Last week I attended the 4th Annual Extended Producer Responsibility Conference held in Calgary, Alberta, Canada and co-sponsored by Alberta Environment and Environment Canada.

It seems to me that the overriding messages from the conference could be paraphrased as, "...Extended Producer Responsibility is a good theory but impractical...", moreover, "...if one of the goals of EPR is to promote design for the environment it isn't working...", and "...there are no true EPR programs in Canada because in practice the requirements are too complicated and onerous...". To hear it, EPR is not an acronym for Extended Producer Responsibility but for Extremely Pedantic Rhetoric.

Extended Producer Responsibility isn't well understood (and I say this notwithstanding those waving accreditations from institutions of received wisdom and shrilly protesting otherwise). As commonly discussed the concept of EPR is unclear (and its obscure and inaccurate naming doesn't help either). Take this classic OECD definition of EPR.

"EPR extends the traditional environmental responsibilities that producers and distributors have previously been assigned (i.e. worker safety, prevention and treatment of environmental releases from production, financial and legal responsibility for the sound management of production wastes) to include management at the post-consumer stage."

Widely cited (I am as guilty as anyone) and oft repeated, this definition offers little about what EPR really is and nothing about how it should work in practice. In my mind this definition causes more confusion than it alleviates.

So I'm going to abandon the unfortunate EPR moniker and turn to alternative language to describe a way of regulating the environmental burdens associated with products and services. That is, language that describes the rights to possess and transfer property - the language of property rights.

Let's skip as much of the legal and economic jargon as we can and go right to a practical environmental example.

A manufacturer produces cathode ray tube (CRT) TVs which are distributed and eventually retailed to consumers. The government determines that the TVs generate environmental burdens at the end of their useful life (i.e. lead contamination) and that those burdens warrant some form of intervention (i.e. regulation) to reduce them to some acceptable level (the "environmental standard").

In a property rights based regulatory approach the government states through regulation that while the title to a TV transfers from producer, to distributor/retailer to consumer as it passes down through the supply chain, the title to the TV immediately reverts back to the producer (or first importer) at the end of the TV's useful life.

The producer may then transfer title to the "waste" TV to a third party (i.e. a waste collector) and the third party to a recycler but only if the transfers can be tracked from beginning to end and can be shown to result in the TV being finally managed to the "environmental standard" (i.e. the transactions are environmentally accountable and transparent).

Any producer (or first importer) that fails to take title of its TVs at their end-of-life and meet the environmental standard in managing them loses its right to transfer (i.e. sell) new TV's to consumers.

That is it. Finis.

But wait! What about the formation and operation of a Producer Responsibility Organization (PRO) for waste TVs? What about the "funding mechanism" (i.e. fee scheme) for collecting and processing TVs to the "environmental standard"? What about all the regulatory and bureaucratic clap-trap that normally accompanies "stewardship" programs?

In a property rights based regulatory approach all of these things are immaterial to the regulator. The producers - the waste TV title holders - sort themselves out to meet the environmental standard in managing their wastes. Producers could band together in a collective (i.e. Electronic Product Stewardship Canada - EPSC comes to mind) to manage their wastes (much as electronic producers do to create technical standards for CDs, DVDs etc.). Like any other aspect of business, contractual obligations and charges for covering the costs of administration, collection and recycling services are the subject of commercial negotiations between producers (or the producer collective) and service providers - what prices are actually established are also irrelevant to the regulator.

But what about the often asked question of program "funding" - i.e. fees and "who pays"? In such a system a collective established by producers will have to assign the costs of administering and paying for collection and processing of producer wastes back to the members of the collective. The cost allocation formula will have to be negotiated amongst the members of the collective. Since the collective is a combine of producers, established by producers for producers, it will not have any government assigned power to levy fees from retailers or consumers. That said, the collective could pass on program costs by entering into an arrangement with retailers / first importers to accept program costs that have been converted to a system of fixed product levies or fees (obviously, with the understanding that the fees will be passed down to the consumer). Of course, such an arrangement of "fixing" recycling prices amongst producers and having retailers agree to pass them on to consumers would be subject to scrutiny by the Competition Bureau.

What have I described above? Well, in a nutshell something that looks very much like the requirements of British Columbia's Recycling Regulation. Not surprisingly, I've heard some describe BC's requirements as "too open" and not providing necessary specifics regarding governance and financing structures necessary to create - and consider the use of the term here in the context of the preceding paragraph - a "level playing field".

So while EPR as "Extended Producer Responsibility" might be better described as "Explicit Property Rights" I suspect some would be much happier with EPR were it to mean "Extremely Prescriptive Regulation".

Over the next couple of weeks I’m going to discuss the Explicit Property Rights model in the context of the sexiest “stewardship” issue going – waste electronics. Specifically, I’m going to talk about the treatment of "historic" and "orphan" waste and design for the environment (DFE) outcomes. Stay tuned.

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I recently had the opportunty to review a draft OECD document entitled, EPR Policies and Product Design: Economic Theory and Selected Case Studies

Prepared for the OECD by Resources For the Future (RFF) in Washington D.C. the document includes a case study of the CPPI designed Used Oil Management Association (UOMA) style used oil material programs that operate in western Canada (and most recently in Quebec).

With fresh references to Environment Canada and cites to officials from the western UOMA programs the document diligently reproduces the received wisdom and glowing reports of the efficiency and effectiveness of UOMA style used oil material programs. The fact that Waste Diversion Ontario (WDO) rejected a UOMA program is given one passing footnote, "In 2004, Ontario voted down a proposal for a similar program in that province." (Say, isn't Ontario Canada's largest province?)

No mention is made of the fact that the WDO's rejection of a UOMA style program was based on long deliberations that resulted in the following determinations.

1. “The program plan does not include economic mechanisms to promote 3Rs, consistent with WDA (Waste Diversion Act) S.1, and to not promote burning, consistent with WDA S.25(2), so that implementation of the Plan would result in more Used Oil Material being directed to 3Rs than burning, all other marketplace influences being equal

3. The quantity of Used Oil Material to be collected through implementation of the Plan is identified in the 5 Year Recovery Objectives outlined in the Plan. The quantity managed through the 3Rs in each year is not identified.”

You would have thought that such a critical assessment of a UOMA program by Canada’s largest jurisdiction (with an extremely effective pre-existing used oil material recovery system) might have been deemed pertinent to the evaluation of the economic effect of UOMA program design. And it might have figured in the RFF work had someone from Canada provided it to the researcher at RFF (I did, but only belatedly after I got a hold of the draft document which I had not known existed before I received it).

Alas, it would seem that Environment Canada did not provide such dissenting information to RFF. Why? Well one can only guess but you might want to read an earlier work on the subject - Environment Canada's 2004 "analysis" of Alberta's UOMA program (again, duly received and published by the unwitting folks at the OECD). One might suspect that it is probably easier to dismiss Ontario's dissent than admit that under all that sugar coating is a rotten lemon (and that you helpd to sell many bushels of those lemons without really checking what it was you were selling).

The full cite of Environment Canada's tribute to the Alberta UOMA program is, Vanderpol, Michael. 2004. “Economic and Environmental Performance of Alberta’s Used Oil Programme,” in Economic Aspects of Extended Producer Responsibility (Paris: OECD).

You might then read my October 2005 crtique of the UOMA Program Review for what it means to dig a little deeper.

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Today's news posting, "RBRC wins advertising award" caused me to dig up a piece I wrote years ago for Hazardous Material Management Magazine regarding the RBRC's voluntary consumer battery recovery program. It would be most interesting to take a look at this program 7 years after the piece below originally ran. I am told that Environment Canada has sponsored a study looking at his very thing and that it is due to be out shortly.

The exchange between the US affiliate of the RBRC and I following publication of the article below can be found at:
http://www.hazmatmag.com/posted_documents/letters/0299a.asp

HazMat Magazine,  December/January 1999

Feature
Batteries Not Included
Short circuiting rechargeable Ni-Cd policy By Usman Valiante

According to the US EPA, nickel-cadmium (Ni-Cd) rechargeable batteries comprise less than 0.1 per cent of municipal solid waste by weight but account for 75 per cent of its cadmium content. With increasing consumption of rechargeable Ni-Cd batteries, governments worldwide have either enacted, or are in the process of enacting, public policy measures to address the end-of-life stage of the battery lifecycle.

For example, Sweden has proposed a complete ban on the sale of Ni-Cd batteries. Belgium is targeting batteries not recycled at a rate of at least 75 per cent with a 33 cent tax. Fifteen American states have enacted some form of legislation to address cadmium-containing batteries. With other US states and Canadian provinces planning to regulate consumer batteries, industry has launched a pre-emptive strike by developing its own recycling initiative for Ni-Cd batteries.

Established in the US early in 1996, the Rechargeable Battery Recycling Corporation (RBRC) announced its launch into Ontario in September 1997. Headquartered in Gainsville, Florida, the RBRC is the operating arm of the Portable Rechargeable Battery Association (PRBA). PRBA is an industry sponsored government relations organization largely tasked with manufacturing consent within state and federal environmental regulatory bodies regarding the issue of Ni-Cd battery waste management. Prior to establishing the RBRC, the PRBA operated Ni-Cd recycling initiatives for several years in the US (including comprehensive retail-to-return programs in Minnesota and New Jersey). In Canada, the PRBA's function is also fulfilled by the RBRC, though its primary roles are to collect licensee funds from participating battery manufacturers and administer rechargeable Ni-Cd battery recycling programs.

In Ontario, the "Charge Up to Recycle!" program is at the forefront of the RBRC's government relations activities. To support its contention that its program is comprehensive, RBRC claims an impressive network of affiliated business partners including Canadian Tire, Radio Shack, Zellers, Black's Photography, Astral Photo Images, and Battery Plus. These retailers provide a potential of 2,000 return outlets for collecting batteries voluntarily returned by consumers.
However, if the results of the RBRC's activities in the United States over the last two and half years of full-scale operation (and 6 years of comprehensive pilot programs) are any indication of what lies in store for Ontario and other provinces, there's cause for concern.

Conflicting data

In the 1998 year-end edition of State Recycling Laws Update, chief RBRC lobbyist Robert Guyer claims that 22 per cent of small sealed rechargeable Ni-Cd batteries were recycled in the US in 1997--an increase of 15 per cent over 1996. Conflicting with this claim is a June 1997 US EPA report entitled, Extended Producer Responsibility: A New Principle for Product-Oriented Pollution Prevention in which the RBRC reported its 1996 recycling rate as 25 per cent.
In the same EPA report, the RBRC provided data indicating that in 1995 it had sent 1,352 tons of Ni-Cd batteries for recycling. Meanwhile, INMETCO--the sole North American recycler of Ni-Cd batteries and the only destination of RBRC-collected batteries--reported receiving 2,500 tons of batteries from all sources, including industrial and commercial (IC&I) waste generators. This is significant because prior to the RBRC initiative most American IC&I generators already had Ni-Cd battery management programs in place. (Disposing Ni-Cd batteries in municipal landfills is prohibited in most US states). With the advent of RBRC, batteries previously sent directly for recycling or proper disposal by IC&I generators are now largely sent to RBRC consolidation points where they are counted as RBRC diverted quantities.

What does this mean? Simply stated, it's quite likely that most of the 2,500 tons recycled by INMETCO originated from IC&I generators. Of the 1,352 tons of RBRC batteries diverted in 1995, it's likely that little was new diversion (e.g., consumer returns to retailers) and resulted instead from ICI generators channeling existing quantities through the RBRC system. Since the RBRC picks up all costs subsequent to shipping batteries to their consolidation point, any increases in recovered batteries in the near future will likely result from an increase in IC&I generators re-channeling their batteries to the RBRC system in order to lower their costs. (The recycling alone costs about US$800 per ton.)

Consider Minnesota, where state legislation required that 90 per cent of sealed Ni-Cd batteries had to be recovered by September 20, 1995. In anticipation, the PRBA commenced a pilot program in 1992. Three years later, of the 80,984 pounds of Ni-Cd batteries received between October 1994 and September 1995, only 3.8 per cent came from retail stores while 77.4 per cent came from IC&I generators. (The remaining 18.9 per cent originated from municipal hazardous waste collection programs). Similarly, in 1995, 92 per cent of Ni-Cd batteries recovered in New Jersey (which has had return-to-retail since 1992) were from ICI sources while only 7 per cent originated from retailers.

Two years later, the national trend seems to have taken a sharp turn. According to Ralph Millard, Executive Vice-President of the RBRC, a full 23 per cent of Ni-Cd batteries recovered through the U.S. RBRC program in 1997 were recovered from retailers.

However, another indicator that RBRC is not expecting significant returns from retailers is the fact that across all of North America it has only four consolidation points to which battery collectors can ship waste batteries. These are: Phillip Services in Fort Erie, Ontario; Toxco/Kinsbursky in California; Wade Salvage in New Jersey; and US Filter and Recovery in Minnesota. (Batteries may also be shipped directly to the INMETCO recycling facility in Pennsylvania).
Why would the RBRC structure the program the way it has? It has a strong incentive. For relatively little effort, fairly reasonable diversion rates were perceived to be achieved in short order. Furthermore, while retailer shipping costs are fully subsidized by the RBRC, IC&I generators must pay for shipment of their batteries to consolidation facilities (which then send batteries to INMETCO). Since the IC&I generators bear their own shipping costs to RBRC consolidation points, the costs of subsidizing retailers (who get virtually no returns) and municipalities (who get some) is relatively small; this keeps RBRC product manufacturer licensee fees low and retailers happy.

Battery powered spin

Another indicator that retailers (specifically grocery retailers--which have a significant share of the consumer battery market) will not figure prominently in accepting returns in Ontario is the fact that the RBRC shares its key Ontario government relations and marketing staff with the Food and Consumer Products Manufacturers of Canada (FCPMC). This group has a long history of opposing any producer responsibility models (including those for beverage containers and motor oil) that involve retailer participation.

The nature and effectiveness of RBRC's Ni-Cd battery recycling programs contrast strongly with another industry sponsored battery recycling initiative--the industry-wide manufacturer controlled network (MCN) for recycling automotive lead-acid batteries. Where Ni-Cd batteries are costly to recycle, automotive lead-acid batteries are a valuable commodity. As a result, lead-acid battery manufacturers initiate a $5 deposit (about double the value of a used battery and is euphemistically referred to as a "fee") which is passed on to distributors and subsequently to retailers and consumers. Consumers buying a new battery at, say, Canadian Tire are not levied the $5 "fee" if they leave their old battery behind. Similarly, Canadian Tire doesn't pay the battery distributor any fee if its order for new batteries is accompanied by an equivalent return shipment of used batteries.

This sensible system is employed widely in the United States. An audited report by Battery Council International (an industry association) states that the US achieved a 94.9 per cent average recycling rate for automotive lead-acid batteries over the 1990-95 period. Lead-acid battery recycling rates in Ontario are reported to be even higher--about 99 per cent annually.

Such a system could work well for Ni-Cd batteries and Ontario's government has created a framework for just such an industry-operated MCN via its proposed amendments to Regulation 347 (General Waste). Designed to essentially take government out of the waste management loop, the environment ministry's proposal would have provided a regulatory foundation for establishing systems for recovering a wide variety of wastes analogous (if not identical) to the system for recycling lead-acid automotive batteries.

In its response to Ontario's proposed MCN regulation the RBRC has suggested some subtle key word changes which suggest a deviation from the widely accepted intent of MCNs.

Specifically, RBRC suggests that it be designated as the "original product manufacturer" and act as a proxy for the true original product manufacturer (thereby assuming responsibility for final disposition of recovered batteries). As the proxy, the RBRC would bear the right to engage its agents (e.g., a waste management company) in activities other than product stewardship; in the RBRC's words, "or other contract or agreement for used product management services." Though not explicitly stated, this assertion likely includes landfill of recovered batteries.

This is especially plausible given that the RBRC provides the following rationale: "Depending on market conditions, spent product may be managed in various ways." Clearly, given the costs of consolidating and shipping Ni-Cd batteries for recycling to Pennsylvania (INMETCO) and that Ni-Cd batteries are not banned from landfill in Ontario, it's quite likely that Ni-Cds collected through RBRC's program will be sent to hazardous waste landfills. Such an effort would be consistent with the current practice of sending virtually all batteries collected through municipal hazardous waste programs to landfill. (Yes, you read correctly.)

In order to avoid take-back regulations, Sweden's battery industry initiated a voluntary Ni-Cd battery recycling program in 1993. Committed to recovering 90 per cent of Ni-Cd batteries sold by the summer of 1995, the program failed when it was unable to surpass a recovery rate of 35 per cent. This prompted the government to consider a ban on the sale of Ni-Cd batteries. (It's worth noting that RBRC's Ontario initiative cannot "fail" since it is not committed to any targets.)

While the RBRC's "Charge up to Recycle!" program makes all of the right noises, it lacks a meaningful approach to actually increase diversion, measure results or meet its design objectives, which were to "preserve natural resources and prevent Ni-Cd rechargeable batteries from entering the solid waste stream." With a little less resistance this program could be easily transformed from a high voltage government relations program into a high amp model of producer responsibility.

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