Amendments to the Environmental Charges Act and Packaging Act Do Not Solve Waste Problems

In its response letter to the Ministry regarding the Draft Environmental Charges Act and Packaging Act Amendment Act, the Chamber highlighted that the area of waste has several problems for the solving of which several different legal acts need to be amended, but the solutions offered in the draft act do not help achieving the set goals in an efficient manner. Furthermore, the draft act requires thorough impact analysis, because the current one is superficial.

It is the expectation of entrepreneurs that the Ministry of the Environment would offer solutions that do not only increase revenue for the state budget, but would substantially help to solve problems in the area of waste. In the Chamber’s opinion, it should be the first priority to ensure efficient supervision in the area of waste. Only after that would it be reasonable to start imposing new fees or additional obligations to the stakeholders in the waste sector.

10 days to assess a draft act that has a significant impact
The Chamber strongly opposes the legislative drafting practice of the Ministry of the Environment where there was no development intent before the draft act was drawn up, its impact analysis is superficial and the stakeholders have been given an unreasonable 10-day deadline for feedback. Among other things, a longer deadline is necessary also for the business organisation to be able to discuss the planned amendments with their members. For example, the Chamber has over 3,500 members who are active companies and according to estimations the draft act will have a direct impact on one third of these members.

Furthermore, it is not reasonable to apply a legislative drafting practice where the Ministry offers a solution to a problem, but does not explain or show analysis of how such a solution has been achieved. In order to ensure transparent legislative drafting it is important to highlight, which alternatives were analysed to solve the problem and why was the solution included in the draft act selected.

It is unreasonable to establish a pollution charge for plastic packaging waste
A survey conducted among the members of the Chamber of Commerce showed that 65 percent of the respondents does not support imposing a pollution charge for the plastic packaging waste that is not recycled. The Chamber highlighted the following points as the main reasons:

• Imposing the pollution charge will increase motivation to leave the plastic packaging amounts undeclared, which will increase unfair competition
  According to the explanatory memorandum, 57,467 tons of plastic packaging waste was generated in Estonia in 2019, but companies declared in the packaging register that only 35,202 tons of plastic packaging waste was released to the market. Thus approximately 40 percent of the plastic packaging waste released on the market is not declared and if pollution charge for plastic packaging waste not recycled would be imposed at 370 euros per ton, it would further increase the motivation not to declare or declare smaller quantities of plastic packaging waste in the packaging register.
  
  Thus, imposing a new pollution charge will increase the costs of honest entrepreneurs by several million euros per year, but will give an even bigger advantage to the persons who fail to fulfil their obligations related to handling of packaging waste already now.
• It is difficult to carry out supervision over the new charge
  Imposing the new charge will also bring along the risk that more people will not declare plastic packaging waste, declare quantities that are smaller than they should be, declare plastic packaging waste at least partially under another waste code, or declare other waste as plastic packaging waste to be able to show recycling at bigger volumes.
  
  Neither the draft act nor the explanatory memorandum have paid attention to these risks and they do not contain any measures that would increase supervision in the field of packaging or make it more efficient.
• Establishing the new pollution charge in the current situation (negative impacts of the corona virus, high energy prices) would be unreasonable
• Pollution charge of 370 euros per ton is unreasonably high
  The Chamber pointed out that the packaging operators pay an annual service fee to the recovery organisations in the amount of approximately 13 million euros. If the amendment would enter into force, the annual costs could increase by approximately 2.4-4.4 million euros.
  
  Furthermore, it is unclear for the Chamber, why the pollution charge is set at 370 euros per ton. First and foremost, we have a question of why have the calculations taken into account the amount of plastic packaging waste declared in the packaging register and not the amount of plastic packaging waste released to the market. In 2019, approximately 34,000 t of plastic packaging waste was not recycled. If we presume that with the new charge, the state would like to gain approximately 4 million euros for the budget and take into account the entire volume of unrecycled plastic packaging waste, the charge should be approximately 120 euros per ton and not 370 euros.
• Imposing a charge for unrecycled plastic packaging waste might not serve the intended purpose in the best way
  In the Chamber’s opinion, imposing a new pollution charge will allow increasing state budget revenue, but when forecasting revenue, two things should be taken into account, which might decrease the revenue planned in the draft act. For example, when the amendment enters into force, the quantity of plastic packaging waste declared in the packaging register may decrease if the state supervision over it is weak.
  
  Another problem is when proof of recycling is submitted to the packaging register even though there has been no actual recycling or less has been recycled than shown on the certificate. Neither of the problems have been highlighted in the impact analysis included in the explanatory memorandum and there has been no assessment of how such negative impacts could be alleviated.
• Risk of double taxation upon imposing the new charge
  For example, operators may have the obligation to pay packaging excise duty as well as the pollution charge if the operator has not recycled packaging waste.
• The charge for the plastic packaging waste not recycled might not be an environmental charge
  The explanatory memorandum to the draft act has not analysed or explained why in the opinion of the authors the new charge is considered an environmental charge not a tax or excise duty. If it is not an environmental charge, in the Chamber’s opinion, the entire draft act should be rewritten.
   
• It is unclear, what is the relation of the new pollution charge to the plastic packaging own funds instalment payable to the European Union
  The explanatory memorandum has set out that the European Union has agreed that each member state must pay 80 cents to the common pot of the European Union per each kilogram of non-recycled plastic packaging waste. Additionally, the explanatory memorandum states that introduction of the plastic packaging own fund will increase Estonia’s payment to the EU budget by 11 million euros, if we take 2021 as an example.
  
  As far as is known to the Chamber of Commerce, the EU law does not state that a member state should nationally establish a plastics charge to finance the new instalment. It is unclear for the Chamber why the state wishes to finance it on the account of the new pollution charge. If the state has decided to go this way, there is a question why the entire sum should be paid from the charges levied from entrepreneurs and why could a part of the sum not be covered from the tax revenue collected to the state budget.

Estonia lacks capacity to recycle all of the most common types of materials
In its letter, the Chamber pointed out that the explanatory memorandum contains misinformation that the capacity to recycle plastic packaging waste is ensured in Estonia by all the most common classes of materials and that the production volumes are bigger than the quantities of locally generated packaging waste.

Additionally, the Chamber highlights that companies whose quantities of plastic packaging released to the market are contained in the packaging register, recycled 61 percent of the plastic packaging waste released to the market in 2019. This is a much higher indicator than the recycling target (45%) arising from the Packaging Act. Thus in the case of these companies, there might not be a lot of room to increase recycling.

In the Chamber’s opinion, recycling should be increased for the plastic packaging waste that is not currently recorded in the packaging register – more than 20,000 tons. At the same time, the draft act does not pay any attention to this problem and in the opinion of the Chamber, the authors of the draft act presume that the companies who already meet the recycling target should increase the recycling to 82 percent in order to ensure that Estonia would meet the necessary targets by 2025. The third circumstance hindering recycling is that a lot of plastic packaging waste (mostly sales packaging) ends up in municipal waste.