Controversial Green Deal – German Associations Warn Against Plastics Tax

On 27th February the European Competitiveness Council met for a policy debate on the European Green Deal. The strategy paper envisages the introduction of a tax on non-recycled plastics. Criticism comes from dvi – Deutsches Verpackungsinstitut (German Packaging Association) and IK Industrievereinigung Kunststoffverpackungen (Industry Association for Plastic Packaging).

The EU Commission’s communication, the “European Green Deal” states:”The Commission has proposed a 25 percent target for climate mainstreaming across all EU programmes. The EU budget will also contribute to achieving climate objectives on the revenue side. The Commission has proposed new revenue streams (“Own Resources”), one of which is based on the non-recycled plastic-packaging waste.” A law like this has already been passed in Italy, where 0.45 euros in taxes are due per kilogram of non-recycled plastic. For the European equivalent, a tax of 0.80 Euros per kilogram is under discussion.

Countries with low recycling rates would be asked to pay

The idea of penalising the non-recycling of plastic seems to make sense at first glance, if it leads to higher recycling rates. However, Dr. Martin Engelmann, Chief Executive of the IK Industrievereinigung Kunststoffverpackungen expressed considerable doubts about this: “The fee will have a particular impact on those Member States with only limited capacities for recycling plastics, as they will have to pay more than those with a better recycling infrastructure.” There are big differences in the distribution of recycling capacities in Europe: According to PRE, the total recycling capacity for rigid polyolefins, especially HDPE and PP, is 1.7 million tonnes. Italy has the highest installed capacity for these streams at a rate of 25 percent, Germany 22 percent, Spain 22 percent, the United Kingdom 15 percent and France 9 percent. This means that the remaining Member States share the remaining 7 percent. This is also reflected in the overall rates of recycling of plastic packaging in Europe: “Paradoxically, therefore, the tax will affect those countries most in need of support in building their recycling infrastructure. Instead of support, these countries will be forced to contribute disproportionately more to the general EU budget than others,” says Engelmann.

Kim Cheng, managing director of the dvi, shares the same view: “Not only is the introduction of such a plastics tax a fatal step in view of the fact that there are often no viable alternatives for plastics in the packaging sector that could guarantee product protection and food safety. What makes matters worse, she said, is that it is precisely those countries whose collection, sorting and recycling systems are not yet so well developed that have to pay the most taxes, which will make it much more difficult to set up the necessary recycling structures and technologies.

Not ring-fenced

This is mainly the case because the revenue would not be ring-fenced and would therefore most likely not be used to improve European recycling capacity. “The predicted 6.6 billion Euros will disappear from the EU budget without being tied to a specific purpose. This makes it abundantly clear that this tax is not about environmental protection and sustainability. Rather, the EU has seized an opportunity it has long longed for to create its own financial resources. It seems that a welcome victim has now been found in the ‘pariah’ plastic. In the end, consumers are the ones who will have to pay for it,” warns the dvi managing director.

Engelmann shares the dvi’s assessment that the plastics tax poses problems for the design of a functioning recycling economy: “The industry is working hard to make plastic packaging more recyclable and to increase the use of recycled materials. But all this costs billions of euros. If this money is now taken away from companies via plastic tax and used to plug holes in the EU budget, this would mean a major setback for the recycling economy.”

Double tax

In dvi’s view, the new tax also leads to a double tax, since the distributors of packaging already pay licence fees for disposal through the dual systems for each package. “The creation of economic incentives, for example through a bonus-malus system based on the recyclability of the respective packaging, is also already being considered therein,” Kim Cheng continues. The dvi calls on the actors responsible to put the new tax to the test once again.

The EU Environment Council will meet on 5 March 2020. In all likelihood, the European Green Deal and the financing of the implementation of the climate targets will also be discussed here. It remains to be seen whether the measures, including the plastics tax, will be adopted unanimously, which is a prerequisite for their implementation.