APCO’s eco-modulated fees are a step in the right direction for sustainable packaging

The scheme focuses on materials Placed on Market (POM), and incentivises APCO members to measure and improve to reduce their fees… it’s both complex and ambitious.

As the global focus on sustainability intensifies, packaging is increasingly identified as a critical area for reform. 

In Australia, the Australian Packaging Covenant Organisation (APCO) is at the forefront of driving this change, particularly through its recently published 2030 Strategic Plan. 

What is the plan?

Firstly, APCO members capture the packaging formats and materials data relating to the packaging they place on market (POM). The eco modulation framework then incentivises them to make improvements to their packaging design to support ease of recycling, which ultimately reduces the fees they pay. 

Materials that are easier to recycle should technically attract lower fees, while hard-to-recycle materials will result in higher fees. 

That said, the model is also likely to consider volume. Whilst a material such as paper or glass is considered recoverable and recyclable, modulation has to consider the volumes and incumbent infrastructure to keep up.  

“The ultimate objective is to reduce the amount of materials placed on market regardless of what they are, so expect some surprises as we move forward.” Edward Whitehead, Phantm’s Head of Strategy

Understanding Eco-Modulated Fees

Our recycling and recovery infrastructure has been improving, but not at the pace required. So eco-modulated fees are levies based on our ability to recover and recycle.

The concept is simple: The easier your packaging is to recover and recycle, the lower the fee.

The eco-modulation approach increases the need to simplify and streamline the number of materials placed on market so that they will ultimately reduce over time. 

APCO has an opportunity to be bold here. Higher fees (for all materials) will push industry to innovate faster and make improvements to mitigate cost rather than absorb and pass on the cost to consumers (as we have seen in other countries when fees were lower). Fees will be paid to APCO, they will determine what happens to these levies. Hopefully, the funds will be spent on active reduction strategies, and not on increased administration costs.

It will be easier to bring the fees down than put them up.

The fees will be applied at a single point in the value chain to avoid duplication, ensuring the financial burden is placed on those responsible for placing the product on market (POM).

The Road to Implementation

The journey to full eco-modulation is gradual, primarily due to the lack of detailed data required to implement the system effectively. APCO plans to collaborate with brand owners to enhance data collection and reporting, refining the model over time to align fees more accurately with the ability to recover and recycle different packaging materials. 

The Timeline

• FY25 - Small-scale pilots begin
• FY26 will see the fee structures announced, giving members one year to understand the financial impact on their businesses
• FY27 members pay fees based on their POM materials. The main focus will be the infrastructure’s ability to recover and recycle the materials

It will be critical to keep to these timelines. There is no time to waste, so we need progress over perfection.

The Implications for Extended Producer Responsibility

Eco-modulated fees are more than just a tool for promoting sustainable packaging; they are a precursor to broader EPR schemes. EPR places the responsibility for the environmental impact of products (including packaging) on the producers. By introducing eco-modulated fees, APCO is setting the stage for more comprehensive EPR programs in the future.

These fees will create financial incentives for companies to invest in sustainable packaging solutions, driving innovation and reducing the environmental footprint of packaging. The sooner we know what the fees look like, the sooner we can plan and invest in change.

How does Extended Producer Responsibility (EPR) and Eco Modulation work together?

EPR fee-setting 

The process of defining the fee levels that are assigned to packaging based on material type (e.g., plastic, paper, metal), weight and characteristics.

Eco-modulation

The approach by which EPR fees are informed by and structured according to environmental considerations and policy objectives, in particular objectives to further increase packaging recyclability and the efficient use of materials (without causing unintended consequences for other environmental metrics such as life-cycle greenhouse gas emissions).

Basic eco-modulation

Variation in EPR fees to account for the recyclability of different materials as well as the net cost of recycling, based on a limited number of factors.

Multi-factor eco-modulation

Adjustments to EPR fees to introduce specific incentives (“bonuses”) and disincentives (“maluses”) that drive at targeted policy objectives beyond packaging recyclability and the efficient use of materials, for example, the use of bio-based materials or recycled content. These adjustments may introduce significant cost and complexity to the operation of the system

Challenges and Opportunities

Implementing an eco-modulated fee structure will require complex materials data collection and reporting. Extensive collaboration across the supply will be required to clear these significant hurdles.

However, these challenges also present opportunities. Proactive companies adopting sustainable best practices will benefit from reduced costs thanks to materials utilisation (reduction) and be eligible for lower fees, due to effective compliance with the eco-modulated framework.

Brands will be able to benchmark performance against industry peers and alternative verticals. 

It will become a Race to Reduce!

Other countries started by implementing Extended Producer Responsibility (EPR) without the eco-modulation incentive. This is the less complex approach typically adopted by larger countries.

The Future of Sustainable Packaging

The introduction of eco-modulated fees in APCO's 2030 Strategy is a critical step towards reducing the amount of materials placed on Market (POM) and ensuring those that are can be recovered and recycled.  Depending on your point of view, financial cost or incentive is required. 

APCO’s eco-modulated fees will drive the much-needed transition to simpler, more sustainable packaging materials that support ease of recycling.

While there is still much work to be done, the groundwork laid by APCO's 2030 Plan offers a clear roadmap for the future.

As companies adjust to these new realities, those that embrace sustainability will not only meet regulatory requirements but also position themselves competitively in the global shift towards a circular economy

Get Regulation Ready

APCO's eco-modulated fees are coming by FY27, so there is no time to waste.

How to prepare:

1. Start capturing, tracking and understanding the materials you use. This takes time, so we suggest starting now
2. Once you know what you have, work out how to simplify, simplify, reduce
3. Get started, our experience working with major brands is often the materials data is not linked to the sales data

Phantm can help businesses of all sizes with each of these three steps and more. Book a call to find our how we can help your business get regulation ready.