Understanding the Belgian "Digital deposit return scheme" proposal

Understanding the Belgian “Digital Deposit” Proposal Introduction Over the past decades, Belgium has struggled with the issue of litter, despite investing millions in clean-up actions, awareness campaigns, and law enforcement (cameras, fines). The Flemish Government has set itself the goal of reducing litter by 20% by 2022 compared to 2015. In 2021, there were still 18,171 tonnes of litter present in Flanders, which was more than 1,831 tonnes away from this target. Therefore, Flemish Minister of Environment Zuhal Demir announced on Friday 23 December that a deposit return scheme will start in 2025 on all plastic bottles and cans. She gave the industry the opportunity to start pilot projects in order to evaluate "Digital Deposit" by the end of 2023. If the evaluation of the pilot projects is not positive, in terms of both feasibility and desirability, a classic deposit scheme will be introduced. The Walloon Region is also exploring a deposit scheme, through a study whose preliminary conclusions are expected at the beginning of July 2023. Deposit Return Schemes (DRSs), with a return-to-retail (RTR-DRS) design, are widely spread in Northern Europe (figure 1). They have proven their effectiveness in reducing litter and increasing the return rate of high-quality materials. The large number of examples in neighbouring countries provides sufficient benchmarks to actually introduce an RTR-DRS by 2025. On the other hand, the Belgian “Digital Deposit” proposal, in which two 2D codes are scanned before packaging is thrown into the blue bag or into “public blue bins”, has yet to prove whether it can be introduced by 2025, or indeed at all. This analysis presents the concepts of return-to-retail DRS (RTR-DRS) and the Digital Deposit proposal. It also assesses the pros, cons, and operationality of the Digital Deposit in the Belgian context. Note that most of the information on the concrete set-up of the system for Belgium comes from the “Deposit Blueprint”, carried out by the firm PwC at the request of the Belgian industry. This analysis will be updated when more information on Digital Deposit becomes available. PwC Study 1) What are ‘Return-to-Retail’ DRS and ‘Digital DRS’? In this section, we present the RTR-DRS and the Belgian Digital DRS proposal and compare their respective costs, implementation timeline, influence on litter, return flow of high-quality material, and potential reuse. Description of the systems In general, a classic deposit return scheme is a system in which consumers pay a deposit upon purchasing each beverage container. Consumers can get this deposit back in full by returning their empty packaging to a collection point, after which the packaging can be recycled or reused. In Europe, these collection points are mainly retail outlets (supermarkets, kiosks, petrol stations…), hence the name return-to-retail (RTR) DRS. 16 European countries have introduced an RTR-DRS system or voted for its introduction. In 10 other countries (Figure 1), a discussion is underway regarding the introduction of a DRS system. Belgium also has a similar system for certain reusable glass bottles. The Digital DRS (aka ‘QR-code system’ or ‘Scanning system’) is an alternative proposal to RTR-DRS. Just as with RTR-DRS, a deposit would be paid upon purchase by the consumer. But with a Digital DRS, the beverage packaging would feature a unique, serialised 2D code (Data matrix or QR code) that is activated upon sale [1] (i.e. receives the deposit value). Several proposals for digital DRS have been examined (see ResourceFutures, 2022). We analyse here the scenario proposed in the PwC study (Figure 2). While with an RTR-DRS, consumers get their deposit back by returning the packaging to a return point, under the D-DRS proposal, consumers would have to scan the 2D code of each package with their smartphone or a home scanner and discard the packaging "correctly" into the designated bin which also contains a 2D code that must also be scanned, as shown in the proposed scenario (figure 2). Another difference is that consumers would discard their packaging in the existing "blue bag" (door-to-door PMD collection) or in new public "blue" rubbish bins. This would add 136,000 new bins alongside existing public rubbish bins. Note that, according to the scenario of the PwC study (figure 2), the blue bag and these new bins would also carry a scannable 2D code. In the PwC study, the chosen scenario also mentions "smart" bins, but these would only be used sporadically: 138 of these bins are planned for the whole of Belgium, including 137 in Flanders and only one in Wallonia, compa

Introduction

Over the past decades, Belgium has struggled with the issue of litter, despite investing millions in clean-up actions, awareness campaigns, and law enforcement (cameras, fines). The Flemish Government has set itself the goal of reducing litter by 20% by 2022 compared to 2015. In 2021, there were still 18,171 tonnes of litter present in Flanders, which was more than 1,831 tonnes away from this target. Therefore, Flemish Minister of Environment Zuhal Demir announced on Friday 23 December that a deposit return scheme will start in 2025 on all plastic bottles and cans. She gave the industry the opportunity to start pilot projects in order to evaluate "Digital Deposit" by the end of 2023. If the evaluation of the pilot projects is not positive, in terms of both feasibility and desirability, a classic deposit scheme will be introduced. The Walloon Region is also exploring a deposit scheme, through a study whose preliminary conclusions are expected at the beginning of July 2023.

Deposit Return Schemes (DRSs), with a return-to-retail (RTR-DRS) design, are widely spread in Northern Europe (figure 1). They have proven their effectiveness in reducing litter and increasing the return rate of high-quality materials. The large number of examples in neighbouring countries provides sufficient benchmarks to actually introduce an RTR-DRS by 2025.

On the other hand, the Belgian “Digital Deposit” proposal, in which two 2D codes are scanned before packaging is thrown into the blue bag or into “public blue bins”, has yet to prove whether it can be introduced by 2025, or indeed at all. This analysis presents the concepts of return-to-retail DRS (RTR-DRS) and the Digital Deposit proposal. It also assesses the pros, cons, and operationality of the Digital Deposit in the Belgian context.

Note that most of the information on the concrete set-up of the system for Belgium comes from the “Deposit Blueprint”, carried out by the firm PwC at the request of the Belgian industry. This analysis will be updated when more information on Digital Deposit becomes available.

1) What are ‘Return-to-Retail’ DRS and ‘Digital DRS’?

In this section, we present the RTR-DRS and the Belgian Digital DRS proposal and compare their respective costs, implementation timeline, influence on litter, return flow of high-quality material, and potential reuse.

Description of the systems

In general, a classic deposit return scheme is a system in which consumers pay a deposit upon purchasing each beverage container. Consumers can get this deposit back in full by returning their empty packaging to a collection point, after which the packaging can be recycled or reused. In Europe, these collection points are mainly retail outlets (supermarkets, kiosks, petrol stations…), hence the name return-to-retail (RTR) DRS.

16 European countries have introduced an RTR-DRS system or voted for its introduction. In 10 other countries (Figure 1), a discussion is underway regarding the introduction of a DRS system. Belgium also has a similar system for certain reusable glass bottles.

The Digital DRS (aka ‘QR-code system’ or ‘Scanning system’) is an alternative proposal to RTR-DRS. Just as with RTR-DRS, a deposit would be paid upon purchase by the consumer. But with a Digital DRS, the beverage packaging would feature a unique, serialised 2D code (Data matrix or QR code) that is activated upon sale[1] (i.e. receives the deposit value). Several proposals for digital DRS have been examined (see ResourceFutures, 2022). We analyse here the scenario proposed in the PwC study (Figure 2).

While with an RTR-DRS, consumers get their deposit back by returning the packaging to a return point, under the D-DRS proposal, consumers would have to scan the 2D code of each package with their smartphone or a home scanner and discard the packaging "correctly" into the designated bin which also contains a 2D code that must also be scanned, as shown in the proposed scenario (figure 2).

Another difference is that consumers would discard their packaging in the existing "blue bag" (door-to-door PMD collection) or in new public "blue" rubbish bins. This would add 136,000 new bins alongside existing public rubbish bins. Note that, according to the scenario of the PwC study (figure 2), the blue bag and these new bins would also carry a scannable 2D code.

In the PwC study, the chosen scenario also mentions "smart" bins, but these would only be used sporadically: 138 of these bins are planned for the whole of Belgium, including 137 in Flanders and only one in Wallonia, compared to more than 136,000 traditional 'public rubbish bins' in a blue colour. With the use of the blue bag and simple "public blue bins", it is confirmed that the deposit containers would therefore be collected together with non-deposit packaging (and non-food products), whereas with RTR-DRS they are collected separately. PwC itself mentions the "potential contamination of waste streams" with the public blue bins (slide 27).

These differences would lead to different results in terms of cost, timeline for introduction, and effectiveness, which we explain in more detail below.

Expenses and savings

Costs: First and foremost, it is important to look at the expenses of both systems, as the cost-benefit ratio of the system is essential to evaluate its success.

Several studies have concluded that RTR-DRS can be set up in a cost-effective way [2] for businesses, and at no extra cost to public actors, given the 100% producer responsibility. In a 2015 study by OVAM, the total annual costs of a deposit on cans and bottles were estimated at €77 million, compared to income streams of €82 million. Here, therefore, estimated revenues exceed costs. The cost and effect study by CE Delft (2017), requested by the Dutch government, suggests even higher potential benefits than costs with an RTR-DRS. Looking at systems that have been operational for some time, we see that the system functions well and is widely accepted by various stakeholders. Retailers are compensated through handling fees, and the system can also generate footfall to stores from consumers coming to redeem their deposits. Reloop provides a clear overview of how all deposit return schemes in the world are practically set up, providing ample information on how the systems work in practice, regarding operational and financial flows.

For Digital DRS, there is as yet insufficient information [3] to confirm that this system can also be set up in an equally cost-effective way. Based on the PwC study, the Belgian packaging industry claims that its introduction would be cheaper. First of all, however, it should be noted that the PwC study provides very little information on the calculations for both the QR code system and the traditional DRS, making it impossible to check them thoroughly, so the conclusions should not be accepted without further proof. What we can check is whether certain costs and revenues have been omitted or whether errors have been made in the calculations, as far as the study is transparent about this. Even with such a limited analysis, it is clear that several elements in the financial layer (slides 56-90) of the study seem questionable. Among others (figure 3, slide 66):

Traflux costs Pillar public blue bins (slide: The investment costs in the chosen scenario do not correspond to PwC's market research (figure 4, slide 28). The investment and placement costs per bin ranged from €1250 to €1450, but PwC used a reference cost of €750 per bin. When the investment costs are corrected (using the lowest cost of €1,250), this leads to an underestimation of €68,133,500. When this underestimation is taken into account, the investment costs for the digital DRS amount to €186,619,990.69 (compared to an estimate in the PwC study of €118,486,490.69), which is higher than the investment costs of the RTR-DRS (€154,864,500), see slide 68.

Cost of home scanners. In the DDRS scenario evaluated by PwC, the cost of home scanners would be €15,260,712.69, corresponding to 554,935 scanners (€27.5/scanner). The number of home scanners needed for all Belgian households would be 5,024,851 (138,183,402.5/27.5 slide 66). In the evaluated scenario, therefore, only 11% of households have a home scanner. This seems an underestimation given the possible refusal of users to use smartphone apps, digital illiteracy (if home scanners would solve this problem at all), persons with disabilities, home scanners for families with children (so they can also participate in the system…). It is possible that some Belgian households would want a home scanner even if they have the application on their phone. Furthermore, it is not clear that home scanners can bridge the digital divide. 11% coverage of home scanners therefore seems to be another underestimation of the cost.

The operational costs in the PwC study are not detailed enough to allow further comments beyond asking a few questions. These include (slide 70): The transfer of pre-sorting costs to the post-sorting bins in 2027 which seems to have been forgotten: in 2027, the annual pre-sorting costs (calculated for the "classic public bins") simply disappear (more than €337,000) while in that same year, the cost of post-sorting (defined on Slide 63 as) "Costs for sorting PMD fractions, based on EPR litter simulation. Applied to volumes collected via public bins (transition) and 'public blue bins'." increases by only about €53,000. How can this be explained?

What are the details of the maintenance/IT costs?

Are the operational costs for cleaning public spaces missing?

This must be included in the calculation since producers are now responsible for these costs.

Timeline

Another deciding factor in choosing a deposit return scheme is the speed with which it can be introduced. RTR-DRS requires an implementation period of 12 to 18 months [4] after the political decision. An RTR-DRS in Belgium could therefore be ready by 2025, provided that the plan for RTR-DRS is worked out in 2023. It can then start according to the schedule announced by Flemish Environment Minister Zuhal Demir.

There is no indication of the time required for the implementation of a digital DRS, as it has not yet been introduced anywhere. Because of the necessary research, the lack of insight into how the system should be set up alongside other stakeholders, and the technological developments that still need to be made and implemented, it is unclear whether the entire digital DRS will be market-ready at any given point.

The Belgian packaging industry has until the end of 2023 to prove not only the technical feasibility of this system, but also whether the system can actually achieve the set goals and is truly accessible to everyone. Pilot projects are seen as a crucial component to demonstrate potential implementation, but so far, previous pilot projects launched by the packaging industry in Belgium to reduce litter have been ineffective and took years to be tested, which has already significantly delayed the decision-making process. This is the case, for example, with the Prime de Retour in Wallonia and the ongoing Click reward system. The city of Antwerp recently even stopped using the Click, given the high costs and the lack of a reduction in litter.

Regarding pilot projects with digital DRS, there have only been small-scale pilot projects (in Dublin and Conwy [5]) involving a few hundred households and lasting less than a month. They were by no means representative of how a system would function on the scale of an entire country and in the long term. Pilot projects typically take a lot of time, and given all the elements that still need to be proven regarding the feasibility, accessibility, and effectiveness of digital DRS, pilot projects at this stage can realistically only provide part of the answer to the question of whether digital DRS will be ready for introduction in 2025. All research to date highlights the low market readiness of digital DRS (see ResourceFutures, 2022) and the long time that would be required to adapt production (PwC study, slide 12).

And it cannot be that the industry is trying to further delay the introduction of a system in Belgium. As Minister Zuhal Demir stated on Wednesday 18 January before the plenary session of the Flemish Parliament, "it comes down to the fact that deposit return will be introduced in 2025" and that "assuming the pilots do not yield results, then it will be the classic system". The pilots will be evaluated by OVAM, together with a sounding board group that includes social stakeholders such as representatives of consumer organisations, municipalities, and environmental associations.

Effectiveness of the system

It is not enough to verify whether digital DRS can be introduced within a certain timeframe. It is also essential to ensure that the objectives for which deposit return schemes are designed are actually achieved. That is to say: reduction of litter, increase in the collection of high-quality material, and transition to reuse systems. The PwC study does not discuss the effectiveness of the system on those elements, but simply assumes that the effect is comparable to a classic DRS, even though the setup of a classic DRS is completely different. Furthermore, the PwC study pays no attention to whether digital DRS even offers the possibility of reuse, even though the intention of the future 'Packaging and Packaging Waste Regulation' is to encourage reuse for beverage packaging.

Effect on litter

A study by CE Delft [6], requested by the Dutch government, looked at international data on the effects of DRS and estimated the potential reduction in litter for small plastic bottles and cans between 70 and 90%.

Just one year after the expansion of the Dutch system to include small plastic bottles, Zwerfinator Dirk Groot recorded 76% fewer small plastic bottles per kilometre (figure 5 [7]). Note that there are still old plastic bottles without a deposit in the litter, illegally imported plastic bottles without a deposit, and plastic bottles of fruit juices or dairy that are exempt from the deposit obligation.

Meanwhile, no study or monitoring has demonstrated the effect of digital DRS on litter. While we can expect its effect to be better than having no system at all, it cannot be assumed that it would be the same as with an RTR-DRS, as was done in the PwC study (see Table 1). The impact of the digital DRS would largely depend on consumer participation and the accessibility of the system to the consumer [8], and there are many questions and uncertainties about this (see next section).

Effect on the collection rate of high-quality material

Countries with RTR-DRS systems have the best collection rates for deposit packaging (figure 6).

Most classic DRS systems in Europe already achieve the target of 90% separate collection for single-use plastic bottles by 2029 under the European SUP Directive. The Netherlands (large plastic bottles) and Germany even achieve a separate collection rate of more than 95%. There is currently no verified information on the percentage of separate collection of single-use plastic bottles in Belgium, but it is generally accepted that the target can only be achieved with a deposit return scheme.