Deposit return scheme: Circularity Scotland hails “milestone” producer registration and reaffirms August 2023 launch date amid growing scepticism

With a planned launch date of 16 August 2023, the pressure is on for the Scottish government to deliver the deposit return scheme (“DRS”) for drinks containers. Despite increased scrutiny of industry readiness, Circularity Scotland (“CSL”) reaffirmed on 2 March that the scheme is on track and that producers responsible for more than 95% of containers sold in Scotland had registered with the scheme.

However, as the “go live” date moves closer, there are still challenges around how the DRS will operate in practice. For producers and retailers, who have new legal obligations under the scheme, this raises questions around how to ensure their compliance in time.

In parallel, the scheme continues to face scrutiny, both in the courts by way of judicial review from small businesses, and increasingly from Scottish ministers voicing concerns about the DRS’s potential repercussions on trade. All three candidates for the Scottish National Party (“SNP”) leadership have said they would pause or change the DRS, and the Westminster government is reportedly planning to deny the SNP’s request for a trade exemption under the UK Internal Market Act 2020, which could cause further disrptions. In this short piece, we take a look at some of the issues still facing businesses.

What is a DRS?

The rationale for DRS is to increase recycling rates of drinks containers. An additional deposit (in this instance 20p) is added to the price of a drinks bottle and is paid by consumer at the point of purchase. The consumer can then recover the deposit when they return the empty drinks bottle to a return point to be recycled.

Countries that operate DRS generally have better recycling rates than countries without them. These schemes are strategically important in the UK in the context of the circular economy and will work alongside initiatives like packaging extended producer responsibility and the plastic packaging tax (see our recent blog post here). The Scottish DRS introduces obligations that risk being onerous on some businesses. It will be regulated by the Scottish Environmental Protection Agency and is being administered by Circularity Scotland. It is the first DRS to be introduced after, and to operate alongside, kerbside recycling for the same types of container.

Who is affected by the Scottish DRS?

The Scottish DRS is of general importance to anyone with commercial ties to businesses operating in Scotland. In particular, the scheme will impact drink producers (brand owners, importers or a filler and sealer of scheme containers with a drink at the point of sale) and retailers (anyone marketing or offering for sale) of drinks in Scotland, packaged in a single-use container made from PET plastic, glass, steel or aluminium, sized between 50ml and 3 litres (a “scheme container”).

Producers of drinks for sale in Scotland that are sold in scheme containers have a variety of obligations, including:

registering with SEPA to be part of the scheme (either directly or through Circularity Scotland);
paying a registration fee;
charging a 20p deposit on each item made available for retail sale in Scotland; and
arranging for collection of empty scheme containers.

Retail businesses that sells drinks in scheme containers to consumers in Scotland have a number of obligations, including:

making sure they sell drinks containers from producers that are registered with the scheme;
charging the deposit on each container;
various signage obligations in store; and
operating a return point for producers, unless exempt.

What sort of issues are businesses facing?

The principle of a DRS is generally supported by industry and by consumers, particularly in light of growing concern around pollution and unsustainable consumption. However, there appear to be practical problems that are yet to be fully considered, and limited time for clarification. For example:

There is still only limited public guidance from SEPA, Circularity Scotland and Zero Waste Scotland for producers and retailers. This means that many businesses are unsure how to approach their compliance, especially when they have multiple sites. On the other end of the spectrum, some businesses based outside of Scotland may consider limiting their operations there.

How the operation of return points will be split, in practice, between individual retailers and the operators of large sites like transport hubs, shopping centres and hospitals. While it seems the intention of CSL is that the large site operators will provide voluntary return points for consumers, the legal obligation to operate a return point falls on individual retailers. If no agreement is reached between them in time for the hubs to order reverse vending machines, and for the individual retailers to apply for exemptions, these retailers risk non-compliance on the launch date.

There are only limited exemptions from the obligation on retailers to operate a return point for scheme containers. The proximity and environmental health exemptions appear to have been awarded to only a small number of premises. There are no automatic exemptions for retailers in moving vehicles like trains, or retailers operating air-side at airports in Scotland.

Lack of alignment with the rest of the UK. The schemes in England, Wales and Northern Ireland are unlikely to take effect before October 2025, meaning that Scottish residents may be inclined to purchase drinks in the north of England rather than at home, but these cannot be recycled through DRS in Scotland. In addition, the materials in scope are expected to vary, with Scotland (and likely Wales) including glass, whereas glass will be out of scope in England and Northern Ireland. Inconsistencies between the devolved nations of the UK are likely to be confusing for consumers and may make the schemes less effective overall.

Supply chain challenges are also being raised. Scheme containers are meant be labelled with the DRS’ branding. This may present a challenge for importers into Scotland of drinks containers that are designed and manufactured abroad. There is also growing discourse around the effect on the retail prices of the 20p deposit applying to individual scheme articles in multipacks. Whether the deposit is redeemed or not by returning the scheme container to a return point, there will still be a markedly higher price at the point of purchase to be borne by the consumer.

Enforcement approach

Whatever your view on the viability of the Scottish DRS, the launch date is approaching and will give SEPA (and anyone they nominate) broad investigative and enforcement powers. As with any new regime, until the scheme is operational it is uncertain how enforcement will look. However, commentary indicates that SEPA will take a collaborative approach with businesses that are actively trying to meet their obligations in time, so a cautious, proactive approach is well advised.

In the time remaining before the implementation of the DRS, affected businesses should assess how they might be impacted and make plans ahead of time. This could involve, for instance, rolling out staff training on what scheme containers are, ordering signage, and making applications for exemptions where appropriate.

Beyond Scotland

At the beginning of this year, DEFRA, the Welsh Government, and the Department of Agriculture, Environment and Rural Affairs in Northern Ireland published a consultation response about the deposit return schemes in the rest of the UK. While these schemes are still at early stages (and unlikely to begin before October 2025), businesses should be mindful of upcoming legislation and pay attention to how these schemes develop.

New and Updated Guidance on the Scope of the UK Plastic Packaging Tax

By Oliver Bristow on March 3, 2023 Posted in Climate Change & Sustainability, Environmental

The Plastic Packaging Tax (the Tax) came into force on 1 April 2022 and applies to finished plastic packaging components (PPC) produced for commercial purposes or imported into the UK that contain less than 30% recycled plastic by weight. Since our previous article and our FAQ for businesses explaining the Tax, HMRC has updated its original guidance to help businesses better understand the Tax. This comes partly because there have been fewer registrations from businesses who consider themselves liable for the Tax than HMRC had anticipated. HMRC has also published a new piece of guidance containing provisions regarding secondary liability and joint and several liability for the Tax.

Greenwashing: UK Regulator Investigation and Further Guidance for Businesses

By Squire Patton Boggs on February 21, 2023 Posted in Environmental, Rulemaking & Policy Development

The UK Regulator – the Competition and Markets Authority (“CMA”) – continues to be active in cracking down on misleading green claims, this time targeting the fast-moving consumer goods industry (“FMCG”).

In this piece, our IP and Technology colleagues discuss the FMCG investigation and the Advertising Standards Authority’s (“ASA“) pursuit of misleading green claims. Read the full publication on our Global IP & Technology Blog.

Revamping of Cosmetics Regulation and Safety

By Squire Patton Boggs on February 2, 2023 Posted in Health & Safety, Rulemaking & Policy Development

President Biden signed into law the “Consolidated Appropriations Act, 2023” on December 29, 2022 (the enactment date). The Act includes the Modernization of Cosmetics Regulation Act of 2022 (“MOCRA”) which increases the authority of the United States Food and Drug Administration (“FDA”) to regulate cosmetics and provide enhanced protections for consumers. The new law includes funding authorizations for implementation totaling $165-millon over federal fiscal years 2023 through 2027. We have prepared a summary of the key updates in MOCRA, timing of the changes, and other insights the cosmetics industry needs to be prepared.

Read the full publication here.

Key Federal PFAS Regulatory Developments in 2022 and 2023

By Charli Davis on February 1, 2023 Posted in Chemicals & Products, Rulemaking & Policy Development

In 2022, US EPA indicated that it would take a more aggressive stance on per- and polyfluoroalkyl substances (PFAS). US EPA developed a PFAS Strategic Roadmap for 2021-2024 that sets timelines by which US EPA plans to take specific actions and sets out its three main directives: 1) research PFAS exposure; 2) restrict PFAS from entering the environment; and 3) remediate PFAS releases. US EPA has taken several actions to follow its roadmap, including the following:

We previously discussed US EPA’s publication of final drinking water health advisories for PFBS, GenX, perfluorooctanoic acid (PFOA), and perfluorooctane sulfonic acid (PFOS) in June. PFOA and PFOS are specific groups of PFAS for which US EPA lowered the level at which these chemicals are allowed in drinking water, reduced from 2016 levels.
In September 2022, US EPA published a proposed rule to designate two PFAS as hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), or “Superfund.” The comment period ended on November 7, 2022. The Agency has not yet issued a final rule.
In November 2022, US EPA published the Fifth Contaminant Candidate List, which is a list of contaminants not currently subject to any national primary drinking water regulations but which may require regulation in the future under the Safe Drinking Water Act because they are known or expected to be found in public water systems. The list includes the chemical group for PFAS as opposed to listing the PFAS individually with an expanded definition of what qualifies as PFAS.
For reporting year 2023 (reporting forms due by July 1, 2024), the National Defense Authorization Act automatically added nine additional PFAS to the Toxics Release Inventory (TRI) list. This means TRI-reporting facilities should track and collect data on these chemicals for the year 2023.

New Plastics Bill Would Require US EPA Action Under TSCA

By Nicole Bothwell on January 5, 2023 Posted in Chemicals & Products, Climate Change & Sustainability

As interest in regulating the production and use of plastics continues to grow, users of chemicals related to plastics should take note of the newly proposed “Protecting Communities from Plastics Act,” introduced in Congress on December 1, 2022 (the Act). The Act is intended to identify potential health effects of certain plastics, limit their production, and set nationwide reduction targets. It would also require EPA to review and potentially to regulate under TSCA the component chemicals in many plastics.

EU Proposal for Packaging and Packaging Waste Regulation

By Squire Patton Boggs on December 12, 2022 Posted in Environmental, Rulemaking & Policy Development

The European Commission has tabled a proposal for Packaging and Packaging Waste Regulation – a cornerstone initiative aiming to revolutionise the industry by common, EU-wide rules for packaging circularity.

In this article, we look at the new rules in more detail as it introduces an array of new rules with regards to packaging that is placed on the EU market, which addresses:

Recyclability
Reusability
Size
Uptake of recycled content

The proposal is open for public feedback until 1 February 2023.

Read the full publication here.

Beware Before You Flare: EPA Revamps Rulemaking to Pave the Way for Methane Emission Reductions

By Jennifer Tharp on December 8, 2022 Posted in Air Quality, Rulemaking & Policy Development

On November 15, 2022, the United States Environmental Protection Agency (US EPA) issued the pre-publication version of supplemental proposed rulemaking for reduction of methane emissions in the oil and natural gas sector. The original proposed rule, published on November 15, 2021, sought to strengthen methane standards for new sources (New Source Performance Standards or NSPS), establish nationwide emission guidelines (EG) for regulation of existing sources, and develop new standards for unregulated sources. US EPA ultimately received more than 470,000 public comments. The rules, once finalized, will be included in 40 CFR Part 60, Subpart OOOOb (NSPS) and Subpart OOOOc (EG).

The Automotive Recall Landscape in the US

By Squire Patton Boggs on December 7, 2022 Posted in Health & Safety, Rulemaking & Policy Development

As automotive technologies evolve, particularly in regard to autonomous vehicles (AVs), legislators struggle to keep pace. The lack of a binding legislative framework for AVs leaves regulators on their own in determining if and how to establish new safety standards. Here, we provide a general overview of recent legislative efforts, the National Highway Safety Administration’s (NHTSA) current regulatory approach for AVs and anticipated rulemakings, and strategies to reduce compliance risk while producing innovative automotive technologies.

Read the full publication here.

US EPA Proposed Clean Air Act Endangerment Finding Targets Aviation Fuel

By Sam Ballingrud on November 3, 2022 Posted in Air Quality, Environmental, Environmental Protection

Lead was once a common additive in fuels, paints, glasses, batteries, pipes, ceramics, and more. As the health effects of lead exposure came to be better known, Congress and EPA began targeting lead pollution under a variety of laws and regulations governing air and water pollution, including the Toxic Substances Control Act, Residential Lead-Based Paint Hazard Reduction Act of 1992, Clean Water Act, the Safe Drinking Water Act, and the Clean Air Act (CAA), among various other non-statutory initiatives such as the 2018 Federal Lead Action Plan. Lead exposure dropped dramatically as a result of these initiatives, but one industry still makes extensive use of lead-based products: aviation fuels for piston-engine aircraft which generate emissions that make up over half the country’s annual lead inventory.

On October 17, 2022, the United States Environmental Protection Agency issued a proposed finding that lead air pollution may reasonably be anticipated to endanger the public health and welfare within the meaning of Section 231(a) of the Clean Air Act, 42 U.S.C. § 7571, and further that engine emissions of lead from aircraft contribute to such pollution. This is a two-pronged “endangerment” and “cause or contribution” finding which addresses both elements provided under Section 231 which provides that EPA shall “issue proposed emission standards applicable to the emission of any air pollutant from any class or classes of aircraft engines which in his judgment causes, or contributes to, air pollution which may reasonably be anticipated to endanger public health or welfare.” An endangerment and contribution finding is therefore the first step in the process of regulating lead emissions from aviation fuels. EPA often, but not always, combines these endangerment findings with the substantive regulations and emissions limitations but has not done so here.