The big bottleneck on plastics packaging

Brand leaders are demanding more recycled content in their packaging than reprocessors can deliver on, so what is causing this market failure? Chris Cullen attempts to find out

Recently I attended a conference on mixed plastics recycling sponsored by Nestlé. The company had reached a plateau in its efforts to increase the recycled content of its plastic packaging. The problem, as Nestlé saw it, was that there was insufficient UK infrastructure to sort and reprocess mixed plastic packaging, forcing the manufacturer to rely primarily on virgin plastic.

To my mind, this is a clear example of a market failure. Mixed plastics are a major waste stream, broadly defined as non-bottle plastic waste, including packaging waste such as pots, tubs, trays and film. Some definitions include post-consumer plastic goods, such as the plastic components of WEEE, vehicles or toys.

In 2008, over 2.1m tonnes of plastic packaging was placed on the UK market, the vast majority of which consisted of virgin material. This figure may well have fallen due to the recession, but can be expected to increase again once economic growth returns.

The use of plastic has environmental impacts on a number of levels, including CO2 emissions resulting from its manufacture, and the disamenity resulting from landfilling or incinerating plastic waste. A closed loop economy of plastic packaging would significantly reduce these impacts.

For example, using a tonne of recycled plastic packaging has a net saving of over a tonne of CO2-equivalent emissions when compared to the same amount of virgin plastic material. As the UK strives to reduce its CO2 emissions, an increase in plastics recycling could make a valuable contribution.

Nevertheless, the recycling of plastic packaging remains at a relatively low rate. But if Nestlé wants more recycled plastic, why isn’t the market able to supply it? At its heart, this is the age old puzzle: which came first, the chicken or the egg? Manufacturers may want the chicken of domestically reprocessed mixed plastic, but reprocessors cannot attract investment in UK reprocessing capacity without the egg of guaranteed end-markets.

For collectors, the opportunity remains to sell often low-grade bales of mixed plastic overseas, at prices that are anything but chicken feed, so their interest in a risky investment in UK-based reprocessing facilities remains limited. While demand from China has reduced in recent few months, plastic recyclate is now a traded commodity and the international market massively influences its availability and price.

It could be argued that oil prices will take care of the problem. Virgin plastic prices rise with the cost of oil, which over the past 10 years has been on an above inflation upward trend. Demand continues to increase while reserves in established oilfields diminish and new, more difficult to drill supplies require ever larger investment to access them. But the cost of reprocessed plastic waste is already lower than producing virgin material – it hasn’t yet had the desired effect on investment, and I suspect it will take a pretty big price differential to inspire change.

There have been some examples of manufacturers teaming up directly with reprocessors to bridge the investment gap, but this has not become a widely adopted model. For anyone other than the biggest players, the level of investment involved is pretty intimidating. Were it not, manufacturers would have started talking about where the reprocessing investment opportunities were for them.

Where the market is failing and the result is environmental damage and the loss of raw materials for the economy, there is a case for government to step in and compel responsible behaviour. Recycling targets, landfill tax and fuel duty are examples of the government legislating to require or encourage a move away from environmentally damaging activities.

In this case, if all plastic packaging placed on the market in the UK was required to contain a specified percentage of recycled content, producers would have a strong incentive to ensure they could source the required recycled material. The motivation to offer guaranteed contracts would stimulate investment in the necessary collection and reprocessing infrastructure – perhaps in some cases backed by the manufacturers themselves.

Such a system would see manufacturers and importers having to prove that the packaging material of items placed on the market meets the minimum requirement for recycled content, or face financial penalty. A carefully designed scheme might allow manufacturers to balance a higher recycled content in some products with purely virgin content in others. The overall percentage of recycled content required could be increased over time, ensuring continually increasing demand for reprocessed plastic and an incentive to innovate.

This approach would have the benefit of driving investment from industry in a direct and purposeful fashion towards a clear goal. It would be more effective in this than alternatives such as placing a tax on virgin plastic material. While a tax could have an impact, like fuel duty it would be complicated by its interaction with the variable price of oil.

The introduction of targets for recycled content in packaging could initially result in an increase in the price of recycled plastic and a spike in imports; however this would most likely be short term, and swiftly counteracted by UK capacity coming online. Any costs would ultimately fall to the consumer; but industry may actually be able to make savings, as reprocessed plastic appears set to be lower and more predictable in price than virgin material which depends on the oil market.

However, despite the opportunity to save, I fear that only when government provides the necessary prompt will we see business do more to build a mixed plastics infrastructure in the UK. Until then we’ll be waiting in vain for much in the way of either chickens or eggs.

A version of this article first appeared at

Chris Cullen is an environmental consultant

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