What happens in California often doesn’t stay in California. If it were a country, California would be the fifth largest economy in the world, and that status gives it tremendous national influence. Pop culture trends that explode in the state are amplified throughout the country, if not the world. More profoundly, when state lawmakers pass “progressive” legislation affecting businesses that other parts of the country initially might balk at, it can be only a matter of time until it plays in Peoria. That’s simply a consequence of the size of the market. Will carmakers build two sets of vehicles, one series that conforms with California’s stricter emissions standards and another for those states with more lax regulations? Probably not. Another case in point is Senate Bill 54, the nation’s toughest legislation restricting single-use packaging, which was signed into law on June 30 by Gov. Gavin Newsom.

As Geoff Giordano reported in PlasticsToday, SB 54 requires all packaging in the state to be recyclable or compostable by 2032 and reduces plastics packaging and foodware by 25% in 10 years.

Most notable EPR bill in the country

One of the levers that the law uses to reduce plastic waste is extended producer responsibility (EPR), which essentially places the financial burden of recycling on manufacturers through a tax. (One could argue that the tax ultimately falls on consumers.) The concept is not new. It is generally credited to Swedish academic Thomas Lindqvist, who filed a report outlining EPR with Sweden’s Ministry of the Environment in 1990. Over the years, the principle found favor in Europe and, more recently, some US states, notably Maine and Oregon. But California, once again, has upped the ante.

Several EPR laws targeting specific products, such as paint, carpets, and mattresses, have been on the books in California for years. The sweeping nature of SB 54, however, makes it  the most notable EPR bill in the nation, writes media outlet Waste Dive, adding that it could influence future legislation in other states.

The law states as a general principle that its intent is to “establish a producer responsibility program designed to ensure that producers of single-use packaging and food service ware covered by this program take responsibility for the costs associated with the end-of-life management of that material and ensure that the material is recyclable or compostable. This standardization will reduce consumer confusion regarding recycling and composting, reduce costs to ratepayers, and increase system efficiency.”

Plastics industry on the hook for $5 billion over 10 years

In addition to establishing a phased approach to recycling single-use plastic packaging, SB 54 requires members of the plastics industry to contribute $5 billion over 10 years to combat plastic pollution. That may make some readers wince, but bear in mind that the legislation led to the withdrawal of an initiative slated for the November ballot that would have been far more onerous and challenging for the plastics industry. If that initiative had passed, “it would have cost Californians an estimated $9 billion annually but only invest[ed] approximately 30% of that to improve recycling in the state,” said Joshua Baca, Vice President of Plastics at the American Chemistry Council (ACC), which took part in negotiating the bill.

Nevertheless, the plastics industry has mixed feelings about the law. The ACC said that, after careful review of the final legislation, “we believe it is not the optimal legislation to drive California toward a circular economy.” The Plastics Industry Association, which did not participate in SB 54 discussions, also expressed disappointment that the law is not supportive of a “circular approach to eliminating plastic waste.” Both organizations did acknowledge, however, that SB 54 presents opportunities for solving recycling issues in the state that would not have been possible with the ballot initiative.

Claims that EPR programs are cost neutral to consumers are disingenuous

For sustainable packaging expert Robert Lilienfeld, a regular PlasticsToday columnist, the core issue is that no one has yet produced an EPR program that appears to work, other than bottle deposits. “The problems include the fact that consumers aren’t incentivized to return packaging or disincentivized not to; the value of these materials aren’t necessarily increased; and the EPR mechanisms may be unwieldy, inexperienced at collection and distribution, and monopolistic. Further, claims that such programs are cost neutral to consumers are disingenuous, as the public always pays in one way or another,” said Lilienfeld.

For Creighton “Chip” Magid, a partner at the international law firm Dorsey & Whitney, the law is “notable because the fees that producers will be required to pay will be variable, adjusted up or down depending upon such factors as the percentage of post-consumer recycled materials used, redesign of packaging to reduce the use of materials or improve recyclability, or, conversely, adverse effects that a producer’s product has on the recycling stream.”

Because California is such a large market, the effects of this act likely will extend well beyond the state’s borders, added Magid, echoing what I wrote at the outset of this piece. “It would be challenging to have California-only packaging and different packaging for the rest of the country.” Magid also wonders how this law will affect proposed federal legislation advanced by US Sen. Jeff Merkley (D-OR).

The Break Free From Plastic Pollution Act, sponsored by Merkley and and US Representative Alan Lowenthal (D-CA), would implement a national EPR program, among other measures. “California’s law is the largest embrace of extended producer responsibility yet,” said Magid. It will be interesting to see whether this affects Sen. Jeff Merkley’s proposed legislation in Congress, he added. “Beyond the EPR component, the California legislation is notable for requiring producers to fund not only the cost of the program itself, but also a new Plastic Pollution Mitigation Fund," said Magid.

How to navigate EPR laws

Given that parts of the California law will probably trickle down to other states, what should plastic packaging professionals do? An article in sister publication Packaging Digest, “3 Steps for Navigating New EPR Laws,” offers some timely advice.

“These [EPR] laws have the potential to create real change two-fold,” writes Joe Schewe in Packaging Digest. “One, by offering fundamentally expensive municipal recycling programs a lending hand with operating costs, while simultaneously encouraging consumer packaged goods (CPG) companies to reduce their carbon footprint. Given many recycling programs across the country have been suspended due to collection costs and inefficiencies, it’s not surprising that many other states are considering similar regulation.”

Schewe goes on to list three considerations that CPGs and their suppliers should keep in mind as they navigate these shifting waters:

Schewe fleshes out these bullet points with some sage advice in the article. It’s worth reading, because whether or not you agree with the concept of EPR or operate outside of California, it’s almost certainly going to be part of your business reality sooner or later.