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Eco-modulation: What is it, does it work, and how can it apply to packaging waste?

Eco-modulation: What is it, does it work, and how can it apply to packaging waste?

Calvin Lakhan, PhD and Co-Investigator, Waste Wiki Project

Calvin Lakhan

Eco-modulation is a term that is gaining significant traction in recent legislative discussions surrounding extended producer responsibility for packaging waste. While eco-modulation is not a new concept, its application to managing end of life packaging waste is still in its relative naissancey. This article attempts to shed light on what eco-modulation is, how it is being implemented for packaging waste, its perceived efficacy, and the challenges/issues associated with its adoption.

What is Eco-Modulation?

In its simplest terms, eco-modulation is the concept of penalizing the use of materials that are perceived to be environmentally harmful, while rewarding the use of those which are perceived as being “better” for the environment (i.e. more recyclable). This can take many forms, i.e. placing taxes on products that have a large carbon footprint, or providing subsidies to those with a demonstrable environmental benefit. Eco-modulation for packaging is most often nested within the framework of extended producer responsibility, which obligates that packaging producers are physically and financially responsible for its management at end of life. While fee rates are largely intended to capture the costs of recycling and assign costs to the appropriate party, eco-modulated fees are based on more nuanced factors that attempt to provide an incentive for producers to reduce the environmental impacts of their packaging. Eco-modulation can be seen as part of a broader movement intended to encourage design for the environment, incentivizing producers/manufacturers to minimize the environmental burden of their products during the “upstream” design phase.

Jurisdictions such as Oregon, Connecticut and New York are exploring how eco-modulated fees can be incorporated into proposed producer responsibility legislation, with a particular emphasis being placed on fee rates that are able to reflect recycled content targets.

Do Eco-Modulated Fees Work?

Source: enviro-pac.com

The answer to this isn’t black and white, as there are relatively few examples of eco-modulation for packaging waste, and even fewer that have existed for any appreciable length of time. It is also extremely difficult to establish a causal relationship between eco-modulation and design for the environment, as decisions surrounding packaging design are a function of multiple factors (i.e. product durability, consumer safety etc.). Of note, Ontario’s Blue Box program has used a simplified version of eco-modulation for the better part of two decades, as the fee schedule is intended to incentivize the use of materials with the highest recycling rates and lowest material management costs. An equalization factor is implemented to help modulate fee rates, as “good performing” materials are able to transfer costs onto “poor performing” materials – further incentivizing the adoption of packaging that is more readily recyclable within the existing system. While a detailed explanation of how Ontario’s fee model works is beyond the scope of this article, fee rates are based on the relative recycling performance and net recycling costs of packaging materials.

Ontario’s eco-modulated fee schedule has had limited discernable impact on the design of packaging, its recyclability, or the development of recycling end markets. In fact, one could make a fairly compelling argument that in spite of the intended effect of eco-modulation, producers have been designing LESS recyclable packages over time, not more.

Over the past 10 years, readily recyclable materials, i.e. newsprint, corrugated cardboard, boxboard etc., are making up less of the overall proportion of packaging materials currently recycled. By contrast, light weight, flexible and composite packaging (difficult to recycle materials) are now making up a greater proportion of the overall waste stream. Due to the costs associated with attempting to recycle these materials, and the fact that they are making up more of all packaging being put onto the market, we observe rapidly increasing recycling system costs and declining recycling performance. Difficult to recycle materials such as paper laminates have also seen stagnating (or decreasing) recycling performance over time. Despite the intended eco-modulated incentive that should encourage laminated paper producers to improve recycling rates and develop end markets, recycling performance has remained unchanged, while material management costs have increased by 30%.

Issues:

The foremost issue with existing and proposed approaches to eco-modulation for packaging waste is not necessarily that it hasn’t been effective, but that it is too narrowly focused on recycling based outcomes. One of the stated purposes of eco-modulation for packaging waste is to encourage recyclability and the use of recycled content in packaging. While this may seem like a good idea, it runs the risk of conflating recycling with sustainability. As noted above, eco-modulation is part of a greater push to encourage design for the environment – but what is best for the environment may not be increasing recycling rates or recycled content.

Light-weighting vs. Recyclability

“The evolving tonne” is a phenomenon that has been acknowledged and accepted by policy makers across North America – the recycling bin of today is fundamentally different than what it was even as little as 10 years ago

Existing recycling infrastructure is becoming increasingly incompatible with the types of packaging products being generated. This is actually one of the arguments used in favor of eco-modulated fee rates, as it is intended to incentivize the use of more readily recyclable packaging materials, or conversely, encourage the development of new recycling infrastructure and end markets. But should higher recycling rates be the goal of a waste management program? NO!

Waste management

Referring to the principles of the waste management hierarchy – reduction is preferred to reuse, and reuse is preferred to recycling. Through that lens, a decision to prioritize recycling based outcomes via eco-modulation seems counter-intuitive, as it is actually our least preferred option. Unfortunately, policy makers, producers and the public conflate recycling with sustainability – if it can’t be recycled, it must be bad. This is perhaps what is most dangerous about approaches to eco-modulation under proposed extended producer responsibility (EPR) legislation, it focuses on recycling based outcomes and is intended to “improve recycling rates and recycled content requirements” for printed paper and packaging. However, not all recycling is created equal, and in many instances, prioritizing mechanical recycling at the expense of other end of life outcomes can be detrimental both environmentally and economically.

While package light weighting has often been characterized as a negative due to low levels of recyclability (flexible and multi-resin plastic packaging), a life cycle analysis that looks at the upstream benefits of light-weighting paints a very different picture. Despite low levels of recyclability, light weight packaging reduces the amount of materials being used (waste reduction), achieves efficiencies in logistics and transportation that results in fewer GHG emissions, increased product durability, increased shelf life (both at the store, and at home), and can allow for discretionary consumption (resealable “press and seal” food packaging).

Eco-modulation, as it is described in proposed EPR legislation, neglects to capture any of the aforementioned benefits. In fact, eco-modulation that prioritizes recycling based outcomes will actually result in many light weight packages being penalized due to low levels of recyclability. There is a very real risk that eco-modulation may result in an environmentally and economically perverse outcome, where producers “switch back” into heavier but more recyclable packaging, yielding a worse environmental outcome.

Increasing Recycled Content Isn’t as Easy as it Seems

Of note, eco-modulation that rewards the use of recycled content may also have unintended consequences, as there are numerous technical and economic barriers to increasing the use of post-consumer resin (PCR) in packaging. The foremost issue is: “Is it even possible?” – in many instances, there are technical barriers to increasing the proportion of recycled content in a product, as it may compromise product quality or durability.

There are also very real concerns surrounding adequate supply of PCR – legislating that producers increase the recycled content of their products and packaging (or rewarding those that do via eco-modulation) assumes that there is sufficient material to meet legislated targets. Market price distortions can occur, as increased recycled content requirements will subsequently lead to an increase in demand for recycled materials. In instances where the supply of recycled material is constrained, increasing recycled content requirements will increase the price of recycled materials and the products that use them. Lastly, incenting the use of recycled content (via eco-modulation or legislative targets) can create an unequal playing field – some material categories (such as beverage bottles) are better suited for increasing recycled content, while others (cleaning products) are not due to concerns surrounding product quality and safety. Is it fair to penalize products that are unable to increase the use of recycled content for factors that are beyond their control?

Eco-Modulation and Life Cycle Thinking

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It is critical that if we are to adopt eco-modulation for packaging waste, it must be based on life cycle thinking. The challenge is how do we go about doing this? Can we credibly quantify environmental impacts and develop a fee schedule that captures criteria such as material reduction/light weighting, logistical impacts attributable to light weighting, effects on useful product life (both at the store and in the home for perishable items packaged using plastics) and discretionary consumption? Eco-modulation based on carbon impact is one option that is being explored in Oregon, but the mechanics of how this could work, and the roles and responsibilities of stakeholders in conducting this analysis is still not clear.

There is also the secondary issue of how eco-modulation should address contextual factors that exist outside the boundaries of a traditional life cycle analysis, but can influence packaging choices. This can include things like maturity of available waste management infrastructure, availability and strength of end markets, environmental risks if landfilled (or if improperly managed at end of life), direct and indirect economic impacts attributable to end of life management options etc. Table 1 below is a non-exhaustive list of potential factors to consider when developing an eco-modulated fee schedule.

The above key performance indicators (KPIs) include both quantitative measures (i.e. $ cost per tonne managed,) as well as qualitative variables that provides useful contextual information that can better inform decision making.

While expanding eco-modulation criteria to include a more wholistic life cycle approach may result in a more time and data intensive process, adopting this methodology is critical in understanding the “true” impact of packaging. Recycling cannot and should not be the benchmark for evaluating the merits of a particular packaging type - it is only one dimension of what is a multi-faceted issue. Once again, we have to ask ourselves "What do we mean by sustainable packaging design?" Too often, both producers and policy makers prioritize recycling, which can be both disingenuous and dangerous. It is imperative that we move away from our fixation on trying to recycle everything, everywhere and embrace a more wholistic life cycle approach.

Calvin Lakhan is currently co-investigator of the “Waste Wiki” project at York University (with Dr. Mark Winfield), a research project devoted to advancing understanding of waste management research and policy in Canada. He holds a PhD from the University of Waterloo/Wilfrid Laurier University joint Geography program, and degrees in economics (BA) and environmental economics (MEs) from York University. His research focuses on four areas: 1) Evaluating the efficacy of municipal policy instruments used to promote waste diversion; 2) Optimizing the recycling system to achieve increased diversion while minimizing material management costs; 3) Examining the role of race and ethnicity as antecedents to recycling behavior; and 4) Encouraging pro environmental behavior among minority and marginalized groups, with a specific examination of how structural inequality manifests itself in impeded access to recycling/waste services.