The WEEE Directive requires producers to pay for disposal of products from August 2005 - but how much will this cost?

The WEEE directive will result in significant costs being incurred by European electrical equipment producers and importers. The UK government's estimate for the UK alone is from £217 million per annum to £455 million per annum. Individual producers need to know now how much this is likely to cost them in order to plan for the future and avoid selling new products at a loss.

Defining the model
At the recent ERA Recycling 6 conference, Mervyn Groves of Sanyo UK described a WEEE cost prediction model which was developed by ERA for Sanyo.The costs that a producer will incur in any particular year in the future depends on a complex inter-relationship between a number of variables including:

	the annual sales of the producers own products in previous years
	the annual sales of all products of this type in previous years
	the lifetime of these products (affecting when products reach end-of-life and therefore disposal must be paid for)
	the number and weight of products sold in that year. The market share is needed to determine the charge payable for disposal of "historical waste" (products manufactured before 13th Aug 2005), the UK government's current preferred option is to base this on turnover.
	the costs for collection and recycling, the number of products reaching the recycler and what is done with them
	the weight and composition of the products being recycled

Figure 1 shows the annual sales profile for a typical product. In this case the market share of "own" product remains roughly constant and rises and falls with the growth and decay of the total market. The relationship between sales, and lifetime of products provides a means of predicting what is disposed of and when. Figure. 2 shows an example of for the same example product. The sales peak in 2006. The product has a mean lifetime of 10 years giving a peak in disposal in 2016. This peak has a spread since not all old products reach end-of-life in the same year.

Figure 1. Sales to date and predicted to 2010

Figure 2. Inter-relationship between sales and disposal for a typical product stream

Calculating the cost
Using the above data, the ERA model calculates the likely costs that will be incurred after 13 August 2005 when the legislation takes effect. It calculates both the cost of recycling own products when they reach EOL as well as the historical costs that are likely to be incurred. In general a producer will want to ensure that income from sales will be sufficient to cover both of these future costs. Figure 3 shows the annual provision that needs to be made for historical waste and also own waste (taking into account predicted interest rate changes between now and the year in question)

Figure 3. Annual cost provision for end-of-life treatment

The cost of disposing of historical waste is a major part of the total cost owing to the falling market post 2006. While this provides an overall number for the provision required it is particularly helpful to translate these totals into the cost per item. This is a critical measure because many producers will wish to ensure that the additional cost of end-of-life treatment is built in to the sale price. This might be as a visible fee in some sectors.

Figure 4 shows the additional cost per item which results for this example product. Assuming a typical product sale price of £200, the end-of-life treatment cost adds 1.5 to 3% to the total. This cost comprises two elements, the cost for historical waste and the cost for disposing of own products (post deadline provision).

Figure 4. The additional cost per item to pay for end-of-life treatment

What happens if something unexpected happens? A number of extraordinary events are foreseeable which could disrupt the "smooth" behaviour described above, for example:
	the Government actively encourage take-back of old equipment? This could increase significantly the quantity of historical waste recovered and as a result, producer's costs will increase.
	a new product is launched with much larger sales than previous products. How much money will be required for the much larger share of historical waste and also how much must be set aside for future recycling costs?
	a producer carries out a unilateral take-back event
The model is capable of taking such one-off events into account. Taking the producer take-back event as an example produces the take back fluctuation shown in Figure 5.

Figure 5. Effect of one-off take-back event on disposal of own end-of-life product

How modelling WEEE behaviour will help you
Having a clear view of when future costs are likely to arise and how much these will be, is crucial to any successful business. Through an understanding of what factors affect costs and how they interact, it is possible not only to make provision for these costs but also to plan to mitigate them.

This type of model can be designed for any type of product in any market and can be used to allow informed business decisions to be made based on the knowledge of how these will affect the costs from WEEE. Income that is set aside for financing the recycling of products when they reach EOL may be subject to tax relief. The Inland Revenue is likely to accept this only if justifiable estimates can be produced and this type of model should be able to provide this.

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