Defra in attempt to cut red tape in PERN system

The Department for the Environment, Food and Rural Affairs has launched a consultation on amending its Packaging Regulations 2007, specifically to relax requirements on foreign reprocessors receiving UK packaging waste.

At present, packaging waste exported outside of the European Union only counts towards recovery and recycling targets if there is firm evidence the reprocessor receiving the material is operating to “broadly equivalent” standards to European recyclers.

This has proved difficult, particularly for exporters of metal packaging waste, because of issues including commercial confidentiality in export agreements, and because markets for material can change at short notice.

Although material is still being recycled, the rules mean the foreign recycling of British packaging waste may not count towards the UK's compliance with the EU Packaging Directive recycling targets.

Defra is now proposing to give Competant Authorities more discretion on what constitutes “sound evidence” of material being reprocessed to broadly equivalent standards, including powers to accredit exporters even when the site to which they are exporting is unknown.

The proposals come with conditions for the material to be single stream, and most importantly, have a high economic value – effectively limiting the changes to metals.

Responses to the consultation should be received no later than 29 April 2008.

Ian Atkinson, from the producer responsibility unit at Defra, said that if the amendments were not adopted, the UK was “at risk” of failing to meet packaging recycling targets for metals.

He said: “We are seeking your views on proposals to revise requirements regarding evidence of broad equivalent conditions for export reprocessing sites, and on the partial impact assessment which supports the proposals.”

Estimates

Looking at Defra's estimations published alongside the consultation, the figures suggest even with the changes to the Regulations, more aluminium packaging waste recycling will need to be carried out for this year's producer targets to be met. However, with the European targets relating to metals, rather than specifically steel or aluminium, the UK appears safer in complying with the Directive.

The consultation explained further: “This proposed option would make it more likely that sufficient PRN/PERNs are generated for producers and compliance schemes to meet their obligations. If the proposed changes are made to the Regulations, it is expected that the overall EU metals target for 2008 would be easily met, as would the steel business targets. However, there would still be a need for more aluminium waste packaging to be recycled to meet business targets for 2008.”

PRN market

If the packaging consultation proposals are adopted, it is likely that the availability of metal packaging waste export recovery notes (PERNs) would increase. PERNs are the evidence of packaging exports and are the same value as domestic reprocessing evidence (PRNs).

Prices for PERNs and PRNs for steel currently stand at around £15 per tonne, but for aluminium where the “broadly equivalents” issue is of particular concern, prices for PERNs and PRNs have been seen up to £80 in recent weeks, although trading has not yet taken off this year.

Defra warned that prices for metal PRNs could still rise “significantly” in the first and second quarter of this year in reaction to “simple supply and demand issues” – and would only be mitigated after the regulation amendments come into force.

The Department said: “The issues related to market uncertainty are likely to persist.”

PRN

In the PRN market at the moment, trading is just warming up as producers and compliance schemes concentrate on the annual administration requirements of the packaging producer responsibility system and finalising compliance arrangements from last year.

Prices have not yet been particularly affected by new national recycling targets which were published by Defra last month (see letsrecycle.com story), but compliance schemes and reprocessors have revealed some possible trends for the months ahead.

Paper

In the paper sector, prices for PRNs are currently low at around £2-£3 a tonne, due to the high levels of reprocessing in the sector compared to the target levels required. This is causing many mills to question whether it is even worth issuing PRNs any longer.

The Confederation of Paper Industries (CPI) – which represents the paper mills – has called on Defra to consider exempting paper from the PRN system if a robust data collection system can be found to ensure UK compliance with the EU Directive.

Peter Seggie, CPI recovered paper sector manager, said: “The PRN/PERN value for paper packaging is just about covering the administrative costs of UK reprocessor and exporters but is not leading to any further investment decision being made on the back of it.”

Wood

In the wood sector, PRN prices remain at a similar level to paper, at between £2-3 a tonne – also because wood reprocessing levels are far beyond the targets required. However, recyclers have welcomed the price moving upwards from as little as 75p per tonne seen last year.

It is also anticipated that Defra could push up its current 20.5% recycling target for wood to 24% by 2012, which would push prices higher. The Department is still considering the options for all packaging recovery targets beyond 2010.

Plastics

In the plastics arena, PRN prices currently stand at around £17 a tonne, but some plastics processors have said relative to the value of plastics, and since plastic packaging is light, this value of PRNs may not give some reprocessors enough incentive to go through the accreditation process to issue PRNs.

If some plastics reprocessors do not become accredited this year to issue PRNs, a resulting increase in plastic PRN prices could be seen later in 2008.

The ban on household plastic film to China earlier this month (see letsrecycle.com story) could also see prices increase, as less PERNs will be issued. Yet, at present, reprocessor have reported that this has had no direct impact on the market.

Glass

In the glass sector, PRNs are currently trading at around £21 a tonne, representing a slight increase from last month.

However, increasingly high collection rates for glass packaging waste – especially via materials recycling facilities – are expected to see an increase in recycling levels that could reduce glass PRN prices by next year.

If PRN prices fall, more glass material could then be channelled into the container industry, rather than the aggregates industry, since the aggregates industry is more reliant on the PRN revenue to process the material suitable for making building products.

One reprocessor told letsrecycle.com: “We will crack the targets easily this year and then the aggregate people will have to start charging rather than pay more than glassworks do for glass.”