Thirteen years after making the case for a deposit return system (DRS) in the UK, Eunomia Research & Consulting says that last month’s confirmation that a DRS would be introduced in England, Wales and Northern Ireland was very welcome (a separate scheme is due to launch in Scotland in August).
The long-awaited consultation response raised more questions than it answered, and not just the explicit outstanding questions, like VAT (it’s not clear why this is still a question – deposits should be exempt from VAT).
Let’s start with some positives:
- There is a 90% collection target.
- An industry-led, not-for-profit deposit management organisation (DMO) will be responsible for the scheme. There is an option for multiple DMOs but the beverage industry has rejected this in other countries, recognising the additional costs and risks.
- A so-called “on-the-go” DRS is disregarded. Excluded larger containers and multipacks never made environmental or economic sense.
- It will be a return to the retail system. Eunomia’s global reviews of DRSs have highlighted how such systems are associated with the highest return rates because of their inherent convenience.
However, there are some negatives.
Why are England and Northern Ireland excluding glass?
In 2018, the government announced a DRS “for single-use drinks containers (whether plastic, glass or metal)”, and their manifesto committed to a DRS “to incentivise people to recycle plastic and glass”. The government’s own impact assessment indicated a higher benefit/cost ratio when glass is included – and 86% of respondents to the first consultation supported glass’s inclusion.
The consultation highlighted retailers’ concerns but not that this is why retailers are typically paid higher handling fees for glass. The government noted “the weight of glass and the potential for breakages posing increased inconvenience for consumers”, but note that this isn’t an obstacle to consumers buying glass bottles in the first place.
By confining glass bottles to the EPR regulations, Defra is not only limiting its ambitions for recycling rates and the impact of the DRS.
Glass bottles tend to be more energy intensive to produce, transport and recycle than plastic and metal alternatives, yet the government is imposing more stringent requirements (with the associated producer fees) on beverage containers with a lower carbon impact.
Defra’s decision risks encouraging producers to switch to bottles that undermine the UK’s net zero ambitions or penalising producers that don’t.
How is this compatible with including glass in Wales?
Interoperability with the Scottish scheme (which includes glass) is another, larger issue so let’s focus on Wales and England. It is a recipe for confusion to have different scopes in what is, to consumers, a single system.
This is important because clarity is crucial for high return rates, and because it is drinks brands and retailers who will bear the brunt of consumers’ frustration.
The divergent scopes also mean more robust (more expensive) fraud prevention measures and/ or higher fraud losses, which will be paid for by producers and, ultimately, their customers.
Why is this not being made as easy as possible for people?
The consultation response says the DRS should “as far as possible, be experienced as a single scheme by consumers and obligated industry participants”. This is not only undermined by the inconsistent glass decisions but targets are to be met separately in England, Wales and Northern Ireland.
Producers will have to report separately on each of their SKUs (stock keeping units) for each of the three nations – likely adding to their costs and even requiring changes to supply chains. The DMO will have to report to different regulators. This again adds to compliance costs, even though cross-border movements could undermine the reliability of data.
If the concern is that the DMO could rely on containers in England and Wales to meet targets – neglecting Northern Ireland – there are other ways to prevent this.
How will they “minimise the burden on the smallest drinks producers”?
Eunomia has previously advised the European Commission on policies to promote equal treatment of producers without placing a disproportionate burden on SMEs – a key principle in effective and fair EPR systems.
Equally, a key principle of deposit systems is that producers are charged fees for each container they place on the market, with fees depending on the container, not the producer. Rather than “the size of the producer” – as emphasised by the government – fees should reflect recyclability and the net cost of recycling.
Why are they legislating for a maximum deposit value?
No other country legislates for a maximum deposit value. Governments either legislate for a minimum or the actual value. A maximum deposit value either leads to a meaninglessly high cap to allow for inflation or successive legislative amendments in the future.
Beverage producers and retailers will not want an unnecessarily high deposit attached to their products. Eunomia has advised on deposit values in North America, Europe and Asia and the temptation among DMOs is always to err on the low side, especially at the outset of the scheme.
The recommended approach is to set a minimum, but perhaps the government is allowing for a low deposit on multipack containers. While some DRSs apply lower deposits to smaller bottles and cans, no system differentiates between multipack and single-format sales.
In simple terms, a lower deposit means less incentive to return the containers – meaning a lower return rate, reduced environmental impact and more consumers losing their deposit.
Does the October 2025 timeline strike the right balance?
With so much delay and discussion already, the temptation is to say the DRS should be launched sooner. But the DMO will be appointed “by summer 2024”, so they will be cutting it fine to give the industry even 18 months to procure and install RVMs (reverse vending machines), build handling centres, develop the IT system (typically an industry, not government responsibility) and change labels, etc.
Eunomia has advised beverage companies planning for, and developing, a DRS that it’s unwise to make substantial investments before the DMO is appointed – rushing could undermine long-term success.
While the pressure is on industry, the governments have given themselves 11 months to pass the regulation, despite years of planning. This could reflect a lack of enthusiasm, Defra’s workload or the administratively complex scheme they have chosen.
What’s next?
There is widespread support for a DRS but a poorly-designed system will not maximise environmental benefits, provide value for money or be sustainable long term.
However, if the governments work with stakeholders to resolve these (and many other) questions, they will give the beverage industry a firm foundation to deliver a high-performing DRS that contributes to decarbonisation and the circular economy in the UK.
