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Competition and EPR in British Columbia
Recycling Council of British Columbia Conference
Thursday June 22, 2017
Leeanne Fraser
Extended Producer Responsibility Section
Environmental Standards Branch
Presentation Overview
1. Background and Drivers – Leeanne
2. Research Project – Usman
3. Next Steps - Leeanne
Background: B.C.’s EPR program
3
• Recycling Regulation
o Schedule 1 – Beverage Containers
o Schedule 2 – Residuals
o Schedule 3 – Electronic and Electrical Equipment
o Schedule 4 – Tires
o Schedule 5 – Packaging and Printed Paper
Background: The Competitive Experience in B.C.
Rec
yclin
g R
egu
lati
on
Schedule Product Category Stewardship Agency
1. Beverage Containers Pop, spirits & wine Encorp
Beer, canned alcohol BDL
2. Residuals Solvent, Pesticide, Gasoline, Paint Product Care
Pharmaceuticals PCPSA
Antifreeze, Oil, Oil Filters BCUOMA
Lead-acid batteries CBA
3.Electronics Computers, TV’s + Cell Phones EPRA
Smoke Alarms Product Care
Lighting Product Care
Small Appliances CESA
Thermostats HRAI
Batteries Call2Recycle
Cell Phones CWTA
Outdoor Equipment OPEI
Telus IT Telus
Shaw IT Shaw
Major Appliances MARR
Vending Machines CBA
Medical Equipment GE
4.Tires Tires TSBC
5. Packaging and Printed Paper (PPP)
All PPP MMBC
Beer, canned alcohol PPP BDL
Background: The Competitive Experience in B.C.
Depot
5
1,200+ Producers
Multi-family
15 PCFs
Collecting Processing
Emterra
Cascade Recovery
Merlin Plastics
Curbside
Packaging and Printed Paper Program Structure
31 RCTs
1 CRF
End Markets
53 Local Government Curbside Collectors
3 Direct Service Curbside Contractors
9 First Nations Curbside Collectors
19 Local Government Multi-Family
Collectors
9 Private Multi-Family Collectors
2 First Nations Multi-Family Collectors
29 Local Government Depot Collectors
83 Private Depot Collectors
4 First Nations Depot Collectors
Background: The Competitive Experience in B.C. R
ecyc
ling
Reg
ula
tio
n
Schedule Product Category Stewardship Agency Competition Issues
1. Beverage Containers
Pop, spirits & wine Encorp
Beer, canned alcohol BDL
2. Residuals Solvent, Pesticide, Gasoline, Paint Product Care
Pharmaceuticals PCPSA
Antifreeze, Oil, Oil Filters BCUOMA
Lead-acid batteries CBA
3.Electronics Computers, TV’s + Cell Phones EPRA
Smoke Alarms Product Care
Lighting Product Care
Small Appliances CESA
Thermostats HRAI
Batteries (non lead-acid) Call2Recycle
Cell Phones CWTA
Outdoor Equipment OPEI
Telus IT Telus
Shaw IT Shaw
Major Appliances MARR
Vending Machines CBA
Medical Equipment GE
4.Tires Tires TSBC
5. Packaging and Printed Paper (PPP)
All (residential) PPP Recycle BC
Beer, canned alcohol PPP BDL
Proposed Individual Producer Plans
Competing Cell Phone Plans
Entire PPP Product Category Plan
Batteries (non lead-acid)
Competition under Extended Producer
Responsibility in British Columbia
Regulating for Environmental Effectiveness and Economic Efficiency
June 22 2017
Chris Busuttil Glenda Gies
Usman A. Valiante
Objective
• To understand the relationship between the legal rules under the current EPR regulatory context and the effects on economic freedom emphasizing competition
– Assessing the risks and benefits associated with competition within PPP
– Identify the legal and institutional best practices for introducing competition at various levels with a view to greater economic efficiency
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Markets
• Institutions of exchange – Legal rules – Cultural and business norms
• Competition – Innovation and market advantage
• Collaboration – Scale – Minimize transaction costs – Network effects and efficiencies
• Choice and free association – Market participants decide on how efficiency is to be gained
10
In an advancing society, . . . any restriction on liberty reduces the number of things tried and so reduces the rate of progress. In such a society freedom of action is granted to the individual, not because it gives him greater satisfaction but because if allowed to go his own way he will on the average serve the rest of us better than under any orders we know how to give.”
Henry Bayard Phillips, “On the Nature of Progress,”
American Scientist 33 (1945)
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Liberty and progress
Markets and efficiency
• Static efficiency - produce goods at least cost
• Allocative efficiency - produce goods in quantities that match consumer demand
– Reduce production of unwanted goods (e.g. pollution)
• Dynamic efficiency - continuously develop new goods and production processes or, simply, innovation – the Circular Economy
12
Market failure and inefficiency
• Externalities (e.g. pollution/waste) • Poor information • Monopoly and market power that unduly
restricts competition • Policy-induced
– Block new entrants – Foster monopoly – Unintended effects – Low stringency or poorly defined performance
objectives – Lack of regulatory oversight
13
EPR as performance-based regulation
• Performance-based regulation
• Market-based policy instrument
– Assigns the end-of-life environmental and financial cost of products and packaging to producers
– In an openly competitive market, EOL cost provides producers with an incentive to reduce those costs through efficiency
– Product redesign, recycling best practices or innovative in technologies and practices to reduce, collect, reuse and recycle
15
EPR under the EMA
• The role of stewardship agencies on behalf of producers
• The implications of stewardship plan approval
• Stewardship agencies and the principal-agent problem
• Regulatory oversight of EPR
16
Making EPR more efficient under the BC Recycling Regulation
• Encourage competition – Use the OECD Competition Checklist – Collaborate with the Competition Bureau
• Refocus stewardship plans to drive competition and economic efficiency – Focus on plan’s approach to market engagement – Carefully consider collection system standards
• Focus on oversight and enforcement – Performance objectives – Free-riders
• Become a better-informed regulator
17
Competition and EPR for PPP 1 PRO
• There is a sole agency delivering residential curbside recycling
• Agency currently harnesses competition in
–Collection markets through competitive tendering through municipalities or by itself
–Post-collection market but recognizing that capital investments based on scale necessary to ensure static and dynamic efficiency
18
Competition and EPR for PPP at the producer compliance level
1. How can more than one PRO accesses what is now a common household collection system as a natural monopoly and hence an essential facility; and
2. How should individual producers with the means to self-comply for collection and post-collection management of their PPP do so?
19
• Option 1: Physical material apportionment mechanism – Regulator or third party established as clearinghouse sets
rules for engaging collection system and material apportionment
• Option 2: Mandated shared use of the common household collection system. Regulator sets rules: – Each producer (acting individually) and each PRO (acting
on behalf of its members) agree to share collection system – Agree to establish receiving capacity in each collection
area – Coordination amongst PRO and producers is by
commercial agreements
20
Competition and EPR for PPP with multiple PRO
Individual producer compliance
• Individual compliance should not be forsaken to preserve the common collection system – Purpose of EPR is not a static collection system
but innovation
• Common collection system or stewardship agency to which the producer is subscribing should not pose barriers to exit or use dominant position to block individual producer
21
Risk and competition in PPP compliance
• Low risk contingent on: – Availability of data to set meaningful and measurable
performance targets; – Availability of sufficiently detailed and accurate data to
enforce against the targets; – Setting performance targets that are sufficient to stimulate
innovation and a induce activity to achieve the overarching environmental objectives;
– Compliance activities that are adequate in scope and timing to deliver a level playing field for PROs and producers; and
– Political will to enforce performance in a uniform and consistent manner
22
Learnings & Next Steps
• Phase 1 Findings (Jurisdictional Scan): Varied Results
• Different market outcomes in different countries • No jurisdiction requires only one PRO, which has led to various
outcomes
• Member state application of competition law affects EPR program design
• Environmental and economic outcomes are misleading and hard to compare
Competition Study
Phase 2 Research findings:
• The findings from the study will require further
analysis
• Ministry will update stakeholders when
appropriate
Thank You.
Questions & Comments Contacts:
Leeanne Fraser, Senior Policy Analyst [email protected] 778-698-4845 Usman Valiante [email protected] (416) 420-4222
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