08/11/2015

Blue Box Backgrounder

Ontario municipalities invented, expanded and sustained the first Blue Box system in the world. This important program keeps waste like paper, plastic, and packaging out of landfill. It’s key to the range of convenient integrated waste management services that municipalities offer and has helped residents to divert increasing amounts of waste. Ontarians recycled 47.3 per cent of their total residential waste in 2013, 39 per cent of which was through their Blue Box.

How Blue Box Funding Works
Ontario’s municipalities have been running Blue Box programs since the 1980s, with the goal of offering convenient and efficient local services to protect the environment.  

Since the Waste Diversion Act, 2002, Stewardship Ontario (SO), as the representatives of the product stewards and importers, has been required to pay half the net cost of the Blue Box program. Property taxpayers and residential users pay for the other half. Historically, SO has always paid closer to 46 per cent of the cost, placing a greater burden on taxpayers. Given that municipalities pay at least half the cost, they continually strive to improve the efficiency and effectiveness of the program.

The cost of recycling has grown considerably over the years. In part, because the types of products and packaging used today involve more lightweight and complex materials that are more costly and harder to recycle. The Blue Box program requires municipal governments to invest in continuous improvement and to improve efficiency and they have been doing that.

Municipal Payments for Steward Obligation
The Municipal Industry Program Committee (MIPC), made up of members of AMO, the City of Toronto and SO, is required to determine the steward’s annual obligation. For 2014 and 2015, this process has been a challenge.  In May 2014, municipal and steward representatives went into arbitration to determine the steward payment for 2014 after a negotiated agreement could not be reached. The arbitration decision resulted in municipalities receiving an additional $15.6 million from the Stewards Obligation for that year.

Again in 2015, the stewards and municipalities could not agree on the Obligation amount. Municipal representatives proposed that the arbitrator’s approach for 2014 should be used again for 2015.  SO disagreed, maintaining that it should pay less, based on its theoretical financial model of how much the Blue Box recycling program should cost. They said that municipalities should be more efficient and that the industry group should pay less. Mediation was terminated in mid-June due to a lack of common ground between parties.

AMO and the City of Toronto then requested a ministerial regulation from the Minister of the Environment and Climate Change to clarify how the Steward Obligation should be set for 2015 onwards, until new legislation is put in place.

On June 16, 2015, Minister Murray wrote to Waste Diversion Ontario (WDO) stating that:

  • WDO has the authority to determine payments to individual municipalities and that they should do so without delay, and should take the steps necessary to determine the payments for 2015 and in subsequent years where the MIPC is unable to achieve consensus on the payments.
  • SO is expected to make such payments as required under the Blue Box Program Plan by which it is governed. Upon determination of the final 2015 payments, SO should make quarterly interim payments to municipalities starting June 30, 2015. WDO should determine an appropriate methodology for cost containment using all available information.
WDO Decision
The 2015 Steward Obligation calculation was then determined using the methodology set out in the 2014 arbitration decision.
  • This method is based on the reported net costs determined through the annual WDO Datacall and verification process, which are thorough, reliable and pass the test of reasonableness.
  • This resulted in a total 2015 Steward Obligation of $114.6 million to be paid by SO through quarterly instalments. On June 30, 2015, SO sent the first 2015 payments to municipalities, who provide the Blue Box Program for their residents.
WDO has established a panel, with both steward and municipal representatives, to submit recommendations to it by mid-September on a methodology to apply cost-containment principles in determining the annual Blue Box steward obligation. The panel is also to submit recommendations regarding the in-kind program, which allows the newspaper industry to make their contribution in-kind through advertising space, in order to address the concerns raised by the arbitrator. WDO is expected to report to the MOECC on the results of this panel by the end of September 2015.

Discussion Paper – New Waste Reduction and Resource Recovery Framework Legislation
The Province has been asked to introduce new legislation to replace the Waste Diversion Act, with a system based on full Producer Responsibility, ensuring that producers are responsible for 100% of end-of-life costs of designated waste, including fair compensation to municipalities for services provided to manage municipal waste.

AMO, the City of Toronto, the Regional Public Works Commissioners of Ontario (RPWCO), and the Municipal Waste Association (MWA) worked together on a municipal discussion paper for Minister Glen Murray’s consideration in the development of a new provincial legislative framework for waste reduction. The paper speaks to the critical municipal needs and the interests that the new framework must address, including:
  • continuing to provide an integrated waste management system for Ontario residents;
  • minimizing the environmental impacts of waste;
  • preserving limited disposal capacity; and,
  • ensuring fair compensation for municipalities for services provided, as well as any assets and associated costs that are stranded as a new system is implemented.
The municipal sector supports efforts to hold industries that produce and manufacture products responsible for the cost of waste diversion and encourages them to make greener products and packaging. Ontario is in need of less adversarial and arduous waste legislation, and AMO looks forward to continued conversation with the MOECC on how a new legislative framework can be designed for more effective waste diversion in Ontario.

It is expected that the Province will introduce this legislation later in 2015.