Costs of compliance
Resource interviews John Redmayne, General Manager of ERP UK, for his thoughts on the cost of compliance.
Why was there the need for a compliance fee within the UK WEEE system?
Prior to the recast, the UK had had a settlement process for WEEE that obliged producer compliance schemes (PCSs) to acquire evidence from each other to balance their obligation at the end of each year, often at a higher price than the actual costs of collection and treatment. In 2012, Hewlett-Packard commissioned a report into the cost impact of WEEE evidence trading in the UK. The report found a wide gulf in excess of £50 million between the market for ‘evidence’ and the actual cost of collection, treatment and recycling of household WEEE.
When it implemented the recast WEEE Directive, the UK government also decided to incorporate changes to the WEEE system as part of its Red Tape Challenge. A consultation was launched and the Minister for Business & Enterprise announced he was “putting forward a package of measures to reduce the cost of compliance for producers”.
The new WEEE system operates using a ‘compliance fee’. Evidence has no value and cannot be traded. PCSs may choose to contract with each other in advance of collections, but if a scheme collects more than it needs for its members’ obligations, it must finance these collections itself. A PCS collecting too little can pay a compliance fee: an alternative way to comply, not a sanction.
BIS stated that the compliance fee would be established to ensure that WEEE collection is the most competitive and effective method of compliance. Schemes are therefore incentivised to meet as much of their obligation as possible through their own operations. However, should they fall short, they are no longer obliged to pay inflated prices for evidence.
What do you think of BIS’s approach to deciding and announcing the fee?
BIS has consistently engaged with all stakeholders in the WEEE sector to ensure the creation of a healthy, competitive marketplace – demonstrating a commitment to the UK meeting the requirements of the WEEE Directive whilst not placing excessive cost burdens on producers.
This combination of engagement and commitment continued throughtout the recast process. The 2013 consultation sought views and opnins from all sectors, and, once the compliance fee approache was chosen, BIS again turned to stakeholders - nviting them to come forward with detailed proposals for the operation of the compliance fee, including the setting of the fee and management of the process and any resulting funds.
How will the compliance fee affect WEEE businesses and the prices and recycling rates for WEEE?
Most observers expect that the impact from the various changes to the WEEE system – including the compliance fee – will continue to work their way through the market in 2015. The new WEEE system should encourage greater choice for producers and healthier competition amongst schemes. Compliance prices for producers have reduced and, with compliance prices for members set around six months in advance, changes will probably not be fully seen until 2016.
In terms of treatment costs, it is worth remembering that these should be driven by the costs of logistics and treatment, and the value of materials recovered, rather than the cost of compliance. At present, fuel costs are coming down, but metal values are less than half those seen in 2011/12.
The new system is also expected to result in a closer match between the amounts collected by PCSs and their members’ obligations. Once appointed, schemes will have to work closely with their local authority partners to ensure that enough WEEE is collected to meet their obligations. This should have a positive influence on recycling rates in the UK. Interestingly, the compliance fee approach selected by BIS could result in fees collected being offered to local authorities through a funding stream similar to that of the distributor take- back scheme (DTS) – expect to see more news on this in May.