Tax on plastic packaging should be set at £150 per tonne, says report

Imperial College London has released a report recommending that the tax on plastic packaging with less than 30 per cent recycled content should be set at £150 per tonne, to provide an incentive for producers to use recycled content in their packaging.

An image of plastic bottles of water

The government announced plans for the introduction of a ‘plastics tax’ as part of last year’s Autumn Statement, proposing that a tax on the manufacture and import of plastic packaging with less than 30 per cent recycled content will be introduced from April 2022. Revenue from the tax will be invested into tackling the issue of single-use plastics.

The announcement of the plastics tax followed a consultation that was launched during the Spring Budget in March 2018. Receiving more than 162,000 responses, the plastics tax consultation attracted the largest response ever to a Treasury public consultation.

According to the Imperial College report, a tax of £150 per tonne of plastic packaging would encourage the packaging sector to reduce the use of virgin plastic, instead stimulating demand for recycled content, estimated to be able to provide 71 per cent of UK demand for raw material.

The report states that if the £230-million total tax cost were to be passed onto households by producers, the average impact of the tax would be 7-16 pence per week per household, depending on the uptake of recycled content. However, the report suggests it would be unlikely that producers would pass on costs to consumers rather than increase the uptake of recycled content.

The £150 figure is based on an estimation that the price difference between recycled and virgin plastic is currently around £500 per tonne. The minimum tax level would therefore need to be £150 per tonne to make costs similar between using 100 per cent virgin plastic packaging and packaging with a minimum of 30 per cent recycled content.

Commenting on the report, Richard Kirkman, Chief Technology and Innovation Officer at waste management company Veolia UK & Ireland and co-author of the report, said: “Moving from virgin plastics to using recycled alternatives is essential for the environment, makes long-term financial sense and reflects public expectations.

“A packaging tax is designed to set a level playing field for companies using recycled content and will enable an additional two million tonnes of packaging to be recycled in the UK.”

Read more: Recycled content: Let’s talk about tax

There have been questions as to whether the £150 per tonne rate would be sufficient to push producers to use more recycled content. Phil Conran, Chair of the Advisory Committee on Packaging and Director of consultants 360 Environmental, said: “I would say that it does not seem to be anywhere enough to influence manufacturing decisions at that level as plastic prices can easily fluctuate by those levels within a very short space of time.

“£150 per tonne would add 0.4 pence to the price of a two-pint milk bottle or 0.1p to the price of a small fruit punnet. Will that really make a difference?”

Questions have also been raised as to whether a fixed flat rate of tax is the appropriate mechanism for incentivising the uptake of recycled content, given that the price of virgin plastic fluctuates depending on the volatile price of oil.

Stuart Hayward-Higham, Technical Development Director at Suez recycling and recovery UK, has questioned whether a movable fee would be a more effective method of taxation, tweeting: “Not sure whether this could be too much when the oil price is low or not enough when the oil price is high. Goal should be to make secondary recycled plastic cheaper than primary and therefore don’t we need to think of something that tracks prices rather than is a fixed fee?”

When the tax on plastic packaging goes ahead, it will be faced with the additional challenge of how to determine the level of recycled content, with a risk that producers could falsely claim that packaging contains recycled content to avoid paying the tax.

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