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Drinks groups seek government intervention as glass recycling bills spiral

Wine and spirits businesses are calling for rapid government intervention after charges for mandatory glass recycling skyrocketed, wiping out some companies’ profits.

Companies that use glass bottles are legally obliged to buy so-called packaging waste recycling notes under a 25-year-old system that aims to ensure businesses that produce and use packaging also fund recycling.

The scheme is designed to operate as a market similar to carbon credits, and companies in the packaging supply chain are legally obliged to purchase notes in proportion to the packaging they handle.

But companies say the market is opaque and costs for the notes have escalated in recent years, with little evidence of a corresponding increase in recycling.

One company, Kingsland Drinks, said its bill for packaging waste recycling notes for glass had risen almost tenfold to an estimated £2.2mn since 2018, mainly because of a steep rise in the cost per note.

Unless there is a dramatic change in prices or a government intervention, with its other recycling costs Kingsland faces an estimated £2.8mn bill for 2022, which will wipe out its entire profits.

Accolade Wines, the UK’s largest wine supplier, faces a £2mn bill this year, according to its chief supply chain officer, Derek Nicol. He said prices for the notes were “more volatile than bitcoin” and the system was “not fit for purpose”.

Line chart of Glass PRN* costs (per tonne of obligation) showing Costs for glass recycling notes have risen rapidly

While costs for energy-intensive glass recycling have risen, drinks groups say prices for notes have shot up much higher and the unpredictable pricing has impeded business planning.

Drinks groups including the Wine and Spirit Trade Association, the Scotch Whisky Association and the British Beer and Pub Association repeatedly wrote to the Department for Environment, Food & Rural Affairs this autumn calling for urgent reforms to reduce volatility and boost transparency.

“The glass PRN market is in crisis. It’s a failing market with ‘risks of fraud and error in the system’, according to the National Audit Office. The result is prices that have rocketed to unrealistic, unrepresentative and — for some — unaffordable heights for glass,” said Miles Beale, chief executive of the Wine and Spirit Trade Association.

“Without action right now, we will see businesses backed into a corner and being unable to comply, with inevitable and large increases in costs to consumers as a result.”

The notes are issued by waste processors and exporters to provide evidence recycling has taken place. They are often bought through so-called compliance schemes, which handle recycling obligations on businesses’ behalf.

According to Ed Baker, managing director at Kingsland, one problem with the system is that only 20 to 30 per cent of the notes are traded on the official exchange and the rest off-market.

The drinks groups in October asked Defra to ask the Competition and Markets Authority to investigate “potential market manipulation to drive up prices”, in a letter seen by the Financial Times. They said the department had not indicated it would do so.

Others in the market suggest that the volatility has resulted from sudden changes in the use of packaging as Covid-19 restrictions were imposed and lifted over the past two years.

The UK’s glass recycling rate has stalled at about 43 per cent, according to a report this year by consultancy Eunomia, compared with 61 per cent in France and 77 per cent in Germany.

Defra held a consultation this year on potential reforms, but deferred some proposals — such as a compliance fee and changing the timescales on which the notes are traded — pending “further development and engagement with the sector”.

Other reforms were pledged alongside a broader overhaul to introduce a system known as extended producer responsibility, from 2024.

Defra said: “We are aware of the issues in the current system for glass [recycling notes]. Whilst fluctuations in prices are to be expected, we have consulted on amendments to the way in which the system operates.” It said it would introduce changes “shortly”.

UK waste management group Biffa said in results for the year to March that it had “benefited from higher packaging recovery note prices”. It declined to comment further but said in a recent update that reform of the PRN system would help to “tighten compliance”.

George Atkinson, head of policy at Valpak, which runs the UK’s largest compliance scheme, said the PRN system had helped to make recycling businesses commercially viable.

But he added that it would benefit from “enhancements” to bolster price transparency and ensure the funds are used to increase recycling within the UK.

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