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Uncertainty after compliance changes

We are now well in to the first year of operating under the new WEEE regulations and, despite what was quite a significant structural reform, the recent second quarter 2014 performance figures from the Department for Business, Innovation & Skills appear encouraging at face value.

But the feeling in the market is somewhat different. While more than 1,000 smaller producers are now no longer responsible for funding recycling in the UK, many of the remaining 3,500 producers are unclear as to the final costs of compliance for this year and beyond.

There are a number of reasons for this uncertainty which largely surround the rate and role of the compliance fee. But adding to this is a feeling that we have lost the sense of proportionality, and to a degree transparency, that existed under the old system, where each producer paid its portion of the cost of recycling its categories of WEEE.   

Before the consultation, most producers and their compliance schemes agreed that things needed to change, particularly with regards to the zero balancing model, and compliance scheme WeeeCare was no different. The need for change, however, was tempered by a realisation that not all elements of the new regulations were broken and that we should not throw the baby out with the bathwater.

Change was what we got. The problem is that we have ended up with less certainty both in regards to the cost of compliance and also the level of recycling that will now be achieved. This raises a bigger question of how do we make an investment case for increased infrastructure to improve UK recycling rates if there is no certainty that there will be demand for the evidence or payment for the work?

The lack of clarity around the compliance fee is one area that continues to undermine confidence. While agreements have undoubtedly been made between schemes, there appears to be nervousness in the industry that many schemes are looking to utilise the fee as an alternative method for compliance.

It is possible that schemes will hold off making arrangements, to see how the market settles down and potentially how the compliance fee will be calculated. This will be damaging for the industry because producers will reduce the funding available for physical recycling.

The introduction of a compliance fee raises some interesting questions in itself. When can a scheme elect to pay the fee as opposed to seeking agreements with other schemes, and what happens should schemes elect to wait for the fee – will the funding of collections cease? One could argue that the very existence of the ‘safety valve’ could and will have a real and significant effect on collection levels.

We have also seen a subtle yet significant change in the rationale for the setting of the compliance fee. It has been stated that the existence of a fee is intended to discourage schemes collecting WEEE significantly above their targets and then seeking to sell that surplus at excessive prices. But originally it was designed as a ‘top-up’ for schemes unable to achieve their targets; it was not to be used as a sanction.

A key message during the consultation process was that the fee would help to fund and develop collection networks. This would suggest that the fee is there to develop additional tonnage should there be an issue with collection methodologies, and assist schemes to achieve their targets in subsequent years, not as an ‘opt out’ to avoid making agreements between schemes.

WeeeCare is the largest producer compliance scheme by membership, and generates sufficient evidence to meet the needs of all its members. While this enables us to provide them with a guaranteed cost for 2014, next year and beyond, it does not remove the need to see a level of stability in the market in order to invest.

We currently provide low-cost evidence to other producer schemes and it is important for the whole sector that we know, within reason, the likely demand as well as the likely market rate. Setting prices after the trade, and in this year after the deadline for trading, simply fuels the uncertainty we were trying to eliminate through the consultation.

We have yet to see how wide and deep these unintended consequences of change will bite the market but, regardless, the next few months will be interesting, challenging and potentially critical for some.

Peter Hunt is managing director of WasteCare Group, which owns WEEE compliance scheme WeeeCare

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