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February 14, 2006

Blue Box Program Plan Review for 2007 Stewardship Ontario Funding Formula - Second Public Consultation Meeting -. February 14, 2006. Introduction to Session & Website Mechanics. Lyle Clarke & Neil Antymis. Welcome!.

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February 14, 2006

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  1. Blue Box Program Plan Review for 2007Stewardship Ontario Funding Formula- Second Public Consultation Meeting - February 14, 2006

  2. Introduction to Session & Website Mechanics Lyle Clarke & Neil Antymis

  3. Welcome! • Second public consultation meeting on Blue Box Program Plan (BBPP) review for 2007 & Stewardship Ontario’s funding formula for stewards • More than 100 people here in person • Approximately 30 registered by webcast • reflects interest & participation of diverse stakeholders

  4. Agenda

  5. Our Audiences • Webcast audience listening on-line • speakers will refer to slide numbers to prompt you to move to the next slide • email questions to: questions@stewardshipontario.ca • Archived webcast available for 180 days

  6. Opening Remarks Derek Stephenson Program Manager

  7. Opening Comments (1) • The work of the Steering Committee to date has been reviewed by newly expanded Stewardship Ontario Board • Board now includes wider representation from • durable products & distributors – CHHA • retail & distribution, including CRFA & Costco • consumable products, Unilever, Nestle, Kraft • Believe it has been an open & thorough review

  8. Opening Comments (2) • Board is supportive of directions outlined, but as with each of you, individual members are thinking through carefully the impacts & issues before final decision • While program has been successful in meeting the obligation of stewards to date • 2005 target has been met • MOE received only 3 comments during most recent fee-setting • Board welcomes attendees’ input as to whether BBPP can be made better

  9. Steering Committee Preliminary Recommendations Lyle Clarke & Neil Antymis

  10. Objectives of review Principles guiding the review Objective of the meeting today Review of process & timelines Screening criteria used Review current funding formula Summary of input & comments Steering Committee recommendations Check against key screening criteria Next steps Topics for Today’s Presentation

  11. Objectives of the Review • Fulfill commitment made during 2006 fee consultation process to consider modifications to BBPP fee setting methodology • Provide an opportunity for all stakeholders to: • re-evaluate the current funding formula • identify & assess potential modifications or alternative approaches

  12. Review of Process & Timelines (1)

  13. Review of Process & Timelines (2)

  14. Screening Criteria (1) • Complies with legal requirements of Waste Diversion Act (WDA) • Furthers policies & goals of WDA & BBPP • Material impact that warrants change • Treats stewards & materials in a fairer manner • Strengthens incentives for 3Rs

  15. Screening Criteria (2) • Improves simplicity & transparency • Facilitates compliance & auditing • Has a proponent • Sufficient outline of approach & data for effective modeling

  16. The Current Funding Formula (1) • Sets fees within context of: • the goals & objectives of the BBPP • the requirements of the WDA, & • program requests made by the Minister of the Environment

  17. The Current Funding Formula (2) • Defines Blue Box Wastes (BBW) as those managed primarily within municipal waste stream • Exempts thousands of companies generating small quantities of BBW from the program • Recognizes differences in costs to manage different material types

  18. The Current Funding Formula (3) • Encourages the diversion of greater quantities of BBW • lowest possible total cost to stewards & municipalities • encourages recovery of next least cost tonne of BBW • shares some of the costs incurred by stewards of materials with the highest recycling rates among stewards of materials with the lowest recycling rates

  19. The Current Funding Formula (4) • Minimizes cross-subsidization among material categories • Provides for a material specific market development fee to help remove barriers to recycling & to improve revenues, & • Shares common program delivery & administration costs across all stewards

  20. The Current Funding Formula (5) In summary: Meets the legal obligations of stewards to share in the costs of operating municipal recycling programs in a manner which minimizes total Blue Box (BB) program costs & for fairness, shares these costs among all obligated companies.

  21. Overview of Input & Comments (1) • Suggestions received since the BBPP first approved (December 23, 2002) • October 27 Advisory Committee meeting to identify additional suggestions & review the long list of ideas • December 8 public stakeholder meeting input

  22. Overview of Input & Comments (2) • Additional written comments received following December 8 meeting • summary of comments posted on Stewardship Ontario website • January 25 Advisory Committee meeting to review preliminary direction of Steering Committee

  23. Issues Raised by Stakeholders (1) • Insufficient sharing of costs incurred by high recycling rate materials among low recycling rate materials: • represents a disincentive to promoting even higher diversion of easily recyclable materials • may encourage stewards to select low recycling rate materials to reduce fees

  24. Issues Raised by Stakeholders (2) • Excessive sharing of costs incurred by high recycling rate materials among low recycling rate materials: • conflicts with nexus requirements of the WDA • some materials must be collected by regulation • penalizes non-recyclable materials for which there is no practical alternative • does not take into consideration other environmental & social factors • municipalities choose what materials collected

  25. Issues Raised by Stakeholders (3) • Revenue from sale of some materials is not calculated accurately or fairly attributed to stewards of those materials. Currently: • benefit of sales revenue that is shared with contractors under municipal recycling contracts is distributed across all materials • surplus revenue from aluminum lowers all stewards financial obligations • The costs of managing materials exempted under de minimis provision, non-compliance & inaccurate data falls to “compliant stewards”

  26. Issues Raised by Stakeholders (4) • The aggregation of some material types blunts the impact of the price signals that are built into the funding formula to encourage greater recycling • The funding formula is overly complicated, difficult to understand & describe • Recycled content credit should be allowed to recognize contribution to demand for recyclable materials

  27. Summary of General Recommendations (1) • Improve accuracy of material-specific net costs by the changing way in which revenue & material prices are calculated • Provide an opportunity for a recycled-content credit program to be incorporated into subsequent annual fee setting calculations within the existing market development component of the fee setting formula • stewards within material sectors would submit detailed plans for such programs for Stewardship Ontario approval

  28. Summary of General Recommendations (2) • Aggregate materials with similar characteristics (handling, revenue, etc.) for fee setting purposes • Do not give exemption or credit for biodegradability • Leave de minimis level as it is • Leave allocation of common costs as it is • Continue to calculate generation using waste audit data cross-checked against steward data

  29. Short-listed Options for Detailed Review (1) Evaluated two alternatives for modifying the funding formula: Modifications to current 3-factor funding formula, keeping core structure same New 2-factor model Decided that Option (a) would be the focus of consultation

  30. Short-listed Options for Detailed Review (2) Option a) Modifications to current 3-factor funding formula selected because: • Greater flexibility to equitably allocate costs to achieve objectives of BBPP & WDA • Ability to meet requirements of nexus • Modeling simplicity

  31. Modifications to Current Funding Formula (1) In addition to general recommendations, e.g. modified calculation of revenue • Simplify recovery rate factor calculation • replace statistical calculation with simplified calculation based on relative recovery • same result with simpler steps

  32. Modifications to Current Funding Formula (2) • Reduce target recovery on equalization factor from 75% to 60% • reflects the 60% diversion target for BBW set by the Minister & rewards highest recovery materials

  33. Modifications to Current Funding Formula (3) • Adjust weightings of 3 factors • shift some of the weighting from recovery rate factor to equalization factor • greater sharing of cost of achieving higher diversion among all materials • can adjust weightings to achieve marginal change or more significant change

  34. Slide 34 Net Cost to Manage Fees Reflecting Cost to Manage Each Material Fee Rates Reflecting 100% Cost 200 160 120 Total Fee Rate ($/tonne) 80 40 0 OTB Steel OMG Glass Other Paper Printed Plastics -40 Paper Aluminum News Packaging Other News CNA/OCNA -80

  35. Slide 35 Current 2006 40/40/20 Net Cost to Manage Impact of Current Funding Formula Current 2006 Fee Formula: Recovery = 40%, Cost = 40%, Equalization = 20% 200 160 120 Total Fee Rate ($/tonne) 80 40 0 OTB OMG Glass Steel Plastics Paper Packaging -40 Aluminum CNA/OCNA News Other Printed Paper Other News -80 • Formula transfers portion of obligation from materials with higher recovery rates to materials with lower recovery rates, e.g. plastics at 18% overall

  36. Slide 36 Impact of Modifications to Current Funding FormulaBefore Impacts of Aggregation/Dis-aggregation Revised Fee Formula: Recovery = 20%, Net Cost = 40%, Equalization = 40% 200 Proposed 20/40/40 160 Current 2006 40/40/20 120 Net Cost to Manage Total Fee Rate ($/tonne) 80 40 0 Steel OTB Glass Plastics OMG Paper Packaging CNA/OCNA News -40 Aluminum Other Printed Paper Other News -80 • Modified formula results in similar fees by category • Biggest impacts on plastic & aluminum

  37. Slide 37 Impact of Modifications to Current Funding Formula Revised Model - Alternative Weightings 200 Current 2006 40/40/20 160 Proposed 20/40/40 Alternative 30/40/30 120 Alternative 20/35/45 80 Total Fee Rate ($/tonne) 40 0 Steel OTB Glass Plastics OMG Paper Packaging CNA/OCNA News -40 Other Printed Paper Other News Aluminum -80 • Factor weighting can be used to shift fees to low recovery & high cost material … biggest impact on plastic

  38. Printed Paper Aggregation • Currently Printed Paper completely dis-aggregated • Recommend partial aggregation • treat “like with like” • spread effects of de minimis, non-compliance, imprecision of data • balance fee rates on newspapers & municipal payment levels • Separate categories for CNA/OCNA newsprint & other newsprint • OMG, OTB, other printed paper together

  39. Slide 39 Current 2006 40/40/20 Fully Dis-aggregated Alternative 20/40/40 Fully Dis-aggregated Printed Paper Aggregation (1) Printed Paper Current Dis-aggregation 90 80 70 60 Total Fee Rate ($/tonne) 50 40 30 20 10 0 CNA/OCNA News Other News OMG OTB Other Print Paper • Minimal impact of modified 3 factor model • Largely due to revised material prices

  40. Slide 40 Printed Paper Aggregation (2) 90 Current 2006 40/40/20 Fully Dis-aggregated 80 Alternative 20/40/40 Fully Dis-aggregated 70 Alternative 20/40/40 Fully Aggregated 60 50 Total Fee Rate ($/tonne) 40 30 20 10 0 CNA/OCNA News Other News OMG OTB Other Print Paper • Other printed paper fees impacted significantly & in line with other paper categories

  41. Slide 41 Current 2006 40/40/20 Fully Dis-aggregated 80 Alternative 20/40/40 Fully Dis-aggregated 70 Alternative 20/40/40 Fully Aggregated 60 Proposed 20/40/40 Partial Aggregated CNA/OCNA News Other News OMG OTB Other Print Paper Printed Paper Aggregation (3) Printed Paper Partial Aggregation 90 80 70 60 50 Total Fee Rate ($/tonne) 40 30 20 10 • Recommended partial aggregation to reflect that generally handled together & given data aggregation, but also reflecting some differences in cost & recovery - fairer to other paper categories

  42. Plastic Packaging Aggregation • Currently Plastic Packaging fully aggregated • Recommend partial dis-aggregation • PET bottles • HDPE bottles & jugs • other • film, plastic laminants, polystyrene, other plastics, (including other PET & HDPE packaging)

  43. Slide 43 Current 2006 40/40/20 Fully Aggregated Alternative 20/40/40 Fully Aggregated Plastic Packaging Aggregation (1)Before Impact of Dis-aggregation 600 Plastic Packaging Current Aggregation 500 400 Total Fee Rate ($/tonne) 300 200 100 0 PET Bottles HDPE Bottles & Jugs Plastic Film Plastic Laminants Polystyrene Other Plastics • Modified model initially shifts costs to lower recovery plastics

  44. Slide 44 Current 2006 40/40/20 Fully Aggregated Alternative 20/40/40 Fully Aggregated Alternative 20/40/40 Fully Dis-aggregated Plastic Packaging Aggregation (2) Plastic Packaging Dis-aggregation 600 500 400 Total Fee Rate ($/tonne) 300 200 100 0 PET Bottles HDPE Bottles & Jugs Plastic Film Plastic Laminants Polystyrene Other Plastics • Complete plastic dis-aggregation impact on plastic laminants is dramatic

  45. Slide 45 Current 2006 40/40/20 Fully Aggregated Alternative 20/40/40 Fully Aggregated Alternative 20/40/40 Fully Dis-aggregated Proposed 20/40/40 Partial Dis-aggregated Plastic Packaging Aggregation (3) Plastic Packaging Partial Aggregation 600 500 400 Total Fee Rate ($/tonne) 300 200 100 0 PET Bottles HDPE Bottles & Jugs Plastic Film Plastic Laminants Polystyrene Other Plastics • Partial aggregation recognizes differences in handling & recovery rates, but is fairer & more balanced

  46. Paper Packaging Aggregation • Currently Paper Packaging fully aggregated • Recommend partial dis-aggregation • OCC & OBB • aggregated together • polycoat, paper laminants, aseptic • aggregated together

  47. Slide 47 Current 2006 40/40/20 Fully Aggregated Alternative 20/40/40 Fully Aggregated Old Corrugated Containers Gabletop Paper Laminants Aseptic Containers Old Boxboard Paper Packaging Aggregation (1) 120 Paper Packaging Current Aggregation 100 80 Total Fee Rate ($/tonne) 60 40 20 0 • Modified model initially shifts costs down marginally

  48. Slide 48 Current 2006 40/40/20 Fully Aggregated Alternative 20/40/40 Fully Aggregated Alternative 20/40/40 Fully Dis-aggregated Paper Packaging Aggregation (2) 120 Paper Packaging Fully Dis-aggregation 100 80 60 Total Fee Rate ($/tonne) 40 20 0 Old Corrugated Containers Gabletop Paper Laminants Aseptic Containers Old Boxboard • Full dis-aggregation does not recognize material handling reality … does not treat “like with like”

  49. Slide 49 Paper Packaging Aggregation (3) 120 Paper Packaging Partial Dis-aggregation 100 80 Total Fee Rate ($/tonne) 60 Current 2006 40/40/20 Fully Aggregated 40 Alternative 20/40/40 Fully Aggregated Alternative 20/40/40 Fully Dis-aggregated 20 Proposed 20/40/40 Partial Dis-aggregated 0 Old Corrugated Containers Gabletop Paper Laminants Aseptic Containers Old Boxboard • Partial aggregation treats materials fairly & balances impact between materials

  50. Slide 50 Impact on Material Fee Rates 250 Comparison of Fee Rates Current 2006 Model 40/40/20 200 Proposed 3-Factor Model 20/40/40 150 Total Fee Rate ($/tonne) 100 50 0 OTB OMG Steel Al Cans Col Glass CNA/OCNA News Other News -50 Clear Glass PET Bottles OCC & OBB HDPE Bottles & Jugs Foil & Other Al All Other Plastics Other Print Paper Other Paper Pckg • Changes vary by material - some adjustments may need to be considered

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