On May 29th 2014 I gave a talk at the Recycling Council of BC’s Zero Waste Conference (which can be downloaded here) about ensuring efficiency and effectiveness under Extended Producer Responsibility.
In that presentation I advance the idea that the designation of a given product or material for EPR creates a new system of exchange between producers and other parties (e.g. stewardship agencies, recycling businesses, local governments etc.). We commonly refer to such systems of exchange as “markets”. By extension EPR creates new markets.
Markets do not function efficiently or effectively without rules. In fact, markets without rules result in “market failure” and soon descend into chaos. Where governments are supposed to be rule makers, the failure to make simple rules and enforce them is what I term “government failure”. More often than not, and especially where EPR is concerned, market failure can be attributed to government failure.
By analogy, one only needs to look at what happened when the US eased mortgage lending rules. The lending rule changes created more demand for housing thereby driving up housing prices. Another set of rule changes allowed the US financial sector to create new “products” by packaging up thousands of risky mortgages and selling them to investors – a lack of transparency resulted in unsuspecting investors buying billions in junk securities which resulted in an economic collapse as the bubble burst and homeowners defaulted on their mortgages.
EPR’s bubble is about to burst.
Across Canada there are growing issues with producer free-riding (i.e. producers who do not undertake their regulated EPR obligations) and a lack of oversight and transparency regarding recycling outcomes.
Within the recycling industry the absence of enforced recycling standards and a lack of tracking and measurement is resulting in fraudulent inlcusion of out-of-province materials, double-counting of collected materials, brokering of materials contrary to EPR program requirements, export of materials to unqualified processors in other jurisdictions and sham recycling (whereby the recycling practices in question amount to little more than disposal).
The result is that the “good” recyclers sticking to the rules are being squeezed out of the recycling market by players that can reduce costs by cutting corners.
The race to the bottom is well underway.
Stay tuned for Part – 2 next week where I go from the theoretical to the real-world.