‘Right of first refusal’ could create rPET monopoly

The proposed policy is being debated as part of the EU’s Packaging and Packaging Waste Regulation (PPWR) proposal and would introduce priority access for the beverage industry to recycled plastics.

EuRIC, FEAD and PRE warn that if the provision is implemented it would be ‘detrimental’ to the development of recycling capacities in Europe by promoting monopolistic control of recycled polymers and going against free-market principles.

The proposal is a result of claims of a recycled PET (rPET) shortage in the EU beverage sector as a result of non-beverage industries, in particular the fibre market, using a significant share of food-contact rPET.

The organisations refute these claims, saying that since the introduction of the mandatory recycled content target for PET beverage bottles in the EU’s Single Use Plastics Directive, the share of the fibre market has dropped sharply. In 2022, it accounted for five per cent of the total rPET market, as purchasing high-priced food-contact rPET is ultimately not financially viable for the fibre industry.

As a result, EuRIC, FEAD and PRE warn that the right of first refusal principle intends to address an issue which does not actually exist. The rPET recycling industry saw an increased investment in food-contact recycling technologies of over 50 per cent between 2019 and 2022. The installed capacity for food grade in 2022 was already at 1.4 million tonnes, while the beverage industry would require 800 thousand tonnes to meet the 25 per cent mandatory recycled content target in 2025, and about one million tons in 2030. The rPET industry therefore already has the capacity required to meet the demand of the beverage industry.

rPET industry capacity and ‘right of first refusal’

EuRIC, FEAD and PRE have gone on to warn that the more pressing issue facing the rPET industry and packaging circularity is the extremely low demand in the EU for rPET and major price fluctuations.

In fact, the European rPET market is facing a surplus status, with very low demand from the beverage industry which is consequently forcing European recycling plants to run well below their capacities. This is linked, among other reasons, to an increase in imports of both low-priced PET virgin and recycled PET.

Between 2021 and 2022, imports of PET doubled to reach 1.9Mt. Alongside the increase, imports represented nearly 30 per cent of the total demand for PET in Europe in 2022 – compared to 23 per cent in 2020.

The value chain organisations warn that granting priority access to specific market players – such as the beverage industry – could result in a stable source of recycled materials to be used in certain categories of new packaging, but the beneficiaries of the priority access would be granted a monopolistic power to set prices for recyclates. Recyclers would therefore have no levers to negotiate the price of recyclates at a sustainable level of profitability, and this would stop investment and innovation in the recycling industry.

EuRIC, FEAD and PRE are therefore calling for a ‘multifaceted approach’ that encourages competition and innovation while addressing the existing systemic barriers. The organisations urge addressing the fundamental bottlenecks in today's plastic packaging circular value chain – the insufficient collection of plastic packaging waste and the lack of design for recycling.

Reflecting on the rPET situation in the UK, Tom McBeth, Policy and Infrastructure Manager at RECOUP, added: “This year, we have seen plastic recyclers suffer considerable challenges when it comes to prices both in terms of increased operating costs, and the well-publicised increased imports of cheap virgin material which is driving down demand and market value.

"Whilst such an approach to domestic material appears to be beneficial to industry and is the right principle, the wider practical impacts of this proposal means that other measures need to be found to protect and support the UK and EU recycling sector in both the short and longer term, particularly when considering the UK’s relationship with the EU and its reliance on the bloc as a key importer and exporter of both plastic packaging and products.”