How EPR and eco-modulation fees impact the recycling and packaging industries

Governing bodies across the U.S. are introducing new laws and fees to reduce single-use packaging waste. One of the most significant policies reshaping the packaging industry is extended producer responsibility (EPR) — a regulatory framework that begins at the point of manufacturing and design.

EPR requires packaging producers to take financial and logistical responsibility for managing the waste and environmental impacts their products generate. Compliance is typically achieved by joining a producer responsibility organization (PRO) and paying associated fees. Five U.S. states have enacted EPR packaging and container laws: Maine, California, Oregon, Colorado, and Minnesota.

While many producers and packaging companies are concerned about new obligations, those who adopt sustainable practices early can benefit through eco-modulation programs, which reduce EPR fees and other compliance costs to reward sustainable innovation.

What is eco-modulation in EPR?

Eco-modulation is the practice of adjusting EPR fees based on a product's environmental impact.

Producers who use sustainable materials and minimize environmental harm at the product concept stage receive lower fees and financial incentives. Those who do not are charged more.

Many in the packaging industry view EPR primarily as a regulatory burden — with increased compliance costs, reporting requirements, and material-specific fees. Eco-modulation reframes this: it encourages system-wide change toward more sustainable, recyclable, or compostable packaging, rather than simply paying a fee to offset recycling costs while continuing business as usual.

Why eco-modulation matters beyond recycling

Recycling alone cannot solve packaging's environmental impact. The environmental cost of producing new items often exceeds the impact of disposal, and some recyclable materials can cause more harm than non-recyclable alternatives, even accounting for full recycling benefits.

Eco-modulation addresses this gap by incentivizing producers to reduce impact at the source, not just at end-of-life.

EPR and eco-modulated fees in Oregon

In August 2021, Oregon enacted its EPR program for packaging through the Plastic Pollution and Recycling Modernization Act, which aims to streamline recycling for consumers, broaden access to recycling services, improve sorting facilities, and generate environmental benefits by mitigating issues like plastic pollution.

Beginning in July 2025, PROs will set the criteria and calculations to adjust and lower fees in accordance with the eco-modulation system to encourage sustainable packaging and product design that lessens the burden on material recovery facilities and Oregon's waste management system.

Oregon's Department of Environmental Quality states: "Even if recycling was conducted flawlessly throughout the nation, it could only deliver 31% of the needed 90% greenhouse gas reduction from that sector." 

Several strategies have been introduced to reduce the impacts of food service packaging, printing, and writing paper such as shifting to green energy production and reuse and closed-loop systems, minimizing material and right-sizing packaging, and prioritizing design changes that reduce eco-toxicity and externalities in the environment. 

Colorado's EPR and eco-modulated fees

Colorado introduced its EPR legislation for packaging — the Producer Responsibility Program for Statewide Recycling Act — in June 2022. This law creates a system where "companies that sell products in packaging and paper products" contribute financially to a statewide recycling initiative to handle specific materials.

The covered materials include packaging materials and paper products regardless of material or recyclability that is used in the facilitation of single or short-term use related to the containment, protection, handling, or delivery of products to consumers. Packaging material includes:

• Paper
• Plastic
• Glass
• Metal
• Cartons
• Flexible foam
• Rigid packaging

Similar to Oregon's program, Colorado's EPR plans on including an eco-modulation system. The goal of the Colorado government is to reduce the creation of new packaging materials, enhance recyclability, use higher levels of post-consumer recycled material, and make all containers reusable and refillable.

Maine becomes first state to implement EPR for packaging

With the passage of its Stewardship Program for Packaging in July 2021, Maine became the first state to implement an EPR law for packaging. The law aims to reduce packaging waste, lower toxicity, and boost recyclability, as outlined by Maine's Department of Environmental Protection.

The program requires producers to contribute funds through a stewardship organization (SO), which will reimburse municipal recycling costs, enhance recycling infrastructure, and educate residents on effective recycling practices. 

The program's exemptions cover certain producers, such as those with annual revenues below $2 million, those selling less than 1 ton of packaging in Maine, or producers generating more than half of their revenue from salvaged goods. 

Section 13 also outlines the full reduction of fees for producers who use recycled content, lower toxicity, reduce the amount of material used (right-sizing), reduce waste from packaging, increase reuse of materials, and use recycled content in and increase the recyclability of the material. 

EPR and eco-modulated fees in California

In June 2022, California introduced an EPR program for packaging with the signing of the Plastic Pollution Prevention and Packaging Producer Responsibility Act. 

The law aims to reduce packaging waste and increase recycling to support California's environmental goals, with three major targets for 2032:

• Ensure 100% of single-use plastic packaging and foodware is recyclable or compostable
• Achieve a 65% recycling rate for single-use plastic packaging and foodware
• Reduce single-use plastic packaging and foodware use by 25%

To help support these goals, CalRecycle appointed the Circular Action Alliance (CAA) as the program's PRO. The state expects to see eco-modulated fees similar to Colorado and other states where the CAA is a designated PRO. CalRecycle estimates that around 13,615 producers will participate, compared to roughly 1,000 in other state EPR programs. These producers are expected to contribute $5 billion over ten years, starting with annual payments of $500 million in 2027.

California will add fees for the presence of hazardous materials as well as toxic heavy metals, pathogens, or additives, and lower fees for reduction related to right-sizing, actions taken to improve consumer recycling practices, and the increased use of renewable materials for items wrapped in plastic.

Minnesota's EPR and eco-modulated fees

Minnesota became the latest state to pass an EPR law with the Packaging Waste and Cost Reduction Act. The goal of the act is to reduce the impacts on human health and the environment by the creation and the lifecycle of consumer materials. 

The program ultimately aims to invest in public education, expand infrastructure jobs, reduce the costs associated with creating more refillable, reusable, recyclable, and compostable packaging, and produce fewer packaging materials going forward. 

Aside from these goals, the program also aims to have all packaging, food packaging, and paper products either refillable, reusable, recyclable, or compostable by the year 2032. The program will be managed by the Minnesota Pollution Control Agency.

Like all other active EPR for packaging laws in the US, Minnesota's bill makes clear mention of plans to include eco-modulated fees to incentivize sustainable decisions at the design stage. 

Specific goals for this stage include eliminating toxic substances, reducing the amount of paper in packaging, increasing the use of post-consumer materials in package designs, and using more materials from sustainable sources.  

Dive deeper into EPR for packaging programs

Staying ahead of new EPR laws begins with a thorough understanding of your packaging's sustainability impact and expertise in conducting life cycle assessments. 

With all current U.S. EPR for packaging programs — including eco-modulation programs that incentivize sustainable packaging design — conducting life cycle assessments can help you map your product/packaging system and value chain, understand key impact areas, and optimize design for reduced impact at the concept phase. 

For a closer look at EPR programs in your region, explore the Packaging School's collection of guides:

• EPR for Packaging in North America
• EPR for Packaging in Canada
• EPR for Packaging in Africa
• EPR for Packaging in South America
• Emerging EPR Bills in the USA