Introduce levies on raw materials to boost secondary material markets, says Eunomia

A system of levies and rebates should be introduced to cut down on the use of raw materials in manufacturing and incentivise those producers that use more recycled materials, according to a new report from Eunomia Research and Consulting.

The report, entitled ‘Demand Recycled: Policy options for increasing demand for post-consumer recycled materials’, was commissioned by the Resource Association and WWF-UK and presented at a parliamentary reception in the House of Commons last night (20 November). Introduce levies on raw materials to boost secondary material markets, says Eunomia

Driving the uptake of secondary materials in manufacturing has become a key objective of the resources and waste industry, with government policy laid out in the 25 Year Environment Plan, the Industrial Strategy and Clean Growth Strategy underlining the need to increase the use of secondary materials in domestic manufacturing. A tax to be introduced by 2022 on the manufacture and import of plastic packaging containing less than 30 per cent recycled plastic was also announced in the recent Autumn Statement.

This is made all the more important by the waste import restrictions imposed by China and other southeast Asian economies, which have resulted in less export capacity for UK secondary materials.

The report looks at ways to overcome key market failures that inhibit the uptake of post-consumer recyclate (PCR), including inadequate producer responsibility, a lack of incentives to use secondary materials, the high cost of carrying out quality checks and a lack of information on the benefits of secondary materials.

Four policy options are proposed to increase the uptake of secondary materials: material taxation, a fee-rebate (or ‘feebate’) system, tradable credits for secondary materials and establishing a single producer responsibility organisation. Central to each option is the concept of a Secondary Materials Certificate (SMC), which would be generated at an early point in the material supply chain and then used along the chain to verify that the origin of the material is ‘secondary’ in nature.

The report recommends further consideration of a ‘feebate’ system as the most attractive policy option. It rejects materials taxation based on the complexity of delivery due to the need develop border tax adjustments and difficulty in identifying secondary material components in all imported and exported material.

The ‘feebate’ scheme would comprise a levy on all packaging incorporated into the cost of the product to the consumer, which would be refunded through a full or partial rebate to organisations demonstrating their use of PCR through the number of certified credits they hold. A twofold incentive is present for producers to increase their use of secondary materials in order to gain higher rebates and lower the cost of their products for the consumer.

The system is favoured due to its versatility in design, the reduced administrative complexity relative to the tax-based measure, and the stability of the incentive it provides.

The report suggests that a single organisation for producer responsibility should be complementary to any policy option used to increase demand for PCR, as it would help to encourage investment and improvements in domestic collection and sorting infrastructure.

‘Much-needed fresh thinking’

Commenting on the report, Dominic Hogg, Chairman of Eunomia, said: “New challenges on resource use require new thinking and new collaborations. I was delighted to be commissioned by WWF-UK and the Resource Association to conduct this analysis and it is good to see productive NGO and industry cooperation on shared concerns. As the Treasury considers its proposal for a tax on plastics, with consideration of exemptions for materials with high recycled content, we believe this type of mechanism should be a strong candidate for consideration”.

Ray Georgeson, Chief Executive of the Resource Association, added: “All parts of the resources supply chain for too long have talked in general terms about the need to boost demand for recycled material and use demand-pull measures to develop the markets to assist in reaching higher recycling targets. This report now adds a real level of detail to this discussion with some much-needed fresh thinking. The Resource Association was delighted to collaborate with WWF-UK in commissioning this work from Eunomia as a contribution to the wider, detailed debate that is now needed.”

Toby Roxburgh, Chief Economic Adviser to WWF-UK, stated: “As public concern about plastic pollution in the oceans drives both government and industry action to address improvements in waste and resource management, reducing raw material inputs and boosting sustainable recycling become essential components of the new Resources and Waste Strategy. In the need for ‘bold and radical’ thinking to feed policy change and deliver the outcomes that society now desires, this research and analysis is a welcome contribution." 

You can read the full report on the Eunomia website.