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The passage of the Waste-Free Ontario Act in June 2016 marked a turning point for our province. It ushered in a new opportunity for Ontario to lead North America in the advancement of a strong circular economy that reduces waste and lowers greenhouse gas emissions, while promoting economic growth and creating good, well-paying jobs for Ontarians.

In fact, the Conference Board of Canada has identified that moving to a more circular economy could support the creation of close to 13,000 new jobs in Ontario and provide a $1.5-billion boost to the province’s gross domestic product.

But the promise of Ontario’s circular economy legislation has not yet been realized. For it to be effective, several regulations must be developed to transform Ontario’s existing recycling programs into true producer responsibility initiatives that empower the market, not the government, to increase diversion by treating waste as a resource that can be recovered and recycled into new products.

Getting the design of these regulations right could pull Ontario out of a decades-long recycling slump and put our province in a leadership position on policy design and environmental protection. But this result can and will only be achieved by basing all new resource recovery programs on the principle of competition. Too often, regulators have dictated the process for waste reduction instead of setting targets and allowing the innovation of the private sector to achieve them.

Canada’s economic success depends, in large part, on an open, competitive marketplace. The free exchange of goods and services between businesses and individuals advances innovation and sustains economic prosperity for current and future generations. The same principle applies to well-designed market-based policies to address environmental challenges, such as extended producer responsibility (EPR).

If set up correctly, EPR systems can maintain efficient recovered-resource markets by requiring companies, or producers, to pay for managing the recycling and safe disposal of their products and packaging once they have been discarded by consumers.

To be most effective, however, this policy approach requires an open market in which both producers and waste management organizations are free to compete and collaborate to find the best way to collect, reuse and recycle materials. The government, within this system, should only set recycling targets, monitor results and enforce environmental and competition rules. Aside from these areas, government shouldn’t interfere. Left to its own devices, the market will find the most efficient way to achieve increased recycling and resource recovery.

Ontario, under the Waste Diversion Act, has already tried a different approach that is not dissimilar to other jurisdictions. Instead of making producers responsible for recycling, and then giving them the flexibility to meet desired outcomes, the government mandated that every company that imports or manufactures a designated material, such as electronics, tires and packaging, must register with and pay fees to an industry-funding organization (IFO), which, in turn, uses the revenue raised from fees to manage the province’s recycling programs.

This system allows for no competition at the producer level and limits competition among waste haulers and recyclers because each IFO is sheltered from competition laws and operates, under government sanction, as a monopsony (a term that refers to a market in which one buyer interacts with several prospective sellers or service providers).

A monopsony, by its very nature, is inefficient. It distorts the marketplace because, without any other buyers to compete with, it does not need to increase efficiency to remain profitable; it can simply raise fees and lower prices for services, such as waste hauling and recycling, to whatever it wants.

This system has left Ontario with the bare minimum. Waste diversion has been stalled at 25% for decades with little to no improvement. Thankfully, all sides are now in agreement that fundamental reform is needed and that the Waste-Free Ontario Act is the most effective way to bring it about. But the role of competition under this new law, and specifically under the new regulations, remains a subject of debate. 

It’s important to note that this legislation, which received all-party, unanimous support at Queen’s Park, affirms the role of competitive marketsand subjects producers and service providers to Canada’s Competition Act, whether they’re operating on their own or together.

The inclusion of this provision makes it clear that nothing producers or service providers do in complying with the new provincial law provides them with a defence for anti-competitive behavior as defined under federallaw. ‎It also ensures that Canada’s Competition Bureau can oversee and enforce all applicable competition rules in Ontario’s EPR markets.

Any new regulations under the Waste-Free Ontario Act must be built on this foundation. There simply is no more room for government protection of anti-competitive behaviour under the justification of environmental protection. Markets must and will drive results for our environment and our economy.

Ontario now has a unique opportunity, under this law, not only to increase resource recovery, but to also lead the North American and international discussion on market-based environmental policy by putting competitive concepts and principles into practice. Together, our goal should be a circular economy in which waste is reduced and recovered as a resource through fair, open, competitive markets.

The OWMA remains committed to working with the Government of Ontario to get the regulations under this visionary legislation right. But time is of the essence. With next election set for the first half of 2018, we can’t afford to let progress stall. The time for action is now.

 

Under Germany’s EPR system, producers were initially allowed to carry out their responsibility to recycle through a single producer organization called the Duales System Deutschland (DSD). However, under this arrangement, the DSD began to engage in anti-competitive practices, which included awarding excessively long, sole-sourced contracts. In response, the German Federal Cartel Office intervened by ending the process of selective tendering and allowing all qualified service providers to compete for contracts to collect and process waste. Next, the cartel office removed the monopoly control the DSD had over the marketplace and allowed new producer organizations to procure waste management services. Now, with competition among service providers and producers, costs are down roughly 50%.