OPINION: ‘Transition year for Scottish DRS could help PRN market’

OPINION: In August, Scotland will officially roll out its deposit return scheme (DRS), covering beverage containers placed on the market. The scheme will fundamentally change the flow of packaging materials, requiring separate reprocessing and recycling.

Materials collected and reprocessed through the DRS will no longer be obligated under the ‘producer responsibility’ system. In essence, this means that producers placing material on the Scottish market will no longer be required to buy PRNs for beverage containers.

The PRN market is target driven, relying on transparency around two key figures: UK obligation, how many PRNs/PERNs need to be purchased in a compliance year, and UK recycling performance, how many PRNs/PERNs are likely to be generated in a compliance year.

It is worth noting that as the material placed on the market in Scotland has no obligations under the PRN system, it is likely that beverage containers collected will no longer generate PRNs.

The challenge

On the surface, switching the obligation from PRN to DRS sounds pretty straightforward and removing the eligibility of DRS materials for PRNs to be generated appears to make sense. However, one major oversight is that the PRN system operates a year in lieu, meaning the UK obligation is based on packaging handled the previous year.

This means that the UK recycling targets for 2023 are based on all packaging handled throughout 2022, including beverage containers. However the quantity of evidence available to the market will not include beverage containers from Scotland following the DRS launch later this year. This will leave the PRN system “out of pocket” in terms of the PRNs available versus those required.

Quantifying the missing tonnage

One common question is, how much tonnage is likely to be missing from the market following the introduction of the Scottish DRS? Unfortunately, the simple answer is that we don’t know. We can theorise rough tonnages but the overall amount affected will depend heavily on market estimates, as well as the theoretical success of the Scottish DRS.

The lack of data transparency is not helped by the lack of consistency between the government and the DRS administrator, Circularity Scotland (CSL). The administrator estimates a relatively high performance of the scheme during the initial 12-months, which in turn suggests that the industry will see a high quantity of missing PRNs following the launch. DEFRA, however would disagree, having stated that they do not perceive the tonnage affected to be significant – despite very little public data to support this.

Figures taken from CSL, on Scotland’s beverage containers placed on market tonnage, can provide an estimate of the minimum impact to the obligation by material (see table below). The DRS tonnage not eligible under the Scottish DRS is calculated by dividing the total POM tonnage by the 5-month period from August to December.

Please note: Percentages given in the table show an estimated minimum impact due to a lack of publicly available POM data.

Finding solutions

There are several solutions to navigate this issue, but broadly speaking only one of them is a practical workaround in reducing the impact on the PRN market, while only requiring minimal intervention from the regulator and little to no change in regulations.

The simplest option is for DEFRA to allow PRNs to be generated on beverage container materials collected in 2023, creating a ‘transition year’. This would ensure that the overall PRN system is not out of pocket compared to the producer obligation, while also providing a slight financial bolster to the set-up of the Scottish DRS.

This is turn would set a precedent for transitional periods for future DRS introductions, something that will be needed to promote alignment across the UK as separate schemes in England, Northern Ireland and Wales are introduced.

The open market approach of the PRN system means that evidence shortfalls do not solely impact producers, it affects everyone. To abate a completely avoidable issue from arising, we are encouraging producers and their representative organisations to write to DEFRA expressing both their concerns and their support for the relatively simple solution of continuing PRN eligibility until the end of 2023.