WEEE Directive Review In search of sustainable solutions

WEEE Directive Review: In search of sustainable solutions Aura Light • BLV • GE Lighting • NARVA • OSRAM • Philips Lighting • Havells Sylvania

Content Who are we Lamps are different with regard to WEEE ELC preferred WEEE solutions WEEE Directive review topics: in search of sustainable solutions Closing remarks Page 2

Who are we? n We represent the leading lamp manufacturers in Europe n 95% of total European production n 50 000 employees in Europe n € 5 billion European Turnover n We are an international non profit-making association under Belgian law with a secretariat in Brussels n We are a flexible, light & efficient lobby organisation n We promote efficient lighting practice for the advancement of human comfort, health and safety n We were created in 1985 Page 3

Who are we? Members Havells Sylvania Page 4

Lamps are different with regard to WEEE n The collection and recycling of Lamps is considerably different from all other WEEE products due to: n Fragility n Hazardous waste regulation n Low weight n High volume of > 700 Mio (WEEE relevant) lamps(1) per year POM n Also due to these characteristics collection and recycling costs are significant in relation to product prices. n (1) Lamps are one of the few components separately included in WEEE legislation Estimation by ELC for the European market including Norway and Switzerland Lamps are different, and require specific WEEE solutions Page 5

Lamps are different with regard to WEEE Situation Netherlands after 3 yrs Best case estimation 60% 40% HID CFL-n. I CFL-I FL Freezer / Fridge Dryer Dishwasher Washer Microwave Coffeemaker Shaver Vacuum Cleaner 0% DVD 20% TV ( % of Cost Price) Eo. L-Fee 80% Lamp recycling costs are 10 -80% of cost-price versus other WEEE: few. Page %6

ELC preferred WEEE solutions A level playing field for (collective) schemes that will n Fulfill the full legal responsibility in a financially sustainable way n Reach current and future targets n Develop Eco-efficient solutions as to successfully integrate financial concerns of its participants and the environmental goals n Provide a sustainable infrastructure for collection and recycling n Operate in a level playing field n Guarantee confidentiality of market data n Inform all stakeholders adequately Page 7

ELC preferred WEEE solutions Observed Risks A level playing field for (collective) schemes that will n Fulfill the full legal responsibility in a financially sustainable way n Reach current and future targets n Develop Eco-efficient solutions as to successfully integrate financial concerns of its participants and the environmental goals n Provide a sustainable infrastructure for collection and recycling n Operate in a level playing field n Guarantee confidentiality of market data n Inform all stakeholders adequately Page 8

ELC preferred WEEE solutions Level playing field Accreditation Guarantees Allocation between schemes Cradle Life Death/Bankruptcy Page 9

WEEE Directive review topics In search of sustainable solutions n Financing of WEEE (Art 8) n Individual Producer Responsibility, provisions and guarantees n Definition of Producer n 'Producer' under EU / national law, Put on the Market n Household vs. Professional n Definition of weight n Target setting n Accreditation of schemes n Allocation between schemes n Guarantees Page 10

WEEE Directive review topics In search of sustainable solutions n Financing of WEEE (Art 8) n Individual Producer Responsibility, provisions and guarantees n Definition of Producer n 'Producer' under EU / national law, Put on the Market n Household vs. Professional n Definition of weight n Target setting n Accreditation of schemes n Allocation between schemes n Guarantees Page 11

WEEE Directive review topics Financing of WEEE Producer obligations with regard to the financing of WEEE n Financing of historic household waste (Art 8. 3) n Collective obligation via collective scheme n Obligation // market share in current period n Financing of new household waste (Art. 8. 2) n Individual Producer Responsibility (IPR) n Can be fulfilled individually or via a collective scheme Page 12

WEEE Directive review topics Financing new waste Concerns arising from Art 8. 2 (Article 8. 2. EU WEEE Directive) Page 13

WEEE Directive review topics Financing new waste Concerns arising from Art 8. 2 Individual Producer Responsibility (IPR) n Aim n To encourage the design and production of electrical and electronic equipment which take into full account and facilitate their repair, possible upgrading, reuse, disassembly and recycling n But n n Is, within the scope of the other objectives of the WEEE Directive, IPR the right financial driver? Will IPR support increased separate collection rates as well as sustainable financing of WEEE? Page 14

WEEE Directive review topics Financing new waste Concerns arising from Art 8. 2 IPR a financial driver to design for better recycling? NO n The financial driver does not exist n Commonly required payback times in the electronics industry for investments are short: max 2 -3 years n Products sold now will return on average in 6 -10 years n Highly unlikely that design projects will start due to financial incentive aimed at ease of recycling n Practical impossibility to identify and sort WEEE (esp. for WEEE lamps) per individual Producer n n Leading to no incentive to design for better recycling for the Producer Necessitating collective collection and recycling of WEEE n Not all Producers under WEEE have an impact on design n Only manufacturers have an impact on the design of the product, not importers, in many cases also not private brand owners Eco-design should be regulated in Energy Using Products (EUP) or in Restriction on Hazardous Substances (Ro. HS) legislation Page 15

WEEE Directive review topics Financing new waste Concerns arising from Art 8. 2 IPR a financial driver for increased (separate) collection rates? NO n IPR will provide an incentive to Producers to minimize collection so as to minimize costs (no collection, no costs). n Lack of financing will result in efforts not to collect any orphan waste (which can never be fully avoided) IPR does not ensure increased collection rates Page 16

WEEE Directive review topics Financing new waste Concerns arising from Art 8. 2 IPR triggering substantial risks? (1/2) YES n IPR will increase the risk for externalization of costs to society, e. g. orphan waste (which can never be fully avoided) n IPR directly leads to huge increases in environmental and financial costs, without adding any value to either the environment, society or the Producers n n IPR is only possible if the EEE can be tracked and traced on a Producer individual level from the cradle to the grave (marking not sufficient, esp. not for small items on which no details can be put) IPR requires Producer specific collection, which is practically impossible due to the need to identify and sort millions of WEEE lamps at Producer individual level n IPR is an incentive for increased illegal import and free-riding n E. g. due to the difficulty to track an Eo. L product back to the Producer and due to the increase in costs Page 17

WEEE Directive review topics Financing new waste Concerns arising from Art 8. 2 IPR triggering substantial risks? (2/2) YES n IPR may trigger Producers to leave the market at the moment the (actual) financing obligation for new waste kicks in, i. e. n n n A number of Producers may decide to "leave" the national WEEE market ("leaving": sales will take place from abroad into the national market): While creating new "Producers" (e. g. the local distributors) having no financing obligations (yet), since they do not fall under the provisions of the law for financing the waste resulting from products POM between 2005 and the moment they became "Producer" under WEEE) Thereby creating a potentially huge amount of orphan waste (i. e. waste lacking a Producer responsible for financing) n IPR will decrease the ability of various stakeholders (especially Government) to monitor and control compliance with the WEEE Directive These risks should trigger a big concern for public authorities, collective schemes and sustainable producers. Page 18

WEEE Directive review topics Financing new waste Concerns arising from Art 8. 2 How to manage these concerns? Different options can be developed, there is however only one sound solution beneficial to all stakeholders n Introduction of solidarity (collective financing responsibility) amongst Producers for new waste n This requires the Amendment of Art. 8. 2 n Introduce a collective financing obligation for new waste on the basis of the market share of the Producers existing on the market in the period that the waste arises Page 19

WEEE Directive review topics In search of sustainable solutions n Financing of WEEE (Art 8) n Individual Producer Responsibility, provisions and guarantees n Definition of Producer n 'Producer' under EU / national law, Put on the Market n Household vs. Professional n Definition of weight n Target setting n Accreditation of schemes n Allocation between schemes n Guarantees Page 20

WEEE Directive review topics Definition of 'Producer' (current) Issues with the implementation of the EU Directive definition of "Producer" into national legislation n The definition of "European Producer" is not implemented in the Member States (resulting into "national Producers" only) n n This is amongst other things caused by the insecurity of national governments in their ability to control Producers from outside of their national territory Drastic increase of number of importers (subsequently considered the "national Producer") reduces control n European Producers cannot register in all countries n End users can source “cross border” avoiding responsibility n Establishment of trade barriers / limited free movement of goods n E. g. difference in burden for buyers when sourcing from a company able to assume Producer responsibility versus from a company not able to assume Producer responsibility Page 21

WEEE Directive review topics Definition of 'Producer' (suggested) The ‘Producer’ means any person, established in the EU who, irrespective of the selling technique used, including by means of distance communication in accordance with Directive 97/7/EC of the European Parliament and of the Council of 20 May 1997 on the protection of consumers in respect of distance contracts (1): i. Sells for the first time electrical and electronic equipment in the EU, ii. Resells under his own brand electrical and electronic equipment supplied by other manufacturers, a reseller not being regarded as the ‘producer’ if the brand of the producer appears on the equipment, as provided for in sub point (i), or iii. Resells in the Member State, where it has an establishment, electrical and electronic equipment, upon acquisition from a producer, which has not fulfilled its legal obligations in the Member State where the reselling takes place. iv. Buys for own use as a professional end user, electrical and electronic equipment, from a producer, which has not fulfilled its legal obligations, in the Member State where the electrical and electronic equipment is used, or from a supplier outside the EU. Page 22

WEEE Directive review topics Definition of 'Put on the Market' Need for definition of 'Put on the Market' in accordance with objectives of the Directive § Split put on the market definition between n n Product/manufacturing related directives like Ro. HS: should be represented by the date stamp on the product. Directives triggered by the location where the product will be used: First sales of EEE in the territory of any member state by an EU based Company (which should then register as a 'Producer' in the respective member state of first sale). Page 23

WEEE Directive review topics In search of sustainable solutions n Financing of WEEE (Art 8) n Individual Producer Responsibility, provisions and guarantees n Definition of Producer n 'Producer' under EU / national law, Put on the Market n Household vs. Professional n Definition of weight n Target setting n Accreditation of schemes n Allocation between schemes n Guarantees Page 24

WEEE Directive review topics Household vs non household n The sales channel (B 2 B or B 2 C) does not define the nature of the WEEE as household (and comparable) or non household waste n The distinction for EEE to be used either in households or non households is very ambiguous. Similar products ('dual use') should be treated according to the same rules. Therefore all dual use products should be reported as household products and Producer responsibility following suit. For Dual use products, taking away the differentiation between household and professional would close loopholes and improve control drastically Page 25

WEEE Directive review topics In search of sustainable solutions n Financing of WEEE (Art 8) n IPR, provisions and guarantees n Definition of Producer n 'Producer' under EU / national law, Put on the Market n Household vs. Professional n Definition of weight n Target setting n Accreditation of schemes n Allocation between schemes n Guarantees Page 26

WEEE Directive review topics Definition of weight n Lamps are different with regard to other WEEE n n Individual weights for lamps can not be checked by a statutory auditor due to the vast number of code numbers (>6000) and as such leave ample room for fraudulent activity Weight of the lamps is not a environmental differentiator (lighter does not mean more environmentally friendly or better recyclable) n Therefore, to avoid abuse n n Lamps weight should be a defined as an average weight per country (to be applied by all schemes) Total weight should be calculated as 'units x average weight', and not 'Σ of the individual weights' Page 27

WEEE Directive review topics Household vs non household n Amount of household waste collected should not be limited to waste collection via municipal collection sites only. All collection of household waste (or waste from dual use products), regardless of the collection channel, should be taken into account when determining % collected rates. n Alternative financing schemes for non household products create a risk for opportunistic behaviour and externalization of costs if not rigorously controlled and clear responsibilities defined Page 28

WEEE Directive review topics In search of sustainable solutions n Financing of WEEE (Art 8) n IPR, provisions and guarantees n Definition of Producer n 'Producer' under EU / national law, Put on the Market n Household vs. Professional n Definition of weight n Target setting n Accreditation of schemes n Allocation between schemes n Guarantees Page 29

WEEE Directive review topics Target setting n Need for challenging yet realistic targets n Targets per category n No externalization to other categories n Targets to be defined as % of historic POM n Lamps are durables (not fast moving consumer goods) requiring the benchmark for targets to be the "historic POM" rather than the current or previous year POM n This issue is especially important in fast growing markets Page 30

WEEE Directive review topics In search of sustainable solutions n Financing of WEEE (Art 8) n IPR, provisions and guarantees n Definition of Producer n 'Producer' under EU / national law, Put on the Market n Household vs. Professional n Definition of weight n Target setting n Accreditation of schemes n Allocation between schemes n Guarantees Page 31

WEEE Directive review topics Accreditation of schemes Need for sound accreditation rules, applicable to both individual and collective schemes, allowing for financially sustainable schemes Including n Legal format requirements, a. o. n n n Business plan requirements, a. o. n Sustainable financing covering for / based on full Producer responsibility n Full geographic coverage for collection n Information and communication planning Penalties for non compliance, a. o. n n Not for profit (no payment of dividend or other to shareholders, etc. ) loss of accreditation / fines Guarantee requirements n In case of dissolution of the scheme (for details see last review topic: "Guarantees") Page 32

WEEE Directive review topics In search of sustainable solutions n Financing of WEEE (Art 8) n IPR, provisions and guarantees n Definition of Producer n 'Producer' under EU / national law, Put on the Market n Household vs. Professional n Definition of weight n Target setting n Accreditation of schemes n Allocation between schemes n Guarantees Page 33

WEEE Directive review topics Allocation between schemes Allocation of financing obligation according to the WEEE Directive (Art 8. 3) n Meaning that the total cost for collection and recycling of all WEEE belonging to the same category should be financed by the cumulative market share of all Producers across the different schemes! n Collective financing obligation is not limited to the collective of Producers belonging to the same scheme! Page 34

WEEE Directive review topics Allocation between schemes n However, due to the fact that the wording of the WEEE Directive is not specific enough with regard to the financing obligation for household historic waste n n A number of financing models are currently applied by a variety of schemes, which in most cases do not allow the sustainable implementation of the obligations they have taken over from their participating Producers Governments accredit schemes which do not have a sound and sustainable financial plan allowing compliance with the letter and the spirit of the WEEE Directive Page 35

WEEE Directive review topics Allocation between schemes Financing models currently applied in the market: which is sustainable? – which is compliant with all obligations? Page 36

WEEE Directive review topics Allocation between schemes Looking at the financing models existing in the market we observe that § Only one financing model for historic household waste, i. e. model I 'financing based on the number of products that are expected to come back in the measurement period based on the average life time of the product' allows full compliance with all Producer obligations under the WEEE Directive. § All other financing models do not allow for full compliance with the spirit and the letter of the WEEE Directive § As such, only the fee reflecting the full financing obligation of Producers can be used as a basis for allocation of the financing obligation across all Producers according to their market share in the measurement period. Page 37

WEEE Directive review topics Allocation between schemes Examples of existing allocation schemes n (Producer) Individual allocation per container (Germany) n No optimization of infrastructure possible n Not suitable for smaller countries due to organizational effort and costs n End of year clearing of collected quantities (Austria) n Triggers a continuous shift of quantities to the next years because the collection network can not / should not be diminished by the scheme making higher collection efforts n Sale of certificates (UK) n Increases the price unnecessarily n Likely to leave some regions un-serviced n Clearing on basis of actual cost incurred: actual collection efficiency is significantly lagging on the cost incurred (currently not used) Page 38

WEEE Directive review topics Allocation between schemes Calculation example for allocation in accordance with collective financing obligation and the letter and spirit of the WEEE Directive Page 39

WEEE Directive review topics Allocation between schemes n Benefits of proposed allocation mechanism: n n n Market driven: scheme with best collection performance sets the pace Clearing mechanism does not offer an incentive to limit collection to any scheme Fee of best performer is benchmark for clearing: best optimum between cost level and performance (collection rate) No incentive for Producers to join a cheap but non-performing scheme Supports a level playing field for both Producers and schemes Page 40

WEEE Directive review topics In search of sustainable solutions n Financing of WEEE (Art 8) n IPR, provisions and guarantees n Definition of Producer n 'Producer' under EU / national law, Put on the Market n Household vs. Professional n Definition of weight n Target setting n Accreditation of schemes n Allocation between schemes n Guarantees Page 41

WEEE Directive review topics Guarantees for future waste n If the obligation for future waste would also become a collective obligation as suggested earlier, guarantees no longer would be required n i. e by amending art. 8. 2. , introducing a collective financing obligation for new waste on the basis of the market share of the Producers existing on the market in the period that the waste arises n In the absence of the collective obligation for future waste, guarantees for future waste n n Should be required for individual schemes Should not be required for collective schemes provided these schemes have a sustainable financial planning (need for sound accreditation rules) Page 42

WEEE Directive review topics Guarantees Individual schemes – guarantee requirements n In addition to the guarantees mentioned in the WEEE Directive, the individual scheme should name as a beneficiary a scheme authorized for the relevant collection and recovery category, which will contractually perform the take-back and treatment of WEEE for the producer in the event of his insolvency or withdrawal from the market. n Individual guarantees are and can not be controlled n The level of guarantees is not defined in the Directive (return rate? ) n When the guarantees are not with a 3 rd party, the reserves are not secured in case of bankruptcy n Suggestions for the Beneficiary: Ø Control via a central EU specialised, financial enforcement body; Ø Define return rate so that the guarantee level can be estimated; Ø Distribution of the guarantee to all participating schemes in accordance with their market share. Page 43

Closing remarks Our suggestions will create an environment in which the market will be able to n Fulfill its responsibilities in a financially sustainable way n Reach current and future environmental targets n Successfully integrate the environmental challenges into their respective business strategy n Maintain competiveness in the market n Provide a sustainable infrastructure for collection and recycling n Operate in a level playing field Page 44

WEEE Directive review topics Back up slides Page 45

WEEE Directive review topics Financing new waste Concerns arising from Art 8. 2 How to manage these concerns? Different options can be developed n Oblige Producers to pay now the NPV of the future fee Activate the actual financial responsibility for future waste for producers today to guarantee the waste management of tomorrow (i. e. pay now the NPV of the future fee ) This sounds as a very simple solution. however this will n n n Not remediate or mitigate most of the aforementioned concerns Further increase number of illegal import (estimated for the EU at > 12% today) Further decrease competitiveness of producers that are aiming to comply and reach the collection and recycling targets Distort financial markets (provisions) Not prevent opportunistic behavior to avoid application of the law Not mitigate the increased environmental and financial costs Page 46

WEEE Directive review topics Visible fee Support for a mandatory visible fee n Effective tool against free riders n Minimizes costs: no mark-up for WEEE costs through the supply chain n Increases transparency n Builds ongoing consumer awareness n Historic waste still needs to be financed also after 2011 n Future waste will also need financing and consumers have a key role to play in enabling financial and environmental sustainable solutions n Ensures the competitiveness of European Producers (WEEE costs only paid once, i. e. in the member state where the EEE becomes waste) Page 47