December 8, 2005

1. Blue Box Program Plan Review for 2007Stewardship Ontario Funding Formula - First Public Consultation Meeting - December 8, 2005

2. Introduction to Session & Website Mechanics Lyle Clarke & Neil Antymis

3. Welcome! • First public consultation meeting on Blue Box Program Plan (BBPP) review for 2007 & Stewardship Ontario’s funding formula for stewards • More than 135 people here in person • Approximately 40 registered by webcast • reflects interest & participation of diverse stakeholders

4. 1st Half of the Morning • Introduction, Dennis Darby • Background & Objectives of Consultation, Lyle Clarke & Neil Antymis • Context for the Review, Keith West • Review of Current Funding Formula, Guy Perry • Long List of Options, Derek Stephenson • Dis-aggregation/Differentiation of Material Fees, Catherine McVitty • Break

5. 2nd Half of the Morning • Recycled Content, John Mullinder • Promoting 3Rs Through the Blue Box Program Plan Funding Formula, Jo-Anne St. Godard • Raising de minimis Level, Judith Andrew • Lowering de minimis Level, Kim McKinnon • Lunch, ~1:00 p.m.

6. Afternoon • Factor Weightings, Guy Perry • Other Suggestions Within Scope of Review, Derek Stephenson/Guy Perry • (e.g., Printed Paper Aggregation, Revenue, Biodegradability, etc.) • Options Out of Scope of Review, Derek Stephenson • Additional Suggestions From Participants • Next Steps • Adjourn

7. Our Audiences • Webcast audience listening on-line • speakers will refer to slide numbers to prompt you to move to the next slide • email questions/comments to: questions@stewardshipontario.ca • Archived webcast available for 180 days

8. Introduction Dennis Darby

9. Making Progress • Board looks forward to reviewing suggestions • Board Steering Committee overseeing review process • effective, open & transparent • Successful implementation of Blue Box Program Plan • Whether/how improvements to funding formula can be made

10. 1. 1800 Stewards Registered & Reported • Represents 1.3M tonnes of Blue Box wastes

11. 2. First Charges Laid • Some companies failed to report on time • Action taken under Waste Diversion Act (2002) • may result in others coming into compliance

12. 3. Target Revenues Met This Year • Shortfall in first two program years • less than 2% of annual budget targets • 2005 revenue target will be met • target $62.5M

13. 4. Municipal Obligations Met • Municipalities paid in full & on time • $81M paid in total by end of 2005 program year (March 2006)

14. 5. Cost Containment Plan Approved • Difficult challenge successfully met • Developed in partnership with Association of Municipalities of Ontario (AMO) & City of Toronto • special thanks for municipal effort & cooperation

15. 6. Effectiveness & Efficiency (E&E) Fund Progress • Also implemented in partnership with municipalities • Total of 34 projects & $5.2M approved to date • By end of 2006, number expected to rise to about 60 projects & $11M • New tools & techniques • great potential for increases in cost-effective diversion

16. 7. First Market Development Support Project Launched • Successful launch with positive results anticipated • Initial focus on glass • strengthen demand & lower recycling costs • $2.5M in financing

17. 8. Financial Assistance Provided to WDO • Supported development of Waste Diversion Ontario (WDO) • Funds loaned awaiting approval of additional Industry Funding Organizations (IFOs)

18. 9. Governance Structure Revised • Recent approval by Minister • Board to expand from 7 to 15 members • includes major sectors of obligated industries • Will be supported by two new committees • ensures policy & technical advice from wide range of stakeholders

19. 10. Four Fee Setting Cycles Completed • Blue Box Program Plan successfully implemented & funded • Challenge today is to see if we can make it better • more effective • easier to administer • fairer to industry sectors

20. Other Provinces Watching Our Successes • In particular: Québec, Manitoba, Saskatchewan • “Need to get it right… • need to harmonize approach to stewardship across the country”

21. Background & Objective of Consultation Lyle Clarke & Neil Antymis

22. Introduction • Background to review • annual review of rules • 4 rounds of fees • suggestions for changes • Spirit of review • open, comprehensive, fair & transparent • Broad timing • submitted to WDO by mid March 2006 • post on Environmental Registry by mid April 2006 (target) • approval by Minister by end of June 2006 (target) • in time for setting fees for 2007

23. Objectives of Review Provide an opportunity for all stakeholders to: • re-evaluate the current funding formula • identify & assess potential modifications or alternative approaches In support of: • the goals of the Blue Box Program Plan (BBPP) • the policy objectives & legal requirements of the Waste Diversion Act (WDA)

24. Steering Committee • Ensure key stakeholder concerns & suggestions are heard • Accurately reflect these to the Stewardship Ontario Board • Make recommendations to the Stewardship Ontario Board

25. Advisory Committee Formation • Initial interim step toward technical & policy advisory committees • part of approved new governance structure • Broad representation – participants invited from: • major contributors • largest obligation • not currently represented on Board • knowledgeable about plan • range of opinions • non-steward key stakeholders, e.g. NGO’s, municipalities

26. Advisory Committee • Identify options for consideration • Identify key issues of concern to their constituency • Encourage their participation in the consultation program • 1st meeting held October 27 to identify & review long list of options

27. Stewardship Ontario Board • Approve the list of options to be considered in the consultation program • Review the work & recommendations of the Steering Committee • Make recommendations to the WDO Board

28. Slide 28 Proposed Timeline & Workplan

29. December 8 Meeting Objectives • The review of suggested modifications & alternatives to the current funding formula • identified within discussion paper # 1 • Identification of additional suggestions within scope of review • Solicit information required to evaluate suggestions • in support of policy objectives & legal requirements of WDA

30. Principles Guiding Review (1) Funding formula must: • meet legal requirements of WDA • treat stewards & material categories in fair & equitable way

31. Principles Guiding Review (2) Desirable that funding formula also: • provide incentives to encourage diversion by • reduction • reuse • recycling • be transparent • be simple to administer • facilitate compliance & auditing requirements

32. Blue Box Program Plan Review:Program and Fee Development Under the Waste Diversion Act, 2002 Presentation by Keith West, Ministry Representative on WDO Board of Directors Director of Central Region Office, Ministry of the Environment

33. Waste Diversion Act 2002 andDiversion Programs • Under the WDA, 2002, the purpose of a WDO diversion program must promote reduction, reuse and recycling (3Rs) and must be financed by industry steward fees, not taxes. • Under subsection30 (1) of the WDA, a designated industry funding organization for a waste diversion program may make rules setting the amount of fees to be paid by stewards or prescribing methods for determining the amount of the fees. • Subsection 30 (3) of the Act requires that the fees paid by Stewards not exceed the sum of: • The costs of developing, implementing and operating the program • A reasonable share of costs incurred by the WDO under the Act (not covered by 1 ). • A reasonable share of costs incurred by the Ministry in administering the Act. • Subsection 30 (3) of the Act also requires that the fee paid by a steward “should reflect the proportion [of these total costs] attributable to the steward.

34. Waste Diversion Act 2002 andDiversion Programs • Steward fees are not taxes because they impose the costs of the program on the stewards in relation to the costs caused by the stewards (nexus) and/or to achieve program objectives (3Rs); • In addition, the fees are paid to the Industry Funding Organization, not to the Crown and are not revenue for general purposes. • A properly designed WDO program has the flexibility between the nexus and introducing other factors to achieve a particular policy objective.

35. Blue Box Program Plan • On December 22, 2003 the Minister approved the Blue Box Program Plan (BBPP) requiring industry stewards to pay fees covering 50% of net municipal blue box program costs. • The BBPP has successfully sustained the municipal blue box system: • Diversion continues to increase • Cost containment measures implemented • Money towards improved system efficiencies – E&E fund • Develop markets – coloured glass market research • Stakeholders working together – MIPC • Opportunity for continuous improvement from lessons learned.

36. Review of Current Funding Formula Guy Perry

37. Industry Obligation • Defined by industry share of the net cost of the residential Blue Box system • 50% of the cost approved by the WDO

38. Allocation to Each Material • Total industry contribution is allocated to each material using the steward funding formula • Results in fee rates for each material • change annually depending on costs & recovery for each material

39. Waste Diversion Act (WDA) • A primary consideration of the funding formula is the section of the WDA referring to: Fees paid by a steward should fairly reflect the costs of developing, implementing & operating the Blue Box program that is attributable to the steward i.e., the cost of managing the Blue Box materials it generates

40. Slide 40 30 25 20 15 Cost to manage ($ Millions) 10 5 0 -5 Newsprint - All Other Paper Plastics Steel Aluminum Glass CNA/OCNA Printed Based Packaging Packaging Packaging Packaging Paper Packaging Cost of Managing Each Material • Chart shows fees that reflect the cost to manage each material • Cost to manage each material determined by detailed activity based costing studies

41. Objectives of Blue Box Program • To meet the intent of the WDA to promote reduction, reuse & recycling • To discharge the legal obligation of stewards under the WDA • To increase the recycling of Blue Box waste • Minister subsequently requested policies & practices to reach 60% diversion

42. Slide 42 Current Funding Formula 30 25 Based only on Cost to Manage Current Base Fees after Funding Formula 20 15 10 5 Fees ($ Millions) 0 -5 Newsprint - All Other Paper Plastics Steel Aluminum Glass CNA/OCNA Printed Based Packaging Packaging Packaging Packaging Paper Packaging 40% 63% 75% 18% 47% • 3-factor formula transfers portion of obligation from materials with higher recovery rates to materials with lower recovery rates • Designed to reward materials that are contributing to the achievement of the objectives of the plan 51% 63% Recovery Rate (%)

43. Three-Factor Formula • Net Cost • 40% of obligation allocated by share of net cost • Recovery Rate • 40% of obligation allocated by relative recovery rate (% recovery) • Equalization • 20% of obligation allocated by incremental cost to reach 75% all materials • Weightings (40:40:20) designed to balance objectives of BBPP & goals & intent of the WDA

44. Slide 44 Administration & Program Delivery 30 Current Funding Formula With Common Costs 25 20 15 Current Funding Formula Without Common Costs 10 Fees ($ Millions) 5 - (5) Newsprint - All Other Paper Plastics Steel Aluminum Glass • Other program costs • market development fees • direct program delivery • WDO & Stewardship Ontario administration • recovery of shortfall (<2% of program cost) CNA/OCNA Printed Based Packaging Packaging Packaging Packaging Paper Packaging • Allocated according to combination of • number of stewards reporting each material • quantities reported

45. Aggregation of Fees (1) For Illustration Plastic Packaging 500 400 300 Fees reflecting cost only Fees ($/tonne) 200 100 0 PET bottles HDPE bottles Plastic Film Plastic Polystyrene Other Plastics Laminants 55.9% 52.0% 7.7% 1.0% 1.8% 8.2% Recovery Rate (%) • Fees for paper, plastic and steel packaging aggregated

46. Disaggregated Fee Rates Aggregation of Fees (2) For Illustration Plastic Packaging 500 400 300 Fees reflecting cost only Fees ($/tonne) 200 100 0 PET bottles HDPE bottles Plastic Film Plastic Polystyrene Other Plastics Laminants 55.9% 52.0% 7.7% 1.0% 1.8% 8.2% Recovery Rate (%) • Fees for paper, plastic and steel packaging aggregated

47. Disaggregated Fee Rates Aggregated Fee Rates Aggregation of Fees (3) For Illustration Plastic Packaging 500 400 300 Fees reflecting cost only Fees ($/tonne) 200 100 0 PET bottles HDPE bottles Plastic Film Plastic Polystyrene Other Plastics Laminants 55.9% 52.0% 7.7% 1.0% 1.8% 8.2% Recovery Rate (%) • Fees for paper, plastic and steel packaging aggregated

48. Distribution of 2005 Fees By Material Steel 5% Aluminum 0% Plastics 39% Glass 12% Paper Based Packaging 34% Printed Paper 10%

49. Distribution of 2005 Fees By Sector Durable Products 8% Printed Media 1% Other Services 4% Retailers & Distributors 35% Other 8% Consumable Products 44%

50. Long List of Options Derek Stephenson