Where Does Your PRN Money Go?

The PRN (Packaging Recovery Note) System is the means by which companies in the UK offset their obligations under the Producer Responsibility Obligations (Packaging Waste) Regulations. The system as a whole is designed to enable the UK to meet the recycling and reprocessing targets set by EU Packaging Directive.

Companies in the UK who have a turnover >£2million and introduce more than 50 Tonnes of packaging into the UK as a result of their business activities, essentially have to do a packaging “tax return”. We’ve written a number of blog posts about the criteria you need to meet in order to be obligated to pay this tax, check out the Environment archive or head to the ’Are You Obligated’ section of the KES website.

If you are obligated, your commitment is calculated based on your packaging use per annum and instead of paying the “tax” as a cash sum, companies are required to purchase Packaging Recovery Notes (PRNs), or be a member of a Government accredited Compliance Scheme such as Kite’s who purchase the PRNs on their behalf. The money paid for the PRNs then helps reprocessors (recycling plants etc.) of packaging waste to finance improvements and projects that will increase the amount of packaging waste they can recycle year on year.

The system has a track record of success.  Not only has the UK met its EU targets since the Regulations were introduced, but the cost of meeting those targets has been lower in the UK than within other EU countries such as Germany, Austria and Spain.

The below graph shows the where the revenue from 2013 was spent:

PRN Market Dynamics

The cost of PRNs is driven by supply and demand and reflects both the net collection volumes and recycling at any given time, against the PRN obligation of all obligated within the UK.

Increasing targets for producers increases their demand for PRNs and therefore drives growth in the recycling and recovery sector.  However, if there have been too many PRNs produced in a given year this may result in less investment into recycling in future as it is no longer of financial interest to reprocessors.  Particularly if coupled with an increase in demand the following year due to higher targets or market bottlenecks this can result in a temporary shortage of PRNs.

Shortages can lead to price spikes and PRN prices can be inflated by the gap between perception and reality of PRN availability. There have been perceived shortfalls in availability of PRNs due to a number of cases of fraud in the system, which have caused the price of materials like glass and plastic to sky rocket.

In contrast, when the price of PRNs increases there is more investment into recycling.  This may result in a future surplus of PRNs once the market has balanced out.

If you need more help with understanding the PRN system or need us to purchase PRNs for you please get in touch with Andy who can provide you with help and confidential advice.  You can call 02476 420080, email compliance@packagingregs.co.uk or head to packagingregs.co.uk for more information.