Russia needs support to protect the Extended Producers Responsibility (EPR)

Russian Ministry of Natural Resources and the Environment published on February 25, 2020 a concept paper, which propose to change the EPR legislation by closing existing collective producer’s compliance schemes, individual compliance agreements; and keep the state regulated eco fee payment as the only way to achieve the legal compliance with the recycling obligations.
The ministry is not satisfied with the current implementation of the law (see the summary of the law here). Nearly 160 thousand companies are producers and importers of goods and packaging; and they have recycling tasks under the EPR legislation; however, in 2019 only 15 175 companies fulfilled their obligations. According to the Federal State Statistic Service, the obliged industry should have paid to the state around 20 billion rubles as eco fee, but in 2019, only 2,466 billion rubles (29 Mio eur) were collected.
The ministry says that poor performance is due to the de-centralized EPR system and missing coordinative body, poor control measures, missing co-ordination with regional waste operators, missing system for the separate collection of municipal solid waste and ineffective law enforcement.
The solution, according to the ministry, is to centralize the system and introduce effective administrative control. 100% recycling target for packaging would be introduced from year 2021 and for the various goods from the year 2022 till 2024 (like EEE, tyres, oils, textiles, etc.) The eco fee would be collected by the tax authorities (or custom authorities in case of importers) and the collected eco fee would be managed by the state company Russian Ecological Operator (REO), which will design and plan Russia-wide collection and recycling system; and signs the key contracts for the recycling program implementation. REO was established in 2019 by the Order of the President and is supervised by the Vice Prime Minister Mrs. Abramchenko, Minister of Environment, two other ministers and GM of REO.
State information systems and registries would be updated, and control measures improved. Certain tax incentives are proposed for the conditioning and selling the collected materials for recycling.

Eco fee scope in the concept paper

Eco fee levels are established by the Government. For the packaging, eco fee payers are packaging producers (not fillers/packers as now) and in case of the import of goods in packaging – importers. For the regulated goods, the eco fee payers are producers and importers of the goods.
Eco fee calculation will be based on the following criteria:
– The less “ecological” is the packaging, the higher is the eco fee
– Eco fee must stimulate the use of the secondary resources (recycled content)
– When establishing eco fee for specific packaging type, the profitability to produce such packaging should be considered
– Eco fee must finance the total cost of the recycling value chain: collection, sorting, transport and recycling
With this approach, authors claim, eco fee will stimulate separate collection of the municipal solid waste. It is planned, that recyclers, who will get financing from the REO, would create a system for the waste material flow and all related costs are covered by the financing provided by the REO. In long term, all costs related to the separate municipal waste collection will be covered by the eco fee; the citizens waste fees will not increase, as all the required infrastructure investments (collection, transport, recycling) will be covered by the eco fee.
The concept paper defines two targets to be achieved: “recycling of the materials separated from the municipal solid waste (MSW) by 2024” (1) and “ensure that by 2024 more than 50% Russian inhabitants have access to the separate waste collection and the inhabitants` fees for the separated waste will be reduced at least 50% compared to the fees payable for the mixed waste” (2).
Current key targets are included in the national plan “Ecology” approved by the president in 2018. It requires that by 2024 60% of MSW is separated for further treatment and 36% of MSW is recycled.

Reactions to the concept

The obliged industry – producers and importers of goods in packaging – do not agree with the new concept and propose that the compliance through the collective schemes should remain in the law, the criteria should be worked out for such schemes and effective control measures implemented across the total recycling value chain. The recycling targets should be increased gradually over the time. They say it is unfair and not acceptable to terminate the existing collective compliance schemes, which have made investments and achieved actual targets. Large international brands have already established PROs like SKO Elektronika-Utilizatsia in 2017 for WEEE (Samsung, Dell, Sony, Philips, LG and six other companies), RusPRO in 2018 for packaging (Nestle, Danone, Unilever, Coca-Cola, Tetrapak, Pepsico), and many others.
In the beginning of March the concept was updated– the obliged industry with “own recycling capacity”, can implement self-compliance scheme and avoid the eco fee payment. Very few could use this option since producers typically don’t own recycling plants unless they are recyclers.
In the middle of March Vice PM set up a working group (representatives from business and government) to revise the concept again. Within the government, there are ministries, which do not support the new concept and believe the collective compliance schemes should remain in the law as an alternative to the eco fee payment.

Originally, the Prime Minister was supposed to approve the concept paper by March 31, 2020. Because of the corona virus outbreak, the approval is postponed to Q4 2020.

Comments

The current legal frame has many flaws and it looks that only 10% of the obliged companies are implementing their obligations and 90% are free riders. The concept paper makes a reference to the EPR system in Germany as a strategic way for improvements; however, the proposed recycling solution is far from the German or any EU main-stream solutions, which usually is a non-state Compliance Scheme(s). The European approach is that either strategic industry objectives – lowest cost possible solution which meets the legal targets (obliged industry owned not-for-profit schemes) or competition of compliance schemes would deliver the optimal solution and the state role is to develop legal frame, monitor and enforce the law. In Russian approach, there are many open questions like if the state company (REO) has enough incentives to ensure  effective and efficient recycling system implementation? What costs the industry is supposed to cover eventually through the eco fees? How the financing of recyclers will lead to sustainable post-consumer waste collection and recycling system? Instead of taking unknown risks in Russia, it would be beneficial to re-visit the EU experience again as it could offer sustainable, effective, efficient, well defined and proven solutions, which meet the key stakeholders expectations.

How can we support implementation of the real EPR in Russia?

Russian authorities and the key stakeholders reference the EU EPR framework as the blueprint for Russia. The concept paper though has another approach. It would be very useful to raise awareness among the Russian authorities and other key stakeholders, how the EPR system functions in EU, what are the benefits for the society and offer support to redefine the EPR in Russia.  Appropriate industry associations, European lobby groups and companies active in Russia should immediately start executive communication with the key Russian stakeholders to convey a message, that there are well functioning alternatives to the state run compliance scheme and take actual steps to improve the EPR implementation in Russia. The doors are not yet closed.

By Raimond Made