Trend watch: Extended Producer Responsibility (EPR) in 2026 — signals, winners, and red flags

Opening stat: Extended Producer Responsibility programs now cover products generating over $320 billion in annual fees globally, with North American EPR legislation expanding from 5 active state programs in 2020 to 23 in 2025—a nearly fivefold increase (Product Stewardship Institute, 2025). Yet industry compliance costs have surged 45% since 2022 as fee structures tighten and recycling economics deteriorate, creating both operational challenges and investment opportunities in compliance infrastructure.

Signals to watch, value pools, and how the landscape may shift over the next 12–24 months. Focus on unit economics, adoption blockers, and what decision-makers should watch next.

Why It Matters

Extended Producer Responsibility fundamentally reshapes how companies account for end-of-life product costs. By shifting financial and operational responsibility for waste management from municipalities and consumers to producers, EPR internalizes externalities that market prices have historically ignored. For investors, this regulatory architecture creates both compliance obligations and value creation opportunities in the emerging circular economy.

The North American EPR landscape is accelerating rapidly. California, Colorado, Oregon, and Maine enacted packaging EPR laws in 2022–2024, with programs becoming operational in 2025–2026. By 2027, states representing over 40% of U.S. population and GDP will have packaging EPR requirements—a regulatory critical mass that effectively establishes a national standard despite federal inaction (Recycling Partnership, 2025).

For producers, the financial implications are substantial. A 2024 analysis by Closed Loop Partners estimated that packaging EPR fees for a typical consumer packaged goods company would represent 0.3–0.8% of packaging costs in early-stage programs, rising to 2–4% as recycling rate targets tighten and eco-modulation penalties apply to difficult-to-recycle materials. For complex packaging categories (flexible plastics, multi-layer materials), eco-modulation can increase base fees by 200–500%.

The unit economics of recycling infrastructure investment depend heavily on EPR fee structures. Higher fees for non-recyclable materials create price signals that can justify investments in advanced recycling technologies, design-for-recyclability innovations, and sorting infrastructure. Conversely, fee structures that are too low or poorly designed fail to drive meaningful system change while adding administrative burden.

Key Concepts

EPR Program Structures

North American EPR programs fall into three primary structural models:

Producer Responsibility Organizations (PROs): Industry-funded non-profit organizations that collectively manage compliance on behalf of member companies. PROs provide economies of scale in program administration, data reporting, and infrastructure investment. Circular Action (packaging) and Call2Recycle (batteries) exemplify successful PRO models.

Stewardship Plans: Individual producers or groups submit plans detailing how they will meet recycling targets, either independently or through PRO membership. This model provides flexibility but creates fragmentation and oversight challenges.

State-Administered Programs: Government agencies manage collection, processing, and reporting, funded through producer fees. This model centralizes accountability but may lack private sector efficiency.

Eco-Modulation Mechanisms

Eco-modulation adjusts producer fees based on product design attributes—recyclability, recycled content, toxicity, and repairability. Well-designed eco-modulation creates incentives for circular design:

Recyclability tiers: Oregon's program establishes fee differentials of up to 50% between readily recyclable materials (aluminum, glass, PET, HDPE) and difficult materials (flexible plastics, polystyrene, black plastics).

Recycled content credits: California's AB 793 requires minimum recycled content in plastic beverage containers (15% by 2022, 50% by 2030), with fee adjustments for exceeding or missing targets.

Design-for-recyclability bonuses: Some programs reduce fees for packaging meeting specific design guidelines (e.g., avoiding problematic additives, using mono-materials).

KPI	2024 Baseline	2026 Target	Top-Quartile Performance
Packaging EPR Fee Rate ($/ton)	$150–250	$200–350	Variable by material
Recycling Rate Achievement (%)	42%	50%	>60%
Eco-Modulation Spread (high/low fee ratio)	2:1	3:1	>5:1
Compliance Reporting Accuracy (%)	78%	90%	>95%
Producer Registration Rate (%)	65%	85%	>95%
Recycled Content Achievement (%)	18%	25%	>35%

What's Working

Multi-State Coordination Efforts

The complexity of state-by-state EPR implementation has spurred coordination initiatives. The Northeast Waste Management Officials' Association (NEWMOA) facilitated development of a model EPR bill template adopted with variations by Maine, Connecticut, and proposed in Massachusetts and New York. This coordination reduces compliance complexity for national brands while maintaining state regulatory authority.

The Recycling Partnership's Pathway to Circularity project provides standardized data infrastructure for tracking material flows across programs. Launched in 2024, the platform enables producers to report to multiple state programs through a single interface, reducing administrative burden estimated at $50,000–200,000 annually for large consumer packaged goods companies.

Technology-Enabled Compliance

Software platforms have emerged to address EPR compliance complexity. RecycleSmart, ERI Direct, and Lorax EPI offer producer registration, fee calculation, reporting automation, and audit preparation. These platforms aggregate packaging data from ERP systems, apply jurisdiction-specific fee schedules, and generate regulatory filings—reducing compliance staff requirements by 40–60% according to vendor claims.

Blockchain-based material tracking is advancing from pilots to production. Circularise's product passport technology, deployed by BASF and Covestro for plastics, provides chain-of-custody documentation that satisfies recycled content verification requirements. While adoption remains limited, regulatory acceptance of digital verification is accelerating.

Design-for-Recyclability Investments

Eco-modulation is driving packaging redesign. Unilever's 2024 commitment to eliminate problematic plastics from its portfolio by 2025—specifically targeting PVC, polystyrene, and carbon black pigments—responded directly to emerging eco-modulation fee differentials. The company estimated €300 million in packaging redesign costs but projected €150 million in annual EPR fee savings once programs mature.

Nestlé's Investment in mono-material packaging for its confectionery products (replacing multi-layer flexible films) demonstrates the design response eco-modulation can catalyze. The new packaging structure maintains product protection while improving recyclability classification, reducing anticipated EPR fees by 35%.

What's Not Working

Data Quality and Verification Challenges

EPR compliance depends on accurate product sales and packaging weight data, yet current systems struggle with verification. A 2024 audit by Oregon DEQ found that 34% of producer reports contained material discrepancies when cross-referenced with import records and retail scanner data. The absence of standardized data formats and reporting timelines across states compounds these challenges.

Free-rider enforcement remains problematic. Online marketplaces and direct-to-consumer brands—particularly international sellers—frequently escape registration requirements. The Product Stewardship Institute estimates that non-compliant producers represent 15–25% of obligated products in active programs, shifting costs to compliant companies and undermining competitive fairness.

Recycling Infrastructure Gaps

EPR fees are intended to fund recycling infrastructure, but the investment pipeline between fee collection and facility development remains underdeveloped. California's beverage container redemption program, which collects over $1 billion annually, faced criticism in 2024 for accumulating unreasonable reserves while recycling rates declined and redemption centers closed.

The economics of recycling infrastructure investment remain challenging. A 2024 analysis by RRS found that new material recovery facilities (MRFs) require 7–12 year payback periods in current market conditions—longer than typical private equity investment horizons. EPR fee structures provide revenue certainty that could improve financing terms, but program volatility (political risk of fee changes) limits bankability.

Stakeholder Conflict and Regulatory Uncertainty

EPR policy development has become contentious. Industry groups (American Beverage Association, Consumer Brands Association) have lobbied for fee caps, limited eco-modulation, and producer-controlled PROs. Environmental organizations advocate for aggressive targets, mandatory minimum recycled content, and reuse requirements. Municipal waste authorities seek fee structures that fully fund their collection costs.

This conflict creates regulatory uncertainty that chills investment. Colorado's packaging EPR implementation, passed in 2022 with a 2025 operational target, faced delays as stakeholder negotiations over fee methodology extended through 2024. The resulting uncertainty deterred recycling infrastructure investments awaiting program clarity.

Key Players

Established Leaders

Waste Management Inc.: North America's largest waste company, with $20+ billion in revenue and extensive recycling infrastructure. Waste Management's investments in advanced sorting technology and organics processing position it to capture EPR-funded infrastructure development.
Republic Services: Second-largest U.S. waste company, with significant polymer center investments to produce recycled plastics meeting packaging specifications. Republic's partnerships with CPG companies for offtake agreements demonstrate vertical integration potential.
Veolia North America: The U.S. subsidiary of French environmental services giant Veolia, with strong capabilities in complex waste streams (electronics, hazardous) and emerging circular economy services.
Circular Action Alliance: The PRO established by major consumer packaged goods companies (Coca-Cola, PepsiCo, Nestlé, P&G) to manage packaging EPR compliance across emerging state programs. Launched in 2023, CAA is negotiating program administration roles in multiple states.

Emerging Startups

Divert Inc.: Specializes in organic waste diversion from retail operations, with technology to convert unsold food into renewable energy. Raised $400 million debt facility in 2024 for infrastructure expansion as organics EPR programs emerge.
AMP Robotics: AI-powered sorting robotics that improve MRF efficiency and material quality. AMP's technology enables recovery of materials previously lost to contamination, directly improving EPR recycling rate outcomes.
Novoloop: Chemical recycling startup converting post-consumer polyethylene to high-performance materials. Novoloop's proprietary process addresses flexible plastic recyclability—a key eco-modulation target.
Rheaply: Asset exchange platform enabling B2B reuse of packaging and equipment, directly supporting EPR-adjacent reuse mandates emerging in some jurisdictions.

Key Investors & Funders

Closed Loop Partners: Mission-driven investment firm with $500 million under management focused on circular economy infrastructure. Portfolio includes recycling technology, reuse systems, and advanced materials recovery.
Generate Capital: Infrastructure-as-a-service investor with $8 billion in assets, increasingly focused on resource recovery and circular economy projects where EPR provides revenue certainty.
The Recycling Partnership: Non-profit combining industry funding, foundation grants, and government partnerships to catalyze recycling system improvements. Operates as a neutral convener and provides $35 million annually in infrastructure grants.
Circulate Capital: Focused on plastic waste reduction and recycling in emerging markets, demonstrating model for EPR-adjacent infrastructure development applicable to U.S. markets.

Examples

Maine Packaging EPR Implementation (2024–2025): Maine's pioneering packaging EPR law, the first in the United States, became fully operational in 2024. The program requires producers to fund the full net cost of packaging waste management in municipal recycling programs—approximately $16 million annually. Eco-modulation provisions reward readily recyclable materials with fee discounts of up to 35%. Early implementation revealed challenges: 23% of obligated producers failed to register by the deadline, prompting enforcement actions, and municipal cost data submitted by 271 communities showed substantial variation requiring standardization. The program nonetheless demonstrated proof-of-concept for state-level EPR in the U.S. context.
Coca-Cola's Multi-State Compliance Strategy (2024): Facing EPR obligations across five states with different requirements, Coca-Cola consolidated compliance through Circular Action Alliance membership while implementing internal packaging redesign to optimize eco-modulation outcomes. The company converted 12 regional beverage brands from multi-layer to mono-HDPE bottles, improving recyclability classification. Coca-Cola estimated the redesign investment of $45 million would generate $18 million in cumulative EPR fee savings over five years while supporting the company's broader World Without Waste sustainability commitments.
Oregon's Advanced Deposit Return System Reform (2024): Oregon reformed its 52-year-old bottle deposit system with significant EPR elements, raising the deposit to $0.15 and expanding coverage to wine and spirits containers. The reformed program achieved 85% return rates within the first year—significantly above typical curbside recycling capture. Crucially, the program included eco-modulated handling fees that penalized difficult-to-recycle container formats. Glass bottle returns exceeded projections by 40%, demonstrating consumer behavior response to well-designed incentives and previewing how EPR eco-modulation might drive material substitution decisions.

Action Checklist

Audit current packaging portfolio for EPR-regulated materials across all active and proposed state programs (Maine, Oregon, Colorado, California, Connecticut, Minnesota, New Jersey, New York, others pending)
Evaluate eco-modulation exposure by classifying packaging by recyclability tier under each jurisdiction's methodology
Assess PRO membership vs. individual compliance economics—CAA membership may offer administrative savings for large portfolios but reduces control
Integrate packaging recyclability into product development criteria, prioritizing materials with favorable eco-modulation treatment
Establish data infrastructure connecting packaging specifications (ERP/PLM systems) with sales volumes (retail scanner data) for compliant reporting
Monitor emerging programs: at least eight additional states have packaging EPR bills under consideration for 2025–2026 legislative sessions
Evaluate investment opportunities in recycling infrastructure positioned to capture EPR-funded expansion

FAQ

Q: How do EPR fees compare to current packaging costs? A: In early-stage programs (Maine, Oregon), base fees range from $150–350 per ton of packaging material, representing 0.3–0.8% of typical packaging unit costs. Eco-modulation can increase fees for difficult-to-recycle materials by 2–5x (e.g., $800+ per ton for flexible plastics in some structures). As programs mature and recycling targets tighten, fees are projected to increase 50–100% by 2030. For context, California's proposed packaging EPR program would generate $1.5 billion annually—comparable to the state's total municipal recycling system operating costs.

Q: What is the competitive advantage of early EPR compliance investment? A: Companies that proactively redesign packaging for recyclability and build compliance infrastructure capture several advantages: (1) Lower eco-modulation fees versus reactive competitors; (2) Supply chain resilience as recycled content mandates tighten; (3) Consumer preference—64% of U.S. consumers indicate recyclability influences purchase decisions; (4) Investor relations—ESG-focused investors screen for circular economy positioning; (5) Regulatory engagement—proactive companies gain influence in rule-making processes. Laggards face compressed timelines, premium costs for recycled materials as demand increases, and potential brand reputation damage.

Q: How should investors evaluate recycling infrastructure opportunities in EPR-enabled markets? A: Key evaluation criteria include: (1) Revenue certainty—EPR fee streams provide multi-year visibility, but political risk of fee changes requires assessment; (2) Technology positioning—advanced sorting (optical, AI-assisted) and chemical recycling address hard-to-recycle streams where eco-modulation creates price premiums; (3) Offtake contracts—pre-committed buyers for recycled materials (CPG companies, converters) derisk commodity price exposure; (4) Geographic footprint—facilities serving multiple EPR-active states diversify regulatory risk; (5) Management experience—circular economy ventures require regulatory navigation skills beyond traditional waste sector operations.

Q: What are the primary compliance risks for producers? A: Major risks include: (1) Registration failure—non-registration triggers enforcement actions, potential sales prohibitions, and penalties of $1,000–50,000 per day depending on jurisdiction; (2) Data inaccuracy—misreporting packaging volumes or material types leads to fee underpayment and audit liability; (3) Eco-modulation misclassification—incorrect recyclability claims triggering penalty fee tiers; (4) Free-rider liability—some programs impose joint liability on brand owners for third-party seller non-compliance; (5) Transition costs—retroactive fee adjustments as programs refine methodologies can create unexpected obligations.

Q: How will federal EPR legislation affect state programs? A: Federal packaging EPR legislation remains unlikely in the near term given Congressional gridlock, but the RECOVER Act and similar proposals would preempt state programs with a national framework if enacted. Industry groups generally prefer federal preemption to reduce compliance complexity, while environmental advocates argue state programs drive higher ambition. Investors should monitor federal legislative developments but not defer state-level compliance—existing state programs contain explicit provisions maintaining obligations regardless of future federal action.

Sources

Closed Loop Partners. (2024). Financing the Circular Transition: EPR and Infrastructure Investment. Closed Loop Fund.
Oregon DEQ. (2024). Oregon Recycling Modernization Act: First Year Implementation Report. Oregon Department of Environmental Quality.
Product Stewardship Institute. (2025). U.S. Extended Producer Responsibility State Legislation Tracker. PSI Policy Database.
Recycling Partnership. (2025). State of Curbside Recycling Report 2024. The Recycling Partnership.
Resource Recycling Systems (RRS). (2024). Material Recovery Facility Economics in the EPR Era. RRS Advisory Practice.
Consumer Brands Association. (2024). Packaging EPR Principles and Implementation Framework. Consumer Brands Association Policy Brief.