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National Environmental Management: Waste Act, 2008 (Act No. 59 of 2008)

Notices

Guideline and Toolkit for the Determination of Extended Producer Responsibility Fees

5. Conditions for fee adjustment

 

This chapter focuses on the adjustment of fees by PROs and presents three options for fee adjustments deemed most applicable within the South African context. These take into consideration the developmental phase EPR is at currently, economic factors such as inflation, as well as other determinants such as capital investment and economies of scale.

 

5.1 Allowance for Increases

Whether increases beyond a certain percentage should be allowed depends on the specific circumstances and objectives of the EPR scheme. In some cases, large increases might be justified to address significant challenges or to meet ambitious waste management targets.

 

In cases where substantial fee increases are proposed, it is essential to consider additional factors and conduct impact assessments. This includes assessing the socioeconomic impacts and considering potential adverse effects on industry competitiveness, as well as the impact on poor and low-income households. These assessments help to ensure that fee adjustments are balanced and fair, taking into account the broader societal implications and potential hardships.

 

The need for fee adjustments, the factors considered, and the magnitude of adjustments should be carefully evaluated in line with the specific objectives, environmental goals, and socioeconomic considerations of the EPR scheme. Regular monitoring, stakeholder engagement, and impact assessments can contribute to effective fee adjustment decisions.

 

5.2 Adjustment options that fit the South African context
5.2.1 No Adjustments

One option for fee adjustments is to not make any changes, particularly if there are economies of scale

and efficiency improvements in the waste management system. In such cases, as the volume of waste

increases and operational efficiencies are achieved, the costs per unit of waste management might

naturally decrease. This could lead to a situation where existing fees are sufficient to cover the costs,

and no adjustments are necessary.

 

Advantages

Disadvantages

Simplicity: Without adjustments, the fee structure remains straightforward and easy to understand for businesses and consumers.

Lack of flexibility: Fixed EPR fees may not account for changes in market conditions, product complexity, or environmental impact, potentially leading to underfunding or overcharging.

Stability: Fixed EPR fees provide a predictable cost structure, allowing businesses to plan their budgets more effectively.

Inequity: Without adjustments, the burden of EPR fees may not be distributed fairly among different stakeholders, potentially placing a disproportionate financial burden on certain businesses or consumers.

Incentives for efficiency: Without adjustments, businesses may be motivated to optimize their operations and reduce waste to minimize EPR fees.

Limited responsiveness: Fixed fees may not incentivize continuous improvement or adaptation to evolving environmental standards and Regulations.

 

5.2.2 Annual Inflationary Adjustments

Another option is to consider annual inflationary adjustments to the fees (CPI). This allows for the fees to keep up with the general increase in prices and costs over time. By applying inflationary adjustments, the fees can maintain their real value and ensure that the costs of waste management services are adequately covered.

 

Advantages

Disadvantages

Flexibility: Annual adjustments allow for the fees to be responsive to changes in market conditions, product complexity, or environmental impact. This ensures that the fees remain relevant and reflective of the actual costs associated with EPR.

Uncertainty: Annual adjustments may introduce uncertainty for businesses, as they need to anticipate and plan for potential changes in EPR fees each year.

Fairness: Adjusting fees annually can help distribute the financial burden more equitably among different stakeholders, ensuring that each party pays their fair share based on their environmental impact.

Administrative burden: Frequent adjustments require administrative efforts to assess and implement the changes, which can be time-consuming and resource-intensive for both businesses and regulatory authorities.

Incentives for improvement: Annual adjustments can incentivize businesses to continuously improve their environmental performance and reduce their waste generation, as lower fees can be achieved through better practices.

Potential for overcharging: Annual adjustments may lead to overcharging if the methodology used to determine the fee adjustments is flawed or if the fees are not accurately aligned with the actual costs of EPR.

 

5.2.3 Three year & Five-year adjustment option

As stipulated in the EPR Regulations, DFFE is required to evaluate the performance of the EPR scheme at the end of a five-year period. This evaluation can conveniently coincide with the option to make adjustments to the fees at three- year and / or five-year intervals during the review phase. The fees set for the next interval can consider a conservative inflation for each year.

 

Advantages

Disadvantages

Flexibility: Adjusting EPR fees every 3 and / or 5 years allows for the incorporation of changing market conditions, technological advancements, and environmental considerations.

Uncertainty: Frequent adjustments may introduce uncertainty for businesses, making it challenging to plan budgets and long-term strategies.

Fairness: Regular adjustments can help ensure that the financial burden of EPR fees is distributed more equitably among businesses and consumers, reflecting their respective impacts on the environment.

Administrative complexity: Implementing and managing the process of adjusting EPR fees every 3 year and / or 5 years can be administratively burdensome, requiring careful analysis and stakeholder engagement.

Incentives for improvement: Periodic adjustments provide incentives for businesses to innovate, improve product design, and adopt more sustainable practices to reduce their EPR fees.

Potential for underfunding: If the adjustments are not adequately calculated or fail to keep pace with environmental costs, there is a risk of underfunding EPR programs, which could undermine their effectiveness.

 

Recommendation:

 

EPR fee adjustments can be done in a 3 and / or 5-year cycle. This will take into account the progressive increases in the collection, recycling and other targets and additional investments required, and the DFFE's evaluation phase of EPR schemes. It also reduces the administrative burden of frequent re-evaluation of fees, provides price certainty to producers and assists PROs and producers implementing their own schemes with their planning and investment decisions over the short to medium

term.

 

Complementary to the 3 and / or 5-year periodic adjustments, annual inflationary adjustments of EPR fees is recommended to maintain their real value and ensure that the costs of waste management services are adequately covered.