Executive summary
Since the late 1980s, the concept of “Extended Producer Responsibility” (EPR) has become an established principle of environmental policy in an increasing range of countries. It aims to make producers responsible for the environmental impacts of their products throughout the product chain, from design to the post-consumer phase. It was hoped that this would relieve the burden on municipalities and taxpayers for managing end-of-life products, reduce the amount of waste destined for final disposal, and increase rates of recycling.
OECD provided a platform for countries to exchange experience, and, in 2001, produced a Guidance Manual to support the development of EPR systems. Since 2001, the number and variety of EPR systems have increased significantly. Thus, a review of recent experience is timely, particularly in view of the support that EPR could provide to enhancing resource productivity and the circular economy, issues that are now high on the environmental policy agendas of many countries. In its first part, this report provides updated Guidance on EPRs, building on the 2001 Manual and in view of the developments and lessons learnt since then. In the second part, the report brings together four selected challenges within EPR and examines them in greater detail.
Evolution and impacts of EPRs
A recent survey identified about 400 EPR systems currently in operation. Nearly three-quarters were established since 2001. Legislation has been a major driver, and most EPRs appear to be mandatory rather than voluntary. Small consumer electronic equipment accounts for more than one-third of EPR systems, followed by packaging and tyres (each 17%), end-of-life vehicles, lead-acid batteries and a range of other products. Various forms of take-back requirements are the most commonly used instrument, accounting for nearly three-quarters of those surveyed. Advance disposal fees (ADF) and deposit/refund account for most of the rest. While in some cases individual firms have established their own systems, in most cases, producers have established collective EPR systems managed by Producer Responsibility Organisations (PROs).
Assessing the impacts of EPR systems is difficult for several reasons: a considerable lack of data, analytical difficulties in distinguishing the impact of EPR systems from other factors, and the wide variety of EPR systems which limits comparison among them. Bearing in mind these caveats, there is evidence that in some countries, EPRs have helped to shift some of the financial burden for waste management from municipalities and taxpayers to producers, and to reduce the public costs of waste management. In addition, it seems likely that EPR systems have contributed to the decreased share of waste destined for final disposal and to the increased rates of recycling recorded in many OECD countries. However, progress in these areas varies very widely among countries, suggesting that there is scope in many countries to improve their performance by emulating the best performers. On the other hand, the consensus appears to be that while EPR systems have contributed to waste prevention (e.g. eco-design) in some countries and some sectors, they are seldom sufficient to serve as the triggering factor.
Guidance and recommendations
Many of the recommendations regarding the good governance of EPR systems identified in the 2001 OECD Guidance Manual are still relevant and should be applied more systematically. For instance, the 2001 guiding principles for EPRs state that these systems should provide producers with incentives to change product designs, stimulate innovation, take a life-cycle approach, clearly define responsibilities and chose flexible policy instruments adapted to the particular product and waste stream.
Similarly, the key factors in designing EPRs already provided by the 2001 Guidance Manual are still as relevant today as they were 15 years ago. Among other things, these recommendations point out that the objectives and the scope of EPR should be clearly defined and the producers of products subject to EPR clearly identified; mechanisms for reporting and monitoring should be established and appropriate enforcement mechanisms and sanctions developed. There are also opportunities to make EPRs more effective including by: increasing their level of ambition, broadening the scope of products covered, better internalising environmental costs. Arguably, the single most important challenge is to make EPR systems more transparent. EPRs should be required to make available the information needed to assess their performance and to identify ways in which they can be made more efficient and effective.
The 2001 Guidance Manual also provided more specific recommendations on a range of issues, the key elements of which have been integrated with the more recent experience.
Design and governance of EPR
The design and governance of EPR are crucial to their performance. The issues range from target setting and monitoring & enforcement, to free-riding and financing.
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The targets of EPR policies should be periodically reviewed and adjusted, taking account of changes in market conditions and technology.
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In mandatory systems, governments should establish consistent and credible means for enforcing EPR obligations, including registers of producers, official accreditation of producer responsibility organisations (PROs) and appropriate sanctions.
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Adequately resourced monitoring systems need to be established; the performance of EPR operations should be regularly audited, preferably independently. In the same jurisdiction, EPR systems should be harmonised to the extent possible, and a means for checking the quality and comparability of data established.
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Free-riding, which still is a challenge to many EPR systems, should be addressed through peer pressure and strict enforcement.
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Governments should identify ways in which EPR systems can be financed in a sustainable manner. This should include analysis of how risks such as price volatility and leakage could be managed.
Promote the integration of competition policy and EPR
As the recycling and waste management industries have grown and become more concentrated, the potential financial gains for producers, as well as the additional costs to society that result from collusion among producers and other forms of anti-competitive behaviour, have become more significant. Since 2001, some competition authorities and courts have reviewed alleged anti-competitive behaviour within EPR systems.
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Most attention should be placed on competition issues in product markets, where the welfare effects are potentially largest, followed by collection and sorting markets, recovery and disposal markets, and the market of producer responsibility services.
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Concerns persist about collusion among producers and about the potential abuse of vertical agreements between PROs and companies involved in downstream operations. An important means for minimising anti-competitive behaviour is to consult competition authorities when EPR systems are being established.
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Services such as waste collection, sorting, as well as material recovery and disposal should be procured by transparent, non-discriminatory and competitive tenders.
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EPR schemes should allow single PROs only when it can be demonstrated that the benefits (e.g. the capacity to manage the waste would otherwise not be built) outweigh the costs of less competition.
Incentives for design for environment
Better internalisation of end-of-life costs and stricter enforcement would also strengthen incentives for improving the eco-design of products and packaging. Setting fees at a level where they recover the full cost of the end-of-life management of the products covered by the EPR is therefore a key measure.
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Ideally, producer responsibility would be implemented at the level of individual producers, but due to the significant economies of scale and scope that are often available, most EPR systems apply collective producer responsibility, which dilutes incentives for eco-design.
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Where possible, producers’ fees should therefore be more closely linked to the actual end-of life treatment costs of their products, for instance through the use of variable (e.g. weight-based) rather than fixed (e.g., unit-based) fees, and/or modulated fees that differ according to specific design features that make products more easily recyclable.
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In the case of globally-traded products, better eco-design incentives could also be achieved by harmonising environmentally-sensitive design.
Integrating informal workers in EPRs in emerging and developing countries
Since 2001, EPR systems have been established in many developing and emerging economies. In contrast to the most developed OECD countries, there are large numbers of informal waste workers engaged in recycling; an estimated 20 million globally. Waste picking is often hard, dangerous and socially precarious. While there are serious concerns about downstream informal dismantling and recycling which can generate negative economic and environmental impacts, the potentially positive contribution of informal waste collection and sorting activities is increasingly recognised.
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EPR systems need to find ways for informal operators to work with rather than against formal waste management systems, unless there is a risk that they will be undermined by them.
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However, this is not always easy or possible, and it will be important to draw lessons from current initiatives to guide further policy development in this area.