Some thoughts on the proposed “latte levy” on takeaway cups

The UK coffee industry has been in the news recently, as a group of politicians that make up the Environmental Audit Committee have come up with several proposals, but this is by far the most eye-catching (and headline-grabbing):

The growing demand for coffee means that the Government should act urgently to tackle avoidable coffee cup waste. The charge on plastic bags prompted consumers to change their habits, reducing plastic bag use by over 83% in the first year. Additionally, the plastic bag charge saw an increased level of support for further charges to reduce waste. We therefore recommend that the Government introduces a minimum 25p levy on disposable cups, to be paid by the consumer on top of the price of the coffee.

There’s a BBC summary article here, and a more in-depth look at the report on the United Baristas blog. The report itself is available here.

I’m going to work from the base principle that the waste produced by disposable coffee cups is a problem, that we should be trying to fix. I will also outline where I disagree, and why, with the government. There’s quite a lot to discuss here, so it is best broken down into four parts:

1. What problems are we trying to address?
2. What outcomes are we looking to achieve?
3. What measures will lead to us attaining our goal?
4. What do I propose?

What problems are we trying to address?

The UK uses about 2.5 billion disposable cups per year, and the rate is increasing. However, this only makes up about 0.7% of all UK packaging waste. Cynically, one might argue that politicians have focused on it because of its visibility, more than its potential environmental impact.

In the UK there are only 3 facilities capable of recycling these cups – because standard recycling facilities cannot remove the bonded plastic liner from the paper. It seems appropriate to note that recycling is a profitable business (when done properly), and these businesses may stand to benefit from all of this/have a role to play in potential solutions. It also seems relevant to note that one of them, Veolia, has global revenues in the billions.

The larger problem, according to the committee (and I agree with them here) is that people incorrectly believe that most cups can be recycled. They point the blame at coffee sellers, but I believe this information is spread by manufacturers first and foremost. This misunderstanding is not just an issue for coffee cups, but for other packaging materials too.

There are other issues, such as the current cost of dealing with them – be it as litter or incurred collecting and sorting the cups. However, let’s just focus on the main issues.

In summary:

• We produce lots of waste
• We don’t realise that most recyclable cups are not being recycled.

What outcomes are we looking to achieve?

We want a few things, I believe, from the coffee market and the consumer:

• Choosing to use less disposable cups (i.e. ceramics or reusable cups like KeepCup)
• Disposing of cups in a way that allows recycling (i.e. specialist collection points, separate from traditional recycling collection bins)
• Potentially encouraging the use of potential alternatives like biodegradable cups and lids, and encouraging their proper disposal too – should the cradle to grave energy costs not be higher than disposable cups.
• Understanding the limitations of the current materials and recycling process.

What measures will lead to us attaining our goal?

So, let’s talk about this tax: on the face of it, there is probably some good evidence it would work. A similar scheme with supermarkets/groceries, with a 5p of 10c fee per bag, has been incredibly successful. In the UK, at least, there have been some key differences:

• Supermarkets can deduct the cost of manufacturing the bag from the fee. Previously supermarkets had to suffer the cost of producing the enormous amounts of bags they gave away for free. Now they have no cost to them, as it is covered by the consumer, which has improved their profitability.
• The cost of the bag, relative to the cost of a typical food shop, is very low i.e. way less than 1% typically.
• Reusable shopping bags are easy to carry and require no maintence or cleaning (hopefully)

Other schemes mentioned in the report suggest charging a deposit, rather than a tax, which I am more comfortable with.

However, I do have grave concerns about a levy as large as 25p. This represents a likely increase in cost >10%. It also presumes that demand for coffee, especially premium/specialty coffee, is fixed. I do not believe this to be the case. I believe that, especially at a time of economic uncertainty, we would see a negative impact on consumption with independent businesses hit hardest of all.

I could be more open to it if the scheme allowed coffee shops to deduct the cost the cups and lids from it – but I don’t think it is realistic as it would be nearly impossible to police. (There are only a few supermarket companies, that have well audited public accounts – there are enormous numbers of coffee shops).

The committee believes that charging a fee is more effective than offering a discount. As much as it pains me, I have to agree here. Pushing reusables as the only answer is problematic for me in a lot of ways:

• There are hygiene issues here. I don’t think baristas should have to wash or handle dirty cups. This would undoubtedly happen often, and be a potentially contentious and difficult interaction for the cafe. Equally, there are other hygiene issues where disposable cups may be the best option when considering infection control or sanitation.
• Standardisation will be a problem. Coffee shops sell by liquid volume, mostly using the vessel as the measure. If people are bringing whatever they have to hand, how would portion control work? Which brands and products are to be considered acceptable? Again – I foresee more difficult conversations for baristas and customers.
• Reusable cups are, for the most part, inconvenient to carry around (in comparison to a shopping bag). I know some brands are better than others, but I just see more friction here.

One final point in this section: takeaway sales are vital to independent coffee businesses. Most lack sufficient capital when they start to be able to afford a large space with sufficient covers to sell enough drinks inside the cafe to be profitable. Reducing takeaway sales, as a whole, would be brutal and destructive to many independent cafes.

What do I propose?

When I look at the two problems, I believe this is a good opportunity to attack the issue of awareness and consumer confusion. I would propose:

1. Every disposable cup must carry disposal information on it. It should state clearly if, where and how a cup can be recycled. I know we all want our cups to be beautiful but I think we’d find ways to display the information in a way that is “on-brand”. Additionally, information and graphics at the point of recycling should be clearer about cups.

2. Continue to incentivise cafes and customers to encourage reuse of cups and suitable reusable cups. To do that I would propose:

• Removing VAT on reusable cups, that meet a threshold of sustainability.
• Taxing the cups at the point of sale from the manufacturer.

Manufacturers should be encouraged to develop better alternatives to what they currently offer. The tax could be waved on alternative products such as those that are biodegradable (if they meet energy impact criteria), which would encourage their use. Cafes would benefit from lower cost of goods if they’re able to encourage more reuse and the tax collected would be easier to project for them in their buying and have fewer issues for cash flow.

1. Build better recycling infrastructure to allow more cups to be recycled. I’m hesitant to suggest spending a lot of public money in a situation where three companies stand to benefit, but I’d be fine with the government lending money at preferential rates or incentivising those companies to build out better collection systems.

2. Use the tax that has been collected, use that money to offer a small refund on a takeaway cup when returned to a dedicated collection point. This would offer an incentive to people to properly dispose of them.

While I haven’t had a lot of time to think about all this, it seemed worthwhile to at least get some thoughts out there. Perhaps let me know on twitter @jimseven if you have any feedback and ideas.