Be excited about EPR, even if it’s not a silver bullet

The bottom line is that a money flow is needed to improve recycling rates, and extended producer responsibility contributes to that.

By Tom Szaky

April 14, 2023

The interior of a reverse vending machine used to collect bottles. Image via Shutterstock/M-Production

[GreenBiz publishes a range of perspectives on the transition to a clean economy. The views expressed in this article do not necessarily reflect the position of GreenBiz.]

Extended producer responsibility (EPR) legislation is popping up in more U.S. states. There's a lot of energy around these policies, which require producers to contribute to the costs associated with recycling the packaging they put into the market.

TerraCycle operates in 20 countries, many of which have federal EPR programs in place. In Germany for example, we’re partly owned by one of the main administrators of the national EPR system. There, and elsewhere, we’ve had a firsthand look at the benefits and shortcomings of EPR.

In the current U.S. recycling system, the main actors — manufacturers, retailers, consumers and waste management companies — are not mandated to adopt circular actions or business models. In other words, manufacturers don't have to make their products and packaging easy to recycle or include recycled content in production. Retailers can sell anything they want. The consumer that buys the product has no legal obligation to recycle it (considering it's recyclable), and even if someone does put something in a recycling bin, the waste management company isn't legally required to recycle it either.

In such an "open loop," what drives each actor is cost (economics) and convenience (a derivative of cost). This is where policy can help.

There are a few ways policy is being leveraged to make the recycling loop less open and more closed. Most of these interventions are pointed at manufacturers, but here's a sense of the current landscape.

Manufacturers: Policies typically fall into the following categories.

Retailers: Some precedent exists for mandates on retailers. In several U.S. states, grocery stores of a certain size are legally mandated to offer plastic shopping bag recycling front-of-store.

Consumers: In the U.S., there's still no legal obligation for consumers to recycle instead of disposing of a recyclable item. Isn't it interesting that we are fined for littering but not for sending recyclable items to landfills?

Recyclers: Recycling companies still don't have to worry about any federal orders to recycle what they collect. The only enforcement they may have is from their clients (which may be municipalities or private companies).

EPR can be effective because it creates a new flow of money to help subsidize recycling. However, it doesn't make everything recyclable, because EPR schemes don't address the underlying economics of waste.

The pooled taxes paid by producers make items that are profitable to recycle more profitable (and thus their rates of recycling increase). But items that have not been profitable to recycle often remain below the line of profitability and as such still do not get recycled (even if the manufacturer of those items is paying its EPR fees). In other words, expensive-to-recycle items, such as cosmetic packaging, will still not get recycled, while aluminum cans will be recycled at an even higher rate because they’re even more profitable than before. (See Figure 1.)

Figure 1

You can see this in action in Germany. The country is often lauded for being the best in the world when it comes to recycling. Packaging EPR schemes in Germany do achieve a 65.5 percent mechanical recycling rate for plastics in their scope, however, 35 percent of plastic packaging is still incinerated.

So, if you’re a producer of aluminum packaging, you benefit from EPR. But if you make snack chip bags, you might not. The tax you’re paying will help fund the recycling of items further up the chain, like that aluminum can, instead of your packaging.

The "perfect" EPR scenario would involve producers being taxed based specifically on the waste they create with their products and packaging. Producers of very hard-to-recycle packaging would pay the most, and producers of already profitable-to-recycle packaging might pay nothing (or even get a credit). This is what TerraCycle does, although on a voluntary instead of mandated basis. We call it voluntary producer responsibility (VPR), where a producer funds what it actually costs to collect and recycle the item, minus whatever the recycled outputs are worth. (See Figure 2.)

Figure 2

Mandating that the collection and processing of every item be fully funded in a fair way could incentivize producers to move into higher-quality packaging forms (from polypropylene to PET). (See Figure 3.)

Figure 3

So perhaps "traditional" EPR isn't perfect, and "perfect" EPR is expensive for producers, but the bottom line is that a money flow is needed to improve recycling rates, and EPR contributes to that.

It's quickly ramping up in the U.S. Four states — Maine, Oregon, Colorado and California — have already passed laws. And in 2022, 40 related bills received consideration across 18 states. A silver bullet EPR may not be, but all of this progress is still something to celebrate.

With all that said, the true solution is to stop waste at the source. We all need to vote for a better future by buying less.

Editor's note: This story was updated May 3 to correct a reference to TerraCycle's partner in Germany. This story was also updated May 10 to update data regarding Germany's laws, policies and progress, and to remove an incorrect interpretation of Germany's litter laws.

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