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

Mr Welford —No material amendments, Chair.

CHAIR —Do you wish to make a brief opening statement before we go to questions?

Mr Welford —I will, if you like. Firstly, I thank the committee for the opportunity to appear before you and especially your assistance in providing a teleconference contact for this appearance. We appreciate the opportunity to contribute to the committee’s deliberations on this bill. The Product Stewardship Bill is an important step forward, in our perspective, in managing materials and products across the economy more environmentally sensitively and also potentially more economically efficiently.

CHAIR —Those sounds indicate that Senator Ludlam is coming in on Skype, so bear with us for a moment.

Senator LUDLAM —Sorry, I am a couple of minutes late.

CHAIR —Mr Welford has just started his opening statement. You have not missed much.

Mr Welford —The bill is only framework legislation at this stage, so there is a lot of devil in the detail in terms of how regulations for particular products will pan out. But I think the submission that the Australian Council of Recycling have given your committee gives you some insight into what we believe are the highlight issues for the committee to give further thought to. The general framework of the legislation in providing for voluntary co-regulatory and mandatory product stewardship schemes we believe is an appropriate framework. However, as the submission indicates, there are some elements of the terminology of the bill that might perhaps be refined, in particular provisions that have yet to give priority to the recovery and recycling of these products as distinct from their simple take-back.

The bill provides for companies that are liable parties to participate in the product stewardship scheme to take back or be part of collective arrangements for the recovery of the products. But the bill itself does not prioritise the requirement that the products themselves or the materials in those products should be recycled within Australia. I think this is something that the committee should give some further thought to.

I will leave the rest open to questions based on the submission I have made and perhaps elaborate further in the context of questions the committee may have. Thank you.

CHAIR —Thanks, Mr Welford. I might start. You say in your submission that the bottom line is to improve the efficiency of PS schemes by requiring certain products to be made in substantial part by recyclable materials. That is a statement of the obvious, I think. Then on B you say we get investment and employment in our domestic recycling industry by preventing the export of products which have not at least undergone some processing here in Australia to convert the end of life product into usable economic secondary material in the true sense. That sounds like a familiar argument and might be an argument I have pursued over the years about value-adding. Why do you think your argument for value-adding in this area would succeed when it has not succeeded in many other areas of economic engagement in this country?

Mr Welford —I am familiar with some of your arguments of the past in this area, Senator Cameron, and I certainly share the sentiment. The distinction I try to draw in the submission in the context that we are talking about here is a distinction between a commodity that obviously it is difficult to oppose the export of on one hand and a waste which we believe should not be exported on the other. To give you an example, the export of the processed materials, for example processed plastic, process cardboard or paper, as a processed ingredient in manufacturing in other countries is something which I would accept it would be very difficult to persuade governments to change policy on. But we are not talking about the crumbed rubber or shredded plastic or indeed shredded metals that have been processed here; we are talking about whole products which in many cases include contaminants which when exported as a whole are simply disposed of in seriously environmentally damaging ways in other countries. I think that distinction is something that the Australian government and the parliament should take cognisance of in looking at the issues around recycling and resource recovery in Australia. To export end of life products as a whole without at least requiring some sorting and processing of their components or their materials here runs the risk that we are simply using other countries as a dumping ground for our waste when a much more sustainable and economically efficient way of dealing with those products and materials is to process them so that, firstly, they have a maximum opportunity of being reused in Australia, but then if there is a surplus that surplus can be legitimately exported.

CHAIR —Does that go for uranium waste?

Mr Welford —Well, I am cautious not to buy into too many diverse arguments, but our view would be that wastes generated within Australia should be largely managed within Australia and processed here. That would be part of our responsibility.

Apart from paragraph (a) in my last page, which you drew attention to, in the context of products I believe the issue is that, if we are to have a sustainable economy, the materials from those products should be recovered from the economy at the end of the product’s life—that is, the life of its economic use—and then those materials should be recovered and reintegrated back into productive use in other forms. Of course, we do this with many materials already—we do it with steel. Our companies, OneSteel and our other steel companies, are able to recover that steel and remanufacture it into new products; similarly with aluminium.

The easiest materials to recycle in Australia are the ones with high embodied energy, because, like the metals, they have value. But as we move into other products, such as this legislation is designed to achieve, the rational approach is that we recover those products in Australia and we process them here rather than send them offshore as a whole product.

Senator BIRMINGHAM —Thank you for joining us today, Mr Welford. I want to go through a few of the points you make in your submission. You highlight a list of target goods or products that you think should be the focus of product stewardship initiatives. Do you think the legislation proposal from the government provides enough clarity around where the focus of activity should go?

Mr Welford —I think there is more that could be done, though perhaps the legislation is not necessarily the place for it. There is a reason that I have drawn attention to that list of products—and there are others, incidentally. I have been informed since circulating the submission among our members that there are mattress companies, believe it or not, who are recovering, reprocessing and remanufacturing mattresses from those materials. There are companies, of course, that already recover mobile phones through the Australian Mobile Telecommunications Association. So there are a range of products which are ideal candidates for product stewardship-type schemes. There is another company called Close the Loop, which is a member of the Australian Council of Recyclers, that recovers printer cartridges. Rather than those whole products being exported to Asia for processing, they are able to be processed here.

One of the issues in relation to this is that for a number of these products we have underutilised reprocessing capacity in Australia and, as I point out in the case of tyres, that capacity for recovery and recycling within Australia is now so underutilised because of this leakage of whole tyres out of Australia that we are losing the capacity of companies and they are folding.

If we step back a little and look at the bigger picture and ask the question of what constitutes a sustainable goods economy within Australia we have to say that wherever possible we should maximise the recovery of end-of-life products in Australia and process those materials where there is a demand for them within Australia. Companies like OneSteel and Alcoa in the steel and aluminium manufacturing industries cannot get enough of those recovered products to meet their needs as it is, so anything we can do to improve the recovery of products that allow remanufacturing in Australia is a good thing and enhances the sustainability of the economy overall—in contrast to simply dumping those products overseas, where in most cases they are not managed sustainably or indeed safely.

Senator BIRMINGHAM —How would you propose to ensure government went about a selection process for product stewardship arrangements that ensured a focus on the types of situations you have just described?

Mr Welford —I think there would need to be a process whereby we look at the low hanging fruit and where the opportunities are. Currently there are a number of businesses in a number of sectors who already have what you might call voluntary arrangements. They are not voluntary arrangements in the sense that they have any formal accreditation or approval by government under this legislation, which does not yet exist, but there are a number of companies already making an effort to recover things like mobile phones, batteries and the like.

The question is: if we want to make our economy sustainable, we need to ensure that those companies are able to have an adequate supply of end of life products. I think the logic of an assessment about which products to prioritise and which of the scheme types would be appropriate—between voluntary or co-regulatory—depends on what are most easily able to be picked up currently. Consultation with industry would readily identify which areas are most easily able to be converted into an accredited scheme. But as I mentioned in relation to voluntary schemes, we need to enable those operators who already function with some kind of take-back scheme to be accredited with a minimum of transaction costs.

Senator BIRMINGHAM —I will turn quickly to a couple of specific issues you raise in your submission. You have highlighted concerns over the objectives, the use of the phrase ‘throughout their lives’ and perhaps not an appropriate focus on end of life definitions and management of products. You also go on to highlight some concern about the way the word ‘waste’ is used. Can you explain to us why those are particular concerns that we should either be mindful of or address in fixing the legislation?

Mr Welford —I appreciate the question. It is an issue that arises in the context of how product stewardship schemes are seen in the community and how the purposes of these schemes are communicated to the brand owners—that is, the product manufacturers. I have gone back and looked at the definitions. The definition of the ‘life of a product’ does in fact cover its end of life management as waste, as it is described in the bill. However, I think it is important, if the act can do so, that it is drafted so as to highlight that the primary purpose of product stewardship legislation really is on end of life and not just throughout the life of a product.

A standard dictionary reading of the bill referring to ‘throughout their lives’ would lead one to think that the only responsibility that this bill imposes is while this product is being used by its end user or consumer. The real value of product stewardship arrangements is that the manufacturer takes responsibility for that product beyond the time when each of us as consumers might be using such a product. That is precisely what is intended with the first tranche of products—namely, computers and TVs—that will come under this legislation. I think it would be preferable if the legislation was drafted in a way to emphasise the importance of that end of life management.

The other issue relating to waste is simply to overcome a perception in the community that all we are handling here is a waste product. Our view about what constitutes a waste product is that it should be, by definition, a product or material that has no economic value or further potential use. None of the products that you would put into a product stewardship scheme ought to be characterised in that way. We put them into a product stewardship scheme precisely because we believe that either the product components or the materials that constitute that product do have further uses if we recover the product and process those components or materials. Accordingly, I would encourage, where possible, that we avoid reference to these products at the end of their life as being ‘waste’ because they should not be regarded as waste until we have exhausted the potential for their materials recovery and recycling.

The other challenge that comes from labelling things as waste—and this is a problem that is experienced with environmental legislation at state level around Australia—is that when remanufacturers take these materials and use recycled materials in manufacturing new products it tends to cast, if you like, a negative perception about the quality of the products that are manufactured out of these materials if we refer to those materials as having been simply waste, because waste in most people’s mind refers to all the combination of putrid rubbish that goes into a landfill. So, wherever possible, as a matter of terminology and as a matter of language, our council encourages us to refer to these things as by-products, end-of-life products, secondary materials or simply materials that can be recovered and reused. When we recover steel and that steel is remanufactured into sheet metal and then remanufactured either in Australia or elsewhere into cars no-one sells the car and says to people, ‘Please drive your waste carefully.’ We regard these products, many of which are made up of up to 70 or 80 per cent recovered materials as perfectly high quality products. If we at the outset in our legislation refer to these recovered product as waste then that tends to weigh on the public perception of those materials for the rest of their economic life.

Senator BIRMINGHAM —Mr Welford, we will have to keep moving along. I will ask one more question and then other colleagues will jump in. You also highlight some concerns about the criteria stipulated in the bill. You have particularly highlighted a concern about the operation of section 5 and used an example that my colleague Senator Fisher highlighted earlier today, and that is whether in fact anything could potentially meet subparagraphs (a) and (f) alone and whether that would be a meaningful program to endorse. Do you think if we took your recommendation of requiring paragraph (c) as a mandatory aspect that would still provide satisfactory flexibility to the scheme while certainty that any project that was undertaken by government would be of value?

Mr Welford —I think you could include paragraph (c) as a necessary as well as a sufficient condition for the minister making a decision to apply product stewardship to a particular product. I am aware that in some of the other submissions there has been some debate about the general wording of paragraph (c) and whether it sets the bar too low. As you see from my submission, I recommend that you leave paragraph (c) flexible in the way that its current terms contemplate.

I think what the legislative draftsperson was trying to achieve in this section was as much flexibility as possible for the minister to assess which products would be appropriate for inclusion in some form of product stewardship scheme. On balance, we would support retaining as much flexibility as possible. The only reason I draw attention to paragraph (c) is that clearly that paragraph reflects the primary function of a product stewardship scheme—namely, the recovery and recycling of products at the end of their life. So, if any of those paragraphs were to be regarded as mandatory rather than discretionary, that might be an appropriate one.

CHAIR —I will go to Senator Fisher for one question and then I will come to you, Senator Ludlum.

Senator FISHER —Mr Welford, coming off the back of your answers, most latterly to Senator Birmingham, if you look at the criteria in clause 5 (a) to (f) of the bill, can you think of any product that mums and dads buy—from, for example, the supermarket shelf—that would clearly not be covered by any of those criteria?

Mr Welford —No, not off the top of my head. I think the criteria that have been outlined pretty much capture all the potential products that one might come across that would be appropriate for a product stewardship type arrangement. As I say, I think the section as a whole is very broad and is intended to be broad so as to allow maximum flexibility to the minister who makes the decision.

Senator FISHER —Then are you saying that any product at all is appropriate for a product stewardship program?

Mr Welford —No, not at all.

Senator FISHER —Then, Mr Welford, I ask my question again: can you think of any product—for example, one on a supermarket shelf—that it would not be able to be argued falls within the coverage of any of (a) to (f)? You have said no, and then I think you have gone on to say, ‘But these are products that are appropriate for product stewardship.’ Is every product in the world appropriate for a product stewardship program? And, if not, how does (a) to (f) let out those that are not?

Mr Welford —I think that, in its current form, (a) to (f) do not let out those that are not.

Senator FISHER —Okay. Thank you.

Mr Welford —And that is why I have suggested that to narrow the scope to some extent would require at least one of the paragraphs being a precondition for inclusion. To me, the obvious paragraph is paragraph (c). That is, you would pick products where there is real value in recovering those products and recycling them. The government has already identified that computers and TVs are such products, and I think that is a rational decision. They would similarly make other choices for inclusion, on a very selective basis I would imagine.

Senator FISHER —Let us hope so. But the bill does not say that. Thank you, Mr Welford.

Senator LUDLAM —Thank you for your evidence, Mr Welford. I will just follow on from where my colleagues have been. I do not share the horror of my colleagues at the idea that anything could eventually find itself needing to be recycled. But I think every single witness who has come—

Senator FISHER —Let us not go, ‘She’ll be right, mate,’ Senator Ludlam.

Senator LUDLAM —Heaven forbid we should improve recycling rates right across the country!

Senator FISHER —That would be good!

CHAIR —Senator Ludlam, we do not have a lot of time, so do not be diverted unnecessarily.

Senator LUDLAM —Okay. I will take your advice, Chair. Everybody who has come has mentioned that they want some kind of prioritisation. I think I heard you go a bit further, in promoting the idea that, across various product streams, we should prioritise which ones we want to go after, and maybe the government would help us by identifying which of the three tiers should apply. Is that reflecting your views correctly?

Mr Welford —Yes, I think that is generally an accurate characterisation of what I have said. For any particular product, one of the three regime types or scheme types would be appropriate. For a number of products, it may well be that the voluntary arrangements—that is, the arrangements that the industry itself sets up—simply need to be endorsed under this legislation to be continued. The one advantage that this legislation provides is the capacity to ensure that those schemes have some accountability and, if you like, some integrity.

The real test of the level of government intervention comes in respect of coregulatory or mandatory schemes, and these might be schemes where the previous senator would have more concerns. My expectation, however, is that government will necessarily take very small steps in this process. No-one would expect government to rush in and declare a whole range of products as being subject to product stewardship—if for no other reason than the infrastructure and the systems for that to occur simply cannot be established easily or overnight. It only really works if you have discrete products where you know who the primary brand owners are.

Senator LUDLAM —Okay. That is helpful. I think that everybody agrees that something upfront that identifies priorities and where the government thinks they fit in the frame of things would be helpful. Let us come then to the more regulated end of the spectrum, because we have spent most of today talking about how voluntary schemes do or do not work. What is your view on the process that we go through at the moment, which is proposed to continue here, where we subject a given product stream to a regulatory impact statement process that can last, in the case of e-waste, up to seven or eight years? How well do you think that process has served us to date, and would you propose any improvements?

Mr Welford —Whenever you are going to have a coregulatory or mandatory scheme, it will necessarily involve new regulation. Where new regulation is involved, I think most parties accept that the regulatory impact statement process is one that we are all bound by. But it does have its strengths and weaknesses. One of its strengths is that it does bring some rigour to assessments about which products should be in and whether the justification for including them exists. The downside, as you point out, Senator Ludlam, is that these processes sometimes take much longer than they should, involve the relevant parties in much more expense than can be justified and, in some cases, rely on financial assessments that do not fully internalise the economic costs of failing to recover these materials and recycle them.

Senator LUDLAM —I think on that last one you have nailed it. These processes do not sometimes do that; they do that by definition, as far as I can tell. You have some quite strong language in your submission around tyres, saying ‘We did a regulatory impact statement, we monetised up all the benefits of recycling and the formula spat out, “Don’t bother; let’s keep dumping this garbage illegally on communities in South-East Asia”, so that is what we are now doing.’ To me, it is a disastrous failure, as I do not want to subject any more product streams there if it can be avoided, that in this instance we weighed up the economic benefits of processing in Australia and decided not to bother. I wonder whether you have any concerns about subjecting other product streams—for example, whether we are going to wind up going down that track with batteries or other kinds of intractable waste.

Mr Welford —I think there is a real risk in the way in which the current RIS process operates. We do risk that problem arising again. The difficulty I see with the RIS is that it looks at the product in isolation. By that I mean that when the regulatory impact assessment was done on tyres it looked at what the financial costs of recovering tyres might be—and, of course, there is debate amongst the tyre recycling industry as to whether those assessments of cost were accurate or not. Leaving that aside, it looked at a system for recovering tyres in isolation. Similarly, other regulatory impact assessments that looked at things like container deposits looked at the individual collection systems in isolation. In the real world, if we set up a recycling industry in Australia where there are collectors of recyclable products and materials around Australia serving product stewardship schemes and serving materials that are already collected because they have an economic driver to be collected, the economics of that whole system will change dramatically compared to simply looking at individual products in isolation. For example, if a collector were to set up, whether it be a non-profit organisation like some in South Australia that currently collect containers or a business that set up to collect materials, they would not just collect tyres. They would collect tyres, they would collect metals and they might collect computers on behalf of the product stewardship scheme. Then those economies of scale would be captured in a way that the RIS does not assess.

Senator LUDLAM —That is really helpful. Thank you very much.

CHAIR —You have raised an interesting point about the definition of ‘waste’. The definition section of the bill states:

waste, in relation to a product, means waste associated with the product after it is disposed of.

I have had a look at what is happening in Europe and their definition of ‘waste’ is:

Any substance or object the holder discards, intends to discard or is required to discard is WASTE under the Waste Framework Directive.

Where do you get your definition of ‘waste’? Is your definition of ‘waste’ used by any government anywhere?

Mr Welford —I must confess that the way in which I have characterised ‘waste’ is not a traditional way in which the word is used. I can explain the reason for that. It has a long history. The history is associated with 19th and 20th century engineering where everything at the end of its life was regarded as waste—that is, non-usable. Our entire history in the so-called waste management industry has been one of disposal of end of life products to landfill primarily but, as we move in this century to a more enlightened view about what is a sustainable society and a sustainable economy, we need to realise that these things are not waste, they are only waste if we do not use them. The fact is that we can use them and we should recover them and recycling technology does enable us to recover them. As these technologies improve, it will become more economically efficient to recover them than simply throwing them away. It is time to turn that language around and stop referring to end of life products as waste, in the way that has been traditional.

CHAIR —Again the European Union go on to say:

Once a substance or object has become waste, it will remain waste until it has been fully recovered and no longer poses a potential threat to the environment or to human health.

From this point onwards, the waste ceases to be waste and there is no longer any reason for it to be subject to the controls and other measures required by the Directive.

Mr Welford —Let me explain. They use that definition of ‘waste’ as a regulatory device to maintain control over the product or substance throughout the end of life management. It is simply, as I say, a historical use of that term to maintain legislative control. New South Wales legislation, for example, does a similar thing.

CHAIR —But in terms of the definition, this is a definition that has been adopted only since December 2010. They go quite clearly to the point that it is waste until you have recovered and you are basically saying that it does not become waste until you have recovered. You do the complete opposite.

Mr Welford —That is right. I am proposing that we do not ascribe the terminology of ‘waste’ to any product or material until recovery options have been exhausted.

CHAIR —That is interesting. It is an interesting submission. Thank you very much.

Mr Welford —Thank you.

[2.39 pm]