Analysis: Deposit scheme would cost NZ $75 million a year

Press Release

New economic analysis says the net cost of introducing a 10 cents charge on beverage containers would cost New Zealand $75 million a year.[Headline]

19th April 2016

The Packaging Forum has today released a new assessment by economist consultants Covec - “Evaluating the Costs & Benefits of Introducing a Container Deposit System”. In 2008 Covec analysed the costs and benefits of a Container Deposit System (CDS) in New Zealand and suggested that overall such a scheme would yield net costs to New Zealand.

Eight years on, Covec has conducted new research using recent data, including taking into account new cost benefit analyses conducted in Australia. The conclusion is that a CDS would place a cost of $75m per year on New Zealand. Although a CDS would lead to an increase in recycling rates it would require new costly infrastructure and result in increased costs to consumers.

Tim Denne, Director at Covec outlined the results:

“Container deposits could be expected to increase New Zealand’s beverage recycling rate from 69% to around 80%, bringing a benefit of $22 million per annum. However, introducing a Container Deposit System on top of a mature and well performing kerbside collection system is outweighed by the $97 million annual cost of establishing and operating a new take back system. This would result in a net cost of $75 million each year meaning that every additional tonne recycled would be at a cost of around $2200.”

“A CDS is expected to result in greater recycling rates, increasing the revenue from material sales and reducing quantities of waste and litter. The two main costs are the costs of household time in making returns and the costs for installing and running collection infrastructure, such as reverse vending machines. These beverage industry costs are likely to be passed on to households in increased beverage prices. Households that do not return their bottles for refunds will bear the cost of the deposit, but this will become a benefit for someone else, possibly the beverage industry itself or the Government.”

John Webber, Manager at the Packaging Forum stated:

“We asked Covec to repeat the Cost Benefit Analysis to understand what has changed since 2008, both in terms of New Zealand’s recycling rate and overseas experience. New Zealanders now consume around 2.1 billion beverage containers each year. Waste Not Consulting provided beverage recovery data which shows that the beverage recycling rate is at least 69% by weight, although it is likely to be over 70% as the data collected does not include commercial collections and collections from the hospitality sector for plastic containers.”

“New Zealand has a beverage container recycling rate achieved through a non-regulated system of kerbside and public place recycling which is higher than CDS systems in California (61%) and similar to New York (69%) and Hawaii (68%) and well ahead of the Northern Territories in Australia which has a recycling rate of 52%.”

“Covec’s research shows compelling economic evidence that the cost of introducing a 10 cents charge on every beverage container in New Zealand far outweighs the forecasted increase in the recycling rate, which is already increasing through voluntary product stewardship at a fraction of the cost. The glass recycling rate is already at 73% with a target of 78% by 2017, having benefited from a decade of voluntary product stewardship.

“We have in place industry initiatives to increase recovery rates for all packaging materials by introducing community/retail drop off facilities; targeting the commercial and hospitality sector; and investing in programmes to reduce litter and increase resource recovery. These will help bridge the gap between the current beverage container recycling rate of 69/70% and the target 80% rate over time, without incurring the large expense which CDS would put on consumers.”

“‘CDS is often proposed as a means to reduce public litter. However, the National Litter Survey found that beverage containers represent around 11% of litter, so not only would a CDS be very expensive for New Zealanders, it would also have no impact on around 89% of litter in public places which is not drinks bottles, cans or cartons.

“South Australia has been operating a container deposit system for over 40 years, in contrast to New Zealand which has a mature kerbside collection system. Overlaying a take back system on top of kerbside collections here will simply increase the cost of beverages. Covec have calculated a handling charge of 3.5 cents per container (at the low end worldwide charges), which will likely be passed on to consumers to help fund industry’s costs, as was the case when CDS was introduced in the Northern Territories.”

ENDS

The NSW Government’s recent Discussion Paper has summarised the funding of a CDS as:

“In general, consumers cover the cost of the scheme in the price of the drink when purchasing it. In this regard, CDSs are based on the ‘polluter pays’ principle, shifting waste management and litter collection costs away from local councils and land managers and on to consumers.”

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