There is great interest in British Columbia these days and it isn’t in anticipation of the upcoming ski season but rather for the controversy around the introduction of Extended Producer Responsibility (EPR) for Printed-Paper and Packaging (PPP).
The introduction of EPR for PPP in British Columbia comes at a time when Ontario’s proposed Waste Reduction Act (WRA) is in second reading and is likely headed to committee for further deliberation.
It is amazing to hear of Ontarians with no idea of BC’s policy and political history of recycling running around waving articles from BC local newspapers as proof that the BC PPP EPR program is a “failure out of the gate”. These media reports are being used opportunistically by some to advocate against a principled approach to EPR for PPP and for a municipal cost recovery approach as proposed in Ontario’s Bill 91 WRA (See my last blog).
Before I can explain what is really going on in BC let me provide some background to the BC EPR program for PPP (full disclosure, I was involved in the BC PPP program design and plan development).
In response to over two decades of BC local government advocacy, the responsibility for collection and recycling of residential packaging and printed paper will transfer from BC local governments to producers that supply products associated with those materials to residents as of May 19th 2014.
In response to the new “Schedule 5 Packaging and Printed Paper Product Category” requirements under British Columbia’s Recycling Regulation key producers formed Multi-Material BC (MMBC) – a producer responsibility organization (PRO) with a mandate to discharge subscribing producers’ obligations (by providing reasonable access to PPP collection services and recycling 75% of the PPP subscribing producers supply to BC residents).
Under the BC Recycling Regulation, producers that don’t subscribe to MMBC can establish their own plan to collect and recycle their share of PPP. Only one other PPP EPR plan has been filed with the BC Ministry of Environment and it deals exclusively with secondary beer packaging (cartons, trays, etc.) associated with beer products supplied by brewers selling through Brewers Distributor Limited.
In developing its stewardship program MMBC evaluated a number of different options for program delivery (the final program design was included in the program plan that was approved by the BC Ministry of Environment in April 2013).
The simplest option involved subdividing British Columbia into a number of collection zones and tendering out the collection of PPP zone by zone with the lowest bidder for each zone being awarded a five to seven year contract to provide MMBC with collection services. Under this approach, the consolidation, transportation, recycling and marketing of the collected PPP materials would also be tendered out by MMBC to the private sector.
This option was not only aggressively advocated by the BC PPP recycling industry but surprisingly also by notable BC environmentalists (who believe any municipal role in EPR is essentially a form of subsidy to producers).
This option would have revolutionized (with all the mayhem that revolutions entail) BC’s recycling system.
Failing to win collection tenders, many (if not all) BC local governments would have been summarily ejected from their longstanding roles as the face of recycling in their communities and replaced with direct commercial arrangements between MMBC and private recycling companies.
Rather than revolution, MMBC opted for evolution – an approach that would build on and evolve the recycling system built by British Columbians and their local governments over the past 20 years.
In developing its PPP program, MMBC adopted key recommendations that the Union of BC Municipalities (UBCM) put forth in its 2012 policy paper. These include:
“That the packaging and printed paper product stewardship program provides an equitable level of service between urban and rural areas, and that existing levels of service be maintained or exceeded for those local governments that have established PPP programs in place.
That local governments be given the right of first refusal for providing packaging and printed paper product stewardship services under the new PPP program. This option would minimize and/or prevent any disruption to existing services, employment contracts, and community expectations.
That the design and implementation of the PPP program seek to minimize the program’s environmental impact by eliminating the need for landfilling and/or incineration of program materials.”
As per the UBCM recommendation, the approved MMBC plan provides BC local governments with the right of first refusal in providing PPP collection services.
BC local governments can choose to accept MMBC financial incentives to collect a province-wide standardized list of recyclables from single-family homes, multi-family buildings and depots or they can choose to turn over the entire collection system to MMBC whereby MMBC will tender for collection services using private contractors.
Local governments have a third choice – they can choose the status quo whereby they continue to operate their recycling programs without any interaction with MMBC whatsoever and at the continued expense of their local ratepayers.
Under the right of first refusal approach, MMBC will also provide financial incentives for PPP collection to any community that currently provides curbside garbage collection but does not currently provide PPP collection.
By providing BC local governments with a right of first refusal, producers and BC local governments have an opportunity to exchange value.
BC local governments offer producers stable and effective relationships with their residents, which will contribute to maximizing collection of recyclable materials.
In turn, producers are offering local governments financial incentives for their collection efforts, the opportunity to retain their role as the face of recycling with their residents and, critically, are assuming full responsibility (and associated cost and financial risk) for processing and marketing materials once they have been collected.
As an example, under the MMBC PPP program should the City of Vancouver agree to act as an MMBC PPP collector (it has only agreed to do so conditionally so far – more on this below) it will receive in the order of $8M a year in financial incentives for collecting recyclable materials while all the responsibility for processing and marketing that collected material will be assumed by MMBC.
To underline the point, local governments will receive cash payments to cover most (if not all, and in some cases more than) their collection costs while producers will bear all of the risk associated with what they supply into the market. Under the plan, if a producer packages its widget in a composite, laminated plastic package that has no recycling market, that producer is going to pay for research and development to ensure the item can be included in the collection system within the next few years.
This transfer of risk to producers speaks to the long-standing concern of BC local governments that there be an approach, “to place on the manufacturers the financial burden of handling excessive or difficult-to-dispose-of waste packaging”.
This is more than a proverbial “good deal” for BC municipalities.
It represents the full expression of extended producer responsibility whereby producers bear the costs and risks of managing the products they put into the market at end-of-life and producers’ commercial partners (such as local governments) remain free to choose if, when, and how they wish to assist MMBC in meeting its objectives.
The MMBC program design is unique and a true made-in-BC recycling solution – there is no other program like it in North America and that is because it is tailor-made to work with the province’s unique recycling culture and its long-standing community based efforts to divert more waste from disposal.
While it all sounds good, human beings remain human beings, and as a result, implementing the approved MMBC program isn’t a simple technocratic exercise of signing agreements and tendering contracts.
Some turmoil with something as big as this is to be fully expected.
So far, there are three main implementation issues. While only two have made the BC papers (and given what I discuss below readers will not be surprised why the third issue hasn’t been covered in print), I’m going to discuss all three below.
Small business exemption
Under the BC Recycling Regulation under the Environmental Management Act there is no small business exemption or de minimis.
As such a small local ice-cream producer with gross revenue of a couple of hundred thousand dollars a year and Häagen-Dazs are treated the same – both must have their own plan or subscribe to a plan.
Of course small business in BC has blown a gasket citing potentially inordinate compliance costs that could be completely out of proportion to the amount of PPP they generate annually.
There are a number of ways to deal with this.
The first option is to do nothing (unlikely given the coverage the issue is getting and the provincial government’s general support for small business).
The second option is to amend Schedule 5 of the BC Recycling Regulation to create a small business exemption.
In Ontario the requirement for a small business exemption in the provincial Blue Box program was directed by the Ontario Ministry of the Environment in its “program request letter”. The actual threshold for the exemption was based on input received during the Blue Box plan consultation phase.
As such, the small business exemption under the Blue Box program rules is $2M in annual gross sales, which generally corresponds to the generation of less than 15 tonnes of PPP annually.
The third option to deal with the issue is to have MMBC create a small business exemption through its program.
MMBC has no legal basis on which to establish a small business exemption. In theory it could create such an exemption through an administrative expedient (which, not to belabor the point, would be of dubious legal standing).
Again, in theory, a program-based small business exemption could entail having the small businesses in question register with MMBC for a nominal fee (thus making them technically compliant with the law) and if they fall under a prescribed threshold, would relieve them of the administrative burden of calculating and reporting their PPP. To simplify things further small businesses with smaller volumes of PPP above the full exemption threshold might be subject to a schedule of flat fees (rather than having them undertake material-by-material calculations).
EPR free riders and special deal seekers
The next issue is one of free riders; that is producers who flout the law by neither establishing their own program nor subscribing to MMBC.
Free rider issues are a problem when regulators don’t enforce their laws. With less than a handful of civil servants overseeing BC EPR programs and dozens of EPR programs in operation, enforcement in BC is highly stretched at best.
While thousands of key producers have subscribed to MMBC, there are likely to be a number of free riders for PPP EPR in BC that cannot be described as small business discussed above.
It will fall to the BC Government to enforce its rules to ensure the integrity of BC’s EPR framework by delivering a level playing field amongst producers.
Like Ontario, the Canadian Newspaper Association (CNA) and BC and Yukon Community Newspaper Association (BCYCNA) have been seeking a special deal with regard to the treatment of newspapers under EPR for PPP.
In Ontario newspaper publishers and members of the Canadian Newspaper Association and the Ontario Community Newspapers Association (CNA/OCNA) do not pay stewardship fees into the Blue Box program but rather meet their obligation to Ontario municipalities by providing municipalities with an in-kind contribution of what was originally $1.3M in newspaper advertising. This arrangement was negotiated by CNA/OCNA with the Ontario Government and was incorporated into the Blue Box program plan under direction from the Ontario Ministry of Environment.
In recent times, the Association of Municipalities of Ontario (AMO) has written to the Province seeking to redress the increased “in-kind” support from newspapers that has resulted in a real reduction of $2.5 million in producer cash payments to Ontario municipalities.
In British Columbia CNA has been seeking a similar in-kind arrangement. However, the BC approach to EPR for PPP does not involve establishing a system of fixed stewardship payments to local governments but instead requires producers to assume responsibility for the PPP system. Accordingly, CNA is not seeking concessions from BC local governments but a subsidy from other producers.
How this dialog plays out should be interesting.
BC local Governments and the collection of PPP
Finally, there is the issue of the municipal response to the MMBC financial incentives for the collection of PPP.
As it stands more than 90 local governments have unconditionally accepted MMBC’s incentive offer to provide collection services to their residents. An additional 24 local governments (including Surrey, Richmond and the City of Vancouver) have sent MMBC letters accepting the collection incentives and citing concerns with some of MMBC’s contract terms. These terms include when and how MMBC can amend contract terms (e.g. to add new materials to the collection system), rules around contamination of collected PPP with non-PPP materials etc.
In a nutshell very few of the complaints from local governments have been about money but rather about the terms and conditions in MMBC’s service agreements.
Of note, 9 local governments (representing 6% of the households receiving PPP collection services) have chosen to opt out of MMBC’s program entirely forgoing EPR and will continue on with having ratepayers fund recycling.
Lastly, more than fifty First Nation operations, private companies and not-for-profit organizations have also accepted MMBC collection incentives.
No one in their right mind should have expected a process by which local governments would transition from the role of drivers of recycling in BC to service providers to be entirely without controversy.
It’s called change management. The success of a change management process depends on a establishing a common vision or outcome and engaging in continuous dialog toward reaching that vision.
Having been an observer to Blue Box funding discussions in Ontario, I can say the BC process is generally going much more smoothly because all parties have started from a commitment to a common vision of EPR and are working to resolve their issues in that context.
Is the BC approach to EPR for PPP perfect? No, but it will deliver better long-term relationships and recycling outcomes than any other jurisdiction in Canada if the parties working to deliver that common vision are given the time and opportunity to do so.