Municipal recycling first emerged in Ontario in the 1980s. Since then, it has transformed into what currently is known as the Blue Box Program, a recycling system that is operated by municipalities but is partially financed by brand-holders, first importers or franchisors of printed paper and packaging. These entities also are known as stewards.
In the past decade, this system has encountered increasing challenges related to fluctuating commodity markets and growing levels of contamination in the recycling system. The system has also witnessed an evolution in the mix of the materials that end up in Ontario’s Blue Boxes, resulting in reduced revenues and increased processing costs for municipalities.
The recent Stewardship Ontario v. Resource Productivity and Recovery Authority arbitration decision highlights some of the cost contribution and division of responsibility issues that have affected the participants in the Blue Box system as a result of these challenges. The decision provides helpful insights for other jurisdictions considering a shared responsibility model for the recycling of printed paper and packaging materials.
In the late 1990s, Ontario created the interim Waste Diversion Organization (WDO) to develop provincewide recycling initiatives for various types of material. In 2002, it enacted the Waste Diversion Act (WDA) to promote recycling and provide for waste diversion programs.
Pursuant to the WDA, the WDO and an industry funding organization, Stewardship Ontario, entered into a program agreement to develop a diversion program for Blue Box recyclables. The program was known as the Blue Box Program Plan (BBPP). It required that stewards contribute 50 percent of the costs of the municipal recycling programs for printed paper and packaging (PPP). WDO would determine the amount of stewards’ funding required from Stewardship Ontario.
A decade after the program was established, disputes over stewards’ funding and the rising costs of materials that made their way into Ontario’s Blue Boxes reached a boiling point. In 2014, these disputes went into arbitration to decide stewards’ funding obligations.
In 2016, the province of Ontario began its transition to an individual producer responsibility model for the management of a variety of materials, including PPP. It enacted the Waste Free Ontario Act and replaced the WDO with the Resource Productivity and Recovery Authority (RPRA). The responsibility for determining stewards’ funding then switched to the RPRA.
By 2018, Stewardship Ontario again disputed the RPRA’s assessment of stewards’ funding obligation for 2019. It argued that the RPRA’s charges, amounting to $126.4 million, were not authorized. The charges included a costs-containment charge, an in-kind advertising charge and charges for municipal costs associated with recycling non-PPP materials.
In his decision following the arbitration of the dispute, the arbitrator, Ronald G. Slaght, found that the RPRA did not have the authority to levy in-kind advertising charges on stewards. However, he found that the RPRA’s costs-containment charge and charges associated with the recycling of non-PPP materials were authorized.
Costs-containment charge. The steward costs-containment obligation was introduced in 2016 to place some financial responsibility on stewards for the growing costs of their packaging choices on municipal recycling systems. Arbitrator Slaght agreed that municipalities were obligated to contain and properly manage costs associated with the Blue Box program. However, the BBPP, and every direction issued by ministers, made it clear that stewards also had a responsibility to act to contain municipal costs.
The arbitrator also upheld the formula the RPRA used to assess the costs-containment charges. He found that its intended purpose was to provide a means for the RPRA to ensure that stewards made some contribution toward the increased costs on municipalities resulting from the shifting mix of materials ending up in Blue Boxes. It was not meant to calculate on a dollar-by-dollar basis the real effect of these changes.
In-kind advertising charge. Through in-kind advertising, newspaper industry stewards provide advertising space in publications for communities to promote waste diversion in lieu of cash to Ontario municipalities. On the RPRA’s assessment of in-kind advertising costs, the arbitrator was unable to find support for the RPRA’s inclusion of in-kind contributions by the newspaper industry, noting that the RPRA’s significant powers to impose costs on stewards were not absolute.
Non-PPP materials. A number of items collected in a typical Blue Box Program, such as office paper, are not included in the definition of Blue Box materials in the BBPP. As a result, municipalities have long imposed charges on stewards for certain residue materials and the contamination that comes with the program.
Stewardship Ontario challenged the RPRA’s non-PPP charges on the basis that they were for materials that were not part of the definition of PPP under the BBPP. In his decision to uphold the charges, the arbitrator found that the financial obligation of stewards was intended to support municipal recycling programs without being constrained by precise definitions in the BBPP.
The Blue Box funding arbitration involving the RPRA and Stewardship Ontario brings into focus some of the challenges of allocating responsibility among various actors in a recycling system. These challenges endure despite prior arbitration in 2014.
The decision comes at an important juncture in the landscape of waste management in Ontario as the province undertakes a transition of its Blue Box recycling system to full producer responsibility. By 2026, producers of printed paper and packaging materials will have the financial and operational responsibility for Ontario’s Blue Box system. The decision highlights the importance of such a transition given the degree to which industry choices affect recycling costs. By having full responsibility for paper products and packaging materials, producers will be able to make design decisions that decrease recycling system costs while maximizing efficiencies.