Tradeable permits for beverage containers

An IndEco article

By: Judy Simon

The Rio Convention creates an obligation for signatories like Canada to encourage sustainable production. To date Canada has done little to fulfill this obligation. This fall Canada hopes to be the host of the first of 4 planned OECD international workshops on "extended producer responsibility"; (EPR), buzz words for manufacturers taking greater responsibility for the environmental costs of their products over their life cycle. Canada's proposed workshop is expected to raise awareness about EPR and provide Canadian input on the OECD's EPR policies. This is an opportune time to do some creative thinking and devise innovative approaches to promote EPR. It is a good time to seriously look at tradeable permits for packaging.

Tradeable permits such as those used in the United States to reduce emissions of lead in gasoline, and sulphur dioxide emissions could be used to limit the manufacture of environmentally inferior packaging, while preserving manufacturer and consumer choice and encouraging high packaging recovery rates. Tradeable permits may not be appropriate for all types of packaging, but could be effective in the beverage container sector to promote refillable packaging - an environmentally superior form of packaging for beverages. Life cycle analyses comparing one way beverage container packaging versus refillables using the same material tend to show that refillables are environmentally superior.

A tradeable permit system for beverage containers should:
    • use the market to encourage environmentally appropriate decisions
    • contain strong incentives for refillables
    • mandate full user pay
    • be performance based
    • provide manufacturers and consumers with a choice
    • encourage high recovery rates
    • be easy to understand and enforce

Here's how such a system could work at the provincial level.

A provincial government would pass a regulation prohibiting the sale or distribution of beverage containers in non-refillable containers unless the company holds a permit to do so. In order to obtain the permit, the company must enter into agreement with the government agency or private company mandated by the government responsible for administering the tradeable permit system. The agreement would set quotas for the sales volume of non-refillable beverage containers (e.g. one quota for beer and one for soft drinks) and establish fees to be paid for overages at levels sufficient to discourage them and pay for the alternative management systems required. Companies that achieved higher percentages of refillables than required by the quota would be permitted to trade their underages with those companies expected to have overruns. The quotas would become more stringent over time as the infrastructure for refillables becomes more efficient.

The program would be self -regulating and easy to administer. Bottlers and distributors ("seller") would be required to submit annual audited statements to the agency stating the total sales volume by container type, itemizing the type and size of any trades made, and calculating any fees to be paid for excess volumes. The fees would be paid to the agency for 3Rs initiatives.

Bottlers and distributors would be required to recover empty containers and pay a handling fee for storage and handling of empties to reflect the actual costs. The agreement would also establish targets for recovery rates.
Deposit return systems on beverage containers have proven to be very effective in achieving high recovery rates. Since there are already deposit return systems for beer and soft drink containers across Canada, it makes sense to test the tradeable permit system with these beverages first and to expand over time.

How practical is this system? This tradeable permit system is modelled on the system in Quebec for limiting the total sales of beer and soft drinks in cans. Some modifications to the existing legal agreement would be necessary in order to base the quotas on non-refillable containers, rather than just cans and to require the reporting of trades between companies. While the current Quebec system does not explicitly mandate trading, this takes place informally. Companies with overages make arrangements for their products to be sold by companies with underages. However, this is done on a small scale because companies do not want to lose control over the marketing of their products. If trading were mandated in the agreement, it is likely that it would become more widespread since companies would be able to retain marketing control.

The timing seems right to pilot such a system. Quebec already has in place most of the components required and a new legal agreement is currently being negotiated. Ontario's container regulations establishing a 30% quota for non-refillable soft drink containers are under review. The government has said that "it continues to support refillable/reusable packaging and is seeking views on alternative approaches.

Putting in place a pilot to promote producer responsibility in packaging would move us forward on our Rio commitments and will certainly give us something to talk about with our friends from the OECD!

Quebec's System for Limiting Beverage Cans
    • Permit and legal agreement required
    • Quotas for total annual sales volumes of cans - not more than 37.5% of the seller's total sales volume
    • Fees set for excess sales
    • If quota is exceeded by 10% or less, pay .30$/L in excess; if quota exceeded by greater than 10%, pay $.30/L
    • Mandated deposit return system
    • Retailers take back empties
    • Bottlers/distributors collect empties, pay handling fee (2 cents/ container)
    • Audited statements required to describe total sales by container type and fees owed
    • Recyc-Quebec, a crown agency, runs the program and uses fees to promote recycling