Today (9 November 2020), the packaging recycling targets for 2021-2022 were announced by DEFRA which is welcome news for the industry as we’d normally expect visibility of these targets much earlier in the year
DEFRA confirmed earlier in 2020 that they would wait ‘as late as possible’ to set the targets for 2021 due to the Covid-19 situation. These targets are key in understanding what the Packaging Recovery Note (PRN) market may start to look like in 2021 and allows us to begin analysing 2021 obligations on behalf of our valued member base.
The 2019 consultation on packaging reform included proposals for interim targets for 2021 and 2022. However, following responses to this and in light of the market situation, the following targets have been agreed and will come into force in 2021 - 2022 (highlighted in green). We have also included analysis of the main target changes in comparison to 2020:
Relevant legislation will be forthcoming to bring these targets into force.
Recovery target removal
The main change from previous years is the removal of general recovery targets from 2021. In the past, Energy from Waste (EfW) or Recovery PRNs were mandated alongside general recycling obligations to bridge the gap between recycling and recovery in the UK. In short, these PRNs were required to meet a producer’s overall obligation in order to be compliant with the regulations, which was calculated from a producer’s obligated tonnages before the recycling targets for each material were applied and was the minimum number of PRNs a company needed to purchase in order to be compliant for that year. From 2021, DEFRA have removed the target for recovery altogether, meaning that not only will this process no longer enable PRNs to be generated, but also that an entire market is closed off moving forwards. In cases where the material specific obligation is higher than the obligation generated by the overall recycling target, the higher amount shall apply when calculating a producer recycling obligation.
Small producer allocation method
In addition, another key change from 2021 is that the recycling factor which is multiplied by turnover to calculate the obligation for small packaging producers who are classified as companies with an annual turnover of between £2 and £5 million (allocation method), has increased from 30 to 35 tonnes. This is worth bearing in mind for any producers unsure about which method to use in 2021. Whilst the 3-year rule that forced producers to stick to one method for a fixed period has now been removed, the position statement allowing for mid-year changes relating to the method used no longer applies.
Key material target changes
Paper sees an increase of 4% in 2021, which is higher than the previous annual average of 1.3% over 4 years. Paper has performed reasonably so far this year, but a 4% target increase could lead to a tighter market in 2021. We have already seen a more open field for various materials meeting general recycling targets in 2020 and a more constricted paper market in 2021 could continue the trend. A further 4% increase moving into 2022 shows DEFRA's commitment to move towards even higher recycling rates for paper prior to the introduction of Extended Producer Responsibility in 2023.
Whilst the overall glass target has only increased by 1%, the change in remelt target has increased by 5%. Glass PRNs can be purchased in both ‘other’ (aggregate) and remelt materials, and the remelt target exists to ensure that glass remelt is encouraged in the UK. The reasoning for this is that recycling through remelt is considered more closed loop than aggregate and tends to be a more expensive process, hence a split target exists to bridge the gap.
An expected small increase in target in line with historic changes. Aluminium performance has decreased slightly in recent months, but overall, 2020 has seen high levels of recycling, so an increase in target will be unlikely to have drastic consequences. There is potential for aluminium to contribute towards general recycling in 2021.
An increase of 1% which is below the 4-year average of 2.5%. Whilst the material performed poorly at the start of 2020, it has increased its output in the second half of the year. Steel may well be a key contributor to general recycling in 2021.
A 2% increase to plastic is in line with historic averages and may well encourage some heightened investment in UK recycling alongside the Plastic Tax on the horizon for 2022. However, plastic tends to be the most volatile material and PRN volatility causes significant issues for re-processors looking to have a stable supply of material. It tends to be market factors rather than targets that have the highest impact on plastic PRNs.
A decrease in the wood targets will to some extent reduce market pressure, but it will also likely allow for the continued growth of biomass burners as end destinations for UK wood waste. That said, if wood performs similar to 2020 in 2021, we may well see it become a core material for general recycling.
A minor increase in target in line with expectations, however, the removal of recovery will make general recycling stand out more. With a wider range of potential material options for 2021 (although a potential reduction in the use of paper) we may see general recycling cause a more stable PRN market for other materials in 2021.
In response to this announcement, Martin Hyde, Policy Leader said: “It is good to have sight of the packaging recycling targets for 2021 and 2022, albeit later in the year than expected. Overall changes are in line with those expected, with some variance from those proposed in the 2019 consultation on reforming the Producer Responsibility System. Uplifts in paper and glass remelt, alongside a reduction in wood will mean 2021 could see continued diversification in the general recycling market”.
Martin added: “Small businesses utilising the allocation method to determine their obligation could see enhanced benefit in moving to a full data option in the wake of an effective 17% increase to allocation targets”.
Member PRN update webinar
We are holding a PRN market update webinar for our packaging members on Tuesday 17 November at 10am when we will be discussing these targets in more detail, as well as analysis on the UK's Q3 verified recycling data by material and our advice to support with 2021 budgeting. We’d encourage our members to attend this webinar if possible, to gain understanding on the current PRN market dynamics and how these new targets will affect your obligation in 2021. Click HERE to register your free place on the webinar.
For any other queries regarding the targets, please contact our packaging team on 01756 794 951 or email firstname.lastname@example.org