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Slide 1 Blue Box Program Plan Review for 2007 Stewardship Ontario Funding Formula - First Public Consultation Meeting - December 8, 2005.

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Presentation on theme: "Slide 1 Blue Box Program Plan Review for 2007 Stewardship Ontario Funding Formula - First Public Consultation Meeting - December 8, 2005."— Presentation transcript:

1 Slide 1 Blue Box Program Plan Review for 2007 Stewardship Ontario Funding Formula - First Public Consultation Meeting - December 8, 2005

2 Slide 2 Introduction to Session & Website Mechanics Lyle Clarke & Neil Antymis

3 Slide 3Welcome!  First public consultation meeting on Blue Box Program Plan (BBPP) review for 2007 & Stewardship Ontario’s funding formula for stewards  More than 135 people here in person  Approximately 40 registered by webcast  reflects interest & participation of diverse stakeholders

4 Slide 4 1st Half of the Morning  Introduction, Dennis Darby  Background & Objectives of Consultation, Lyle Clarke & Neil Antymis  Context for the Review, Keith West  Review of Current Funding Formula, Guy Perry  Long List of Options, Derek Stephenson  Dis-aggregation/Differentiation of Material Fees, Catherine McVitty  Break

5 Slide 5 2 nd Half of the Morning  Recycled Content, John Mullinder  Promoting 3Rs Through the Blue Box Program Plan Funding Formula, Jo-Anne St. Godard  Raising de minimis Level, Judith Andrew  Lowering de minimis Level, Kim McKinnon  Lunch, ~1:00 p.m.

6 Slide 6Afternoon  Factor Weightings, Guy Perry  Other Suggestions Within Scope of Review, Derek Stephenson/Guy Perry  (e.g., Printed Paper Aggregation, Revenue, Biodegradability, etc.)  Options Out of Scope of Review, Derek Stephenson  Additional Suggestions From Participants  Next Steps  Adjourn

7 Slide 7 Our Audiences  Webcast audience listening on-line  speakers will refer to slide numbers to prompt you to move to the next slide  questions/comments to:  Archived webcast available for 180 days

8 Slide 8 Introduction Dennis Darby

9 Slide 9 Making Progress  Board looks forward to reviewing suggestions  Board Steering Committee overseeing review process  effective, open & transparent  Successful implementation of Blue Box Program Plan  Whether/how improvements to funding formula can be made

10 Slide Stewards Registered & Reported  Represents 1.3M tonnes of Blue Box wastes

11 Slide First Charges Laid  Some companies failed to report on time  Action taken under Waste Diversion Act (2002)  may result in others coming into compliance

12 Slide Target Revenues Met This Year  Shortfall in first two program years  less than 2% of annual budget targets  2005 revenue target will be met  target $62.5M

13 Slide Municipal Obligations Met 4. Municipal Obligations Met  Municipalities paid in full & on time  $81M paid in total by end of 2005 program year (March 2006)

14 Slide Cost Containment Plan Approved  Difficult challenge successfully met  Developed in partnership with Association of Municipalities of Ontario (AMO) & City of Toronto  special thanks for municipal effort & cooperation

15 Slide Effectiveness & Efficiency (E&E) Fund Progress  Also implemented in partnership with municipalities  Total of 34 projects & $5.2M approved to date  By end of 2006, number expected to rise to about 60 projects & $11M  New tools & techniques  great potential for increases in cost-effective diversion

16 Slide First Market Development Support Project Launched  Successful launch with positive results anticipated  Initial focus on glass  strengthen demand & lower recycling costs  $2.5M in financing

17 Slide Financial Assistance Provided to WDO  Supported development of Waste Diversion Ontario (WDO)  Funds loaned awaiting approval of additional Industry Funding Organizations (IFOs)

18 Slide Governance Structure Revised  Recent approval by Minister  Board to expand from 7 to 15 members  includes major sectors of obligated industries  Will be supported by two new committees  ensures policy & technical advice from wide range of stakeholders

19 Slide Four Fee Setting Cycles Completed  Blue Box Program Plan successfully implemented & funded  Challenge today is to see if we can make it better  more effective  easier to administer  fairer to industry sectors

20 Slide 20 Other Provinces Watching Our Successes  In particular: Québec, Manitoba, Saskatchewan  “Need to get it right…  need to harmonize approach to stewardship across the country”

21 Slide 21 Background & Objective of Consultation Lyle Clarke & Neil Antymis

22 Slide 22Introduction  Background to review  annual review of rules  4 rounds of fees  suggestions for changes  Spirit of review  open, comprehensive, fair & transparent  Broad timing  submitted to WDO by mid March 2006  post on Environmental Registry by mid April 2006 (target)  approval by Minister by end of June 2006 (target)  in time for setting fees for 2007

23 Slide 23 Objectives of Review Provide an opportunity for all stakeholders to:  re-evaluate the current funding formula  identify & assess potential modifications or alternative approaches In support of:  the goals of the Blue Box Program Plan (BBPP)  the policy objectives & legal requirements of the Waste Diversion Act (WDA)

24 Slide 24 Steering Committee  Ensure key stakeholder concerns & suggestions are heard  Accurately reflect these to the Stewardship Ontario Board  Make recommendations to the Stewardship Ontario Board

25 Slide 25  Initial interim step toward technical & policy advisory committees  part of approved new governance structure  Broad representation – participants invited from:  major contributors  largest obligation  not currently represented on Board  knowledgeable about plan  range of opinions  non-steward key stakeholders, e.g. NGO’s, municipalities Advisory Committee Formation

26 Slide 26 Advisory Committee  Identify options for consideration  Identify key issues of concern to their constituency  Encourage their participation in the consultation program  1 st meeting held October 27 to identify & review long list of options

27 Slide 27 Stewardship Ontario Board  Approve the list of options to be considered in the consultation program  Review the work & recommendations of the Steering Committee  Make recommendations to the WDO Board

28 Proposed Timeline & Workplan 1 st Public Meeting Dec 8 Receive & Review Comments - Detail for modeling impacts - Detail for modeling impacts - Further general comments - Further general comments Dec 22 Jan 12 SC Recommendations Jan 20 2nd advisory committee meeting Jan 25 Stewardship Ontario Board for approval of preferred option Feb 1 or 2 2nd public meeting -Recommendations on FF & related changes to BBPP -Recommendations on FF & related changes to BBPP Feb 15 3rd advisory committee meeting -Preferred option & related impacts to BBPP -Preferred option & related impacts to BBPP Mar 7 Stewardship Ontario Board Approval Mar 9 WDO Board Approval Mar 22 Target for posting on Environmental Registry Mid Apr Target for Minister approval End June Slide 28

29 Slide 29 December 8 Meeting Objectives 1.The review of suggested modifications & alternatives to the current funding formula  identified within discussion paper # 1 2.Identification of additional suggestions within scope of review 3.Solicit information required to evaluate suggestions  in support of policy objectives & legal requirements of WDA

30 Slide 30 Principles Guiding Review (1) Funding formula must:  meet legal requirements of WDA  treat stewards & material categories in fair & equitable way

31 Slide 31 Principles Guiding Review (2) Desirable that funding formula also:  provide incentives to encourage diversion by  reduction  reuse  recycling  be transparent  be simple to administer  facilitate compliance & auditing requirements

32 Slide 32 Blue Box Program Plan Review: Program and Fee Development Under the Waste Diversion Act, 2002 Presentation by Keith West, Ministry Representative on WDO Board of Directors Director of Central Region Office, Ministry of the Environment

33 Slide Waste Diversion Act 2002 and Diversion Programs Under the WDA, 2002, the purpose of a WDO diversion program must promote reduction, reuse and recycling (3Rs) and must be financed by industry steward fees, not taxes. Under subsection30 (1) of the WDA, a designated industry funding organization for a waste diversion program may make rules setting the amount of fees to be paid by stewards or prescribing methods for determining the amount of the fees. Subsection 30 (3) of the Act requires that the fees paid by Stewards not exceed the sum of: The costs of developing, implementing and operating the program A reasonable share of costs incurred by the WDO under the Act (not covered by 1 ). A reasonable share of costs incurred by the Ministry in administering the Act. Subsection 30 (3) of the Act also requires that the fee paid by a steward “should reflect the proportion [of these total costs] attributable to the steward.

34 Slide Waste Diversion Act 2002 and Diversion Programs  Steward fees are not taxes because they impose the costs of the program on the stewards in relation to the costs caused by the stewards (nexus) and/or to achieve program objectives (3Rs);  In addition, the fees are paid to the Industry Funding Organization, not to the Crown and are not revenue for general purposes.  A properly designed WDO program has the flexibility between the nexus and introducing other factors to achieve a particular policy objective.

35 Slide Blue Box Program Plan On December 22, 2003 the Minister approved the Blue Box Program Plan (BBPP) requiring industry stewards to pay fees covering 50% of net municipal blue box program costs. The BBPP has successfully sustained the municipal blue box system: –Diversion continues to increase –Cost containment measures implemented –Money towards improved system efficiencies – E&E fund –Develop markets – coloured glass market research –Stakeholders working together – MIPC Opportunity for continuous improvement from lessons learned.

36 Slide 36 Review of Current Funding Formula Guy Perry

37 Slide 37 Industry Obligation  Defined by industry share of the net cost of the residential Blue Box system  50% of the cost approved by the WDO

38 Slide 38 Allocation to Each Material  Total industry contribution is allocated to each material using the steward funding formula  Results in fee rates for each material  change annually depending on costs & recovery for each material

39 Slide 39 Fees paid by a steward should fairly reflect the costs of developing, implementing & operating the Blue Box program that is attributable to the steward Waste Diversion Act (WDA) i.e., the cost of managing the Blue Box materials it generates  A primary consideration of the funding formula is the section of the WDA referring to:

40 Cost of Managing Each Material  Chart shows fees that reflect the cost to manage each material  Cost to manage each material determined by detailed activity based costing studies Newsprint - CNA/OCNA All Other Printed Paper Based Packaging Plastics Packaging Steel Packaging Aluminum Packaging Glass Packaging Cost to manage ($ Millions) Slide 40

41 Slide 41 Objectives of Blue Box Program  To meet the intent of the WDA to promote reduction, reuse & recycling  To discharge the legal obligation of stewards under the WDA  To increase the recycling of Blue Box waste  Minister subsequently requested policies & practices to reach 60% diversion

42 Current Funding Formula  3-factor formula transfers portion of obligation from materials with higher recovery rates to materials with lower recovery rates  Designed to reward materials that are contributing to the achievement of the objectives of the plan Newsprint - CNA/OCNA All Other Printed Paper Based Packaging Plastics Packaging Steel Packaging Aluminum Packaging Glass Packaging Fees ($ Millions) Based only on Cost to Manage Current Base Fees after Funding Formula 75% 63% 51% 18%47% 40%63% Recovery Rate (%) Slide 42

43 Slide 43 1.Net Cost  40% of obligation allocated by share of net cost 2.Recovery Rate  40% of obligation allocated by relative recovery rate (% recovery) 3.Equalization  20% of obligation allocated by incremental cost to reach 75% all materials Three-Factor Formula  Weightings (40:40:20) designed to balance objectives of BBPP & goals & intent of the WDA

44 Administration & Program Delivery  Other program costs  market development fees  direct program delivery  WDO & Stewardship Ontario administration  recovery of shortfall (<2% of program cost) (5) Newsprint - CNA/OCNA All Other Printed Paper Based Packaging Plastics Packaging Steel Packaging Aluminum Packaging Glass Packaging Fees ($ Millions) Current Funding Formula With Common Costs Current Funding Formula Without Common Costs  Allocated according to combination of  number of stewards reporting each material  quantities reported Slide 44

45 Slide 45 Aggregation of Fees (1) PET bottlesHDPE bottlesPlastic FilmPlastic Laminants PolystyreneOther Plastics Fees ($/tonne) 55.9%52.0%7.7%1.0%1.8%8.2% Recovery Rate (%) Fees reflecting cost only  Fees for paper, plastic and steel packaging aggregated For Illustration Plastic Packaging

46 Slide 46 Aggregation of Fees (2) PET bottlesHDPE bottlesPlastic FilmPlastic Laminants PolystyreneOther Plastics Fees ($/tonne) 55.9%52.0%7.7%1.0%1.8%8.2% Recovery Rate (%) Fees reflecting cost only Disaggregated Fee Rates  Fees for paper, plastic and steel packaging aggregated For Illustration Plastic Packaging

47 Slide 47 Aggregation of Fees (3) PET bottlesHDPE bottlesPlastic FilmPlastic Laminants PolystyreneOther Plastics Fees ($/tonne) Disaggregated Fee Rates Aggregated Fee Rates Fees reflecting cost only 55.9%52.0%7.7%1.0%1.8%8.2% Recovery Rate (%)  Fees for paper, plastic and steel packaging aggregated For Illustration Plastic Packaging

48 Slide 48 By Material Plastics 39% Paper Based Packaging 34% Printed Paper 10% Steel 5% Glass 12% Aluminum 0% Distribution of 2005 Fees

49 Slide 49 By Sector Durable Products 8% Retailers & Distributors 35% Consumable Products 44% Other 8% Printed Media 1% Other Services 4% Distribution of 2005 Fees

50 Slide 50 Long List of Options Derek Stephenson

51 Slide 51 Purpose of Consultation  Process to date  compiled suggestions received during start-up years  Advisory Committee meeting to identify additional suggestions & review the long list of ideas  suggestions summarized & distributed in discussion paper  Today’s consultation meeting  describe ideas within scope of review  describe ideas outside of scope of review  identify additional ideas

52 Slide 52 Ideas Within Scope of Review  Modifications to current funding formula  adjust factor weightings  adjust allocation of common program costs  further aggregation of the printed paper category  dis-aggregation of plastic & paper packaging fees  revisit de minimis level  use data from stewards reports for generation & recovery estimates  adjust allocation of material revenue

53 Slide 53 Ideas Within Scope of Review  Alternatives to current funding formula  recycled content  biodegradability  rewards for changes to packaging with reduced waste stream impact

54 Slide 54 Ideas Not Within Scope of Review  Eliminate in-kind contributions  Flat unit-based fee for all materials  Unit-based fee for all materials resulting in neutral market impacts  Collect fees directly from consumers  Set fees by brand  Establish a schedule or cap for increases in fees

55 Slide 55 Additional Ideas?  All ideas will be considered in relation to:  how the modified BBPP would comply with the WDA  whether the modifications would meet the objectives of the BBPP  whether the changes, taken together, achieve an appropriate balance among the review principles

56 Dis-aggregation/Differentiation of Material Fees Catherine McVitty Manager, Environmental & Corporate Affairs Unilever Canada Slide 56

57 Slide Dis-aggregation of fees Create differential fees for different plastic and paper grades. Fees would reflect costs and ability of system to manage different grades. Create incentives in the funding formula to drive design and purchasing choices to packaging materials that are more readily recyclable and easier to handle through the recycling system. Slide 57

58 Slide Benefits Create cost incentive to design packaging in recyclable materials. Supports market development of recyclable packaging material Rewards users of recyclable materials with reduced fees Fees would be designed to more accurately reflect how various grades of materials are managed through the recycling system. Slide 58

59 Slide Benefits Would motivate market development for those grades of material that are not readily recyclable in order to bring fees down. Might bring total system costs down by moving more packaging into fewer, recyclable materials. Slide 59

60 Slide Drawbacks Lacks simplicity in reporting for stewards Requires adjustment to factor weightings to ensure that an increased volume in highly recyclable material doesn’t drive up cost to manage that material. Gives preferential treatment to some grades of plastics or paper. Slide 60

61 Slide 61 Questions & Answers

62 Slide 62 Break

63 Recycled Content (Green Procurement Credit) John Mullinder Executive Director Paper & Paperboard Packaging Environmental Council Slide 63

64 Slide Individual musing, not official position of PPEC or AF & PA Not a collective material suppliers’ view Option presented for discussion, requires further consideration. Caveats

65 Slide Suggestion Average recycled content (or green procurement) credit in funding formula Would meet conditions of Op. Agreement MOE/WDO (on 3Rs) and BBPP (on Green Procurement) Focus on voluntary brandowner/publisher decision- making (what they have control over) Apply equally to domestic and imported material Include a graduated incentive scale (carrot/stick)

66 Slide Talking about averages (multiple clients, production runs, economies of scale, rolling averages) Brandowner/publisher focus (They determine material specs. Is explicit credit in levy for reduction but none for recycled content) Steward-driven (Not based on whether municipality collects material or not, or how much it collects, or what happens to it after. Stewards do not control this. Stewards do not control capture rates, open or closed loop recycling or quality of resulting feedstock). They do control material specs up front. Key Factors

67 Slide Virgin versus Recycled (claim that health reasons require virgin material therefore not a level playing field) But un-level playing field now through cross-subsidization of packaging materials (alum. credit is shared, aggregation of paper and plastic packaging cross-subsidizes some categories, composites are shielded, least cost tonnes subsidize most cost tonnes). Is virgin versus recycled any different? Brandowners have already decided that the principle of their right to choose between packaging materials is more important than the principle of equality between packaging materials. Group benefits over individual benefits. Key Factors (cont’d)

68 Slide Is a brandowner/publisher claim. They provide back-up in Steward Report. Onus is on them (just like a tax return). Open to audit. Can be cross-checked (anonymously) by particular recycling industry. For example, paper industry knows exactly where every mill in world is, equipment it uses, what it produces, its likely fibre supply. Verification

69 Slide Size of credit? How to measure it? If submitted in Steward’s Report, claim would have to be for the specific material that steward used (claim and credit tied together). In other words, would not be a common rate for PET or corrugated. Graduated incentive scale (start at 20-25%?). Need credible entry number (not 5%) and the carrot (green procurement credit) has to be significant enough to make the effort worthwhile pursuing. “ If you are not buying recycled, you are not recycling.” To be resolved

70 Slide 70 Questions & Answers

71 Incenting 3Rs through the Blue Box Program Plan Funding Formula Jo-Anne St. Godard Executive Director Recycling Council of Ontario Slide 71

72 Slide The principal objectives of the program Intent of the WDA & by extension the BBPP 1.Promote 3Rs 2.Develop, implement & operate waste diversion programs Stated in the Operating Agreement between the WDO & MOE 1.A Waste Diversion Program should support actions that reduce the amount of waste generated by a waste generator 2.A waste Diversion Program should support actions that involve the repeated use of a product or packaging of a product without a materials change to the form of the product or packaging between uses

73 Slide Measuring Success Barriers to Integrating 3Rs incentives The current funding formula is designed to raise funds for recycling not to encourage designs that incorporate environmental sustainability. First Things First In order identify whether the current funding formula has been effective in achieving the stated goals of the program, a logical first step would be to undertake an analysis of what packaging changes have occurred since program implementation  Has there been a switch to a more recyclable material?  Is there more recycled content incorporated into packaging?  Has there been a reduction of materials used in packaging?

74 Slide DIRECTLY rewarding 3Rs activities How can stewards champion 3Rs? Reduce the am’t of materials (reduces recyclables & residuals) Choose packaging that has high recovery rates & contains recycled content (low cost to the overall system) Promote 3Rs benefits at the point of generation (to your customers)

75 Slide Mechanisms to stimulate 3Rs activities Mechanism 1 – Add a composite category to the list of materials Background Composite packaging is categorized based on the highest content material found within the package. Pay-In levies assessed in this manner do not reflect the true cost of processing composites. In order for composite materials to be judged fairly against all other material types, they should be levied as a category unto themselves reflecting recovery rates and cost burden to the system. Implementation Categorize (define) composite packaging collected Establish a recovery rate & system costs for composite packaging Add composite category * levy fees based on current pay-in model Establish year over year material targets for composites

76 Slide Mechanisms to stimulate 3Rs activities Mechanism 2 – Provide rewards to stewards who achieve material specific targets Background Effectiveness of the program can only be measured by setting and achieving targets. The program should increase the recycling of Blue Box wastes overall and for individual materials. Setting targets helps to achieve;  High standards for municipalities and stewards  Creates an environment where alternative recovery options may be considered Implementation Set annual material-specific targets & post targets for public comment Report results through OCNA/CNA in-kind contribution & post on stakeholder websites (WDO, MOE, AMO, S.O. and RCO) Re-allocate 5% de minimus provision to discount those stewards who achieve their targets (incorporate into subsequent year’s costs) For those materials that do not achieve recovery rate targets, alternative collection and recycling mechanisms must be reviewed by the related stewards.

77 Slide Mechanisms to stimulate 3Rs activities Mechanism 3 – Recognize and reward; promote and educate consumers about reduction/reuse benefits Background - Reduction and reuse activities could provide significant gains in the overall diversion goals of the BBPP. Currently there are no DIRECT financial benefits to stewards who demonstrate a reduction or reuse of their package. Implementation 1.In the net cost portion of the pay-in model, develop a “sub-formula” (credit system) that reduces the % paid to recognize & reward reduction or reuse. For example; (Steward ABC has reduced the size of their package by 20% & has changed to a more recyclable option, and 50% reduction in the “cost to the system” portion of the pay-in model.) 2.Use OCNA/CNA in-kind newspaper “pooled” advertising (province- wide) to promote reduction and reuse initiatives to consumers.

78 Slide 78 Questions & Answers

79 Raising de minimis Level In Defense of the Blue Box Program Plan de minimis Exemption Judith Andrew Canadian Federation of Independent Business Ontario Legislative Affairs Department Slide 79

80 Slide 80 CFIB Member Profile and Size of Ontario Businesses CFIB’s diverse membership of 42,000 small and medium-sized businesses is a good reflection of Ontario’s economy Source: CFIB data, Ontario (January 2005) Source: Statistics Canada, Employment Dynamics (2001)

81 Slide 81 Small Business Demographics Have Operational Impacts  Small business owners work alongside their employees.  Government requirements are completed after hours CFIB National Survey on Regulation – Ontario Data, 1,028 Ontario Respondents

82 Slide 82 Premier McGuinty’s Pre-Election Commitment  “We will reduce the bureaucratic workload for small business. We will convert the Red Tape Commission to make it an agency specifically devoted to meeting the needs of small business.”  The Small Business Agency is just getting underway.  In the interim, there has been a significant increase in the bureaucratic workload, making fulfilling the Premier’s commitment even more challenging.

83 Slide 83 Waste Diversion Ontario Misses Minister’s Orders and Intentions  In approving the BBPP on December 22, 2003, the Minister asked WDO to: “Undertake analysis of the financial and operational impacts of the Blue Box Program Plan on the small business community.”  The Minister also requested a rule to exempt stewards 30(1) e of the Act, based on Deminimis Criteria

84 Slide 84 Impact of Lowering or Eliminating the de minimis Exemption  Trying to capture more smaller firms from those currently exempted would cause levy increases – not decreases.  Small businesses would need to be registered in person due to lingering difficulties with understanding of the registration and packaging audit requirements.  The cost of collection to Stewardship Ontario would far exceed the levy revenue collected.  The levy for all stewards would increase to reflect growing administration at SO.

85 Slide 85 CFIB Recommendations on Blue Box  Raise the deminimis exemption to relieve small firms and plan administrators, effectively focusing on large waste contributors  Clarify compliance requirements and provide practical tools (website, information/education materials)  Revise Funding Formula to: 1) simplify for clarity and fairness 2) reward firms with lower levies for packaging reductions achieved 3) end municipal pass through of half their rising costs.

86 Lowering de minimis Level Kim McKinnon Canadian Council of Grocery Distributors Vice President, Ontario Region Slide 86

87 Slide CCGD MEMBER STEWARDSHIP OBLIGATION CCGD represents large and small food distributors - $23.0 billion in revenue Contributes approximately 12% of Stewardship Ontario levies

88 Slide DE MINIMUS IN ONTARIO – HOW DID WE GET HERE? Waste Diversion Act is silent on de minimus however Minister of Environment provided a provision. CCGD and other obligated stewards, agreed to disagree and a compromise decision was reached to get the program started. Current de minimus $2 million in sales, or 15 tonnes of blue box waste.

89 Slide CCGD BLUE BOX PROGRAM PRINCIPLES All stewards and materials are treated fairly and equitably. Diversion and the cost is a joint consumer/producer responsibility. Environmental Stewardship obligations are a public good not a tax. Social responsibility equally shared. Small doesn’t exempt a company from its social environmental obligation. Large or small companies may generate the same amount of waste Provide incentive through stewardship fees/municipal bag limits, expansion of blue box programs for producer and consumer to move to more recyclable, reusable forms of packaging The more exemptions the less motivation to contribute to environmental goals of the Province.

90 Slide CCGD DE MINIMUS RECOMMENDATIONS Eliminate De Minimus. Replace with a choice: 1. Flat fee per steward based on a sliding scale for sales under $2.0 million. 2.Flat fee per steward based on amount of waste weight produced. 3.Choose to calculate using current formulas and waive the flat fee proviso.

91 Slide WHAT DOES CCGD RECOMENDATION ACHIEVE? 100% of stewards registered and working toward diversion and most environmentally sound packaging practices. All contribute to social good. Manageable administrative burden for under $2 million in sales and under providing flat fee option. Increased transparency of real levels of waste generation, diversion and costs as all stewards are reporting and volumes are being tracked over time. Ministry of Environment objectives of 60% waste diversion will not be achieved if exemptions are applied.

92 Slide 92 Questions & Answers

93 Slide 93 Lunch Webcast Resumes at ~1:00

94 Slide 94 Welcome Back  Reminder to our webcast participants to questions anytime to:

95 Slide 95 Factor Weightings Guy Perry

96 Current Funding Formula Weightings  3 factor formula transfers portion of costs from materials with high recovery to materials with low recovery rates  Designed to reward materials that are contributing to the achievement of the objectives of the BBPP  Weightings (40:40:20) designed to balance the objectives of the BBPP & goals & intent of the WDA Newsprint - CNA/OCNA All Other Printed Paper Based Packaging Plastics Packaging Steel Packaging Aluminum Packaging Glass Packaging Based only on Cost to Manage Current Base Fees after Funding Formula Slide 96

97 Slide 97  Stewardship Ontario staff believe there is merit to considering adjusting weightings & factors within the current funding formula to transfer more of obligation from materials achieving higher recovery to materials achieving lower recovery  to promote greater diversion in a cost effective way  to equitably share the cost of increased diversion Adjusting Weightings

98 Slide 98 Increased Diversion at Lower Cost (1) Newsprint - CNA/OCNA All Other Printed Paper Paper Based Packaging PlasticsSteelAluminumGlass 100% Cost at Current Recovery of 55% Overall

99 Slide 99 Increased Diversion at Lowest Cost (2) Newsprint - CNA/OCNA All Other Printed Paper Paper Based Packaging PlasticsSteelAluminumGlass Current Funding Formula at Current Recovery of 55% Overall 100% Cost at Current Recovery of 55% Overall

100  All stakeholders benefit from reaching highest overall diversion rate at lowest possible cost  These costs should be shared equitably Increased Diversion at Lowest Cost (3) 100% Cost at Current Recovery of 55% Overall Newsprint - CNA/OCNA All Other Printed Paper Paper Based Packaging PlasticsSteelAluminumGlass 100% Cost at 55% Recovery for Each Material 100% Cost at Current Recovery of 55% Overall Current Funding Formula at Current Recovery of 55% Overall Slide 100

101 Effect of Adjusting Equalization Factor Target  One possible approach:  reduce target recovery on equalization factor from 75% to 60%  60% factor may have some justification given Minister’s policy direction Newsprint - CNA/OCNA All Other Printed Paper Based Packaging PlasticsSteelAluminumGlass Current Formula with 75% Recovery Target Current Formula with 60% Recovery Target Slide 101

102 Effect of Adjusting Factors & Weightings  Many other possible approaches can be considered e.g. shift in weighting from recovery rate to equalization Newsprint - CNA/OCNA All Other Printed Paper Paper Based Packaging PlasticsSteelAluminumGlass Fees Reflecting Cost Only Current Formula Shift from Recovery to Equalization Factor Further Shift from Recovery to Equalization Factor Slide 102

103 Slide 103 Questions & Answers

104 Slide 104 Other Suggestions Within Scope of Review Derek Stephenson/Guy Perry

105 Slide 105 Other Suggestions Within Scope of Review  Adjust allocation of common program costs  Further aggregation of the printed paper category  Allocation of revenue  Use data from stewards reports for generation & recovery estimates  Biodegradability  Rewards for changes to packaging with reduced waste stream impact

106 Slide 106 Allocation of Common Program Costs (1)  Currently allocated as follows:  first to each major material category (e.g., printed paper, plastics, etc.) by relative number of stewards reporting each material  then, to material sub-categories (e.g., within plastics, PET, HDPE, etc.) according to relative quantity generated  Two additional options have been raised:  flat rate per unit of packaging or printed material  rate based on relative volume & weight generated

107 Slide 107 Allocation of Common Program Costs (2)  Key questions  to what extent does the modification better reflect the drivers of WDO & Stewardship Ontario administration & program delivery costs?  are the data required to calculate the allocation readily available?

108 Slide 108 Further Aggregation of Printed Paper (1)  A commercial document printed in black on high grade paper has a fee of 8 ¢/kg compared to a glossy catalogue with a fee of 0.7 ¢/kg  Other printed paper category–significant portion of material managed but for which fees cannot be collected such as:  many stewards fall under de minimis  paper from home offices, schools, etc. collected in Blue Box programs  magazines from out-of-province publishers

109 Slide 109 Further Aggregation of Printed Paper (2)  Key questions  sharing costs associated with de minimis, non-reporting, material with no steward & non-compliance?  is an incentive to switch between paper grades desirable?  is aggregation justifiable since printed paper is marketed as mixtures & recovery rates of specific grades is less accurate?  should the CNA/OCNA newsprint be included in the aggregation?

110 Slide 110 Revenue Allocation (1)  Considering revenue in the fees as follows:  3-year average of revenue reported by municipalities  allocate this to individual materials using 3- year average prices from CSR Price Sheet  Concerns raised about current methodology

111 Slide 111 Revenue Allocation (2) Revenue Sharing  many municipalities have contracts where the revenue is retained by the service provider  it is assumed that the municipality receives a discount for the revenue forgone  this discount benefits all materials  the dollar amount of the discount is generally unavailable & so it is not attributed to individual materials  the greater the material price, the more the benefit is shared

112 Slide 112 Revenue Allocation (3)  Possible modification:  use annual revenue reported for each material to better reflect actual revenue received by programs  try to account for the contribution by each material to the revenue shared & attribute this to each material accordingly

113 Slide 113  Current generation estimates based on waste audits in representative programs across the province  used for calculating recovery rates  Ensure that all material has a steward identified & pays the appropriate fees  fee rates calculated using reported steward data  Key questions if we use steward data for both purposes  how to calculate & collect fees for material generated by stewards not registered?  how to calculate & collect fees for material for which a steward cannot be identified?  how would municipal recovery rates be related to generation estimates? Generation Data from Stewards’ Reports

114 Slide 114  Credit for materials which meet a defined threshold for degradability  Key questions:  definition & range of biodegradability  impact on costs  incorporating costs for tracking, verification & auditing into fees Biodegradability

115 Slide 115 Rewards for Changes to Packaging  Costs may be incurred for recycling related decisions  Currently reward materials with lower cost of management & high recovery rate  Key questions:  definition of “reduced impact on the waste stream:” emissions, toxicity, energy?  how could the impacts be measured & compared?  should decisions already taken be credited, & if so, how?  hierarchy for different materials?

116 Slide 116 Questions & Answers

117 Slide 117 Options Out of Scope of Review Derek Stephenson

118 Slide 118 Outside Scope of Review (1)  Eliminate in-kind contributions  Minister recently approved the revision to the BBPP confirming the CNA/OCNA in-kind contribution  Flat unit-based fee for all materials  described by MOE lawyers as “definitely in red zone”  not carried forward given the legal & policy issues  Flat unit-based fee resulting in neutral market impacts  not carried forward given the legal & policy issues & practical feasibility

119 Slide 119 Outside Scope of Review (2)  Collect fees directly from consumers  not carried forward as no authority  Set fees by brand  not carried forward because not practical  Establish a schedule or cap for increases in fees  not carried forward because not legal

120 Slide 120 Questions & Answers

121 Slide 121 Next Steps Comments & Information  submit information for evaluating a specific option by December 22, 2005  send to:  include contact information as we may need clarification  submit general comments by January 12, 2006 Key dates  steering committee makes recommendations January 20, 2006  meeting of advisory committee January 25, 2006  2nd public stakeholder meeting February 15, 2006 (date to be confirmed)  review preferred option and related changes to BBPP

122 Slide 122 Thank You


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