Our recent work on recycling - Recycling: Beware Of The Misleading PR – would suggest that the UK treasury will raise quite a bit of money from the plastics tax. We see very little chance of most packaging meeting a 30% recycled content goal any time soon, and possibly ever. We could see an odd dynamic where UK packagers import recycled resin from the EU to meet the minimums. This would then be at odds with EU recycled content goals and would need the EU to do something similar on the tax front to avoid the trade. The EU has a plastic tax in the works and its net effect will be similar to the one in the UK – any trade arbitrage for recycled resin would not likely last long.
As we sift through the positioning for the upcoming COP26 meeting and the attention focusing report from the IPCC this week, it is a reasonable question to ask what this means for the plastic waste issue. If governments, lobbyists, and activists are likely to be more focused on climate change action over the next few years, which seems to be a reasonable conclusion, will there be the bandwidth for plastic waste? The plastic waste issue is less open to interpretation than the climate change issue and is a visible problem for all, but if governments need to prioritize where they spend their incremental dollar, and/or where they provide incentives of penalties, the climate is going to be pushed to the front of the line in our view. Plastics producers will have to deal with emissions, like any other industrial user of power and heat. The risk is that local governments, looking for revenue to support climate initiatives see taxing virgin plastic (or unrecycled plastic) as a way to both push plastic waste initiatives forward and raise revenue. Adding a plastic tax in the US to the superfund proposal in the infrastructure bill would be hitting the chemicals industry from two sides and would give bodies like the ACC far more grounds for pushback. For more on the IPCC analysis see our ESG & Climate Change report from this week.