Let the Annual Plastic PRN Poker Game Commence, says RECOUP

Date Published: Friday 23rd October 2015

Stuart Foster from RECOUP has stated that ‘the unnecessary annual game of plastic PRN poker between the sellers and buyers will commence now Q3 2015 data has been published.’

His comments come as the latest packaging recycling data was released yesterday. The provisional data shows that 197,249 tonnes of plastics packaging were recycled in Q3. That equates to 61% or 120,664t being exported, whilst around 39% or 76,585t stayed in the UK for recycling. It is acknowledged that there are several plastic reprocessors and exporters still to report their quarterly data so these figures will be revised up.

Foster notes that ‘as anticipated, the provisional Q3 data shows reported plastic packaging recycling tonnage was down when compared to the previous quarter. It will cast some doubt over the achievability of the 2015 target and almost certainly lead to speculation on further plastic PRN increases to the end of the year. The fact that significant PRN tonnage from 2014 year was carried over to 2015 will provide a cushion, but it is almost certain that cushion will not be there for 2016 as plastic packaging recycling targets increase by another 5%. For the benefit of everyone, we need to see some changes to the way the current system works.’

The summary of responses to the DEFRA consultation on aspects of packaging waste regulations was published recently, including views on targets and potential PRN value impacts. The full RECOUP response (available here) outlined a number of relevant points including;

  • Approaches to mitigate artificial short term PRN price volatility must be considered as they can be difficult to manage and often do not reflect the underlying performance against targets. It is therefore proposed that a mechanism is introduced to enable more stable short term prices.
  • Larger traders and reprocessors have the ability to withhold or move significant material tonnage stocks for legitimate business reasons, but in doing so can also have a temporary but significant impact on the perceived shortfall or oversupply of PRN’s, and therefore the value. If a shortfall is reported in official data for this reason, the PRN value impact should be mitigated.
  • There is a need for the PRN funding to be more transparent. Amendments to the accepted PRN spend categories and a better understanding of where these funds are used in line with established priorities is needed.

Amongst the recommendations that RECOUP believe merit more detailed consideration and further feasibility assessment were;

1)      Plastic packaging targets will increase. Temporary over supply of material to market results in an artificial lowering of obligation costs (Q4 2014 as an example), despite longer term trends. Producer responsibility should apply even if targets are being met in the short term. A default minimum value for plastic PRN’s should be considered for 2016 and 2017, and reviewed at the end of that period. This would help to avert the boom and bust approach we currently see. The floor price would be reset at the beginning of each year and there are already models such as the carbon floor price which provide a reference point for this approach. The expected benefits would include additional confidence in PRN values for producer supply chain budgeting each year, and encouragement for reprocessors and exporters to be registered and accredited every year rather than work outside the system when PRN values are low.

2)      A mechanism is needed to restrict the volatility of short term plastic PRN prices. This would take the form of a percentage limit on the monthly value range changes applied to a PRN using an independent and public reference point. For example a maximum price change of 20% in any one month would still provide value flexibility based on demand. Market competition for material is encouraged and necessary, but considerable daily or weekly price changes purely due to PRN value amendments are not.

This will mitigate the impact of a temporary over capacity or shortfall, and the immediate impact on the producer responsibility costs is minimised. If changing PRN supply or demand represents a genuine market adjustment, then the longer term values will continue to move up or down accordingly, a characteristic of the PRN system that works well and must be retained.

3)      There is a requirement for exported material to follow a transparent and auditable route that the producers, consumers, local authorities and waste management companies can have confidence in. Creating a more positive and acceptable view of export markets based on a better understanding of those markets is critical, particularly non OECD destinations. A strong UK reprocessing sector is also needed and RECOUP will continue to advocate its development, but the reality is that over 60% of the plastic packaging recycling tonnage reported in 2014 was against export activity and those markets are likely to continue to be viable and competitive.

Whilst some organisations already undertake auditing on a voluntary basis to better understand their market outlets and protect their integrity, this is an investment that should be made by all involved in trading material and issuing PERN’s. Further consideration is needed towards making an appropriate auditing and reporting system mandatory as part of plastic packaging recycling export activities. The costs of that activity will be recognised as eligible against PERN funds under the current ‘costs of complying with the regulations’ category. This system will require some control and management in terms of auditor competence and approach.

 

4)      A review of the current approved categories for PRN spending is required. This includes removal of the ‘retaining of funds’ option as funds are raised against the need to address a market shortfall in any given year, not to be spent at a later date.

Based on published information, approximately £55m has been raised through the plastic PRN system over the past three years, with £11.3m from the £55m raised (20% of total) being allocated towards local authority collections. Local Authorities were asked as part of the RECOUP annual survey if they see any benefit from plastic PRN monies. Of 199 responses, 39% said yes, 61% stated unsure or no. There is a need to ensure that plastic PRN funding is more transparent.

 

http://www.360environmental.co.uk/news/836/

Please note the numbers have been updated since the press release was published. 

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