The majority of extended producer responsibility (EPR) programs in Canada are funded through the use of an eco fee-excluded pricing mechanism. Eco fees are excluded from the posted or advertised price of the product and are collected separately at the point of purchase. Generally, EPR legislation is silent on the issue of the visibility or non-visibility of eco fees and the majority of producers and retailers, when given a choice, have chosen the eco fee-excluded approach. By ducking the issue in their EPR regulations, an approach which is also reflected in the CCME’s Canada-wide Action Plan for EPR, governments have in effect defaulted to the eco fee-excluded approach.
In contrast, under New Brunswick’s Designated Materials Regulation which supports the EPR paint program, “no brand owner shall charge a retailer and no retailer shall charge a consumer any separate
fee with respect to the costs associated with implementing or operating a paint stewardship plan …” Quebec’s Eco-peinture program operates in a similar way but is governed not by a regulation but by an accreditation agreement between Recyc-Quebec and the paint stewards.
The failure to launch Phase 2 of the Ontario Municipal Hazardous and Special Waste (MHSW) program last year, while setting back the progress of EPR in the province and perhaps elsewhere, has had at least one positive outcome by focusing badly needed attention on the whole eco fee mechanism.
In a similar fashion to the GST/HST, where Canada is unique in making such a value added tax visible, the visibility of eco fees may have served to heighten consumer awareness about EPR programs, but often at the price of misinformed public debate about who is responsible for imposing the fees and confusion as to whether or not the fees are a tax under another name. Consumers also have no idea of the real cost of what they are buying until they get to the till. What is needed is a proper communications strategy to support the EPR program. Such a strategy should not be confused with the supposed communication of the added price itself.
Eco fee-included pricing can serve to encourage producers to internalize end-of-life costs in the price of goods, as they do with other costs incurred in manufacturing and selling their products. Visible eco fee-excluded pricing unfortunately gives no such signals to producers. With a visible fee, the producer is less directly accountable because the consumer explicitly pays the fee. The producer prices the product for the market with due regard for competitive and profit pressures, and then simply adds the eco fee. This is not a recipe for environmental accountability or environmental product performance. It is a recipe for fee collection.
Because most producer responsibility organization (PROs) have their own source of funding from visible fees, they can operate largely independently from corporate head offices. This independence may support efficient decision making but it is another question altogether whether it provides any incentives for better product environmental design. It very likely does not. Conversely, an invisible eco fee makes the PRO member more directly accountable to the corporate head office which is now the source of the funding. There may be a price to pay in the efficiency of decision making, but that would be a price worth paying if it helped meet EPR policy objectives.
While recognizing the mistakes made in the Ontario MHSW program – and there is lots of blame to go around – much of the controversy and the retreat might have been avoided, if the eco fee had been included in the price of the products covered by the program rather than excluded and added at the point of purchase.
Eco fee-included pricing is clearly not a magic bullet for all that ails EPR programs. It needs to be put into action along with proper communications and differential fees, and other supporting regulations and policies such as toxics reduction and green procurement. Because there is so little experience with eco fee-included pricing in areas where there are real environmental design opportunities, it is also fair to ask whether it would in fact advance improved life-cycle environmental performance. We won’t know until we try.
Finally, if there is any lesson from the July 2010 Ontario debacle it is surely that governments can no longer duck the eco fee issue and will have to seriously consider more prescriptive approaches regarding EPR program fees in the future. Producers, for their part, are going to have to recognize that calls for environmental accountability are not going to go away. Perhaps a good look at the New Brunswick and Quebec approaches would be a place to start.
NOTE: A more fulsome and detailed discussion of eco fees and other related EPR issues can be found in Duncan Bury’s article, “Should Extended Producer Responsibility Programs Use Eco Fee-Included Pricing?” in the Canadian Tax Journal (Vol.58. No.4).
Duncan Bury is principal of Duncan Bury Consulting in Ottawa, Ontario. Contact Duncan at Duncan@duncanburyconsulting.ca