The end of 2005 sees the expiry of the 3rd Packaging Agreement, one of the aims of which was to reduce the number of beverage cans and bottles in street litter by 80% compared with 2001. If this target is not met, the Environment secretary may opt to introduce a compulsory financial deposit on beverage packaging. One alternative to compulsory deposits would be a flexible ecotax/deposit system under which producers or retailers would have a choice of either imposing a fixed charge per beverage packaging or introducing a deposit. CE has assessed the impact of two ecotax variants: � 0.10 and � 0.25 per can or bottle. An ecotax/deposit system is less of a burden to industry than compulsory deposits and industry support for this option is therefore likely to be greater than for compulsory deposits. The impact of an ecotax will depend on the exact response of producers, retailers and consumers, and the scope for interaction between them makes it difficult to predict with any precision. In this study an attempt was nonetheless made and it was estimated that an ecotax of � 0.10 could lead to a 20-60% reduction in the number of cans and bottles in street litter and a � 0.25 charge to a 40-80% reduction. Under a compulsory deposit system, an 80% reduction might be achieved. With the two ecotax options, the impact depends very much on the response of the various parties. If deposit scheme meets with strategic resistance, it will probably be less effective than calculations of economic optimisation would suggest. A compulsory deposit scheme is far less susceptible to strategic response of whatever kind. Finally, it should be noted that a generalised policy for all types of litter, not just for bottles and cans, is also an option. This broader approach appears fairly promising, too, and the report sketches some of the possibilities in this direction.