A Deposit Return Scheme (DRS) for single-use drinks containers is due to go live across Scotland on 16 August 2023 and is set to be the first DRS in the UK. Whilst the principle of introducing DRS in Scotland has broad support across industry and political parties, there is debate about the scheme’s readiness and the details of its implementation as the ‘go live’ date draws nearer.
Some form of DRS already operates in over 45 countries, although systems vary. Key environmental aims of the Scottish scheme are to reduce litter and greenhouse gas emissions, increase recycling (to 90% of scheme containers), and shift costs of recovery of containers away from local authorities on to producers. This is aligned with environmental principles of ‘producer responsibility’ and ‘polluter pays’ which are central to the shift to a more circular economy. DRS is also seen by the Government as being key to stimulating progress towards its recycling target of 70% of all waste by 2025 – a target where progress has stalled in recent years, sitting at 42.7% for 2021.
This blog summarises the scheme, concerns raised and how the Scottish Government has responded. At the time of writing the Scottish Government remains committed to the August 2023 start date. As usual with our longer blogs, we’ve added a contents popout here to help with navigation.
What is the DRS and how will it work?
Key elements of the scheme are set out below. More detailed information can be found on the Zero Waste Scotland website.
The Deposit and Return Scheme for Scotland Regulations 2020 were passed by the Scottish Parliament in 2020, following a consultation in 2018 and scrutiny by the Parliament of draft Regulations in 2019. Powers to introduce Regulations stem from the Climate Change (Scotland) Act 2009. In 2022, Amendment Regulations delayed the ‘go live’ date from July 2022 to August 2023, after a review found that due to the pandemic and EU exit the 2022 date was not practical.
- Consumers will pay a refundable deposit of 20p when they buy a drink in a single-use container made of PET plastic, glass, or steel and aluminium drinks cans (50ml to 3 litres). This will not apply in hospitality settings that are ‘closed loop’ i.e. where containers are not taken off the premises.
- Circularity Scotland Ltd (CSL), a not-for-profit private-sector enterprise was set up in 2021 to run the scheme. The Regulations allow producers to appoint a scheme administrator (approved by Scottish Ministers) to meet obligations on their behalf.
- Retailers of containers covered by the scheme must operate a return point in return for ‘handling fees’, unless granted an exemption.
- The Scottish Environment Protection Agency (SEPA) is the scheme regulator and will maintain a register of producers selling scheme containers. They were working to a registration deadline of 1 March 2023 but producers are still able to register beyond the deadline.
- Zero Waste Scotland advises the Government on scheme design, leads on the delivery of a pilot, Return & Recycle Orkney, and manages exemptions for return points. The Government simplified the exemptions process with Zero Waste Scotland issuing new guidance as a result of feedback from retailers.
The Environmental Regulation (Enforcement Measures) (Scotland) Amendment Order 2020 has also been passed, giving additional powers to the Scottish Environmental Protection Agency (SEPA) to enforce the scheme.
What progress has been made and how is progress reviewed?
The Scottish Government considers that the August 2023 date is achievable, although this is subject to controversy and was debated in the Parliament on 22 February 2023, with a motion agreed:
That the Parliament believes that a Deposit Return Scheme (DRS) can make a positive contribution to increasing the rate of recycling and reducing litter for drinks containers; recognises that the Deposit and Return Scheme for Scotland Regulations 2020, which establish the approach and structure of Scotland’s DRS, were agreed by the Parliament in May 2020; welcomes the recent progress made by Circularity Scotland, SEPA, the Scottish Government and the UK Government in finalising the key operational elements of the scheme; further welcomes the package of measures recently announced by Circularity Scotland to support producers; notes that the most recent review in October 2022 concluded that ‘the DRS Programme has gained increased momentum and is in a much improved position’; understands that Scotland’s DRS will make an important contribution to cutting climate emissions, and calls on the Scottish Government to continue to take a pragmatic approach to implementation, working with industry to identify and address concerns.
The Minister for Green Skills, Circular Economy and Biodiversity, Lorna Slater MSP said in response to a question in Parliament on 23 February 2023:
Likewise, businesses of all sizes are continuing to make good progress as they prepare for launch in August this year. The deposit return scheme is a transformational step change on our road to net zero, and businesses here in Scotland have the necessary momentum to get us there.
Also in February 2023, Circularity Scotland announced a £22 million support package to help producers, removed some up-front fees and set out a new simpler labelling option to support smaller producers.
On 1 March 2023, the Minister provided a further update, given there was a deadline of 28 February for producers to register with SEPA. The Minister stated that 664 drinks producers had registered by the deadline, estimated to represent over 90% of the volume of drinks containers on the Scottish market. She stated that this gave the scheme the momentum to progress towards the August deadline. Questions were raised in the Parliament about what percentage of the total number of drinks producers currently operating in the Scottish market had not registered. The Minister did not provide a direct answer to these questions but said that SEPA had been asked to take a pragmatic approach to the deadline and urged producers to continue to register.
The progress of the scheme has been monitored using Government Gateway reviews, used for major project management. A Gateway review carried out in May 2022 stated that a “fully functioning and compliant DRS cannot be in operation” by August 2023. The review noted that whilst the industry-driven model is innovative in shifting towards producer responsibility, this is challenging for Government because it retains less control i.e. as opposed to if the scheme administrator were a public body, and the transition from government to industry leadership was “ongoing”. However, a subsequent review carried out in October 2022 found that the scheme had gained momentum and upgraded the delivery confidence assessment to ‘amber’ from a previous ‘amber/red’, meaning “successful delivery appears feasible” but significant issues still exist.
Industry concerns about scheme readiness
In November 2022, representatives of 522 drinks and hospitality businesses wrote an open letter to the Scottish Government calling for DRS implementation to be paused. Concerns raised included:
- Potential losses in consumer spend if the scheme encourages fraudulent behaviour e.g. in the form of ‘booze trips’ across the border.
- Potential loss of investment in the Scottish economy and small business closures, if businesses view the Scottish market as less appealing due to costs and differing requirements.
- Potential negative implications for local authorities by undermining kerbside collections.
The Scottish Government is also facing a possible judicial review of the scheme by an independent grocer (backed by the Scottish Grocers Federation), which claims that the handling of returns threatens the viability of their business.
The industry letter urged the Government to delay the scheme and collaborate with the UK Government on an aligned scheme. Plans are developing for DRS in other parts of the UK but are significantly behind Scotland. The UK Government Department for Environment, Food and Rural Affairs (Defra) consulted on introducing DRS in 2022 in collaboration with the Welsh Government and the Department of Agriculture, Environment and Rural Affairs in Northern Ireland. Defra has since announced intentions for regulations to be in force by 2023 with a view to implementation in 2025 – subject to ongoing discussions with industry. At the moment, it does not appear that schemes may fully align as Defra has suggested they would exclude glass, in contrast to the Scottish scheme which includes glass.
The Scottish Government is also under pressure from environmental stakeholders to avoid delays, citing the need to prevent further litter and carbon emissions, and to avoid penalising businesses who have already invested in a 2023 start.
Further questions have been posed by waste industry stakeholders about the award of a 10-year contract by CSL for recovering containers to Biffa – including about the openness of the procurement process and implications for remote locations. The Scottish Government has emphasised that as a private company, this is a matter for CSL.
The Minister for Green Skills, Circular Economy and Biodiversity responded to the above-mentioned letter on 17 November 2022 emphasising the industry-led nature of the scheme, but also committing to continue to work with CSL and explore routes to addressing concerns. Since this exchange a number of adjustments have been announced, in particular the £22 million CSL support package, more details of which can be found in a letter from the Minister to MSPs on 09 February 2023. The letter also states that CSL plan to hold a briefing in Parliament. Even more recently on 26 February it was reported by the media that the Minister was considering a one-year grace period for participation of small producers.
Interaction with the UK Internal Market Act
Questions have also been raised (both in the media and in evidence submitted to a Scottish Parliament Committee) about how the scheme interacts with the UK Internal Market Act (IMA) 2020. More background to the IMA in relation to DRS is set out in a previous SPICe blog. The UKIMA establishes two market access principles to protect the flow of goods and services in the UK’s internal market. In relation to goods which appears to be where the media focus has been in relation to the DRS scheme:
The mutual recognition principle provides that goods that have been produced in, or imported into, one part of the UK and comply with relevant requirements there, can then be sold in any other part of the UK without adhering to different regulatory requirements in that part.
The non-discrimination principle sets out that the sale of goods in one part of the United Kingdom should not be affected by restrictions that discriminate against goods from another part of the United Kingdom.
Questions have been raised in the media about how the distinct requirements imposed by DRS in Scotland interact with those IMA principles. The UK Government and devolved administrations have agreed a process for considering exclusions to the market access principles. Any party to that agreement, e.g. the Scottish Government, can seek exclusions from IMA principles for specific areas covered by common frameworks, exemplified recently for the first time by the single-use plastics ban.
On 28 February 2023 the Scottish Government published a summary of developments and correspondence with the UK Government regarding the prospect of a such an exclusion for DRS. The Scottish Government states that it first raised the issue of an exclusion with UK Government in 2021 when it sought a broad exclusion under the Resources and Waste Common Framework (a provisional Resources and Waste Common Framework was published in December 2022) that would cover a range of policy areas, including single use plastics and DRS. A narrower exclusion than the Scottish Government (and which the Welsh Government supported) had wanted was agreed by the UK Government at that time, covering single use plastics. Subsequently, the Scottish Government states that the process for considering an exclusion for DRS commenced in October 2022, documented in minutes from the Inter-Ministerial Group meeting on 7 November 2022.
Conclusions
The implementation of DRS in Scotland is a significant milestone, representing a transition to a different model of producer responsibility and requiring extensive collaboration and systems development across business and regulators. It is clearly a ‘disruptive’ moment in the shift towards a circular economy which will also ultimately require mass participation of consumers. Its implementation is also happening against a backdrop of both financial challenges for many businesses, as well as the urgency of addressing the climate emergency.
Whilst challenges are plainly significant, the Scottish Government maintains that the August 2023 start date will go ahead. It also remains to be seen whether the change in First Minister will impact on DRS implementation.
How the situation progresses is also likely to provide some insight into how the internal market in the UK will operate in practice post EU exit, in the context of shared ambitions to address the climate and ecological crises.
Alexa Morrison, Senior SPICe Researcher
Image credit: “Beverage can tops” by Topher is marked with CC0 1.0. is marked with CC0 1.0.