Defra launches investigation as PRN market flounders

The move comes after the packaging waste recovery note (PRN) market – the financial mechanism of packaging producer responsibility – collapsed last month.

” We need to find out where the big falls are, and whether this is a blip, a longer-term trend or something that needs enforcement action.“
– Defra spokesman
PRNs and their export equivalent PERNs are now being purchased by packaging producers from reprocessors for as little as 3 per tonne. The price collapse came partly because this year's obligation of producers to buy PRNs was revealed to be much lower than expected (see letsrecycle.com story).

Consultants Solution 7 have been brought in by Defra to conduct a swift investigation in, expected to reach its conclusions by the end of September.

Reasons
The investigation will seek the reasons behind the unexpected shortfall in producer obligations. It has already seen packaging producers and their compliance schemes asked to provide data comparing how much packaging recovery and recycling they were supposed to pay for last year compared with 2006.

A Defra spokesman confirmed: “Defra has issued a consultancy project to Solution 7 to investigate the obligation data. It will look into what caused the shortfall this year, looking into whether there have been problems with the data, any underreporting of data or some other issue that might require enforcement action on the part of the Agencies.”

Although new regulations were brought in this January making new categories of packaging liable for producers to fund recycling (see letsrecycle.com story), this year's obligation figures are thought to be very similar to last year's.

Even with franchise businesses and companies providing leased packaging now legally obliged to buy PRNs to pay for recycling, the number of PRNs requiring purchase this year has not grown significantly from 2005.

Shortfall
This, industry experts have said, could mean a 300,000 tonne shortfall in the obligation levels predicted by Defra when it set this year's recovery and recycling targets.

Particular shortfalls from the expected obligation tonnages have come in the steel material stream, which saw a 13% drop from expected levels. But, there is also now a suspicion that the packer-filler obligation in the glass stream is significantly down on expectations – despite no major changes in the UK drinks market.

The Defra spokesman said: “We need to find out where the big falls are, and whether this is a blip, a longer-term trend or something that needs enforcement action.”

He added that the move was being taken swiftly to ensure that there is no threat to the UK's compliance with packaging recovery targets set by the Europe for 2008.

Valpak
The UK's largest packaging waste compliance scheme, Valpak, told letsrecycle.com that its members obligations had actually grown from 2005 in line with Defra estimates. Since Valpak represents over half the market for packaging producer responsibility, the scheme suggested obligation falls elsewhere could be significant.

Welcoming Defra's investigation into the issue, a spokesman for the scheme said: “We support the investigation which Defra is carrying out, particularly as Valpak's data is more in line with Defra's original expected obligation growth levels vs 2005. For example, in glass the 2006 UK obligated tonnage figures published in August show a fall in the obligated tonnage captured of 1.5% vs 2005.

“Whereas Vapak's like for like obligation, ignoring joiners and leavers, shows an increase more in line with Defra's original estimated growth of more than 4%. Given that Vapak is over 50% of the market then the rest of the UK's obligation must have fallen by more than 7%. We find this surprising and are currently scrutinising our figures further and would urge other schemes to do the same,” the Valpak spokesman added.