Plastic Taxes Incentivize Recycling and Boost Government Revenue

(Photo Stacked boxes sort plastic waste. Credit Canva Stock.)

(Photo Stacked boxes sort plastic waste. Credit Canva Stock.)

by | Feb 20, 2023

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(Photo: Stacked boxes sort plastic waste. Credit: Canva Stock.)  plastic tax legislation

(Photo: Stacked boxes sort plastic waste. Credit: Canva Stock.)

Less than 10% of the global plastic waste produced to date has been recycled, according to the UNEP. Yet there is reasonable hope that will change, as countries like the UK, Spain, and Ghana roll out widespread plastic tax legislation.

Over the last decade, companies did commit to reducing plastic waste, yet single-use plastic production continues to rise, with the majority still made from fossil fuel-based virgin feedstocks. When industry promises and consumer pressures fail, public policy can step in where goodwill falters.

Taxes may seem an extreme move, but plastic laws are actually not new. Over 40 countries have already banned the use of plastic bags. When done in small steps, consumers and businesses can more easily shift. Nine U.S. states have limited plastic bags in varying degrees of strictness, incentivizing customers to bring reusable bags. In this example, the cost may initially feel high to the consumer, but it drastically reduces waste and mainly requires a change of habits.

The EU is aiming higher though. In the European Commission’s Strategy for Plastics in a Circular Economy, all plastic packaging will be reusable or recyclable by 2030. At the time, the report noted that demand for recycled plastics only made up 6% of the total market. This philosophy aims not to eliminate plastic entirely, but rather to focus on stimulating a circular economy. The hope is that the plastic tax legislation would also significantly change the recycling infrastructures within countries, as the rates of recycled plastics rise.

If a plastic tax was applied to the 20 most common plastic consumer products which contain less than 30% recycled content, then plastic waste generation could be reduced by nearly a third below the baseline. This would also bring in up to $1.3 billion annually in tax revenue, according to one estimate from Grzegorz Peszko, an economist at the World Bank. Such revenue often goes into the national general budget and is then reinvested into the environment.

Aligning with this direction, Spain activated its plastic tax legislation on January 1, 2023, with the goal of preventing waste from non-reusable plastic packaging and encouraging the recycling of plastic waste. Rather than punishing the development of all plastic, there is a lower taxable amount specified for packaging that contains 35% of recycled content versus one containing only 30% of recycled content. This differs from the UK model of rewarding any plastic container that contains 35% recycled content with tax-free status.

In other cases, like that of Ghana, the rate is not reduced at all for recycled content, which leaves the country without a domestic recycling market or enticements to start. Perhaps even more importantly, Ghanaian plastic products – mostly likely 100% virgin plastics – will then not receive any reduced tax breaks when entering the markets in countries like Spain or the UK.

Each country is currently enforcing its own tax legislation on domestically manufactured goods and imported goods alike. Yet this places a complicated burden on multinational companies to tailor products to each policy and provide evidence about recyclable content. Fortunately, the UN is drafting an “End Plastic Pollution” resolution to set consistent, global rules for the production and waste process of single-use plastics. The draft is due to be signed in 2024 by all UN members.

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