Deep inside the EU’s seven-year budget and recovery plan, which was approved on Friday 24 July, is a plastics’ waste levy of €800/tonne that comes into force in January 2021, despite the fact that insufficient recycling infrastructure exists throughout the EU.
EU legislation passes the regulatory burden to collect the €800/tonne levy to each EU country to choose its own policies to pass costs on to companies and consumers as they wish, which may create a mosaic of different policies throughout the 27-country union.
Markets were muted in their response, most likely unaware of this key detail on page 65 of the seven-year budget and recovery plan. The EU policy regarding recycling food contact materials also presents a market pincer as the policy currently requires that to recycle plastics into food grade plastics these recyclables must be themselves sourced 95% from waste that was originally food contact quality plastic.
This means that in key markets and for certain polymers, such as polyethylene (PE), there is insufficient food contact grade PE available to source and then recycle into food grade PE. Unlike the UK, where milk bottles use PE, much of the rest of the EU uses Polyethylene Terephthalate (PET) for milk.
The starting levy of €800/tonne[i] is only expected to rise as the EU pushes industry to embrace circular economy principles, and the plastics packaging industry itself now must quickly adapt or decline. The €800/tonne levy is similar to current virgin polymer prices in the EU and will thus impact margins.
In France, according to Bloomberg, all virgin plastic prices are higher than the €800/tonne levy, with the exception of PET – see Table 1.
Table 1: Virgin Plastics Prices, France 24 July 2020 (Source: Bloomberg, L.P. 2020).
| Plastic Type | France: Spot price per tonne, 24 July 2020 |
| LDPE | €1,210 |
| LLDPE | €1,125 |
| PET | €770 |
| HDPE (film) | €1,150 |
| Polypropylene (injection moulding) | €1,130 |
While PET already has a very well developed recycling infrastructure in place that has put downward pressure on virgin PET supply, LDPE, LLDPE, HDPE and polypropylene recycling infrastructure could be improved in France, which would put downward price pressures on these polymers too.
In western Europe, PET bottle collection rates have grown slowly from 58% in 2016 to 65% in 2019. Thus, there is not enough food contract grade recycling material in Europe to substitute for the demand that virgin plastics meet.
With build times of at least 18 months for new plastics packaging facilities, the January 1, 2021 deadline may not be achievable by industry. Finally, the levy is on weight not volume and thus the burden does not focus equally on high volume / low weight plastics flexibles and film that are hard to recycle and often end up in landfills, rivers and oceans as single-use plastics pollution.
Most polymers are recyclable if infrastructure is in place. So, with lower PET prices combined with greater availability of recycling infrastructure, some packaging companies may consider switching polymers to this lower cost / higher recycled plastic.
It is now up to each country to invest in downstream recycling infrastructure, in particular in the less recycled polymers listed above and also poly vinyl chloride (PVC) and polystyrene (PS), so as to attract industry and jobs that support a circular economy. The EU Recovery Plan pushes companies to expand recycling, embrace the circular economy and may encourage companies to substitute away from harder to recycle polymers.
[i] European Council (July 2020). Special meeting of the European Council (17, 18, 19, 20 and 21 July 2020) – Conclusions.
