Reform is welcome, but PRN changes must add benefit to the system
Joseph Doherty considers the implications of the reforms to the PRN and PERN system. He is Managing Director of Re-Gen Waste in Northern Ireland which processes over 200,000 tonnes a year of household recyclables and is a significant PERN Trader.
The UK’s PRN system has been in place for 24 years and is widely acknowledged to be in need of improvement if it is to continue under extended producer responsibility (EPR) as a way of managing recycling evidence. Some of the key concerns expressed by both buyers and sellers have included excessive volatility, the potential for abuse and a lack of transparency. The consultation seeks to address these through several proposals. It also considers the interface between EPR and depost return schemes (DRS) which, whilst not likely to be an immediate issue for most of the UK, will be significantly tested from August 2023 when the Scottish DRS system starts.
I think the industry recognises the need for change. However, I believe the current system broadly works and that any reforms must be workable and produce tangible benefits. Some of the proposals do not meet these criteria.
The Government supports the introduction of monthly reporting of PRN tonnage, price and revenue data by reprocessors and exporters to improve transparency for producers and compliance schemes and ‘reduce price fluctuations that result in producers paying fairer prices for PRNs/PERNs’.
I think it is beneficial that the Government doesn’t force monthly trading. It is a very one-sided proposal and hard to see how this will be communicated by the regulators to provide meaningful benefits. Will they publish average prices that include forward selling, for instance, and how will the pricing information help reduce price volatility? How will a seller decide on which tonnes to notify?
The value of the additional revenue reporting categories is questionable. The system needs appropriate auditing, without which it seems unlikely the additional data will provide any greater transparency or benefit to the market.
The consultation considers changes to the period over which PRNs can be traded to prevent market manipulation and excessive prices. But we must question how this fits with the purpose of the PRN which is to stimulate recycling and record levels of recycling in relation to specific compliance year targets.
The opportunities for price manipulation in a highly competitive market are limited and are certainly not confined to reprocessors and exporters. Producers’ Schemes previously had to submit Operational Plans that required quarterly PRN purchasing, but these were rescinded several years ago as being excessively bureaucratic. Interventions in the way the PRN operates without controls on both sides are likely to lead to targets being missed, shortfalls accumulating and prices being depressed when they are needed most.
Whilst reform is welcome, changes must add benefit to the system, not just additional bureaucracy. And they need to be fair to both sellers and buyers. The proposed changes will have to be effectively enforced to be meaningful. Given the current struggles with enforcement, adding further burden to the regulators must only be considered if the changes are effective at reducing price volatility, improving cost transparency on the complete PRN supply chain and preventing fraud and PRN abuse.