Cost of deposit return scheme “largely outweighs gains”, says IEA

The running costs of the government’s proposed deposit return scheme (DRS) for drinks cans and bottles is a very expensive way of achieving very little, according to a new briefing from the Institute of Economic Affairs (IEA).

The report finds that the DRS is expected to cost almost £1 billion and £814 million per annum thereafter – to collect recyclables it says are worth just £37 million.

While the DRS is expected to increase recycling rates, it is unlikely to recover more than an extra 10-15% of beverage containers, the briefing states. 

The IEA said in a statement: “Whilst it would be better to recover and recycle this waste than send it to landfill, the marginal cost is excessive; a relatively small proportion of cans and bottles should not be recovered at any cost.”

Head of lifestyle economics at the Institute of Economic Affairs Chris Snowdon – “It is a loss-making enterprise which consumers will ultimately pay for. In addition, everybody is going to have to start traipsing off to collection points with bottles and cans which would otherwise be recovered with a minimum of hassle through kerbside collection.”

The government’s impact assessment puts what the IEA calls an “unfeasibly high” value on the intangible benefits of a modest reduction in littering, while “ignoring” the significant costs to consumers of collecting and returning their containers, according to the briefing.

The report suggests that the benefits of the policy are outweighed by its costs. A DRS would be a “loss-making inconvenience for consumers and retailers alike,” it says.

According to Defra’s Impact Assessment, a DRS would:

  • produce recyclable materials worth £37 million
  • reduce litter clean-up costs by £50 million
  • produce ‘greenhouse gas emissions savings to society’ worth £12 million

This produces benefits of less than £100 million, for more than £800 million of cost, the report claims, and the IEA says the UK already has a “comparatively high” recycling rate with kerbside recycling, with the recycling rate for plastic drink bottles is 74% in the UK. 

Parts of the USA, Canada and Australia which have had a DRS in place for many years have recovery rates that are similar to – or lower than – the UK, it says.

The IEA says: “The vast majority of the containers intended to be collected through the DRS are already being recycled via kerbside collection. Under a DRS, local authorities will lose the revenue they make from selling these materials.”

IEA expected costs (retailers)

The government’s impact assessment estimates that the cost in the first year will be £1,093 million, with running costs of £814 million per annum thereafter. These costs will be met by producer fees and unclaimed deposits and will ultimately fall on consumers.

Setting up and operating the system:

  • Reverse vending machines: Approximately £30,000 per machine, plus around £62,000 worth of retail space
  • Storing returned containers: £17.4 million per annum cost to the retail sector
  • Operating manual return service: 114 hours of extra work per small retailer per annum

IEA expected costs (consumers)

Significant cost of unpaid work required of consumers to make the DRS function, the IEA says:

  • Storage of DRS-compliant cans and bottles in their home
  • Time and inconvenience of returning recyclables

The opportunity cost of just five minutes extra labour per week, per household would equate to £1,687 million per annum (based on the median hourly income of £14.31), the briefing finds.

Proposals

IEA says that unless a more “robust” economic case can be made for the DRS, the idea should be abandoned.

If the government does proceed with the policy, containers larger than 500ml should be excluded as they are rarely used outside the home and therefore will be recycled via kerbside collection, it says.

Glass bottles should also be excluded, the IEA says, as they have a “very low value” in the recycling market and an exemption could encourage manufacturers to switch from disposable plastic to reusable glass.

“Better street bins would make out-of-home recycling easier without resorting to an expensive and inefficient deposit system,” it says.

Defra – “In line with our usual evidence-led approach, we continue to build on our economic assessments of a Deposit Return Scheme.” 

Commenting on the report, author and Head of Lifestyle Economics at the Institute of Economic Affairs Chris Snowdon said: “A bottle deposit scheme is a nice idea in principle, but it doesn’t make economic sense. The government’s own estimates show that it will cost over £800 million to collect recyclables worth just £37 million. 

“It is a loss-making enterprise which consumers will ultimately pay for. In addition, everybody is going to have to start traipsing off to collection points with bottles and cans which would otherwise be recovered with a minimum of hassle through kerbside collection.

“To make the scheme appear worthwhile, the government has put an unfeasibly large figure on the value of a modest reduction in littering while totally ignoring the unpaid labour that will be expected of every household.
“Increasing recycling rates is a noble aim but it should not be done at any cost.”

[UPDATED 18 April]

A Defra spokesperson said: “We are committed to driving-up recycling and tackling plastic pollution. That’s why we are currently consulting on a Deposit Return Scheme for single-use drinks containers as a part of our landmark Resources and Waste Strategy. 

“In line with our usual evidence-led approach, we continue to build on our economic assessments of a Deposit Return Scheme.” 

Find out more about Defra consultation on a Deposit Return Scheme for single-use drinks containers.


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  1. Interesting case, though on the numbers it is quite dependant on the cost of the retail space. Recycling is often put past the tills and are you assuming public space should be free?
    This article suggests that DSR simply shouldn’t be done, but that analysis is based on looking at DSR on its own rather than as part of system. For example it ignores that fact that if people are travelling to a store to purchase the bottles they could take them back on their next trip. So it doesn’t create additional trips. DSR can provide a much more uniform material for recycling or even reuse rather than reprocessing. Therefore DSR could be seen as a step towards a circular economy rather than a destination. That additional value is created overtime. That effectively giving people a few quid for litter picking (kids or more likely the homeless) could be more valuable than we can count in pounds and pence.

    • Martin,
      this research simply confirms what we’ve always known: DRS is just another of the great cons that Governments (including the Scottish Government) are using to mislead the public rather than do something positive (ie fund Council waste recycling properly and fine those who drop litter. A G Barr had a DRS scheme in Scotland for over 60 years and abandonned it a few years ago because participation had dropped below 50% (all the research says you need 80+% participation for DRS to succeed. But it’s being driven by a bunch of so-called ‘experts’ who have little clue about how the public behaves (a bit like the looney 5p plastic bag charge that hasn’t reduced consumption as WRAP would like us to believe, partly due to many customers simply pay the 5p and throwing the bags away anyway).
      It’s high time the ‘Consultants’ understood we’re not like the Europeans: we’re a dirty nation and what works on the continent usually doesn’t work in the UK.

  2. Is anyone really surprised by this economic analysis? Very good to have done it, but this is virtue signalling by a government that is in hock to the environmental movement. What a pity no journalist or broadcaster did not question the economics at the proposal stage, as it always seemed unrealistic. Some may remember Cadbury Schweppes abandonning returnable tonic water bottles in the ’70s. The same principle applies here: the cost outweighs the benefit.

  3. So no mention about the environmental impact regarding the continual use of plastics that end up in the oceans? It costs too much so we’ll ignore it.

  4. Really good to have this sort of analysis which confirms what many of us are have been thinking. Interestingly I was at a meeting today where a short presentation from DEFRA on consistency, amongst other issues from the consultations on the waste strategy, and flagged up was that we should not take away the freedom for an Authority to choose how it delivers its services. If that is the case how do we ever expect to get the consistency needed to deliver effective recycling in England. I thought that inconsistency had got us in the mess that we are now in so with such a statement how can things change.

  5. Two further thoughts:
    Firstly, plastic is used everywhere in modern society and we benefit hugely from it. What we need to correct is careless disposal, but not with uneconomic recycling schemes like the DRS. Municipal collection of co-mingled waste for recycling, and energy from waste plants for black bag rubbish.
    Secondly, consistency means one solution for everyone. This sort of thinking is one of the reason the EU is so unpopular – if you get it wrong, everyone suffers. Diversity is better, where the best is obvious to all over time and gets copied.

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