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8. Individual Producer Scheme Stability

The stability of a product stewardship scheme can be affected by three factors:

1. the existence of free riders;

2. the issue of how to deal with historical product; and

3. changes in product markets.

These issues can act as a barrier to establishing a product stewardship scheme due to fears of instability once the scheme is up and running. We have examined how these factors might affect the stability of the Paintwise product stewardship scheme.

8.1. Free riders

Free riders are producers that do not pay into a product stewardship system, but still benefit from the outcomes of the system. Free riders can create instability in a product stewardship scheme because they leave responsible brand owners to pick up the costs of managing all products in a market.

Paintwise is the only product stewardship (producer responsibility) scheme for paint currently operating in New Zealand and is, in part, underwritten by Resene itself. If the balance of the industry did not follow suit (or collaborate with the scheme) in some form then they might be regarded as "free riding" on the scheme.

However, Resene has developed the programme in order to both solve the end-of-life problems around unused/unwanted paint and to enhance its brand position in terms of environmental performance. It has done so with no concern for what other market participants might do at the same time. The Paintwise scheme has also allowed for other brands of paint to be accepted into the scheme for a fee paid at the point of drop-off (ie in the shops).

In addition to this, Resene has stated that it is open to other brand owners joining Paintwise and discussions have already been initiated. It can therefore be seen that Resene does not see free riding as a threat to the Paintwise scheme.

At this stage, it appears unlikely that the free rider issue will prevent the continuance of Paintwise. Resene has signalled it is in this process for the long haul, whether on its own or with other participating brand owners.

8.2. Historical and "orphan" waste

Historical waste is product that was placed on the market before a product stewardship initiative began to operate. A product stewardship scheme is faced with the problem of financing the collection and processing of this "pre-existing" product.

Orphan waste is product that is on the market but the original producer has gone out of business or withdrawn from the market.

Product stewardship schemes are faced with picking up the cost of managing these historical and orphan products. In some instances the financial burden of dealing with these products is significant enough to prevent a product stewardship scheme being established. This barrier is particularly the case for long-life products (eg televisions) because these products remain in the market-place for a long period of time, and brands can change significantly during this time.

Paintwise deals with historical and orphaned waste by allowing consumers to drop off any brand of paint. Non-Resene paint is charged a fee at point of drop off, while Resene brand paint has had the fee charged at point of sale. Historical and orphan waste is therefore not an issue for the stability of Paintwise.

8.3. Change in product market

Instability could also be caused by shifts in the market. For example, if there is a major shift to different types of paint, or if different packaging materials become more prevalent. This might shift the economics of recycling and make a scheme more expensive.

One identified potential for a product shift to happen in the paint market is a continuation of the trend away from solvent-borne and toward water-borne paint (currently 88% and 12% respectively of Resene paint sales). A continued shift would have the effect of reducing recycling costs and would not therefore impact on the stability of the scheme.