January 3, 2023
From August 2022, a Recycling Partnership blog authored by Senior Policy Advisor Michael Washburn. The original post can be read here.
The U.S. recycling system is not one unified entity – it is a network of 9,000 separate local recycling programs. Recycling access, infrastructure and education have been underfunded for far too long, leaving many U.S. residents, more than 40 million, without convenient access to recycling. Better access, infrastructure, and education is required for an effective and efficient system. We need smart, well-designed policy to improve the U.S. residential recycling system, to get it working efficiently, and provide sustainable funding for the system so that it can continue to improve in the future.
Extended Producer Responsibility (EPR) legislation is a policy approach with far-reaching effects, including incentives to make packages sold on store shelves more recyclable, informing Americans about what and how to recycle, and helping to provide critically needed feedstock to create new products out of recycled content for all materials – while providing a sustainable funding source to improve our recycling systems. This will increase recycling rates and reduce greenhouse gas emissions from original production.
During the 2022 legislative sessions in various states, we heard concerns about how EPR proposals might exacerbate inflationary pressures and arguments suggesting that EPR compliance fees placed on brands could directly impact the ultimate prices consumers pay at the store. There is, however, precious little evidence to support this assertion.
Recently, Columbia University posted research entitled, “Economic impacts to consumers from extended producer responsibility (EPR) regulation in the consumer packaged goods sector.” The Recycling Partnership funded this research to inject credible, data-driven, scholarly insight into the previous unfounded arguments related to the impact of EPR compliance on the prices consumers pay for goods. In short, the paper clarifies that prices of consumer goods fluctuate due to several considerations and that the link between compliance costs and consumer prices is weak at best. Even in high-volume households– the researchers found it is possible that there might be a slight increase in costs for a variety of reasons, but this cannot be directly attributed to compliance impacts.
At the same time, of course, consumer packaged goods businesses are just that, businesses, so how do you untangle increased compliance expenses from all the other forces that drive pricing? Indeed, the Columbia University paper points out that the biggest driver of prices comes from “elasticity,” or what we all know as supply-and-demand. What a consumer is willing to pay and how competing products are positioned against each other, has a significant impact on pricing. So, too, do other factors like changes in commodity prices, energy costs, transportation, inflation, and the fact that brands sell to retailers, who then set the price. Retailers employ strategies like national pricing as well as local incentives and sales that, taken together, make it hard to argue that EPR would be somehow connected to the price of a particular product or group of products in any particular state. It would be like saying that a rock thrown into an ocean could cause a tsunami.
The Columbia University paper asserts that packaging is never more than 2% of the total cost of a product and that there is never a case where brands can pass 100% of an added cost to consumers. The paper concludes that for households consuming the highest quantities of consumer goods per month, a worst-case scenario shows the highest-consuming households paying a small increase if any EPR cost were absorbed. It is important to note that the paper only includes groceries in its analysis, while EPR would apply to items in the pharmacy, the home improvement store, as well as packaging around other products. EPR costs would be spread over all these categories, and, therefore, means that further analysis would be required to understand the impact of EPR expenses allocated across all types of consumer goods.
While it is unproven conjecture to suggest that EPR fees could be passed on to consumers, a broader view shows that not fixing recycling through policy has far bigger implications for family budgets. The Columbia University paper does not examine how EPR would displace how recycling is paid for today – which in most communities, is paid for almost entirely by households through taxes or utility bills. A basic premise of EPR, as the paper points out, is to reduce overall system costs by creating efficiency. A more efficient recycling system delivers jobs, greenhouse gas reductions, and local economic and environmental benefits. A smart, well-designed EPR policy ensures that local communities will continue to sustain recycling operations while the private sector (producers) fund advancements in infrastructure and education to support the recycling system and local community programs.
We applaud the researchers at Columbia University for finally giving us a good analytical starting point, grounded in real data, and framed using credible economic theory. This would be the second such study alongside the Resource Recycling Systems’ (RRS) work for Oregon Department of Environmental Quality. Now, The Recycling Partnership will seek to understand: the net financial impact of EPR on consumers, the consumer cost of climate change, and the business cost of not being able to access feedstock to make new products through an efficient recycling system. We will examine these questions with a view toward the impact of EPR.
We also call on the larger recycling community to support more research that can clarify EPR’s full impact on consumers including the multiple societal costs that could be avoided by increasing access to recycling. This is another step on our journey; our work is not complete. The Recycling Partnership is committed to addressing these questions and collaborating with all stakeholders to make recycling better, drive better, more recyclable and reusable design for packaging, and build a transparent and accountable recycling system.
Disclaimer: Guest blogs represent the opinion of the writers and may not reflect the policy or position of the Northeast Recycling Council, Inc.