Enforcement of PRN regime in doubt as prices continue to fall

The Environment Agency's role in policing the system of tradable PRN certificates, which are used to demonstrate compliance under the packaging regime, has been strongly criticised just as the Government is proposing to extend the Agency's enforcement role. Meanwhile, PRN prices fell to a new low over the summer.

Under the regime, businesses or compliance schemes acting on their behalf must demonstrate that they have taken "reasonable steps" to recycle and recover packaging waste - usually by purchasing PRNs or their equivalent for waste exports. These certificates are issued by reprocessors such as paper mills accredited by the Environment Agencies.

There is concern that PRNs are being issued erroneously, particularly in the wood and plastics sectors, boosting reprocessing statistics but depressing PRN market prices.

In a consultation paper in July, the Environment Department proposed new regulations to allow only accredited reprocessors to take any part in the compliance market. Reprocessors and exporters would be required to adhere to their business plans and to more comprehensive conditions, including a requirement for an independent auditor's report (ENDS Report 343, pp 41-42 ).

But in its response to the consultation, compliance scheme Biffpack - part of waste management company Biffa - lays into the Environment Agencies' enforcement record.

"To date," it says, "the Agencies have proved themselves to be unable to provide the necessary level of trained and consistent resource to meet the various enforcement tasks currently required."

The Environment Agency "does not have the systems able to record, monitor and deal with the current levels of data input and output with accuracy and there appears to be little analytical activity applied."

Biffpack, like most other compliance schemes, supports DEFRA's proposals to make the PRN system statutory and make reprocessors liable for the authenticity of PRNs they produce. But it warns that "there is still abuse of the system due to both a lack of enforcement and a lack of penalty."

Similarly, Angus Macpherson, managing director of the Environment Exchange brokerage, has questioned whether the Agencies have staff with skills to audit the PRN system, and if it is in the public interest for them to take on the roles of adviser, accreditor and regulator.

He also questions whether industry is receiving value for money from the Agencies, which already take £3.5 million in registration fees and are set to receive more under proposed changes to fee levels.

Those who suspected that the PRN figures were inflating the picture on recycling were vindicated earlier this year when DEFRA admitted that its provisional packaging recovery data had seriously overstated the UK's recycling record. Following an official investigation, the national recycling rate for 2002 was cut from 47.5% to 44.1% (ENDS Report 342, p 16 ).

Although suspicion had centred on two materials - wood and plastics - the investigation only examined the wood reprocessing sector. The recycling rate for wood was slashed from 84% to 54% after assumptions about the proportion of pallets in mixed wood waste were revised downwards and the Timber Packaging and Pallet Confederation agreed there was 40% more wood packaging in the waste stream than it had thought.

The Agency has since written to accredited wood reprocessors to say that exemptions from waste management licensing are permitted only for firms dealing with green waste or virgin timber, not those reprocessing waste wood products. The exemption applies to sites involved in small-scale "chipping, shredding, cutting or pulverising waste plant matter (including wood or bark), or sorting and baling sawdust or wood shavings" for recovery or reuse.

The Agency's belated action suggests that some wood reprocessors are operating illegally without a waste management licence.

A second investigation - this time into plastics - is about to get under way. DEFRA has already reduced last year's plastics recycling rate from 22.5% to 19%. This guess at the true figure was reached by looking at the previous rates of increase and picking a recycling rate that looked in line with the trend.

According to the revised figures, some 217,000 tonnes of plastics packaging was recycled in the UK last year. But research conducted for WRAP, the Government's Waste and Resources Action Programme, suggests that the true figure could be as low as 176,000 tonnes.

In a survey of 41 plastics reprocessors earlier this year, more than 90% thought that "the Agency audit process carried out at the time of re-accreditation was inadequate to expose companies that issue PRNs/PERNs falsely," according to a report prepared for WRAP by Enviros.1 Enviros gathered data through telephone questionnaires aimed at reprocessors and manufacturers. Based on data supplied by reprocessors, it estimates that around 229,000 tonnes of plastics packaging may have been recycled.

But a second method using data from trade associations and prominent industry players puts the figure at just 176,000 tonnes. The midpoint between these two figures is just above 200,000 tonnes - below the revised official figure.

Most companies surveyed believed that "misdescription" of non-packaging materials was the most common source of wrongly issued PRNs. In some cases, this could be due to genuine misinterpretation of Agency guidance on what constitutes packaging waste.

Other possibilities include the inclusion of process waste in a batch of packaging waste, and the false description of non-packaging as packaging at various points up and down the supply chain.

A small proportion of companies felt that double-counting of packaging - when a reprocessor issues PRNs on material but subsequently sells some or all of the load to another reprocessor - could also be a cause. Other reasons could be issuing PRNs for waste imported into the UK or for process residues.

Belief that PRNs are being issued erroneously has depressed PRN prices, claim market observers. "The Agencies haven't shown any desire to pull their finger out and this is killing the whole PRN market," said Mr Macpherson.

The average trading price of PRNs dropped from £8 per tonne in May to below £4 in August. While low prices allow the Government to claim that the UK has a low-cost regime for meeting the targets set by the EU packaging Directive, little revenue is being made available for investment in collection and reprocessing infrastructure or market support mechanisms.

Meanwhile, cost burdens are falling on local authorities as they try to meet their statutory recycling targets with little or no help from the packaging regime.

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