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Case study: Finnish deposit refund system (DRS)

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This presentation was given at IEEP's capacity building for environmental tax reform conference on 5 October 2017 in Brussels, Belgium.

Speaker: Pasi Nurminen (PALPA)

Published in: Environment
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Case study: Finnish deposit refund system (DRS)

  1. 1. 1,7 billion environmental acts a year
  2. 2. The Finns are the best beverage package returners in the world Return rate of beverage packages is more than 90%
  3. 3. Return rates % 0 20 40 60 80 100 96 98 00 02 04 06 08 10 12 14 16 Can PET OWG All packages in the DRS have quickly gained a high return rate
  4. 4. Factors of high return rates Correct deposit values Wide coverage of deposit packages Learned return habit Environmental awareness Wide consumer collection network Location of consumer collection points Well functioning RVMs
  5. 5. 1500New packages (SKUs) inspected and approved 1.7 Bn Returned deposit packages 300 M € worth of deposits credited 17 600Metric tons of UBC aluminium recycled PALPA in 2016 12 700Metric tons of PET-bottle bales recycled 51 000Metric tons of glass recycled 5000Retail collection locations for consumers 9000Collection locations in hotels, restaurants, catering (HoReCa) 4 000Reverse vending machines (RVM)
  6. 6. Operating network • PALPA’s strategy is to run the recycling system by a network of companies • Operating with a network allows flexibility and scalability • Most operations are outsourced
  7. 7. Majority of recycling system costs is related to handling and logistics Challenge: • Wide consumer collection network is one of major factors in reaching high return rates • The low population density in Finland increases the cost of transportation Solutions: • Baling and counting operations have been decentralized to several locations in Finland • Material is compacted and sorted as early as possible after the collection • Operations have been outsourced to waste management companies
  8. 8. Taxation affects packaging choices The change in package taxation during 2005-2008 caused considerable growth of one-way packages in the Finnish market 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 1,800,000 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Can PET-bottle One way glass bottle PALPA: returned deposit packages 1996–2016 (1000 units)
  9. 9. Taxation as an incentive • Packaging tax for certain beverages – Importers and producers have to pay a packaging tax of 0.51 € / ltr for packages in customs tariff group CN 22 – Importer or producer is allowed to a tax exempt if the company and the products are registered in a deposit recycling system • Deposit recycling systems are approved and controlled by Environmental Authority under Ministry of Environment
  10. 10. Legislation Finland • Joining a deposit recycling system is not mandatory for producers / importers • Any retail outlet selling deposit packages is obliged to take back empties • The only exception is the volume in relation to sales
  11. 11. Legislation Sweden • Joining a deposit recycling system is mandatory for producers / importers • Retail outlets selling deposit packages are not obliged to take back empties
  12. 12. Legislation Norway • Recycling rates define the amount of the package tax • The higher the return rate, the lower the tax
  13. 13. 50%50% Shareholders PALPA Beverage industry Retailers Common decision making between trade and industry makes implementation easier
  14. 14. Financing the recycling systems • Recycling system revenues come mainly from material sales and recycling fees • Recycling fees are paid by beverage producers and importers • All the fees and compensations are decided by PALPA board of directors (representatives of trade and industry) – All the fees are based on real costs. – All the recycling systems have their separate P&Ls and their own pricing. No cross subvention between the systems is allowed. – All the fees and compensations are the same for companies selling, collecting or transporting similar packages €
  15. 15. Stakeholders Producers and importers PALPA Consumers Retailers HoReCa Recyclers Handling plants RVM producers Advertisement agencies Package material producers Transport companies CustomsMinistry of Environment IT system Service provider Communication agencies Environmental Authorities Law offices Wholesalers Sticker producers Retailer and producer associations EPR organizations Competition and consumer authority Credit providers Media Environmental register of packages
  16. 16. Co-operation with Palpa Producers and importers Retailers and HoReCa Baling / counting operators Transporting companies Recycling companies Bring packages to the market. Palpa charges the deposits and recycling fees Act as collection points and receive a handling fee from Palpa Transport the collected packages and receive a transportation fee from Palpa Bale packages and count manual returns (no RVM). Palpa pays for this service Recycle the material, of which Palpa receives revenues
  17. 17. Short summary of PALPA Suomen Palautuspakkaus Oy (PALPA) administrates and develops three deposit beverage package recycling systems • PALPA does not own any part of the recycling system or does not have any ownership within system operators. Most operations are outsourced. By joining in a recycling system the beverage producers and importers can get an exempt from package tax • The Recycling system costs are covered with recycling fees paid by producers and importers. PALPA is a non-profit company. Recycling systems operated by PALPA collect annually approximately 1.7 Billion packages and 80 000 tons of material • Return rates are the best in the world, over 90 % • All the packages are recycled into new packages or raw materials for other industries 1 2 3
  18. 18. 1,7 billion environmental acts a year
  19. 19. Support material
  20. 20. Material flow Beverage producer / importer Retailer / Return location Transport operator Baling and counting plant Material recycler Consumer 7 New packages made of recycled material are manufactured 6Baled material is delivered to material recycler 5 Packages are transported to baling and counting plant 1 Products are sold to stores 2 Consumer buys the product 3 Consumer returns the package 4 Transport operator collects the packages
  21. 21. Deposit flow Beverage producer / importer Retailer / Return location Transport operator Baling and counting plant Material recycler Consumer Importers and producers pay the deposit to PALPA Retailer pays the deposit within the product price Consumer pays the deposit The deposit is returned to consumer The deposit is credited to the retailer by PALPAPALPA gets the information of returned packages from retail location (RVM), transport operator and counting plant € € € € € Money (deposit) Data € i i i ii
  22. 22. Other fees and compensations Beverage producer / importer Retailer / Return location Transport operator Baling and counting plant Material recycler Consumer Beverage importers / producers pay a recycling fee to cover the rest of the recycling system costs PALPA pays a transportation fee for each transportation unit collected from the return location Material recycler pays for the recycled material PALPA pays for baling and counting service PALPA pays a handling fee to the retailer for each package collected from consumers € i€ € € €€ i ii € € € € Money (other compensation) Data Money (deposit)€ i €

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