Frank Marella

1
Draft Framework for NEPSI National Advanced
Recovery Fee / Partial Cost Internalization
Hybrid System

• Frank Marella
• Sharp Electronics

Hybrid!
2
Summary

• Establish a visible, national fee at all points
  of purchase ("Advanced Recovery Fee") for a
  limited amount of time (discussion needed
  regarding timeframe) to fund establishment of
  infrastructure and retire significant quantities
  of historic equipment. Rationales Addresses
  industry concerns that CI is not practical for
  historic equipment and creates no design
  incentives. Incorporates the education benefits
  of an ARF. Establishes a short-term funding
  mechanism.

3
Summary (cont.)

• Sunset the fee after prescribed period (to be
  determined).
• Thereafter split costs according to a shared
  responsibility model (how/who to be discussed).

4
Key objectives are to

• Establish uniform, national program which
  preempts inconsistent state requirements
  pending agreement from preemption subgroup
• Educate consumers through use of ARF initially
• Use ARF as means to allocate costs of historic
  product, for a significant period of time, to
  equitably cover this cost
• Make system as administratively simple as
  possible
• Assure a level playing field among industry
  participants and
• Provide opportunity for design incentives for new
  products through some level of cost
  internalization Rationale meets NGO and some
  governments desires to create opportunities for
  design changes and creates potential economic
  benefits from such changes

5

• Assume that NEPSI agrees to above framework in
  2003 (NEPSI agreement) further assume that
  federal legislation is passed as soon as
  politically feasible which establishes this
  framework as law.
• NEPSI participants will work together to achieve
  federal legislation.

6
Interim Infrastructure Development

• There exists a voluntary agreement between
  manufacturers and government to expand the
  current system of collection and voluntary,
  manufacturer take-back programs while the
  national ARF is being implemented.  Funding for
  all activities is voluntary.

7
Primary Features of Legislated ARF

• (Note The details of the ARF under this model
  would be the same as the stand-alone ARF model
  currently being discussedit is understood that
  the ARF model has not been finalized, and these
  system aspects may change. Only the major
  features are summarized below).
• Visible, advance recycling fee ("fee") is
  collected from consumers at all points of sale
  and passed in trust into a trust fund. It is not
  a negotiable part of the product price.

8
Primary Features of Legislated ARF

• Legislation authorizes establishment of a trust
  fund and national TPO with multi-stakeholder
  governance and a predominance of industry
  representation. Legislation will clearly define
  limited responsibilities and powers of the TPO.
• Fee pays for 1) collection incentive, 2)
  transportation, and 3) recycling. For more
  details on what is covered by ARF see most recent
  version of Base Service document (1/23/03). (TBD)

9
Primary Features of Legislated ARF

• The ARF will be collected at retail from customer
  at point of sale, and the retailer will pay fee
  to trust fund. ?
• Individual manufacturers have the flexibility to
  act independently in some circumstances (e.g.,
  recycling their own products rather than having
  them recycled by others and receiving payment for
  same from the fund).
• Fee is reviewed or sunsets after a period of time
  or after meeting some performance standard.
• ? There was considerable discussion of another
  payment option whereby the manufacturer pays fee
  to trust fund, adds it as visible surcharge on
  wholesale price to retailer, and the retailer
  collects fee from customer at time of sale. This
  was the preferred method for a portion of the
  G12, however it was unanimously opposed by the
  industry stakeholders.

10
Post-ARF Shared System Costs

• After ARF sunsets, same system costs are shared
  according to shared responsibility model precise
  entities and responsibilities TBD
• Government and other collectors (e.g.,
  retailers, haulers, others) will cover costs of
  collection and transportation to consolidation
  points. Collectors may charge drop-off fees to
  cover collection and consolidation costs if
  necessary. ?
• ? There is a concern of the government
  stakeholders about how to cover the costs of
  getting NEPSI products to consolidation points,
  particularly if an ARF is removed as a financial
  tool. Industry stakeholders feel that if ARFs
  and partial cost internalization are used on
  products concurrently, that this essentially
  represents a double-tax on their products.
  Government and industry stakeholders are in
  discussion to try to arrive at an equitable
  solution.

11
Post-ARF Shared System Costs

• The NEPSI stakeholders will jointly determine how
  consolidation points will be identified. (TBD)
• Manufacturers cover transportation costs from
  consolidation points and processing costs.
• Retailers, producers (and TPO if it still exists)
  shall provide general and national promotion
  synergistic with local promotion. States/local
  governments are primarily responsible for
  education outreach on local services.

12
Key Legislative Provisions Necessary for Any
System to Reach Objectives

• Preemption (TBD by preemption subgroup)
• Free Riders and Enforcement Legislation
  establishes clear responsibilities for all
  players (e.g., manufacturers, collectors,
  recyclers) and creates enforcement capability
  against free riders.
• Antitrust Legislation insulates manufacturers
  from antitrust prohibitions as necessary.

13
Key Legislative Provisions Necessary for Any
System to Reach Objectives

• Performance Metrics and Reporting Legislation
  establishes performance metrics and reporting
  requirements as appropriate.
• Environmentally Sound Management Manufacturers,
  government and NGOs will develop environmentally
  sound management standards for recycling under
  this program.
• Oversight