Further information on the Container Return Scheme proposal

Further information on the Container Return Scheme policy proposals which are part of the recent Transforming Recycling consultation. The information is provided in response to questions asked in webinars held in March and April. The consultation closed on 22 May.

What a container return scheme is

A container return scheme (CRS) is a resource recovery scheme that encourages people to return beverage containers for recycling or refilling in exchange for a refundable deposit.

When someone buys a drink, they pay a refundable deposit on the normal price of the drink.

If consumers return their beverage container(s) to a designated scheme drop-off point for recycling the deposit is refunded.  

Getting your deposit back

Deposit refunds can include: 

  • cash  
  • supermarket vouchers (for cash or credit)  
  • donation to charity 
  • electronic funds transfer (through an account or mobile phone app). 

Container return schemes overseas

About 50 schemes exist globally, with more expected by 2023. For example, every Australian state has or is in the process of implementing a CRS. Overseas CRS have been proven to be a successful solution to increase recovery and decrease beverage container litter. 

The best performing schemes in the world – for example, in Germany, Denmark, Finland, Croatia, Netherlands, Iceland, Norway, Sweden, Lithuania, Michigan, and Oregon – achieve return rates of over 85 per cent. In comparison, New Zealand’s beverage container recovery is estimated at only 45 per cent.  

Why New Zealand needs a container return scheme

New Zealand’s recovery rates for beverage containers are low compared to countries with container return schemes in place. In 2020/21, an estimated 1.7 billion beverage containers were either stockpiled, littered or sent to landfills in New Zealand. In addition, beverage containers are a significant and visible source of litter on our coastlines, public spaces, and landfills.  

Implementing a scheme would help to bring New Zealand’s resource recovery systems up to global standards.

Based on the proposed design outlined in Part 1 of the Transforming recycling consultation document, we expect that implementation of the NZ CRS would significantly increase recycling rates to 85–90 per cent. At an 85 per cent recovery rate the scheme would receive more than 2 billion beverage containers annually for recycling. 

Support for a NZ CRS so far

To date, there has been strong public support for a NZ CRS. In 2018/19 the impetus for a CRS grew with 96 per cent of local government mayors in favour of a scheme. In 2020, a Consumer NZ survey found that 78 per cent of respondents were in favour of a scheme.  

In addition, the Labour Party’s 2020 Election Manifesto noted a commitment to investigate a NZ CRS. Implementing a NZ CRS is also a recommendation of the Office of the Prime Minister’s Chief Science Advisor’s 2019 report Rethinking Plastics in Aotearoa New Zealand. 

Who benefits from a NZ CRS

A NZ CRS would provide a wide range of benefits such as circular economy job creation, industry growth and innovation, litter reduction, and improved public awareness and engagement in resource efficiency.  

For charities and NGO’s, there would be an opportunity to generate revenue from operating scheme depots, or for those not participating in the network directly, fundraising drives as a part of the “informal network” (eg, via charity drives and collection points at schools, sports clubs, etc). In addition, the CRS return technology would be designed to provide you with an opportunity to voluntarily donate your refundable deposit to charities. 

Why a 20 cent refundable deposit is proposed

The deposit level is one of the things we are seeking feedback on. Australian schemes have a consistent deposit level of AUD 10 cents, do not require retailers to take back eligible containers, and range between 48-78 per cent recovery. Australian officials have noted that an AUD 10 cent deposit level is low, and some are considering an increase to 20 cents. In comparison, high-performing international schemes, such as some of those in the European Union (EU) with return rates above 85 percent, have deposit levels equal to or greater than NZD 30 cents.   

Modelling based on international schemes suggests that, while there are some exceptions, the deposit level has the greatest impact on returns. Analysis from overseas schemes and modelling obtained by the Ministry of the Environment shows that a NZD 20-cent deposit would produce enough incentive to dramatically increase recycling rates to 85% or more and reduce litter rates for beverage containers by 60%, while also managing household costs.  

Compared to a 10-cent refund, a 20-cent deposit would create a stronger incentive for consumers to return containers for a refund, reduce beverage container litter, be more closely aligned with deposit amounts of higher-performing schemes overseas, and deliver greater community benefits. 

Scheme fees and what they would be used for

The core costs of a CRS (aside from the refundable deposit) are covered by a non-refundable scheme fee. The scheme fees cover the costs of managing the scheme, including recovering, transporting and processing the returned beverage containers, and are a core financial element of schemes globally. 

The scheme fees are variable costs and to some degree depend on the nature and efficiency of a scheme. They are also proportional to the number of containers returned, because the substantive cost within the scheme fee is the ‘handling fee’ paid to return facility operators for each container that comes back to a container return facility (CRF). 

Financial modelling for a NZ CRS indicates the gross scheme fee would cost approximately 8.8 cents per container. However, this estimate may be high (based on international scheme costs), and in any case, scheme net costs (ie, costs to consumers) are likely to be no more than 3 to 5 cents (+GST) per container. 

Further analysis of the modelled scheme fees for New Zealand can be found in the interim regulatory impact statement. 

What an eco-modulation fee is

Eco-modulation is a pricing mechanism within a CRS that can be used to ensure materials are recycled. A fee can be modulated to reflect the costs of recycling a given product, and the fee typically increases when a product is hard to recycle. Equally, products that are easy to recycle have lower scheme fees, encouraging producers to use recyclable materials. The eco-modulation fee incentivises producers to improve the environmental sustainability of their product design.  

 The consultation document is proposing that the scheme fees would be eco-modulated to improve waste minimisation and circular economy outcomes. If the scheme fees are eco-modulated, the fees paid by the producer would vary according to specific criteria relating to aspects of their products’ environmental performance (eg, the waste hierarchy). The aim of this policy mechanism is to encourage producers to shift toward more sustainable product design and incentivise recyclable, and in the future, reusable packaging. 

Cost of drinks

It would depend on decisions made by the drink producers and retailers.  If all of the costs are passed through to consumers, it would be approximately 23 cents (26 cents including GST), but experience from overseas suggests that full pass through of costs varies by product type and full cost pass through may not occur.   

Drinks included in the scheme

It is proposed that all single-use beverage containers would be in scope of the scheme and eligible for a refund if they are made from one or more of the following frequently bought beverage container materials:  

  • glass (all colours) 
  • plastic (PET, HDPE and PP only, and recyclable bio-based HDPE and PET) 
  • metal (eg, aluminium, steel, tinplate and bimetals) 
  • liquid paperboard. 

All single-use drinks, including cordials and concentrates are included in the scheme. However, fresh white milk is proposed to be exempt in all packaging formats. The definitions of drinks that are included in the scheme would be further considered at the legislation and regulation development stage, if a commitment to implementing a NZ CRS is made. See the graphic below for further detail. 

beverage containers v2

Beverage containers included

  • All single-use metal beverage containers
  • All single-use glass beverage containers
  • All single-use plastic beverage containers (PET 1, HDPE 2 and PP5,  and recyclable bio-based PET 1 and HDPE 2)
  • All single-use liquid paperboard beverage containers.

Beverage containers not included 

  • Any beverage container made from a material other than metal, plastic, glass or liquid paperboard (Excluded for now)
  • Fresh milk in all packaging types (Exempt)
  • Beverage containers that are intended for refilling and have an established return/fillables scheme (Exempt)
  • All cups (Out of scope).
beverage containers v2

Beverage containers included

  • All single-use metal beverage containers
  • All single-use glass beverage containers
  • All single-use plastic beverage containers (PET 1, HDPE 2 and PP5,  and recyclable bio-based PET 1 and HDPE 2)
  • All single-use liquid paperboard beverage containers.

Beverage containers not included 

  • Any beverage container made from a material other than metal, plastic, glass or liquid paperboard (Excluded for now)
  • Fresh milk in all packaging types (Exempt)
  • Beverage containers that are intended for refilling and have an established return/fillables scheme (Exempt)
  • All cups (Out of scope).

Why glass has been included in the scheme when there are already schemes in place for container glass

Glass makes up nearly 1 billion beverage container sales in New Zealand annually, of which 92% are alcohol products. Glass is the most common packaging format type in New Zealand. Given recycling is typically a low margin high volume industry, to leave glass out of the scheme would both, create an uneven playing field for beverage producers, as well as undermine the cost effectiveness of the scheme. For example, the scheme Benefit Cost Ratio drops from 1.61 with glass in to 1.1 with glass out. Glass beverage containers are a significant source of litter. A refundable deposit would significantly reduce beverage container litter, including glass. 

Why fresh milk is proposed to be exempt

It is proposed that fresh milk would be exempt in all packaging types. This is because fresh milk is often considered a staple food item for households (unlike flavoured and sugary drinks and alcohol) and where milk is consumed at home, kersbide collections collect much of this material. It is also not frequently consumed while ‘out and about’ thus, a lesser litter issue.  

The main gap in the recovery of fresh milk containers is from the commercial and hospitality sectors (such as cafés, restaurants, etc). The consultation document is proposing to investigate means of targeting and increasing the commercial (away from home) recovery rates of fresh milk beverage containers, and that further engagement would be needed with key stakeholders – we encourage you to have your say on this. 

Additional costs of including fresh milk

If fresh milk were included in the NZ CRS, the annual estimated net cost to households that participate in recycling via the scheme is $3-$4 per year, and assuming 100% pass-through of estimated scheme costs. 

Soy and other milk alternatives

The proposed exemption of fresh milk only applies to fresh white dairy milk that requires refrigeration. This definition includes cream but does not include beverages that are shelf-stable (long-life) or partially dairy/milk-based, such as (but not limited to) drinkable fermented dairy drinks like kefir, flavoured milk, smoothies, drinkable yoghurt and plant-based milk alternatives (eg, oat, almond, coconut, soy, etc).  

Why liquid paperboard beverage containers are included

Liquid paperboard (LPB) products are the cartons sometimes used for milk products, plant milk alternatives and juices, and are made from a combination of plastic, aluminium and fibre. Recycling these cartons is difficult and uses processing technology which New Zealand does not have. As a result, these container types are sent to landfills or, at best, downcycled into other products.  

However, exempting LPB from the NZ CRS could have a free-rider effect and incentivise producers to switch to LPB as a cheaper packaging option. Better outcomes are possible for the majority of LPB containers if they are included in a NZ CRS. Eco-modulation of the scheme fee could mean that producers of harder to recycle packaging such as LPB would likely have a slightly higher scheme fee in order to ensure the containers are recycled at some level. 

 

Reasons for including liquid paperboard in the scheme and excluding from kerbside

Liquid paperboard (LPB) packaging is an easily separated packaging type via a CRS, (unlike kerbside collections, where LPB is often flattened and can end up as contamination in paper and cardboard bales). A CRS would capture the majority of LPB packaging as a clean single stream, making it readily available for secondary recycling (noting that LPB is not able to be recycled as container-to-container packaging like other beverage container types).  

Why reusable/refillable beverage containers are proposed to be exempt

It is recognised that refillable containers will have an important role to play in facilitating the transition toward a circular economy and activity further up the waste hierarchy. However, limited information is currently available on our refillable/reusable systems.   About two thirds of overseas container return schemes exempt refillable containers and focus on single-use beverage container recovery.   

A national refillable beverage system would require bespoke logistical management, and national or regional collection and sterilisation infrastructure. Further investigation is required to understand how CRS infrastructure could support a future shift toward reusable/refillable containers. This includes consideration of how refillable beverage packaging could be incorporated within or alongside a NZ CRS.  

It is proposed that beverage containers that are intended for refilling and have an established return/refillables scheme would be exempted from the NZ CRS at this stage. This means that refillable beverage containers would not be eligible within the scheme at the outset and would not include a refundable deposit. This would not prevent existing refillable systems (such as ABC Swappa Crate) from operating or stop new beverage producers from moving into the refillable market.  

The proposals are seeking your feedback on future-proofing provisions for refillables (eg, eco-modulation fee and/or refillable targets), and on how the Government could promote and incentivise the uptake of refillable beverage containers and other refillable containers more broadly.  

 

What we mean by ‘excluded’ containers

Any “beverage container” (as per the proposed definition1) that is made from materials other than metal, glass, plastic (PET 1, HDPE 2 and PP 5, and recyclable bio-based PET and HDPE) and LPB are proposed to be excluded from the scheme for now. The products that fall within this proposed exclusion are likely to be relatively low volume ‘niche’ containers (eg, compostable plastics, biodegradable plastics, bladders, pouches etc.). 

The proposal as it currently stands would see excluded container types (3 litres and under) assessed on a case-by-case basis by the scheme’s managing agency and the government agency responsible for the scheme. Current regulations in relation to priority products under WMA Section 22(1)(a) include prohibiting the sale of a priority product, except in accordance with an accredited scheme. While new bespoke legislation is proposed for a NZ CRS, this principle is proposed to be carried forward to manage the free-rider risk for a NZ CRS. If the principle were carried into CRS legislation, this would mean that without an agreement with the scheme’s managing agency, the beverage packaging type would not be able to be sold in NZ and the producer/importer would need to shift to a more recyclable packaging format that is accepted by the scheme.   

We are keen to hear from any beverage producers using compostable plastics, biodegradable plastics, bladders and pouches on this proposal. 

Please note that if a NZ CRS proceeds, the scheme’s scope of containers and a process for assessing new products would need to be developed with industry and through further consultation on possible regulations. 

What we mean by ‘exempted’ containers

Some beverage containers meet the proposed definitions of ‘beverage’ and ‘beverage container’ but are proposed to be exempt from a NZ CRS. This means that these containers could still be sold in New Zealand but would not carry a refundable deposit and scheme fees in the purchase price and could not be returned through the NZ CRS.

Exempted beverage containers may still be subject to some level of regulation, including data reporting requirements. Other beverage containers may be determined to be exempt from the NZ CRS in the future. 

As with exempted containers (fresh milk in all packaging types and beverage containers that are intended for refilling and have established return and refill systems in place), producers of containers over 3 litres are proposed to be exempted and may still be subject to some level of regulation, including data reporting requirements. 

What we mean by ‘out of scope’ containers

The proposed definition of an eligible ‘beverage container’ is a vessel or casing of a beverage (regardless of whether it is sold alone or as a unit in a multipack) that is sealed in an airtight and watertight state at the point-of-sale. Beverage containers that do not meet the proposed definition of an ‘eligible beverage container’ such as open beverage containers like cups and coffee cups are out of scope. 

Non-beverage containers (eg, ice cream tubs) are also out of scope and would not be included in the scheme. Like products that are exempted, being out of scope means that these containers could still be sold in New Zealand, but they are not eligible to include a refundable deposit and scheme fees in the purchase price and cannot be returned through the NZ CRS. 

Why single-use cups and coffee cups aren’t included

Single-use cups and coffee cups are not proposed to be included in the CRS, because they do not meet the proposed definition of a ‘beverage container’ (ie, they are not sealed in an airtight and watertight state at the point-of-sale). In response to the feedback received through public consultation on proposals to phase out certain plastics, a parallel work programme is underway by the Ministry to coordinate sector experts and inform a plan for single-use cups and coffee cups, including possible options for phasing out these cups by 2025. 

What is happening with bio-based or compostable bottles

Compostable bottles are not included in the proposed scheme because for the most part, these cannot be recycled, and can cause contamination issues in our waste stream. Detail about this would be developed if a scheme is progressed. The aim of the NZ CRS is to reduce beverage container litter and increase recycling, rather than capture biodegradable or compostable material, which is often a contaminant in the recycling stream.  

Recyclable bio-based HDPE or PET beverage containers are proposed to be included due to the potential these alternatives provide for emissions reduction, and given they are compatible with our conventional recycling systems.   

Read the Ministry’s position on where compostable products could play a role in a circular economy in Aotearoa New Zealand.

Why large containers (over 3 Litres) are exempt from the scheme

It is proposed that the size of eligible beverage containers would be less than or equal to 3 litres in volume, and that there would be no lower limit for beverages.   

Examples from scheme operators in other jurisdictions indicate that the small volume of containers larger than 3L can be challenging to collect through a scheme, particularly where reverse vending machines (RVMs) are the main method for return. Given the small volume of containers over three litres on the New Zealand market, it is proposed that they are not included.  However, volumes could be monitored, and the scheme adjusted if this changes.  

Technology currently being considered for a scheme

Main types of container return facilities

  • Retail sites that could use reverse vending machines (RVMs)
  • Over the counter (OTC) returns
  • Larger depots (manual or automated) that would target commercial volumes.

The specific technology solution would be determined at a future time if a scheme proceeds.  

About the main types of container return facilities

Reverse vending machines (RVM)

  • An automated vending machine accepts empty containers (up to 100 per minute in standard models).
  • The technology can accurately verify, count and sort containers by material type.
  • Machines are typically set up inside or outside retail locations and can be sized for low, medium and high-volume sites.

Over the counter

  • Small volumes of containers are received/redeemed by small businesses (eg, dairies).
  • Any manually counted containers are then shipped to a depot for electronic verification and aggregation.

Depot (manual or automated)

  • Eligible containers are brought to a depot and counted onsite either manually by staff or using automated counting, verification and sorting technology before a refund is given.
  • Depots are generally managed by interested stakeholders such as entrepreneurs, community groups, charities and waste operators.
  • Depots generally cater for large private and commercial-scale customers such as collections from charity drives, hotels, bars and restaurants.

Where the scheme would operate

The CRS is proposed to be a national scheme operating across the country in both urban and rural areas. 

Logistic solutions to move containers received and who pays

The recovery of CRS container from the network (RVMs, depots and OTCs) is the responsibility of the managing agency. Transportation is included in the scheme fees. With retail sites, there may also be opportunities to use reverse logistics to transport containers.

Legislation and the CRS

New bespoke legislation is proposed for a NZ CRS. If a scheme proceeds, the NZ CRS legislation is likely to include setting out the structure and function of a scheme’s governance (including the roles and responsibilities of the scheme’s managing agency) and operational requirements of the scheme (including forms of refunds, scope of containers, conditions of acceptance for containers (including labelling requirements), requirements for collection points, and roles and responsibilities for all scheme participants. 

How countries have managed potential increases in scavenging

In places with CRS in place, such as Berlin, a designated shelf is often provided around public rubbish bins. This enables people to donate their bottles and cans to others, so they may, without scavenging the bin, collect and return eligible containers to a CRS return point and receive the refund.  

Putting empties into your home kerbside bin

You could put empty beverage containers into your home recycling bins, but you would not receive a refund for these containers.   

Proposed management of the scheme

An industry-led scheme is proposed to ensure it is run efficiently and effectively. The container return scheme could be led by retailers, beverage producers, recyclers or any such combination of industry representatives.  

Scheme governance should be well-balanced among industry members from different sectors, particularly beverage producers and retailers.  

An industry-led scheme does not exclude community, NGO nor iwi/Māori representation from scheme governance. Any proposal to become the managing agency would need to be considered and approved by government. 

When a scheme would be implemented

If the Government decides to implement a NZ CRS, there is likely to be further consultation at the legislation/regulation development phase. Pending consultation outcomes and the legislative development process, we anticipate a CRS could be operational in New Zealand by 2025 at the earliest.