The Environment Agency (EA), sponsored by the United Kingdom’s Department for Environment, Food and Rural Affairs (DEFRA), would neither confirm nor deny a report from the Guardian newspaper that said the agency was investigating complaints that organised criminals and firms are abusing the plastics recycling regime and waste regulations set by both the United Kingdom and European Union.
The Guardian claims six U.K. exporters of plastic waste have had their licences suspended or cancelled in just the last three months, and a single firm has had 57 containers of plastic waste stopped at U.K. ports in the last three years due to concerns over contamination of waste. In addition, the newspaper says, the EA is investigating false claims for tens of thousands of tonnes of plastic waste that might not exist, asserting that “recycled” plastic waste is being dumped into waterways and the sea and plastic waste is being illegally routed to the Far East via the Netherlands.
“We are sending two-thirds of plastic that we are claiming to be recycling overseas, and of what we are sending overseas, more than half was going to China,” Dominic Hogg, chairman of environmental consultancy at Eunomia, says. “Those borders are now closed, so other venues have been found. But there have been numerous problems with the quality of the material we have been sending to, for example, Malaysia, Poland, and Russia, because of contamination. We’re not doing a good job at the border, because nothing that is going out of the country should be anything other than good quality, clean material suitable for recycling.”
“Waste crime damages lives, livelihoods and the environment. We have a specialist investigations team and staff up and down the country dedicated to bringing culprits to justice,” noted an EA spokesperson in a recent statement. “Whilst the majority of the businesses we regulate are responsible, there are some who exploit the system and put people and the environment at risk. We take all allegations of fraud seriously and are putting more resource into improving compliance in the waste and recycling sector.”
The possibility of fraud appears almost built into the system. Exporters make money by charging retailers and manufacturers a fluctuating tonnage rate for something called plastic export recovery notes (PERNs). PERNs retail currently for £60 (U.S. $76) a tonne. Retailers and manufacturers buy PERNs to prove to the government that they are contributing to the cost of recycling plastic packaging waste that they either produce or use. But a National Audit Office (NAO) report published in July said since the system relies on companies making self-declarations about how much plastic they are exporting, it creates an incentive to inflate those figures. In addition, companies that produce plastic waste must self-register. The EA has identified a large number of companies that have not registered, yet it is not effectively compelling compliance with this requirement.
“If there is an incentive to be ‘economical with the truth,’ or make fraudulent declarations, then unless the checks and balances, and the compliance audits, and the sanctions are sufficient (and at the moment they aren’t), there’s a chance that some people will cheat the system.”
Dominic Hogg, Chairman, Eunomia
“The system we have in place at the moment—material goes to a sorting plant and then to a reprocessor, but because of contamination, the U.K.-based reprocessor might be able to claim 0.7 of a tonne as recycled for every tonne of material received,” Hogg says. “If you are exporting the same material, then the whole tonne is counted as recycled. So, there is an incentive in the system that encourages people to export material with—to put it bluntly—as much contamination as they can get away with. If you can get away with high levels of contamination, then why not do it?”
Hogg explains that though reprocessors have potentially lowered the cost of sorting, by running too much material through the sorting plant it does not get sorted properly and low quality is the result. “If you can claim for the full tonne and sell PERNs then, even though it may be the case that none of it actually gets recycled because of the contamination levels, the exporter may have made money,” he said.
The packaging recycling obligation system is laid out by the Producer Responsibility (Packaging Waste) Regulations, introduced in 1997, when the government chose to establish a market-based system for incentivising recycling of packaging waste—part of implementing an EU Directive on packaging and packaging waste. In 2017, 7,002 companies registered as having packaging obligations across the United Kingdom. In 2017, reprocessors and exporters received £73 million (U.S. $93 million) from obligated companies in exchange for recovery evidence notes. Costs in the United Kingdom are much lower than the compliance costs in many other EU countries, because companies operating there are required to fully fund collections. This is the case in, for example, Germany, Belgium, and the Netherlands. In contrast, the U.K. system passes most of the cost onto the taxpayer and companies only contribute indirectly to collection costs through PERNs.
Waste service and provider compliance
Compliance aspects of both the waste service and the waste provider include:
Duty of Care documentation and records
Waste carriers’ licenses
Internal containment and movement processes
Disposal site due diligence
Staff understanding and training needs
Waste hierarchy requirements
Waste compliance requirements faced by a waste management site include:
Environmental Permits, Planning and Exemptions
Producer responsibility registrations for packaging
Environmental Permit quarterly returns
All incoming and outgoing waste transfer notes and hazardous waste consignment notes
Disposal site environmental permits
Source: 360 Environmental Limited
According to the NAO report, although the government claims to have met both its and the EU’s targets for recycling each year, figures do not take into account undetected fraud. It continues: “There is a financial incentive for companies to overclaim, and a particular risk that some of the material exported overseas is not fully recycled.”
The NAO reports that in 2016-17 the EA carried out less than 40 percent of the compliance visits it planned to; 124 compared with a target of 346. Furthermore, exporters it rated as high risk were less likely to receive a compliance visit than those rated low risk, and only one in four high-risk exporters received a compliance visit in 2017. In further criticism, the NAO reported that the EA carried out only three unannounced visits in 2017-18—covering less than 2 percent of accredited reprocessors and exporters—despite an internal audit report in 2015 having raised concerns about the number of unannounced visits.
The EA says a “Producer Responsibility Investigations” (PRI) team went live in January 2018 and that the agency was increasing compliance checks this year and making sure regulations were ahered to by using various enforcement sanctions. “Accredited exporters are subject to compliance assessments through the year to ensure compliance,” it noted. “Any non-compliance is dealt with through suspension or cancellation of their accreditation. They are required to provide details and information to all of us overseas recyclers they intend to use. Only those overseas recycling sites which meet specific criteria are approved by us for the exporter to use.”
Showing that the government was aware of the problem prior to the NAO report, it awarded an additional £30 million (U.S. $38 million) in “waste crime funding” in the 2017 budget for the four-year period from 2018/19. The EA is also working with DEFRA to redesign the Resource and Waste Strategy, a target for an overstretched government in 2018. This new strategy will include “measures on improving regulatory controls around waste exports.”
“Anyone designing a producer responsibility system would like everyone in the scheme to reveal the truth: in any producer responsibility scheme, setting up the incentives to ensure this happens can be challenging,” Hogg explains. “If there is an incentive to be ‘economical with the truth,’ or make fraudulent declarations, then unless the checks and balances, and the compliance audits, and the sanctions are sufficient (and at the moment they aren’t), there’s a chance that some people will cheat the system.”
The Guardian said the recent inquiries found that custom figures for plastic exports are significantly lower than figures provided to the EA by exporters, but a spokesperson from the Environmental Services Association (ESA), the trade body for the waste management industry, was not aware of any specific allegations of fraud against certain exporters.
“In terms of the data, ESA has made the Environment Agency aware of apparent discrepancies between HMRC’s [Her Majesty’s Revenue & Customs] figures and PERNs relating to plastics exported mainly to the EU,” Jakob Rindegren, ESA recycling policy advisor, notes. “It is not entirely clear yet whether the discrepancies may be partly caused by inaccuracies in the way data is collated.
“However, in any event, it is important that the EA regulates the system robustly to ensure that criminals are prevented from operating. In our view, waste crime more generally should be tackled through a range of measures, which are outlined in a recent report commissioned by ESA,” he adds.
The report, “Rethinking Waste Crime,” was written by Eunomia and includes the following recommendations:
Modernising the regulatory regime
Improving enforcement efforts
Developing secure sources of enforcement funding
Improving cross-regulatory cooperation and raising awareness
In particular, the regulatory regime should be reformed so that the parts of it that are not liable for inspection or oversight by the EA are brought within the regime and annual subsistence fees are charged to waste carriers and waste brokers as well as waste operators with environmental permits to fund the expanded inspections.
Says Hogg: “What I hope will happen—because we will not have left the EU before this law has to be implemented—is that the producers will have to pay for the full cost of the collection and sorting services, and they will seek a more accountable system as a result that is producing good-quality material that can actually be used right here.”