The Government has published its response to the PRN consultation, giving an indication of how the system will change when EPR starts in 2024. Joseph Doherty, Managing Director of Re-Gen Waste, which processes over 200,000 tonnes a year of household recyclables and is a significant PERN Trader, considers the implications.
The PRN system has been in place for 24 years and is widely acknowledged to be in need of improvement if it is to continue under EPR as a way of managing recycling evidence. Some of the key concerns expressed by both buyers and sellers have included excessive volatility, the potential for abuse and a lack of transparency, and the consultation seeks to address these through a number of proposals. It also considers the interface between EPR and DRS which whilst not likely to be an immediate issue for most of the UK, will be significantly tested from August 2023 when the Scottish DRS system starts.
Re-Gen has been involved with the sorting of packaging waste and the issuing of export PERNs for many years and recognises the need for change. However, we believe the current system broadly works and that any reforms must be workable and produce tangible benefits. And we believe that some of the proposals do not meet these criteria.
The Government supports the introduction of monthly reporting of PRN tonnage, price and revenue data by reprocessors and exporters to improve transparency for producers and compliance schemes and ‘reduce price fluctuations and result in producers paying fairer prices for PRNs/PERNs.
We are happy that it doesn’t force monthly trading. It is a very one-sided proposal and it is very hard to see how this will be communicated by the regulators in order to provide meaningful benefits. Will they publish average prices that include forward selling, for instance, and how will the pricing information help reduce price volatility? How will a seller decide on which tonnes to notify?
We need higher penalties for late registration to prevent what happened this year with the potential late registration of a significant level of tonnes of material.
We can understand the more regular publishing of tonnage data but as we can see from the current quarterly data requirement with the number of operators reporting late and the amount of data amendment after the publication date, it will add significant pressure on the regulators to be effective. We believe that higher penalties are needed.
We also question the value of the additional revenue reporting categories. The system needs appropriate auditing. Without proper auditing, it seems unlikely that the additional data will provide any greater transparency or benefit to the market.
The consultation considers changes to the period over which PRNs can be traded in an attempt to prevent market manipulation and excessive prices. But we must question how these fit with the purpose of the PRN which is to stimulate recycling and record levels of recycling in relation to specific compliance year targets. The opportunities for price manipulation in a highly competitive market are limited and are certainly not confined to reprocessors and exporters.
Producers’ Schemes previously had to submit Operational Plans that required quarterly PRN purchasing, but these were rescinded several years ago as being excessively bureaucratic. Interventions in the way the PRN operates without controls on both sides are likely to lead to targets being missed, shortfalls accumulating, and prices being depressed when they are needed most.
We must also be mindful that export reform will see a change in when tonnage can be reported as exported from the point of export to the point of arrival at the destination site which could see a significant loss of export PERNs in the first year of change due to shipping times, especially to destinations that are far away.
A looming challenge for EPR is the interface with DRS. In the early years of DRS, there is likely to be significant volumes of DRS material in residual and recyclable waste collected from households and businesses. Ensuring that this material attracts the benefit of either DRS or PRN value will be extremely important if recycling levels are to be maintained and the Government’s position not to progress with any of the consultation proposals is welcome until this has been further thought through.
Finally, we welcome any attempts to improve operator competence, a requirement that will also be applied to Compliance Schemes under the EPR proposals. But again, we would caution about how this would be implemented in order to be effective.
We believe that the key to the success of EPR and the operation of the revised PRN system will be effective enforcement supported by stronger powers for the regulators to prevent abuse or mismanagement. We hope that the PRN reforms will be developed and implemented through extensive consultation with industry to ensure that the PRN system can still function in the way it was designed and would caution against adding bureaucratic burdens without ensuring that they deliver real tangible benefits without negative unintended consequences.