Background

History of Deposit / Return Systems or “Bottle Bills”

(Provided by the Container Recycling Institute)

A “bottle bill” is a law that requires a minimum refundable deposit on beer, soft drink, and other beverage containers in order to insure a high rate of recycling or reuse. Deposits on beverage containers are not a new idea. The deposit-refund system was created by the beverage industry as a means of guaranteeing the return of their glass bottles to be washed, refilled, and resold.

It was not until after World War II that cans began replacing glass bottles in the beer industry. The convenience and disposability of cans helped boost sales at the expense of refillable glass bottles and, by 1960, approximately 47 percent of beer sold in the U.S. was packaged in cans and no-return bottles. Soft drinks, however, were still sold almost exclusively in refillable glass bottles requiring a deposit. Can market share was just 5 percent. With the centralization of the beverage industry and a more mobile and convenience-oriented society, the decade of the sixties witnessed a dramatic shift from refillable soft drink “deposit” bottles to “no-deposit, no-return” one-way bottles and cans.

The gradual demise of refillable beer and soft drink bottles in the fifties and sixties and the rise in one-way, no-deposit cans and bottles resulted in an explosion of beverage container litter. This prompted environmentalists to propose bottle bills in their state legislatures that would place a mandatory refundable deposit on beer and soft drink containers.

The first bottle bill was passed in Vermont in 1953. However, it did not institute a deposit system. It merely banned the sale of beer in non-refillable bottles. The law subsequently expired four years later after strong lobbying from the beer industry.

By 1970, cans and one-way bottles had increased to 60 percent of beer market share, and one-way containers had grown from just 5 percent in 1960 to 47 percent of the soft drink market. British Columbia enacted the first beverage container recovery system in North America in 1970.

In 1971, Oregon passed the first bottle bill requiring refundable deposits on all beer and soft drink containers. By 1987, ten states (over one-quarter of the U.S. population) had enacted some form of beverage container deposit law or bottle bill.

The so-called “bottle bills” were intended not only to reduce beverage container litter, but to conserve natural resources through recycling and reduce the amount of solid waste going to landfills. They proved to be extremely successful in achieving these goals.

Seven states reported a reduction of beverage container litter ranging from 70 to 83 percent, and a reduction in total litter ranging from 30 to 47 percent after implementation of bottle bills. High recycling rates were also achieved.

Legislation has been introduced in New York that would expand the state’s bottle bill to include non-carbonated beverage containers. The bill, known as the “Bigger, Better Bottle Bill” (A.3922-A/S.1696-A), will result in an estimated 2.5 billion additional containers annually and could generate up to $172 million in new revenue. A number of other states, including Michigan and Massachusetts, are also considering expanding their bottle bills to include non-carbonated beverage containers, which currently account for 25% of the beverage market.

See SERC’s State Activity page for more information on bottle bill legislation in individual states.

For over thirty years bottle bills have been extremely effective at achieving economic, social, and environmental goals. But they have been extremely unpopular with the regulated parties. The sample bill in this package presents an opportunity to provide a new approach that addresses concerns of the industry stakeholders without compromising the public interest. This can be accomplished by:

1. Clearly framing economic, as well as social and environmental benefits, of the proposed deposit program – benefits to the public, to local governments, and also to industry, within the statement of intent (Findings Section) of the bill.
2. Minimizing prescriptive language that specifies the design of the deposit-return program and, instead, defining a performance standard that the regulated parties must meet, allowing the regulated parties to design their own deposit-return program.

Findings: Why Is This Legislation Necessary?

The “Findings Section” of the bill lists considerations that justify the proposed legislative action. Traditionally, bottle bills highlight environmental and social problems. This section will clearly frame the economic considerations as well as environmental and social considerations that will be addressed by the legislation:

• Economic Considerations: Externalized waste management and litter pickup costs will be internalized (producer pays for container management rather than local governments/ratepayers); opportunity costs will be reduced (municipal funds will be available to other programs because of reduced waste management expenditures); increased efficiency (low cost to government and strong incentive for industry to design and implement a cost-effective system)
• Environmental and Social Considerations: Conservation of energy and virgin materials and reduction in litter, litter-related injuries, and litter pickup costs; refundable containers are an asset to community groups and disadvantaged populations
• Legal / Political Considerations: Existing laws

A Performance-Based, Minimally-Prescriptive Approach to Regulation

Traditional deposit-return legislation prescribes specific roles and responsibilities for retailers and distributors; e.g., collection of refund value, return of refund value, reimbursement of retailer, payment by distributor. These prescriptive provisions freeze the program in a particular form and constrain the industry from innovating potentially more cost-effective solutions to the beverage container management challenge.

A non-prescriptive deposit-return law would establish performance standards that reflect the community’s standard for the desired environmental and social performance, while avoiding language that specifies the exact system by which the regulated parties would achieve those standards. That is, it would tell regulated parties what outcomes are expected and leave it to the beverage industry to design a deposit-return program for achieving those outcomes.

In some nations, current thinking in regulatory policy calls for an approach that sees the overall system as “Plan - Do - Check,” and assigns to government the first and last roles, while assigning to the regulated party the middle function. Thus, government establishes measurable performance standards (plan) and carries out monitoring/evaluation functions (check), but the regulated parties design and implement the program to achieve the standards defined by government. This approach is appealing because it reduces the administrative burden on government and takes full advantage of the business skills of industry.

Applied to the current example, a bottle bill using this approach would confine the “prescriptive language” to one provision: the requirement that the container management system use an economic instrument (refundable deposits) to incentivize recycling. This one prescriptive tool is justified by the universal experience in deposit and non-deposit jurisdictions: only refundable deposits have been capable of achieving the desired level of beverage container recycling. In fact, the bottling industry itself used deposits very effectively for decades to encourage the return of beverage bottles.

The language of a non-prescriptive bottle bill would:

• Establish a measurable performance standard of 80% recovery of used, empty beverage containers for recycling or reuse; 
• Establish a minimum refundable deposit as the economic incentive for consumers to recycle; 
• Require beverage brand-owners, as a condition of sale of their product, to develop and submit a Beverage Container Management Plan incorporating the refundable deposit, which would be approved by a state’s environmental protection agency, and would describe the Beverage Container Management Program that they would implement for recovering and recycling or re-using empty beverage containers;
• Establish consequences for failing to submit and implement the plan and operate the approved program, and consequences for failing to achieve the legislated performance standard (failure to achieve the performance standard could include a mandatory 10-cent deposit and a traditional return-to-retailer system); and,
• Establish provisions for monitoring/evaluation of the industry’s performance; e.g., the designated state department would review reports submitted by the industry, publicize the results, and impose (or recommend to the legislature) consequences in the event of failure to achieve mandated standard.