Independent Review of Container Deposit Legislation in New South Wales

Executive Summary

Container deposit legislation (CDL) describes legislation that establishes a deposit and refund system for used containers. As part of the review of the New South Wales (NSW) Waste Minimisation and Management Act (1995), the NSW Minister for the Environment, The Hon Bob Debus, commissioned Dr Stuart White to conduct an Independent Review of Container Deposit Legislation in NSW (the CDL Review).

Container deposit legislation is an example of an increasingly important environmental management principle, known as extended producer responsibility (EPR). Dr White was, therefore, requested to investigate the broader principle of EPR with reference to international experience, including how it might be implemented in NSW. This investigation, contained in Volume I of this report, revealed that EPR is a strategy worth pursuing. It has the potential to deliver improved waste management and broader environmental outcomes in NSW, in an economically efficient manner.

The new Waste Avoidance and Resource Recovery Act (2001) contains provisions which are consistent with the best practice elements of EPR recommended in this Review.

In accordance with the terms of reference of the Waste Act Review, Volumes II and III of the CDL Review describe and assess the effectiveness of container deposit legislation in litter and waste management in the NSW context. After initial investigation, the CDL Review focussed on CDL applying to post-consumer beverage containers made from materials currently recycled. The Review then examined the appropriateness of the introduction of such legislation in the NSW context by assessing:

stakeholder and community attitudes to container deposit legislation;
costs and benefits of container deposit legislation on both a whole of society basis and in respect to key stakeholder groups; and
the feasibility of container deposit legislation given the current industry, institutional, and legislative frameworks.

The CDL Review found that stakeholder attitudes to CDL are highly heterogeneous, with strong support from local government and environment groups, majority support from the community, limited support from the recycling industry, and opposition from the beverage, packaging, and retail industries.

When both financial and environmental impacts were considered on a whole of society basis, the potential benefits of introducing CDL in NSW were found to significantly exceed the costs. The annualised net economic benefit of CDL in NSW in the case where recovered container materials are recycled was found to be of the order of $70-100 million per year compared to the current situation. This net economic benefit is largely due to environmental benefits that were valued by the CDL Review at $100-150 million per year. This valuation of environmental benefits is exclusive of the value of improved visual amenity due to litter reduction. Litter reduction is, however, an important benefit to be gained from CDL and has historically been a major driver for its introduction both in Australia and overseas.

In summary, the estimated value of the environmental cost of disposing of a single average beverage container to landfill, compared to recycling that container, is 8-9¢. The cost of recovering that container through a combined CDL and kerbside recycling strategy is approximately 2-3¢.

Consumers of containerised beverages were identified as the stakeholder group that would bear the largest cost burden if CDL were introduced in NSW. The beverage industry and both large and small retailers would also be likely to incur net costs under such a system. The magnitude of these costs would depend strongly on the extent to which they were able to pass them on to consumers and also on the type of CDL system established.

Local government, in contrast, would realise financial benefits from the introduction of CDL, through reduced costs of kerbside collection and through the value of unredeemed deposits in the material collected at kerbside. The timing, and extent of these benefits would depend on the timing of renewal and negotiation of recycling contracts relative to the introduction of CDL, in cases where councils use contractors for kerbside collection. It would also depend on the terms of such contracts in relation to the ownership of used container materials and the unredeemed deposits.

New South Wales has a very high recovery rate for old newsprint, at approximately 75% in 2000. The frequency and convenience of kerbside collection is a major factor in this recovery rate, and therefore it would be important to ensure that CDL did not compromise this success. The modelling and analysis that has been undertaken in this Review indicates that the introduction of CDL will ultimately improve the financial performance of kerbside recycling by reducing its costs. There would be no financial justification for any council to reduce the frequency and convenience of kerbside collection of paper as a result of the implementation of CDL.

The CDL Review estimated that there would be a net employment increase of between 1,000 and 1,500 full time jobs if CDL were implemented, depending on the option. Potential long term losses of employment are mainly from kerbside recycling, MRF sorting and garbage collection, estimated at 25 jobs, with the net increase in jobs being due mainly to employment in collection centres or retail outlets.

Other stakeholder groups likely to benefit financially from CDL due to collection and donation of deposit bearing containers are charities and some disadvantaged sections of the community.

The CDL Review concluded that NSW would obtain overall benefits from the significant improvement in the container material recycling rate and the reduction in litter that could be expected to result from the introduction of a best practice form of CDL. The Review considers that the desired outcomes of high recycling rates and reduced litter are also achievable through other regulatory mechanisms such as mandatory recovery and recycling targets. However, it notes that international experience has found deposit-refund systems to be the most effective mechanism for achieving high container recovery rates.

There are several issues that would warrant further attention prior to the development of container deposit legislation or other forms of extended producer responsibility in NSW. Primary among these are potential legal impediments. These impediments would be less likely to arise if the deposit-refund or other form of EPR system were established by industry or implemented at a national level. The current opposition of important industry stakeholders to CDL will also warrant consideration, as will an effective mechanism for the administration and regulation of the system. With careful reference to previous Australian and international experience with EPR schemes in general and deposit-refund systems in particular, it would be possible to implement an effective and economically efficient container deposit-refund system in NSW.

The overall conclusion of the CDL Review is that:

The potential benefits of, and level of community support for, significantly increased recovery of used containers are such that action should be taken to ensure that the recovery rates are raised to a more economically optimal level based on total benefits to society. The current mechanisms for container collection and recycling are unlikely to achieve these rates and the current targets in relevant Industry Waste Reduction Plans are well below these optimum levels.

Recommendations

In regard to the implementation of the principles of extended producer responsibility in NSW, the CDL Review recommends that:

Policy and legislative frameworks in NSW be amended to incorporate the principles of EPR and to facilitate its effective implementation.
The NSW Government seek agreement at a national level for the adoption of EPR. This would allow a more effective model of EPR to be developed for NSW by addressing constitutional and cross-border issues.
Legal impediments to EPR, specifically those relating to constitutional, mutual recognition and taxation issues, be fully investigated.
Product-specific EPR programs be developed that incorporate mandatory performance targets.
Industry be given the opportunity to determine how they will meet the performance targets specified by product-specific EPR programs, e.g. via the establishment of voluntary schemes that provide appropriate environmental, economic and social benefits, with an understanding that mandatory schemes will be implemented if the voluntary schemes fail to achieve their performance targets.
Products are selected for development of an EPR program based on analysis similar to that conducted for beverage containers in the CDL Review. This would include a comprehensive analysis of the total costs and benefits to society, including externalities, and the use of representative and deliberative processes of public participation.

Regarding container deposit legislation in NSW, the CDL Review’s recommendation is that either:

1. Container deposit legislation be introduced that establishes a container deposit and return system with the following features:

Deposit applicable to all beverage containers made from aluminium, glass, PET, HDPE, other plastics, liquid paper board and steel;
Mandatory acceptance of used containers and refund of deposits by all retailers of deposit bearing containers. This should be subject to exemptions and/or qualifications that would prevent an inequitable burden being placed on small retailers where these exemptions would not compromise consumer access and convenience;
Should point of sale return not prove possible to implement, a depot or collection centre based CDL system should ensure accessibility, preferably requiring retailers with a threshold turnover level to provide facilities near retail outlets;
A uniform deposit level of ten cents initially with provision to alter the level of deposits on certain container types at the discretion of the Minister for the Environment;
A mechanism for ensuring that those parties involved in the acceptance of used containers and refunding of deposits are adequately compensated for those services, and
A mechanism for expanding the range of containers subject to a deposit.

2. The strengthening of industry recycling targets to levels that achieve equivalent outcomes to those that could be expected to result from the introduction of CDL. These targets should therefore:

Achieve recovery rates for the recycling of used container materials of ninety percent, and;
Apply as a minimum to beverage containers, with provision for expansion to encompass other container types.