Eco-Modulation: Setting Packaging Fees Based on Environmental Impact
Eco-modulation refers to a fee or payment structure applied to producers of packaging covered under extended producer responsibility (EPR) regulations. Producer fees follow a bonus/malus (i.e., reward/penalty) system commensurate with the environmental impact of their packaging and the policy objectives of the EPR law.
Simple or basic eco-modulation systems typically charge fees based on material weight and product type, while advanced eco-modulation schemes levy fees based on multiple criteria (e.g., recyclability, recycling rate, recycled content, product lifespan, etc.).
As a rule, producers of consumer packaged goods (CPGs) will pay higher fees or penalties to a producer responsibility organization (PRO) for harder-to-recycle, hazardous, higher carbon, or environmentally harmful materials. Conversely, packaging that is recyclable, minimally designed, lightweight, renewably sourced, made with recycled content, refillable, reusable, returnable, compostable, or has a reduced environmental footprint will typically carry lower fees or discounts.
Through its payment structure, eco-modulation incentivizes producers to design best-in-class sustainable packaging and to phase out packaging materials and formats that disrupt recycling infrastructures, pose pollution and disposal problems, or end up in landfills.
Why Eco-Modulation Matters
Eco-modulation aligns economic incentives with environmental goals, such as the circular economy and lower carbon emissions. Eco-modulation contributes to the circular economy by encouraging the use of recyclable and recycled content materials, refillable and reusable packaging, reducing the need for virgin materials, and minimizing the generation of waste and pollution.
As part of EPR, eco-modulation holds producers monetarily responsible for the entire life cycle of their packaging, including end-of-life and disposal. This accountability shifts the financial burden of waste management from consumers and local municipalities to the companies and brands that produce and profit from the products, fostering more responsible manufacturing.
The fee-based approach stimulates innovation by offering producers a return on their investment when they design sustainable packaging that lowers or eliminates their eco-modulated charges. Research shows consumers prefer sustainable packaging and are willing to pay extra for it.
France was an early adopter of EPR for packaging (1992) and eco-modulation fees (2011). These efforts have produced recycling rates of 66% for household packaging (about 3.8 million tons) and 1 million tons of paper, avoiding 2.2 million tons of CO2 emissions annually.
U.S. State Eco-Modulation Fees
In the U.S., five states — California, Colorado, Oregon, Maine, and Minnesota — have passed EPR laws for packaging. While these states' EPR statutes include some common elements of eco-modulation, the fee stipulations differ for each state. Furthermore, some states are still finalizing their bonus/malus payment systems.
In California, eco-modulation fees factor in post-consumer recycled (PCR) content, refill/reuse systems, hazardous/toxic materials or additives, compostable materials, plastic derived from renewable sources, and source reduction/package rightsizing. Additionally, California rewards packaging with labeling instructions for improved recycling, sorting, and disposal.
Colorado's eco-modulation fees encompass material recycling rates, PCR content, refillable and reusable packaging, recyclability, source reduction, and difficult-to-recycle materials that increase recycling costs or disrupt the recycling infrastructure.
Oregon's eco-modulation fees consider material recycling rates, product-to-package ratio, PCR content, material type, and life-cycle analysis (i.e., environmental impact).
Maine's eco-modulation fees cover PCR content, toxic materials or additives, litter reduction, recyclability, source reduction, reusable packaging, and labeling of packaging materials to reduce consumer confusion.
In Minnesota, eco-modulation fees account for PCR content, package reuse, light-weighting, toxic substances, recyclability, compostability, and renewable or sustainable sources.
Because of the variability among states, producers and brand owners should standardize their packaging to meet the most stringent eco-modulated fee requirements. Creating different packaging formats for every state would be cost-prohibitive.
Your Sustainable Packaging Partner
At Berlin Packaging, we partner with our customers to unpack their full sustainability potential by creating packaging solutions that optimize sustainability, functionality, performance, brand impact, cost, and material availability. We help brands navigate environmental regulations, such as meeting EPR and eco-modulated fee requirements and incorporating PCR content into their packaging portfolio.
We conduct life-cycle assessments (LCAs) of packaging, quantifying a product's environmental impact (i.e., GHG emissions, water use, mineral resource use, and fossil fuel use) throughout its entire life cycle, from sourcing and manufacturing to distribution and end-of-life. LCAs offer comparisons between potential packaging solutions, enabling brand owners to make informed decisions and articulate their commitment to sustainability to their target consumers.
As part of our support to customers in achieving their sustainable packaging goals, we provide an expansive suite of leading sustainability services ranging from consumer and market insights, circularity road mapping, and recyclable stock solutions to custom packaging design, refillable and reusable packaging models, and sustainability communications strategies.
Furthermore, we partner with like-minded organizations to address broad packaging issues and drive systemic change throughout the supply chain toward sustainable packaging practices.
Explore Other Sustainability Topics
The information contained in this article is intended for general information purposes only and is based on information available as of the initial date of publication. No representation is made that the information or references are complete or remain current. This article is not a substitute for review of current applicable government regulations, industry standards, or other standards specific to your business and/or activities and should not be construed as legal advice or opinion. Readers with specific questions should refer to the applicable standards or consult with an attorney. It is the customer’s responsibility to determine whether its filled product is subject to any applicable government regulations and to ensure compliance with such regulations.