Thursday, March 20, 2014

Extended Producer Responsibility: Stakeholder Concerns and Future Developments

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This report was prepared by the INSEAD Social Innovation Centre with the support of European Recycling Platform (ERP)

Developed at a time when waste had come to be seen as a cost producers should pay for, the concept of extended producer responsibility (EPR) evolved into a legislative tool to handle this cost, using the mechanism of producer responsibility organisations (PROs). Increasing commodity prices over the last decade are changing this paradigm, however, and waste is increasingly considered as a potential source of revenue. Legislation has largely failed to adapt to this paradigm shift, and therefore does not fit the reality of waste markets anymore. Indeed, from the legislative tool it was initially, EPR has developed into a market driven by multiple forces, one in which legal and marketbased approaches try to cohabit, which has led to an inefficient and partially dysfunctional system. Our report aims to explore recent advances in EPR and to provide recommendations for the stakeholders involved in this market. After a brief introduction on the history of EPR in Europe, we discuss pending issues in the current practice of EPR, with particular emphasis on the WEEE Directive and its Recast as they are the focus of recent discussions on implementation. Then, based on a series of interviews with a set of stakeholders, we analyze the perspectives and key concerns regarding EPR implementation. From the analysis of stakeholder concerns, we identify five factors that limit or disrupt the stability and effectiveness of EPR systems: · Commodity dynamics8: Volatile commodity prices influence leakages of waste outside the EPR system and the value producers recover from waste · Volume dynamics: Uncertain volumes of waste collected by PROs limit planning of future investment for waste operators · Competition dynamics: Variations in the level of competition between PROs may change the efficiency of EPR markets · Regulatory dynamics: The possibility of unexpected changes in future legislation may negatively impact the stability needed by producers and waste operators · Design dynamics: Potential product design changes lead to uncertainty in terms of waste to be recycled in the future As they play against the long-term stability that businesses need to operate, these different factors should be alleviated through some legal and operational mechanisms. For example, we recommend flexible adaptation at national levels of a limited number of general principles imposed by the European Commission. In order to let competing PROs contribute to increasing performance and efficiency, we also suggest national authorities further open EPR markets to competition. We also recommend that PROs take a role in providing stability to EPR markets, thus helping to improve the effectiveness of EPR in achieving its objectives.