Introduction

In February 2008, the Minister of the Environment approved the first phase of Ontario’s Municipal Hazardous or Special Waste Program Plan (the “MHSW Plan”). The MHSW Plan was developed by Stewardship Ontario in cooperation with Waste Diversion Ontario (WDO). This plan set out a program, which was implemented on July 1, 2008, for managing household hazardous waste materials. These materials included paint, antifreeze, fertilizers and other wastes designated for the first phase of the program. (See pages 121-124 of the ECO’s 2007/2008 Annual Report for the ECO’s review of the first phase of this program).

In July 2008, the minister requested that WDO amend the MHSW program to include all wastes that had been designated as hazardous or special. This expanded list of MHSW includes batteries, household cleaners, pharmaceuticals, aerosol containers and portable fire extinguishers. In September 2009, the minister approved the amended MHSW Plan.

The ECO supports the MHSW program as a major step forward towards the better management of household hazardous materials and the improved diversion of waste from landfill.

On July 1, 2010 – the date the expanded program was implemented – some retailers chose to add a separate “eco fee” line to their receipts. These “eco fees” were created by retailers presumably to make visible the amount the retailer has increased a product’s retail price in order to recoup an increase in wholesale price. These “eco fees” created widespread confusion based on the misconception that a “recycling tax” was being applied (see Clearing up the Confusion on page 6).

On July 20, 2010, after much negative media and public outcry over retailers’ “eco fees”, the minister announced that the MOE would work with stakeholders over the following 90 days to “develop a new system.”

The ECO is very concerned that the controversy caused by media and public confusion could jeopardize the future of what is a necessary step forward for waste diversion in Ontario. While not perfect, the MHSW program as approved in September 2009 is a good plan that should not be scrapped. In this Special Report, the ECO provides a review of the MHSW Plan, with recommendations to improve the program.

BACKGROUND

The term “municipal hazardous or special waste” (MHSW) refers to a variety of potentially dangerous household waste products. MHSW can be categorized into two main groups:

• Consumables – products designed to be consumed, but may result in leftovers that need to be safely managed (e.g., paints, fertilizers and pharmaceuticals); and • Durables – products designed to be discarded in its original form after its useful life expires (e.g., oil filters, oil containers, and batteries).

The provincial government has a specific list of materials that are designated as MHSW (see Appendix A).

MHSW, also commonly called “household hazardous waste” creates problems when landfilled, incinerated, or otherwise improperly managed. In a regular municipal landfill, the chemicals in these wastes can leach out and travel into nearby water supplies. If incinerated, toxic chemicals from MHSW can be released into the air we breathe.

MHSW must be properly managed to prevent the contamination of our natural environment. This includes efforts to reduce, reuse and recycle the materials, and, where necessary, as a last resort, to safely dispose of these wastes through efforts to stabilize or neutralize the hazardous materials and dispose of them in a special landfill designed to accept hazardous waste.

Historically, however, MHSW materials have largely gone to regular municipal dumps not designed to handle these special wastes. In recent years, many municipalities have set up programs to collect and properly process these wastes; however, these diversion efforts have relied entirely on voluntary measures by municipalities and the funding from property taxes to support them.

It has been clear for some time that a better approach is needed in Ontario. This Special Report assesses the Stewardship Ontario program that was recently implemented to address this need. It also looks at the role of the Ontario government in selecting a specific stewardship-based approach and in putting the mechanisms in place to ensure that the system accomplishes the environmental goals the government intended.

THE STEWARDSHIP APPROACH

Before getting into the details of the MHSW program, it is worthwhile to briefly step back from the specific program and take a look at the range of options available to government for ensuring the responsible management of potentially hazardous or problematic municipal wastes.

If Ontarians generally agree that better programs are required to manage MHSW, the immediate question that arises is “who should pay for these better programs?” Should taxpayers pay (through municipal property taxes) or should industry pay? Or should the costs be shared in some fashion? The past few years have seen the public policy pendulum swing away from government (i.e., taxpayer) funded programs and towards industry-funded models, known as either “extended producer responsibility” or stewardship programs.

The stewardship concept is based on having the “steward” – the company that makes or imports the product – pay the full costs of managing their product or packaging when the consumer is done with it. This approach has three major potential benefits: • Fairness. Most people see this method as more equitable, because the costs are borne by the manufacturer of the product (which may be passed on to the consumer in the product price), rather than by the taxpayer. After all, why should a taxpayer who never uses a specific hazardous product be responsible for its waste management costs? Should that not be the responsibility of the consumer who made the choice to buy that product? • Environmental effectiveness. When manufacturers are required to take responsibility for their waste products, experience in other jurisdictions has shown (Europe has the most and best examples) that companies will make efforts to redesign their products with the environment in mind, in order to reduce their end-of-life management costs and potential liabilities. This has resulted in environmentally preferable products and packaging with fewer environmental impacts. • Cost effectiveness. The cost savings that stewards realize when they redesign their products using environmental criteria are likely to be passed on in whole or in part to the consumer, as part of the natural competition found in market economies. Over time, this competitive pressure lowers the overall costs of the program, maximizing cost effectiveness.

The general consensus that has developed in recent years is that government-funded programs cannot deliver the same benefits as stewardship programs, primarily because:

• Having the taxpayer fund the program is inherently unfair and provides no incentive to the public to change their purchasing behaviour; • Government has no control over product design and thus cannot create products with improved recyclability or other environmental benefits; • Government program costs are not kept in check by the discipline of competition.

ENSURING THE STEWARDSHIP ADVANTAGE: CRITERIA FOR SUCCESS

The advantages that stewardship can potentially offer over government-funded and operated programs are completely dependent, however, on how well the program is designed and monitored by government. Many varieties of stewardship programs exist in both North America and Europe and some work better than others. For all of the advantages of a stewardship program to be fully realized, the following three fundamental criteria need to be met:

1. All waste management costs must be included. Products that are not captured in the program and that end up in landfills still have disposal costs. Stewards should pay these costs as well as the costs of products that are successfully captured by the diversion program. 2. Correct price signals. An individual company should pay less if the environmental impact of its products is less and vice versa. If disposal is still cheaper than recycling, for instance, the system will not work. Furthermore, a non-competitive, shared stewardship model with a flat fee system for all companies within a given product category does not provide any incentive for companies to compete with each other on the basis of green design. 3. Government oversight. Although stewardship programs are operated and paid for by the stewards themselves, government must still set the rules and monitor the overall results if the program is to set and achieve the appropriate societal goals. The latter include both economic and environmental accountability.

The ECO believes that the potential advantages of stewardship make this approach the most desirable one for the province. The issue then becomes whether or not the program developed by Stewardship Ontario, under the guidance of Waste Diversion Ontario and the Ministry of the Environment, meets the above criteria for a successful stewardship program.

HOW WASTE DIVERSION PROGRAMS ARE DEVELOPED

In June 2002, the Ontario government enacted the Waste Diversion Act, 2002 (WDA) to “promote the reduction, reuse and recycling of waste and to provide for the development, implementation and operation of waste diversion programs.” Under the WDA, a waste is first designated by regulation and then a waste diversion program is developed that sets diversion targets and provides sustainable funding for the program.

The WDA established Waste Diversion Ontario (WDO) as a permanent non-government corporation comprised of representatives from industry, municipal and commercial sectors, and the environmental community. Under the WDA, brand owners (manufacturers) and importers of products that become a designated waste are called “stewards” and can join together to establish an industry funding organization (IFO) for that waste. IFOs are responsible for developing and operating waste diversion programs and for funding them with fees charged to the stewards. WDO incorporates the IFO, reviews the proposed plans and forwards them to MOE for approval. Stewardship Ontario is the IFO for MHSW. As the IFO for MHSW, Stewardship Ontario collects fees from stewards to finance the MHSW diversion program.

Ontario now has several waste diversion programs under the WDA, including the Blue Box program (for glass, metal, paper, plastics and textiles), the Used Tires program (for vehicle tires), the Waste Electrical & Electronic Equipment (WEEE) program (for computers, televisions and other electronic equipment), and the MHSW program.

HOW THE PROGRAM WORKS

• Stewards – i.e., manufacturers or importers – have two options for meeting their obligations under the WDA. The company can either: 1. Participate in the Stewardship Ontario program; or 2. Apply to WDO for approval of their own stewardship program.

• The MHSW Plan requires industry stewards of designated hazardous products to take financial responsibility for the full end-of-life management for the wastes collected under the program. The ECO notes, however, that the program excludes the end-of-life management costs for those products not collected under the program (i.e., sent directly to landfill).

• Participation in the Stewardship Ontario program entails: registering with Stewardship Ontario as a participant steward, reporting the necessary data to Stewardship Ontario (such as the amount of each MHSW product sold into the marketplace), and paying their share of the stewardship program costs to Stewardship Ontario.

• The entire cost of the MHSW program is funded by the stewards through stewardship fees paid to Stewardship Ontario. In allocating the program costs, each steward is required to pay to Stewardship Ontario its fair share of the “common costs” of the program (i.e., the costs that are common to all material categories, such as the start-up costs of the program, development of the corporate website, shared promotion and education, steward registration, etc.) as well as the steward’s proportionate share of the “material-specific costs” (i.e., the specific costs, such as collection, transportation, processing and treatment/disposal, that pertain directly to the management of the particular category of waste).

• Municipalities, not-for-profits and private businesses will be paid to operate the various components of the program (e.g., collecting, hauling, processing, etc. the materials) under contract to Stewardship Ontario. The contracts will require that all service providers collect and submit to Stewardship Ontario data on the amounts and types of wastes handled. The MHSW Plan also requires stewards to track MHSW materials.

• As the success of the MHSW program relies on the voluntary participation of the public to return waste materials to a MHSW collection point for proper recycling or disposal, the MHSW Plan aims to make it as easy as possible for consumers to “do the right thing”. To increase accessibility and make collection as efficient as possible, Stewardship Ontario plans to operate a number of different collection services, including: permanent depot facilities; collection events; “Depot-in-a-Box” (i.e., a mobile depot that travels to different areas); and “Return-to-Retailer” programs.

• The MHSW Plan includes promotion and education activities (such as a social marketing campaign) to inform the public that the MHSW program exists, to encourage participation in the program, and to motivate consumers to adopt better environmental behaviour.

• The MHSW Plan sets a target for collecting 68% of the total amount of MHSW materials available, and a target for recycling 52% of the material available by the fifth year of the program.

For more detail on the plan, please see Appendix C: Key Elements of the MHSW Program.

CONCLUSIONS

The ECO believes that the MHSW program is a major step in the right direction:

• The program will keep more hazardous materials out of our environment – MHSW materials must be managed properly at the end of their life. Without proper management – i.e., collection, recycling and safe disposal – these toxic materials end up in landfills, where they can contaminate water, air and soil. The MHSW program will increase diversion of our municipal hazardous wastes from landfills by extending collection and recycling services across Ontario.

• The program will put the cost of managing MHSW where it belongs: on producers – There is no question that MHSW must be properly managed to prevent the contamination of our environment. This necessity, however, brings with it an unavoidable economic cost. If we accept that there is a cost, who should pay it? Historically, the costs of managing MHSW in Ontario have been borne by the public through municipal property taxes. The ECO strongly supports the stewardship model adopted in the MHSW program, which shifts the full cost of managing hazardous wastes from the taxpayer to the manufacturer of the product.

• The program will provide much-needed information – The MHSW program will provide much-needed information on the amount of hazardous waste that is generated, collected and disposed of in Ontario by requiring stewards to track MHSW materials. This information can be used to measure progress in meeting the program’s goals, as well as measure the costs of the program.

However, the ECO believes that the MHSW program as currently constituted does not meet the criteria for a successful and effective stewardship program (see page 3). First, stewards only pay for the end-of life management costs of the portion of their products that is collected through the program; materials going directly to landfill remain the financial responsibility of municipalities. Since the program aims to collect only 68% of the available MHSW by the end of Year 5, almost one third of the MHSW generated in the province at that time will still be going to landfill, with the disposal costs borne by the taxpayer. Second, stewards pay a flat fee per unit product within each material category, rather than a fee that varies with a specific product’s environmental attributes. This provides no incentive for companies to design for the environment, as individual stewards are not competing with each other on this issue. Finally, although government is overseeing this program via WDO, the ECO does not see how it will be able to ensure cost-effectiveness without the discipline provided either by differential fees or the competition created through companies taking individual responsibility for the end-of-life management of their products.

To ensure that the full potential of stewardship is achieved, the ECO recommends the following:

• Stewards should finance all waste management costs, including the costs of disposing those products not captured by the program – The fact that stewards only cover the end-of-life management costs for those materials that are collected through the MHSW program represents a failure to create full product stewardship. In addition, only including the cost of materials collected under the program creates a disincentive for Stewardship Ontario to collect waste materials for diversion. The ECO recommends that MOE require that the MHSW program cover all end-of-life management costs, including the costs of disposing those products not captured by the program.

• Steward fees should differ based on the end-of-life costs of responsibly managing an individual product’s waste – An individual company should pay less if the end-of-life costs of managing its product are less. For example, if a manufacturer produces a paint that has fewer toxic chemicals (e.g., no volatile organic compounds), thus making any leftover paint easier and cheaper to manage, that company should pay a lower fee than a manufacturer that sells a more toxic and more difficult to manage paint. Unfortunately, the fees currently charged to stewards do not take into account differences in the specific costs of managing the waste created by an individual producer’s products. The Ministry of the Environment itself points out, when steward fees are uniform across all producers, “there is no direct financial incentive provided to individual producers to reduce their costs through product design, such as designing a product that is easier and cheaper to recycle. The lack of direct financial incentives to improve product design can be an impediment to reducing waste, increasing reuse, and ultimately striving for zero waste.” A truly differential fee structure would compel stewards to improve the design of their products to the point, in some cases, that their fees are reduced to nil because the product no longer needs to be managed by the MHSW program. One of the objectives of the MHSW Plan is to provide an ongoing price signal to stewards to promote continuous improvement in product design by reflecting “over time, the differential economic and environmental costs of managing products with similar functions but different designs and characteristics.” The ECO sees this objective as a priority and fundamental to achieving real waste diversion and a cost-effective program. The ECO therefore recommends that MOE implement the phase-in of differential fees based on the full end-of-life management costs of a product’s waste.

APPENDIX A: Materials Included in the MHSW Program

The MHSW Plan identifies which municipal hazardous and special wastes (as designated under O. Reg. 542/06, Municipal Hazardous or Special Waste, under the Waste Diversion Act, 2002) are included in each phase of the MHSW program.