EPR Modulated Fees and Q&As

EPR Modulated Fees

The four nations are jointly launching a set of engagement activities before final fees for packaging within the EPR scheme are agreed with the aim that from 2025/2026 onwards, EPR fees will be adjusted (modulated) to incentivise producers to use materials with a lower environmental impact.

Modulation will be based on a material’s recyclability in the first year, with the possibility to add further environmental factors in the future.  More recyclable packaging will be priced at proportionally less per tonne than less recyclable packaging in the same material type.

Our vision is that by 2030, the packaging supply chain will be optimised, to maximise recycling rates and material quality, minimising environmental impact.

Modulated fee formula

At the Business Readiness Forum, Jacob Shackleton of the EPR Policy Team, introduced the modulated fee formula to explain how using individual base fees and a modulation factor a final modulated fee figure was determined (see below).

Engagement

The scale of the adjustments will initially be set by the four nations, and later by the EPR Scheme Administrator. We aim to publish the modulation factors by the end of 2023 to give producers time to make appropriate preparations.

We recognise the central role producers and their representative organisations need to play in establishing this pricing mechanism and initial engagement has begun to establish the precise responsibilities that they and other parts of the waste value chain will play. Further engagement will be required, and we expect this will be via:

• Modulated fees focus groups and stakeholder forums
• Modulated fees survey (will share via next newsletter)

The aim of this engagement is to:

• Seek views on materials with lower recyclability that could be given an increased fee in the first year of modulation.
• Derive criteria to more robustly assess which materials to modulate and by how much, to inform further analysis.
• Work closely with stakeholders to agree a vision statement for modulated fees.
• Invite representatives from across the value chain to take part, including large and small producers, Waste Management Companies, Material Recovery Facilities, trade associations, environmental groups and Local Authority Networks.

Timeline

Stakeholders at the BRF we keen to know exactly what the timeline looked like for Modulated Fees. Here is the timeline as presented but further information can be found in the Q&A at the end of this article.

Modulated Fees Questions and Answers from BRF 30 May 2023

Base and Modulated Fees explained

Question: What does ‘Base Fee’ mean?

Answer: The base fee is what you will be charged in year one of EPR and it covers the costs incurred by local authorities efficiently and effectively managing packaging waste in each broad material group.

We look at what it costs a local authority to manage a material group efficiently and effectively (e.g. the total cost for managing plastic packaging) and divide that total cost by the number of tonnes of that packaging material placed on the market by all producers. By dividing the total cost by the total tonnage, we get the cost per tonne of managing that material - this is the base fee.

Question: Will EPR base fees be the same for different materials (i.e. paper and plastic) or will they be different as per current PRN industry?

Answer: They'll be different depending on that material group. So, paper and card base fees will be different from plastic base fees, which will be different from the aluminium base fees, etc. In total, there will be eight different base fees, one for each of the eight broad packaging material groups (paper and card, fibre-based composite, glass, aluminium, steel, plastic, wood and other).

Question: Can you confirm whether all fees will be modulated or if only a portion of fees will attract the modulation?

Answer: Our approach in the first year of modulation (2025/26) will be to identify materials that we think are the least recyclable materials, which we want to disincentivise. They will be modulated upwards, being charged an increased fee compared with the base fee.

Then fees for other packaging types will be reduced proportionally so we will cover the exact cost. This modulation will take place within material groups (e.g. an increased fee for one type of plastic packaging causes a reduced fee for other types of plastic packaging). Most packaging types will be modulated either up or down, but we don't have the scale yet. The fees for more recyclable materials are not expected to change much.

Question: Will modulation be set based on quantity and quality of recycled material rather than collection rate?

Answer: It will be based on all these considerations.

Question: When you say recyclable, do you refer to the content of the pack or the recycling rate of the specific type of material?

Answer: It won't just be based on recycling rates of the material. For example, we may consider other factors, such as if it is commonly collected by local authorities for recycling, or how easily it can be sorted by local authorities. The contents of the packaging may also influence its potential for recycling. It will not just be based on the recycling rates, although that is obviously part of the assessment.

Modulation and materials

Question: How will modulated fees work for reusable packaging?

Answer: There is provision to modulate fees against a wide range of criteria under sustainability. However, for now we’re going to be working to recyclability as the main modulation criteria. Initially reusable packaging will not be in scope.  

Question: How will polystyrene be treated with fee modulation, seeing as weight is not a defining factor in the use of the material?

Answer: Polystyrene is an example of the type of packaging we might consider modulating. This is something we will explore further as part of our stakeholder engagement and evidence gathering.

Question: Are you able to give a sliding scale of most desirable recyclable material? Changing packaging is not something that can happen overnight and it would be great to get a sense sooner than the end of 2023.

Answer: We will be engaging with producers, local authorities, and other stakeholders to establish a sliding scale.

Question: Are modulated fees applicable to the 'Local Authority Fees' part of EPR only?

Answer: Yes.

Question: How will the material be treated with regards to modulated fees when the packaging material itself is considered easy to recycle, yet the contents the packaging holds will deem it difficult to recycle?

Answer: This is one of the areas that will be considered when we design which fees we will be modulating.  

Question: How many materials do you think could be modulated? Is there a minimum or a maximum, e.g. split by polymer type and or colour? And what about PE lined board and corrugated, would these be modulated? Could you give us a bit more an idea of the thinking behind some of this?

Answer: We don't have a definitive number. The aim in the first year of modulation is not modulate everything. However, we want to identify the ‘worst offending types of packaging’ that we want to disincentivise. In terms of splits by polymer type, colour, etc, we will consider these differences.

For example, use of an unusual colour for packaging might have implications on how easily those items can be sorted for recycling. Black plastic and some colours of glass can be more difficult to sort.

Timelines

Question: If the final confirmed set of base fees will not be known until July 2024, when will companies need to pay the local authority waste management fees for the packaging they put on the market in 2023?

Answer: The invoices will be issued as soon as possible within the financial year 2024/25 and they will come with standard payment terms.

Question: Will modulated fees apply to packaging placed on the market from 1 January 2024?

Answer: Yes.

Question: When will producers need to begin collecting the more detailed packaging information, e.g. polymer type?

Answer: If it is decided a material is modulated (upwards or downwards), then that material will need to be reported from January 2024.

Glass

Question: In the case of glass packaging, being very recyclable and a high recycling rate - is there likely to be a modulation that reduces the EPR impact for fillers of glass packaging?

Question: As glass is a fully recycled material does that mean it will have a favourable bonus modulation?

Answer for both: As glass is generally very recyclable it will not be automatically modulated downwards. Glass fees may go up or down, taking into account the colour or packaging type.

Question: Surely no need to modulate fees for aluminium or glass as - based upon recyclability only - these materials are infinitely recyclable?

Answer: Drinks cans, which make up most of the aluminium packaging, are covered by DRS and EPR excludes DRS packaging. What’s left are predominantly aerosols and foils, which are less recyclable in practice.

It's not the case that all aluminium under EPR will be modulated down, some could be modulated up. More broadly, we will take into account other factors related to recyclability, such as collection for recycling in addition to a recycling rate. This means that we may modulate some types of aluminium or glass packaging up or down to reflect this.

Packaging

Question: How do you consider packaging collected from business sources and then recycled under business-to-business arrangements, so not involving local authority collections or disposal contracts?

Answer: Currently, anything sold into businesses is out of scope for EPR. Therefore, it would not be reported in your data submission for the disposal cost fee element of packaging EPR.

Also, we exclude local authority waste management costs relating to business waste when we calculate the total cost producers must cover in disposal cost fees.

Question: Are HDPE milk bottles classed as drinks containers under EPR?

Answer: All household packaging, except DRS packaging, is in scope of EPR. So if the milk bottles are household packaging, and they are supplied by a large obligated business, then they would fall within the scope of the disposal fee obligation of EPR.

Question: Regarding packaging that will be reported with packaging type drinks containers or commonly ends up in public bins. Will these packaging types be classed as household although not reported as household type and therefore get a share of the household waste disposal cost?

Answer: Anything that ends up in a household bin will attract a disposal fee, so that means normal bins collected from your house or taken to a Household Waste Recycling Centre (HWRC) - the tip as we used to call it – and all packaging that ends up in street litter bins that are managed by local authorities in the public realm.

The local authority costs of effectively and efficiently dealing with packaging in street bins will be calculated separately to the costs of packaging collected in household bins and at HWRCs. Only producers that place packaging on the market that commonly appears in street bins will be charged their share of the street bin packaging costs of local authorities.

Miscellaneous

Question: Did you mention that the modulated fees will introduce a carbon impact cost? If yes; how will this be set as most products do not have Lifecycle Assessments associated to them and when is this likely to be introduced?

Answer: We won't be including carbon impacts from the first year of modulation.

Question: You mentioned that many other international EPR schemes have introduced modulation. Will you take on board best practice already established and learnings?

Answer: Yes. We anticipate trade associations and producer organisations will share that knowledge in discussions. There are several businesses with packaging obligations in other countries’ schemes and we're very keen to hear about those experiences.