BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
AB 2467 (Nestande) - California Beverage Container Recycling and
Litter Reduction Act: market development payments.
Amended: May 5, 2014 Policy Vote: EQ 7-0
Urgency: No Mandate: No
Hearing Date: June 30, 2014 Consultant:
Marie Liu
This bill meets the criteria for referral to the Suspense File.
Bill Summary: AB 2467 would require Department of Resources
Recycling and Recovery (CalRecycle) to pay market development
payments to both certified entities and product manufactures.
Fiscal Impact: On-going cost pressures in the low millions of
dollars on the California Beverage Container Recycling Fund
(special) for maintaining broad eligibility for market
development payments.
Background: The California Beverage Container Recycling and
Littler Reduction Act (act) requires beverage containers sold in
this state to have a California redemption value (CRV) of 5
cents for containers that hold fewer than 24 ounces and 10 cents
for containers that hold 24 ounces or more and requires a
distributor to pay a redemption payment to CalRecycle. CRV
proceeds are deposited into the California Beverage Container
Recycling Fund (fund) and are continuously appropriated to
CalRecycle for the payment of refund value and processing fees.
Besides refunds and administration of the program, the fund is
also used to support programs to encourage recycling, including
the Plastic Market Development Payment (PMDP) program, which was
established by AB 3056 (Chapter 907, Statutes of 2006). The PMDP
is designed to encourage in-state recycling of plastic beverage
containers to be used as feedstock the manufacture of new
plastic products in California. To this end, CalRecycle may give
payments, not to exceed $150 per ton, to "certified entities" (a
recycling center, processor, or drop-off or collection program,
herby referred to in this analysis as "processors") for the
preparation of recycled plastic for reuse or to product
manufactures who utilize recycled plastic to manufacture a new
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product. CalRecycle is authorized to pay a different rate to
processors and manufactures. Currently the PMDP program pays the
maximum incentive of $150 per ton to both processers and
manufacturers.
CalRecyle is authorized to award up to $10 million annually for
this program. However, under �1458, CalRecyle may increase the
amount of available awards if certain conditions are met.
The PMDP program sunsets on January 1, 2017.
This past fall, CalRecyle proposed plans to enact emergency
regulations to issue PMDP payments to product manufacturers only
and to end payments to processors. This proposal was in response
to the high demand for the PMDP program. In 2013, funds were
almost exhausted in the first quarter of the fiscal year and
fully exhausted in the second. In 2012, the PMDP allocated $20.5
million in payments with over $11.5 million in payments within
the first two quarters of the year. Most of the participants to
the PMDP have been manufactures (slightly less than 75%).
Approximately 10% of the participants are processors and
approximately 20% are both manufactures and processors. Entities
that are both a manufacturer and a processor can receive
payments for both processing and manufacturing (i.e. two
payments on the same piece of plastic but for different
purposes).
Proposed Law: This bill would eliminate CalRecycle's discretion
in determining whether processors, manufactures, or both should
be eligible to receive market development payments and instead
declares that both entities must be eligible.
Staff Comments: Expanding eligibility for grant monies (or in
this case market development payments) creates cost pressures on
the funding source because it increases the demand for grants,
regardless if the funding source is limited. In the case of the
PMDP program, the act currently gives CalRecycle flexibility in
determining whether the eligibility should be broad (processes,
manufactures, or both) or more narrow (e.g. just the
manufacturers). This flexibility allows CalRecycle to control
the demand (and associated cost pressure) for the program.
This bill would mandate that the PMDP program have broadest
eligibility that is currently possible, and thus the highest
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demand for the program with regards to eligibility. The
difference between the demand under the broad eligibility and
the demand under a more narrow eligibility would be the cost
pressure created by this bill. While this cost pressure is
unknown and likely variable as the plastics market changes,
staff estimates that it is in the low millions of dollars.
Staff notes that the cost pressures in this bill are to the
California Beverage Container Recycling Fund, which has a
substantial structural deficit.