WDA's half-baked fee formula has come back
to haunt CSR

by Jay Arthur

Notwithstanding Quebec's decision to adopt Ontario's 50-cent  solution, it is a half-baked measure and it is coming back to haunt us all.
And it's not even really half-baked. The "responsibility" being taken by brand owners under Ontario's Waste Diversion Act (now there's a euphemism if ever I heard one) is not only partial, it is actually partially partial.
And this is why the good folks at Corporations Supporting Recycling have less hair every time you see them. They have been tearing it out trying to keep everyone happy. And they really don't have a lot in the Act to work with.
The Bill 90/WDA formula is the problem. With brand owners paying only for what is recovered by the recycling system, as opposed to what is generated, it has nothing to do with taking responsibility and everything to do with avoiding it.
Many people knew this at the time the bill was proposed, and they took the time to tell the legislative committee--all to no avail.
Not only does the WDA formula completely ignore all the products and packaging which end up in the waste stream, it also stipulates that only half the cost of what is recovered in the blue box will be paid by the producer/consumer. So, given a formula that encourages producers to package their goods in materials that have low recovery rates, the good folks at CSR, now constituted as Stewardship Ontario, were tasked with finding a way to offset that anomaly.
And thus this rather bizarre "three-factor" material fee formula was born. Developed by Stewardship Ontario staff, the formula balances recovery rate, actual cost and an equalization factor to determine the fee a brand owner should pay for using a certain material.
The intent is noble enough, recognizing as it does that there is indeed a built-in bias toward making packaging decisions that favour the least recovered materials. The idea of the formula is to reward, not penalize, those materials with higher recovery rates.

Unfortunately, the good folks are further hampered by the need to relate the fee to the actual cost of recovery, in order to maintain the illusion that the fee it is paying for a "service", and is thus not, heaven forfend, a tax.
As a result of all these statistical calisthenics, the material rate for wine and liquor bottles suggested the Liquor Control Board of Ontario (LCBO) should be paying not the $5 million it has already committed, but $2.5 million! (It actually costs more than $11 million to manage LCBO containers, according to a recent PPSReveiw, I note.) The extra LCBO funds were quickly reassigned to "aggressive" market development.
As a result of this piece of news, the monies needing to be raised from the other brand owners has increased by $2.5 million, adding to each brand owner's share of the pie.
And just to muddy the waters further we have the de minimus rule which says it is not worth the paperwork to collect fees from the little guy because the revenue would be outweighed by the administrative costs.
And then of course you have to recognize that not everyone will pay so you need to set your fees based on  an assumed compliance rate that is realistic.
The good folks did just this. They looked around at other programs, and reasoned, quite fairly, that a 60 per cent compliance in Year One made sense. And the brand owner fees were set accordingly. They also calculated the brand owner fees based on a 95 per cent compliance rate and both were made available at the stakeholder meetings.
Needless to say, the latter were much lower and by the next WDO board meeting, the good folks advised they were using the higher compliance rate. This may have made the brand owners happy, and made it easier to "bury" the extra $2.5 million,  but it did not impress the municipal representatives. They quite reasonably pointed out that this assumption placed in real doubt the good folks' ability to raise the necessary funds to pay their portion of the partial responsibility proscribed by the Act.
No problem, said the good folks. If we can't raise enough funds, we'll take back the LCBO money and market development can wait another year.
Well, this has certainly been an example for the rest of Canada so far, hasn't it?