Fee setting

Fee setting for obligated packaging and paper is a complex process which requires in-depth knowledge and expertise. In consultation with our program partners and stewards, we maintain a suite of models, in accordance with an approved fee methodology, that informs fee rates. Fee setting defines how a program’s costs are allocated to each obligated material.

Fees are calculated in accordance with the principles determined by producers using the Four-Step Fee Methodology. The fee methodology relies upon a number of inputs:

• Gross cost of the recycling system
• Commodity revenue
• Quantities of materials supplied to the residential market
• Material-specific recovery rates
• Program management costs including promotion and education
• Research and market development costs.

In 2021, we implemented Material Cost Differentiation (MCD), which considers material-specific cost impacts as an important input to Step 1 of the Four-Step Fee Methodology. This step is responsible for allocating the most significant component of each program’s annual budget – the gross cost which is the cost to collect and manage the material. By differentiating material-specific cost impacts we can be assured that each material is fairly assigned its share of the gross cost based on the impact it has on the recycling system activities.

We are continuing our work to improve harmonization and fairness in the annual fee-setting process with the Disaggregation and Material Category (DMC) project. The DMC project will aim to align the material categories used by stewards when completing their annual reports with MCD categories used to measure cost impacts

We ensure that the program Boards of Directors and the steward community are involved in any initiative that will impact the fees – engaging them throughout the process and adhering to endorsed guiding principles, to ensure fees are fair and transparent.

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The Evolution of fee setting

In order to ensure fairness and stay current in an evolving industry, the fee setting process has advanced. Below shows the methodology used in the past, and what we use today with most of our partner programs.

YEARS USED	FEE METHODOLOGY	COST METHODOLOGY
Up to 2017	Three-factor Formula	Activity-based Costing
2017-2020	Four-step Methodology*	Activity-based Costing
2021-present	Four-step Methodology	Material Cost Differentiation**

*Stewardship Ontario started using the four-step methodology in 2021

**Stewardship Ontario has not started using material cost differentiation cost methodology

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Program fee rates can be found on the reporting resources page.