A deposit return scheme on drinks containers

How the tool works and current applications in the UK

Deposit-return schemes are a mechanism consisting of front-end charges placed on products combined with a rebate upon their correct treatment. This is intended to incentivise correct end-of-life treatment and significantly reduce littering. A deposit return scheme covering drinks containers is planned for introduction in Scotland, England and N. Ireland in 2027. This charge-rebate system will consist of front-end charges on single-use drinks containers combined with a rebate upon their disposal at collection points. Anticipated effects include a reduction in littering, increase in single-stream collection rates of target materials and improved recycling rates due to lessened contamination. This may have knock on effects so as to reduce costs of recyclate and increase recycled content.

Deposit Return Schemes (DRS) have proven to be highly effective tools for combating littering and fostering recycling. The global deposit book from reloop gives a comprehensive summary of DRS schemes in place (Reloop, 2022). Among global leaders, Norway, Germany, and Lithuania stand out for their exemplary DRS models. These countries have achieved success through innovative system designs, high collection rates, and broad public engagement. Norway, Germany and Lithuania all have slightly different approaches for example the deposit management organisation (DMO) for Norway is a charity organisation, in Germany is industry led and Lithuania uses a non-profit organisation, however all have achieved over 90% return rates in their schemes (Reloop, 2022). The following is a summary of findings from a review of available literature, giving a assessment of the instrument against each selection criteria.

Performance

Environmental effectiveness

Deposit Return Schemes (DRS) have proven to be powerful tools in reducing plastic pollution and enhancing recycling efficiency. Forecasts from Defra project that the implementation of DRS in the UK could lead to an 85% reduction in litter, underscoring its potential to drastically minimize plastic waste (Defra, 2024a). Evidence from Norway reinforces this projection, where plastic bottle collection rates consistently surpass 90%, highlighting the real-world success of well-designed systems in reducing environmental pollution (March et al. 2024a).

There is potential for DRS to reduce carbon emissions, with many reports suggesting the increase in recyclate quality can improve recycling and decrease reliance on virgin fossil feedstocks (March et al., 2024a,c,d. Rhein et al., 2021. Tudor & Williams, 2021. Karasik et al., 2020. Defra, 2021a,b. Defra, 2024a,b. Kukenthal et al., 2023. Picuno et al., 2024. Eunomia, 2010. Systra, 2021). Diverting waste from landfill and incineration can reduce emissions and mitigate pollution to the natural environment. However, establishing the necessary infrastructure, such as reverse vending machines and logistics networks, can lead to a temporary increase in carbon emissions. There are criticisms that DRS does not promote circular economy by proliferating the use of single use plastics and materials and actively encouraging the production of single use materials to be in line with DRS.

Financial cost to the public sector

Deposit Return Schemes (DRS) offer potential long-term savings for the public sector. According to Defra, the UK could save an estimated £11.4 billion over time through reduced litter cleanup and landfill costs (Defra, 2024 a,b). Additionally, private sector financing plays a critical role in offsetting public costs by bearing the majority of the costs when in line with political frameworks such as extended producer responsibility. Unredeemed deposits also contribute to the funding of the scheme. Implementing DRS involves high initial costs for public sector finance, through new reverse vending machine infrastructure and collection services. Furthermore, the system requires ongoing administrative oversight, including managing deposit flows and ensuring compliance. These administrative costs can strain public sector resources if not efficiently managed, highlighting the importance of careful planning in DRS implementation.

Long-run effects

DRS can drive significant behavioural change by embedding sustained recycling habits in consumers and willingness to adapt more sustainable practices. DRS can also drive demand for increased reprocessing with a consistent high quality recyclate feedstock. If high return rates are sustained there will be a long-term environmental benefit through reduction in pollution and diversion from landfill and incineration. As return rates stabilise the revenue from unreturned deposits will be lost, which could result in a decline in participation from industry, particularly small business owners.

Distributional and equity effects

The deposit refund system ensures that all participants, including low-income groups, can reclaim their deposits, promoting fairness and equity in recycling participation. Integration with extended producer responsibility can ensure consumers do not take on the financial burden. Despite these benefits, DRS can impose operational burdens on retailers, particularly small businesses. Retailers are required to manage container returns, which can be costly and logistically complex. Additionally, deposit schemes may disproportionately affect those with limited access (e.g. rural areas, low income groups and disabilities) if the upfront deposit costs are not effectively offset by timely redemption and easy access is not made available to all.

Spillovers

A successful DRS model (e.g. Norway), can be used as an example of best practice for other countries to model and approach for other policies. The use of DRS can also complement better waste management practice and long-term reduction of waste for materials in scope. However, the inclusion of DRS can disrupt kerbside collections and reduce the value of kerbside recycling, causing a financial burden on local councils. For the UK, the devolved administrations have differing scope for DRS creating logistical complications for cross-border collection.

Modelling assumptions

We list below the assumptions in the policy scenario model used to proxy the effect of introducing a Deposit Return Scheme within the scope of plastic packaging.