Waste management in Hungary in line with EU directives
There is a significant transformation in the Hungarian waste management sector, mainly due to the need to comply with EU waste management directives. The modern world generates a lot of waste, which needs to be managed professionally, but is exceedingly expensive to manage effectively. The question is eternal in this area: who is responsible for the management of waste and, even more importantly, who should finance it.
The EU's waste policy has set a clear direction that the waste management activities required at the end of a product's life cycle – such as collection, treatment, recycling, disposal – should be the responsibility of the producers of the product, including the payment obligations.
This is called the Extended Producer Responsibility (EPR) scheme. We should remember this concept and acronym, as this liability system will fundamentally transform waste management and its financing in the future.
The transformation of the Hungarian waste management system has also started on the path set out by the EU Directive, and changes, both legal and practical, are currently underway.
The Parliament has already adopted the basic legislative changes that create the producer responsibility scheme* and has defined the type of detailed provisions needed for the operation of the scheme.
The details of the government decree are still in draft form, but not many changes are expected before the July 2023 launch, so it is time for businesses to start preparing for these changes.
Key changes pertaining to waste management in Hungary
There are two major issues, one is how the state intends to deal with its waste management responsibilities and the other is what payment obligations are expected to cover the related finances.
On the first issue, the legislation is significantly more advanced, as the waste management task under the responsibility of the state will be carried out by MOL through a concession. In the system currently being outlined, the practical implementation will in fact be carried out through MOL as the concessionaire. This change will mainly affect companies active in the waste management sector. They will enter into a contractual relationship with the concessionaire and will in the future carry out their activities within this framework.
Extended producer responsibility (EPR)
The other issue is more of a fiscal type: who will bear the costs of treating the waste from each product?
The Hungarian solution follows the EU Directive and, through the introduction of extended producer responsibility, places related financing obligations on the producer of the product. It is expected that the new fee will be known as the EPR fee based on the English name of the concept.
We should learn the name of this fee and the rules for the expected payment obligation, as it will be with us for a long time, along with the current environmental product charge, which serves a similar purpose.
If, at first reading, you feel that the environmental product charge and the expected EPR fee are similar in nature, you are not mistaken, as the legislator is well aware and is seeking to ensure that the two fees co-exist harmoniously.
The detailed rules of producer responsibility, including rules on the EPR fee, are only known at draft level, but are expected to be introduced in July 2023 with minor adjustments compared to the draft.
Given that the extended producer responsibility will affect a wide range of companies and is expected to be introduced in less than six months, companies are advised to understand the expected rules in depth and be prepared.
Which products are covered by the extended producer responsibility?
Based on the legislation already adopted and available at the draft level, the products covered by the EPR scheme are the following; which in practice can also be called circular products.
- packaging products;
- specific single-use plastic products;
- electrical and electronic equipment;
- batteries and accumulators;
- office paper;
- commercial printing paper;
- cooking oil and grease;
- certain textile products;
- wooden furniture.
The EPR fee will be payable upon first domestic transfer of ownership of circular products, at the rate set out in the decree. At the moment the decree is also at draft level, but even on this basis the rates are not yet known.
The economic operators concerned are companies engaged in the production and trading of circular products including those who import them from abroad.
What does the EPR obligation mean for companies?
The EPR obligation basically means registration, record keeping and payment obligations.
According to the draft, the companies concerned will have to register with the waste management authority by 30 April 2023, but the obligation to pay the fee will not be to the authority but to the concessionaire, i.e. to MOL, as far as we know at present.
The activities covered by the EPR will be recorded in a statutory register similar as defined by the currently known product charge management rules (product codes, product movements, quantities) and the fee will be paid periodically, with a data reporting obligation to the waste management authority by the 10th of the month following the quarter concerned.
Under the legislation, the environmental product charge, which currently exists with similar obligations, will continue to exist in parallel with the EPR, however – as intended by the legislator – for products that are subject to both EPR and the product charge, only one of the two public charges should be paid, under current rules only the EPR charge.
Given that a significant proportion of the products concerned are products that are subject to both the product charge and the EPR, it will be important for companies to manage their two payment obligations and, in particular, their record keeping obligations, in a harmonised way.
There are still some unanswered questions
It is presumably because of the details of the parallel treatment of the two charges that the final version of the EPR is still awaited. Many experts are already doing farewell to the product charge, saying that this level of overlapping between the product scopes of the two charges foreshadows that the product charge would be abolished.
The situation is further complicated by the fact that the two fees are handled differently by the authorities, with the Hungarian tax authority controlling and collecting the product charge while having nothing to do with EPR, which is the responsibility of the concessionaire and the waste management authority. The provisions of the Waste Act already adopted suggest that the two charges will be applied in parallel in the longer term, as the Act creates the legal possibility for the two authorities concerned to exchange data for the purposes of audits.
The EPR obligations, including the payment obligation, are just around the corner, and for companies subject to EPR this is a completely new compliance activity, so it is advisable to have an expert review whether you are subject to EPR and, if so, what you need to do, because if the drafts are to be believed, the introduction is only a few months away.