Circular Economy Policy: Navigating Its Strengths And Limitations
Circular economy policy is a critical lever for systemic change, but are policies like Extended Producer Responsibility (EPR), landfill bans, taxes, and deposit schemes truly the silver bullet we need? Join Christine Yeager as she dissects the complexities of these tools, uncovering their potential, pitfalls, and the delicate balance between environmental goals, business realities, and social equity. Discover how the right policy design can catalyze innovation and market development, and explore the global trends shaping a more sustainable future.
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Circular Economy Policy: Navigating Its Strengths And Limitations
In this show, we've talked a lot about Extended Producer Responsibility because it's a reality. It's here. It's happening. It's unfolding in the United States and globally. I want to take a step back and put a critical lens on policy. What are the policies out there available that are driving a circular economy? What are the good things about them? What are the pitfalls? What are the challenges associated with them?
We're going to examine the strengths and limitations that these policies have, like Extended Producer Responsibility, taxes, bans, deposit return schemes, and how these influence the delicate balance between environmental, social, and economic priorities. Sometimes, policy seems to offer straightforward solutions. They set a rule. They have some type of disincentive or incentive. The change happens.
More often, these tools involve trade-offs between short-term costs and long-term benefits, between environmental ambitions and economic realities, and between the needs of different stakeholders. In this episode, we’re going to unpack some of this, and we’ll look at how leading countries and companies are navigating this complex terrain and what lessons we can draw for building a truly circular system.
Per ush, we're going to start with some vocabulary. Circular economy is a system where materials are kept in use for as long as possible through reuse, repair, refurbishment, recycling, minimizing waste, and regenerating natural systems where possible. Triple bottom line is a business framework that expands success metrics beyond profit to include social and environmental performance. Externalities are the hidden costs or benefits of a business decision that aren't reflected in market prices, like carbon emissions or landfill waste.
Let's start with what policy tools are out there. There's Extended Producer Responsibility, which we have a whole episode on if you want to go deep. This shifts the waste management costs away from municipalities and local governments onto producers or the brands that make and sell this packaging, those with the purchasing power to decide what their product is sold in.
This also exists for mattresses and things like this, but what we're talking about here is mostly paper and packaging EPR. This can lead to innovative product development and market creation for these recycled materials. Implementation varies widely, and enforcement is inconsistent. Without proper oversight, EPR can simply shift costs downstream, passing them to consumers or small businesses without reducing overall waste.
There's also deposit return schemes. There are about ten deposit return scheme states. Some are Maine, Oregon, California, New York, and Hawaii. You buy a can or a bottle. You pay $0.10 or $0.5 per can or bottle, depending on the state. You have the option to return that can or bottle at the end of your use of it, and then you get $0.10 back for each can or bottle you return.
Deposits are also used in the space of reuse as well, in that you are paying a deposit to use the item for a period of time, and you return it, and then you get your deposit back. The Christmas markets in Germany do this. The legislation here requires that this fee be charged to you at the point of sale, and then you, the consumer, are in charge of getting that returned deposit back when you return your material. This is proven to be pretty effective for certain types of products like beverage containers.
Oregon did an overhaul of its deposit returns scheme legislation and system. They've seen incredible returns due to these changes that they've made. In fact, 1 of them was changing the price from $0.5 to $0.10. $0.5 is not enough for a consumer to go after is what they found, and that $0.10 was a more effective price. This creates a direct financial incentive for consumers to return the items. Therefore, it yields these higher collection rates.
It's limited in scope. If you don't structure it properly, there is an opportunity for both fraud and a disincentive to get more returned deposits. What I mean by that is in some states, it has been a line item on their budget for so long, this line item of unredeemed deposits, that that money is not required to be put back into recycling or into getting more product or more bottles and cans returned to them. It then becomes a new line item that they can use for something else.
In states like New York, the recycling rate has capped out and hasn't changed a lot. It’s 40% or so. That’s because there’s not an incentive to change and to decrease the unredeemed deposits and increase the redeemed deposits. In states like New York, the recycling rate has stalled, in general. For aluminum cans, it is at 70%, which is high. For plastic bottles or PET bottles, it's at 55% compared to Oregon, which is seeing rates in the 70% and 80%.
Deposit return schemes can be great. Some people would say that coupling a deposit return scheme with an EPR is one of the most effective ways to get the best recycling return rates and the recycling rates up, but there are trade-offs for all of these things. It needs to be run in a way that there's an incentive for those unredeemed deposits to continue to go down.
Circular Economy Policy: A ban without a plan, and insufficient oversight, can lead to illegal dumping or shifting waste to less sustainable routes.
There's also policy around taxes and landfill levies. These aim to internalize environmental costs, making disposal more expensive. It’s making the landfill tipping fee higher. It's a pay-as-you-throw type of idea. You may not know what that is. Pay-as-you-throw is another legislative tool, and this exists in Decatur, where I used to live in Georgia. You buy your trash bags, but you don't pay for recycling. You're paying for every bag that you throw away.
There are other systems where they weigh your trash, and then you don't have to pay for your recycling. It incentivizes you financially to put more material into your recycling bin and less material that goes into the landfill. This is similar to that in that it would be like a landfill levy where you're paying for how much goes to the landfill. This can incentivize waste reduction and recycling investment. This success depends on appropriate pricing and political support. If it's set too low, then they can be ineffective. If it's too high, then there's this potential economic backlash.
There are also landfill bans and restrictions, which I'm learning a lot more about as I'm volunteering on the compost council here in Colorado. This is to restrict what can go into the landfill, or ban things that are not allowed to go into the landfill. This prohibits disposal of certain waste streams to push for recycling, reuse, or proper hazardous waste management.
When enforced effectively, they can be powerful signals, but without adequate infrastructure and with not enough oversight, they can lead to illegal dumping or shifting waste to less sustainable routes like incineration. There's eco-modulation within EPR. This is an add-on to EPR where you incentivize the companies that are doing above and beyond their peers.
An example is if you have maybe more recycled content or your carbon footprint is lower, or you're using an easier-to-recycle package than your peers are using, so you're trying to be industry-leading in this space, then you can receive a fee reduction. It does get capped at a certain point. You can't completely eliminate your EPR fees.
There's been some mixed success here because, as it's rolling out in the United States, there's a lot of confusion about what it even is and how to achieve it. In Oregon, it requires an LCA or a Life Cycle Analysis plus an audit of that Life Cycle Analysis. That can be cost-prohibitive compared to the cap on the amount of fee reduction you can see. It does encourage better product design. There's this incentive happening that could help companies be incentivized to do more, but we'll see how it plays out.
Coupling a deposit return scheme with EPR is one of the most effective ways to raise recycling and return rates.
At the end of the day, there are a lot of trade-offs with these policies. Environmental advocates favor stricter regulations, bans, and high taxes to prioritize waste prevention, but many businesses are looking for something a bit more flexible. Maybe market-based incentives like eco-modulation or being able to still have freedom to do what's right for your business without being crippled by these high taxes or fees.
The challenge is designing policies that are both effective, fair, and adaptable. How do we navigate the trade-offs? A couple of recommendations. There's naming the tension, inviting the right voices to the table, being clear about your vision, being transparent, and then building in the reflection. Naming the tension is, what are the real trade-offs? What are the costs versus access?
What is the short-term gain versus long-term gain? Are we prioritizing the right environmental income outcomes and the right social equity or economic growth? Being clear about where the tensions are allows for this opportunity to address them when you're pushing for particular legislation or pushing against a particular legislation. It allows the conversation to be specific.
Invite the right voices from various folks throughout the supply chain to end users to understand the impact at every level, ensuring stakeholder input informs policymaking. For example, you can try to figure out what has worked and what hasn't worked when other people have implemented policies. That can inform anything in the future that somebody might be pushing for.
It also allows for industry or companies to get specific about how they want to participate or where they want to push what they want to support. In general, a lot of companies have a what-they-are-against policy lens, but it's about what you are for and how you push for the things that can achieve both these environmental outcomes that you might be looking for in an industry, and protect the growth of your business.
That brings us to the next one, which is to define your vision. What is it that you need to be going after? What is it ultimately that you are trying to achieve? Is it that you're optimizing waste reduction, trying to drive more social equity, or trying to reduce carbon emissions? If it's all three, what are your clear goals? How do those goals align with your business?
Circular Economy Policy: To ensure your efforts have a material impact, focus on what's truly driving your carbon footprint.
I've said it here before that you want to make sure that anything you're trying to do has a material impact. Therefore, you need to look at what's driving your carbon footprint, for example. You need to look at the biggest levers or the biggest aspects of your business. You need to look at the things that are in your control, and then define what success looks like and how policy participates or not.
There are a lot of companies out there with recycled material commitments. They want to put more recycled material into their packaging. If you're going to make that type of commitment, then you're going to have to get behind some type of policy because one company cannot fix the United States’ recycling challenges. Unless you happen to be a very small company in a small community and you own and operate your MRF, then you can increase the material that's coming through and available for you to buy, but that's highly unlikely.
Next, be transparent. Share the journey. What's working? What's hard? Where are adjustments that are needed? This transparency builds trust and momentum on both sides, whether you're the one pushing for the policy or the company trying to comply. For example, countries adopting EPR often openly discuss enforcement challenges and infrastructure gaps, and that sets realistic expectations for the market.
That leads us to the next one, which is to build in reflection. Use retrospectives learned from your experience and adjust the policies accordingly. Try and build trust with the consumer and the legislators through this transparency and honesty about the evolution of this work. You can create trust with consumers and communities.
What does this look like on a global scale? What's the global landscape? What are the emerging trends? There is global momentum. Countries like those in Europe are enacting comprehensive EPR laws covering diverse products. Many nations are implementing landfill taxes, deposit return schemes, and bans. There's a lot around this concept of batteries, because batteries can cause fires. There are a lot of different policies happening across the globe to accelerate waste diversion.
Denmark, for example, has had waste reduction and zero waste commitment for a long time because they're running out of space. It’s the same thing in Japan. There are all these physical barriers for certain countries that require a look or a mirror held up to their waste management policy. We, in the United States, have plenty of space, so we keep filling landfills. At a global scale, there is a lot of momentum around policies focused on reducing waste to landfill.
Sharing stakeholder input informs policymaking.
There are technological advances. There's digital tracking. There's something called digimark where you can't even see it on your label, but certain readers can read it. You can track your product beyond this point of sale. There are also lifecycle assessments and circularity metrics that support enforcement and accountability. These tools help companies and regulators measure progress and identify gaps.
There are challenges. Policy differences across regions can hinder global supply chains. Enforcement gaps remain. It's hard to find who all the producers are. For example, there are traceability challenges which makes the enforcement difficult. Economic viability for recycling infrastructure is also a challenge, particularly for complex materials like textiles or multilayer plastics. It's still uncertain if there's ever going to be a responsible end market for flexible plastics that continues to be used.
Here in Colorado, there's somebody who's turning it into a roadbase, which is great, but that's a one-time use. It's not circular. It's a second use. How do you create a longer-term circular economy for some of these more challenging materials? Policies are vital, but they're insufficient alone. Infrastructure markets and enforcement must evolve in tandem with the policy, and even well-designed policies, such as risk, limited impact, or unintended consequences.
How do we move forward? We need to recognize these limitations, and we need to think about them from a systemic lens. Recognizing the limitations can look like implementing in a slower way. Some of these EPR legislations that have passed have a stair-step approach to the fees being implemented. For example, in Maryland, in the first year the fees are due, they cover 50% of the cost instead of 100% of the cost in year one. In year two, it's 75% of the cost. In year three, it's 300%. That allows a little more time for the ramp-up from a fee perspective. That means the implementation might be slowed, but then it also gives the pro time to figure out exactly what needs to get done in the right order and prioritize.
Banning without a plan is not great. If there's no infrastructure to support the banned material, then where does it go? It gets illegally dumped. There are compost or organic material bands in California, but there's not enough infrastructure to support processing all of the organic material. It has to get trucked far away. There are a lot of infrastructure challenges that are slowing the implementation. Therefore, you're fining all these people, but there's nowhere to take the material, potentially.
In Texas, the Texas legislature at the state level passed a bill saying that you can't build a compost facility in a county that doesn't have a composting ordinance. In the city of Austin, they were trying to expand infrastructure to support the material that they have because they have a composting ordinance. They were trying to build a composting facility in a different county, and they're not allowed to because of this new legislation. There's only so much land space in Austin, so you have this conflict between the ordinance and the requirement to compost, and not having a place to manage the compost.
The other challenge that happens is that you have to get people to use the compost or use the material. You have to create the responsible end market, and then you have to create the market for it. You need people to buy this material. Taxes without market incentives may have minimal impact. If you don't have any clear enforcement or incentives tied to something, then it's never going to get off the ground. If you've taxed something and then there's no option for the market to correct and start to change the behavior, then that will limit your impact.
Circular Economy Policy: Policies are vital, but insufficient alone. Infrastructure, markets, and enforcement must act in tandem with policy.
There’s the systemic approach. The other way to move forward here is to look beyond the limitations, but start to think about things from a systemic standpoint. Combine regulation with technological innovation, market development, and social engagement. Design policies that are adaptable, transparent, and aligned with broader sustainability goals. Embrace transparency about trade-offs and challenges, fostering trust and continuous improvement.
To summarize everything, we want decisions, not checklists. We want to lead by example. What I mean by decisions, not checklists, is to build a circular economy, consider the complex trade-offs, and bake that into the decisions that you're making. Don't check off, “We've got a ban. Now we're going to go forward.” It's how you build the plan before the ban, if you will.
Policies like EPR, taxes, bans, and deposit schemes are essential tools, but they're not the whole story. They're not everything that needs to get done. You've got to think about how and the implementation aspect of this. This concept of having adaptability in the legislation for it to evolve with the infrastructure and the implementation can be powerful.
Leading by example are companies like Cotopaxi, Patagonia, and Ikea. They demonstrate that progress doesn't require perfection, just transparency, perseverance, and a willingness to adapt. These companies share their journey publicly. Why embrace change through policy? We want to embrace the fact that policy is a tool in the toolkit to drive sustainable change, especially for the circular economy, but it's not the only tool in the toolkit.
If you embrace that perspective, then you can start to unpack how we make this a reality beyond pushing for policy changes and how we make this a reality through direct designing for circularity, leveraging the consumer interest in this space as a value proposition, and bringing people and customers in potentially to help support the policy or help get ahead of this policy avenue. If the industry is making the change without the policy, then the policy becomes less relevant. When we make trade-offs visible and deliberate, we lay the foundation for a more resilient, equitable, and sustainable future.
Thank you for tuning in to the show. Join us next time as we explore more ways to harness systemic change for a better tomorrow. In our next episode, we have a guest. We will be bringing on somebody from A1 Organics, so I can talk about my favorite circularity example, which is composting. We'll talk more about this idea that you need to think beyond the policy and think about the end market, and how you drive home the point of the value of what you're trying to do from a circular economy standpoint, leveraging that carrot of the value as a way to grow what needs to grow in order to have more waste diverted from landfill.