Making sense of EPR base fees

On 15 August 2024, Defra published packaging EPR (pEPR) base fee estimates and guidance. Understandably, many businesses eager to get a glimpse into the cost impacts of EPR on their business operations have been asking for this update for over a year. We’ll break down why the fees are a welcome step forward in the pEPR programme, but also explore why businesses should make cautious use of these latest figures when trying to forecast their EPR costs next year.

pEPR fees recap

Under pEPR, packaging producers will face increased costs for compliance. As in previous years, producers will have to pay a fee to register with environmental regulators and if they are a member of a compliance scheme, the relevant membership fee for that. Similarly, producers still have costs associated with procuring PRNs/PERNs to meet their recycling obligations. What is truly ‘new’ is the EPR fees that large producers will have to pay. These fees cover the costs of household packaging waste collections and other associated activities performed by the scheme administrator and regulators.

It is this new EPR fee that is the cause of much concern for producers, as many in industry have suspected they will come to be the lion’s share of producers’ costs in the future. Naturally, producers want as much foresight of this fee as possible, in order to budget effectively for their compliance costs next year.

Unfortunately, EPR fees are designed to cover the actual costs of local authorities, the scheme administrator and environmental regulators doing their work in 2025 and so, by their very nature, we will not be able to know the final material specific EPR fee that producers must pay until all of the relevant data has been reported by Summer 2025. Therefore, in the interim we only have estimates of these fees to work with – and because EPR is wholly novel to the UK’s packaging system, it is incredibly difficult to make such estimates.

The pEPR base fee announcements of 15 August

Due to the importance of forecasting these likely costs, government undertook a project in early 2023 to provide these ‘EPR base fee’ estimates; due to the difficulty of making these estimates, it has taken until now for them to be calculated and approved for publication.

Defra’s EPR base fee estimates for 2025/26 as of 15 August 2024.

What was published on 15 August are welcome indications of what EPR fees could look like in 2025, with per tonne material specific costs broken down into low, middle and high-cost scenarios. Defra has heavily caveated the published fees, as they are largely based on data originating from 2019 and lots of assumptions have been made in order to arrive at these figures. So, whilst these are a welcome step in the right direction, and provide producers an insight into how EPR will impact them financially next year, they are only the first step on a very long path.

What can industry do now?

Industry has spoken with a near unanimous voice welcoming this latest publication of fees. Many understand the uncertainties and ambiguities underlying these fee estimates, but they a clear sign that EPR reforms are on track to be rolled out in 2025. What industry must now do though is work on those fee ambiguities and data gaps to improve the confidence of cost forecasts for producers.

Valpak is undertaking its own work, as the operator of the UK’s largest packaging database, to diagnose the implications for members. Ultimately though, the biggest improvement in the accuracy of fee estimates will only come about when producers fully engage with EPR data reporting requirements, and submit packaging data by 1 October 2024 – this data will be invaluable for calculating future fee estimates, and ultimately the final EPR fees that producers will actually be invoiced.

Defra intend to publish updated fee estimates in September, in light of actual EPR data reported by producers this year. In addition, Defra has stated that we can expect an update on eco-modulation in the Autumn. You can contact Defra directly if you have queries after reading the guidance, using their dedicated email address here.

Conclusion

This latest fee announcement then should in many ways be seen as a call to arms for industry – let’s get producers registered and reporting data to improve the confidence in EPR cost forecasts as we go into 2025.

Supporting customers to reduce pEPR fees

Helping businesses to reduce pEPR costs

We understand that these are challenging times and offer a suite of complementary services designed to assist obligated businesses in navigating and mitigating the financial impacts of pEPR base fees. These are as follows:

Data Quality Assessments – It is essential that you have accurate packaging weights to avoid overpaying fees under pEPR. We offer data health checks on packaging weights to ensure meticulous accuracy in reporting.

Packaging Analysis and Benchmarking – We can help identify areas for cost reduction and environmental impact improvement by comparing your packaging strategies against industry standards.

What If Modelling – Allows you to explore various scenarios and the potential outcomes of hypothetical modifications to your packaging data aiding in strategic decision-making.

Packaging Technology Consultancy – We can provide expert advice on the adoption of new technologies and practices that can lead to more sustainable packaging solutions and potentially lower pEPR fees.

All these services form a comprehensive approach to managing the challenges posed by pEPR legislation. For detailed information on how we can support your business, download a copy of our Packaging Analysis white paper, join our “EPR Update for Members: Defra Base Fees“ webinar on 5 September, or contact us.