PRNs: Looking Back At 2018

Prn trader’s Simon Stringer, MCIWM, looks back at the PRN year and says he hasn’t had a year like this in the past 15 that he’s been involved with them. He also says 2019 will be one that will cost producers more money…

What a year! I haven’t had one like that in the past 15 that I’ve been involved with PRNs. It started with mutterings about problems with exports of plastic and paper to China but things really took off in the late spring or early summer as people started to realise the extent of the constraints being imposed. Prices for paper started in the low single figures but peaked at mid £20s; plastic started in the mid twenties and traded at £150.

And yet, by all accounts, the UK has exported or reprocessed enough material to meet its obligations. There may be some PRNs not allocated to producers yet, as they may think that the costs are too high and so will risk not complying.

Prices for all PRNs increased last year (and are expected to continue their upward trajectory this year). Wood, a cinderella PRN, had contributed to the “general recycling” pot generously over the years. For 2018, in anticipation of the EU agreeing challenging wood targets in its forthcoming Circular Economy package, the UK set the target at 38%, up from 22%.

Some would say that the system is broken. Some would say that it works given that the UK has enough PRNs on the books. Most would acknowledge that the system needs to be changed or at least tweaked or modified.

That in itself probably wouldn’t be a huge problem, as the material was available. However, the government has two competing policies that it supports for recycling wood – the PRN system and the biomass system which is subsidised. The biomass oriented material has a subsidy of £35-£55 per tonne, so the clever money was on having to exceed that figure to be able to use it in the PRN system.

Some would say that the system is broken. Some would say that it works given that the UK has enough PRNs on the books. Most would acknowledge that the system needs to be changed or at least tweaked or modified. The system was designed to be low cost, except when there is a shortage (or perceived shortage or non-release) of PRNs and so the price goes up to encourage more suppliers to get involved.

However the inflation of pices seen in 2018 has been unprecedented, and even more critically for the bill payer – not budgeted for. Producers are starting to look at the costs and ask even more pertinently – who’s getting the extra money?

A Difficult Start

2019 has had a difficult start. The reprocessors and exporters had more stringent monitoring of the applications (as had been requested by industry) and this meant that along with the late applications, some were not able to answer the questions posed by the regulators in a timely manner.

The sampling and inspection plan section especially seemed to bring challenges. It has led to some reprocessors and exporters not bothering to be involved with the system as it is compex, there is no guarantee that a PRN may be raised on the output or export, there may be no end destination for the material, it may get rejected by the end destination and so a decision to opt out (as it is not mandatory to report the packaging waste export or output as a PRN) .

This has led to a shortage of PRN suppliers in January. February is another month, but what changes will be implemented by then? This could ultimately lead to a loss of PRNs for the first couple of months – in an already tight year.

It looks like 2019 will be a busy year for people involved in policy development, but one that we can look at the existing systems and see how they can be changed or amended, but also in tandem with other changes to the wider waste and resources environment.

The UK PRN system has a quirk that allows any material recorded as December waste to be used in the year it was recorded or the following year. This transitional tonnage is used as a buffer for when things get difficult.

A greater than usual amount was brought into 2018 from 2017, but the producers have used up some (we don’t know how much yet) of the 2018 transitional tonnage, which means that the system has a reduced buffer for 2019. This will lead to increased costs for producers in addition to the pressures of increased targets for 2019.

Late in December last year Defra released its Waste and Resources Strategy. This year (probably mid-February) we expect to see consultations on Deposit Return Systems (DRS), 2021-2023 (and perhaps beyond) recycling targets for materials, in line with the Circular Economy ambitions; consistency for collection systems amongst the household collectors (frequency and material type accepted) and the single use plastics tax.

The timescale for responses to these is expected to be shorter than normal as they are coming out later than expected. Some of these will be England only, but some are Treasury related, so are UK wide, even as NI doesn’t have an active legislature. In these cases Defra and the relevant officials will be working together so that all the administrations can move in concert.

It looks like 2019 will be a busy year for people involved in policy development, but one that we can look at the existing systems and see how they can be changed or amended, but also in tandem with other changes to the wider waste and resources environment.

It will be one that we may be able to approach the future with a more holistic understanding of what regulations can be changed to give a better environmental outcome. It will be one that will cost producers more money, as changes to the regulatory framework are not quick, so the earliest we will see short term changes will be 2020, but with greater scope for reform in 2023.

Prn trader

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  1. Simon – great article. Very interesting. The PRN or trade-able credits system has served major producers very cost effectively over the years as a means to satisfy their legal obligations. Contributing towards 20% of the total cost is a job well done i understand. It will be interesting given this metric how introduction of cost prohibitive DRS and CE thinking (paying for costly recycling) where by its nature certain waste materials are not cost effective to recycle.

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