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

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• 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.

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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

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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

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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 Research Project Objectives

– Phase 1: jurisdictional scan

– Phase 2: analysis

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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

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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

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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

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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

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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

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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

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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

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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?

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• 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

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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

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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

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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 Leeanne.Fraser@gov.bc.ca 778-698-4845 Usman Valiante Valiante@corporatepolicygroup.com (416) 420-4222

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