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8. Agrecovery Performance Against Government Policy Objectives

The Government has laid out its policy objectives for product stewardship in New Zealand. These objectives are contained within the Product Stewardship and Water Efficiency Labelling Discussion Document.

8.1. What are the environmental gains?

More than 1.2 million plastic agrichemical containers are sold every year. This means that an estimated 750 tonnes of plastic, often contaminated with chemical residue, is currently being disposed of or burnt, in New Zealand.

The proposed Agrecovery programme will result in a significant reduction in resources being inappropriately buried or burnt. The programme will maximise recovery of plastics for recycling into other plastic products, closing the loop and preventing potential environmental damage due to landfilling.

The potential environmental gains from the Agrecovery programme are backed up by the findings of the 2003 life-cycle analysis [URS & NZIER (2003)Op Cit. ] of disposal options for farm plastics. This study found that the collection and recycling of farm plastics has a net environmental gain when compared with other disposal options.

8.2. Is Agrecovery a true product stewardship approach?

The Ministry for the Environment Product Stewardship discussion document describes product stewardship as:

"an approach whereby producers, importers, brand owners, retailers, consumers and other parties involved in the life cycle of a product accept a responsibility for the environmental impacts of the products through their life cycle. This can include upstream impacts from the choice of materials and the manufacturing process, through to downstream impacts from the use and disposal of products."

Agrecovery is a product stewardship solution being developed by the agrichemical industry. It is a true product stewardship approach because it will shift the responsibility and financial burden of managing waste containers to the producers of the products.

Agrecovery will be funded by a levy on all participating manufacturers, based on market share or product put on the market (to be decided). In this way, the environmental externalities associated with the disposal of containers will be internalised into the price of the product. This will send an economic signal to the producers of containers about the environmental impact of their product.

8.3. Is it efficient?

The Agrecovery system has been designed as a private sector initiative with minimal government involvement. It has been deliberately designed to be simple and effective, with as little bureaucracy as possible.

The development of a coordinated, nationwide scheme for agrichemical containers will bring with it economies of scale and logistics efficiencies unattainable by alternative approaches such as individual local government or industry collection and recycling initiatives.

There will also be an improvement in the viability of recycling through the aggregation of material as opposed to individual councils negotiating with service providers. The potential for end markets for materials will also be improved due to security, quality and quantity of supply.

Comparison with similar schemes internationally suggests the recovery solution costs are comparable and represent the latest available thinking to ensure efficiency.

The key to reducing per litre cost to market levies for brand owners is drawing into the programme as many brand owners as possible so that economies of scale work.

Table of Cost Comparisons

Country Recovery Rate Cost per kg (USD) Comments

CANADA

67%

$1.39

Mature programme

AUSTRALIA

39%

$1.17

Mature programme

THE NETHERLANDS

45%

$2.28

Similar volumes into market as NZ

FRANCE

42%

$2.12

Classified hazardous

GERMANY

60%

$1.25

Private company contract

NEW ZEALAND

50%

$1.87

Higher in early stages as volume builds

NEW ZEALAND (proposed)

65%

$1.44

At expected recovery target

8.4. How transparent is Agrecovery?

 

The development of the Agrecovery programme has taken place in an open and transparent way. Multiple stakeholders have been involved including farmers, local and national government, producers and recyclers.

A business plan for Agrecovery has been developed that clearly sets out the structure, operation and financial performance of the programme.

The Agrecovery programme will set targets for container collection as part of implementation in consultation with key stakeholders including government, farmers and producers.

The Agrecovery programme will produce an annual report providing details on performance against goals and targets, including:

  • programme membership;
  • quantities of containers collected;
  • materials recovered;
  • financial performance.

These reporting criteria will adhere to an international reporting standard that is being developed for agrichemical container collection programmes. This will enable benchmarking of Agrecovery performance against programmes worldwide.

All industry sectors will have the potential to pass on criticism and suggestions for improvement to the programme to representatives on the Agrecovery Foundation and through its advisory committee. Trustees on the Foundation include local government, Federated Farmers, Fonterra, Agcarm and Horticulture New Zealand. There will also be a website where suggestions and feedback can be posted by any users of the service.

8.5. Do the benefits outweigh the costs?

A product stewardship scheme such as Agrecovery is needed in order to comply with internationally accepted best practice and to meet the demands of international trading practices such as EurepGap. The Agrecovery programme is the most efficient way of getting there that the industry can devise.

It is worth considering the disadvantages of not having a scheme. Agriculture contributes approximately 20% of the country's GDP and accounts for 65% of our export earnings. In 2004, our agricultural, horticultural and forestry export earnings were $18.5 billion. What might happen if our markets determine that our products are not marketable because our environmental performance is not in keeping with other developed countries? The potential cost of loss of market due to a decline in our "clean and green" image has been estimated at more than $500 million to the dairy industry alone [Ministry for the Environment (2001)Valuing New Zealand's Clean Green Image] .

The benefits of the Agrecovery scheme include:

  • reduced pressure on landfill;
  • less potential for residual chemicals to leach when disposed of in landfills;
  • improved recovery of resources reducing the need for virgin material;
  • reduced risk of contamination through on-farm burial;
  • reduced atmospheric pollution from container burning;
  • improved compliance reporting for New Zealand farmers against international standards such as EurepGap;
  • adding to New Zealand's "clean and green" image in export markets;
  • introducing the farming community to sustainable farming principles.

Costs will include:

  • collection of containers;
  • treatment of containers;
  • administration of the scheme;
  • any enforcement (uncertain of the need as yet);
  • education of participants.

Total costs of the Agrecovery system have been estimated at $1.4 million per year.

8.6. Does Agrecovery create competition issues?

Product stewardship schemes can generate some competition issues. These issues fall into two categories [OECD (2001) Extended Producer Responsibility: A Guidance Manual for Governments] : competition reduction in the product market, and competition reduction in the collection/recycling market.

Product market

When producers work cooperatively on a product collection and recycling system, there is a concern that those producers could agree to uniformly pass on the costs to their customers through raised prices.

The Agrecovery programme sets a "fee for service" or "levy" that is paid by producers to the Agrecovery Fund. Producers hold individual contracts with the Agrecovery Foundation to participate in the Agrecovery programme.

These vertical contracts mean that producers do not collaborate on the programme; rather they pay the not-for-profit Agrecovery Foundation to provide them with a desired service.

The Agrecovery Foundation is made up of a diverse group of representatives from:

  • Horticulture New Zealand;
  • Agcarm Inc;
  • Fonterra;
  • Environment Waikato;
  • Federated Farmers;
  • Ministry for the Environment (ex officio).

Agrecovery provides no mechanism for the fixing of prices or the unified passing on of costs through price rises.

Similarly, producers coming together to develop a product stewardship scheme may create a barrier to market entry for new competitors because membership of the scheme is restricted, or new entrants pay a levy that is greater than that for existing members.

Agrecovery avoids creating a barrier to entry because it is a true industry-wide scheme which is open to membership from all relevant companies. There is no joining fee. The Agrecovery levy is a set price that is paid per litre/kg of product placed on the market irrespective of how long a company has been a member of the scheme. Because Agrecovery only requires a financial input from members based on a levy proportional to the volume they place on the market, the scheme doesn't discriminate against big or small companies, importers or local producers, generic or research-based companies, or brands that have retailers or not.

Also, participants in Agrecovery do not profit from the levy. The Agrecovery levy will be used solely to cover the costs of the Agrecovery programme. If the programme levy delivers a surplus, these funds will be used to improve programme performance or reduce the levy to be paid by the brand owners for subsequent periods.

Collection/recycling market

There are competition concerns when there is the potential for an industry scheme to agree to use a single service provider without an open tender process. This would have the effect of shutting out competitors and creating a "monopoly" service supplier.

Agrecovery has a contracted programme manager to take the scheme through its establishment and initial operation phase.

Programme management and delivery will, beyond this timeframe, be appointed in a fully contestable process.

Agrecovery will set minimum standards for the recycling/processing of collected containers (see section 8.7, below). "Approved Processors" will be contracted against agreed criteria incorporating verifiable standards and applications testing as well as value-for-money criteria.

8.7. Are there safe standards for collection and handling of material?

Considerable effort and commitment have gone into designing a scheme that is a model for the safe handling and recycling of agrichemical containers.

Agrecovery has a requirement that all containers are triple-rinsed by farmers prior to being accepted at collection points. This is in accordance with current and accepted best practice. All farmers and growers are presently encouraged to rinse containers three times with the rinsate (wash water/diluted chemical) placed into the spray tank.

All collection sites will be staffed and controlled by fully-trained employees who have been provided with criteria for accepting and rejecting containers. These staff will be crucial to ensuring that the material accepted at collection sites is as safe and environmentally acceptable as possible. This information will also be communicated to farmers to ensure their understanding and compliance.

Beyond collection, the Agrecovery programme will have clear, publicly-stated standards for materials processing contracts. Contractors meeting the standards will have Approved Processor status. Approving processors will be required to ensure that minimum standards are adhered to and that materials are recycled or disposed of in an appropriate way.

8.8. Is there communication and education about Agrecovery?

The Agrecovery programme contains a significant education and communication component. Communications will target specific stakeholders and will be designed to encourage the participation of end-users (farmers) in the programme.