California's new Extended Producer Responsibility Act is major addition to suite of plastic-focused laws

"One of the law's innovations is the Producer Responsibility Organization, or PRO, a nonprofit entity responsible for ensuring compliance with SB 54. All producers of covered material must form and join a PRO by 2024."

On June 30, 2022, California Governor Gavin Newsom signed into law Senate Bill 54, the country’s most ambitious restrictions on single-use plastics and packaging. The law, designed to shift plastic pollution responsibilities from consumers to plastics industry players – a concept known as extended producer responsibility – creates significant fee obligations and is the latest of several plastics-focused laws the state has enacted in recent months.  Lawmakers and stakeholders negotiated the measure while a similarly focused initiative was pending on the November ballot.

SB 54, or the Plastic Producer Responsibility Act, regulates (A) single-use packaging (not limited to plastics) and (B) plastic (including plastic-coated) single-use food service ware (collectively, covered material). Several categories of materials are excluded from the law's coverage, including medical products packaging and beverage containers subject to the California Beverage Container Recycling and Litter Reduction Act.

Obligations for producers

The law is comprehensive, requiring that producers of covered material sold, offered for sale, imported, or distributed in the state ensure: 

1. The amount of plastic covered material in the state be reduced by 10 percent by 2027, by 20 percent by 2030, and by 25 percent by 2032. The 25 percent reduction specifically requires both moving away from single-use and re-thinking plastic packaging design: (A) 10 percent of plastic covered material must be reduced by switching out plastic for refillable or reusable packaging or eliminating a plastic component; (B) the remaining 15 percent of plastic covered material must be reduced by “concentration, right-sizing, lightweighting, or shifting to bulk or large format packaging that allows consumers to refill home or commercial reusable containers, or shifting from a plastic covered material to a nonplastic covered material.” The law also gives the California Department of Resources Recycling and Recovery (CalRecycle) authority to increase the percentage reduction of plastic covered material required for compliance under certain conditions.
   
   
2. All covered material be recyclable or compostable by 2032.
   
   
3. Plastic covered material be recycled in California at rates of 30 percent by 2028, 40 percent by 2030, and 65 percent by 2032.
   
   

SB 54 also essentially bans expanded polystyrene foodware: producers may not sell, offer for sale, distribute, or import these items into California unless they demonstrate that 25 percent of all expanded polystyrene in the state is recycled by 2025, 30 percent by 2028, 50 percent by 2030, and 65 percent by 2032.

Leave it to the PROs

One of the new law's innovations is the Producer Responsibility Organization, or PRO, a nonprofit entity responsible for ensuring compliance with SB 54. All producers of covered material must form and join a PRO by 2024. The PRO’s governing body must then submit an application to CalRecycle and, if approved, the PRO will be responsible for carrying out SB 54’s requirements, including creating a comprehensive plan and budget, which the PRO must first submit to an advisory board for review and comment and then to CalRecycle for approval.

Among many other requirements, the PRO plan must:

1. Set forth actions and investments the PRO will implement to comply with the bill.
   
   
2. Create a “source reduction plan” to achieve the 25 percent reduction in plastic covered materials by 2023. Notably, individual producers that are part of the PRO must submit individual source reduction plans to the PRO, including data regarding plastic usage.
   
   
3. Identify technologies and means that the PRO will use to meet the bill’s recycling requirements.
   
   

Once the plan is approved, it will be valid for five years.  It must be posted on the PRO’s website along with an annual report and budget describing how the PRO is implementing the plan and complying with the bill. These reports must also be submitted to CalRecyle.

No later than 2027, no producer may sell, offer for sale, import, or distribute covered materials in California unless the producer is approved to participate in the PRO’s plan. A narrow exception permits producers to comply with the bill individually if they meet certain enumerated requirements or can demonstrate a recycling rate of 65 percent  for three consecutive years before 2027 and 70 percent thereafter. Producers complying individually undertake the same responsibilities as a PRO.

PROs must also provide data to CalRecycle about their members’ relevant activities. For example, PROs must report the aggregate quantities in total weight and the number of plastic components of covered material sold, the amount of plastic covered materials sold, and the number of plastic components and weight of plastic covered material shifted to a refillable or reusable packaging.

Financial obligations

SB 54 establishes significant financial obligations for producers of covered material.

First, these producers must pay fees to the PRO. In turn, on or before the end of the 2026–2027 fiscal year, the PRO must pay CalRecycle a “circular economy administrative fee” in an amount to be set by CalRecycle. This fee will then be deposited into the California Circular Economy Fund, established by the new law.

In addition, beginning in 2027, the California Department of Tax and Fee Administration will assess an annual surcharge of $500 million from each PRO, to be deposited in the California Plastic Pollution Mitigation Fund. A PRO may collect up to $150 million from plastic resin manufacturers that sell plastic covered materials to the PRO’s members for the purpose of paying this surcharge.

Obligations for CalRecycle

Additional detail regarding SB 54’s requirements will be coming soon, when CalRecycle adopts regulations to implement the law and ensure compliance by 2025. Among other things, these regulations will address funding, reporting, and a process to exempt small businesses from the law’s requirements. SB 54 also obliges CalRecycle to:

1. Post a list of covered material categories to its website by July 1, 2024.
   
   
2. Conduct a “characterization study” of covered material categories disposed of in California landfills. The study must be posted to CalRecycle’s website and updated in 2028, 2030, 2032, and at least every four years thereafter. CalRecycle must post its preliminary findings from these studies and hold a public meeting to receive comments.
   
   
3. Calculate and post on its website the recycling rates for each covered material category by 2026.
   
   
4. Create and post on its website by 2024 a list of covered material categories that are deemed recyclable and compostable. This list must be updated annually until 2023 and evaluated every two years thereafter.
   
   
5. Review relevant data to determine whether to adjust the initial recycling rates required by SB 54.
   
   
6. Establish a producer responsibility advisory board to be responsible for “identifying barriers and solutions to creating a circular economy” and providing initial recommendations to CalRecycle and the PROs.
   
   

Importance of compliance

SB 54 sets a high price for producers who fail to comply with the law. CalRecycle may issue notices of violation to entities not in compliance with SB 54 and may also impose penalties for noncompliance as high as $50,000 per day.

California’s current aggressive stance on plastic pollution and recycling suggest the new law will be vigorously enforced. Among other actions focused on plastic production, in May 2022, the California Attorney General launched an investigation into what he described as the fossil fuel and petrochemical industries’ role in plastic pollution, alleging misleading representations regarding the efficacy of recycling. SB 343 is another example. Signed into law in October 2021, that law bars recyclability claims on any product or packaging that fails to meet California’s strict recyclability criteria and requires that producers substantiate such claims.

In short, SB 54 is a substantial development, but only the latest in a series of actions California has taken to address plastic pollution and recycling. It likely will not be the last.

Find out more about the implications of this new law by contacting any of the authors.