Overview
The rise of Extended Producer Responsibility (EPR) laws for packaging in the United States places obligations on producers and their Producer Responsibility Organization (PRO) to ensure that recycling rates for covered materials increase. But many of these laws also specifically require that the covered material is recycled at a so-called Responsible End Market (REM).
What's an End Market?
Knowing the key steps that go into recycling, including end markets, is important to understand before diving into REMs. There are several key factors and steps that are involved in recycling. These include, at a high level, whether:
- consumers and businesses have access to recycle the material in a given jurisdiction;
- the material is collected for recycling;
- a Material Recovery Facility (MRF) in the area processes and sorts the material; and
- the material is sold to another entity – an end market – who will further process and then use the material to make a new product.
Although definitions can vary, if all of these activities occur, then the material can generally be considered recycled in most jurisdictions. A key issue with end markets and MRFs is that a MRF will not be inclined to process and sort a material unless a financially viable (i.e., profitable) end market exists, but an end market will often not exist unless and until a supply of the material exists in the first instance. The circular nature of this problem means that infrastructure investment is often needed at the MRF before an end market can form.
What's a Responsible End Market?
We examine below the REM definitions in the statutes for the states with packaging EPR laws. It is important to note that some of the states that have adopted EPR for packaging laws not only include definitions for a REM, but also provide that recycling does not occur – under the law – unless the material is sent to a REM.1 Others may not explicitly define recycling in such a way, but still require that the material be sent to a REM.2
REM Definitions in State Packaging EPR Statutes
- California - Means a materials market in which the recycling and recovery of materials or the disposal of contaminants is conducted in a way that benefits the environment and minimizes risks to public health and worker health and safety.3
- Colorado - Means a materials market in which the recycling of materials or the disposal of contaminants is conducted in a way that: (a) benefits the environment; and (b) minimizes risks to public health and worker health and safety.4
- Maine - Although there is no definition for a REM in the statute, the regulations adopted in Maine provide that, for a material to be considered "readily recyclable," it must meet certain "marketability" criteria, which sound in REMs, including if "there are at least two facilities in North America operating in accordance with applicable environmental laws that recycle the packaging material type into products that are not primarily used for fuel and are not placed into the permitted area of a landfill. Recycling processes that are inconsistent with applicable laws and conventions are examples of processes that do not safeguard the environment and human health."5
- Maryland - Means a material market in which the recycling and recovery of materials or the disposal of contaminants is conducted in a way that: (1) benefits the environment; and (2) minimizes risks to public health and worker health and safety.6
- Minnesota - Means a materials market that: (1) reuses, recycles, composts, or otherwise recovers materials and disposes of contaminants in a manner that protects the environment and minimizes risks to public health and worker health and safety; (2) complies with all applicable federal, state, and local statutes, rules, ordinances, and other laws governing environmental, health, safety, and financial responsibility; (3) possesses all requisite licenses and permits required by a federal or state agency or political subdivision; (4) if the market operates in the state, manages waste according to the waste management goal and priority order of waste management practices…; and (5) minimizes adverse impacts to environmental justice areas…."7
- Oregon - Means a materials market in which the recycling or recovery of materials or the disposal of contaminants is conducted in a way that benefits the environment and minimizes risks to public health and worker health and safety.8
- Washington - Means an entity that: (a) first produces and sells, transfers, or uses recycled organic product or recycled content feedstock that meets the quality standards necessary to be used in the creation of new or reconstituted products; (b) complies with all applicable federal, state, and local statutes, rules, ordinances, and other laws governing environmental, health, safety, and financial responsibility; (c) if the market operates in the state, manages waste according to the state's solid waste management hierarchy…; and (d) meets the minimum operational standards adopted under a producer responsibility organization plan to protect the environment, public health, worker health and safety, and minimize adverse impacts to socially vulnerable populations.9
While there is some general overlap in the statutory definitions for REMs, and in most cases the definitions are somewhat high-level, there is divergence from state-to-state. For example, the Minnesota statute explicitly incorporates environmental justice considerations into the REM definition. The implementing regulations in some of the states can also impose far more stringent criteria to qualify as a REM. For example, Oregon's regulations impose, among other requirements, the following obligations on REMs:
- Compliance – the entity must follow its own local, state, and national laws (including relevant environmental, labor, and public health laws) and treaty obligations, and be registered and permitted as required by local, state, and national authorities;
- Transparency – the entity must be willing to be named and audited, provide chain of custody documentation for tracking materials (originating in Oregon) to disposition, maintain record keeping relevant to chain of custody and material disposition, and promptly document within the chain of custody any penalties, violations, or regulatory orders received;
- Environmentally-Sound – the entity must be willing to be audited and monitored for outdoor air, water, and land emissions and disposal; and the entity must store and manage waste and recyclables in a way that avoids release into the environment; and
- Minimum Recycling Yields – the recycling supply chain recycles or causes to be recycled at least 60 percent of each material listed in the recycling acceptance lists.10
Additional auditing and verification steps are required to be carried out under the Oregon regulations by both the PRO and MRFs, the latter of which are obligated to ensure that their recycled material outflows are marketed to REMs.11
Another notable aspect of REM provisions is that they can impose extraterritorial requirements. For example, an end market could be located in a state that does not currently have a packaging EPR law (e.g., Idaho). If the Idaho-based end market wants to be considered a REM under the laws of another state with a packaging EPR law (e.g., Oregon), then the Idaho-based end market may find itself obligated to comply with the REM provisions of Oregon's law. These issues raise important business considerations for such entities in terms of whether it is financially worthwhile to take on the additional compliance and other burdens to be considered a REM. This is particularly true to the extent REM requirements adopted in regulations across the several states with packaging EPR laws diverge in material ways.
Is your Company an End Market that will Need to Comply with the Responsible End Market Criteria?
The standards for identifying end markets (and REMs) can vary across state laws, so it is important to closely scrutinize the statutory and regulatory definitions to determine if your company is potentially captured.
California's draft regulations provide that an end market is the "entity that produces and sells…recycled content feedstock…to be used for the creation of new or reconstituted products" and the "entity that produces and uses such material in the creation of new or reconstituted products…" (our emphasis).12 California's draft regulations further define end markets based on the material category, with separate provisions for glass, metal, paper, and plastic. For example, the plastic end market under the draft California regulations is the "entity that first produces plastic feedstock that meets the quality standards necessary to be used in lieu of virgin material for the creation of new or reconstituted products. Such end markets include, but are not limited to, entities that create pellet."13
Oregon's regulations also define end markets based on the material category, but there are important differences. For example, the plastic end market under Oregon's regulations "is the entity that last processes flake, pellet, or other resin material containing recycled plastic prior to sale or transfer to another person that creates a new product either by placing it into a mold or through extrusion or thermoforming" except that, "for plastic that is recycled to produce packaging for food and beverage applications or for production of children's products, the end market is the entity that places it into a mold for the manufacturer of such packaging or product."14
1 See, e.g., Cal. Pub. Res. Code § 42041(aa)(3) (providing that "to be considered recycled, covered material shall be sent to a responsible end market").
3 Cal. Pub. Res. Code § 42041(ad).
4 Colo. Rev. Stat. § 25-17-703(41).
5 06-096 Me. Code R. § 428(4)(C).
6 Md. Code. Ann. Env't § 9-2501(w).
7 Minn. Stat. § 115A.1441(31).
8 Or. Rev. Stat. § 459A.863(29).
9 Wash. Rev. Code § 70A.208.020(36).
11 See Or. Admin. R. 340-090-0670(3) and Or. Admin. R. 340-096-0310.
12 Proposed Cal. Code Regs. tit. 14, § 18980.4(b).
13 Proposed Cal. Code Regs. tit. 14, § 18980.4(b)(4).
14 Or. Admin. R. 340-090-0670(1)(d) and (e).
