Collective producer action for extended producer responsibility (EPR) is a hot topic in Ontario. This article focuses on the Intermediary provisions of Bill 91, which are redundant and should be eliminated.
Ontario’s Environment Minister Jim Bradley has stated that the Industry Funding Organizations (IFOs) mandated by Ontario’s existing Waste Diversion Act (WDA) are, “…in effect, cartels, the only game in town for people,” adding, “So there is no real incentive for individuals except simply to show up and pay whatever price is determined by that particular organization…”
The question is, if government shouldn’t mandate cartels, what role if any should it have with regard to collective producer action and does the province’s new draft Bill 91 Waste Reduction Act strike the right policy chord in this regard?
As a start, let’s consider a situation where government stays entirely out of the picture and simply assigns individual producers their end-of-life responsibilities (individual producer responsibility or “IPR”).
In this scenario, producers’ decisions to work together or individually to collect and recycle their products is driven by a number of factors. These include:
- whether they can directly control their products at end-of-life,
- the economies of scale and administrative efficiency associated with collective action,
- the availability and means of access to existing collection and recycling infrastructure, and
- the relative economic advantage of individual versus group buying of recycling services.
While it makes complete sense for, say, individual producers of floor-standing photocopiers to recover, refurbish-reuse or recycle their copiers through their existing closed-loop leasing systems, it’s hard to imagine potato chip producers collecting and recycling their potato chip bags individually.
It’s not surprising that the recent designation of printed-paper and packaging for EPR in British Columbia has resulted in only two producer collectives: one for beer secondary packaging (i.e., cartons, cases, caps, etc.) and one for everything else.
Despite this predisposition to collective action freely convened by producers, governments still feel compelled to intervene in how producers organize themselves.
Harkening back to Minister Bradley’s comments, the inverse of the free association of producers is mandated IFOs under Ontario’s existing Waste Diversion Act.
IFOs are collective organizations comprised of a small subset of producers that the WDA holds responsible for program delivery. Producers at large only have the legal obligation to pay whatever stewardship fees are set by the IFOs in order to cover the costs of running the program; the IFOs do the rest.
Producers, municipalities and the waste service sector have all complained about the problems associated with interacting with IFOs afforded with a tremendous amount of government-backed economic clout.
To mitigate this clout, the current Waste Diversion Act requires IFOs (or more accurately their stewardship programs) to “…affect Ontario’s marketplace in a fair manner…” and the government to approve the method by which IFOs set stewardship fees paid by stewards (and, ultimately, by consumers).
Alas, with monopoly inevitably comes utility-style regulation, and with utility-style regulation comes incessant squabbling over things like what are “reasonable” municipal costs for collecting blue box materials (much more on this in my next blog) or whether a given tire stewardship fee is too steep for farmers to pay to have their tires recycled.
The ministry claims that that the proposed Bill 91 Waste Reduction Act embodies IPR and that it fixes the malaise associated with the existing WDA by eliminating the rigid IFO construct.
But it doesn’t.
Rather, it replaces it with something rather bizarre: the “Intermediary.”
Bill 91’s Intermediaries are given a strange, restrictive definition: “…a person or entity is owned, operated, controlled or managed, directly or indirectly, by the producer or by the producer together with one or more other producers,” that, “brokers, arranges for or facilitates the provision of the waste reduction services.”
Under Bill 91, producers and Intermediaries that form must have written agreements with each other, and the contents of those agreements are spelled out in legislation.
The ministry goes to great pains to explain that Intermediaries are not IFOs and that, “the proposed Act does not allow the transfer of liability from individual producers to Intermediaries”. On this the Ministry of Environment is emphatic.
The ministry claims that regulation of Intermediaries prevents producers from sloughing off their responsibilities to Intermediaries and then invoking a “due diligence” defence if the Intermediary fails to meet the ministry’s waste service and reduction standards.
In written opinions, environmental law experts say the Intermediary provisions of Bill 91 do nothing to achieve that end. Whether Intermediaries are recognized in the Act or not, Bill 91 affords producers the right to invoke a due diligence defence.
Moreover, they note that the legislated requirement for service agreements between producers and intermediaries add nothing to the regulatory framework; they merely prescribe the basic commercial obligations that would be contained in any arm’s length contract between producers and intermediaries (i.e., the services to be performed, compliance with regulatory standards, etc).
The ministry’s recent regulation of producer responsibility for pharmaceuticals and sharps demonstrates that the Bill 91 provisions regarding Intermediaries are entirely unnecessary.
In October 2012, the Ontario government promulgated Ontario Regulation 298/12 “Collection of Pharmaceuticals and Sharps – Responsibilities of Producers” under the Environmental Protection Act (discussed in an earlier blog post). The regulation assigns end-of-life responsibility for waste pharmaceuticals and sharps to individual producers of those products.
To help producers comply with O. Reg. 298/12, the Health Products Stewardship Association (HPSA) formed as a producer-driven compliance initiative.
HPSA oversees the pharmacy-based collection system, contracts with the disposal company to recover and dispose of pharmaceutical and sharps wastes (recovered from pharmacies) and provides producers with all necessary operational, administrative and reporting functions to ensure individual producer compliance.
HPSA acts exactly like an Intermediary proposed under Bill 91, yet it’s not facilitated, recognized or regulated in any way under Ontario law.
In conclusion, the Intermediary provisions of Bill 91 are redundant and should be eliminated.
Producers should be allowed to form collectives (or not form them as the case may be) and enter into whatever agreements with whomever they see fit and without interference by the Ontario government or the new Waste Reduction Authority.