- Transposition of the new Packaging Directive is already five months late. Failure to adopt the amendment to the Packaging Act means a new legislative process, including commenting procedures. This will delay transposition by at least another year. From an EU point of view, it is significant that while a delay in transposition is tolerated if the transposition standard is in the parliamentary process, it is never tolerated if the transposition is not submitted to parliament at all. This is precisely the situation that will arise if the draft amendment is rejected. At the same time as the amendment to the Packaging Act is delayed, the transposition of the directive on single-use plastic products, which is a follow-up to the Packaging Directive, must also be delayed. Its transposition law is logically heavily dependent on the existence of an already functioning amendment to the Packaging Act. The Czech Republic is therefore threatened with two significant derogations.
- The postponement of the amendment to the Packaging Act will have material economic consequences. A number of investment projects are currently underway, both municipal projects aimed at improving waste management infrastructure, particularly sorting, and private investment, particularly in waste treatment and recycling technologies. These projects foresee that the operating costs will be financed by producers and importers of packaged goods through authorised packaging companies, as they will become responsible for recycling waste after sorting with the amendment of the law. Similarly, the municipal sector is counting on the fact that, given the higher targets of the new law, they will have to support further infrastructure development. Under the current legislation, the authorised packaging company can only support these projects as research activities, as pilot projects, but cannot finance them systematically, as envisaged by the amended legislation. The postponement of the amendment will therefore force investors, both municipal and private, to either put projects already underway on hold or risk significant operational losses. Investors, because of the uncertainty created by the rejection of the law, can hardly be expected to reactivate suspended or postponed projects before the new legislative process is fully completed and the amendment comes into full effect. The rejection of the law effectively postpones investment in waste infrastructure for at least two years. Unfortunately, the rejection of the law will also make it impossible to draw resources from the National Recovery Plan, which has been approved for the Czech Republic by the European Commission only for the years 2021-23. A significant part of this plan is precisely the subsidies for the transformation of waste management, but without the amended Packaging Act, it will not be possible to demonstrate the sustainability of most projects. This is therefore to the detriment of domestic investors, especially smaller and medium-sized companies, and to their disadvantage against foreign competitors who will use these resources.
- The postponement of the amendment to the Packaging Act will have negative environmental impacts. Delaying investment in waste treatment and recycling means that for at least another two years recycling efficiency will remain at current levels with a corresponding percentage of landfill of already sorted waste. Similarly, delays in the development of municipal sorting infrastructure will cause the efficiency of household waste sorting to stagnate. This delay may be a welcome reprieve for landfill operators. Not only does it have a negative environmental impact, but it also threatens the achievement of the EU targets for the Czech Republic. The first set of targets is to be met by 2025, and this requires active development of sorting and especially recycling technologies over the next five years. By postponing the amendment to the law, the Czech Republic will shorten this already short period of five years to just three years.
- The postponement of the amendment to the Packaging Act will significantly limit innovation in packaging technology and the ecodesign of packaging. The new Packaging Directive relies heavily on 'ecomodulation', the rule that producers of easily recyclable packaging should pay less for recycling than the actual cost, while producers of difficult to recycle or non-recyclable packaging should pay more. Such a practice is not only not allowed by the packaging law today, but is even explicitly prohibited. The ecomodulation is intended to lead to changes in packaging technologies such that all sorted packaging is easily recycled, while at the same time encouraging investment in recycling. Postponing the amendment to the Packaging Act will also postpone this process, which will not only make it more difficult in the future to meet the recycling targets under the directive, but will also lead to further landfilling and delay the innovation process, as manufacturers cannot invest in technological change without knowing the ecomodulation rules. Given that it takes several years to change packaging technology, the postponement of the amendment to the law means that the necessary changes in packaging technology will not take place until 2025, when the first set of EU recycling targets will come into force. A side effect of not adopting the amendment to the Packaging Act will be that, while innovative, easily recyclable packaging will be placed on the market in neighbouring countries, packaging for goods made with outdated technologies that have not undergone ecodesign will be preferentially placed on the Czech market. This will further complicate recycling and not only jeopardise the achievement of recycling targets, but also make the Czech waste management more expensive.
- The postponement of the amendment to the Packaging Act will damage the competitiveness of the Czech economy in the long term and increase the costs for citizens. The adoption of the package of directives on circular economy and their transposition into Member States' legislation has triggered investment activities in the field of packaging waste recycling. Moreover, these activities have now been supported by the EU's time-limited Green Investment Plan, which aims to restore the economy after the COVID crisis. Such investments are not operationally economic, without a financial contribution from producers of packaging and packaged goods to cover the costs, as mandated by the Waste Directive. The postponement of the amendment to the law will make it impossible for Czech companies to access this financing. For domestic investors, this means postponing projects, while at the same time limiting access to subsidies, not least because it will not be possible to demonstrate the sustainability of a project without funding from authorised packaging companies. For foreign investors, it means choosing another country to build recycling technology in Central Europe, one that has already transposed the Packaging Directive. The confluence of these effects will lead to recycling technologies for Central Europe being built outside the Czech Republic. Ultimately, in order to meet the recycling targets, sorted Czech packaging waste will be recycled abroad, at high transport costs and with the financial cost of this recycling being borne by the Czech consumer in the price of the product. In real terms, the Czech Republic, which has the potential to become a destination for major recycling investments thanks to its high sorting rate, will thus give up its advantage and become dependent on recycling technologies in neighbouring countries. This dependence will be reinforced by the fact that waste exported from the Czech Republic will be returned in the form of recyclate to production in Czech companies, which will be forced to use it under new EU regulations. The second area in which the Czech economy will lose competitiveness is eco-designed packaging technologies. Eco-modelling is aimed at adapting packaging to the nature and capabilities of the recycling industry in a given market. However, companies operating in multiple markets are trying to find the optimal type of packaging for multiple markets, i.e. to harmonise their production in some way. The Czech Republic's high degree of sorting makes it a natural benchmark for eco-modulation and many international manufacturers follow Czech conditions as a guide for eco-design. If the directive is not transposed in the Czech Republic by an amendment to the Packaging Act, i.e. if ecomodulation is not introduced, the Czech economy will give up this advantage. Without existing ecomodulation rules in place in the Czech Republic, producers will only eco-design by adapting to recycling conditions in neighbouring countries, regardless of conditions in the Czech Republic. Czech manufacturing companies will then have to accept the ecodesign direction, even though their domestic recycling infrastructure is adapted to their production. Ultimately, this will force the Czech Republic to adapt its domestic recycling infrastructure to packaging designed for the markets of neighbouring countries, while at the same time adapting the packaging used by domestic producers in the same way. These costs will then be borne by domestic companies and ultimately by the Czech consumer.The third area in which the Czech economy will lose competitiveness is the loss of domestic sales for recyclates produced in the Czech Republic. Delaying projects to build domestic recycling technologies will create room for importing subsidised recyclates from neighbouring countries that already have their legislation set to meet EU recycling targets and use ecomodulation-type instruments to support their recyclers.
- The postponement of the amendment to the Packaging Act limits the possibility of a competitive environment. The reason given for rejecting the amendment to the Packaging Act is that it does not provide room for competition, i.e. it does not help the emergence of new authorised packaging companies. It is true that, in line with other EU countries, the amendment imposes a number of requirements on emerging authorised packaging companies. This is consistent with their important role in financing waste sorting and recycling, which is key to the growth of recycling (a large number of EU countries allow only one such company for this reason). It is not true that the amendment restricts the emergence of these competing entities. On the contrary, compared to the current law, which requires a new packaging company to have a nationwide functional sorting system contracted in all municipalities before it can start its operations, the amendment significantly softens this condition and at the same time introduces the principle that a new packaging company can use the collection system of an existing company. Thus, by not adopting the amendment, competition is not helped but, on the contrary, its emergence is limited.
- The postponement of the amendment to the Packaging Act will cause the Czech Republic to deregulate due to its inability to record packaging and recycling. The rules for reporting packaging and packaging waste and for reporting recycling are effective from January 2021. The current law keeps records according to the old definitional rules for packaging, which are fundamentally different, and in particular keeps records of recycling according to the definition in force until the end of 2020, when recycling is already considered to be the treatment of waste at the sorting plant, not its final processing. If the amendment is not adopted, the Czech Republic will not be able to report, at least for 2021, the fulfilment of the packaging recycling targets or the amount of packaging on the market in line with EU regulations. This in itself will lead to a serious deregulation procedure in 2022. In addition, the calculation of the so-called plastic tax, which is a revenue of the EU budget, is linked to this new record. It can therefore be expected that this issue will be taken very seriously by the EC.
If you have any questions about the above information, please do not hesitate to contact me.
Best regards and best wishes for good health
RNDr. Miloš Kužvart
Czech Association of Circular Economy, z.s.
Executive Director
Tel. 724695777
