Report – Feasibility of Expanding a Container Deposit Scheme

Executive Summary

This report assesses the feasibility of expanding the State Container Deposit Scheme (the Scheme) beyond its current beverage container coverage to include wine and spirit glass bottles and other presently excluded containers such as large juice, cordial and flavoured milk packaging. The assessment models the first full operating year of expansion for a hypothetical Australian state and evaluates three options against status quo. All figures are illustrative but internally consistent, and are expressed in Australian dollars.

The analysis finds that full expansion (Option C) brings an estimated 450 million additional containers into scope, lifts the state-wide container recovery rate by approximately 7.2 percentage points, and diverts around 44,550 tonnes of material from landfill each year. The net cost to the Scheme is estimated at $40.95 million, recovered through a supplier contribution of 9.1 cents per newly eligible container. The expansion covers its fixed network costs once the return rate exceeds 25.6 per cent, well below the modelled first-year rate of 65 per cent, and returns a quantified benefit-cost ratio of about 1.4 with capital payback of roughly 2.8 years. Full expansion is recommended, delivered in stages with structured support for material recovery facilities and equity-focused network design.

Introduction

Container deposit schemes place a small refundable deposit, conventionally 10 cents, on eligible beverage containers to incentivise their return for recycling. Every Australian state and territory now operates such a scheme, from the long-standing South Australian system to more recent programs including New South Wales (Return and Earn), Queensland, Western Australia and Victoria (NSW EPA 2022). These schemes are a form of extended producer responsibility, shifting the cost of end-of-life container management from local government to the beverage supply chain (OECD 2016). This report examines whether the Scheme should expand its container coverage, and if so, on what basis.

The policy driver is national. The National Waste Policy Action Plan commits Australia to an 80 per cent average resource recovery rate across all waste streams by 2030 (Commonwealth of Australia 2019), while packaging targets coordinated by the Australian Packaging Covenant Organisation press industry toward higher recovery and recycled content (APCO 2023). Deposit schemes are among the most effective instruments for lifting beverage container recovery, yet their impact is bounded by what they cover. This report tests the feasibility, cost and stakeholder consequences of widening that coverage. The scope is the first full operating year at state level.

Background and Policy Context

The Scheme currently covers most beverage containers between 150 millilitres and 3 litres but excludes several high-volume categories, most notably wine and spirit glass bottles, plain milk containers, cordials and large juice packaging. These exclusions were adopted at establishment on the grounds that some categories are less prevalent in public litter and that including heavy glass would raise handling costs (Eunomia Research and Consulting 2018). Those grounds are increasingly contested. Wine and spirit glass is a large share of household beverage packaging by mass, is a significant contaminant of kerbside recycling, and features prominently in glass litter counts (Keep Australia Beautiful 2021).

Nationally, beverage containers remain a substantial waste stream. The National Waste Report records packaging as one of the largest material categories by both generation and recovery, with glass recovery lagging behind aluminium and paper (DCCEEW 2022). Waste account data likewise show that packaging consumption continues to grow with population and consumption (ABS 2022). A deposit scheme works by closing the loop between purchase and recovery, as illustrated in Figure 1. Suppliers pay a contribution on every container placed on the market; consumers pay a refundable deposit at purchase and reclaim it on return to a refund point; and the aggregated material is sorted and sent to reprocessors for conversion into recycled feedstock.

Approach and Assumptions

The model estimates the incremental effect of expansion, holding the existing scheme constant, with parameters calibrated to a mid-sized state from published scheme and packaging data (DCCEEW 2022; APCO 2023; Eunomia Research and Consulting 2018). Key assumptions are: 450 million newly eligible containers placed on the market annually (320 million wine and spirit glass, 130 million other); a first-year return rate of 65 per cent for the new categories, conservatively below the mature scheme rate of about 76 per cent; a refund of 10 cents per container; a handling fee of 3.5 cents and logistics and administration of 2.5 cents per redeemed container; blended material revenue of 2.0 cents per redeemed container; a status quo kerbside recovery rate of 45 per cent for these categories, rising to 78 per cent after expansion; an average container mass of 0.30 kilograms, reflecting the dominance of glass; and a state waste levy of $150 per tonne. Fixed network costs attributable to expansion are $4.2 million per year, with one-off capital of $18.0 million for glass-capable reverse vending machines and depot upgrades.

Cost and Benefit Analysis

The volume of containers actually returned drives every downstream figure. Redemptions are the product of supply and the return rate: 450 million multiplied by 0.65 equals 292.5 million containers redeemed in the first full year. Refunds equal 292.5 million multiplied by $0.10, or $29.25 million. Adding handling (292.5 million multiplied by $0.035, or $10.24 million) and logistics and administration (292.5 million multiplied by $0.025, or $7.31 million) gives a gross cost of $46.80 million. Material recovery revenue of $5.85 million (292.5 million multiplied by $0.020) reduces this to a net Scheme cost of $40.95 million.

Because the Scheme is funded by suppliers rather than the public purse, the relevant price signal is the contribution per container placed on the market. This equals the net cost divided by supply: $40.95 million divided by 450 million, or $0.091 per container. This 9.1 cent contribution is consistent with the pass-through economics of existing schemes, which the competition regulator monitors (ACCC 2020). Table 1 sets out the full build-up.

Table 1: Cost and benefit model for full expansion (Option C), first full operating year

Note: figures are illustrative and internally consistent for a hypothetical mid-sized state; they are not drawn from any actual scheme.

The environmental return is captured by the recovery-rate uplift. Recovery of the new stream rises from 45 per cent under kerbside collection to 78 per cent once a deposit is attached, an uplift of 33 percentage points. Applied to supply, this yields 450 million multiplied by 0.33, or 148.5 million additional containers recovered each year. At an average mass of 0.30 kilograms, that is 148.5 million multiplied by 0.30, equal to 44,550 tonnes diverted from landfill, avoiding 44,550 multiplied by $150, or $6.68 million in disposal cost alone. When litter clean-up savings, reduced glass contamination at material recovery facilities, and avoided virgin-material and carbon costs are added, total quantified benefit reaches $22.38 million (Institute for Sustainable Futures 2021; Keep Australia Beautiful 2021).

Break-even is best framed against fixed network cost, since the deposit itself is a transfer rather than a societal loss. The quantified benefit per redeemed container is $22.38 million divided by 292.5 million, or $0.0765, against a variable operating cost (handling plus logistics less material revenue) of $0.035 plus $0.025 less $0.020, equal to $0.040. The contribution margin is therefore $0.0765 less $0.040, or $0.0365 per redeemed container. Covering the $4.2 million fixed cost requires $4.2 million divided by $0.0365, or 115 million redemptions, equivalent to a return rate of 115 million divided by 450 million, that is 25.6 per cent. The modelled rate of 65 per cent sits comfortably above this threshold. On an operating basis the benefit-cost ratio is $22.38 million divided by $15.90 million (variable $11.70 million plus fixed $4.2 million), or 1.4, and the $18.0 million capital is recovered in roughly 2.8 years.

Stakeholder Impact

Feasibility depends not only on aggregate economics but on how costs and benefits fall across parties, summarised in Table 2. The beverage industry bears the contribution, which is passed to consumers as a higher shelf price; the competition regulator has found that scheme costs are passed through broadly in line with the deposit and monitors against opportunistic pricing (ACCC 2020). Material recovery facilities face a genuine trade-off, losing some container material but shedding the substantial cost of managing broken glass that contaminates paper and cardboard bales. Consumers pay the deposit and reclaim it on return, so the effect is close to neutral for participants, though apartment residents and lower-income households can face access barriers where the network is thin. Charities gain a proven fundraising channel through donated refunds and containers (NSW EPA 2022).

Table 2: Stakeholder impact assessment of full expansion

Options Comparison

Three options are compared in Table 3: retaining current coverage (Option A), adding wine and spirit glass only (Option B), and full expansion to all currently excluded categories (Option C). Option B captures the material with the highest litter and contamination burden, and its benefit-cost ratio is close to that of full expansion because glass dominates the mass and the litter problem. Option C, however, recovers substantially more containers, delivers a larger state-wide recovery uplift, and offers a simpler consumer message, one deposit rule for effectively all drink containers, which the international evidence links to higher and more durable participation (Eunomia Research and Consulting 2018; Zhou, Gu and Wu 2020).

Table 3: Options comparison, first full operating year

The two expansion options divert almost identical tonnage because glass carries most of the mass, yet Option C recovers roughly 40 million more individual containers and lifts the state-wide recovery rate by 7.2 percentage points against 5.3, a difference that matters against the National Waste Policy Action Plan target and for the lighter plastic and carton litter Option B leaves untouched (Commonwealth of Australia 2019).

Risks and Implementation

Several risks warrant management. First, the return rate may undershoot the 65 per cent assumption in early years, particularly for heavy glass; the break-even analysis shows the Scheme remains viable down to 25.6 per cent, so the exposure is to reduced benefit rather than insolvency. Second, glass handling raises transport and breakage costs, which the material revenue assumption already treats conservatively. Third, industry opposition and short-run price effects require careful sequencing and regulator engagement (ACCC 2020). Fourth, cross-border purchasing and container fraud must be controlled through supplier registration and barcode verification. Fifth, material recovery facilities face revenue disruption and will need transition arrangements.

Implementation should proceed in stages rather than as a single switch:

1. Consultation and regulatory amendment, including supplier and community engagement (months 1 to 6).
2. Network upgrade to glass-capable reverse vending machines and depots, with priority on apartment-dense and regional areas (months 4 to 12).
3. Supplier registration, barcode enrolment and contribution setting (months 6 to 12).
4. Phased go-live, beginning with wine and spirit glass, then remaining categories (months 12 to 18).
5. Statutory review of return rates, costs and equity outcomes at 24 months, consistent with the review practice adopted for comparable schemes (NSW EPA 2022).

Recommendations

1. Adopt Option C, full expansion, as it delivers the largest recovery uplift and net community benefit for a marginal 0.5 cent per container difference over glass-only expansion.
2. Set the supplier contribution at approximately 9.1 cents per newly eligible container, with annual reconciliation to actual return rates.
3. Fund a network densification program before go-live to protect access for apartment residents and lower-income and regional households.
4. Negotiate transition support and revised gate-fee arrangements with material recovery facilities to manage the loss of container material and the saving in glass contamination.
5. Legislate a 24-month statutory review of return rates, cost pass-through and equity outcomes, reporting publicly against the National Waste Policy Action Plan target.

Conclusion

Expanding the Scheme to include wine and spirit glass and other currently excluded containers is feasible and cost-effective. Full expansion brings 450 million containers into scope, lifts state-wide container recovery by an estimated 7.2 percentage points, and diverts around 44,550 tonnes from landfill for a net Scheme cost of $40.95 million, recovered through a modest supplier contribution. The expansion breaks even at a return rate far below the expected level, returns a benefit-cost ratio of about 1.4, and repays its capital within three years, while advancing Australia’s national recovery targets. The principal risks are transitional and manageable through staged implementation, network investment and support for material recovery facilities. On the evidence modelled, the recommended course is staged full expansion.

References

Australian Bureau of Statistics (ABS) 2022, Waste Account, Australia, Experimental Estimates, ABS, Canberra.

Australian Competition and Consumer Commission (ACCC) 2020, Container deposit scheme price monitoring, ACCC, Canberra.

Australian Packaging Covenant Organisation (APCO) 2023, Australian Packaging Consumption and Recovery Data, APCO, Sydney.

Commonwealth of Australia 2019, National Waste Policy Action Plan, Department of Agriculture, Water and the Environment, Canberra.

Department of Climate Change, Energy, the Environment and Water (DCCEEW) 2022, National Waste Report 2022, DCCEEW, Canberra.

Eunomia Research and Consulting 2018, A comparative study of deposit return systems, Eunomia, Bristol.

Institute for Sustainable Futures 2021, Container deposit schemes and the circular economy, University of Technology Sydney, Sydney.

Keep Australia Beautiful 2021, National Litter Index, Keep Australia Beautiful, Sydney.

NSW Environment Protection Authority (NSW EPA) 2022, Return and Earn statutory review, NSW EPA, Sydney.

Organisation for Economic Co-operation and Development (OECD) 2016, Extended Producer Responsibility: Updated Guidance for Efficient Waste Management, OECD Publishing, Paris.

Walls, M 2011, Deposit-refund systems in practice and theory, Resources for the Future, Washington DC.

Zhou, G, Gu, Y & Wu, Y 2020, ‘A systematic review of container deposit scheme performance’, Journal of Cleaner Production, vol. 251, pp. 119-130.