This article notes the current status of UK EPR and captures key information on modulated fees which has just been released by Defra.
Defra is currently having discussions with a wide variety of stakeholders on the topic of modulated fees and how these will be calculated under the new enhanced Extended Producer Responsibility (EPR) scheme in the UK.
These discussions are expected to continue into early 2024, with an aim to:
Introduction of the UK’s new enhanced Extended Packaging Responsibility scheme has been very disjointed. So far, Defra has confirmed that:
Starting in the reporting year 2026/2027, EPR fees will be adjusted (i.e. modulated) to incentivise businesses to use materials with a lower environmental impact. More recyclable packaging in each material type will be priced at proportionally less per tonne than less recyclable packaging in the same material type.
In practice, some packaging will receive an increased fee, and other types of packaging will receive a decreased fee. For example, the Government may choose to assign PVC packaging a modulation factor of 1.2. This would mean that PVC packaging would attract a 20% higher fee than the plastic ‘base fee’. Other, more recyclable plastic packaging, would receive a reduced fee.
Defra's EPR team is currently working to create a methodology which Producers can use to calculate their packaging’s recyclability and forecast likely fees.
Since September 2023, Defra has been capturing input on a shortlist of packaging that could trigger increased fees under the modulation provisions of packaging EPR. More details on this can be found in the next section, on how modulated fees will work.
There are currently 13 shortlisted materials in discussion, although this list may be shortened. The materials include:
The Scheme Administrator for the UK’s new enhanced EPR scheme for packaging has a duty to increase or decrease base fee rates for packaging to reflect the environmental sustainability of different materials and types of packaging. Initially the focus of this modulation will be on the recyclability of the packaging, but Defra has made it clear that the Scheme Administrator can, over time, broaden this criteria to reflect wider environmental impacts, such as:
The aim of modulation in all cases is to incentivise the use of packaging which has a lesser impact on the environment.
Defra is currently working to create a methodology which Producers can use to make an assessment of their packaging’s ‘recyclability’, via their Recyclability Assessment Methodology (RAM) project, the results of which will be available from mid to late 2024.
A review of materials being considered for higher modulation - conducted by the Waste and Resources Action Programme (WRAP) - highlighted three criteria which may be used to assess ‘recyclability’:
There has been an interesting range of questions raised during recent Defra stakeholder events querying the other factors that might influence modulated fees and the ‘recyclability’ of packaging, including whether a material’s circularity, litterability and/or carbon impact - or the size of some packaging and its inability to be sorted at facilities - will be relevant.
Modulation of fees applies only to packaging supplied by ‘Large Producers’ under the new enhanced EPR framework, and only to the packaging which is subject to disposal cost fees i.e. household packaging.
Anything that is modulated upwards or downwards will need to be separately reported under the new enhanced EPR Packaging framework.
Eventually, however, all Producers will have to label their packaging ‘Recycle’ or ‘Do Not Recycle’ in accordance with the Recyclability Assessment Methodology.
In January 2024, it is expected that Defra will share:
This an area of rapid change, where the cost implications for businesses across a range of sectors are very significant.
Our legal, commercial and operational team is tracking developments very closely and advising multinational companies on the development of packaging-related regulation in the UK and across Europe.
We are helping clients to consider their pack mix of the future and the circularity of products, bearing in mind relevant commercial considerations and desired progress towards Net Zero goals.
We can help businesses comply and plan for the future by providing:
The article touches upon the expected fees payable, timelines relevant to large packaging producers over the coming year, and includes links to PwC guidance on how to account for pEPR fees for internal financial and account teams.
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