- Provide for import levies and export refunds in lieu of substance deposits and
refunds. The legislation should include the regulatory power to collect or refund set
fees on the import or export of products that contain a small quantity of the regulated
substance. These fees would be based on general estimates of substances contained in a
product, rather than actual measurements. This may be the only administratively viable way
of collecting deposits for these products. Fees and refunds collected on this basis should
be necessary only for imports and exports since it will be much easier to measure the
primary production or disposal of a substance within the jurisdiction. [(290) -- 290. Huppes, above at
]
Provincial fees and refunds must be clearly associated with a larger substance deposit refund system. Importers or exporters of a substance should be able to opt, at their own expense, for actual measurements of the amounts of a substance exported or imported in their products. So long as it is clear that the import levies and export refunds are intended as non-discriminatory means of avoiding the administrative difficulty of measuring small amounts of substances present in products the provisions should be constitutionally permissible. Otherwise they may risk being characterized as an unconstitutional provincial tariff.
- Provide for administration fees. Substance deposit refund systems can entail significant administrative costs, although these have been estimated as less than the significant environmental benefits that result. Legislation should provide for administrative fees that fully recover administrative costs. [(291) -- 291. Ibid.
]
- Further offence provisions. It should be an offence to misrepresent quantities of the regulated substances that are produced, disposed of, imported or exported.
- Enforcement Provisions. The legislation should provide regulators with all the powers granted to excise tax collectors to carry out inspections, tests and audits.
- Provide for sub-delegation. It may be appropriate to delegate different functions to different agencies. For instance, customs and excise officials are already trained to collect excise taxes on the primary production and import of substances such as alcohol and would be well suited to collect substance deposits and refund the appropriate amount of deposits on export. [(292) -- 292. Ibid., at 35-40.
] Other agencies would be better qualified to determine appropriate disposal of regulated substances.
- Provide for a central agency with a power to direct delegated functions. Since substance deposit refund systems are likely to involve different functions being carried out by different agencies, perhaps even different levels of government, a central agency should be created to coordinate these different functions, with the power to issue binding directives to different delegates. [(293) -- 293. Ibid., at 30.
]
- Specify or allow regulations specifying financial arrangements. It will be necessary to define the responsibility of various agencies for administrative costs and refunds and specify which agencies keep the proceeds from deposits. Legislation should allow for innovative financial arrangements which provide an incentive for competent administration. For instance, a report on the use of substance deposit refund systems for the European Community suggested that the party responsible for the refund portion of the system should have the refund payments deducted from its budget; this gives the administrative body a financial incentive for competent administration and fraud prevention. [(294) -- 294. Ibid., at 29.
]
Possible legal challenges to the use of deposit/refund systems
Manufacturers, distributors and retailers may challenge new deposit refund laws using constitutional, administrative or trade law arguments. Since beverage container legislation is one of the oldest forms of economic instruments in use, there is a history of mostly unsuccessful cases from which to learn.
Constitutional Law
As discussed in
Charter Challenges
This conclusion is supported by the history of challenges to deposit refund systems in the United States, where distributors and retailers have mounted a number of constitutional challenges against mandatory deposit regulations or laws. The Court s have rejected the majority of these challenges. [(296) -- 296. See below at footnotes 298, 299, and 300 and in under the Trade and Commerce heading.] For instance, Courts have held that the equal protection clause of the U.S. Constitution, [(297) -- 297. Amendment XIV, Section 1 of the U.S. Constitution says "No state shall ... deny to any person within its jurisdiction the equal protection of the laws."] which is roughly similar to the Charter's section 15, was not violated because soft drink and beer containers were regulated differently from milk cartons and fruit juice cans, since there were many reasonable grounds which could justify the classification. [(298) -- 298. American Can Co. v. Oregon Liquor Control Commission 517 P 2nd 691, (Or., 1973): Anchor Hocking Glass Corp. v. Barber 105 A 2nd 271, (Vt., 1950): Midstate Distributing Co. v. Columbia 617 SW 2nd 419, (Mo. App., 1981) ] In addition, the American Courts have held that the equal protection clause does not require government to attack all aspects of a problem at the same time. [(299) -- 299. Ibid. ] The outcome of challenges such as these would be even clearer in Canada where soft drink or beer producers would not be recognized as the type of group which section 15 is intended to protect. [(300) -- 300. See , footnotes 40 to 44.]
American Courts also have rejected arguments based on provisions similar to section 7
of the Charter of Rights. Both the American "due process"
constitutional guarantee and section 7 of the Charter have been interpreted as not
allowing overly vague prohibitions if these are subject to criminal penalties. Industry in
the United States has argued that due process was violated because deposit refund
regulations were unconstitutionally vague. One Court found that the definition of
"soft drink" in the law would give a person of ordinary intelligence fair notice
as to which beverages were within the deposit requirements. [(301)
-- 301. Bowie Inn, Inc. v. Bowie, 335 A 2nd 679, (1975). ] Courts in Canada
probably would come to a similar conclusion. [(302) -- 302.
See Canadian Pacific Ltd. v. Ontario (1993), 10 C.E.L.R.(N.S.) 169 (Ont.
C.A.).] American Courts also have rejected arguments that due process was violated because
deposit refund laws imposed a heavy, or unequal, burden on those who must comply. Given
the legitimate purpose of this legislation, arguments based on the cost of compliance
simply did not warrant a due process analysis. [(303) -- 303. Dana
Distributors Inc. v. Dept. of Environmental Conservation 532 N.Y.S. 2d 351,
(N.Y., 1988); Midstate Distributing Co. v. Columbia 617 above at
Administrative Law
Challenges to Regulations
For instance, in the United States, states have a police power which may be exercised
on matters which bear real and substantial relation to the public health, morals, safety
and welfare of the citizens. The exercise of that power by the legislature will not be
interfered with unless it is shown to be exercised arbitrarily, oppressively, or
unreasonably. Courts have held that there is a clear relation between a mandatory deposit
requirement and the objective of reducing litter, and that a law designed for that purpose
was not arbitrary and did not violate due process. [(304) --
304. Bowie Inn, Inc. v. Bowie, cited above at
Challenges to Administrators' Discretion
Straight deposit refund systems with a fixed fee for all or various classes of beverage containers provide little potential for challenge, since there is no individual discretion exercised which would give rise to a right to procedural fairness. Deposit refund systems for hazardous products containers or substance charges would involve the exercise of more discretion by regulatory officials and, therefore, would be potentially open to more challenges in Court . [(305) -- 305. See discussion in - Discretion heading.] Once again, clear statutory provisions for appealing decisions on the amount of deposits or refunds should exist where regulators have some discretion in determining these amounts.
Trade Challenges
Deposit refund systems and other measures [(306) -- 306. As
well as the Canada - U.S. beer dispute and the Danish Bottles case discussed below we note
that the German Green Dot program was challenged by France and Britain under EC law prior
to France adopting a program modeled on the Green Dot program: see Makuch, above at
The Relevant Trade Agreements
General Agreement on Tariffs and Trade ("GATT")
GATT provides that any laws, charges or regulatory requirements applicable to imported
products must also be applied to domestically produced products. [(308)
-- 308. Article III, see also Julian Lew & Clive Stanbrook, International Trade:
Law and Practice, Vol. II (1990).] Bans on importing products are also generally
contrary to GATT. [(309) -- 309. Article XI. This is subject
to a number of exceptions in Article XI as well as those Article XX exceptions discussed
below.] Thus, a ban on import of goods in non-reusable containers might be contrary to
GATT unless it comes within one of the exceptions to this rule. Moreover, the Technical
Barrier to Trade Code, to which Canada is a signatory, provides that
countries will undertake to administer regulations relating to products so as to minimize
unnecessary restrictive effects on imported goods. [(310) --
310. Lew, above at
These restrictions are subject to two exceptions listed in paragraphs (b) and (g) of Article XX of the Treaty.
1. Measures necessary to protect human, animal or plant life or health; and 2. Measures relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption. [(311) -- 311. At the time GATT was drafted, protection of the environment was not a matter of international concern, and consequently no specific mention is made of the environment.]
These provisions are generally seen as being the main basis for upholding environmental protection measures that have negative trade effects. [(312) -- 312. Frank Stone, Canada, The GATT and the International Trade System 2d ed. (Montreal: The Institute for Research on Public Policy, 1992) at 251.] Article XX provides that restrictions on trade justified under paragraph XX(b) and XX(g) must not be "arbitrary or unjustifiable".
Canada -- United States Free Trade Agreement (the "FTA")
The provisions of the FTA which relate to deposit refund systems are essentially the same as those in GATT. The FTA preserves the general obligations in Article III of GATT. [(313) -- 313. Article 501, FTA.] With respect to beverage containers, parties are obligated not to introduce any specifications in relation to packaging and labeling that would constitute an arbitrary, unjustifiable or disguised restriction on trade. [(314) -- 314. See Articles 708(2) and 711. ] However, this is subject to the exceptions found in Article XX of GATT. [(315) -- 315. Article 1201. ] Technical specifications for other products that might be subject to deposit refund systems are valid if they are demonstrably designed to achieve a legitimate domestic objective, which is defined to include protection of the environment. [(316) -- 316. Articles 603 and 609.]
North American Free Trade Agreement ("NAFTA")
NAFTA's fate is currently uncertain, due to substantial opposition in the United States Congress and the upcoming Canadian federal election. If NAFTA is passed, it will incorporate GATT obligations and exceptions. [(317) -- 317. Article 103.1.] Whether additional obligations in NAFTA relate to deposit refund systems and related measures depends on whether the systems or measures are considered to be "standards related measures". A standards related measure is defined to include regulations on "goods' characteristics ... or their related operating methods..." [(318) -- 318. Article 915.] It is not clear whether a deposit refund system would be considered a standards related measure. Arguably a deposit refund system might be an "operating method" relating to goods. Also, labeling measures taken in conjunction with a deposit refund system are clearly standards related measures and thus would be subject to NAFTA.
Even if either deposit refund systems or related measures are considered standards related measures they will be valid under NAFTA so long as their demonstrable purpose is a legitimate objective, defined to include environmental protection, and they do not exclude goods of another party which meet that objective. [(319) -- 319. Articles 904 and 915.]
The Potential for Trade Challenges
It is necessary to consider whether deposit refund systems could be challenged as unnecessarily restricting trade and whether measures taken in conjunction with deposit refund systems -- such as levies or bans on non-reusable beverage containers -- could be challenged under these trade agreements.
Based on decisions made under GATT, reports by GATT committees and decisions made under other trade agreements, it appears that deposit refund systems are unlikely to be successfully challenged. However, environmental levies or bans on products may be problematic under trade laws, especially if they have a disproportionate effect on imports.
Deposit Refund Systems
GATT's Group on Environmental Measures and Trade recently reported that:
"...sales taxes on products that can create pollution (those containing chlorofluorocarbons, for example), deposit refund schemes for recyclable waste (bottles, scrap cars), or favourable tax treatment of environmentally friendly products (lead-free gasoline, solar panels for home heating) and other nondiscriminatory measures ensuring a pattern of domestic consumption that minimizes pollution would not normally be open to challenge." [(320) -- 320. Trade and the Environment, February 1992, at 7, quoted in Miren A. Letemendia, "Packaging Initiatives as International Trade Barriers," Paper prepared for the 13th Annual Conference of the Recycling Council of Ontario, Ottawa, October 7-9, 1992, at 5. ]
Similarly, a recent report from the European Community recommends expanding deposit refund systems from beverage containers to batteries and more complex apparatus such as cars and televisions. [(321) -- 321. European Community, Working Group of Experts from the Member States "Report of the Working Group of Experts from the Member States on the Use of Economic and Physical Instruments in EC Environmental Policy" (1991) 14 Boston College Int. and Comp. L. Review, at 447. ]
While there seems to be general support within trading regimes for deposit refund systems, due to concerns about Canada's trade obligations, it is worth examining the interpretation of GATT in order to affirm the conclusion of the Group on Environmental Measures and Trade.
Any attack on a deposit refund system likely would be based on GATT. Article XX(b) is generally seen as allowing measures to protect the environment [(322) -- 322. Steve Charnovitz, "Exploring the Environmental Exceptions in GATT Article XX", (1991) 25 Journal of World Trade 37 and Kyle E. McSlarrow, "International Trade and the Environment: Building a Framework for Conflict Resolution", (1991) 21 Environmental Law Reporter 10589.] so long as the measures adopted involve the least inconsistency with the trade objectives of GATT. [(323) -- 323. Thailand -- Restrictions on Importation of and Internal Taxes on Cigarettes, (1990) GATT Doc. DS10/R.] For example, a ban on cigarette imports imposed supposedly for human health reasons is not valid if there are no restrictions on domestic production. [(324) -- 324. Ibid.]
The exception in Article XX(g) is for measures relating to the conservation of natural resources. Arguably deposit refund systems are aimed at conservation of natural resources, such as land for landfill. [(325) -- 325. Deposit refund systems may also be aimed at conservation of natural resources consumed in production of imported products on which deposit refunds are placed. However, Article XX(g) has been interpreted by one GATT panel as not allowing measures aimed at preservation of natural resources in other countries: see United States -- Restrictions on Imports of Tuna, (1991) GATT Doc. DS21R/R as cited in Eric Christensen & S. Griffen, "GATT sets its net on Environmental Regulation: the GATT Panel Ruling on Mexican Yellowfin Tuna Imports and the Need for Reform of the International Trading System," (1992) 23 The University of Miami Inter-American Law Review 569, at 570.] If so, they will be valid under Article XX(g) as long as they are "primarily aimed at" conservation. [(326) -- 326. Canada - Measures Affecting Exports of Unprocessed Herring and Salmon, GATT Doc. L/6268. ] A measure will be considered primarily aimed at conservation so long as the GATT panel finds that a government would have adopted it for its own purposes. [(327) -- 327. In the Matter of Canada's Landing Requirement for Pacific Coast Salmon and Herring, (1989) Canada - United States Trade Commission Panel, at 31-32.]
Although Articles XX (b) and (g) have not been considered in the context of deposit refund systems, it seems likely that the minimal trade effects of deposit refund systems would be considered acceptable if a deposit refund system were challenged. A case decided under European law -- which places greater limits to restrictions on trade than GATT, NAFTA or the FTA -- upheld a Danish deposit refund system on the basis that the effects on trade were not disproportionate to the positive environmental effects. [(328) -- 328. European Commission v. Denmark, [1989] 1 C.M.L.R. 619.] In the Danish Bottles case, the European Court of Justice held the deposit refund system was
...an essential element of a system aiming to secure the reuse of containers and therefore appears to be necessary to attain the objectives of the disputed regulations. In view of this finding, the restrictions which they impose on the free movement of goods should not be considered as disproportionate. [(329) -- 329. Ibid., at 624.]
Challenges to Related Measures: Product Bans and Environmental Levies
The European Court of Justice did not uphold all aspects of the Danish Bottle Law. Other parts of the Danish regulation limited the quantities of beverages which could be imported in containers not previously approved by Denmark, even where the importer could ensure the return of the containers. These were found contrary to European Community law as the quantitative restriction was judged to be disproportionate to the legitimate objective of environmental regulation. This portion of the judgment has been criticized because the reuse regulations were more environmentally beneficial and ecologically superior to the recycling requirements that the deposit refund system encouraged. [(330) -- 330. Stephen Shrybman, "Trading Away the Environment," in The Political Economy of North American Free Trade, Grinspun & Cameron, eds., (Montreal: McGill - Queens University Press, 1993) at 271-294.] Thus, there are some limits to the measures that can be taken in conjunction with deposit refund systems.
One limit may be the use of product taxes to encourage the use of reusable containers over the use of recyclable or non-recyclable containers. As part of an ongoing trade dispute between Canada and the United States over measures in both countries that favour domestically produced beer, in July of 1992 the United States Trade Representative (the "USTR") imposed a 50% duty on all beer brewed in Ontario. One of the major reasons cited for the tax by the USTR was an environmental levy of ten cents a container that Ontario placed on non-refillable alcoholic beverage containers. [(331) -- 331. An earlier GATT decision in the U.S. - Canada beer wars did not rule on Canada's right to impose environmental taxes: Canada -- Import, Distribution and Sale of Certain Alcoholic Drinks by Provincial Marketing Agencies, (March 1992) 4 World Trade at 114. ] Although the dispute was settled by an agreement on beer pricing between the United States and Canada which allowed the environmental levy to remain in effect, [(332) -- 332. Canada - U.S. Memorandum of Understanding on Provincial Beer Marketing Practices, August, 1993.] it still indicates a potential challenge to environmental levies.
The United States government and the aluminum manufacturers argued that the environmental levy was a thinly disguised tariff barrier, because the levy was not applied to soft drinks, only alcoholic beverages. American beer is primarily sold in cans, which makes it more competitive than bottled beer. The levy was, they argued, designed to make American beer less competitive. The American challenge to the Ontario levy should not be mistaken as an indication that the Ontario levy -- or green levies in general -- are contrary to international trade law per se. Problems arise because of the potential for environmental levies to be used improperly as a trade barrier. The challenges that have been raised against green levies are based on the argument that the primary purpose of the responsible government is to protect its own producers from competition, not to save the environment. Thus, the American case points to the fact that the levy is limited to beer as proof that its real purpose is to discriminate against U.S. beer products, not to protect the environment; otherwise, other beverage containers would be included. The United States case would lose almost all its force if the Ontario levy were more widely applied. GATT panels have held that non-discriminatory environmental taxes were GATT legal. [(333) -- 333. In United States -- Taxes on Petroleum and Certain Imported Substances, (1987) GATT Doc. L/6175 the GATT panel upheld taxes on imported hazardous substances but rejected taxes on imported petroleum products on the basis they were discriminatory.]
Deposit refund systems in other jurisdictions.
A number of product deposit refund schemes exist and a number have been proposed. No
substance deposit refund schemes yet exist, though several have been proposed. The
existing regimes apply to products as varied as car hulks in Norway and Sweden, [(334) -- 334. Opschoor, above at
Beverage Containers
Although the percentage of beverage containers in the overall composition of the municipal waste stream is relatively small, the problem of improper disposal has been obvious and easy to solve in relation to other waste reduction or disposal issues.
British Columbia was the first North American jurisdiction to legislate a deposit refund system for beverage containers. The system is most successful with beer containers, where return rates for glass beer bottles exceed 95% and for aluminum cans exceed 90%. B.C.'s soft drink system is not as effective. [(337) -- 337. British Columbia, Ministry of Environment, Beverage Container Recovery System, (Victoria: Ministry of Environment, November, 1991) at 1.] The Ministry of Environment, Lands and Parks is currently considering expanding the system to include other beverage containers such as bottled water, fruit juice and drink, wine and spirits, milk, and eventually all beverages. [(338) -- 338. British Columbia, Ministry of Environment, Beverage Container Initiative - Policy Options (Victoria: Ministry of Environment, 1992).] A multi-stakeholder review is taking place to provide policy input on the design of a new system. An expanded deposit refund system which would encompass products other than beverage containers, as well as hazardous or polluting substances should be enacted. The proposed B.C. Environmental Protection Act could include the authority for such an expanded system. [(339) -- 339. British Columbia, Ministry of Environment, New Approaches to Environmental Protection (Victoria: Ministry of Environment, 1992). This legislation discussion paper released by the Ministry about this proposed new Act contains a chapter devoted to market based incentives, but does not discuss deposit-refund systems.]
Similar systems operate throughout North America. Nine of the twelve provinces and territories have deposit refund systems for beverage containers and the B.C. Government Employees' Union has produced draft legislation for a National Beverage Container Act. [(340) -- 340. British Columbia Government Employee's Union "Act on Reduction of Pollution and Waste Through the Reuse of Beverage Containers," (1993).]
Three provincial systems stand out. New Brunswick's Beverage Containers Act [(341) -- 341. S.N.B. 1991, c. B-2.2.] applies to almost
all containers under 5 litres other than milk. All containers must be approved on the
basis of an acceptable plan for redemption and recycling or reuse. The Act provides
an economic incentive for the consumer to use reusable containers over recyclable
containers. The deposit is the same for either reusable or recyclable containers. The
consumer, however, receives the full refund only on refillable containers and 50% of the
refund on recyclable containers. [(342) -- 342. Ibid.,
s. 5; General Regulation - Beverage Containers Act, N.B. Reg. 92-327, s. 9 and s.
15.] The 50% of the deposit which is not refunded is divided between distributors to cover
handling costs and the province's Environmental Trust Fund, where it is allocated to
environmental education, and administration of the Beverage Containers program. [(343) -- 343. Ibid., General Regulation, s. 15 and s. 19.]
The New Brunswick Act also provides authority to ensure that pricing does not eliminate
the incentive to purchase refillable containers. [(344) --
344. Beverage Containers Act, above at
Nova Scotia's Litter Abatement Act [(345) -- 345. S.N.S. 1989, c. 8. ] allows the government to require approval of all types of packaging for any products. Regulations [(346) -- 346. Beverage Container Regulations, N.S. Reg. 246/90.] under the Act apply to virtually all alcoholic and non-alcoholic beverages requiring deposits and either reuse or recycling of returned containers. Deposits are generally higher for non-refillable containers in order to provide an incentive to re-use rather than recycle.
Manitoba's Waste Reduction and Prevention Act [(347) -- 347. S.M. 1989-90, c. 60.] and Beverage Container and Packaging Regulation [(348) -- 348. Man. Reg. 137/92.] do not require manufacturers or distributors of sealed beverage containers to establish deposit refund plans. However, they effectively encourage plans by requiring manufacturers and distributors to produce waste reduction and prevention plans and by assessing them with a charge if their sector does not achieve recycling and reuse rates of as high as 95% for some types of containers. [(349) -- 349. Ibid., s. 4 and 5. Target rates for non-refillable glass containers are the lowest at 71.25% by 1995. ] The government may require deposit refund systems if these measures are ineffective.
At least eleven states have laws in place and nineteen other states are considering introducing legislation. [(350) -- 350. Container and Packaging Recycling UPDATE (Washington D.C.: Container Recycling Institute, December 1992).] In addition, a national beverage container law has been proposed in the United States [(351) -- 351. The National Beverage Container Reuse and Recycling Act of 1992. Under the bill, a state would be exempt from the national legislation if it had a 70% recycling rate for containers or had legislation substantially identical to the Act. National beverage container legislation has been proposed in every Congressional session since 1971: "Container Deposit Legislation" (1986) 11 Columbia. J. Environmental Law 353. ] The United States Environmental Protection Agency requires beverage containers sold at federal facilities to be made returnable with a $.05 deposit.
Deposit refunds systems for beverage containers are also common in European and other countries. Countries have devised systems to incorporate deposit refunds in coordination with product bans or product taxes. A brief description of some of the European systems is found in Appendix 1.
Other Existing Deposit refund Laws
Deposit refund systems for batteries now exist or will operate soon in Manitoba,
Minnesota and Denmark. [(352) -- 352. A mandatory deposit
refund system (DRS) is planned for batteries in Manitoba: ERL 217. Minnesota has a
statutory $5 DRS on car batteries, cited in Calvin Sandborn, "Harnessing the Market
Place to Reduce Hazardous Waste" May 29, 1991. A Danish battery mandatory DRS was
scheduled to be passed in 1991; a voluntary system now been agreed. 10-50 DKr battery: ERL
206.] A system of deposits and refunds for nickel-cadmium batteries has also been proposed
in Sweden. To ensure high returns of batteries, the Swedish Environmental Protection
Agency has recommended refunds of 10% to 40% of the purchase price of the batteries.
Cadmium in rechargeable nickel/cadmium batteries accounts for more than half of the
cadmium usage in Sweden. Its use should be discouraged due to the well documented
environmental and health risks. [(353) -- 353. Swedish
Environmental Protection Agency, Nickel-Cadmium Batteries: Cadmium in Phosphorus
Fertilizers: Economic Instrument of Control in Environmental Policy (Stockholm:
Swedish Environmental Protection Agency, 1991).] Car batteries in Rhode Island, Wisconsin,
Minnesota and Washington are subject to deposit refunds, [(354)
-- 354. Michael Stone, above at
Germany's packaging law requires 50% reduction of packaging waste by 1993. At the beginning of this year, a deposit was placed on packaging for a wide variety of products such as soaps, detergents, paints and beverages. Retailers will be responsible for establishing a collection system. [(356) -- 356. James McCarthy, "Waste Reduction and Packaging in Europe," Resource Recycling, July 1991, at 58.]
Car bodies are subject to a deposit refund system in Norway and Sweden. The objective
is to promote the reuse of materials and discourage the disposal of vehicles out of doors,
important since cars include many toxic components including lead and mercury. The initial
system for Swedish car bodies worked poorly because the deposit was too low. The deposit
of $49 (U.S.) was increased to $81 in 1988; the system raises 14M$ annually and is used
for a vehicle scrapping fund. [(357) -- 357. Opschoor, above
at
Germany has recently introduced a draft ordinance on automotive waste, requiring car manufacturers to take back post-consumer cars to drain, dismantle, and separate the cars. Manufacturers and dealers will be obliged to reuse or recycle the parts and specific recovery quotas have been established. No deposits are proposed yet, though there is authority under the Waste Act to require such deposits. [(359) -- 359. Jan Bongaerts, "German Ordinance on Automotive Waste," [February 1993] European Environmental Law Review 31. ]
Proposed Deposit Refund Systems
Policy makers in the U.S. and the European Community have been urged to expand deposit refund systems in recent years.
A proposal in the European Community for a comprehensive deposit refund scheme on
pollutants such as nitrogen, phosphorus, sulfur, carbon, cadmium and some organic
chlorines was the result of a major research study on the use of economic instruments as
tools for environmental protection sponsored by the Commission of European Communities. [(360) -- 360. Huppes, above at
The substance deposit system was described as basically a tax on the import or primary production of every unit of a given substance and a refund upon export or "acceptable disposal" of every unit. A substance deposit, either alone or in conjunction with an emission charge, was found to be theoretically a useful way to control nitrogen and phosphorus emissions, sulphur dioxide and carbon emissions and cadmium and organic chlorines.
This study details the administrative and economic aspects of using a substance deposit across the Single Market of the European Community. Border control would be required for the import and export flows. A central agency would be responsible for administrative implementation of the substance deposit system, delegating its functions of deposit payment and refund at the outer borders of the European Community to existing customs and excise offices. The administrative apparatus necessary for dealing with substances like nitrogen and phosphorus, commonly used in agriculture, is already in place in the form of the structure used for the Common Agricultural Policy in the Community. The analysis assumed a uniform economic and environmental policy for the whole of the European Community, but since that unanimity does not now exist, the authors of the study propose that one country take the lead in introducing these financial instruments for environmental control. Two or more additional countries could then develop the same policy and administrative controls of the substances could be abolished for trade between the participating countries. As more countries become involved in the program, the European Community could provide some informal guidance about the appropriate administrative setup as well as the correct level of taxes and deposits.
The long term effectiveness of these instruments is estimated to be very substantial:
reductions of emissions in the order and magnitude of 50% are feasible and dynamic
cumulative effects could be much higher. [(361) -- 361.
Huppes, above at
Project 88, a non-partisan research project on economic instruments to protect the environment, sponsored by two American Senators, proposed a deposit refund system for containable hazardous waste in a 1988 report. [(362) -- 362. T. Wirth & J. Heinz, Project 88: Harnessing Market Forces to Protect Our Environment (Washington, D.C.: Project 88, 1988).] This problem was estimated by the Congressional Budget Office to be about 30% or 80 million metric tonnes of 1983 industrial hazardous waste. Half of that amount was potentially recyclable after a reclamation or re-refining process.
A deposit refund system for this type of waste was proposed because of three positive features. First, the administrative agency would have the comparatively easy task of checking product refunds, rather than preventing illegal dumping. Second, this system would produce an incentive to recapture substance loss from the production process. Third, it would also provide an incentive to look for non-hazardous substitutes for the substances regulated under this scheme.
Project 88 continued its work with a second report produced in 1991. [(363) -- 363. Wirth & Heinz, above at
A deposit refund system has been proposed for sales of refrigerator units containing chlorofluorocarbons, to ensure the proper return and disposal of such chemicals. [(364) -- 364. Peter Bohm, Deposit-Refund Systems: Theory and Applications to Environmental, Conservation, and Consumer Policy (Baltimore: Johns Hopkins University Press for Resources for the Future, 1981) at 129-169.] The Canadian Automobile Association has proposed that deposits "or other means'' should be used to ensure that automobile parts generally are returned and recycled. [(365) -- 365. Canadian Automobile Association, News Release (26 June 1991).]
Summary
Deposit refund systems are a well established tool for waste reduction. More use of the systems should be encouraged, for hazardous substances as well as products. There are precedents available for enabling legislation, as well as a body of mostly American case law which provides additional guidance for drafting statutes to avoid legal challenges.
Trade law has the potential for legal challenges to deposit refund systems, but the challenges are unlikely to succeed. Challenges based on the Charter and administrative law are also unlikely to succeed in overturning deposit refund laws.
The growth in the number of jurisdictions using this type of economic incentive, the number of products covered by these laws, and the additional products and substances proposed to be covered by the laws shows the great potential use of this tool to reduce waste and to encourage environmentally preferable behaviour.
Appendix
Beverage Container Deposit Refund Systems in Other Jurisdictions
The State of South Australia has had a compulsory deposit refund scheme since 1977. Austria has a mandatory deposit refund system on refillable plastic beverage containers combined with a product tax on non plastic beverage containers. [(366) -- 366. Environmental Resources Limited, Economic Instruments and Recovery of Resources from Waste, (London: HMSO) 1992, at 203.] The deposit is 4 schillings ($0.37 U.S.). [(367) -- 367. J.E. McCarthy, "Recycling and reducing packaging waste: How the United States compares to other countries," (1993) 8 Resources, Conservation and Recycling at 293-360.]
Denmark has a deposit charge on beer and soft drink containers. This charge is backed
up by a ban on nonrefillable beverage containers that are domestically produced, as well
as a sliding scale of product taxes on packaging for liquids to encourage the use of
returnable containers for recycling and reduce consumption of disposable packaging. [(368) -- 368. Environmental Resources Limited, above at
Finland has a combination of deposits and taxes on non-returnable beer and soft drink
beverage containers. [(369) -- 369. Environmental Resources
Limited, above at
Germany has a mandatory deposit refund scheme on plastic beverage containers except
milk and liquid containers larger than 0.2 litres. The return rates for returnable
beverage container systems is at least 72%, whereas the exempt containers have much lower
return rates, such as 17% for milk. [(370) -- 370.
Environmental Resources Limited, above at
The Netherlands has a deposit on glass beverage containers backed up by a product tax
on non-refillable plastic beverage containers. It also has a voluntary deposit refund
scheme on refillable PET bottles. [(372) -- 372. Opschoor,
above at
Sweden has a deposit refund system for glass beverage containers as well as for
aluminum cans. An increase in the deposit on the cans in 1987, from US $.05 to $.09, has
led to the current return rate of 85%, the highest rate for these cans in Europe. Sweden
has also prohibited the use of non-refillable PET containers as of July 1, 1991, and is
considering bans on other plastic packaging. [(375) -- 375.
Environmental Resources Limited, above at
Switzerland has a mandatory deposit refund system for refillable beverage containers
backed up by a statutory requirement for reduction of beverage containers tonnage in waste
and a product tax on beverage containers. [(378) -- 378.
Environmental Resources Limited, above at
[ Econ. Inst. Home ] [ Chp.1 ] [ Chp.2 ] [ Chp.3 ] . . . * . . . [ Chp.5 ] [ References ]
