1
A Load of Rubbish?
Introducing a Deposit Return Scheme to the UK
Christopher Snowdon, Head of Lifestyle Economics, Institute of Economic Affairs
Summary
A UK-wide deposit return scheme (DRS) can be expected to increase recycling rates for beverage bottles and
cans from 70-75 per cent to 85-90 per cent, but at a disproportionate cost.
A DRS is expected to cost over £1 billion in its first year and £814 million per annum thereafter. The tangible
economic benefits are expected to be less than £100 million per year. In financial terms, a DRS would be
highly inefficient, largely because kerbside collection already recovers 72 per cent of these containers.
The government’s impact assessment is only able to claim a net economic gain by including intangible benefits
of £986 million per annum from a reduction in litter. This figure is highly questionable. The impact assessment
neglects to include the much larger costs of unpaid labour that will be incurred by households having to collect,
store and return empty containers. When the full costs and benefits are included in the analysis, there seems
to be no economic case for a deposit return scheme.
What is a Deposit Return Scheme?
Under a Deposit Return Scheme (DRS), consumers are charged a small deposit for every single-use
plastic/glass/metal drinks container they buy. The deposit is redeemed when the bottle or can is taken to a
reverse vending machine or manual collection point. The aim is to increase recycling/recovery rates and
reduce littering. The Department for Environment, Food and Rural Affairs has proposed a DRS with a deposit
of 10-20p as part of a ‘crack down on plastic pollution’ (DEFRA 2018). It will work in tandem with the existing
system of kerbside collection which covers 99 per cent of households.
DEFRA’s impact assessment predicts that the scheme will cost £204 million to set up, with annual running
costs of £814 million, i.e. a cost of £1,018 million in the first year. It predicts economic benefits worth £1,093
million in the first year. Over ten years, it expects the benefits of the scheme to exceed the costs by £2.1 billion.
The problem
Recent years have seen growing concern about single-use plastics, with the BBC’s Blue Planet II series
drawing attention to the amount of plastic pollution in the ocean and the danger it poses to sea life.
The EU's target for 2020 is to have 50 per cent of all waste from households recycled. In 2017, the UK achieved
45.7 per cent (DEFRA 2019). 13-14 billion plastic drinks bottles are used in Britain each year, of which around
nine billion are made of polyethylene terephthalate (PET) (Voluntary and Economics Incentives Working Group
2018: 12-13). Between 4.3 billion and 5.6 billion drinks are sold in glass bottles and between 8.1 billion and
9.6 billion drinks are sold in metal cans (ibid.)
In 2017, the recycling rate for drink containers made of PET was 74 per cent. Recycling rates for glass and
metal containers were both 70 per cent (Valpak 2019). DEFRA (2018b: 60) notes that these recycling rates
are ‘significantly lower than many other major developed economies’.
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DRS systems in other countries
Deposit Return Schemes in other countries have deposits ranging from 8p (Sweden) to 22p (Germany). Table
1 shows the recycling rate for PET, glass and aluminium beverage containers in fourteen countries which have
a DRS. Estimates vary, so more than one figure is shown for some countries. They usually exceed 80 per
cent. In Finland, Norway, Germany, Lithuania and the Netherlands, they exceed 90 per cent.
Table 1: Beverage container recovery rates
Date of
introduction
Drink
containers
covered
Total
recovery
rate
Glass
(FEVE)
Aluminium
(European
Aluminium)
British
Columbia
1970
PET, metal,
glass
84%*
82%§
89%†
92%*
87%‡
90%*
South
Australia
1977
PET, metal,
glass
77%§
79%*
84%*
New York
1983/2009
PET, metal,
glass
65%*
-
-
Sweden
1984
(metal)/1994
(PET)
PET, metal
85%§
88%*
N/A
85%‡
83%*
California
1987
PET, metal,
glass
81%*
74%*
95%*
Iceland
1989
PET, metal,
glass
90%*
86%*
94%‡
Finland
1996/2008
(PET)
2012 (glass)
PET, metal,
glass
93%*
94%†
89%*
99%‡
97%*
Norway
1999
PET, metal
96%*
N/A
96%‡
97%*
Israel
2001
PET, metal,
glass
77%*
77%*
-
Denmark
2002
PET, metal,
glass
89%*
85%†
89%*
90%‡
89%*
Germany
2003
PET, metal,
glass
97%*
86%†
99%‡
96%*
Estonia
2005
PET, metal,
glass
82%*
63%†
87%*
71%‡
87%*
Netherlands
2005
PET
95%*
N/A
N/A
Croatia
2006
PET, metal,
glass
(refillable)
“Up to 90%”*
50%†
52%‡
3
Date of
introduction
Drink
containers
covered
Total
recovery
rate
Glass
(FEVE)
Aluminium
(European
Aluminium)
Ontario
2007
PET, metal,
glass (alcohol
only)
89%*
95% beer
82% wine
& spirits*
82%*
Northern
Territory
(Australia)
2012
PET, metal,
glass
75%§
54%*
60%*
61%*
Lithuania
2016
PET, metal,
glass
93%§
-
-
UK
N/A
N/A
-
70%◊
70%◊
*CM Consulting and Reloop (2016)
European Container Glass Federation (FEVE) (2019)
European Aluminium (2018)
¶ Valpak (2019)
§ Government statistics: South Australia
https://www.epa.sa.gov.au/environmental_info/container_deposit#return; Northern Territory
http://www.territorystories.nt.gov.au/jspui/bitstream/10070/305177/1/2017_2018_CDS_annual_report.pdf;
British Columbia http://www.bottlebill.org/legislation/canada/britishcolumbia.htm; Lithuania
https://www.openaccessgovernment.org/recycling-lithuania-deposit-system-exceeds-all-expectations/45003/;
Sweden http://pantamera.nu/om-oss/returpack-in-english/about-returpack/
Note that the figures above are for beverage bottles only. For plastic bottles in general, recycling rates tend to
be lower. The charity RECOUP (2018: 4) says that 59 per cent of plastic bottles are recovered from
households, and the recycling company SUEZ (2018: 3) quotes a figure of 57 per cent. Both these figures
include containers such as shampoo and milk bottles which would not be affected by a DRS and should not
be compared with the figures shown above which are for beverage containers only.
This can cause confusion, such as when the BBC (2018) reports that ‘In Norway, 95% of all plastic bottles are
now recycled, compared with England at the moment where the rate is 57%’, or when the Guardian claims
that ‘Recycling rates for plastic bottles stand at 57%, compared with more than 90% in countries that operate
deposit return schemes (Lavelle and Zhou 2017). These are apples and oranges comparisons. The recycling
rate for plastic drink bottles is 74 per cent in the UK and 95 per cent in Norway - and Norway is exceptional.
Parts of the USA, Canada and Australia, which have had a DRS in place for many years, have recovery rates
that are similar to - or lower than - the UK.
It nevertheless seems likely that more bottles would be recovered with a DRS. According to a report for the
UK government by the Voluntary and Economics Incentives Working Group (2018: 33), the average return
rate in jurisdictions which have a deposit of $0.10 or less is 71 per cent and the average return rate in
jurisdictions where the deposit is more than $0.10 is 86.7 per cent. With a deposit of 10-20p being suggested,
the higher of these two averages may be the best guide. If the UK’s recovery rate rose from the current 72 per
cent to the DRS average of 86.7 per cent, the system would be responsible for collecting 15 per cent of total
beverage containers, a relative increase of 21 per cent.
1
1
The government makes a similar assumption in its impact assessment, predicting a recycling rate of 85 per
cent.
4
In this scenario, a DRS would recover an additional 1.1 billion extra PET bottles. Clearly, it would be better to
recover and recycle this additional waste rather than send it to landfill or incinerate it, but this relatively small
proportion should not be recovered at any cost. The question is whether the benefits of operating a deposit
return scheme alongside kerbside collection are worth the additional expenditure.
Costs: businesses
The German DRS cost around £600 million to set up in 2003 and has ongoing costs of £700 million a year
(BBC 2018b). The Voluntary and Economics Incentives Working Group (2019: 27) cites a range of estimates
between £400 million and £900 million for the initial set up of a DRS in the UK. The British Retail Consortium
says that each reverse vending machine costs between €15,000 and €80,000 and believes that setting up the
system in the UK would cost £900 million in total. The environmental consultancy Eunomia estimates that each
reverse vending machine costs £32,000 initially with running costs of £2,700 per annum. These costs can be
higher or lower depending on the machine’s complexity which, in turn, depends on the size and type of
materials it accepts. The Packaging Federation estimates that around 30,000 machines would be needed
nationwide.
The government’s impact assessment estimates that the total set up cost will be £1,093 million, with running
costs of £814 million per annum. It expects these costs to be met by producer fees and unclaimed deposits in
about equal measure. It does not anticipate taxpayers’ money being used.
The expense of setting up and operating the system is only the most obvious cost. For shopkeepers, the loss
of revenue from losing floor space is another concern. Reverse vending machines are expected to cost a
typical supermarket store around £62,000 worth of retail space (Environmental Audit Committee 2017: 30).
The Association of Convenience Stores (2017: 1-2) estimates that storing returned containers will cost its
sector £17.4 million per annum and that operating a manual return service will require 114 hours of extra work
per store per annum. As one shopkeeper says: ‘We are fighting for every inch of space. If someone comes in
with a black bag of plastic bottles, where are you going to keep this stuff?’ (ibid.: 12).
DEFRA (2019c: 38) has suggested that 'all retailers would be obligated to provide a return point unless they
fall below a potential de minimis which would exempt them from the obligation’. It intends to pay retailers a
handling fee but the experience of other countries which have a DRS suggest that this may not cover the costs
(Association of Convenience Stores 2017: 4).
On the other hand, some businesses could make a profit if enough deposits go unredeemed. It is estimated
that beverage producers in Germany have made €3 billion (£2.6 billion) in unclaimed deposits since the DRS
was introduced in 2003 (Oltermann 2018).
Costs: consumers
People who do not recycle their beverage containers will face an effective price rise under the DRS, but
consumers in general are likely to see prices rise somewhat as a result of businesses passing on the costs of
running the system.
A less obvious, but highly significant, cost is the unpaid work required of consumers to make the DRS function.
Under the existing system of kerbside collection, which collects plastic bottles from virtually all residences (see
Table 2), residents simply separate their recycling from their non-recyclable waste and place them in two
outdoor bins. Under a DRS, they would need to store all DRS-compliant cans and bottles in their home until
they are able to take them to a reverse vending machine.
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Table 2: Percentage of local authorities collecting each material 2017/18 (WRAP 2018)
Glass
Cans
Plastic bottles
England
89%
100%
99%
Wales
91%
100%
100%
Scotland
78%
100%
100%
Northern Ireland
100%
100%
100%
UK
88%
100%
99%
This requires space in the home to store the containers and varying degrees of hassle depending on where
the nearest machine is. For many shoppers, it will mean putting empties in the car and taking them back to the
supermarket from which they were bought, queueing for the machine, taking a voucher and cashing it
elsewhere in the store. For those who do not have a car or rely on home delivery, it will require an otherwise
unnecessary journey. The opportunity cost of even a few minutes extra labour per week adds up to a
considerable amount when multiplied by every household in the UK (see Discussion below). Most of this work
is already done more efficiently by kerbside collection and would be duplicated by a DRS.
Costs: local authorities
If the UK introduces a DRS it will be unusual in bringing it about when there is already comprehensive kerbside
collection/recycling in place. Studies from Australia suggest that a DRS would cannibalise 17-25 per cent of
the materials from kerbside collection (Lee et al. 2018: 4). This is a concern for local authorities who make
money from the sale of recyclable materials. The recycling company SUEZ (2018: 3) estimates that a DRS
would cost the average local authority between £113,000 and £192,000 a year. Nationwide, this amounts to
between £47 million and £80 million. Strictly speaking, this is not an economic cost as the wealth is merely
being transferred, but the government will need to find ways to compensate local authorities.
It has been argued that a DRS could save local authorities money by lowering the costs of waste management.
English councils spend £3.3 billion a year on rubbish collection and recycling (Environmental Audit Committee
2017: 23). SUEZ argues that a DRS would reduce the £683 million annual cost of litter collection and that the
system would be cost-neutral if littering costs fell by 7-12 per cent (SUEZ 2018: 3).
No relevant research on littering has been conducted in Europe but evidence from the USA, cited by Eunomia
(2017: 57-61), suggests that a DRS would cut plastic bottle littering by at least 80 per cent, equivalent to
600,000 bottles a day. This could be realistic but Eunomia’s suggestion that local councils could therefore save
money by reducing the number of street bins seems less plausible, not least because the total amount of litter
did not generally decline in US states after the introduction of a DRS.
DEFRA (2019b: 27) estimates that the cost of litter collection in the UK is £438 million per annum and that
there will be savings of £50 million per annum to councils from reduced litter collection costs, but it is far from
certain that there are enough marginal costs to cut in litter/rubbish collection given the large fixed costs.
Benefits: increased recovery/recycling rates
If a DRS achieves the same average recovery rates as seen in countries where the deposit is ten cents or
more, it would produce more materials to be sold for recycling. In recent years, the price of recovered clear
6
PET has averaged £176 per tonne, recovered glass has been worth around £15 per tonne, and recovered
aluminium cans have averaged £1,016 per tonne (WRAP 2019).
Based on the assumption that a DRS would increase recycling rates to 85 per cent, DEFRA (2019b: 25)
estimates that the extra recyclables would be worth £37 million per annum, with most of it coming from
aluminium cans (see Table 3). This amounts to less than five per cent of the cost of running the scheme.
Table 3: DEFRA’s projection of the value of the additional materials recovered under a DRS
Extra recoveries (tonnes)
Material revenue
PET
47,614
£8,285,870
Steel
6,952
£878,831
Aluminium
23,884
£24,512,402
Glass
275,390
£3,143,033
Total
353,840
£36,819,091
Benefits: Carbon dioxide emissions
According to the Voluntary and Economics Incentives Working Group (2018: 59), ‘preventing one tonne of
plastic from being used saves 3,100kg of CO2 equivalent compared to saving 1,623kg CO2 if one tonne of
plastic is recycled’. DEFRA (2019b: 26) values the reduction in greenhouse gas emissions at £12 million in the
first year, rising to £28 million per annum by 2032.
Benefits: waste gatherers
It is generally agreed that DRSs offer a way for children and the homeless to make a little money from gathering
discarded bottles (Barrin 2018). This, in turn, presumably leads to less litter. Whilst this is an economic benefit
to them, cheaper make-work schemes are surely available.
Benefits: littering and ocean pollution
When the plans for a DRS were announced, the government’s principal concern appeared to be ocean
pollution. Environment Secretary Michael Gove said that plastic is 'wreaking havoc on our marine environment
We have already banned harmful microbeads and cut plastic bag use and now we want to take action on
plastic bottles to help clean up our oceans (DEFRA 2018).
It is doubtful whether a DRS in the UK would make any measurable difference to this type of littering. Ten
rivers transport 88-95 per cent of all the plastic found in the oceans (Schmidt et al. 2017). Eight of them are in
Asia. The other two are in Africa. The amount of plastic debris in British waters is much lower than the global
average (Maes et al. 2018: 795) and the most common plastic items found in these waters are plastic bags,
sheets and fishing gear, not bottles (ibid.: 796). The UK government may have been inspired to act by The
7
Blue Planet II but there is little reason to believe that the marine pollution shown in that documentary - which
was mostly filmed in the Indian and Pacific Oceans - would be alleviated by a bottle deposit scheme in Britain.
Interestingly, ocean pollution is barely mentioned in DEFRA’s impact assessment and the government has
made no attempt to estimate what effect, if any, a DRS would have on this well-publicised problem. Instead,
the impact assessment focuses on littering in Britain and this is where the impact assessment finds the greatest
benefits. As mentioned above, DEFRA estimates that litter collection costs will fall by £50 million, but this is
small beer compared to its valuation of the psychological benefits of people seeing less litter.
Based on a 2011 study which found that people would be willing to pay an extra £47.40 in council tax to
achieve a one point reduction in litter, DEFRA estimates that a DRS would produce the equivalent of £986
million in intangible benefits. This valuation of the disamenity of litter’ represents 90 per cent of the total
economic benefit DEFRA claims for the policy. Without it, the economic case for a DRS disappears.
Discussion
DEFRA’s impact assessment acknowledges that the 'potential cost to consumers for the time required to return
drinks containers to [reverse vending machines] or manual take-back points’ is a ‘key non-monetised cost’ and
yet it makes no attempt to put a value on it. It is likely to be huge. I have been unable to find reliable estimates
of how much time is required of shoppers to make the system work but, for the purpose of illustration, if each
household in the UK spends just five minutes a week moving, storing and reclaiming the deposits from their
beverage containers, the economic cost would equate to £1,687 million per annum (based on the median
hourly income of £14.31).
This sum comfortably outstrips the less tangible benefit of £986 million for the ‘disamenity of litter’, and there
are two reasons to believe that the £986 million figure is an overestimate. Firstly, the study from which it is
derived is based on stated preferences, which are notoriously unreliable because respondents do not have
skin in the game. They can express a preference for paying higher council tax to support any cause of which
they approve but they do not have to put their hand in their pocket.
Secondly, DEFRA (2019b: 26) assumes that if the DRS leads to a 85 per cent return rate, there will be an 85
per cent reduction in drinks container litter. This is fallacious logic. Containers recovered through kerbside
collection are always going to be more likely to be recycled - and less likely to be littered - than containers
bought ‘on the go’. It is also bad maths. Even if the current rate of ‘on the go’ recycling was the same as the
overall rate (72 per cent), raising it to 85 per cent in no way implies that littering will drop by 85 per cent.
Moreover, if the public truly believed that it is worth spending £986 million to see the volume of litter reduced
by 17 per cent, as DEFRA’s reading of the survey implies, councils could raise taxes and greatly improve their
anti-litter work. Such a sum would more than double the amount spent on litter collection and would,
presumably, result in litter of all kinds being reduced by more than 17 per cent. Therefore, even if we take the
£986 million figure seriously, spending it on a DRS is not the most efficient way to use it if tackling litter is the
objective.
This is not to deny that people object to seeing litter, nor that their lives would be slightly improved if there were
less of it. Many of the costs of littering are intangible and emotional, but they are nonetheless real. But the
costs to consumers of having to cart their empty cans and bottles to a reverse vending machine are equally
real and arguably more tangible. They are certainly easier to quantify. By including an implausibly large figure
for emotional benefits to the public while ignoring the public’s unpaid labour costs, the impact assessment is
skewed towards finding a net benefit. DEFRA’s deposit return scheme is unquestionably loss-making in
financial terms, but it is almost certainly loss-making in broader economic terms too.
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Conclusion
The proposed bottle deposit scheme is an expensive way of achieving very little. It promises to produce
recyclable materials worth £37 million and reduce litter clean-up costs by £50 million, as well as producing
‘greenhouse gas emissions savings to society’ of £12 million. There are reasons to doubt the estimate for litter
clean-up, but even if all these figures are correct, it will produce less than £100 million of benefit for more than
£800 million of costs. The DRS can only be presented as producing a net gain if one accepts that a modest
reduction in littering will have the same effect on the nation’s happiness as a £986 million windfall, and if one
ignores the opportunity costs incurred by people being made to store their empties at home before taking them
to a collection point.
It is easy to imagine people who do a regular supermarket shop getting into the routine of stashing their empties
in a cupboard before loading them into the car, driving to the store and taking them to the machine. But the
vast majority of these containers are being recycled via kerbside collection already. The issue is with bottles
and cans bought ‘on the go’, for which recycling rates can be below ten per cent (DEFRA 2019c: 16). Fifteen
per cent of plastic drinks bottles and 30 per cent of canned drinks are used outside the home (Lee et al. 2018:
2). These are the materials that the government wants to collect, but a DRS is a very blunt tool for doing it.
At the very least, the government should exclude containers larger than 500ml from the scheme. These are
rarely used ‘on the go’ and are generally recovered through kerbside collection. It should also consider
excluding glass bottles which have a very low value in the recycling market and which, in contrast to plastics,
have generated little public concern. Glass bottles have the benefit of not being merely recyclable, but
reusable. Effective circular economies for glass bottles already exist in industries such as brewing and would
not benefit from a DRS. Exempting glass could also encourage manufacturers to switch from disposable plastic
to reusable glass and would lower the costs of the DRS since machines that take fewer (and smaller) materials
are cheaper to run. In Germany, the DRS led to fewer bottles being made from recyclable materials as
manufacturers sought to keep retail prices low (Oltermann 2018). According to Barrin (2018), ‘the number of
recyclable bottles on the German market has dropped from 80 per cent to 50 per cent since 2003’. This is an
unintended consequence that the UK government surely wishes to avoid.
Even under a DRS, it will often be inconvenient for consumers to return ‘on the go’ containers. Officials could
do more to make out-of-home recycling easier without resorting to an expensive and inefficient deposit system.
DEFRA (2019c: 16) notes that ‘only 49% of the 391 local authorities in the UK provide recycling “on-the-go”
collection units in public spaces’. There is clearly room for improvement here, and although containers
recovered from street bins are more likely to be contaminated with other waste (and therefore harder to
recycle), this could be addressed by using more three-way bins like the one shown in Figure 1.
There are undoubted benefits from recovering more recyclable materials and reducing litter, but the benefits
of a policy must outweigh its costs. The DRS, as currently proposed, does not seem to do this.
9
Figure 1: Jumbo 3-way recycling bin
2
2
Reproduced with permission from http://larkin-eng.com
10
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https://www.acs.org.uk/sites/default/files/lobbying/acs_submission_-_defra_deposit_return_scheme.pdf
Barrin, M. (2018) Bottled gold the unexpected side effects of recycling in Germany. Geographical, 29 June.
http://geographical.co.uk/people/development/item/2819-bottled-gold
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Schmidt, C., Krauth, T. and Wagner, S. (2017) Export of plastic debris by rivers into the sea. Environmental
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IEA Briefing Papers are designed to promote discussion of economic issues and the role of markets in solving
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