Paper chase: a golden opportunity to get EPR right

by John Mullinder,

The complicated patchwork of different collection and processing arrangements that is the current B.C. residential Blue Box “system” is being thoroughly reviewed in readiness for the 2014 launch of a 100 percent industry-funded program for printed paper and packaging. It’s a big job, with many sometimes competing elements to be factored in. Chief among these is who gets to do what, and how, going forward.

It is our belief that the industry collective of grocery retailers, consumer packaged goods companies and newspaper publishers which will run the program has failed to seize a golden opportunity to introduce the lowest-cost, most effective option in B.C. Instead the collective has given in to the politics of the moment and granted local governments the “right-of-first-refusal” on collection contracts. In effect, it is saying: “We (industry) will allow you to continue to base collection on municipal borders. We know it’s not the most efficient way to collect materials, but by allowing you to stay in the game maybe you will tone down the rhetoric somewhat, and ease the transition.”

The proposed plan from the rest of the industry flows from this key political decision. The private sector (which actually does most of the collection in B.C., as contractors “managed” by municipalities) could be effectively shut out of competing directly for collection contracts. It will only get to bid on a piece of the action if the current (mostly local government) collection manager decides to opt out. 

There are additional costs to industry funders (stewards) that flow from this decision on collection policy. Instead of a relatively simple province-wide collection plan based on the best logistics to get the most material out, the proposed program will have to manage alternatives (should a local government opt out) to fit around municipal borders. The plan will also need what the collective is calling a Market Clearing Price (MCP) – an idea that hasn’t worked successfully with printed paper and packaging anywhere else. And rather than having one, province-wide promotion and education administration, several levels will be required (one for each of the municipalities opting in, and one for the collective – Multi-Material BC (MMBC) – when local governments opt out). Even if they get their act together, there’s a duplication of costs here. 

The most significant extra costs to industry stewards will come on the processing side. Under the “incremental approach” suggested by the drafters of this plan (adding new materials only “when markets become available”) B.C. processors could be re-designing their material recovery facilities (MRFs) several times – once to adjust to the new collection list currently being floated, then again and again as other materials are added (or maybe not) over the years. 

This “brownfield” approach is the worst, most costly way to design a system. It is far better to design for the most expected eventualities upfront, with a new (greenfield) operation, rather than tacking on bits and pieces over time. There’s an extra benefit to going greenfield: a new MRF can be designed to handle all (not just select) printed paper and packaging materials. This leads to another option: why not collect all printed paper and packaging from the start? Sure, not all of it will find ready markets and may have to go to energy-from-waste or landfill, but if the steward fees are fair, those non-recyclable materials will incur a penalty, which in itself should spur packaging re-design and reduce MRF residue rates. 

Process redesign costs big money: about $25 million for a decent two-stream MRF, even more (over $30 million) for a single-stream facility. That’s borrowed money that has to be paid back over at least 15 years. And it won’t be loaned unless there are guaranteed contracts for the supply of materials. So B.C. processors need long-term contracts. A five to seven year contract ­– likely all that would be guaranteed under the draft plan’s requirements to secure tonnage from collection contractors – would be insufficient for processors to even consider innovating by building a greenfield MRF. 

Allowing processor companies to bid directly for long-term collection contracts in a tendering process supervised by MMBC would at least give them the opportunity to secure that supply. But the current plan closes that particular door, forcing the processors to negotiate separate contracts with as many as 60 different municipalities. The additional administrative costs of undertaking these multiple negotiations (legal, accounting) will all be passed on to the stewards in their processing costs. So will the “risk costs” of the empty space that has been set aside at the MRF for the “someday” addition of new materials to the collection system.

And what happens if the collection contractor changes at some point? Assuming that two seven-year contracts had been signed at the outset, the processor could now be left holding the bag with only half the MRF paid off.

There is (or was) a golden opportunity to promote a viable, logical, industry-led, lower-cost alternative for managing B.C.’s printed paper and packaging. 

1. Establish collection zones 
Where are the materials and what are the most efficient logistics to capture them? Collection based on municipal borders or where one municipal border happens to run up against another does not make economic sense. Whoever meets the qualifications criteria for collection should be allowed to compete. If you don’t perform (whether you are a local government, private sector contractor or subscription service) you are out.  

2. Include all residential paper and packaging from the start
This meets the provincial regulation, creates a level playing field between materials, and promotes a consistent, harmonized, simple message to consumers across the province. It also places an increasing emphasis on design for recycling or end-of-life and allows B.C. processors to design for all materials upfront and to start processing them immediately.

3. Establish collection methods for the province
The type and proportion of materials to be collected (80 percent paper) and the need to maximize market revenues suggests that a two-stream approach (paper fibres and plastic, glass and metal containers) is a lower cost and efficient option. Single stream tends to become a secondary garbage pick-up, with higher amounts of residues being sent to energy-from-waste or landfill. Householders have no problem distinguishing between fibres and containers and feel they are doing something for the environment, not simply dumping stuff in a box or bag just to get rid of it. A dedicated truck picking up fibres one week and containers the next is easy to promote and works successfully (in Ottawa for example) and even meshes nicely with garbage and organics collection. 

4. Have one administrative body  
A single body (MMBC) should control the letting of tenders for collection and processing (with appropriate dispute resolution mechanisms). It makes sense to have one administrative body controlling the big picture (collection, processing, logistics management and communications) and reporting to the Ministry of Environment. MMBC’s role should be to manage and control overall program costs, liaise with local governments, and to stimulate innovation through pilot projects and research and development programs.

There’s no question that the grocers (and the others in this industry collective) need to manage the whole process. Our concern is that the grocers and the collective have already given away the store.

John Mullinder is the Executive Director of The Paper & Paperboard Packaging Environmental Council (PPEC).

www.ppec-paper.com.