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23rd Mar 2022
It’s now just a matter of weeks until the implementation of the UK Plastic Packaging Tax and HMRC is urging businesses to familiarise themselves with the changes. This has included guidance for companies on the steps they can take to determine if they need to pay the new tax and further information about how to register, the records to keep and how to file returns.
With so much focus on payment of the tax, it raises thoughts and questions about where and how this new tax revenue will be spent – a key point that remains unclear. Duo’s Brand Director Zoe Brimelow looks at how the UK Plastic Packaging Tax could be used to help finance an industry-led approach towards improving recycling and resourcefulness.
Hundreds of millions
According to the UK Government’s exchequer impact of the Plastic Packaging Tax, an estimated £235 million ($310m) in revenue will be generated during the first year. It’s expected that some of this will be used to cover set up and delivery of the new tax system.
HMRC expects to incur a one-off capital cost of between £10-£20m ($13-26m), along with a further £22m ($29m) allocated to staffing and resource costs to implement change, monitor compliance and meet customer service needs. If this totalled the upper end of estimates at £42m ($55m), it would leave £193m ($254m) remaining from the first year of Plastic Packaging Tax revenues. As it stands, there’s no indication about where this money will go and how it’ll be spent.
Given the aim of the tax is to provide a clear economic incentive for businesses to use recycled plastics in the manufacture of plastics packaging, perhaps the new tax revenues could be used to help fund and encourage change at an industry level.
Barriers to change
For more than 30 years, we’ve worked with businesses on developing more sustainable packaging strategies. We’ve experienced a great deal of enthusiasm and progression along the way. However, we’ve also noticed two recurring trends of ‘cost’ and ‘lack of infrastructure’ as barriers to the wider take up of recycled and recycled-content plastics packaging.
In some instances, companies might prefer non-recycled packaging alternatives, wrongly believing that these offer better performance. This can stem from misperceptions about the demands of certain packaging applications and non-recycled alternatives not measuring up, as well as scepticism about the challenges of adding recycled content to plastics compositions. There are also misled doubts that adjusting formulations can reduce the effectiveness and efficiency of plastics packaging and that recycled-content options are a risky and wasted expenditure.
A lack of recycling facilities and services also proves something of a deterrent for companies keen to switch to more sustainable packaging choices. Too much time and resource are required of them to return and recycle packaging, which detracts from their core business. This is made more challenging by the UK’s lack of true closed-loop recycling infrastructure – a critical component for separating plastics to ensure the same virgin materials can be recycled together and reused without impairing performance capabilities.
New Plastic Packaging Tax revenues could be used to address these challenges through the creation of an impact investment fund. A similar approach exists in the US and saw a collaboration of companies raise an initial $25m last year to invest in scalable recycling technologies, equipment upgrades and infrastructure solutions. There’s a goal to reach $100m, with businesses across the plastics value chain contributing towards advancing the recovery and recycling of plastics.
Investing in an impact fund
The remaining £193m ($254m) from the first year of the Plastic Packaging Tax could be ring fenced as a fund for helping develop a more established and available closed-loop recycling system in the UK. Grants could be used to help set up closed-loop recycling facilities and to help cover the costs of more collection points, vehicles and workers. Such an approach would help ensure that as more recycled-content packaging is used, it is increasingly recycled and reused.
Alternatively, an investment fund could be utilised by packaging manufacturers and customers to expedite switching to recycled-content plastics packaging. A match-funding style scheme could be introduced, where tax revenues are used to increase existing research and development expenditure. Funding could also help accelerate the development of new plastics packaging materials that contain even higher percentages of recycled content. Incorporating recycled content into plastic packaging compositions is a complex process and investing more in this area would help drive innovation.
There could also be an opportunity to reinvest tax revenues in subsidising the costs of more sustainable packaging choices. The additional costs of recycled-content packaging could be offset for three or six months to make it feasible for end users to test different options. This could instigate behavioural change and prove even more effective if the prices of plastics packaging with less than 30 per cent recycled content are rising at the same time.
Undoubtedly, any of these suggestions will require time and significant investment to achieve impact. They are not beyond the realms of possibility, though. After its first year, between 2023- 2026, the UK Plastic Packaging Tax is expected to generate up to £670m ($883m) – a sizable new stream of revenue that could help fund the transition to more circular packaging.
If you need support with re-designing packaging products to incorporate recycled material the Duo team are on hand to help, reach the team here
As featured in Plastics in Packaging