Title: Introducing a Deposit Return Scheme on beverage Impact Assessment (IA) containers Date: 24/02/2021 IA No: Stage: Consultation Lead department or agency: DEFRA Source of intervention: Domestic Other departments or agencies: Type of measure: Secondary legislation Contact for enquiries: David Gell John Walsh Summary: Intervention and Options RPC Opinion: Cost of Preferred (or more likely) Option Business Net In scope of Total Net Present Net cost to business Measure qualifies as Present One-In, Two- Value per year (EANCB) Value Out? 6,091m -3,235m 347m No NA What is the problem under consideration? Why is government intervention necessary? Max 7 lines Drinks containers are often made of easily recyclable materials (PET plastic, glass, aluminium, steel), yet are frequently disposed of inappropriately, rather than recycled, generating negative externalities including increased CO2 emissions from the use of virgin material to create new products and unsightly and unhygienic litter. A Deposit Return Scheme is a system that encourages the return of the packaging to collection points through the incentive of a refundable deposit paid by consumers at the point of purchase. The deposit placed on drinks containers acts as an incentive against improper disposal, increasing the recycling rate and reducing the incidence of litter for these materials. Government intervention is necessary to achieve this step-change in behaviour as these litter benefits do not attract the engagement of the private sector. What are the policy objectives and the intended effects? Maximum of 7 lines The key objectives of introducing a DRS are increased recycling of drinks containers in scope of a DRS; higher quality recycling; greater domestic reprocessing capacity through providing a stable and high-quality supply of recyclable waste materials; and a reduction in litter and associated litter disamenity. The intended effect of introducing a DRS is to change behaviour of consumers, producers and retailers to deliver a significant change in the capture for recycling of empty drinks containers and the incidence of litter. What policy options have been considered, including any alternatives to regulation? Please justify preferred option (further details in Evidence Base) Maximum of 10 lines Option 1 – Do nothing Option 2 – Introduce an ‘All-In’ DRS to cover PET bottles, steel cans, aluminium cans and glass bottles, with no restriction of the size/format of drinks containers in-scope. Option 3 – Introduce an ‘On-the-go’ DRS to cover PET bottles, steel cans, aluminium cans and glass bottles up to 750ml in size and sold in single format containers. Option 4 – Introduce ‘All-in’ DRS with no glass intake. DRS to cover PET bottles, steel cans and aluminium cans, with no restriction of the size/format of drinks containers in-scope. Will the policy be reviewed? It will/will not be reviewed. If applicable, set review date: Feb/2029 Does implementation go beyond minimum EU requirements? Yes / No / N/A Are any of these organisations in scope? If Micros not Micro Medium Large SmallYes exempted set out reason in Evidence Base. Yes Yes Yes What is the CO2 equivalent change in greenhouse gas emissions? Traded: -1.9mt Non-traded:-1mt (Million tonnes CO2 equivalent) I have read the Impact Assessment and I am satisfied that, given the available evidence, it represents a reasonable view of the likely costs, benefits and impact of the leading options. 1 Signed by the responsible SELECT SIGNATORY: Date: 2 Summary: Analysis & Evidence Policy Option 1 Description: Option 1 – Do nothing / baseline packaging producer responsibility reform. FULL ECONOMIC ASSESSMENT Price Base PV Base Time Period Net Benefit (Present Value (PV)) (m) Year 2018 Year 2022 Years 11 Low: High: Best Estimate: COSTS (m) Total Transition Average Annual Total Cost (Constant Price) Years (excl. Transition) (Constant (Present Value) Low High Best Estimate Description and scale of key monetised costs by ‘main affected groups’ As this option represents the baseline and is included for comparative purposes, it has no incremental costs or benefits. Other key non-monetised costs by ‘main affected groups’ None BENEFITS (m) Total Transition Average Annual Total Benefit (Constant Price) Years (excl. Transition) (Constant (Present Value) Low High Best Estimate Description and scale of key monetised benefits by ‘main affected groups’ None Other key non-monetised benefits by ‘main affected groups’ None Key assumptions/sensitivities/risks Discount rate 3.5% BUSINESS ASSESSMENT (Option 1) Direct impact on business (Equivalent Annual) m: In scope of OITO? Measure qualifies Costs: Benefits: Net: No NA 3 Summary: Analysis & Evidence Policy Option 2 Description: Option 2 – All drinks containers included in DRS FULL ECONOMIC ASSESSMENT Price Base PV Base Time Period Net Benefit (Present Value (PV)) (m) Year 2018 Year 2022 Years 11 Best estimate: 5,884.5 COSTS (m) Total Transition Average Annual Total Cost (Constant Price) Years (excl. Transition) (Constant (Present Value) Low High Best Estimate 2,150 172 6,346 Description and scale of key monetised costs by ‘main affected groups’ (discounted) Capital investment costs (1,760m); Organisational Set up costs (141m); IT Installation costs (7m); Training and familiarisation costs (14m); Relabelling costs (36m); Central administrative costs (239m); Enforcement costs (11m); Reverse Vending Machine (RVM) Handling costs (536m); RVM Maintenance (783m); Counting centre costs (212m); Retail rental costs (152m); Manual take-back labour costs (279m); Logistics (1,982m); Retailer opportunity costs (194m); Deposits unredeemed by consumers used to fund system (Assumed to be 50% of net costs) (-3,598m). Other key non-monetised costs by ‘main affected groups’ The potential cost to consumers for the time required to return drinks containers to RVMs or manual take- back points. BENEFITS (m) Total Transition Average Annual Total Benefit (Constant Price) Years (excl. Transition) (Constant (Present Value) Low High Best Estimate 0 1,392 12,231 Description and scale of key monetised benefits by ‘main affected groups’ (discounted) Reduction of disamenity from litter (11,198m); Net material revenue (347m); Direct costs of litter clean-up savings (661m); Savings from recycling (93m); Increase in greenhouse gases (GHG) from transport (-68) Other key non-monetised benefits by ‘main affected groups’ The provision of a high-quality stream of waste for the domestic reprocessing market. Key assumptions/sensitivities/risks Discount rate 3.5% Assumption that the return rate achieved by the DRS is 85%, and that will result in an 85% reduction in drinks container litter. Assumption that some estimates based on Scotland can be scaled up via population to the UK. Sensitivities around litter disamenity estimates as this is an uncertain area of research. BUSINESS ASSESSMENT (Option 2) Direct impact on business (Equivalent Annual) m: In scope of OITO? Measure qualifies Costs: Benefits: Net: -266 No NA 4 Summary: Analysis & Evidence Policy Option 3 Description: Option 3 – ‘On the go’ drinks containers included in DRS FULL ECONOMIC ASSESSMENT Price Base PV Base Time Period Net Benefit (Present Value (PV)) (m) Year 2018 Year 2022 Years 10 Best estimate: 282 COSTS (m) Total Transition Average Annual Total Cost (Constant Price) Years (excl. Transition) (Constant (Present Value) Low High Best Estimate 1,235 85 3,503 Description and scale of key monetised costs by ‘main affected groups’ Capital investment costs (949m); Organisational Set up costs (141m); IT Installation (7m); Training and familiarisation (14m); Relabelling (17m); Central administrative costs (239m); RVM Handling costs (298m); RVM Maintenance (468m); Counting centre costs (163m); Retail rental costs (84m); Manual take-back labour costs (100m); Logistics (932m); Opportunity costs (97m); Material revenue from unredeemed deposits (-1,701m) Other key non-monetised costs by ‘main affected groups’: The potential cost to consumers for the time required to return drinks containers to RVMs or manual take-back points. BENEFITS (m) Total Transition Average Annual Total Benefit (Constant Price) Years (excl. Transition) (Constant (Present Value) Low 0 High 0 0 Best Estimate 0 431 3,785.4 Description and scale of key monetised benefits by ‘main affected groups’ (discounted) Reduction of disamenity from litter (3,614m); Net material revenue (99m); Direct costs of litter clean-up savings (201m); Savings from recycling (25m); Increase in GHG from transport (-21m) Other key non-monetised benefits by ‘main affected groups’ The provision of a high-quality stream of waste for the domestic reprocessing market. Key assumptions/sensitivities/risks Discount rate 3.5% Assumption that the return rate achieved by the DRS is 85%, and that will result in an 85% reduction in drinks container litter. Sensitivities around litter disamenity estimates as this is an uncertain area of research. BUSINESS ASSESSMENT (Option 3) Direct impact on business (Equivalent Annual) m: In scope of OITO? Measure qualifies Costs: Benefits: Net: -182.7 No NA 5 Summary: Analysis & Evidence Policy Option 4 Description: Option 4 – All-in drinks containers included in DRS, excluding glass FULL ECONOMIC ASSESSMENT Price Base PV Base Time Period Net Benefit (Present Value (PV)) (m) Year 2016 Year 2017 Years 10 3,582.3 COSTS (m) Total Transition Average Annual Total Cost (Constant Price) Years (excl. Transition) (Constant (Present Value) Low High Best Estimate 1,738 171 5,491 Description and scale of key monetised costs