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ENVIRONMENT AND COMMUNICATIONS LEGISLATION COMMITTEE
13/04/2011
Product Stewardship Bill 2011

CHAIR —Thank you, Mr Angel, for coming to talk to us today. The committee has received your submission, submission 13. Do you wish to make any of amendments or alterations to your submission?

Mr Angel —No, but I have got a few extra points for you.

CHAIR —Would you like to make a brief opening statement before we go to questions?

Mr Angel —Yes, thanks. I will be brief because I understand you want to have a conversation. For us, the fundamental test of the legislation is: will it make a difference? Reflecting on some of the submissions and some of the requests about accrediting existing voluntary schemes or preferring voluntary schemes as the default of the legislation—which I will explain a bit more in a second—we think the Product Stewardship Bill 2011 has a particularly unfortunate slant in that area.

The bill also appears to offer the opportunity of voiding good state schemes, which may be mandatory or co-regulatory. This federal bill appears to utilise federal powers to extinguish good schemes. It does those three things—the accreditation of the existing schemes, the preference for voluntary schemes and the voiding of state schemes—without a process of full exploration of the alternatives and by use of the regulatory impact statement process, which, by definition of its methodologies and application, preferences voluntary schemes but puts co-regulatory and mandatory schemes under much more severe assessment. We would argue that regulatory impact statements to date under the Commonwealth-COAG situation are not good at assessing environmental regulation.

We have had a couple of examples of schemes that have been claimed to be good voluntary schemes or co-regulatory schemes—such as the Australian Packaging Covenant. I sit on the Australian Packaging Covenant Council. We have had deep and meaningful discussions about whether the Australian Packaging Covenant has made any difference to the recycling rate for packaging. We are clearly ambivalent about that. In my mind the fact is that if you had no Australian Packaging Covenant you would still have the same rate of packaging recycling because it is funded by kerbsides—that is, local councils and ratepayers—and because of the export demand. The APC does have some other uses such as improving packaging behaviour, materials and content of recycled material, which it is now embarking upon, but it cannot be claimed to be an excellent example of co-regulatory mechanisms.

In particular, the Australian Packaging Covenant has done very little on beverage containers. Under our current situation we only collect about 20 per cent of plastic, 38 per cent of glass containers and only 15 per cent of away-from-home beverage containers. You cannot just smear some critical issues under the so-called recycling and packaging gross figure in an effort to avoid one of our more favourite topics, container deposits.

There are other schemes, such as MobileMuster, a voluntary scheme. It, after many years, has only achieved about a five per cent recovery of mobile phones. It does claim that quite a lot are in storage in people’s wardrobes, drawers and office desks. However, the critical fact which this bill must also direct itself to is the provision of collection infrastructure. Even if all of the mobile phones that are being stored came out for recycling, MobileMuster does not have the infrastructure to take hold of those and recycle them.

So you have to ask whether a voluntary program has sufficient resources and organisational capacity to develop an infrastructure that gets this stuff to a higher level of collection and recycling. In fact, one of the things that will give us a much greater collection of mobile phones is the e-waste scheme, which is much-heralded and will hopefully be in concert with this bill. That is a co-regulatory scheme and it has come about because of many years of failed voluntary programs. I will give credit to the computer and TV industry for coming on board after a lot of discussions, but the fact is that while we waited for a co-regulatory or mandatory scheme hundreds of millions of electronic items went to landfill.

There are two final points I wish to make. The bill has insufficient external and independent advice to the minister; it is all very bureaucratically controlled inside government. In order to get a proper assessment of what the best type of scheme is—whether a voluntary scheme has gone as far as it can or whether it has too many low targets and insufficient resources to put infrastructure for collection in place—you need much better external independent advice. We are a proposing a special committee to not only advise the minister but also involve the community in looking at what type of scheme is best. No particular offence to the bureaucracy, but they do tend to resist co-regulatory and mandatory schemes because of the administrative load and because of the pressure brought about by the regulatory impact statement process, which I have referred to as not particularly good at environmental regulation.

Finally, I want to say that I am not aware of any product stewardship scheme in the co-regulatory or mandatory field which has forced an industry to go bankrupt or lose significant amounts of market space. In fact, the eventual outcome is to improve that sector’s social licence to operate. I am aware of the absence of a product stewardship scheme which has sent recycling companies bankrupt and out of business. That was in the area of tires. We have tried for many years to get a tire recycling scheme for Australia. We failed. The regulatory impact statement terminated efforts at some sort of regulatory process. As a consequence, a lot of tires are either landfill—because it is cheaper than recycling—or are being exported, often for illegal recovery of materials in China via Vietnam. Several Australian tire recycling companies have gone out of business. So, frankly, without product stewardship schemes in Australia you not only harm existing recycling operations which are struggling but also prevent the growth of a domestic recycling industry.

CHAIR —Thanks. You heard the evidence from AgStewardship and CropLife before you. They say: ‘Don’t give us more problems with duplication in regulation. We’re doing it pretty well. We are world-class.’ Do you have any view on that evidence?

Mr Angel —I think you would call that scheme a moderately successful voluntary scheme. It has taken 10 years to get to a 50 per cent recovery rate. I do not really understand the duplication argument because if it comes under this legislation they would simply replace—not duplicate—the reporting and auditing processes that they currently have. Obviously, as part of bringing the AgVet scheme under the legislation, you would reduce the reporting and auditing process to one process. I think they are trying to retain their independence and their identity. Perhaps they are somewhat concerned about bureaucratic or government oversight, but I think what gives the public confidence is someone external saying: ‘Your figures are right. Your auditing is okay.’ We had this as a quite serious problem with the Packaging Covenant. You cannot operate if the public thinks you are a sham.

CHAIR —You also indicated that you think there is a need for external advice. Is there a model for the external advice that you could point as to?

Mr Angel —Certainly the New South Wales product stewardship legislation did have an independent committee made up of experts, NGOs and industry representatives. It was involved in establishing a list of priority products and also offering advice each year and a public annual report on the progress towards product stewardship for various products.

CHAIR —That worked successfully?

Mr Angel —We thought it was successful. The public reports were very illuminating and put out in a transparent manner what industry was up to and the stage at which the government negotiations had been reached. I have to say, the bureaucrats were not particularly in love with it.

Senator FISHER —Are you clear about the products to which the bill applies?

Mr Angel —If you are asking me whether, in a theoretical scenario, the bill applies to everything, I suppose you could argue that, if you wanted, to go to some sort of theoretical extreme, but the fact is that, in assessing which products or materials that this bill applies to, there are quite a few filters beyond the fact that you would not overwhelm the administrative systems of government by having 100 things at once. The points of need for the bill to apply—whether it is application of criteria or some form of enlightened regulatory impact assessment, and in fact what it industry says it is willing to do, because they become part of the negotiation—is sufficient. I do not expect an avalanche of products to be subject to product stewardship.

Senator FISHER —I am not quibbling with the intent of the bill. The intent behind the bill is a good thing and something to which we must work. You said, ‘Theoretically, potentially everything’ and ‘There are filters.’ What are the filters in the bill, to your mind, and how would they apply in practice?

Mr Angel —Initially, the filters are the criteria, two of which need to be satisfied. They are not minimalist types of considerations. Having been through some years of seeking product stewardship schemes for some products—not all products—the questions are asked, the interrogation of the need is quite significant, and you have to pass that test—

Senator FISHER —What part of the bill says you have to interrogate as to the need?

Mr Angel —Quite clearly, the criteria will be applied by the minister, and that is one of the reasons we are suggesting greater transparency in his processes, both in public exhibition of his reasons and assessment of options, plus the advice from an expert and stakeholder committee. He would have to satisfy those before doing something that he would think is politically acceptable.

Senator FISHER —Section 5 of the bill sets out the product stewardship criteria to which you have referred. You said that you only need to satisfy two of the five. You also said that the need needs to be demonstrated. If it were argued that the two criteria  were satisfied in respect of a particular product—for example, (a) and (f); so the products are in a national market and taking action to reduce impacts will offer business opportunities that would contribute to the economy—how would that demonstrate need in respect of a particular product?

Mr Angel —The first point is that I do not think this particular section of the act makes the minister do anything. He has discretion and that discretion is bounded by good advice, administrative capacities et cetera. How those two things—

Senator FISHER —What gives him discretion?

CHAIR —Senator Fisher, please let the witnesses answer your questions.

Mr Angel —How do those things demonstrate need? Well you do not get to the question of need until you have justified making a move. You must meet those two criteria, such as there is a national market, because clearly this legislation is not intended to make only schemes for particular states. That is the first test, so you will not get multiple schemes in different states. These are practicality tests and, if you cannot pass those practicality tests, why ask about the issue of need as well? We have maybe three or four product stewardship schemes in Australia. Governments have often passed the buck between state and federal because we have had state legislation and the federal COAG process says, ‘We will do it instead.’ It has been incredibly hard to get good product stewardship.

Senator FISHER —I am not asking about that. Single is obviously going to be better than multiplicity and duplicity and inconsistency. You have said that obviously you need to justify making a move, but isn’t that a circular argument? You are trying to say the need will be demonstrated by justification that a move needs to be made. Where in the bill is that stated? That is a question I have already asked you and, with respect, I think you have answered it in a circular way. You may care to comment on that, but let us look at the issue in a different way. You have said that, yes, theoretically the bill applies to every product. Tell me some examples of some everyday products to which the bill would not be able to apply.

CHAIR —Just before you go that, Mr Angel, can I indicate that you can take questions on notice and we can also ask the department later today about these aspects. You do not have to be an expert on the specific minutiae of the bill.

Senator FISHER —No, but you have been talking about product stewardship products. You have talked about four of them. You are an expert and you have been working on this for a long time, so have a go.

Mr Angel —I do not know what you are asking me because I think it is such a theoretical question that it will not arise.

Senator FISHER —Let us hope so, but what in the bill means that it will not arise? I am trying to get my head around it.

Mr Angel —What in this bill makes it apply to everything? On paper everything; in practice potentially nothing, as I have outlined.

Senator FISHER —Which would be dumb.

Mr Angel —Yes. So it will be somewhere in the middle, or somewhere closer to not very many. Knowing how government processes work, how government regulatory assessments work, how industry negotiates and how we have had to work on the various committees, in reality it does not apply to everything. Frankly, I think it is the sort of fiction that puts the bill in a completely wrong perspective and light. What legislation makes everything happen unless it says that everything is going to come under it? It is a discretionary exercise and discretion in ministerial and government terms is very bounded.

Senator FISHER —Ultimately, are you saying it will be up to the minister of the day whether there is a need to mandate product stewardship in respect of any particular product?

Mr Angel —Yes, but we are also saying we need greater transparency in that process, which brings its own constraints on the minister.

Senator FISHER —Where is the transparency in ministerial discretion?

Mr Angel —There is not any in this bill. That is one of the issues we have.

Senator LUDLAM —I am not quite sure where my colleague is heading, but it seems to me as if this bill—

Senator FISHER —I wish I knew. I wish the bill could tell me. It might help.

Mr Angel —Can I just try to answer that question?

Senator LUDLAM —Go ahead, Mr Angel.

Mr Angel —It is true that one of the things this bill lacks is a priority setting process, which could clearly bound the minister’s timetable for doing things. That was the reason the New South Wales legislation had an expert committee assisting him and the bureaucracy in applying quite detailed criteria about the need. So I agree to the extent that the discretion invites unfortunate scenarios, but that discretion should be bounded in more transparent and external advice.

Senator LUDLAM —It seems to me that the discretion could just as easily mean that nothing ever gets put into this thing. The bill is an empty container. It does not actually talk about any particular product streams.

Senator FISHER —Hence the problem.

Senator LUDLAM —Yes, hence the problem. The minister could choose to do nothing with this or, as you seem to be hinting, they could go and, heaven forbid, attack every waste stream in the country and make everything recyclable and so on. My question I suppose relates more to how we have seen various product stewardship proposals functioning in the past. You raised the issue of televisions, e-waste and so on. Are we just setting up a repeat where, for any individual product stream once we have prioritised it, we take a decade or so assessing whether to bother or not? I cannot see what difference passing this bill will actually make in reality.

Mr Angel —I think in the main the bill tries to validate the status quo. It does that through its preference for voluntary schemes without a level playing field on which you assess those schemes against other types of approaches. Certainly the claim by some sectors to have their schemes automatically accredited simply repeats the lack of transparency that they already have or lack of independent and external assessment.

The regulatory impact statement process, as I said, is pretty poor at looking at environmental policy. It is okay when you can quantify things down to the dollar with other sorts of instruments, such as tax, but, when you are talking about often difficult to quantify public benefits from protecting the environment, the RIS process has been particularly poor. As a consequence it ends up overstating the costs and understating the benefits. We suggested in our earlier submission that the minister have the right to vary or create a more enlightened regulatory impact statement process so that these things are given proper accord.

Senator LUDLAM —If we were going to institute some kind of threshold test for whether a given voluntary scheme is working or not, what kind of criteria would you want to set?

Mr Angel —The first thing you would look at is the coverage, the number of firms in the sector. The free rider issue has been of great concern to most sectors because those that are in the scheme bear some cost and those out of the scheme do not bear any cost and may get a competitive edge in the marketplace. That is why co-regulatory schemes are at least the minimally acceptable approach, because you can use federal powers to bring free riders into the system. That is what the Australian Packaging Covenant does.

The second thing you would look at is the level of resources being applied to the collection infrastructure. The third thing would be the targets which are embodied in the program. For example, with MobileMuster you have two, three, four and five per cent targets over 10 years. You really have to question whether it is worth anyone’s effort. In the case of the e-waste scheme the various parties, including us, agreed to an 80 per cent recycling target by 2020. That seems pretty reasonable. The fourth thing is the external and independent auditing process of the results. Not surprisingly, people often suspect industry sponsored figures for their level of achievement and the scheme itself loses credibility.

Senator LUDLAM —You have addressed in one of your proposals for the object of the act that the act should contribute to reducing the amount of virgin resources used in products by preferencing recyclate. We could potentially get that into the objects but I am not sure what teeth it would have. What impact will this bill have on the front end? We contemplate this bill mostly in terms of waste—what falls out the end of the pipe—but how do we impact on the way that products are made in the first place to either be easily recyclable themselves or be made of recycled material? Can you see this bill, if it becomes law, having any impact? If not, how would you improve it?

Mr Angel —I do not see any overt capacity of the bill to do that. The reason you want to encourage the increased recyclate content of a particular product—if that is technically possible—is that you often encourage the domestic recycling industry. You create a market for the recyclate and that leads to very significant economic benefits. The fact is that for every tonne of waste that goes to landfill there is one job, but if you take it right through the whole processing and manufacturing system and include that recyclate in a product you create nine jobs. That is the first reason to have the recycled content of the product as one of the key considerations.

Secondly, as we have are now trying to do with the Australian Packaging Covenant, the vast majority of the focus is now on those products and the recycled content of the packaging, plus reducing the amount of packaging and its environmental impact. Over several years, the APC is going to be spending a lot of time with its various signatories to get them to assess new product packaging and to look at existing product packaging. Clearly, as a consequence, you reduce the amount of waste going to landfill because more of the packaging is from recycled content and you also waste far less virgin resources.

Senator LUDLAM —This is really a portfolio for patient people, isn’t it? Thanks for your time.

CHAIR —There are two issues that you have raised, Mr Angel: the capacity of this bill to be all-encompassing or do nothing. I think those are the two polemics that have been raised. If you had an activist minister advised by an external advisory committee would that be a positive approach if this committee looked at that? Not that we can tell the minister to be activist—but the external committee.

Mr Angel —I think it would be positive because I think the bureaucracy—and this is based on real experience—tends to have quite a conservative view of what can be done in terms of both their perceived future administrative workload and their usually junior position in the regulatory impact statement processes. Until very recently, they have found it very difficult to confront the gatekeepers of the RIS process.

When you have an external committee the people really do interrogate issues. You do not get extreme or highly activist results coming out of expert joint-stakeholder-type committees, but they are usually a bit more adventurous than the bureaucracy—or the minister’s office, perhaps. I think that is for the good.

CHAIR —Thank you very much for your evidence. If you have something you can put it on notice.

Proceedings suspended from 10.39 am to 10.52 am