California's EPR Program: Base Fees, Eco-Modulated Fees and Surcharges - What, When, and How Much?

The state of play for California’s landmark legislation, the Plastic Pollution Prevention and Packaging Producer Responsibility Act (also known as “SB 54”), an extended producer responsibility (“EPR”) law for single use packaging and plastic food service ware, is at a critical juncture.

On March 5, 2025, after multiple iterations of the rules and associated public comments, Governor Newsom vetoed the final rulemaking package as too burdensome for businesses and sent the California Department of Resources Recycling and Recovery (“CalRecycle”) back to the drawing board.  On August 22, 2025, CalRecycle opened up a forty-five-day public comment period on the new proposed regulations. Without further delays, the rule could be finalized in early 2026.

Fee Program Implementation

Under the proposed regulations, producers have thirty days after the effective date of the rules to join the producer responsibility organization (“PRO”) and report supply data for calendar year 2023. Circular Action Alliance (“CAA”), the PRO in California (and every state that has selected a PRO), expects producers to join the PRO by September 5, 2025 and report supply data by November 15, 2025. The supply data for 2023 will be used to establish a baseline for source reduction requirements and enable CAA to create an estimated fee schedule.

For the first two years of the program, CAA must assess fees to cover various costs of operating and administering the program – and two years after the program plan is approved, assess base fees adjusted by eco-modulated fees (or earlier, if CAA determines it has sufficient information to prepare a final fee schedule). CAA expects to submit the program plan to CalRecycle by mid-2026, thereby setting the stage for assessment of base fees and eco-modulated fees in late 2028/early 2029 (assuming a few months for CalRecycle’s review and approval of the program plan). Fee schedules can be revised on an annual basis thereafter.

On or before March 1, 2027, CAA intends to assess the surcharge against all producers of plastic covered materials to subsidize the California Plastic Pollution Mitigation Fund (“Fund”).

Administrative and Operating Fees

Among other things, producers will be assessed fees sufficient to reimburse CalReycle and CAA for oversight and administrative costs, including CalRecycle’s costs to prepare the needs assessment and CAA’s costs to prepare the program plan.

Base Fees

Base fee rates are set for every category of covered materials under the program. Base fees are paid by producers based on the weight of the packaging for each covered material category, multiplied by the base fee for that category. Various factors must be considered by the PRO in establishing base fees including recycling rates, source reduction data, and recycling capacity. Among other things, SB 54 requires that higher rates must be set for certain materials to cover the higher costs of recycling associated with those materials.

Eco-Modulated Fees

Where applicable, eco-modulated credits or maluses, designed to incentivize certain outcomes or behaviors, are then applied as adjustments to each producer’s base fee.

SB 54 identifies nine eco-modulated fee factors, including credits for the percentage of post-consumer recycled content (“PCR”), standardization of packaging, and labeling and instructions that improve consumer behavior – and including maluses for materials that contain chemicals on California’s Proposition 65 list. Proposition 65 chemicals are ubiquitous so this malus fee may impact a broad range of materials. For example, among the chemicals on the Proposition 65 list are phthalates commonly used as plasticizers for polyvinyl chloride (“PVC”) – likewise, many inks and dyes used with packaging materials may contain Proposition 65 chemicals.

Fee adjustments to base fees must be made on a material category basis that addresses each of the eco-modulated fee factors.  One approach would be to off-set credits with malus fees, where applicable, for the same covered material – for example, where packaging materials are standardized but are printed with inks on the Proposition 65 list. Whether the malus offsets the value of the credit would depend on the value that CAA sets for each adjustment.

Surcharges

Producers of plastic covered materials will be assessed an annual surcharge based on their market share of the plastic covered materials to cover the annual $500 million which must be raised every year for ten years (for a total of $5 billion) to subsidize the Fund.

Other Program Features

Other features of California’s program could potentially have greater impact than the eco-modulated fee factors on producer design choices and supply chain investments.

By 2027, producers must source reduce use of plastic covered materials by 10% – ramping up to 20% by 2030 and to 25% by 2032. At least 10% of the reduction must come through reuse and refill or elimination of plastic covered materials. Up to eight percent of source reduction goals can be met through the use of PCR content. Other source reduction measures include light-weighting, right-sizing, and concentration and bulking of packaging.

Finally, by 2032, all covered materials in California must be recyclable or eligible to be labeled compostable.  Among other requirements, California’s unique definitions of materials that are considered recyclable and compostable include prohibitions against the presence of certain chemicals in the materials – and, for compostable materials, under the proposed regulations, prohibit the presence of plastics in the materials (bioplastics are excluded from the definition of "plastics" but the relationship between bioplastics and compostability is complex and evolving based on their composition and ability to meet certain feedstock requirements).

Conclusion

Eco-modulated fee factors will not be assessed for a couple of years and the value of the eco-modulated factors is unknown without a final fee schedule; nonetheless, producers can still take meaningful steps now to plan for fee optimization and prepare for program compliance given general program objectives and other program features.