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WEEE targets see a market in balance

At the end of 2013, the Government published new regulations for waste electrical and electronic equipment (WEEE) that radically altered how household obligations are managed.

The key change was to move to a system that sets annual collection targets, coupled with a compliance fee (CF) that may be used by a producer compliance scheme (PCS) if it has not met its target. Two years on, we have a chance to review the new system.

Around February each year, the relevant Whitehall department reviews the previous year’s WEEE collection data. This responsibility used to be with the business department (BIS) but, from this month, now sits with Defra.

Officials analyse collection trends during the previous three or four years and then propose targets for that year. Their objective appears, broadly, to encourage an overall increase in WEEE collection. The targets are also intended to reflect the tonnage of WEEE that is actually likely to arise through the household WEEE system.

By doing this, Defra looks to ensure that supply (WEEE actually collected) and demand (WEEE needed by PCSs to comply with their targets) are in balance. Keeping the balance should help to control costs and ensure that a PCS is likely to need most of the collected WEEE. Targets are based on six WEEE collection streams, although in practice they are allocated to 14 categories.

Forecasting the level of WEEE likely to arise is challenging, and stakeholders are consulted on the proposals around the end of February. Often, it is not sufficient simply to apply a mathematical prediction based on trends from earlier years, and officials sometime have to consider other factors.

National targets are announced towards the end of March and, at the end of the month, each PCS receives notification of its share. This is based on the aggregate previous year market share of product put on the market by the PCS’s members, split by stream.

For both 2014 and 2015, despite positive and negative variations at stream level, the Government has been able to report that the combined target set at the beginning of the year has been exceeded (see table).

The collection targets set by Defra for PSCs should not be confused with national targets laid down in the WEEE Directive. The former apply only to WEEE that is collected through the UK’s PCSs, whereas the latter include WEEE collected through other routes (business WEEE and scrap metal).

WEEE collection

WEEE collection

The Government has indicated that it will use “substantiated estimates” of WEEE collected through these other routes to comply with directive targets.

The fee element is a vital part of the new WEEE system. If the target is set too high for a particular WEEE stream, then some PCSs will not be able to meet their targets – and would compete vigorously for access to that WEEE, resulting in increased costs. The CF gives PCSs that do not meet their target, or any other reason, a legitimate alternative means of compliance.

Use of the CF is not restricted in any way and any PCS can do so. But that does bring risks because Defra does not announce whether a fee will be set until late in January, after the end of the year in which it is to be used. And its chosen mechanism is not announced until early February, after any opportunity to buy or sell evidence between PCSs has passed.

So a PCS that chooses to rely heavily on the CF would face unknown costs and probably very significantly higher ones than its competitors.

How the CF is set is therefore sensitive. Shrewdly, Defra passes that task to stakeholders and, around July each year, invites organisations to submit proposals by the end of September. They consult on the proposed options.

For 2014 and 2015, BIS, as was, chose proposals prepared by the Joint Trade Associations (JTA), a group of nine trade associations representing producers in many electro-technical sectors. Recolight is a supporter of the JTA.

A fundamental requirement is that the CF should be set at a level to encourage collection without resort to the fee. But it must also be set at a level that discourages PCSs from collecting above their targets in the hope of selling any surplus at excessive prices. That requires a careful balance, and independent economic rationales are used to help get that balance right.

The 2015 CF proposal sensibly stipulated that any WEEE with a net positive value – such as may be the case with large domestic appliances – should not be subject to a CF. This makes sense: if other economic operators can make profits from collecting certain types of WEEE, it would not seem right to penalise PCSs that, as a result, cannot access that WEEE.

The WEEE regulations require producers of electrical equipment and collectors of WEEE to classify that product, and waste, as waste from businesses (B2B) or consumers (B2C).

However, towards the end of 2014, the Government announced a clarification on how this classification should happen in respect of dual use. Dual-use equipment is a product that could be used by a consumer or a business.

The clarification required any dual-use equipment to be classified as B2C from the beginning of 2015. Because PCS targets are based on previous year market share, this will affect PCS targets and hence producer costs in 2016.

The effect has been two-fold. It has brought more producers within the household WEEE system, and there has been a slight increase in the level of WEEE reported as household – although this has been more pronounced in certain sectors, notably lamps.

Overall, Defra expects the change to be cost-neutral but anticipates some winners and losers. For some producers, which were selling only B2C equipment before the change, costs may well go down in 2016. This is because a broadly similar quantity of WEEE is now funded by a larger number of producers. Conversely, producers whose products are largely dual use but sold to businesses may see their target, and hence costs, increase in 2016.

Dual use has had the biggest impact in the lamps sector, and the Government has sought to take account of this change by significantly increasing the target from 840 tonnes in 2014 (before dual use) to 6,882 tonnes in 2016 (after dual use). A key benefit of this change is that business holders of waste lamps that are dual use should now be able to access free recycling.

A good test of the system is to assess if WEEE held at local authorities is actually being collected. If quantities of uncollected WEEE were appearing at household waste recycling centres, it would certainly be an indicator that the WEEE system is not performing as it should. But that is not the case.

Although a number of councils have seen changes of collection contractors, particularly during the past six months, collections have not been affected: the WEEE is still being treated.

During the past two years, commodity prices have dropped significantly. This has created a number of challenges for many WEEE recyclers, which rely on incomes derived from recyclate sales. The changes to the household WEEE system were in part a response to complaints from producers that costs were too high.

Changes to the system that corrected that problem happened to coincide with commodity price changes. In compliance year cycles, PCS market prices can be expected to fluctuate to take account of commodity prices.

The changes to the regulations that came into effect at the beginning of 2014 corrected a fundamentally flawed system. They introduced normal market dynamics, driven by a national WEEE target, and with a CF that created an alternative means of compliance.

So far, the proof of the pudding is in the collecting. Household WEEE collections grew by 6% from 2014-15. They also exceeded targets set in 2014 by 0.38% and in 2015 by 2.9%. At the same time, there has been no return to the untreated WEEE mountains of the past. The verdict can only be that the new system is performing well.

2013 WEEE regulations

Summary of changes to the household WEEE system:

  • Removal of the 100% market – PCSs are no longer forced buyers
  • Government sets annual targets
  • PCSs may use a compliance fee as an alternative to WEEE collection
  • Definition of household extended to include dual-use products

Cost savings to producers:

  • For 2014, the Government estimated savings of £18m
  • If replicated in 2015, aggregate savings are now £36m

Nigel Harvey is chief executive at Recolight

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