Sustainable Financing April 15th and 16th, 2004 Sacramento, California Dialogue

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project2 Overview Background Background Presentations (Workgroups G and C) Presentations (Workgroups G and C) Cost diagram Cost diagram Attributes of a sustainable financing system Attributes of a sustainable financing system Next Steps Next Steps

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project3 Boston Meeting Discussion PREMISE: We need to first figure out what we want to accomplish, and THEN we can figure out how to finance it. PREMISE: We need to first figure out what we want to accomplish, and THEN we can figure out how to finance it.

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project4 Boston Meeting Discussion Overview of Potential Financing Strategies Front-end payments Front-end payments –Advanced Recycling Fee (visible) Tires, lead acid batteries, motor oil Tires, lead acid batteries, motor oil Government or industry-managed fund Government or industry-managed fund –Cost internalization (invisible) Deposits Deposits Retail coupons/incentives Retail coupons/incentives Back-end fees Back-end fees

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project5 Boston Meeting Discussion What are the 2 main things about financing that you would like addressed in dialogue? What are the 2 main things about financing that you would like addressed in dialogue? Additional research/information you need to be prepared to discuss financing at the California meeting? Additional research/information you need to be prepared to discuss financing at the California meeting? Formed Workgroups Formed Workgroups –Redemption Deposit –Financing

Sustainable Financing Work Group G

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project7 Team Members Scott Cassel, PSI – Facilitator Scott Cassel, PSI – Facilitator Dave Darling, National Paint & Coatings Assoc. Dave Darling, National Paint & Coatings Assoc. Carl Minchew, Benjamin Moore Carl Minchew, Benjamin Moore Susan Petersen, ICI Canada Susan Petersen, ICI Canada Robert Wendoll, Dunn-Edwards Robert Wendoll, Dunn-Edwards Bill Sierks, MN Office of Environmental Assistance Bill Sierks, MN Office of Environmental Assistance Kelly Wilson, MN Office of Environmental Assistance Kelly Wilson, MN Office of Environmental Assistance Mike Nechvatal, IL Environmental Protection Agency Mike Nechvatal, IL Environmental Protection Agency Irene Gleason, FL Department of Environmental Protection Irene Gleason, FL Department of Environmental Protection

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project8 Workgroup G Goals Provide guidance to PSI to enable a productive discussion on financing issues at the CA meeting Provide guidance to PSI to enable a productive discussion on financing issues at the CA meeting Develop a thorough understanding of sustainable financing options. Develop a thorough understanding of sustainable financing options. Bring participants up to speed on financing options. Bring participants up to speed on financing options.

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project9 How Paint Management Financed Now Government programs Government programs –Taxes –Waste surcharge (e.g., $.50/ton for HHW) –Bond funds (capital expenses, staff) –End of life fees Retailers Retailers –Manage own paint surplus

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project10 FEE-RELATED FINANCING SYSTEMS

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project11 British Columbia Paint Program Provincial regulation (1994) Provincial regulation (1994) Visible eco-fee ($0.10-$1.00 CA) related to container size Visible eco-fee ($0.10-$1.00 CA) related to container size Program Goals: Program Goals: –Shift disposal cost to brand owner/consumer –Reduce waste disposal, promote reuse/recycling Collection depots managed by brand owners and some municipalities Collection depots managed by brand owners and some municipalities Product Care Association manages $ and central bulking facility, contracts for recycling services Product Care Association manages $ and central bulking facility, contracts for recycling services

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project12 British Columbia Paint Program How it works: How it works: –Brand owner makes payment to Product Care based on containers sold –Brand owner recovers fee through sales chain –Retailer recovers fee (visibly) from consumer Collected paint goes to (2003 data): Collected paint goes to (2003 data): –Non-paint uses (54%) –Energy recovery (32%) –Reuse (7%) –Reprocessed as paint (7%)

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project13 British Columbia Paint Program Fund used for: Fund used for: –Operations –Education Metal paint cans and plastic pails are recycled Metal paint cans and plastic pails are recycled

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project14 Quebec Paint Program Provincial regulation (2001) Provincial regulation (2001) Invisible eco-fee ($0.25 CA) on containers sold in Quebec Invisible eco-fee ($0.25 CA) on containers sold in Quebec Goals: Promotes reuse/recycling and producer responsibility Goals: Promotes reuse/recycling and producer responsibility Collection depots managed by retailers and municipalities Collection depots managed by retailers and municipalities

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project15 Quebec Paint Program Eco-Peinture manages $ and contracts for recycling services Eco-Peinture manages $ and contracts for recycling services How it works: How it works: –Brand owner pays into fund (Eco-Peinture managed) Processed paint goes to: Processed paint goes to: –Raw material export (64%) –Unusable/landfilled (16%) –Energy recovery (8%) –Incineration (3%)

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project16 Quebec Paint Program Graduated performance goals on amount collected Graduated performance goals on amount collected Paint cans are recycled Paint cans are recycled

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project17 Nova Scotia Paint Program Provincial regulation (2002) Provincial regulation (2002) Invisible eco-fee ($0.10-$1.00 CA) related to container size – but many show fee Invisible eco-fee ($0.10-$1.00 CA) related to container size – but many show fee Goals: Promote reuse/recycling and producer responsibility Goals: Promote reuse/recycling and producer responsibility Collection depots managed by municipalities (some also collect bottles) Collection depots managed by municipalities (some also collect bottles)

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project18 Nova Scotia Paint Program Product Care manages program for most companies Product Care manages program for most companies Resource Recovery Fund Board provides operations for program Resource Recovery Fund Board provides operations for program Paint reprocessed and sold to consumers Paint reprocessed and sold to consumers Paint cans are recycled Paint cans are recycled

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project19 Ontario Container Program Provincial law (2002); enacted Feb Provincial law (2002); enacted Feb Part of Blue Box Recycling Program Part of Blue Box Recycling Program –Packaging and printed papers Goals: waste reduction, reuse, recycling Goals: waste reduction, reuse, recycling Invisible (“buried”) Eco-fee: Invisible (“buried”) Eco-fee: –1 cent per one-gallon steel paint can –6 cents per plastic five-gallon plastic pail => Funds 50% of recycling costs

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project20 Ontario Container Program Empty paint cans collected at municipal depots and curbside Empty paint cans collected at municipal depots and curbside 60% diversion goal on all Blue Box materials by % diversion goal on all Blue Box materials by 2008

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project21 Canadian Paint Return Programs SYSTEM ASPECTS WORKING WELL Mandatory through back drop legislation Mandatory through back drop legislation Financing systems are sustainable Financing systems are sustainable Third party handles Paint Return Program Third party handles Paint Return Program –Product Care – instrumental in developing agreements with all provinces –Eco-Peinture for Quebec –Product Care and Resource Recovery Fund Board for Nova Scotia

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project22 Canadian Paint Return Programs SYSTEM ASPECTS WORKING WELL Industry has much control over the program and funding Industry has much control over the program and funding Uses existing municipal infrastructure Uses existing municipal infrastructure Markets have been developed for paint collected Markets have been developed for paint collected Programs are financially audited Programs are financially audited

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project23 Canadian Paint Return Programs CONCERNS EXPRESSED Not a National Paint Return Program for Canada Not a National Paint Return Program for Canada –No uniformity, each province has own set of regulations Eco-fees not visible in some provinces (Quebec & Nova Scotia) Eco-fees not visible in some provinces (Quebec & Nova Scotia) –Industry concern –Government often prefers invisible fees Recycled paint is competing with virgin paint Recycled paint is competing with virgin paint

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project24 Canadian Paint Return Programs CONCERNS EXPRESSED Concern about the composition of recycled paint Concern about the composition of recycled paint Mandatory recycling into paint (Nova Scotia & Quebec) Mandatory recycling into paint (Nova Scotia & Quebec) In Ontario, product is managed separately from packaging In Ontario, product is managed separately from packaging

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project25 The Ideal Canadian Program – Manufacturer Perspective National Paint Return Program National Paint Return Program –Uniform program to include paint and aerosols Mandatory back drop legislation Mandatory back drop legislation One company handles paint return (e.g. Product Care) One company handles paint return (e.g. Product Care) –One auditor –One fee system Manage can and paint together Manage can and paint together

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project26 The Ideal Canadian Program – Manufacturer Perspective Visible Eco-Fee Visible Eco-Fee Consumers do not return paint to retailers Consumers do not return paint to retailers The paint industry wants paint to be reused/recycled into other products/materials. The paint industry wants paint to be reused/recycled into other products/materials. –We are not the experts in recycling paint into other products

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project27 Tire Fee – U.S. 35 states with tire fee ($1-2 avg; $0.25-$5 range) 35 states with tire fee ($1-2 avg; $0.25-$5 range) 37 states ban whole tires from landfills 37 states ban whole tires from landfills Goal: alleviate tire piles, mgt of current tire disposal Goal: alleviate tire piles, mgt of current tire disposal Most states manage funds Most states manage funds Funds used for: market development, collection/processing, cleanups Funds used for: market development, collection/processing, cleanups

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project28 Pesticide Registration Fee – MN Federal law (FIFRA) established pesticide registration fee program Federal law (FIFRA) established pesticide registration fee program States can register pesticides and assess fee on manufacturer States can register pesticides and assess fee on manufacturer Goal: health/env’l concerns over pesticide use Goal: health/env’l concerns over pesticide use MN fee dedicated to: MN fee dedicated to: – program oversight (use, storage, handling, disposal) –Collection/disposal of waste pesticides

Redemption Deposit Workgroup C

Team Members PSI Facilitator: Heidi Sanborn PSI Facilitator: Heidi Sanborn Marv Goodman, National Council on Paint Disposition Marv Goodman, National Council on Paint Disposition Mike Nechteval, IL EPA Mike Nechteval, IL EPA Irene Gleason, FL DEP Irene Gleason, FL DEP Barry Elman, US EPA Barry Elman, US EPA Steve Long, MA DEP Steve Long, MA DEP Carl Minchew, Benjamin Moore Carl Minchew, Benjamin Moore Rayna Laiosa, Benjamin Moore Rayna Laiosa, Benjamin Moore Suzette Thomason, Steel Recycling Institute Suzette Thomason, Steel Recycling Institute

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project31 Redemption Deposit Workgroup Goals Conduct research on retail deposit programs with consumer incentives Conduct research on retail deposit programs with consumer incentives Consider how funds are paid into deposit/redemption programs Consider how funds are paid into deposit/redemption programs Analyze feasibility of national paint deposit Analyze feasibility of national paint deposit Provide findings and background on the feasibility of implementing a deposit/redemption strategy Provide findings and background on the feasibility of implementing a deposit/redemption strategy

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project32 Research Developed 18 questions Developed 18 questions Developed format for responses Developed format for responses Programs researched Programs researched

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project33 DEPOSIT-RELATED FINANCING SYSTEMS

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project34 Auto Battery Deposit – U.S. “It works because it has too” “It works because it has too” Shortages of raw materials Shortages of raw materials Deposits insure that they will have product to sell Deposits insure that they will have product to sell Retailers have potential to increase profits Retailers have potential to increase profits Out with the old, in with the new Out with the old, in with the new

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project35 Auto Battery Deposit – U.S. There is legislation in 37 states but do they need it? There is legislation in 37 states but do they need it? –Require retailers/wholesalers take back old batteries when sell new –Some states require collection fee of $1-3 –Other states require refundable deposit of $5-10 Some retailers charge $5-7 “core charge” that is returned only if consumer brings back old battery in specified time period Some retailers charge $5-7 “core charge” that is returned only if consumer brings back old battery in specified time period Old batteries have value up to $2/each on commodity market Old batteries have value up to $2/each on commodity market 97% level of participation in recycling speaks volumes 97% level of participation in recycling speaks volumes

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project36 Bottle Bill Deposit - MA Mandatory – Enacted in 1983 Mandatory – Enacted in 1983 Goal – anti-litter and reclaiming material Goal – anti-litter and reclaiming material Deposit 5 cents, 2003 redemption: 69% Deposit 5 cents, 2003 redemption: 69% Bottlers pay 2 ¼ cent handling fee to redemption centers/retailers Bottlers pay 2 ¼ cent handling fee to redemption centers/retailers Retailers required to take back what they sell Retailers required to take back what they sell $ Held by state, used to be dedicated to recycling $ Held by state, used to be dedicated to recycling Unredeemed $ goes to MA general fund Unredeemed $ goes to MA general fund Met goals but needs collection efficiency improvements Met goals but needs collection efficiency improvements

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project37 Australia Beverage Container Deposit Program Regulatory 5¢ to 10¢ full deposit return program (contracted handling fee) Regulatory 5¢ to 10¢ full deposit return program (contracted handling fee) Managed by manufacturer contracted "Super Collectors" (EPA approves contracts) Managed by manufacturer contracted "Super Collectors" (EPA approves contracts) Goal - Reduce littering and encourage recycling Goal - Reduce littering and encourage recycling 84-90% recycling rate, 74% plastic 84-90% recycling rate, 74% plastic Participant deposit refund available from depot/retailer, "Super Collector" reimburses deposit and pays handling fee Participant deposit refund available from depot/retailer, "Super Collector" reimburses deposit and pays handling fee

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project38 Maine Pesticide Container Deposit Program Regulatory $5 to $10 full deposit return program on restricted pesticide containers (possibly sunsetting) Regulatory $5 to $10 full deposit return program on restricted pesticide containers (possibly sunsetting) Managed by manufacturers/dealers with government provided stickers, special collections, and fund to offset handling costs Managed by manufacturers/dealers with government provided stickers, special collections, and fund to offset handling costs Goal - Stop illegal dumping of containers Goal - Stop illegal dumping of containers 80% recycling rate? Uncertain sales & recycling numbers 80% recycling rate? Uncertain sales & recycling numbers Participant affidavits given to dealer for deposit returns & government for tracking Participant affidavits given to dealer for deposit returns & government for tracking

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project39 Used Oil Deposit - CA Legislated 1991, no sunset Legislated 1991, no sunset Deposit amount: 4 cents/quart Deposit amount: 4 cents/quart Goal: pollution prevention, recycle a resource Goal: pollution prevention, recycle a resource Return rate 48% in 2002 Return rate 48% in 2002 State agency manages fund State agency manages fund $ Distributed as block and competitive grants $ Distributed as block and competitive grants Block grant is noncompetitive and distributed statewide based on cents/per capita Block grant is noncompetitive and distributed statewide based on cents/per capita Studies show retailers get $12 in sales when customers return oil Studies show retailers get $12 in sales when customers return oil

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project40 OTHER FINANCING SYSTEMS

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project41 Pesticide Container Recycling Program in Continental US Managed by non-profit industry-affiliated organization Managed by non-profit industry-affiliated organization –Funded by more than 30 member companies –Voluntary member assessment based on market share Goal to subsidize recycling/reduces local waste management burden Goal to subsidize recycling/reduces local waste management burden Approximately 20-25% recycling rate Approximately 20-25% recycling rate Four contractors service public & private collection sites Four contractors service public & private collection sites –2,000 to 3,000 sites in 48 states –6.7 million pounds of plastic collected (2003)

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project42 Rechargeable Batteries – U.S. Voluntary industry initiative (1994) Voluntary industry initiative (1994) –Response to MN and FL laws Rechargeable battery manufacturers established non-profit corporation (RBRC) Rechargeable battery manufacturers established non-profit corporation (RBRC) –Members paid for right to use recycling logo –Fee assessed based on market share –Cost “internalized” into product price –RBRC conducted entire program (education, collection, processing, etc.)

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project43 Rechargeable Batteries – U.S. Collection at municipalities, retailers (voluntary, businesses) Collection at municipalities, retailers (voluntary, businesses) –Free for consumers and municipalities –Small charge for businesses Concern over “free riders” so legislation enacted after RBRC created Concern over “free riders” so legislation enacted after RBRC created No program goals No program goals Little government involvement Little government involvement

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project44 Used Oil Recycling Bill – MA Proposed changes to existing legislation Proposed changes to existing legislation Hybrid: Deposit and Fee elements Hybrid: Deposit and Fee elements $.05 per quart “recycling incentive payment” by petroleum manufacturer or oil distributor at wholesale level into state Used Oil Fund $.05 per quart “recycling incentive payment” by petroleum manufacturer or oil distributor at wholesale level into state Used Oil Fund $.05 per quart payment to collection centers (municipal, private) based on hauler manifests $.05 per quart payment to collection centers (municipal, private) based on hauler manifests Consumers receive $.05 incentive payment from collection centers Consumers receive $.05 incentive payment from collection centers Fund created by unredeemed oil (sales-payment) Fund created by unredeemed oil (sales-payment)

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project45 Used Oil Recycling Bill – MA Goals: Pollution prevention, reuse resource Goals: Pollution prevention, reuse resource Regulatory relief for retailer (under existing collection requirement) Regulatory relief for retailer (under existing collection requirement) –Small retailer exemption –Retailer opt-out/flexibility Coupon allowance as alternative to payment (at least 2x $0.20/gallon) Coupon allowance as alternative to payment (at least 2x $0.20/gallon)

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project46 Used Oil Recycling Bill – MA Funds used for: Funds used for: –Recycling incentive payment to collection centers –Public education –Training and equipment grants –Curbside recycling pilot projects –“Insurance” fund for contaminated oil Multi-stakeholder dialogue Multi-stakeholder dialogue –Full consensus reached in 1996 –Bill in MA Ways & Means Committee awaiting Governor’s support

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project47 Program Design Options (examples) Uniform national program or state/local variation? Uniform national program or state/local variation? Cover oil-based and water-based products or just oil- based? Cover oil-based and water-based products or just oil- based? Establish uniform fee/deposit for all paint products or differentiate among products (e.g., oil-based vs. water- based; risk-based)? Establish uniform fee/deposit for all paint products or differentiate among products (e.g., oil-based vs. water- based; risk-based)? Visible vs. Invisible fee? Visible vs. Invisible fee? Who collects fee/deposit? Who collects fee/deposit? Who manages the fund (government vs. third party) Who manages the fund (government vs. third party) How are the funds distributed? How are the funds distributed? Deposit: Focus on paint and can together or the paint alone? Deposit: Focus on paint and can together or the paint alone?

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project48 Cost Diagram

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project49 Ideal World – Financing Paint has value so no need for financing system to subsidize collection and processing. Paint has value so no need for financing system to subsidize collection and processing. Funds collected are only those needed to collect and manage paint; there would be no excess funds. Funds collected are only those needed to collect and manage paint; there would be no excess funds.

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project50 Key Financing Questions Can we get the cost of managing leftover paint to zero? Can we get the cost of managing leftover paint to zero? What can be done to contribute to making paint collection and management programs profitable? What can be done to contribute to making paint collection and management programs profitable?

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project51 Key Financing Questions At what point do we think it will be profitable to collect and process leftover paint? At what point do we think it will be profitable to collect and process leftover paint? –What needs to happen from now to then? –Is funding needed in the interim? Under what scenario might funding be necessary? Under what scenario might funding be necessary?

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project52 Strategies for Reaching Profitability Education to reduce leftover paint Education to reduce leftover paint Reduce regulatory barriers/disincentives Reduce regulatory barriers/disincentives Increase reuse opportunities Increase reuse opportunities Implement cost-effective collection programs Implement cost-effective collection programs

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project53 What Might Need to be Financed? Capital costs (collection) Capital costs (collection) Operating costs (collection, transportation, processing) Operating costs (collection, transportation, processing) Education/outreach Education/outreach Pilot projects Pilot projects Market development Market development Enforcement Enforcement

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project54 Next Steps What more information do you need to determine if financing will be needed? What more information do you need to determine if financing will be needed? What should the workgroup do to prepare you for a financing discussion in DC? What should the workgroup do to prepare you for a financing discussion in DC? What do we want that DC financing discussion to be? What do we want that DC financing discussion to be?

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project55 Attributes of a Sustainable Financing System Fair for all manufacturers and retailers Fair for all manufacturers and retailers Flexibility to lower or eliminate cost to consumer as program costs decrease Flexibility to lower or eliminate cost to consumer as program costs decrease Non-government managed fund Non-government managed fund Maximum manufacturer/retailer flexibility Maximum manufacturer/retailer flexibility Performance measures Performance measures

April 15-16, 2004 Sacramento MeetingPSI Paint Stewardship Project56 Attributes of a Sustainable Financing System Provides consumer convenience and incentive for product return Provides consumer convenience and incentive for product return Consistent nationally Consistent nationally Allows for third party program management Allows for third party program management