The Reform of Extended Producer Responsibility, which will benefit Poland the most

The EPR of the producer means almost PLN 100 billion for the economy. Experts warn that the ministerial version of the EPR means taxes and risks. They emphasize that adding money itself will not solve numerous problems worrying the waste industry. Not only a comprehensive change in the rules of the game is needed, but also in the fees.

Assumptions of the draft amendment to the Act on the management of packaging and packaging waste, published on April 30 this year by the Ministry of Climate and Environment in the form of an entry in the list of legislative and programme works of the Council of Ministers, lead to a sad conclusion: the entities introducing packaged products will face further payments. They will find out about the rates to be paid from the Journal of Laws (in the case of products in packaging intended for households) and the Polish Monitor (in the case of transport and collective packaging). Whether we call these payments "fees" (in the first case) or "minimum remuneration" (in the second case), we will simply be dealing with a tax on packaging. It will be a lost opportunity not only for waste management, but also for the entire Polish economy. A lost opportunity worth almost PLN 100 billion.

One needs to remember: in its legislative plans, the Ministry intends to separate the packaging waste stream into household waste and transport and trade waste. The first type is to be subject to a tax (more precisely: a fee), collected by marshal offices and then transferred to the National Fund for Environmental Protection and Water Management. It is not known how much this tax will be. It is known that on average it is to be PLN 0.50 per kilogram, and its exact amount will be specified in the ordinance of the Minister. In addition, it is supposed to set a minimum level of the "remuneration" to be collected by the producer responsibility organizations from those introducing transport and collective packaging waste management.

Unanswered important questions

According to the assurances of the Ministry, funds from the tax on products in packaging intended for households are to reduce the burden on residents due to waste management. However, the published assumptions do not explain how this would happen. It is only known that fees for producers are to be charged every month and they are to be sent to local governments.

Furthermore, it is not known how the producer responsibility organizations (this is what today's packaging recovery organizations are supposed to call them) are to use this "compulsory remuneration", even at a minimal level, to manage transport and collective packaging. The more so because these packagings have never been a problem: high-quality clean foils or paper are the materials most sought after by recyclers. Not to mention wooden pallets.

For the above reasons, the published assumptions raise very important questions, and the representatives of the Ministry consistently refuse to provide details and tell us to wait for the publication of the act. These questions, however, need to be repeated consistently, because the answers to them will determine how much the ministerial draft deviates from the provisions of the Waste Directive regarding the Extended Producer Responsibility. And it will be, as we already know from the assumptions presented.

First, it is not known what the actual costs are in local governments: To determine the tax, the ministry adopted the level of fees that the introductory persons paid in 2019... in the Czech Republic.
Secondly, the basis of the rate used to determine a given packaging is not known: whether there will be Czech eco-modulation in Poland, or whether it will be determined from behind an official desk by the Vistula River.
Thirdly, how does this mechanism fit the net cost principle, explicitly enshrined in the waste directive.
Fourthly, we do not know whether the funds from producers will go to municipalities and whether the latter will have any obligations related to receiving this money.

Meanwhile, the EU law states clearly: “The Member States shall take the necessary measures to ensure that the financial contributions to be paid by the producer of a product meet its extended producer responsibility obligations and do not exceed the costs necessary for the provision of the waste management services in a cost-effective manner. These costs shall be established in a transparent way between the entities concerned.” No more and no less.

Tax is the simplest form of "coping" with the obligations of producers. Someone will set the amount, someone will collect, someone will donate, and someone (maybe) will receive. The proposed mechanisms lead to the conclusion that no matter what happens to the money, it is important that producers pay, because that's all that matters. Are these rules in the EU law? One can become suspicious that there is less and less attention to them than to the detriment of not only the proposed law, but also common sense.

Money without reform is an illusion

In many speeches delivered by the participants of the public debate on the Extended Producer Responsibility, a specific mythologization of the EPR funds is visible. The additional stream of money is supposed to be a "cure for all evil": to fix everything, improve it, stabilize it and lead the country to a path of success. Nothing is more wrong! It is due to the fact that one should face the truth and openly say what the municipal waste management looks like in Poland.

70% of the waste generated by residents is mixed waste, and only 30% is selectively collected - as much as one quarter of this is biodegradable waste. For this reason, the EPR funds will not cover a total of 75% of the waste generated today in municipalities. The residents are the ones who pay and will pay for the management of mixed and bio waste.

Another painful truth is that it is the management of mixed and biodegradable waste that causes the greatest problems for municipalities and the highest costs for residents. The sharp increase in these costs in recent months was not related to raw material waste, but to the rampant costs of managing the energy fraction, an increase in storage fees and the impossibility of composting. Will the funds from the EPR in any way reduce prices in these areas? No, because the funds from the producers of packaging products cannot be used for these projects.

In this context, the shaking of the municipal system based on the Public Procurement Law is the "nail in the coffin". The main threat, contrary to popular opinion, is not the rule of the lowest price, as public procurement can consider other factors, and the officials conducting tenders are increasingly aware of the consequences of choosing a price below the profitability criterion. The fundamental problems are: the short duration of contracts concluded with a waste management plant, which is at most 3 years, and the current practice has shortened this horizon and average contracts are concluded for a period from a few months to one year, and a tender mechanism that does not give entrepreneurs in the waste sector any guarantee that after fulfilling the contract received, they will obtain further orders. Consequently, the installation can be deprived of a substantial part or all of the waste stream. Finally, the entity submitting an offer for the collection of waste from residents is obliged to indicate the municipal installation to which the collected waste will be delivered, which usually results in sacrificing the quality of the sorting process for a lower price. This is the reality of today's system, which, as a result of these barriers, is developing very slowly in terms of quality, in contrast to the dynamically increasing prices for municipal waste management services.

Therefore, the disadvantages of the public procurement system mean that both the expanded and newly created sorting plants as well as the treatment or recycling plants necessary to be built will not have any guarantee of maintaining the supply of waste necessary for running their business. In such conditions, only a desperate person will be tempted to invest, although there is no shortage of EU funds for them (representatives of the National Fund for Environmental Protection and Water Management recently revealed that the money is waiting but no one is submitting applications!). Due to the lack of certainty that any waste will be delivered to the installation in a year or two, it effectively threatens to maintain the requirement of investment durability, which will simply result in the return of EU subsidies.

In Poland, almost everything is missing. The analysis of the investment gap prepared by the Institute of Environmental Protection for the Ministry of Climate and Environment shows the need to build and modernize 1,300 points for Selective Collection of Municipal Waste and 200 sorting plants (municipal installations), build the entire infrastructure for recycling biodegradable waste, and expand the incineration plant to manage as much mixed waste as today. This includes the expansion of the paper mill, the construction of 25 plastic recycling plants, 4 cullet treatment plants, the addition of 300 metal separators, and the development of infrastructure for recycling multi-material waste. This is over PLN 26 billion by 2034, not to mention expenditures on incinerators.

If the financial situation of municipalities was better, they might find funds for their own contribution to EU funds in order to implement the necessary investments (except for incinerators, because EU funds cannot be allocated to them). But it is not, which the municipalities say very emphatically. Furthermore, even local government entities, not to mention private investors, are afraid of using these funds, so as not to give them back in a few years.

Division of tasks, i.e. let everyone do their own thing

In this situation, the only reasonable solution is to divide tasks between municipalities and the producer responsibility organizations. The latter must take over the obligation to organize separate collection and further management of waste from four main fractions, i.e. glass, plastics, paper and cardboard, and metals, as well as multi-material packaging, due to the fact that these fractions mainly include packaging waste generated from products placed on the market. Municipalities should focus on what is most important to them: on the collection and management of mixed and biodegradable waste (because today it is 75% of all municipal waste), as well as bulky and demolition waste.

Such a division will “unblock” the system, because the EPR organizations will contract all services on the basis of the Civil Code, which will enable the conclusion of long-term contracts with sorting plants, treatment plants and recyclers. It will ensure the certainty of supplies of raw materials and business stability, i.e. it will guarantee the durability effect, which is the most important in the investment process. This will further allow to plan and implement the projects necessary to fill the investment gap. For example, from the EU funds waiting idly today, as even the representatives of the National Fund for Environmental Protection and Water Management talk about it.

To have or not to have 100 billion

The division of tasks and unblocking the system is to fill the investment gap, and such filling is a powerful social and economic impulse for the entire country. The investment contribution, new jobs and expenses of employees in the sector and related industries will give the Polish economy approx. PLN 95 billion by 2034, which will accelerate Poland's GDP growth by at least 0.33% annually. For comparison: that's roughly 1,980 km of new highways.

The number is extremely high, but completely real. There is only one condition: the producer's EPR model, providing the producer responsibility organizations full implementation responsibility for waste generated from their products. Producers are not afraid of obligations imposed based on the EU law or the costs associated with their implementation. As long as the costs are related to the change of the system that will best serve not only waste management, but also the environment and all citizens.

The introduction of a packaging tax, as planned by the Ministry, is therefore pointless. It will not change anything, and it will not help anyone. The municipal system will remain unsteady and constrained by public procurement. There will be no necessary investments, and today's waste infrastructure gap will continue to exist. We should know what the consequences of this can involve: Poland's failure to meet EU recycling levels, the shortage of raw materials on the market, dependence on foreign suppliers, and getting stuck in the tail of countries implementing circular economy. Poland will lose out, that is all of us, especially producers and local governments.

One can have a good system, division of tasks, investment unlocking, and an impulse that generates PLN 100 billion in the economy. But one can also not have it and collect a tax that is choking producers. The choice is clear.

Author: Krzysztof Baczyński, President of the Management Board of EKO-PAK Employers Association
The title and lead were prepared by the TOGETAIR editorial team

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