4 Policy Approaches for Product Stewardship Schemes

This section considers a range of policy options and their ability to achieve useful reductions in waste. It then outlines a preferred approach based on the strengths of the other options.

4.1 Option 1: Status quo

The current approach to product stewardship provides some scope for flexibility. It allows for the development of schemes without any involvement of the Government, as well as schemes established with government support. Examples of established national schemes are those covering packaging, tyres and used oil. Some existing schemes have, however, been limited in terms of their scope and performance. These are outlined in the Appendix.

The establishment of product stewardship schemes could be further encouraged through the clear articulation of the objectives being pursued by government and how they will be achieved.

Schemes are limited to areas and activities where they are established by individual companies, or the industry comes to an agreement. However, the current law does not provide the ability to address free-riders. The Government cannot regulate for the establishment of schemes and cannot set enforceable performance targets.

Table 4: Option 1: Status quo

Features	This option will:	This option will not:
Based on Waste Strategy principles Voluntary approach Existing level of government encouragement and support	Give industry-wide flexibility Allow new schemes Improve rates of resource recovery for some products and reduce the nuisance or risk associated with these products	Clarify priorities for schemes Give assurance that schemes will have wide participation by being able to deal with free-riders Allow government to make the establishment of schemes mandatory

4.2 Option 2: Industry-led schemes with the regulation of free-riders

This approach would maintain some of the positive features of the current approach (flexible, industry-led schemes), but it would also provide the opportunity to regulate in circumstances where the presence or potential presence of free-riders threatened the successful development of an efficient and effective scheme.

The establishment of a product stewardship agreement would provide the basis for an approved industry product stewardship scheme (or schemes). The agreement would include commitments to action that reduces the problem of waste, including commitments such as product take-back schemes for recycling, and agreement on the use of recyclable materials. The expectation is that each agreement would be designed to address issues and opportunities in a particular product or group of products, and that no two agreements would be the same.

Agreements could include a commitment to regulate to impose a cost on those that do not join the scheme (free- riders), where this is necessary because non-participation prevents the scheme achieving waste reduction goals and where it is a significant burden on participants. The nature of the regulatory intervention would be limited to controlling free-riders, and the development of the schemes would be undertaken by industry. Controls over free-riders allow industry to share the costs of schemes fairly.

New legislation would be required to provide the regulatory powers to control free-riding. Such legislation would not, however, include the power to force an industry sector to develop a product stewardship scheme, nor would it allow government to set performance objectives.

If participating businesses are to be given protection from free-riders by means of regulation there will need to be protection for consumers, because regulation could affect competition. In addition, where the regulation imposed a levy there would need to be assurance that any levy was properly spent.

Table 5: Option 2: Industry-led schemes with the regulation of free-riders

Features	This option will:	This option will not:
Product stewardship agreements between industry and government Establishment of industry-led schemes under agreements Legislation providing for the regulation of free-riders to industry agreements	Provide an explicit agreement between parties as the basis for product stewardship schemes that establish 'responsibilities' Provide incentives for potential free-riders to join schemes and possible regulation to ensure a 'level playing field' for all producers within a sector Enable the establishment of schemes involving a whole industry sector	Force an unwilling industry into the establishment of product stewardship agreements Make the establishment of schemes mandatory, or give the Government power to set scheme performance requirements such as targets

4.3 Option 3: Mandatory approach to the establishment of product stewardship schemes

This would involve new legislation and regulation to make the establishment of product stewardship programmes for specific products or product categories mandatory. The regulations would be used where there are problems with waste products. For these products the regulations could cover matters such as:

product design requirements
mandatory consumer information
collection and recycling targets
minimum treatment standards
mandatory financing mechanisms
deposit–refund schemes
advance disposal fee schemes
materials taxes
specified minimum recycling content.

A mandatory system would require the Government to formally oversee the development of the system, as well as the means to monitor and enforce compliance. This may have the disadvantages of losing the effectiveness and flexibility of schemes initiated and led by industry. In addition to the administrative costs of regulation, this option could also impose costs on the economy arising from inefficiency if the regulations are not well targeted and well designed.

Table 6: Option 3: Mandatory approach to the establishment of product stewardship schemes

Features	This option will:	This option will not:
Legislation requires product stewardship schemes Prescribed targets for collection and recovery Can be either industry delivered or government delivered Allows for specific tools to be implemented	Provide a 'level playing field' for producers Provide certainty for all stakeholders Give clear performance expectations Give government control over the performance of product stewardship activities Provide a range of economic and other tools to back up schemes	Give the flexibility and effectiveness of industry-led approaches to product stewardship Provide market incentives for industry to reduce programme costs through product redesign

4.4 Option 4: Preferred approach - a mix of voluntary and regulatory approaches

The preferred approach seeks to draw on the strengths of all the options outlined above and to avoid the weaknesses of each. It involves establishing a generic framework that can cater for a range of future voluntary product stewardship schemes, and providing for some regulation as a backstop. In summary, the preferred approach has two main features.

Product stewardship agreements would be negotiated and signed by an industry sector, either collectively or by individual firms. The Government may be a party to the agreement.
A regulatory safety net comprising regulatory powers would be enabled by new legislation. The legislation would provide the tools to allow the regulation of free-riders where this is necessary, and would also provide for mandatory schemes as a backstop measure. Regulation for mandatory schemes would only be used where there are significant waste problems and no voluntary scheme to deal with them.

The first preference for implementing product stewardship schemes is for voluntary product stewardship agreements with industry. This retains the flexibility and strengths of the voluntary approach, and reflects concern that poorly designed regulation can be administratively expensive and result in significant efficiency losses in the economy.

Under this approach, the Government would focus on identified priority wastes. These are wastes where there are significant problems with disposal (or potential problems where the waste stream is growing). Initially, a voluntary scheme would be sought to address the problem. This enables industry and stakeholders to develop an effective scheme that deals with the problem but which operates in a way that suits them. One area where this is expected to be important is in design changes to reduce waste problems. In some sectors that already export to Australia the scheme may mirror approaches being taken in Australia, while in others approaches used in Europe, Asia or North America may be more important. The key thing is that the scheme is effective at dealing with the waste issue.

Regulation would then be considered only where no effective voluntary scheme could be developed and where there was a clear indication that there would be net benefit from such intervention.

Figure 1: Preferred option for product stewardship policy

See image at full size including text description

More details on the criteria for identifying the priorities for action and issues on the design of schemes are outlined in section 6 of this paper.

Table 7: The preferred approach

Features	The preferred approach will:	The preferred approach will not:
Product stewardship agreements between industry and government Legislation can regulate free-riders As a backstop regulation could require industry to operate product stewardship schemes	Enable industry-led schemes Allow a range of economic and other tools to be used to back up schemes Provide certainty and a 'level playing field' for producers Give government control over the performance of product stewardship activities, if necessary Give clear performance expectations	Rely on industry leadership Avoid regulation entirely - regulation may be needed for free-riders

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