Defra sets indicative fees for packaging EPR

The Department for Environment, Food & Rural Affairs has today (15 August) published estimates on the likely fees that producers will face next year, when extended producer responsibility for packaging (pEPR) comes into force. 

In doing this, Defra aims to provide businesses with an indicative range of costs associated with each packaging material, enabling them to plan budgets, including whether to pass on any of this charge to their customers.

According to a Defra Spokesperson the pEPR scheme will 'create 21,000 jobs, stimulate more than £10 billion investment in the recycling sector over the next decade, and see packaging producers, rather than the taxpayer, cover the costs of managing waste'.

Today's guidance on fees that will be charged by the Scheme Administrator (SA) does not cover other regulatory costs, including the purchase of Packaging Waste Recycling Notes (PRNs) or Packaging Export Recovery Notes (PERNS), which currently will also remain in place.

The announcement has been broadly welcomed by industry, providing a clear indication of the new Government’s willingness to introduce pEPR. Commenting on this Jacob Hayler, Executive Director of the Environmental Services Association, said: “Defra’s publication of illustrative base fees for packaging producers under EPR offers reassurance for circular economy investors over the continued direction of travel for resources and waste policy under the new Government.

“The announcement also provides much-needed clarity to obligated packaging producers to enable them to prepare for the introduction of charging from 2025 – helping to build a more complete picture of the economics of the new regime.”

Illustrative fees

The illustrative base fees (see Table 1 below) have been calculated using a proxy method. While efforts have been made to align this data with the new EPR reporting obligations, the Government acknowledges that the classifications may not be an exact match.

The calculation of the illustrative base fees divides the estimated costs incurred by Local Authorities for managing packaging waste by the total estimated amount of household packaging placed on the market. This calculation yields a fee rate expressed in pounds per tonne of packaging.

For each packaging category, Defra has considered two key components. The numerator based on the Local Authority costs for managing that specific type of packaging waste, less any revenue from material sales, plus a portion of additional expenses such as Scheme Administrator fees and debt provision. The denominator, meanwhile, represents the total weight of that packaging category introduced to the market for household use.

To reflect the economic landscape of 2025/26, when the scheme launches, the Government has used cost estimates from 2019 provided by WRAP, adjusting them for inflation. The packaging weights, on the other hand, are derived from the 'PackFlow Refresh 2023' reports, offering recent market data.

Acknowledging the inherent uncertainties in such projections, the Government presents a range of fee estimates—lower, intermediate, and higher—for each material category. These variations account for potential fluctuations in disposal costs, material revenue prices, and the estimated weights of household packaging entering the market.

Table 1 - Illustrative EPR for packaging base fees rates for 2025/26 for all packaging materials except for Glass packaging, includes estimated intermediate revenues based on PackFlow reporting

Glass fees are calculated differently using a separate methodology developed by Defra. This approach, still being refined, is considered more accurate for estimating Local Authority costs for managing glass waste. 

Table 2 - Illustrative EPR for packaging base fees rates for 2025/26 for Glass packaging

However, the eventual method for determining the weight of packaging material placed on the market will be set by the actual data reported by producers through the Report Packaging Data (RPD) online portal. Producers are required to submit their complete 2023 household packaging data by April 1, 2024, laying the groundwork for this approach.

Commenting on the guidance, Robbie Staniforth, Head of Policy at Ecosurety said: “Today’s release of information is another significant milestone on the road to EPR implementation. Given remaining cost uncertainty of the new system, it is understandable that the Government has given a range of expected costs.”

Expected timeline

Defra is expecting to release an updated version of the figures in September 2024, following a review of data submitted by producers in the Report Packaging Data (RPD) online portal earlier this year.

Fee rates for the first year of the Extended Producer Responsibility (EPR) scheme (2025/26) cannot be confirmed until after the initial Report Packaging Data (RPD) deadline on 1 April 2025, when the Scheme Administrator is able to draw on the submitted data from producers.

From 2026, for Year 2 of pEPR, fees will be modulated based on the level of environmental impact of the material used, so that packaging with a lower impact will be less expensive for producers.

Staniforth added: “These indicative fees will allow packaging producers to start the complicated process of agreeing internal budgets for these new costs in 2025. Approaches for how they use these indicative figures will vary, dependent on each individual company’s budget setting process.”

Steve Gough, Chief Executive of Valpak, welcomed the pEPR update: “DEFRA’s long-awaited guidance on EPR fees brings more clarity to the industry around the EPR regulations and provides guidance for producers to plan for their 2025 budgets.

“With the next set of base fees to come in September once more robust data has been verified by regulatory bodies, we are approaching the longer-term certainty that producers need to ensure they are meeting their compliance requirements.”