disposal. The recent increase in the landfill tax escalator has been fundamental in establishing an investment trajectory away from landfill, but there is little evidence that the increased costs of disposal will ever be significantly felt upstream, at the product design and production end of the chain. This is disappointing, given research suggests that design can determine up to 80 per cent of a product’s environmental impact.9 As a result recent years have seen an attempt to tackle the whole life environmental impact of products through the application of producer responsibility legislation, which has generally focussed on specific waste streams – in the EU, packaging, end-of-life cars, batteries and waste electrical and electronic equipment (WEEE). Producer responsibility measures have had limited effects however, mainly because their aim seems to have been to shift end-of-life costs from public authorities to the private sector.

While such initiatives have improved collection and recovery of materials, resulting in improved recycling rates, they have also managed to fragment and dilute responsibility through the involvement of third-party organisations.

Instances of genuine redesign of products are rare.

We therefore need product policy to deal more holistically with the problems we face. In the UK, the government has an explicit aim of decoupling economic growth from waste growth, so addressing the wastefulness of products is a priority. Waste Strategy for England 2007 also sets targets for reducing the amount of residual waste (waste not recycled) from 450kg per person in 2000 to 225kg in 2020, as well as setting targets for greater recycling of household waste. Product policy is a necessary part of meeting these targets. Waste comes from products and from the way in which products are produced. If we want to ‘design out’ waste in preference to dealing with it as it arises we will need to change products. Products will need to become more durable, more reusable, more recoverable, and more recyclable. We might also want to replace certain products with services, in an effort to dematerialise the economy.

We also need product policy to address energy and water consumption.

Ideally, the next generation of consumer products will be highly efficient across the board, on energy, water and materials. The materials used will more easily make a journey from ‘cradle to cradle’ rather than cradle to grave.

Products or materials?

Policymakers have given some consideration to whether a materials or products focus is likely to be more productive. Focussing on materials means looking at fewer things, and thinking about large scale flows through the economy. It tends to focus attention on the sources of materials and their implications, and then at end of life, their degree of recoverability and recyclability. Focussing on products, on the other hand, means looking at a greater number of things and understanding the complexities of how materials become products. However, this may be essential because some of the environmental impacts of products, including their recoverability and recyclability, will be determined by the way in which materials are chosen and combined rather than by the materials themselves. As discussed above, the environmental impacts of the products in use will also be determined largely by design rather than intrinsic physical properties of the materials.

How might we select products and materials for intervention?

The following might be objectives of policy that aims to improve products and materials: a. Reduce the amount of residual waste (and thus also carbon wastage). b. Conserve materials that are or might become scarce. c. Reduce the use of materials that have unacceptable ecological ‘overburden’, whether in extraction, production, use or disposal (e.g. degrading of ecosystems, acute or persistent toxicity). d. Divert biodegradable materials from landfill to address greenhouse gas emissions. e. Address climate change by promoting greater energy efficiency (throughout the product lifecycle including in-use and end-of-life treatment, not just ‘embodied’ energy or carbon i.e. that used in production). f. Promote greater water efficiency (throughout the product lifecycle).

So the following might be criteria for selecting products or materials for intervention: 1. Products or materials that end up as significant waste streams that are difficult to recover and/or recycle, and thus continue to add to the burden of residual or hazardous waste.

This could be further broken down into:

a) Materials that are perfectly recyclable, but because of the way they are distributed in the economy, are not well recovered, even if they have high value (e.g. aluminium). b) Materials that are recyclable and have value, but because of the way they are combined in products are not readily recovered (e.g. the paper and metals in composite packaging). c) Materials that are theoretically recyclable, but there not are sufficiently developed markets to warrant separating them at treatment stage (e.g. many types of plastic). d) Materials that cannot be recycled (those made from some composite materials, or materials with hazardous components).

2. Products whose component materials are or might soon become scarce, and where market pricing of that scarcity will not necessarily address the problem.

3. Products whose component materials cause an unacceptable ecological burden (whether in extraction, production, use or disposal), in a way that is not priced by the market (even if this is outside UK). This includes those which are hazardous, those that employ polluting production processes, and those where there is an unacceptable impact from extraction, such as metal ores.

4. Products that do not take advantage of innovations in energy or water efficiency to bring down per capita energy or water consumption.

good product, bad product?

Substitution of materials within products may be a route to improving environmental impact. So it is hard to get away from the fact that we have to understand, and address, both materials and products.

good product, bad product?

In addition, alongside addressing the qualities of individual products and materials, product policy might want to address the overall quantity of products and materials in the system, particularly those that use energy. That would mean adding criteria for: 5. Products with built-in obsolescence, i.e. disposal is encouraged before they have reached the end of their useful life.

6. Products with poor durability, i.e. do not last as long as consumers would like and force replacement.

7. Products that require energy (from mains or batteries) where their predecessors did not (electric pepper grinders, lavatory brushes, coffee frothers etc).

Where have we got to in UK thinking?

The waste strategy’s key materials list is (in no order of priority): textiles, plastics, paper/card, glass, wood, aluminium, food and garden waste. The key products are: clothes, packaging, newspapers, direct mail, batteries, paints, garden pesticides, transport/vehicles, electronic and electrical equipment, food and drink.

Criteria are cited as waste volume/growth, cost, practicality, and environmental impact expressed as carbon and hazardousness. We have not been able to address cost and practicality in this paper, but it can be seen from our list of criteria above, that we envisage a wider basis for product policy than that envisaged by the waste strategy. In particular, carbon and hazardousness do not account for all the impacts of products or materials that we might want to address – including use of potentially scarce materials, ecosystem degradation and water use.

Box 1: What are the instruments that could be applied to these issues?

Issue

Regulatory solutions

Pricing solutions

Voluntary agreements

High value recyclable materials not recovered well

• Ban final disposal (i.e. landfill/ incineration) • Statutory targets • Eco-design regulations mandate a proportion of recycled content for products

Composite materials not easily recovered or recycled

• Eco-design regulations set standards for recoverability/ recyclability • Eco-design regulations mandate a proportion of recycled content

• Landfill tax • Voluntary targets • Deposit refund set with producers, scheme to improve who then fund collection rates infrastructure and • Levy that funds education extra infrastructure and education • Levy on products without a given proportion of recycled materials • Landfill tax • Voluntary targets to • Deposit refund improve recycling scheme to improve rates at companies” collection rates discretion • Levy to fund specific collection/ treatment infrastructure • Levy on products without given proportion of recycled materials

Non-recyclable materials

Scarce materials

Materials with unacceptable ecological burden

• Landfill tax • Levy to encourage shift to materials with stronger markets • Levy to fund R&D into creating stronger markets or developing alternative materials • Levy on products without a given proportion of recycled materials • Eco-design • Landfill tax regulations create a • Levy to encourage phase-out shift to recyclable materials

• Voluntary agreement to shift materials

• Eco-design • Levy to discourage regulations to limit use/shift to use alternatives • Levy to fund research into alternatives • Cap and trade system

• Voluntary agreement to discourage use/research into alternatives

• Eco-design regulations mandate shift to materials with stronger markets • Eco-design regulations mandate use of proportion of recycled material

• Eco-design • Levy to discourage regulations to limit use/shift to use alternatives • Levy to fund research into alternatives • Cap and trade system Products needing • Levy products with • Eco-design greater energy/water regulations set efficiency lower efficiency product standards than a certain for energy and threshold • Carbon tax water efficiency • Personal traded (could be the ‘dynamic carbon allowances • Water charges standards’ recommended by • Personal traded CEMEP)a water allowances • Levy products that Products with built-in • Eco-design obsolescence regulations require perform worse than modular design competitors, to so that individual encourage shift • Refundable levies components can be updated, and to encourage return reuse of products is of products to reuse encouraged centres Products with poor • As above • As above durability Products with • Eco-design to limit • Carbon tax ‘unnecessary’ energy use/phase out • Personal traded use carbon allowances

• Voluntary agreement to shift to recyclable materials

• Voluntary agreement to discourage use/research into alternatives

• Voluntary agreements on efficiency standards

• Voluntary agreement towards modular design

• As above • Voluntary agreements to phase out or pre-empt introduction

a. Commission on Environmental Markets and Economic Performance, Report November 2007, p30-31

good product, bad product?

Materials without sufficient markets

good product, bad product?

10

What is meant by a product levy?

The European Commission defines taxes and charges as covering all compulsory unrequited payments, whether the revenue accrues directly to the government budget or is destined for particular purposes (e.g. earmarking or hypothecation). The word ‘levy’ is used to cover taxes and charges. A levy is considered as environmental if the taxable base of the levy has a negative effect on the environment.

Green taxation has hardly touched products Surprisingly, the problems with products have not yet been a significant part of the recent debate about green taxation in the UK, which has focused mainly on the transport and housing sectors. There have been hints of a shift in this: in July 2007 Gordon Brown announced, with French president Nicholas Sarkozy, his intentions to lobby the European Commission for reduced rates of VAT on green products. But the reduction and/or harmonisation of VAT rates across the EU requires the unanimous backing of all 27 EU member states, and the European Parliament has only a consultative role in taxation matters. The Commission also acknowledged that “the room for manoeuvre is narrow”10 with respect to variable reduced VAT rates in the EU, due to the risk of distortions in the internal market. Reports in January 2008 that the Commission had cooled on the idea because it had not yet assessed the economic impact of such a move11 were immediately dismissed

by Commission officials.

The concept of taxes on environmentally damaging products (other than those based on the fuel efficiency of cars) has been debated even less. We believe this is an omission, and that a discussion about their potential is long overdue.

Green Alliance has advocated the use of product levies before: in early 2006 we advocated charges on inefficient appliances and devices to reflect the environmental costs of products.12 The charge would apply to individual products that failed to meet efficiency criteria compared to other products in the same class. The rationale for an inefficiency charge on wasteful products, rather than reduced VAT for the most efficient goods was twofold: firstly, because charges are more consistent with the polluter pays principle, and secondly because they allow for a much greater differential than the 10.6 per cent difference in purchase price that a reduction from 17.5 per cent to five per cent VAT entails – as a result they have the potential to send a much clearer signal to consumers.

We further developed these calls in A zero waste UK,13 which which called for product levies designed to shift behaviour from certain products towards better alternatives, and suggested a hit list of products that would be first in line to attract a charge. This list included goods that were disposable (mobile phone chargers, cutlery, nappies, razors), non-recycled or hard-to-recycle (toilet paper, laminate drinks cartons or materials with complex additives), non-refillable (printer cartridges), or non-rechargeable (some batteries).

Green Alliance believes the time is now right for a renewed debate about the environmental impacts of products, and the potential for product levies as one of a range of tools that could be deployed in a drive for better products. The 2007 waste strategy does acknowledge the need for product and packaging

11 good product, bad product?

design to place more emphasis on reducing waste, and the new sustainable products and materials division, set up to identify and catalyse action on products across the supply chain through the development of roadmaps for priority products, will report on its progress in spring 2008. As the Sustainable Development Commission notes, a roadmap process is likely to include a series of interventions along an agreed timescale to deliver significant sustainability improvements. The Commission’s report, You are what you sell,14 sets out the ‘toolbox’ for product policy interventions. These include product standards (voluntary, minimum and dynamic), choice editing, procurement, industry agreements and fiscal incentives. On using fiscal incentives, the Commission comments: “Central and local government have a clear remit to use fiscal incentives and disincentives to give significant cost signals to consumers and businesses about more sustainable choices. Measures can help internalise costs not usually factored into decisions, such as longer-term security and health, or where the market price for social or environmental goods is too low. To change behaviour, however, monetary incentives need to be combined with other interventions that enable change, and provide people with a genuine alternative”.

A stimulus to innovation A levy on a particular product is not about punishing the product for its negative environmental impact. Designed correctly, and applied to the right product with the right flanking interventions, it should also be a stimulus to innovation in the market’s search for better products that will avoid the levy. The CEMEP report argued that “not all businesses feel the green consumer ‘pull’ to the same degree and it cannot be relied upon as the sole driver for change. The £20 billion figure for green and ethical purchases represents only two per cent of total goods and services”. CEMP goes on to say that the barriers to green purchasing are significant and complex, but include the assumption that buying green is more expensive. Even where savings will accrue to the consumer, CEMEP notes that “product differentiation on the basis of carbon or resource efficiency is currently a very weak source of competitive advantage; the cost savings either to the manufacturer or the user are small, and there are few buyers for whom environmental efficiency is a significant factor compared with overall price, performance and availability”.

“a levy can be a stimulus to the market’s search for better products”

good product, bad product?

12

Box 2: So what could a product levy be used to do, and in what circumstances might a levy be a better instrument than other approaches?

Purpose of levy

Reasons why a product levy may be better than, or supplementary to, regulatory/voluntary approaches

1. Encourage greater recovery through changing consumer behaviour (e.g. deposit refund)

Can be used to boost recovery and recycling rates where statutory targets and/or voluntary agreements are not achieving sufficient capture. Can also be used to get over infrastructure bottlenecks.

2. Pay for specific collection and recycling infrastructure

Can be used get over infrastructure bottlenecks.

3. Fund research and education

Could be used to benefit the economy as a whole, and boost existing private or public sector budgets.

4. Discourage use of a product or material (without clear alternative)

Could be used where a ban is not feasible, and voluntary phase-out unlikely, possibly because using a levy would mobilise a temporary revenue stream to help the transition.

As above.

5. Encourage shift from one product to another 6. Promote re-use of products

7. Create an incentive to use recycled material 8. Create an incentive to design more efficient products 9. Impose a fine for non-achievement of targets

10. Raise general revenue (i.e. no explicit environmental objectives)

A deposit refund scheme could be particularly useful here: it is hard to regulate for reuse, and voluntary agreements are unlikely if they create an uneven playing field.

Main alternative is statutorily required percentages, which may be less flexible, or using procurement rules.

Alternative is eco-design regulations, which may be less flexible, or using procurement rules.

Alternative/back-up to enforcement of regulations, or could be constructed as an extra incentive and rewards for meeting of targets.

Not generally popular, but should be framed as shifting the tax base from ‘goods’ to ‘bads’.

2. experience from other countries The table below shows the diverse areas where environmental levies have been tried in OECD15 countries. However, taxes on individual products are relatively underused compared to taxes on basic commodities such as fuel and fertiliser, or activities such as driving or flying. Within the category of individual, nondurable products (ones with high turnover) the most numerous examples relate to packaging and batteries, which is where we therefore concentrated our efforts in gathering case study materials. We include a look at some of the emerging measures on carrier bags.

Box 3: Products and materials subject to environmental levies in OECD countries Raw materials

Manufactured products Commodities

Individual products

Non durable products • Water (abstracted) • Fossil fuels (extracted) • Wood (lodging) • Gravel (extracted) • Chemicals (mined) • Metals (mined)

• Water (consumed) • Fossil fuels (consumed) • Electricity • Chemicals • Metals • Pesticides /fertilisers (agricultural use)

• Electric bulbs and fuses • Batteries • Disposable products (tableware, cameras, razors, carrier bags) • Packaging • Textiles • Household cleaning products • Pharmaceutical products

Durable products • Vehicles • Tires • Car batteries • Big electric appliances (refrigerators, freezers, air conditioners, air humidifiers, dishwashers, washing machines, space and water heaters) • Consumer electric products (hair dryers, shaving machines, sewing machines, vacuum cleaners) • Consumer electronicsb

b. Such products may be highly susceptible to fashion trends and could also be treated as non-durable products

What are some of the more interesting examples?

We looked at examples of levies in three product groups: packaging (Belgium, Denmark, Finland, Norway, Netherlands), carrier bags (Ireland, Scotland, Belgium) and batteries (Belgium, Denmark, Sweden). These were not selected to be comprehensive, but because they seemed to cover a range of objectives and experiences. More detailed case studies are found in annex a.

Packaging and how to condition its environmental impact has been a vigorous debate in many European countries for many years. The Belgians set out to use their generic ecotax law to promote refillable drinks containers, believing them to be more environmentally friendly, but have fallen foul of industry lobbies and legal challenges aiming to show that that is not necessarily the case. Paradoxically, exemptions to the ecotax for high rates of recycling non-

good product, bad product?

13

good product, bad product?

14

refillable containers have boosted recycling enormously, but along with legal challenges from the EU have served to erode the market for refillables.

The packaging industry body, Fost Plus, claims 91 per cent recycling of household packaging (not just drinks containers) put onto the market by its members in 2006, or 83.9 per cent of total packaging (in 2004, the UK recycled 50 per cent of total packaging)16 and Belgium appears to have done best at decoupling packaging growth from GDP.17 But refillable containers now account for only eight per cent of the Belgian market, down from 11.3 per cent in 2003. The Belgian government has recently been discussing the introduction of new packaging taxes that would cover all packaging and would be differentiated by material in terms of carbon impact.

The Danes have had a similarly mixed experience. They have a packaging tax based on weight (to encourage lightweighting) as well as material type (based on an index of environmental impact judged by life cycle analysis (LCA)) for the majority of packaging, apart from drinks containers which have a volumebased tax backed up with a deposit refund system. Although a ban on cans was withdrawn in 2002 by the new Danish government after EU challenge, the deposit refund system has survived and now recovers both refillable and non-refillable drinks containers. Collection and reuse is high – in 2005, 100 per cent and 84 per cent respectively for refillable and non-refillable drinks containers, although the former figure is thought to be an exaggeration. It is estimated by the Danish Waste Management Association that glass and plastic bottles in deposit systems are on average reused 30 and 20 times respectively, and 12 per cent of total household waste thus avoided. In terms of packaging reduction, there is unfortunately little data on consumption of the materials covered by the tax, and no evidence on substitutions between materials.

Finland originally adopted a relatively simple tax system, the level of which

was linked to the achievement of recycling targets or refill quotas. For both refillable and non-refillable containers to be subject to a reduced tax rate, a deposit refund system had to be in place. Since Finland’s low population density and lack of markets for recovered materials made sorting and recycling systems expensive, there was considerable support for the deposit refund system, which boasted return rates of 98-99 per cent for refillable glass (reused 33 times on average) and plastic bottles (reused 18 times).

During the late 1990s and early 2000s Finland generated the least amount of per capita packaging waste amongst the EU 15. However, even before the recent change in the law to completely remove the tax advantage to refillable packaging, Finland’s packaging waste generation increased significantly, to 124kg per capita in 2004. That said, and despite the increasing market share of non-refillable packaging, the effective deposit refund system in place means that Finland still generates significantly less packaging waste than other EU countries.

Norway’s packaging taxes are also linked to recycling targets and refill quotas.

Until 2000 the rate of tax was differentiated by drinks type, but since 2000 it has been by packaging material, with the underlying rationale being the likelihood and impact of materials becoming litter. There is also a flat-rate tax on non-refillable containers. The tax system works alongside deposit refund systems for both refillable and non-refillable containers – manufacturers and

The present political preoccupation with carbon has worked through to at least one product levy – the Netherlands government is in the process of introducing a carbon-based packaging tax, the first such levy in the EU. The tax will be based on estimated carbon dioxide emissions produced in making packaging materials (as calculated by an independent organisation) and the revenue will be used to establish a general national waste reduction fund, a programme that will include the separate collection of household packaging.

The Irish plastic bag levy was the first consumer-paid levy of its kind,18and countries around the world are now aiming to either tax or ban plastic bags out of existence. The objective was to reduce plastic bag litter by encouraging use of reusable bags, as well as to raise funds for a variety of environmental initiatives. The point-of-sale tax now stands at €0.22, and consumption of plastic bags has dropped by 90 per cent. However, it appears that use of paper bags has increased, as well as sales of bin liners and nappy bags, suggesting that alternatives to plastic bags had not been fully thought-through – a point used by the UK to justify voluntary targets for a reduction in the impact of carrier bag use, for the time being at least.

A more comprehensive approach has been taken in Belgium, where since July 2007 a new environmental levy has been applied to a number of throwaway items including plastic bags, clingfilm, disposable cutlery and aluminium foil.

Biodegradable and reusable plastic bags are exempted. At the same time, the Wallonia region of Belgium has moved to ban single-use supermarket bags after 2010.

In Scotland a plastic bag levy was considered but put on hold because of lack of sufficient evidence that it would have the desired effect.

Batteries are another relatively common set of candidates for levies. Belgium’s federal ecotax law was designed primarily as a threat to spur industry action – it can be avoided in return for voluntary schemes. For batteries this had the effect of prompting a successful industry system for collecting and recycling (portable) batteries – collection and recycling of these batteries now stands at over 50 per cent, although down from 60 per cent in 2002. In the UK the current recycling rate is two per cent (the forthcoming batteries directive requires collection rates of 25 per cent by 2012 and 45 per cent by 2016).

However, in a sense it has resulted in a levy on batteries, since the cost to industry has been passed on to consumer, albeit at a very low level (around €0.12). So the aimed-for behaviour change was primarily about recovery, rather than changing consumer habits around the amount of battery use, or changing the types of battery in use.

15 good product, bad product?

importers pay reduced rates of tax if they can encourage consumers to return containers. In 2006, 82 per cent of PET bottles and 92 per cent of cans were returned, and 100 per cent of those were recycled, although not domestically but in the UK and Denmark respectively. There is a clear trend towards nonrefillable containers – in 2006, 23 per cent more disposable cans and 40 per cent more disposable bottles with deposit symbols were sold compared to 2005 – but refillables still have an approximate 60 per cent share of the market.

good product, bad product?

16

The Danish battery experience is slightly more interesting – a producer-level deposit refund system aimed at reducing specifically nickel cadmium (NiCd) batteries, but also funding the recycling of all batteries. NiCd batteries were seen as the largest single potential contributor to cadmium pollution, so the tax aimed to discourage their use, and failing that to pay for collection and recycling. The tax is collected from battery importers and producers, and can be refunded to them (at the same level per battery) when they collect used batteries. Prior to the charge NiCd use had been rising at 20 per cent per year, and that trend has now reversed. Collection and recycling rates for NiCd batteries now stand at 50-60 per cent. Collection and recycling of other battery types, for which there is no specific legislation, is lower at 33 per cent, but still substantially above the UK. Similarly, Sweden has used charges to shift consumers from cadmium and mercury batteries as well as to increase collection and recycling of all batteries. In 1987 a fee was imposed on mercury and cadmium batteries, varied according to the weight of the metals in the batteries, which was used to fund education, collection and recycling as well as data processing by the Swedish Environmental Protection Agency. The fee was imposed on battery producers and importers and passed on to consumers at point of sale. There is no provision for refunds as in Denmark. In 1997 the fee was significantly increased in order to encourage substitution of these batteries with less toxic alternatives (from SEK13-23/kg to SEK300-500/kg or €32/kg). It is not clear how far a shift away from mercury batteries was prompted by the tax or by technological advances since the tax was initially low (and batteries containing more than 0.0005 per cent of mercury by weight were banned after 2000), but the large tax increase since 1997 has been credited with significantly decreasing sales of NiCd batteries – down 78 per cent between 1997 and 2006. Overall collection rates for household batteries of all types are now approximately 65 per cent, but recycling rates are disappointing – only hazardous batteries are recycled.

What might be the criteria of a good product or materials levy?

17

The case studies above suggest a number of lessons for the UK. They confirm some of the findings from a 2001 report19 by a consortium led by Ecotec, which are summarised in annex c. We think some of the most important considerations are:

good product, bad product?

In terms of where to apply at levy: 1. Scale. The problem has to be of a certain size. Poor capture rates for key

materials, particularly those with positive market value, certainly qualify – we clearly need levies and/or deposit refunds to help address the problem, otherwise the solution is to ban final disposal. There are also significant quantities of products that have no recycling potential – they may be either problematic wastes (such as nappies), or large users of resource (such as composite packaging) and these seem appropriate targets for a levy of some kind.

2. A levy is an appropriate instrument to deploy (see box 2). A levy need not necessarily be an alternative to regulation or voluntary agreements – it can act as an additional signal on top of targets and agreements, in particular to improve capture rates or to fund collection and treatment infrastructure not provided by the market. A levy might also be appropriate to shift behaviour from one option to another, where a ban is not acceptable, or as a first step towards a ban with revenues funding development of alternatives. A levy might be less useful for general, unspecified reduction of a behaviour without clear alternatives, since responses are unpredictable (as with the Irish plastic bag tax).

3. A change won’t happen in the general scheme of things. But as CEMEP forcefully pointed out, most markets don’t shift without specific regulatory or price intervention. Voluntary actions from companies are often inconsistent and subject to rapid change.

4. A levy won’t incur large administration costs. This argues for levying a limited range of materials and products, and collecting the tax alongside other taxes.

5. Preferably would be done on a pan-EU basis to avoid challenge on grounds of competence or barriers to trade. However, it is interesting that some

countries appear to have implemented measures without the expected accusations that they are favouring internal markets and distorting competition.

6. Values. Alongside considerations of equity, we believe taxes and levies should to some extent be based on judgements about value. Taxing products that use energy unnecessarily such as electric pepper grinders will inevitably attract accusations of gesture politics and criticism that fairly insignificant products are being singled out for punishment. However, we believe there is a place for subjective judgements as part of the possible criteria we set out here. A tax on such a product might appear trivial but would reflect its aggregate environmental impact and send a clear message that this is not a direction that product design or marketing should be taking.

18

In terms of how a levy is designed:

good product, bad product?

1. The rate of the levy must be high enough to effect the desired change – experience from other countries suggests that often initially, levies are conservative and thus relatively ineffective.

2. Care must be taken that exemptions do not undermine the impact of the levy, or so complicate its administration that it costs outweigh benefits.

3. The desired change must be clearly delineated, so as to increase confidence in the levy as an environmental (rather than purely revenue-raising) instrument, to help raise awareness of the issues at stake and, crucially, to enable measurement of progress and cost-effectiveness.

4. If revenue is hypothecated, if must not be to something that requires continued funding if the point of the levy is to decrease a given behaviour – in the latter case the assumption should be that revenue will also decrease over time. If equilibrium is reached something is not right.

5. There should be an early announcement of the intention to implement a levy, to enable businesses to prepare. This should not be confused with allowing time for businesses to argue their way out of the proposition.

6. The usual criteria set down by the Treasury, such as avoiding unintended consequences, socially regressive measures, and adding to the tax burden in a politically unacceptable way, are taken as read (although this doesn’t necessarily mean that in the context of environmental measures that these criteria will yield the right answer).

3. what should we be considering in the UK?

good product, bad product?

19

The government needs to send a signal that qualities such as energy efficiency and recyclability must be a given in the choice of materials we use and the products we design. In the absence of either a price or regulatory signal we continue to have products brought into the market place that diverge from environmental objectives. A price signal could be an alternative to a regulation, or it could be a complement, perhaps a precursor to legislation and structured in such a way as to raise both awareness and funds in the short to medium term.

Replace VAT with a goods tax graduated by environmental impact The most straightforward way to condition products is to replace VAT with a product tax that is environmentally graduated, with exemptions for the ‘best’ products and partial exemptions for others. This will be complex task and will require considerable input of both thought and data, but we need to make that effort if we are to tackle the impacts of the products around us and reorientate the economy towards one that is both low carbon and resource efficient.

A general tax with exemptions for the ‘good’ is recommended on the basis that it might be easier to agree criteria for the products of the future than to agree which products to demonise, especially given a tendency to be forced into complex exemptions to protect particular industries. It could start at a very low level to avoid distortions, but have the potential to be ratcheted up (in the same way as the landfill tax). There are simpler opportunities, for instance giving a general tax exemption for remanufactured goods.

We have a partial precedent for this approach in the lower rate of VAT levied on the supply and installation of energy-efficient devices by contractors but it is not yet legal under EU law to extend this to the products themselves. This debate is on going with the EU, but we believe the UK government should be pushing it in the more radical direction of seeing all product taxation as potentially environmental taxation. A detailed economic analysis of the implications of such an approach can be found in a 2006 paper by Johan Albrecht from the University of Ghent.20

Starting with packaging If a universal levy is not feasible, it could start with particular classes of products or materials, such as packaging, levied across the board but with exemptions for the highest performing packages. Deciding what constitutes ‘highest performing’, with all the complexity of weighing up material use, carbon intensity and even water use, will have to be undertaken by an independent, highly authoritative organisation. Such an exercise would help to resolve all the competing claims in the packaging sphere, and the high degree of consumer and retailer confusion.

“in the absence of either a price or regulatory signal, products continue to be brought into the market place that diverge from environmental objectives”

“there are simpler examples, for instance giving a general tax exemption for remanufactured goods”

good product, bad product?

20

“the materials and products dilemmas that we are facing need considerable funding for data collection, analysis and debate”

Money from such a levy could raise money to support innovation in the short term. Levies on materials might be more straightforward to administer than on products in terms of deciding criteria (having less complexity than products) and might address commercial waste streams in a way that a levy on products might not, because they could be applied further up the supply chain, rather than at point of sale of a final product. Applying a levy ‘upstream’ might also make it cheaper to administer.

The signalling value of such a levy on packaging should help to discourage future development of hard-to-recycle materials. Certain plastics and nonrecyclable composite materials are the prime candidates here, with a view to encouraging innovation that delivers the undoubted high functionality and often carbon efficiency of such materials, but also delivers easy recoverability and recyclability. The innovation point is important, because a levy should not simply induce a switch to heavier, possibly less carbon efficient materials, just because these are more recyclable. It is sometimes argued that lightweight materials, for instance the plastics developed in response to packaging reduction targets that are tonnage based, or the substitution of composite cartons for glass containers, are more carbon efficient because less fuel is used to transport them, but this has not yet been subject to detailed study.

The Dutch initiative to put carbon into its packaging levy equations may be instructive here.

Textiles, given the move to more complex and diverse fabrics, could be seen as a parallel to plastics, and a candidate for a levy with exemptions that favour recyclability in a similar way. The revenue from such a levy could be used to fund research into alternatives, or could even be used to provide pumppriming for new sorting and recycling infrastructure for recyclable materials, where the market is failing to bring these on-stream quickly enough. Public awareness of the problems around textiles is low, making a levy an attractive option for funding publicity and assisting the activities of NGOs in the collection of pre-owned clothes and textiles for recycling.

A battery redesign levy In a similar way to the materials levy, we must explore using product levies to prompt a switch from a less desirable version of a product to a more desirable one and, in tandem, establish a fund to research and implement alternatives.

Batteries may be a good candidate here. The Danish and Swedish examples show that levies can be used to discourage use of a particular type of battery, but batteries in general would benefit from redesign with the environment in mind – to be more energy efficient, to use less harmful materials, to be more recoverable and recyclable. The products and materials dilemmas that we are facing need considerable funding for data collection, analysis and debate – funding that does not appear to be available through present academic or government research budgets, and is not being undertaken by business unless pressed by a regulation or a price signal. Levies that have an in-built assumption of decreased revenues over time (because they are having the desired effect of reducing the levied behaviour) can be compatible with raising revenue for specific purposes as long as that revenue does not need to continue ad infinitum. A bounded research fund might help to address concerns that a levy is simply an open-ended revenue raising measure.

We must have a serious debate about the potential for deposit refund systems, construed here as a type of levy, and often integrated with levy systems in other countries, to encourage both reuse and high capture and recycling of basic materials such as paper, metal, glass and plastics. We have tended to dismiss such schemes for a variety of reasons, but other countries have shown that these can be implemented in ways that avoid undue distortions of trade, and that reuse and recycling can at least to some extent exist side by side.

The key is to target particular sources of materials – particularly products consumed outside the household,21 and those that end up as litter. The Department for Environment, Food and Rural Affairs (Defra) should examine the potential for a deposit refund scheme that covers ‘on the go’ packaging materials that do not typically find their way into kerbside schemes, such as smaller (less than one litre) plastic bottles and cans. Sales of these types of drinks containers are growing at approximately five per cent a year,22 and Encams reports that over the last four years drinks-related litter has increased by 37 per cent.23 The set up and running of refund centres could be the responsibility of charitable organisations, who would fund the centres through money generated by unredeemed deposits and sale of recovered material; any surplus generated could go to the charities.

It has been suggested that a deposit refund scheme could interfere with the UK’s method of meeting the targets set by the EU’s packaging directive, whereby companies fulfil their responsibility as producers by purchasing packaging waste recovery notes (PRNs) from reprocessors or by joining compliance schemes that buy PRNs on their behalf. Prices for PRNs, and their export equivalent, packaging export recovery notes (PERNs), are determined by supply and demand: in theory, a shortfall in recovery and recycling infrastructure will result in higher PRN prices, triggering investment in infrastructure and encouraging companies to reduce their costs through addressing their packaging use. In practice, however, the dominance of a few large compliance schemes competing for custom has arguably reduced the incentive for companies to reduce packaging waste and distanced retailers and others from the sharp end of local authority waste management. Furthermore, because of the strong demand for materials from external markets such as China, money from PRNs has not trickled down to local authorities as anticipated, leaving UK waste infrastructure significantly underfunded. We believe that the UK’s compliance system needs reforming to better stimulate processing capacity in the UK. One way to do this could be conditioning the existing PRN system, for example by allocating a proportion of a business’s PRN target to the municipal waste stream. Such changes could also address any issues arising from the introduction of a deposit refund system.

Even if the current PRN system was not changed, we believe that the PRN system and a deposit refund system could exist side by side: the PRN system does not exist in a vacuum at the moment but alongside local authority collection schemes. Local authority recycling schemes affect the price of PRNs and vice versa: if there were no collection of recyclables from households and bring banks then PRN prices would be much higher; if PRNs did not exist then local authorities waste costs would also be much higher. A deposit refund scheme for ‘on the go’ plastic bottles and cans, for example, would

21 good product, bad product?

Deposit refund systems

“reuse and recycling can, to some extent at least, exist side by side”

good product, bad product?

22

“we do not feel that product levies are being given sufficient consideration in instances where their use could drive real environmental improvements�

recover materials that previously ended up in street bins and as litter. Once the packaging had been collected and the refunds made the packaging would count towards the amount of plastic or aluminium that has been collected for recycling and this would reduce the need for other recycling to occur to meet packaging targets and local authority recycling targets. Packaging with deposits disposed of at home open up the possibilities for new forms of collection systems, for example those run by local charities or youth groups.

who do we need to talk to?

With this report we are hoping to start a discussion, both in and outside government, about the potential merits of a product levy framework. We are not arguing that a product levy will always be the right solution – indeed, there will be instances where regulation will prove more appropriate, or necessary anyway, particularly where certainty of outcome is desirable. But we do not feel that product levies are being given sufficient consideration in instances where their use could drive real environmental improvements, particularly in areas where regulation has not delivered the change we have wished to see, such as those set out above. In some cases, a simple ban on a particularly wasteful product, where an alternative exists with the same functionality but significantly better environmental performance, might be a better solution.

Development of these ideas needs to take place with input from Defra, the Treasury, Business, Enterprise and Regulatory Reform (BERR) and the Department for Innovation, Universities and Skills (DIUS). It could be placed in the context of the follow up to the CEMEP report, and should draw on the experiences of those with practical experience of implementation in other countries, both political and administrative. Green Alliance looks forward to constructive discussions both in and outside government on how a product levy framework could be taken forward in the UK.

annex a: case studies of product levies

23

Box 4: The EU batteries directive

good product, bad product?

The UK has until 26 September 2008 to implement the new batteries directive.

Proposals for new legislation covering batteries were issued by the European Commission in 2003, because existing legislation on batteries only covered an estimated seven per cent of consumer batteries on the EU market containing mercury, lead and cadmium above a certain threshold level. The new directive was agreed on 26 September 2006 and will apply to all types of batteries irrespective of their shape, weight, composition or use.

The directive “seeks to improve the environmental performance of batteries and accumulators and of the activities of all economic operators involved in the life cycle of batteries and accumulators, e.g. producers, distributors and end users and, in particular, those operators directly involved in the treatment and recycling of waste batteries and accumulators.”24 This emphasis on recycling and treatment of batteries is reflected in the key provisions of the directive, which specifies a 25 per cent collection rate for waste portable batteries to be met by 2012 and 45 per cent by 2016. These relatively unambitious targets will nevertheless be extremely challenging for the UK to meet, as currently only two per cent of portable batteries (approximately 600 tonnes) are collected and recycled every year. Coordinated collection systems, financed by battery producers, will have to be set up and BERR is currently consulting on what form such systems should take.25 In the meantime, WRAP has been working with local authorities and battery recyclers to trial household collections. It is clear that local authorities themselves also present a significant awarenessraising challenge: 57 per cent of recycling officers responding to a recent survey said they had “no plans” for battery collections.26 Specific recycling targets also apply to all batteries: by 2011, 75 per cent by average weight of NiCd batteries and accumulators, 65 per cent of lead acid, and 50 per cent of others, have to be recycled. The directive also prohibits the placing on the market of any batteries that contain more than 0.0005 per cent of mercury by weight and of portable batteries that contain more than 0.002 per cent of cadmium by weight. Surprisingly, these are the only limitations: the government has not taken a view as to whether rechargeable batteries should be encouraged over primary, one-use batteries, mainly on the basis that there are some applications such as smoke alarms that are unsuitable for rechargeable batteries. However, recent LCA evidence suggests even clearer environmental advantages of rechargeable batteries than had previously been thought,27 suggesting that the government should be doing much more to encourage the use of rechargeables – currently only ten per cent of the UK battery market.

24

Belgium

good product, bad product?

Quick summary A threatened federal ‘ecotax’ on batteries, as part of Belgium’s overall framework on product taxes spurred a voluntary agreement with the battery industry to attain high recycling rates. The industry-funded compliance organisation, BEBAT, passes on the costs of the scheme to consumers. Battery recycling in Belgium is now approximately 60 per cent.

Background on Belgian ecotaxes Belgium’s ecotax law was introduced in July 1993, when the green parties of Wallonia and Flanders plus a third opposition party demanded the ecotax law in return for their cooperation on a range of other issues facing the Belgian federal government.

The Belgian ecotax law contained both a general framework for the introduction of ecotaxes and a first series of ecotaxes, to be gradually implemented according to a precise timetable laid down in law (which was subsequently relaxed).

Belgian ecotaxes are product taxes, meaning that the products are only subject to an ecotax provided that payment of the tax can be avoided through selecting a more environmentally friendly alternative. If consumers respond effectively to ecotaxes, so the logic goes, tax receipts will be minimal.

Somewhat in contradiction to this principle, Belgian law stipulates that tax receipts will be allocated to the regions, creating a clear fiscal interest and raising suspicion in industrial circles that the hidden motive is revenue raising.28 The main aim of Belgian ecotaxes is to change the structure of relative prices in the Belgian economy, thus providing consumers with an incentive to change their consumption habits. Changes in consumer behaviour then feed back into the economic system and change producer behaviour. The overall objective of Belgium’s ecotax framework is to reduce pollution in the broadest sense, although the ecotaxes are not related in a precise way to the environmental damage the products are causing. Instead, the explicit aim of the tax is to put pressure upon producers and consumers to change their behaviour, and so the rate is set relatively high.

Battery ecotaxes The reasoning above is difficult to apply to batteries, since substitution of battery type can only occur when the product that uses batteries is being replaced (and this may occur relatively infrequently). The aim of the battery ecotax was thus more about increasing the volume of separately collected batteries. This was implicit both in the design of the original tax (which would have exempted those batteries where a deposit refund scheme was in place) and then in the negotiated agreement which replaced it.

The proposed Belgian battery tax In the early 1990s, batteries were seen as causing significant environmental problems in Belgium. Consumers were supposed to collect them separately

In July 1993, the Belgian government announced there would be an ecotax on all sold batteries, scheduled to come into effect on 1 January 1994. The tax was to be BEF20 (€0.49) per battery sold (20-30 per cent of sales price) for all batteries, except those difficult or dangerous to remove, such as in medical appliances. Batteries would be exempt from the tax if they were part of a deposit refund scheme. The deposit had to be at least BEF10 (€0.24) per battery, and batteries subject to this system were to have a mark on them to indicate this.

The voluntary agreement The proposed tax on batteries was never implemented, because the threat of the tax was enough to spur the battery industry into negotiations with the Belgian government, arguing that there is no substitute for batteries, and so consumers would have to spend BEF1.5 billion (€37.2 million) annually. It also predicted that higher prices and lower sales would lead to a employment fall in the industry and put it at a competitive disadvantage compared to other producers. The negotiations produced an agreement, signed in June 1997, that a voluntary scheme would be launched by the industry and supported by a battery charge.

The agreement, between the federal government, the regions and the Belgian battery industry (both battery producers and distributors) meant that batteries were now to be exempted from the ecotax once a voluntary collection and recycling scheme for all batteries was set up. The following conditions applied: • The system had to be financed by the battery industry by means of a collection and recycling contribution of which the amount was to be decided by authorities; • Specific collection targets had to be met that were negotiated between the government and the industry (with yearly evaluations); • If these conditions were not met, an ecotax on batteries would be levied on all household batteries sold in Belgium.

To ensure that the targets were met, the battery industry set up a non-profit organisation, BEBAT, to coordinate the collection and recycling of all batteries.

The financing of the collection and recycling contribution was to be paid by members of the organisation; this contribution would be passed on to the consumers through a price increase. This price increase was set at BEF4 (€0.09) per battery by the Royal Decree of April 16 1996, far lower than the proposed ecotax of 20 BEF. In January 1999, at the request of BEBAT, the contribution of BEF4 was raised to BEF5 (€0.12) to cover higher costs due to investments in improved recycling techniques and to more intensive media campaigns. This enabled BEBAT to re-establish a positive net income following two years of net losses.

25 good product, bad product?

through each region’s public collection sites, but there were few incentives to do so, and so collection levels were low and batteries were routinely disposed of with household waste.

good product, bad product?

26

Results From 1996 to 2002, collection rates29 for all batteries continuously increased, going from 46 per cent in 1997 up to 60 per cent in 2002. However, despite this strong progression, the high mandatory targets set up at the beginning (75 per cent in 2000) were not reached and they were subsequently revised down in 2000.

One explanation for the initial surge in quantities collected is that householders were encouraged to clear out old batteries that had accumulated in previous years (the ‘hoarding’ effect). Since 2001, the growth rate of collection slowed down to less than four per cent per year, possibly partly due to the increase in sales of rechargeable batteries – they accounted for 36 per cent in 2004 of battery sold in 2004, against 14 per cent only in 1997 – which given their longer lifecycle (from five to 20 years depending on the device they power) may well have contributed to a decrease in the level of spent batteries collected.

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

?

2572 2535 2925 2891 2895 2903 2916 3059

?

?

Rechargeable

?

?

422

497

714

982

?

?

?

?

14

16

20

25

?

?

?

?

?

?

Total sales

Primary

?

Rechargeable as per cent of total

Sales

1052 1423 1423 1729

29

27

33

36

2994 3032 3640 3873 3955 4339 4339 4788

Collection 804

1037 1468 1638 1805 2183 2368 2466 2456 2433 2424

441

444

352

94

197

300

142

10

10

10

63

0

0

64

75

94

89

86

94

99

99

99

97

100

Collection targets per cent

Collection rate per cent

Collection total

Bebat per cent of total

Other

Bebat

0

441

1248 1389 1562 1835 2105 2325 2378 2476 2466 2469 2424

?

?

46

52

50

54

57

60

57

52

?

?

None

40

50

60

67.5

75

60

60

62.5

65

65

?

27 good product, bad product?

Evolution of collection and sales of portable batteries in Belgium between 1995 and 2005 (in thousands of tonnes)

good product, bad product?

28

Collection facilities In 2002 there were a total of about 20,000 collection points in Belgium, or one collection point per 500 inhabitants. Collection points can be found in supermarkets and local shops, jewellers, photo shops, do-it-yourself stores, toy stores, electrical stores, pharmacies (which account for 19 per cent of collection) as well as schools (24 per cent), public and private institutions, and eco-yards (24 per cent). In addition, three plastic bags are mailed yearly

by BEBAT to households in which they can store batteries and bring them back to collection points at their convenience. The mailings publicise the environmental benefits of battery recycling and allow consumers to take part in a lottery by returning their batteries.

BEBAT’s share in total collection went from zero in 1996 to 97 per cent in 2005, showing that the organisation has definitively taken over the role of separate battery collection from the regions. This is probably due to its media campaigns and the high profile BEBAT obtained by the placement of boxes in shops and public places, as well as the performance incentive faced by the industry – there remains a clear threat of an ecotax if targets are not met.

Other related instruments • Codes of conduct In addition to the ecotax law, the Belgian battery industry signed two codes of good conduct with the Federal Ministry of Economic Affairs and the Federal Secretary of the Environment, in anticipation of the European directive of 1991. These codes included a commitment by industry to replace the mercuric oxide batteries by zinc-air batteries before the end of 1990 and to reduce the content of mercury in alkaline batteries. There has been a decrease in the amount of mercury in batteries, but this is a global trend and primarily due to advances in technology.

Lessons for the UK from Belgium In Belgium’s case, it was the threat of the ecotax legislation that forced the industry and retailers to come up with the alternative solution of a voluntary collection and recycling system. The announcement effect was important too – the ecotax had been announced early enough for the stakeholders to be able to react to it before its actual implementation. The continuation of the threat of the tax proved important for the viability of the industrial initiatives, and provided the cohesion necessary to make such initiatives work. However, since 2003 there have been no green party politicians in the federal Belgian government, and since 2004, none in the Flemish regional government.

Contacts in Belgium are aware of decreasing political appetite for further ecotaxes.

Denmark

29

Quick summary

good product, bad product?

Denmark has a producer-level deposit refund system aimed at reducing the use specifically of NiCd batteries, but also at funding the recycling of all batteries.

Background The tax is part of a government effort to reduce the environmental impact of NiCd batteries. It came into force on April 1 1996 and covers NiCd batteries only. Other measures were already in place for other types of hazardous battery: lead batteries are covered by a special recycling scheme that constitutes part of a voluntary agreement, and mercury batteries have been phased out in Denmark.

Objectives The tax had a clear objective: to discourage the use of NiCd batteries.

Cadmium is a heavy metal that cannot biodegrade and presents a health risk to humans and animals, and NiCd batteries were the largest single potential contributor to cadmium pollution. The secondary objective of the tax is to pay for the collection and recovery of NiCd batteries.

The tax is not seen as a producer responsibility measure because the onus is not placed on battery importers or producers to be responsible for their products at the end of their useful life. Instead, the objective is that producers and importers of both batteries and products containing batteries switch to better alternatives. Although the tax is not explicit to the consumer, it was also intended that the increased price of NiCd batteries, and better alternatives on the market as a result of changed importer/producer behaviour, would encourage a shift in consumer purchasing behaviour too.

The tax works in conjunction with collection of used NiCd batteries and the refund scheme. The Danish Environmental Protection Agency (DEPA) administers the refund scheme, and registers and approves the professional collectors to whom they pay the refund. These schemes aim to increase recovery rates of used NiCd batteries in order to ensure that they are safely disposed of.

Design • Tax base and tax rates The tax targets all sealed NiCd batteries whether for domestic or professional use. The tax is levied on both new and used NiCd batteries (it is levied on used NiCd batteries to stop the import of used batteries that then benefit from the collection refund/reward). The tax amounts to DKK6 (₏0.8) per single battery or DKK36 (₏4.8) per battery package, or a minimum DKK6 per cell. A similar rate is applied when the batteries are included in other products.

good product, bad product?

30

• Payment: responsibility and recipient The tax is collected by the Customs and Excise Department from registered producers and importers of NiCd batteries. Due to competitive reasons, the tax does not apply to exports of NiCd batteries (but also because there are no NiCd battery producers in Denmark). The revenue from the tax enters the state budget and is used to fund the collection and recovery of used NiCd batteries.

The tax is not explicit to the consumer on purchase of a NiCd battery.

Results • Use of NiCd batteries In 1999, the DEPA concluded that the charge had lead to reduced NiCd battery use. Prior to the charge, NiCd battery sales were increasing by 20 per cent a year. This trend appears to have been reversed. Reports created in 1999, 2000 and 2005 by the DEPA further concluded that that the tax had raised the prices of NiCd-batteries to a level a little above the prices of the normally more expensive NiMH (nickel metal hybrid) and Li-ion (lithium ion) batteries.

This lead to reduced NiCd battery use and an overall substitution from NiCd batteries towards environmentally less harmful and higher quality NiMH and Li-ion batteries.

The use of single NiCd batteries for ordinary use and sales of NiCd batteries for use in less energy demanding applications such as telecommunications dropped to virtually zero. However, sales of NiCd batteries for more energy intensive uses, such as hand tools, increased, because sales of hand tools increased in Demark over the period.

NiCd batteries are now mainly used in wireless hand tools and for industrial, medical, emergency purposes. There are other options for batteries in hand tools: only 40 per cent of hand tools used by professionals in Denmark use NiCd batteries – but there is a persistent belief that alternatives are not available or practicable (this belief is more widespread in central Europe and to a minor degree in the Nordic countries).

The substitution from NiCd to other types of batteries was occurring already because of technological development – but the tax accelerated this trend.

NiCd batteries collected in Denmark and revenues, 1996-2006 Year

Tonnes NiCd collected/year

Revenue (DKK millions)

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

8 93 78 83 72 91 110 62 ? ? ?

34 31 29 25 23 20 21 14 22 23 24

This scheme replaces the 1991 voluntary agreement on NiCd batteries, which aimed to collect 75 per cent of all NiCd batteries. This aim was not met and only 35 per cent of the batteries were collected, therefore the agreement was denounced.

Between 1997 and 2005, the amount of NiCd batteries collected varied from 62 tonnes a year in the early stages to 117 tonnes in 2005. No figures are yet available for 2006. DEPA estimates that these collection figures account for between 50 and 60 per cent of all NiCd batteries in Denmark.

The collection scheme applies to all sectors (individuals, private businesses, and public institutions). There are about 20 registered enterprises in the collection scheme that ensure batteries are collected, handled, and transported to recovery facilities in an environmentally safe manner. Enterprises that collect the batteries are registered with and have obtained approval from DEPA. The batteries are delivered to recovery plants in Sweden or France.

The 2005 DEPA report pointed out that while much is being done to collect NiCd batteries, the amount of NiCd batteries being disposed of with ordinary waste was assessed to be more or less equal to the amount of batteries being collected through the NiCd battery collection scheme (the text of the reports says “the results indicate that while much is being done to collect NiCd batteries, substantial NiCd amounts may still be disposed of with ordinary waste” indicating the hoarding effect). There is however little evidence for either fate. Problems include the fact that consumers find it difficult to tell NiCd batteries apart, so some regions of Denmark collect all batteries regardless of type.

• Refund scheme Enterprises that participate in the collection scheme are entitled to a tax refund of DKK120 per kilo of batteries returned (excluding purchase tax), that basically corresponds to the level of the tax. The entitlement to a refund is conditioned on the provision of proof that the batteries have been weighed on arrival to a recovery plant in either Sweden or France. The refund is administered by the DEPA. Individuals can deliver NiCd batteries to one of the registered collectors and get a payment for even a small amount of batteries; this aspect is not regulated by the DEPA and depends solely on the agreement between the collector and the individual. Non-profit organisations are able to earn extra money by helping the professional collectors with the collection of rechargeable batteries. Normally an amount between DKK50 (€6.7) and 100/ kilo (€13.4) can be obtained, all depending on the quality of the collected material. Non-professional collectors need not to be approved by the DEPA.

Conclusions Denmark has worked for more than two decades to minimise the inputs of cadmium to society. Although NiCd batteries are still used in wireless hand tools and for industrial purposes, single NiCd batteries for ordinary use and sales of NiCd batteries for use in less energy demanding applications has been successfully discouraged. The present collection scheme has been relatively successful in comparison to the previous voluntary scheme.

31 good product, bad product?

• Collection of used batteries

good product, bad product?

32

There has been little work to date on the resource implications of different types of batteries (e.g. one-time use versus rechargeable) and the Danish government have not expressed a preference based on resource efficiency considerations. However, the DEPA’s waste management plan intends to fund or part-fund work into the development of new technologies that could make batteries more resource efficient.

Sweden Quick summary Sweden has charges to encourage the use of cadmium-free and mercury-free batteries through substitution with better alternatives, as well as to fund the increased collection and recycling of all batteries. Key points include: • A battery charge initially used to finance an information campaign, recovery and disposal then, following the 1997 battery ordinance, significantly increased to encourage substitution to batteries free from heavy metals (mercury and cadmium); • Post 1997, a sharp decrease in sales of NiCd batteries as a result of substitution with NiMH batteries; • Collection rates of household batteries have doubled in the last ten years from 0.1kg per person in 1997 to 0.2kg per person in 2007, but recycling rates are disappointing – only hazardous batteries are recycled.

Background Heavy metal pollution from household batteries has concerned the Swedes since the 1970s. At the time, municipalities were starting to incinerate household waste in place of landfilling and exhaust fumes revealed high concentrations of mercury. Separate collection of batteries was initiated: button cells batteries were the first to be collected in 1979, followed by alkaline batteries containing mercury a decade later. The problems linked to pollution from NiCd batteries became more serious in the early 90s, with the rise of portable phones and cordless power tools that came with NiCd batteries as standard.

In 1987 the first provisions relating to charges on batteries were introduced, together with a nationwide information campaign on batteries containing mercury and cadmium. It was decided that all these batteries should be separately collected and the government set a collection target of 75 per cent.30

Aims The battery charges were at first introduced to finance a public information campaign as well as to fund the recovery and final disposal of the collected batteries. Following the 1997 battery ordinance however, the charges were significantly increased in an effort to encourage the use of batteries free from heavy metals.

Design Since 1987 a battery fee applied to all household batteries containing mercury and cadmium.31 The charge varied according to the heavy metal and its weight content in the battery.32

The funds from these charges go to a battery fund administered by the Swedish Environmental Protection Agency (EPA), which pays for: • • • •

An information campaign for municipalities and consumers; The municipalities’ sorting of hazardous batteries; The disposal or recycling of hazardous batteries; The EPA’s data processing for hazardous batteries.

During the period 1987-1997, the charge for NiCd batteries was raised twice, mostly due to financial difficulties encountered by the battery fund as a result of decreasing revenues from lower mercury and cadmium content in sold batteries, putting pressure on the long-term viability of the collection and recycling operations.

Evolution of the battery fees from 1987 until now (in SEK/kg) Type of battery

1987-1992

1992-1994

1994-1997

1997-today

NiCd

13

25

46

300 (€32.34/kg)

Alkaline batteries* Button cells*

23

23

23

500 (€53.90/kg)

23

23

23

500 (€53.90/kg)

* Containing mercury

After 1997, the charge for hazardous batteries was substantially increased from precedent years’ levels. The charges for NiCd batteries and for batteries containing mercury went up to SEK300/kg and SEK500/kg respectively in 1997.

Results • Use of mercury and NiCd batteries Up to 1997, technological developments led to a significant decrease in the contents of mercury and cadmium in small batteries – the most commonly sold alkaline battery in Sweden has not contained mercury since 1992.33 It seems however that this was more attributable to heightened environmental awareness and international developments than to Swedish battery charges, which were deemed too low to have any significant impact on the Swedish market. Furthermore, compulsory marking for hazardous batteries, the threat of a sales ban on alkaline batteries during the 1980s and the threat of a deposit return system for NiCd batteries in 1993 had probably more effect in the promotion of lower heavy metal contents in batteries (see section on related instruments).

Since 1997 however, the role of the battery charges in changing market demand has become much more significant. The sharp increase of the charge

33 good product, bad product?

The manufacturers and importers of these batteries, or of products containing or accompanied by such, batteries are responsible for the payment of the fee. It is then passed onto the consumers at the point of sale. There are no provisions for refund mechanisms.

good product, bad product?

34

on NiCd batteries (from SEK46/kg in 1994 up to SEK300/kg in 1997) was followed by an impressive decrease in sales for such batteries in Sweden.

Evolution of sales and collection of NiCd batteries in Sweden since 1997 34 1997

1998

1999

2000 2001

2002 2003

2004

2005

2006

Sales Yearly change per cent

328

190 -42

175 -8

141 -19

145 3

134 -8

111 -17

87 -22

78 -10

73 -6

Collection Yearly change per cent

141

144 2

170 18

142 -16

167 18

116 -31

124 7

141 14

151 7

141 -7

Sales of NiCd batteries dropped by 42 per cent in the first year following the increase in the charge and by 78 per cent overall between 1997 and 2006. In addition, it was reported that in Sweden the share of NiCd batteries within the cordless power tools market – traditionally its biggest market35 – has decreased substantially as a result of substitution by nickel metal hydride (NiMH) batteries. In 2003 NiMH batteries had a market share of close to 90 per cent for cordless power tools in Sweden.36

Collection facilities for used batteries From 1987 until 1997, only batteries containing mercury and cadmium were collected separately from household waste. The Swedish authorities however realised that consumers had difficulties in distinguishing between hazardous and non-hazardous batteries, and decided that all household batteries and products with in-built batteries should be separately collected. This new provision appeared in the 1997 Battery Ordinance.

Municipalities are responsible for the collection from households and consumers. Each of Sweden’s 290 municipalities determines its own collection system for discarded small batteries: some apply a kerbside pick-up system, but most of them have collection boxes at recycling stations. Today there are about 11,000 collection points for spent batteries in Sweden: one collection point for every 9,000 inhabitants.

Municipalities and retailers share responsibility for informing households about collection facilities. The municipality has to inform retailers and consumers about the organisation of the local collection system, retailers are in turn required to inform consumers where they can turn in discarded batteries. Some retail outlets can also take back spent batteries, although they are not legally required to. Retailers who sell products with in-built hazardous batteries are required to take back the products and ensure that they are taken to a collection station designated by the municipality.

Collection targets and achievements The separate collection of button cells batteries containing mercury quickly reached the 75 per cent government target set in 1987: 89 per cent of such

On the other hand, the collection rate of alkaline batteries containing mercury never exceeded 30 per cent during the 1987-1993 period while it varied between 35-45 per cent for NiCd batteries during 1987-1996, far below the initial 75 per cent and then revised 90 per cent (in 1993) government targets.

Today the collection rate of household batteries is estimated to be just over 50 per cent, meaning that despite 18 years of information campaign and SEK63 million of related expenditures, almost half of spent batteries still end up with mixed household waste. Overall, the levels of batteries collected in Sweden are far below those of all other fractions of household waste.

Related instruments • Threat of a sales prohibition for alkaline batteries containing mercury in the 1980s, with eventual ban after 1988. The problems caused by the

incineration of mercury batteries in the late 1970s and the increasing sales of power tools prompted municipalities to start collection schemes but also to call for government action. In response, the Swedish Ministry of the Environment firmly stated that the only level of mercury it would tolerate was zero. During the 1980s, the likelihood of a sales ban of batteries containing mercury increased, supported by the general public. This threat echoed not only in Sweden but also in Europe as a whole and served as a guideline for the substantial product development that took place in the European battery industry in the late 1980s, when the first mercury-free primary cells were put on the market. The subsequent ban on the sales of alkaline batteries containing mercury, after the 1988 elections, had no significant effect on the market, since it was already being supplied with mercury-free batteries. • Threat of a deposit-refund system for NiCd batteries, followed by a voluntary agreement (1993-1996). In order to increase the collection rates

for NiCd batteries, a dedicated organisation, SIMBA (the Foundation for the Collection of Hazardous Batteries), was set up in 1993 by retail associations as part of a voluntary agreement with the government, whereby retailers committed to increase the recovery rate for NiCd batteries to 90 per cent by 1995. This agreement came about after the government planned to introduce a deposit refund scheme for NiCd batteries that would be administered by those who sold them, a move strongly resisted by the battery industry. • Information campaigns (since 1987). The first battery campaign costing

SEK4 million went from 1987 until 1993. The goal was that 75 per cent of all batteries sold should be collected by 1992. The focus of the information campaign was to raise awareness about the dangers associated with heavy metals in battery and the need to collect them. A 1990 evaluation of this campaign found that 93 per cent of the public had noted the battery information campaign. Actual collection was however below the target.

35 good product, bad product?

batteries were being collected in 1991, 96 per cent in 1993. The main reason for this success is that many button cells were sold at places such as pharmacies (for use in hearing aids), where staff had technical training and more personal contact with the customers.

good product, bad product?

36

The second battery campaign was led by SIMBA and primarily communicated the importance of recycling NiCd batteries. The goal was that 90 per cent of spent NiCd batteries should be separately collected by the year of 1995. SEK16 million from the battery fund was spent on the campaign but resulting collection rates did not match expectations (30 per cent in 1995), and as a result SIMBA was disbanded in 1997.

The third battery campaign has been ongoing since 1999 and is led by the government. It aims to raise awareness among the public about where to return used batteries and regarding what products contain built-in batteries. Between 1999 and 2005 the proportion of people that admitted to throwing their batteries in the bin decreased by 15 per cent, but was still significant at 22 per cent.

Particular problems encountered in Sweden • Debate around the measurement of the collection rate. In Sweden, the

collection rate for batteries is measured as the amount collected during one year divided by the amount sold the previous year. This measurement is somewhat fair for primary (non-rechargeable) batteries – although there is still a hoarding effect to take into account – but it is less appropriate for rechargeable batteries as they can last many years.

• Confusion as to where to return used batteries. The Swedes are well aware

about the danger of leaking batteries and the importance of collecting them. However it appears that the message about how and where to do it did not come across; instead of one organisation managing batteries there seem to be several from the consumer’s point of view. Allocating collection and information responsibilities across both municipalities and retailers probably led to this confusion. In addition collection rates could be higher if the collection points were increased.

• Substantial free riding on the payment of the fees. This is the consequence

of insufficient supervision activities. At the Swedish Environmental Protection Agency, it was estimated that 75 per cent of the fees were collected, but the Delivery Association for Electric Hand Tools estimated that the fees for rechargeable batteries in hand-tools are paid by 50 per cent of the suppliers only.

Lessons for the UK from Sweden • Only charges set high enough will change producers and consumers’ behaviour. The threat of a sales ban was also significant in encouraging the

use or design of alternative products.

• All batteries should be collected, not just the hazardous ones. People

have limited knowledge about batteries and limited time to sort them.

Collecting and recovering all types of batteries increases the chances of recovering more quantities of valuable materials.

small objects that are easy to carry, are potentially long lasting and can be stored for a long time before being eventually discarded. As a result they are very different from other types of recyclables such as paper, packaging, bottles, which are bulky and tend to be thrown away rapidly after being used. The collection of batteries may be more convenient if it is done through retailers, offices, or schools, rather than through possibly far-off civic amenities sites. • Information is necessary but not sufficient. Information campaigns on

the importance of separate collection and recycling of batteries are good but they alone will not make people to recycle their used batteries unless convenient facilities are in place.

37 good product, bad product?

• Batteries should be treated differently than other recyclables. Batteries are

38

Packaging

good product, bad product?

Belgium Background The Belgian ecotax on beverage containers was introduced in 1993 in advance of legislation implementing the Packaging and Packaging Waste Directive.37 It has been subsequently revised on a number of occasions in 2004, 2006, and 2007, notably following challenges by the European Commission or Belgian courts.

Aims and design of charge The aim of the original Belgian ecotax on drinks containers was to promote the use of refillable containers, on the understanding that refillable containers are better for the environment than their disposable alternatives. The prevention of packaging litter was a secondary justification.

The ecotax applies to the importers, wholesalers and domestic manufacturers or producers who sell the beverages containers subject to the ecotax on the Belgian market. The revenue recipient is the national government through the tax and custom administration. There is no earmarking of revenue, nor are there any mechanisms for refunds.

The practical implementation of the ecotax in 1993 was based on a complex system of exemptions based on both reuse conditions for refillables, and recycling rates for non-refillables, to be met by either the individual producer or a body acting on their behalf. This was the result of a political compromise that tried to appease a Belgian industry of which half had based its product and marketing strategy on refillable bottles and the other half on one-way containers. The left-hand column of the table below reflects the charges, exemptions and conditions that applied to the original ecotax.

In response to the ecotax law the industry created Fost Plus in 1994. Originally a cooperative and since 1996 a not-for-profit company run for its members, it functions in a similar way to the German dual system but allocates costs more precisely to participants and has put the majority of its emphasis on recycling rather than reuse and waste prevention. Its recycling objectives relate to all materials collected from households, rather than just materials from drinks containers. The success of Fost Plus in achieving its recycling targets and challenges to the system from the European Commission have combined to erode the market share of refillable drinks containers (see achievements section below).

The Belgian government has recently been discussing the introduction of new packaging taxes that would cover all packaging and would be differentiated by material in terms of carbon impact. These new taxes would run alongside the current ecotax on drinks containers. The proposals were widely derided by industry as a revenue-raising measure to fill a â‚Ź640 million budget hole38 and the proposals have since been downgraded to a tax on a much more limited number of products.

1993-2003

1 April 2004 – end 2005

2006

€0.37 per container for beer, mineral water and some soft drinks (lemonade, colas)

€9.85 per hectolitre • €9.85/hl of of product packed product packed in individual in non-refillable containersc individual containers • €0/hl of product packed in individual refillable containers

2007

• €9.86/hl of product packed in individual containers for non-refillables • €1.41/hl of product packed in individual containers for refillable containersd

Refillable containers

Non-refillable containers

Exemptions and conditions for exemptions Strict recycling targets to be met by industry through the Green Dot scheme managed

by Fost Plus (20 per cent containers to be recycled in 1996, to rise to 70 per cent in 2000, with different percentage targets depending on the material used).

Three conditions to be met for exemptions: containers could be reused at least seven times, they were sold and collected through a deposit– refund system with minimum deposits required by law, and they were actually being reused, with different reuse targets for different types of drink.e

No more exemptions, but reduction in VAT and excise duties on non-alcoholic drinks

None

Same conditions Same conditions apply for exemption apply in order to benefit from zero tax rate

None

No more exemptions for refillable containers

39 good product, bad product?

Tax rates

Period

Box 5: Evolution of the ecotax on drinks containers over time: tax rates, exemptions, and challenges by courts

Challenges by courts

good product, bad product?

40

The proposal for exemptions from ecotax on nonrefillable beverage containers to be linked to recycled content was challenged in 2003 by the Commission.

Ruled illegal in December 2005 by a Belgian court because it exempted refillable containers altogether. The court contested that importers could not in practice obtain an exemption from the ecotax, because longer transport distances make it harder for importers to switch to refillable containers.

Scheme annulled in January 2007 by the Belgian court of arbitration because it wrongly discriminated against one-way drinks in view of the high recycling rates achieved in Belgium.f

None as yet

c January-July 2005: tax rate increased to €14.5/hl d Corresponds to 1/7 of the charge on non-refillable containers e Another condition stipulated that containers wear a label that states the container is reusable and is subject to a deposit. NB in practice the symbol that marks refillable containers often needs a magnifying glass to see it, as there was no minimum size specified by the law. f Ends Europe Daily 18/01/2007

Results Reuse A 1998 report from the European Commission reported a systematic decrease of the market share of refillable containers in Belgium. It stated that “the positive influence of ecotaxes cannot be confirmed for reuse packaging. The law…is above all considered to be ‘paper’ [with] no effect because of the diverse possibilities of release [from the law]. Exemptions from the ecotax result very easily if within the packaging agreement the recovery target may be achieved”.39 Between 1 April 2004 and the end of 2005, the ecotax was set at the same rate for both refillable and non-refillable drinks containers. In a clear move to favour refillable containers over non-refillable ones, there were no more exemptions from the ecotax for non-refillables achieving set recycling targets, but the original exemptions for refillable containers remained the same. This was ruled illegal by a Belgian court because it discriminated against imported drinks shipped long distances in non-refillable containers. It was also alleged that Belgian consumers were traveling abroad to France and Holland to buy their beer, soft drinks and mineral water, especially after the tax was increased by 47 per cent in January 2005. The European Organisation for Packaging and the Environment, Europen, believes that producers and retailers reallocated the cost of this tax increase within their product range so that the intended price differential between refillables and non-refillables was not increased as intended, but raised the price of all Belgian drinks, prompting a surge of cross-border shopping and incurring tax losses for the government, lost revenue for Belgian industry and increased costs for Fost Plus, who had to deal with packaging waste on which no fee had been paid.40 Other commentators, including the Belgian environmental NGO BBLV, believe that the problem of cross-border shopping has been exaggerated, saying that Belgians regularly travel abroad to shop abroad for a variety of reasons, for

After the December 2005 ruling, the government included refillables in the ecotax – but set the tax rate at zero compared to €9.85/hl for non-refillables.

A second court case followed, with the Belgian court of arbitration ruling in January 2007 that the ecotax law wrongly discriminated against non-refillable containers given the high recycling rates achieved for drinks packaging in Belgium. Although the court did accept that refillable and non-refillable containers may be taxed at different rates, it ruled that the law did not take account of the whole life cycle, nor had the government taken into account available scientific findings.

Further changes to the ecotax in 2007 have set the tax on refillable containers at one seventh of the rate charged on non-refillables, compared to the previous version of the ecotax which exempted refillables fulfilling the specified reuse conditions, and our NGO commentator in Belgium believed that this will accelerate the decline in market share of refillable containers, which now hold only eight per cent of the Belgian drinks market (down from 11.3 per cent in 2003). The changes have also been challenged by the packaging industry lobby, who argue that there is nothing to guarantee a refillable container granted the lower tax rate will be reused seven times and that it is impossible to say that a refillable container has one seventh the environmental impact of a non-refillable one, particularly when washing and transport is taken into account. There have been no serious legal challenges as yet to the latest version of the ecotax but there continue to be rumblings of discontent from industry.

Recycling If the ecotax has not achieved its original objective of promoting reuse, it has played a fundamental role in helping Belgium achieve high recycling rates quickly, thanks to the link between recycling targets and tax exemption during the 1993-2003 period. The European Commission commented that targets for material recycling and incineration were determined clearly within the agreement from 1993-2003, however there were no quotas for the reuse of packaging. As a result, producers have orientated themselves onto the mandated recycling targets, which have been easily achieved through the establishment of Fost Plus.

Fost Plus now manages household packaging waste on behalf of 6,200 producers (92 per cent of the market) in Belgium, and is seen as a European model due to its exceptional collection and recycling results achieved in less than ten years – an impressive 91 per cent recycling rate for household packaging put onto the market by its members in 2006 (or 83.9 per cent of total packaging). Incineration with energy recovery and disposal without energy recovery have both declined as the recycling rate has increased.

Belgium also seems to have successfully decoupled packaging growth from GDP: between 1995 and 2006 GDP rose by 52 per cent while packaging quantity increased by eight per cent. In 2006, the organisation was able to lower its rates for displaying the Green Dot on packaging, because of the increase in income generated by the sale of materials (€32 million in 2006 compared to €24 million in 2005).

41 good product, bad product?

example because overall prices are six per cent lower in Holland, and they can get a much larger selection of wines in French supermarkets.41

good product, bad product?

42

Unsurprisingly, the organisation is hostile to the packaging ecotax: a recent message from the organisation’s chairman and managing director read, “The business world has no desire to avoid discussion of the environmental taxation issue, but it could do without initiatives such as the packaging tax, based on arbitrary choices with no real benefit to the environment”. It sees threats to business interests not just in subsequent revisions of the ecotax law but also in a new Interregional Cooperation Agreement (ICA) between the three regions of Belgium, which could increase corporate obligations for managing household packaging waste.

Lessons for the UK from Belgium Belgium’s experience of ecotaxes suggested that problems can arise because one instrument is used to achieve several goals at once, such as reducing waste production, carbon dioxide emissions and litter. All three of these reasons have been cited as being important at different times during the evolution of Belgium’s ecotaxes on packaging. Crucially, if the relationship between these goals is not sufficiently established, trouble is often in store: for example, reducing litter might be best achieved by an ecotax that favours refillable containers, but it is much harder to prove that the resource/energy benefits of reuse over recycling, despite the existence of the waste hierarchy at EU level.

This problem has plagued Belgium’s packaging ecotax.

Coherent and effective policymaking on products and producer responsibility has been made more challenging by the fact that producer policy and ecotaxes are federal government competencies, whereas waste strategy and management are regional government competencies. The need to coordinate a regional packaging take-back programme on the one hand (as the regions are responsible for the recognition of recycling associations), and the national ecotax system on the other, has been particularly difficult.

Integrating the ecotax into Belgium’s tax system also proved complex. In order to limit administrative costs, the packaging ecotax was linked with existing indirect taxes such as VAT or excise tax by stipulating that the ecotax was due the first time that an indirect tax was paid on goods in Belgium.

Policymakers also had to take into account the small country’s role as a ‘distributor’ in the European economy, whereby goods are imported and reexported after further processing in Belgium. It was harder to apply the ecotax to imported products because of EU rules and so made local producers fear a competitive disadvantage. The Belgian academic Marc de Clercq comments: “the combination of [these] considerations resulted in a complex set of legal provisions governing the import and export regimes of goods and as such raised complicated problems with respect to the implementation of new ecotaxes.”42 There has also been much discussion in Belgium about the relative importance of the environmental impact of products and packaging subject to the ecotax, with industry claiming that packaging waste is a small proportion of total waste. Europen argues that packaging waste is far better dealt with through taxes on final disposal on all waste i.e. landfill tax. On the other hand, environmental groups claim that due to industry pressure, taxes have been neither high nor specific enough to get structural change in packaging design and use.

Denmark

43

Quick summary

good product, bad product?

Denmark’s packaging tax, based on weight and environmental impact of material type, applies to the majority of packaging, apart from drinks containers, where a volume-based tax applies. The tax on drinks containers is backed up with a deposit refund system.

History The first Danish packaging tax appeared as early as 1978, with the Tax on Beverage Containers and Cups for Dispensed Drinks. This tax was volumebased and only applied to liquids in bottles and jars.

In 1981, a law was passed stating that all beer and carbonated drinks must be sold in returnable glass or PET plastic bottles, effectively excluding steel and aluminium cans from the market. In 1988, the European Court delivered a shock verdict in its favour and against the European Commission’s arguments that the by then famous ‘can ban’ amounted to a restriction on free trade disproportionate to environmental gains.

The volume-based drinks packaging tax was updated in 1999 by the Tax on Certain Retail Containers. This new tax extended its application to a wider range of packaged products,43 not just drinks containers. It also introduced weight-based rates to promote a reduction in the packaging material used, irrespective of material, by addressing the failure of volume-based rates to distinguish between thin and thick materials. To achieve this, the tax rates were set so that the tax was the same for a pack of a standard size regardless of the material chosen. In practice Ecotec points out that this was difficult to adhere to given the range of packaging design and variations in weight.

The aim of fiscal equality between materials was changed in the revision of the taxes in 2001, when the government decided that the environmental impact of different packaging materials should be reflected in the weightbased tax rate. Originally the same for all materials, tax rates were differentiated on the basis of an index of environmental impact that reflected, among other factors, carbon dioxide emissions, primary energy, fossil resources use and waste. The index was based on the result of LCA studies, which have been widely criticised by the packaging industry (see box six below).

Carbon dixoide emissions

Primary energy

Fossil resources

Waste

Index for primary materials (all numbers relative to glass) Environmental effects

good product, bad product?

44

Cardboard

-0.44

-0.91

2.77

-0.02

-0.02

Glass

1.00

1.00

1.00

1.00

1.00

HDPE

4.38

6.08

6.56

9.02

-0.17

PP

4.49

5.53

6.96

9.86

-0.16

LDPE

5.03

4.04

7.48

8.60

-0.19

PET

7.36

6.29

8.38

9.93

0.01

PS

8.96

8.41

9.21

12.02

-0.11

EPS

20.04

10.14

12.04

14.72

-0.06

PVC

19.69

5.60

7.48

6.86

1.39

Tinplate/steel

4.72

5.15

4.45

3.03

12.06

Aluminium

19.45

17.30

19.18

8.80

5.77

The revised tax on certain types of packaging came into force on 1 April 2001.44 The can ban was eventually revoked in early 2002 after a court case brought by the Commission, aided by the election victory of centre-right parties in Denmark. It was replaced with a mandatory deposit scheme for oneway drinks containers.

Aims of the tax A government review concluded in 1997 that: • The tax should seek to reduce the weight of packaging, for each particular material (implementation of weight-based tax in 1999); • The tax should be based on a life cycle assessment of environmental impacts in order to promote the most environmentally friendly materials (implementation of materials-based tax in 2001); • The tax should be based on weight of packaging and be differentiated by material (implemented in weight-based tax in 1999 and materials-based tax in 2001).

The waste management plan 1998-2004 also clarified that the aim of the volume-based tax was to encourage the use of refillable packaging, as the tax is only levied on new packaging.

Design of the tax • Payment: responsibility and recipient The tax is paid by businesses that bottle, fill up or pack goods within the commodity groups that are covered by the tax. Businesses that import goods that were packed abroad, and those that act as intermediaries and/or trade in unused packaging materials are also subject to the tax. The recipient is the national government through the Regional Tax and Customs Administration.

Exports of containers from registered businesses are tax-exempt.

• Tax rates

Volume-based tax rates Type of drinks container

Packaging material

Tax rate per container* DKK (€)

Containers for beer, carbonated soft drinks and other carbonated beverages

All materials

0.05-0.64 (0.7-8.30)

Containers for wine, fruit wine and other alcoholic drinks

Cartons and other laminates

0.15-2.00 (2.0-26.00)

Other materials

0.25-3.20 (3.3-41.60)

(*) There are six size bands for different sizes of containers (<10cl, 10-40cl, 40-60cl, 60-110cl, 110-160cl, >160cl)

Other packaging materials are taxed by weight and material, regardless of their application. Since February 2004, the tax also differentiates between containers for wines and spirits and those for beer and carbonated drinks, with lower rates applying to the latter than previously.

Weight-based tax rates Packaging material

Tax rate/kg DKK (€)

Cardboard and paper (virgin) Cardboard and paper (recycled) Textiles EPS, PVC Other plastics (virgin) Other plastics (recycled) Other plastics (filled) Other plastics (UN approved) Aluminium Tinplate and steel Tinplate and steel (UN approved) Glass and ceramics Wood

0.95 (0.13) 0.55 (0.07) 0.95 (0.13) 20.35 (2.73) 12.95 (1.74) 7.75 (1.04) 7.75 (1.04) 10.35 (1.39) 33.30 (4.46) 9.25 (1.24) 7.40 (0.99) 1.85 (0.25) 0.55 (0.07)

Design of deposit refund scheme The Danish deposit refund system for refillable beer and carbonated drinks bottles has been in operation since the 1970s. It is a cornerstone in the country’s waste prevention effort. From 1989, the law required that all containers for beer and carbonated soft drinks produced in Denmark should be refillable, be a part of a deposit refund system, and approved by the DEPA. The national government sets the rates for the deposit system. The purpose of

good product, bad product?

45

Drinks containers are taxed by volume, not weight, to support the depositbased refill system for beer and soft drinks (weight-based taxes for deposit bottles could provide conflicting incentives for refillable bottle design, as a weight-based tax would favour lightweight bottles not so suited to refilling).

good product, bad product?

46

the mandatory system was to limit waste from packaging by encouraging the reuse of beverage containers.

The same 1989 order also required that all imported containers should be collected in a deposit refund system (glass and plastic) and it banned the sale of beer and carbonated soft drinks in metal containers - the ‘can ban’.

The European Commission argued that the can ban was in conflict with the internal market provisions of the packaging directive and brought the case to the European Court of Justice in 1997. No final verdict was reached but the deposit refund system was extended in 2002 to beer and soft drinks in nonrefillable bottles, as well as cans, if they are registered with Dansk Retursystem, the branch organisation responsible for operating the system since 2000. In April 2005, the deposit refund system was extended further to include cider, energy drinks and ready-to-drink drink containers. The mandatory deposit refund system thus now operates as a mechanism for the recovery of both refillable and non-refillable drinks containers.

Results • Packaging consumption According to the DEPA, the tax has provided and continues to provide a greater incentive to reduce packaging materials and is more successful than its predecessor. However, there is still little if no data on the actual levels of packaging consumption for the product applications covered by the tax. A decrease in tax revenues since 2002 may indicate that the tax has resulted in decreased amounts of packaging.

Evolution of the tax revenues since 1994 (in DKK millions) 1994

1995

1996

1997

1998

1999

2000 2001

2002 2003 2004 2005

309

320

360

353

637

569

611

688

594

654

623

622

• Collection and reuse In 2005, return percentages were 100 per cent and 84 per cent for refillable and non-refillable drinks containers, respectively,45 although the accuracy of the former figure has been called into question. The return rate for refillable containers evidently fulfils the legal return requirement of 98 per cent, however the return rate for non-refillables has not reached the target percentage of 95 per cent. Dansk Retursystem says that this is because the market share of non-refillables has not grown as rapidly as previously forecast.

According to Dakofa, the Danish waste management association, glass bottles and plastic bottles in deposit systems are reused on average 30 and 20 times respectively. The association also estimates that about 350,000 tonnes of waste, which is 12 per cent of the total amount of household waste in Denmark, is avoided as a result of the deposit system. However, recovery of disposable packaging as a whole, at 82 per cent, fell short of the target of 90 per cent.

Since then the system has been widened to include alcopops and cider to bring these products into line with beer and soft drinks.

There is so far no information on the evidence or not of substitutions between materials following the application of the environmental index to the packaging tax rates.

Opposition Denmark has taken an ambitious, LCA-based approach to drinks packaging with mixed success. The packaging industry lobby has been voracious and dogged in its criticism of various Danish packaging laws, citing various market distortions, disproportionate costs in relation to environmental benefits, and flawed LCAs. The European Commission has been equally critical, if somewhat belatedly.

Box 6: Criticisms of the Danish packaging system • Many types of packaged products are currently exempt, for example milk.

It has been argued that it would be more equitable if the tax were applied to a wider range of products.

• Market distortion in favour of Danish producers, who are better able to use refilllables than importers.

• The volume based packaging favours refillable packages (e.g. glass and PET) over metal cans.

• The relative tax rates between cans and cardboard/laminates favour the latter, even though recycling of cartons is likely to be lower.

• Tax rates vary if paper and glass used for packaging is recycled. This is not the case with cans if the metal used is recycled.

Flaws in life cycle analysis of packaging such as: • Exclusion of the distribution phase in the LCA studies, which means that the results may wrongly favour refill systems over one-way or recyclable packaging.

• The assessment of steel packaging was affected by the low recycling rate for steel in Denmark - which because of the ‘can ban’ has little critical mass.

• The LCA studies were based on outdated figures and not subject to review.

Only the weight-based tax provides the incentive to reduce the weight of packaging. For drinks bottles such as wine and spirits that are subject to a volume-based tax but are not covered by the deposit refund system, there is no incentive for minimising the amount of packaging material used in the bottles.

The packaging tax has created difficulties for importers of packaged products.

“They need to know the packaging material and packaging weight of all the goods which they import. Some importers have found it difficult to get accurate information from their suppliers”.46 The tax is more difficult to collect than other taxes. “This is because there are a number of definitions to be checked and assessments to be made in relation to the products covered by the list of customs codes. Furthermore, the tax is collected from quite a large number of producers rather than just a few”.47

47 good product, bad product?

• Choice of packaging material

48

Finland

good product, bad product?

Quick summary The Finns have a long history of reusable drinks containers dating back to the origins of the Finnish alcohol monopoly, which controlled the packaging of beer and other alcoholic drinks and usually favoured reusable containers.

Finland’s deposit refund scheme, which now applies to both refillable and non-refillable drinks containers, is one of the few of its type that seems to be grudgingly accepted by the packaging industry lobby. This is mainly because it was in effect before systematic collection arrangements were in place for other types of packaging waste (and also before non-refillable drinks containers came onto the market in significant quantities). Finland’s recycling rates for glass packaging are now average for the EU, although recycling rates for metals and plastic are still below average. Per capita packaging waste generation, amongst the lowest in Europe during the 1990s, has leapt over the last few years.

Background The prevention of drinks container waste and its resulting litter motivated the implementation of the original levy, but the impracticality of recycling in Finland also necessitated it. At the time, Finland’s capacity for recycling glass was limited, and markets for recovered glass were unstable. The country had limited facilities for converting recovered PET and other plastics into feedstock and exported almost all of its recovered PET and aluminium. Furthermore, Finland’s low population density continues to make investing in extensive recycling and sorting systems economically difficult to justify.

Design of the tax Finland has used a tax system to promote refilling since the 1970s. In 1994 a container levy on both alcoholic and non-alcoholic drinks was brought in to supplement other food and drinks taxes. The bottler, brewer or importer paid the tax upon shipment to shores, and the revenue went to the Finnish treasury. The amount of the levy was based on the method for managing the containers:

Option

Tax

No recovery of packaging waste Recycling Refilling

No tax*

€0.67 per litre €0.17 per litre

* To obtain an exemption from the levy on drinks containers, the refilling system had to meet three main requirements: • •

•

A deposit of between €0.08 and €0.25, Return rates of 75 per cent in the first year, 85 in the second and 95 by the fourth year.

Submission of reports to the ministry of the environment.

The tax of €0.17 per litre applied to non-refillable bottles and cans subject to a deposit refund system for recycling approved by the authorities. Despite this

In 2005, the tax was changed and extended to refillables. Between 2005 and the end of 2007, the tax was €0.51 per litre for non-refillable containers that were not part of an approved deposit refund system, and €0.085 per litre for containers for which functioning collection and recovery systems are in operation. From January 2008, both refillables and non-refillables became exempt from the tax if they participate in an approved deposit refund system.

Deposits will be introduced on one-way plastic bottles, with a return target of 80 per cent.

Results Up until the mid 2000s, the system was effective at promoting refilling. In 2000, Finns consumed 73 per cent of beer and 98 per cent of soft drinks and mineral water from refillable bottles with 290 million refillable bottles circulating at any time. The Finnish Environment Institute estimated that glass bottles were refilled 33 times on average and plastic bottles 18 times. The system made Finland the EU champion in the prevention of packaging waste: in 2002, Finland generated 87kg per capita of packaging waste, while other EU member states generated an average of 176kg per capita (the UK generated 167kg).48 More recently, however, the market share of refillable bottles in the drinks market has been falling. Statistics from Brewers of Europe show that in 2002, 73 per cent of Finnish beer was in refillable bottles; by 2004 that figure had fallen to 67 per cent; the proportion of draught fell from 20.3 per cent to 16.3 per cent. By 2004 Finland’s per capita packaging waste was 124kg, still significantly below the EU-15’s average of 179kg but much higher than previously.49 The decision in 2005 to further remove the tax advantage to refillable containers has resulted in further growth in non-refillable drinks containers - both cans and plastic bottles. The scrapping of taxes on both refillable and non-refillable bottles that are part of an approved deposit refund scheme in January 2008 is likely to erode the market share of refillable containers further.

Criticisms The levy has been the subject of debate within the Finnish government. In 2000, the Finnish Competition Authority (FCA) demanded the abolition of the drinks container levy and the deposit laws because the organisation believed that both laws were effectively closing the drinks market to new, small and foreign companies. One barrier was the minimum amount of drinks that a new company would have to sell before it could earn profits from refilling.

Another possible barrier was the one-time membership fee of 17,000 to participate in Panimoliitto’s (the Federation of the Brewing and Soft Drink Industry, a trade association that manages the refillable bottle pool for its members) bottle management system. To help the smaller bottlers compete, the government proposed to exempt manufactured mineral waster from the tax system. Parliament rejected this proposal, but Panimoliitto offered to replace its fixed membership fee with a fee based on the number of different products annually offered by a drinks producer.

49 good product, bad product?

concession, the packaging industry objected to the fact that non-refillables were still subject to a price penalty compared with refillables.

good product, bad product?

50

The levy has also survived a challenge from the packaging industry, which argued that the purpose of the levy was the preservation of deposit-return systems for drinks containers. They pointed out that it covers a narrow range of products, with packaging for milk excluded from the tax. In 1996, the European Aluminium Association and the Beverage Can Makers of Europe complained to the European Commission that the tax discriminated against recyclable one-way containers because it still applied even when recycling rates were high. The Commission responded by saying that the amount of the tax was too low to validly argue that its purpose was something other than environmental protection.

Factors in the success of the Finnish system: • The deposit return system was in place before Finland introduced a multimaterial system for all packaging meaning that the habit of returning drinks containers to the store was not lost and the non-drinks packaging system was built around it; • The system is technically well-designed; • Deposits are high enough to provide a good incentive for consumers (minimum sums are mandated by the environment ministry); • There are plenty of return points for consumers; • Effective economic incentives support the whole system; • Excessive costs not incurred by any party. The cost of administration of the levy is low, probably because it is co-collected with other food and drinks taxes; • Finland was not in the EU when its system started.

Norway Quick summary Norway has applied an environmental tax to drinks containers since 1974.

The tax has been modified a number of times since, once in 1994 and most recently in 2000 - the latter to differentiate between different packaging materials used. The tax is linked to the achievement of recycling targets or refill quotas, and Norway has several successful deposit-refund schemes in place for both refillable and non-refillable drinks containers.

Design of tax The tax actually consists of a number of different charges. The environmental tax is linked to the percentage of drinks containers that are recycled or reused - so if a recycling or reuse rate of 80 per cent is achieved, a container type is exempt from 80 per cent of the tax. Up until 2000 this tax was determined by drinks type, with non-alcoholic still dinks like milk and juices paying the least at NOK0.32/€0.04 per unit, and all other drinks paying NOK3.19/€0.09 per unit. The rationale behind this distinction was that milk and juice were consumed in the home and were part of a healthy diet, whereas other drinks were consumed away from the home and were therefore more likely to become litter.

Since 2000 the tax has differentiated between different packaging materials, with glass and metal attracting the highest charge at NOK4.46/€0.55 in 2005 and cartons the least at NOK1.11/€0.14. Plastic attracts a tax at the rate

In addition to the environmental tax linked to recycling rates, since 1994 a basic packaging charge has been levied on non-refillable drinks containers at a flat rate that was NOK0.89/€0.11 in 2004. This is specifically to encourage refillable containers, which have approximately 60 per cent of market share in Norway, but are in decline.

Deposit refund systems The tax system on drinks containers works alongside deposit-refund systems for both refillable and non-refillable containers. The system for non-refillable containers, in operation since 1999, is operated by a trade and industry organisation called Norsk Resirk. Consumers pay NOK1.0 for PET bottles and cans up to 0.5 litres and NOK2.5 if containers are over 0.5 litres. Manufacturers and importers of drinks in cans or non-refillable PET bottles register their products with Norsk Resirk, which allows them to pay reduced rates of the environmental tax depending on Norsk Resirk’s success at encouraging consumers to return their drinks containers. The tax rate decreases as the return rate for different containers increases; so a 90 per cent return rate for cans translates into a 90 per cent discount on the tax. Norsk Resirk estimate that the deposit refund system saved Norwegian consumers over NOK1 billion in environmental levies in 2006, a year in which 82 per cent of PET bottles and 92 per cent of cans were returned. Norsk Resirk also guarantees that 100 per cent of both types of drink container will be recycled - in the case of cans, by Novelis in Warrington, England, and in the case of plastic bottles, by Expladan in Denmark. Cans and bottles are sorted, compressed and weighed in Norway before being sent to the UK and Denmark for recycling.

The organisation derives its revenues from an administration fee, paid by importers and manufacturers on each can and bottle sold, deposit surpluses and the sale of collected packaging materials. Because un-refunded deposits are a source of revenue, Norsk Resirk makes more money when the return rate is low, and profits are used to further develop the collection system and increase its efficiency by, for example, increasing marketing and product development efforts or reducing the administration levy. When the return rate is high, revenues fall. The administration levy charged to producers must then be increased, but this increase is smaller than what manufactures and importers would have to pay in increased tax due to lower return rates.

There are also return systems in operation for drinks cartons, non-refillable glass bottles and refillable glass and plastic bottles, administered by an organisation called Returkartong. The collection and recycling of cartons and non-refillable glass bottles is financed by recycling fees on the products charged by Returkartong. Refillable glass and plastic bottles are collected

51 good product, bad product?

of NOK2.69/€0.33. Again, the rationale behind these differing rates is the impacts of containers as litter: the tax is levied at different rates for different materials according to littering potential, a material’s relative lifespan and its environmental impact when littered – hence glass is highly taxed as it has a long lifespan and is dangerous when littered, whereas paper decomposes quickly. In January 2006 the Norwegian government extended the tax to juice and milk containers, arguing that out-of-home consumption of these drinks products had increased and that they now merited the tax.50

good product, bad product?

52

through a system operated by the Norwegian Brewers and Soft Drinks Producers, where the same deposit-refund rates apply as to the Norsk Resirk system, but the retailer receives a slightly higher refund than consumers. The return rate for refillable bottles was 95 per cent in 2005.

There is a clear trend towards more non-refillable drinks containers. In 2006, 275.3 million cans and 88.5 million plastic bottles with a deposit symbol were sold in Norway, an increase of 23 per cent for cans and 40 per cent for bottles compared to 2005. The market share for refillables is still 60 per cent, but contacts in Norway report that it is in decline.51

Factors in the success of the Norwegian system • The deposit is set high enough to motivate consumers, who have long been used to the concept; • Norway has a highly concentrated grocery sector with few independent stores, which means that there is no need to transfer the deposit, and its associated costs, through a number of sectors; • It is easy for public to take back their cans and bottles: all shops that sell bottles and cans are legally obliged to refund the deposit, even if they do not have one of the country’s 3170 reverse-vending machines, meaning that over 9,000 places accept deposits; • Norsk Resirk runs well-resourced, innovative information campaigns, including a ‘deposit car’ going on a countrywide road-trip, TV commercials, and a particular focus on school recycling programmes; • Charity-donation programmes raise profile of system and provide ‘feel good factor’; for example skiers and walkers can place cans and bottles into special bins, and the deposit funds the Norwegian Red Cross; • More and more products continue to be included in the deposit-refund systems to benefit from lower rates of the packaging tax. This has spread awareness of the system; • Norway is not an EU member state, which has helped its system of packaging taxes and deposits stay clear of challenge by the EU courts.

However, in 2007 Norway received a letter of formal notice concerning its base tax on non-refillable drinks packaging from the European Free Trade Association (EFTA) Surveillance Authority, which had concluded that the base tax was contrary to Article 14 of the EEA agreement (which says that “no Contracting Party shall impose, directly or indirectly, on the products of other Contracting Parties any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products.

Furthermore, no Contracting Party shall impose on the products of other Contracting Parties any internal taxation of such a nature as to afford indirect protection to other products”). Norway’s deputy finance director argued that the differentiation is justified for the attainment of goals which are compatible with the internal market, namely environmental protection, and that the fact that imported products are more frequently subject to a higher tax than similar domestic products does not automatically imply that there is illegal discrimination, as long as this is an accidental consequence of differentiation which is based on objective reasons. It is not clear what the long-term implications of this dispute will be for Norway’s packaging system.

Officials recently announced that the Netherlands government would be introducing a carbon-based packaging tax aimed at reducing carbon emissions related to the use of packaging, the first such levy in the EU. It could also be the start of an EU-wide move to force companies to add carbon emissions to the list of criteria they use when choosing their packaging.

The Netherlands tax, due to be implemented in early 2008, is being brought in under an agreement between the countryâ&#x20AC;&#x2122;s environment ministry, local authorities and industry. The tax will be based on estimated carbon dioxide emissions produced in making various packaging materials, and will be used to establish a general national waste reduction fund, a programme that will include the set up of separate collection of household packaging. Further, the Dutch government will adopt a new recycling target of 42 per cent for plastic packaging by 2012, up from the current 22.5 per cent as mandated by EU law.

Europen has already warned that the tax could complicate waste and recycling targets. The organisation claims that previous experience shows that â&#x20AC;&#x153;it is impossible to compare fairly all of the environmental factors of each packaging material, let alone the packaging produced from those materials.â&#x20AC;?52 The tax is likely to be based on a calculation of carbon dioxide emissions from the production of each kilogram of packaging material put into the Dutch market and (presumably) the embedded carbon content of the packaging.

Details of how the tax will be apportioned between each material have yet to be announced but differences of opinion will undoubtedly arise over the validity of the calculations, which are to be made by an independent organisation.

53 good product, bad product?

The Netherlands

54

Plastic bags

good product, bad product?

Considered by many to be the scourge of the modern world and blamed for resource depletion, litter and harm to wildlife, the last couple of years have seen a flurry of measures, from Kerala to Kenya, to ban or tax plastic bags out of existence. Although the UK government has maintained that it has no plans to introduce a tax on plastic bags, the London Councils recently consulted on a range of options to reduce the use of throwaway shopping bags (defined as any type of shopping bag that is given away free and has a very limited intended lifespan), including an outright ban (that 60 per cent of respondees supported), a council-collected levy on retailers, and a retailer-collected levy on shoppers. As a result, the London Councils are seeking to introduce a bill that will ban the distribution of free, throwaway shopping bags in the capital.

However, Westminster Council has already voiced its concerns over the feasibility of an outright ban, suggesting instead a deposit-refund scheme for disposable bags that would encourage both reuse and more in-store recycling.

A Bill proposing an environmental levy on plastic bags was introduced into the Scottish Parliament in 2005, but withdrawn in 2006 (see below).

Outside the UK, taxes are being planned, or have already been introduced, in Ireland, San Francisco, Kenya, Bangladesh, Quebec, British Colombia, Sweden, Tanzania, South Africa, Malta, Singapore, Hong Kong and Denmark. A ban on the distribution and use of single use supermarket shopping bags will come into force in 2010 in the Wallonia region of Belgium, and the Indian state of Kerala has banned thin plastic bags since September 2007. Recently, the Chinese government announced a ban on the production, sale and use of ultra-thin bags, as well as banning shops giving out free plastic bags to customers from June 2008. The Maui County of Hawaii is also currently considering a ban on all non-biodegradable plastic bags.

Republic of Ireland Due to its relative longevity and the proximity to the UK, the Eire plastic bag tax is the most frequently cited example of a successful instrument to limit the use of plastic bags. Introduced in March 2002, the tax is a charge on plastic shopping bags that applies at the point of sale in all sales outlets, which retailers are required by law to pass on to their customers in full. Exemptions from the levy include smaller plastic bags used to store non-packaged goods and fresh meat, fish and poultry, both packaged and unpackaged. Reusable ‘bags for life’ costing more than 70 cents are also exempt from the levy. The initial charge for a plastic bag was 15 cents, and the charge was increased to 22 cents on 1 July 2007 after concern about the increasing numbers of people who were paying for plastic bags.53 The objective of the tax was to “encourage the use of reusable bags and to change people’s attitudes to litter and pollution in Ireland”.54 Ireland’s use of 1.2 billion plastic shopping bags a year (328 bags per person) was deemed “excessive and largely unnecessary”, the bags constituting a “very visible” component of litter in Ireland’s towns, coastlines and countryside and detracting from the country’s green image, crucial to the continuing success of its tourism industry.

The tax does have some serious detractors: plastic bag manufacturers and distributors have said that the Irish scheme has led to a huge increase in paper bag use and more plastic packaging (ironically to protect pallets of paper bags). It has also been reported that sales of plastic bin liners and nappy bags items have significantly increased following the introduction of the levy - the Carrier Bag Consortium (CBC) claimed that the increase is in the range of 300-500 per cent, an estimate that is doubted by Waste and Resources Action Programme (WRAP) although they concede that the levy might have increased plastic consumption because of substitution. Given that the main objective of the tax was to reduce plastic bag litter, this argument has not had much impact on the Irish government’s appraisal of the measure’s effectiveness, as plastic bags used as bin liners are much less likely to end up as litter or in waterways.

The CBC also claims that the tax discriminates against the elderly, infirm and those without cars, and that it has led to an increase in theft from stores.

The United Kingdom Defra say they are “monitoring developments” of the Irish plastic bag tax, but maintain that there is “no clear evidence that such a tax would be beneficial on either broad environmental or litter grounds. This is because people would be encouraged to use other materials or alternative forms of packaging instead, which may be equally or more damaging to the environment”.56 The voluntary agreement on plastic bags, signed in February 2007, commits its signatories including the major retailers to a 25 per cent reduction in the ‘environmental impact’ of plastic bags by the end of 2008. This reduction in impact can be achieved through a reduction in numbers of bags used by shoppers, higher recycled content and lightweighting, and an increase in recycling of bags. However, pilot reusable bag campaigns carried out by WRAP in 2005 found that the trials had “not produced a strong positive change in bag use” and that the trials demonstrated that “significant changes in behaviour could not be achieved without the active engagement of a wide range of retailers backed up with consistent messages to customers”.57 It is not clear whether WRAP or Defra considered the trials to have met these conditions or not.

In the past year, the plastic bag has gained particular notoriety. An increasing number of grassroots initiatives to create ‘plastic bag free’ towns, such as in

55 good product, bad product?

A fierce debate is still raging about the efficacy of the Irish tax. Its proponents claim that it has been wildly successful, with a decrease in consumption of plastic bags of over 90 per cent since the introduction of the levy, and millions of euros raised for funding waste management, litter prevention and other environmental initiatives (€17.5 million in 2005).55 It is reported that plastic bags as a component of litter fell from five per cent before the introduction of the tax to 0.22 per cent afterwards. Despite the lack of recommendations for clear alternatives, in the grocery sector disposable plastic bags have largely been replaced by reusable long life shopping bags. The tax has been less effective in the clothing and other sectors, where higher quality plastic bags have in general been replaced by high quality paper bags rather than reuseable bags. The tax appears to be popular with the public: an Irish national survey of environmental attitudes and actions in 2003 found that 91 per cent of those surveyed supported the tax.

good product, bad product?

56

Modbury, Devon and Hebden Bridge, Yorkshire have captured the public’s imagination, and led to Gordon Brown calling for their elimination in a recent speech, a move that has infuriated the plastic and packaging industries. The public mood appears to be against them as well: a survey carried out by the British Market Research Bureau in September 2007 revealed that 61 per cent of people wanted supermarkets to stop handing out free plastic bags.58

Scotland The Environment and Rural Development Committee concluded that “the likely extent to which plastic bag use may be reduced by a levy (estimates of approximately 90 per cent were given in evidence) does make it a potentially powerful tool. Putting a value on an item can change people’s behaviour and, in at least some instances, there is a place for statutory regulation being used to achieve that. A levy does have the potential to reach virtually every citizen immediately and could cause them to reconsider their resource use decisions.

The Committee is, therefore, sympathetic to the aims of the Bill and considers that positive steps are required to achieve these aims. However…the evidence it has considered has made it clear that there are a number of complex interacting implications of a levy which make it very difficult to judge whether this particular levy scheme is an appropriate one that will achieve its desired effect”.59 Due to the committee’s lukewarm conclusion the bill was withdrawn.

Belgium In April 2007 the federal government of Belgium introduced a new environmental levy that will be levied on certain throwaway materials for domestic use, because of the carbon dioxide emissions of the products, and paid for by whoever supplies the goods to the retailer.

The levy will be imposed on: • Throwaway bags and plastic bags for the transport of goods bought in a retail shop: €3/kg; • Throwaway cutlery: €3.6/kg; • Plastic strips, including sheets and foils for domestic use: €2.70/kg; • Aluminium foil: €4.50/kg.

The following bags are exempted: • Biodegradable bags meeting compostability standards;; • Re-usable plastic bags.

In a separate move, the Wallonia region in Belgium has signalled its intent to ban the distribution and use of single use supermarket bags after 2010.

There are two main types of deposit refund scheme: those to encourage the return by consumers of disposable drinks packaging for recycling, and those to encourage the return of refillable drinks packaging for refilling.

Schemes are also split between those that are mandatory deposit systems (i.e. there is a legal requirement for a monetary deposit to be applied to a packaged product, usually a disposable drinks container) and those that are industrymanaged, ‘quasi-voluntary’ systems: • In a mandatory deposit schemes, such as those in Germany and Denmark, the level of the deposit is not usually related to the replacement cost, and is usually prescribed in legislation. The system is not a tax, because the filler or retailer retains unredeemed deposits, but it is an economic instrument intended as an environmental policy tool.

• Industry-managed quasi-voluntary systems, such as those in Finland and Norway, are the result of a number of different circumstances: where operating a deposit system is one of a range of permitted recovery options, where deposit-bearing containers are taxed at a lower rate, and where certain types of disposable containers are only allowed on the market when the authorities were assured that a deposit system would be used to encourage a high return and recycling rate. In these cases, the operation of the deposit system is under industry’s control, but the system would not have come about without legal intervention.

Specific advantages of deposit refund schemes for refilling: • Reuse is environmentally better than recycling, in most circumstances (although it seems you can argue strongly either way. Two key factors that determine the results of the LCA are the transport distances and the trip rate of the packaging - how many times a container is reused. Both can differ substantially).

• Refilling can cut the public costs of waste management and create jobs. In the US, net employment gains have been documented in nearly every state that has enacted a deposit scheme.

• Particularly suitable for countries with a limited capacity for recycling glass and converting recovered PET into feedstock, and unstable markets for recycled glass and plastic.

Specific disadvantages of deposit refund schemes for refilling: • Examples of successful schemes are limited to those in countries with relatively low population densities, with a large degree of state control over the drinks industry, such as the Finnish alcohol monopoly, or with a highly concentrated grocery sector. Supply chains in these places are generally shorter, both in terms of distance and number of players.

• Crucially, schemes that are still relatively successful today were set up before disposable packaging was widespread. And even countries with refillable deposit systems are seeing sales of disposable packaging increase.

57 good product, bad product?

annex b: deposit refund schemes advantages and disadvantages

good product, bad product?

58

• It would be very difficult to set up a national deposit scheme for refilling in the UK, mainly due to the nature of today’s supply chains and the complete lack of standardisation in the drinks industry. Requiring design, marketing and innovation to be skewed towards re-use would be a big undertaking and require significant culture change. Furthermore, an industry-run scheme, which collaborated on collection facilities and standardisation, would very likely fall foul of the UK’s strict rules on monopolies. However, regional reuse schemes for some types of drinks should be feasible. Local authorities can already issue recycling credits for reuse, but this power is not being used. Regional Development Agencies could do much to encourage more regional reuse programmes.

• Deposit systems do not protect refill systems. Incpen argue “choice of container depends on a huge range of technical, social and environmental considerations, including the nature of the distribution system used and consumer behaviour and preferences. The decline in refillables is due to a combination of these factors and a deposit, even set at a high rate, cannot change that”.60 In the US, mandatory deposits on both refillable and disposable containers actually accelerated the decline in refillable systems, because retailers found handling returned disposable containers much easier than refillable ones.61 Although, arguably if the system had taxed disposables to actively encourage refillable systems this might not have happened. It is fairly clear that the drinks industry in the US has actively worked to undermine refilling.

• Deposit systems can cause market barriers: the additional costs associated with deposit systems affect importers more than local producers, as a higher proportion of importers’ production is typically in disposable containers.

The EU has challenged many schemes for refillables on this basis.

• D eposit systems can cause market distortions: there is no clear and logical border between products and packaging materials that are appropriate to handle through deposit systems and those that are not. For example, in Germany juices are not subject to the deposit, but compete with fruitbased soft drinks, which are. Deposit systems can also cause problems for cross-border shopping. Deposit systems in a consumer’s home country can refund a deposit to a consumer that they did not receive because the product was bought abroad, incurring an economic loss. Ensuring that deposits are not paid back on foreign containers by means of a special marking system is a barrier to trade because the cost of complying with the marking system would only fall on foreign products.62

General advantages of deposit systems: • Deposit refund systems increase recycling rates for drinks packaging. In Norway, 92 per cent of aluminium cans were recycled in 2006. In the UK, the figure was 48 per cent in 2006.63 Other factors might have contributed to this significant difference in recycling rates, but Norway’s deposit scheme is certainly a large part of the explanation.

• Deposit refund systems reduce litter. Drinks container litter has dropped between 70-85 per cent, and overall litter between 30-65 per cent, in US states that have mandatory deposit schemes. 64 Other surveys found that while there was a reduction in drinks-related litter, the impact on total littering was not statistically significant. In the UK, drinks-related packaging is the second most commonly littered item, after smokers”

General disadvantages of deposit systems: • There are no compensating benefits with regard to an overall improvement in recycling performance. But, recycling rates for drinks containers are far higher in countries with deposit systems than those without). In the US drinks container recycling rates in states with deposits are two to three times higher than in those without.

• Deposit systems undermine the economics of kerbside collection schemes because they divert valuable recyclable material from them to a parallel system. They also increase the environmental impact of recycling because they increase the transport needed for sending materials to reprocessing.

However, cans, bottles and cartons are increasingly consumed ‘on the go’ and are therefore more likely to be littered or disposed of in street bins where they go to landfill or incineration. In the US, the aluminium can recycling rate dropped by 20 per cent between 1992 and 2004, despite a doubling in the population with access to kerbside recycling. Evidence from the US also suggests that cans are losing market share to PET bottles and thus cannot be counted on indefinitely as a stable source of kerbside collection revenue.65 • In most cases deposit systems raise prices for consumers - they cost more to run than industry can make from them through the retention of unclaimed deposits and the value of the reclaimed material since they require extra non-revenue generating activities, which build inefficiencies into distribution operations. For retailers, the extra handling and sorting costs and space requirement reduces the profitability of drinks in relation to other products, which leads to higher prices and reduced choices for the consumer. However, there is little documented evidence for this claim.

The Container Recycling Institute points out that soft drink prices are among the most price-variable among all food and drinks products on the market, giving companies great liberty to set prices to their advantage and make deposit laws appear inflationary.66 Industry-run schemes, such as in Canada, can profit significantly from the value of recovered material and unredeemed deposits.

• Problems can be caused if the deposit on refillables is lower than the deposit on non-refillables: German law set the deposit on non-refillables at €0.25, whereas the deposit on refillables (set by industry) is €0.8 or €1.5 depending on size. This has resulted in consumers who don’t intend to return the empties buying refillable bottles and treating them as nonrefillables, which can decrease the return rate for refillables significantly.

59 good product, bad product?

materials: drinks-related litter was found at 69 per cent of surveyed sites in 2005-2006, up from 28 per cent in 2001-2 (some argue that ‘surveyed sites’ is not the best way of measuring littering).

• They are socially equitable: if you are rich enough to not worry about returning your used drinks packaging, someone poorer can benefit.

However, this may perversely increase littering, as people could justify it by assuming their container would be picked up by someone else.

• Charities can run return schemes and profit from sales of recovered material and unredeemed deposits.

• Materials collected through deposit-refund schemes are generally of much higher quality than those collected through kerbside schemes.

good product, bad product?

60

â&#x20AC;˘ Deposit systems do not reduce litter, which requires a holistic approach of public education and law enforcement. Incpen report that in the US, homeless people empty bins onto the street to find deposit containers.67 Encams, the organisation that runs the Keep Britain Tidy campaign, has never lobbied for a deposit refund system for drinks packaging because they have no firm evidence that such a measure would deter littering.68 â&#x20AC;˘ Deposit systems disadvantage the elderly and disabled, who may have difficulty returning containers to be redeemed. However, there is no real reason why this should be the case, as it is much harder to carry full bottles and cans home from a store than it would be to return empties on the next shopping trip.

Design of levies: • Two key issues affect the outcome of levies: the level of the levy, and exemptions from it. In both cases the design of levies has tended to be very conservative, with low introductory levels and a significant range of exemptions to protect those most affected.

• There is rarely any systematic parallel empirical review of the impacts of a levy, nor any attempt to define the environmental impacts in the absence of the levy. This renders ex-post assessment of levies difficult.

• The design of levies is frequently focused on raising revenues, and not explicitly directed to introducing a new incentive for changes in environmentally harmful behaviour. However, there is no consistent choice in whether to earmark revenues or not, given different fiscal policies.

Environmental impacts: • Are generally positive, but in most cases small relative to the problem being addressed.

• The effects of the levy are often limited because of the conservative nature of the design. In cases when the scale of a levy has been increased over time, environmental benefits also increase.

• Even quite small changes in price/cost can send strong signals as to the desired behaviour. This suggests that the environmental benefits are greater than would be estimated based on analysis of price impacts alone, given the levy’s additional role of raising awareness and sending a ‘moral’ signal.

Impacts on competition, trade and employment: • Generally negligible impact on competition and trade, as the potential for negative impacts is generally eliminated in the design.

• No evidence of significant negative impacts on employment. Some evidence that employment gains could be made, the sectors benefiting from the tax signal and from revenue expenditure tending to be more labour intensive (e.g. recycling). Net employment effects are likely to be more visible in the long term.

• Incentive effect will lead to more employment in clean technologies and processes.

Key lessons for future environmental levies • Exemptions to affected sectors have been granted too regularly, often based on a static cost assessment and without reference to the potential dynamic efficiency effects.

• The levies that have combined a direct incentive effect supported by hypothecated spending have been more successful in both generating environmental benefits and avoiding adverse economic impacts, not least because they support the dynamic adjustment process.

• The competition concerns argues for a pan European perspective to the continued drive to introduce more effective and efficient levies.

61 good product, bad product?

annex c: summary of key conclusions of the Ecotec report on environmental taxes and charges in the EU 69

good product, bad product?

62

Exchanging information on intentions and designs might help address certain competition fears and ensure compatibility. It would also help to encourage the design of broader strategies within which levies would be just a part.

The report concludes: â&#x20AC;&#x153;In essence, environmental taxes have to grasp the nettle of structural adjustment rather than pretending that environmental improvements can be attained without frictionâ&#x20AC;?.

notes and references

63

1 www.greenfiscalcommission.org.uk 2 Green taxes were 3.6 per cent of GDP in 1997 but were 2.7 per cent in 2006: www. statistics.gov.uk/CCI/nugget.asp?ID=152&Pos=&ColRank=2&Rank=448 3 www.defra.gov.uk/environment/business/commission/index.htm 4 www.defra.gov.uk/environment/statistics/pubatt/index.htm 5 www.eoearth.org/article/Global_Environment_Outlook_(GEOâ&#x20AC;&#x201C;4):Chapter_5 6 www.ecologicalbudget.org.uk 7 www.neweconomics.org/gen/uploads/fmq2gmn5w2dn2qemwoor0m4505102007192709. pdf 8 www.tyndall.ac.uk/media/press_releases/tyndallpress18Oct07.pdf 9 http://ec.europa.eu/enterprise/eco_design/standardisation/mandate.pdf 10 www.euractiv.com/en/taxation/brown-sarkozy-team-green-tax/article-165761 11 ENDS Europe Daily 2467, 22 January 2008 12 PSI & Green Alliance, 2006, A Green Living Initiative: engaging households to achieve environmental goals 13 Green Alliance, 2006, A zero waste UK 14 Sustainable Development Commission, 2007, You are what you sell â&#x20AC;&#x201C; Product roadmapping: driving sustainability 15 The Organisation for Economic Cooperation and Development 16 http://dataservice.eea.europa.eu/atlas/viewdata/viewpub.asp?id=2697 17 Between 1997 and 2004 the growth in total packaging waste generation in the EU-15 was faster than growth of GDP. At the same time growth of generation of four main fractions of the packaging waste stream (glass, metals, paper and cardboard, plastics) is half of the growth of GDP and relative decoupling has been achieved.

18 Denmark imposed a tax of DKK2/kg on plastic bags in 1994, but as it was not levied on consumers directly it had a limited effect on behaviour.

19 http://ec.europa.eu/environment/enveco/taxation/pdf/xsum_table_of_content.pdf 20 Johan Albrecht, 2006, The use of consumption taxes to relaunch green tax reforms, International Review of Law and Economics 26 p88-103 21 35 per cent of drinks cans, for example, were consumed outside the home in 2004 according to Alupro, and Recoup estimates that 25,000-30,000 tonnes of plastic bottles, the majority of which are single use PET bottles, are not captured through municipal waste collection every year.

22 Stuart Foster, Recoup, personal communication, 2008 23 www.encams.org/views/main.asp?section=10&sub=22&pageid=155 24 www.defra.gov.uk/environment/waste/topics/batteries/index.htm 25 www.berr.gov.uk/files/file43214.pdf 26 www.ionaftp.com/emap/MRW%20State%20of%20the%20Nation%202008.pdf 27 The Uniross study, independently carried out by Bio Intelligence Service, is based on a comparative LCA between a NiMH rechargeable battery and its charger and a disposable battery. The study shows that, for a same quantity of energy produced, rechargeable batteries have up to 32 times less impact on the environment than disposable batteries. For more information see www.rechargeonslaplanete.com 28 Product taxes that were also implemented include disposable drinks containers and disposable cameras. A tax on disposable razors was introduced but subsequently withdrawn after sales of disposable razors fell to zero, while a proposed tax on paper (which was to be function of the recycled content of paper) was never implemented due to measurement difficulties.

29 Measured as the weight of batteries collected during one year over the weight of the sold batteries during the same year.

30 Measured as quantities collected during one year over the quantities sold the precedent year.

31 Starter batteries containing lead are also subject to a charge (SEK32/kg between 1987-1997, SEK30/kg since 1997). A collection rate of 95 per cent was introduced for these batteries.

Since 1991, a producer take-back legislation for starter batteries was established, which resulted in the implementation of as successful collection system, orchestrated by the industry association Returbatt AB. 32 At the beginning, batteries containing over 0.025 per cent of weight mercury or cadmium were subject to a fee. Since 1997, the charge applies to batteries containing over 0.025 per cent of weight cadmium or over 0.0005 per cent of weight mercury.

33 In addition, a large proportion of alkaline manganese button cells was replaced by batteries with zero or very low mercury content.

34 www.batteriinsamlingen.se 35 According to market research firm Avicenne, power tools accounted for 43 per cent of worldwide NiCd batteries sales value in 2005 36 Compared to 7 per cent only on a worldwide basis (in sales value) according to Avicenne

good product, bad product?

good product, bad product?

64

37 Law of 16 July 1993 aimed at completing the Federal State Structure 38 www.packagingtoday.co.uk/story.asp?storycode=44242 39 European Commission, 1998, Reuse of Primary Packaging, Belgium 40 Europen, 2007, Economic instruments in packaging and packaging waste policy 41 BBLV, personal communication, 2007 42 M de Clercq, F Senesael, A Seyad, 1996, The dynamics of interaction between industry and politics: the introduction of ecotaxes in Belgium, Business Strategy and the Environment Vol 5 (3) 43 Including soap, detergents, lubricants, perfume, margarine, non-carbonated soft drinks and vinegar.

44 Also included in the packaging tax revision were carrier bags, disposable tableware and PVC foils. The tax on carrier bags was introduced in 1994. It covers paper carrier bags, which are taxed at DKK10/kg and plastic carrier bags under five litres, taxed at DKK22/ kg. The tax on PVC foils was introduced in 1999 and is a tax on PVC film used in food packaging. The rate has remained the same since 2001, at DKK20.35/kg. The tax rate on disposable tableware was introduced in 1982 (initially based on value, i.e. 50 per cent of wholesale price). The rate now is based on weight, at DKK19.20/kg.

45 www.dansk-retursystem.dk/composite-187.htm 46 Ecotec, 2001, Study on environmental taxes and charges in the EU 47 Ibid 48 http://dataservice.eea.europa.eu/atlas/viewdata/viewpub.asp?id=1740 49 http://dataservice.eea.europa.eu/atlas/viewdata/viewpub.asp?id=2695 50 The following drinks continue to be excluded from the environmental tax: raw pressed juice, juice concentrates, juice, nectar, syrup, beverages made from vegetables, powdered products, and fruit and berry juice and concentrates, milk, milk products, cocoa and chocolate beverages and powders.

51 Norsk Resirk, personal communication, January 2008 52 www.beveragedaily.com/news/ng.asp?id=80194-europen-carbon-waste 53 It is claimed that the immediate effect of the levy was a decrease from 328 bags per capita to 21, and from there a gradual increase, rising to 31 in 2006.

54 www.citizensinformation.ie/categories/environment/waste-management-and-recycling/ plastic_bag_environmental_levy 55 www.environ.ie/en/Environment/Waste/EnvironmentFund/PublicationsDocuments/ FileDownLoad,5059,en.pdf 56 www.defra.gov.uk/environment/localenv/litter/plasticbags/index.htm 57 Ibid 58 www.guardian.co.uk/environment/2007/oct/02/recycling.waste 59 www.scottish.parliament.uk/business/committees/environment/reports-06/rar0612.htm#anna 60 Incpen, 2006, www.incpen.org/pages/userdata/incp/MandatdepsSept2006.pdf, p5 61 Europen 2007, Economic instruments in packaging and packaging waste policy, p21 62 Ibid, p20 63 According to Alupro, www.alupro.org.uk/facts%20and%20figures.htm 64 The Container Recycling Institute, 2006, The 10 cent incentive to recycle, p1 65 The Container Recycling Institute, 2006, The 10 cent incentive to recycle 66 Ibid 67 www.incpen.org/pages/userdata/incp/MandatdepsSept2006.pdf 68 Encams, personal communication, January 2008 69 http://ec.europa.eu/environment/enveco/taxation/pdf/xsum_table_of_content.pdf

good product, bad product?

65

good product, bad product?

66