PLASTIC CREDIT SYSTEM

Plastic Credit Systems require manufacturers to meet obligations by purchasing recycling certificates issued by accredited re-processors or recyclers based on the amount of plastic waste recycled. 

TARGET USERS: Businesses, Industry, Government

KEY CONSIDERATIONS: Plastic Credit prices are based on supply and demand, with prices fluctuating depending on whether the market is short or in surplus as compared to annual targets.

    MORE INFORMATION: See Plastic Credits and Packaging Producers


    Collections: FINANCIAL INSTRUMENTS


    THE PROBLEM

    The trade in plastic across international borders remains largely unregulated and most plastic value chains do not have a global feedback loop to hold upstream stakeholders accountable for their products after the point of sale. As of now, there is no universal governance mechanism or regulatory body to ensure transparency and accountability of actors across the entire plastics value chain.

    Part of the problem is the economics of current recycling systems. As long as companies are not held accountable for the full life cycle costs of plastic pollution (including the significant costs to nature and society), recycling rates will simply remain linked to the price of oil, making it cheaper for companies to use virgin plastics instead of recycled plastics.

     

    THE SOLUTION

    Plastic Credit System instruments require manufacturers to meet obligations by purchasing recycling certificates issued by accredited re-processors or recyclers based on the amount of plastic waste recycled. This system uses a Recovery Note (RN) to provide evidence that waste material has been recycled into a new product. In the UK, their system is based on packaging, and Packaging Recovery Notes (PRN) form a key part of their Producer Responsibility Obligations Regulation since 2007. Using the UK system as a model, RN’s could be used on plastics beyond just packaging.

    In the UK, PRNs are issued by accredited preprocessors and act as an incentive to recycle. They are a way for businesses to offset the amount of packaging that they place into the market. Packaging producers and handlers are obligated to purchase a number of PRNs every year based on the type and amount of packaging they handle. This is referred to as the businesses PRN obligation.

    In order to comply, a business must calculate their PRN obligation (packaging obligation) for the current compliance year in each specific material. There are six materials for which a business might have an obligation, plastic, paper, glass, aluminum, steel and wood. PRNs are material specific and businesses need only purchase PRNs to cover material that they have performed activity on.

    The PRN market is an open market allowing PRNs to be traded between accredited preprocessors and obligated companies. Trading of PRN’s for the current compliance year can take place between 1st December the previous year and 31st January the following year, allowing registered companies to both buy and sell PRN’s during this period. As with any open market the cost of compliance will vary throughout the year driven by the fluctuating price.

    The proportion of costs of recycling to which an obligated company is responsible (how many PRNs they need to buy) is determined by the activity they have carried out on that material.

     

    ALTERNATIVE SOLUTIONS

    Extended Producer Responsibility initiatives, taxes, levies and other financial instruments serve as similar solutions according to the polluter pays principle.

     

    CASE STUDY EXAMPLES

    See Valpak example in the UK: https://www.valpak.co.uk/compliance/packaging-compliance/recycling-evidence

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