Now is the time to be seeking clarity

Jacob Hayler, Executive Director ESA, Apr 12, 2022

Will the Plastic Packaging Tax tip the market balance away from virgin plastics, asks the Environment Services Association’s Executive Director

Announced in 2018, the UK Plastic Packaging Tax has been introduced (on 01 April 2022),and the many organisations involved in the plastics supply chain will undoubtedly be watching to see what impact it will have on the market, although few immediate major shifts are anticipated.

From that date, plastic packaging manufactured or imported into the UK that does not contain at least 30 per cent recycled material will be charged a tax of £200 a tonne. The purpose of this, of course, is to drive greater demand for recycled material and ‘pull’ it through the recycling system, while discouraging the use of virgin materials.

Recycled plastic prices remain very high owing to a shortage of recycled material on the market coupled with rising demand and, for some grades, prices are now double those seen in the first quarter of 2021. This demand has been partly driven by the promise of the plastics tax itself as, early on, bigbrand manufacturers sought to secure supplies in full knowledge of whatlay down the road. This in itself is proof of the efficacy of the tax and an incentive to invest in new plastics reprocessing infrastructure.

Given the lower price of virgin plastic compared with recycled plastic, however, there is concern that manufacturers of some plastic packaging types could pay the tax and continue to use virgin material on purely economic grounds. So, some would argue that the tax needs to be higher than £200 per tonne to bridge the price differential – and, elsewhere in Europe, countries such as Spain and Italy are looking to introduce a plastics tax of €0.45 per kg (€450 per tonne – about £375).

Others have questioned the 30 per cent threshold, which could result inmanufacturers shelving more ambitious plans for increasing the recycledcontent of their packaging beyond the tax threshold, at least in thenearterm. If introduced, an escalator approach to raising the recycled content threshold would continue to incentivise manufacturers to increasethe recycled content of their packaging, ensuring the tax can reachits full potential in the long term.

We are in a period of transition, with the demand and supply imbalance being partly a result of the push and pull policy drivers being out of step with one another. Market forces via the tax are increasing demand for recycled content while we awaitthe implementation of the resources andwaste strategy (RWS) measures – extendedproducer responsibility, collection consistency and perhaps, in time, deposit return schemes – to‘push’ more and better-quality material into recycling systems, thereby increasing the supply of recycled materials.

The Plastic Packaging Tax and RWS were announced around the same time, but the latter has been delayed. The RWS is a detailed package of policies and, as the most radical policy shift for our sector in decades, it isworth taking the time to get right. At the same time, however, if the government wants the Plastic Packaging Tax to meet its full potential wewould welcome full policy clarity on the RWS. Without this, millions ofpounds worth of investment in domestic reprocessing capacity and delivery of new recycling infrastructure is at risk of being stalled.

Implementation of the RWS, coupled with long-term clarity on the Plastic Packaging Tax, would lead to an equilibrium between push and pull measures, hopefully resulting in more domestic recycling capacity and less price volatility.

We believe it is important that the Plastic Packaging Tax continues todrive the market, in perpetuity. That is why the ESA would like to see along-term Plastic Packaging Tax escalator mechanism – similar to the successful landfill tax – for both cost per tonne and the threshold for percentage of recycled content. The tax could also be broadened in its scopeto include all plastics, not just plastic packaging.

Targeting plastics in the waste system is undoubtedly important from an environmental and resource-efficiency perspective. Getting more of these materials out of the residual waste stream also has an essential role to play in meeting net zero targets, so working towards a proper functioning circular economy for plastics remains a top priority.

*This article was first published in the CIWM Circular magazine (March/April 2022 edition), and has be reproduced with kind permission.