Corporate resistance to plastic recycling still a factor

A postponement of Italy’s plastic packaging tax to July 2026 shows that, for many brands and fast-moving consumer goods (FMCGs) companies, the threat of financial penalties or the push of regulatory obligation is still the main driver for increasing the use of recycled plastics in packaging, according to London-based Independent Commodity Intelligence Services (ICIS).

This spring, Italy extended the rollout of its 450 euros- ($490-) per-metric-ton plastic packaging tax until July 2026, marking the seventh postponement of the tax that originally was to come into effect this July.

ICIS asked people involved in several polymer markets what such policy delays mean: “The responses overwhelmingly point to the fact that, without heavy financial penalties or a legal requirement under either [national] or EU law, many companies will currently opt for cost savings over sustainability."

In Italy, the tax would have added $490 per ton to the price of virgin plastic, but the postponement led many of ICIS’ sources to expect companies that were considering increasing the use of recycled plastics to stick with virgin material for now.

In the polyethylene terephthalate (PET) market, those companies that were following the development of the legislation will now continue to use PET rather than switch to recycled PET (rPET), according to one beverage brand contacted by ICIS.

Despite corporate pledges and sustainability statements, a plastics converter told the firm companies will stay with virgin polymer for the next two years without the financial incentive to switch to more recycled content.

A producer of virgin polyethylene (PE) and polypropylene (PP) tells ICIS the delay means less pressure to prompt investments in the recycling sector.

“Other comments from market sources reiterated the fact that, without this tax in place, the businesses in or serving the Italian market have lost their incentive to move to higher recycled content levels, especially at a time when prices for recycled material such as rPET and recycled polystyrene (rPS) are commanding a significant premium over their virgin counterparts,” ICIS says.

Adding nearly $500 per ton to the price of virgin material would represent what ICIS says is a substantial step to disincentivize the use of virgin PS and drive people toward rPS, but the absence of such a driver will make investing in rPS harder.

From the brand side, a large FMCG representative tells ICIS having the tax in place would help incentivize its customers to use more recycled content, but for the time being, it would have to rely on its own and its customers’ sustainability targets to continue to support the argument for the use of recycled-content resins.

“While the delay of the tax only impacts the Italian market, it points to a wider issue seen across both European and global markets when it comes increasing recycled material usage,” ICIS says.

Without the financial incentive of a tax or fee, or without the legal obligation of a regulation, directive or law, many companies right now will choose margins over sustainability, “especially in a tough macroeconomic climate,” the firm adds.

ICIS analysis conducted by Matt Tudball with contributions from Stephanie Wix, Caroline Murray, Ben Monroe-Lake, Carolina Perujo Holland and Mark Victory points to the upcoming implementation of the Single Use Plastics Directive (SUPD), which mandates the use of 25 percent rPET in PET beverage bottles starting Jan. 1, 2025, as an example that is raising questions.

The analysts say many rPET market participants have yet to see demand for rPET reach the levels expected ahead of implementation.

The firm says clarity is lacking around how the SUPD will work, such as how the 25 percent will be measured (by individual unit or country-wide incorporation), who will be checking the percentage of rPET in bottles and what the penalties will be for those who miss the target.

“Some rPET sources think some brands may simply declare they are using rPET when they are not because they do not expect they will be audited, or others may simply ignore the directive because of a lack of enforcement,” Tudball writes.

A similar situation occurred involving a Spanish 450-euros-per-metric-ton plastic packaging tax that went into effect in January 2023. ICIS says its rPET sources “saw no impact on demand” in 2024, and it was only this May that the first Spanish company reportedly has been audited by Spanish authorities to ensure compliance.

In the United Kingdom in its 2022-2023 financial year, a Plastic Packaging Tax (PPR) designed to drive recycled plastic inclusion resulted in receipts collected by HM Revenue and Customs (HMRC) totaling more than $350 million.

U.K. government statistics indicate of the total plastic packaging manufactured in and imported into the U.K., 39 percent was declared as taxable under the PPT, and of the remaining 61 percent declared, about 40 percent contained the required 30 percent or more of recycled plastic.

ICIS says the amount collected shows that many companies paid the $256 per metric ton fee rather than pay a higher cost for recycled material.

Instances show alternative approaches to taxation or regulation can have a positive impact on the recycling sector.

ICIS cites France, where lower eco-modulation fees on the sorting of mixed plastic scrap—thus, a form of extended producer responsibility (EPR) system—led to the creation of a recycling stream for low-density PE flexible materials and a growing market for recycled-content low-density polyethylene (LDPE) bales and pellets.

“The reaction to the Italian tax, the revenue generated by the U.K. tax, and the seeming lack of urgency from some beverage brands ahead of the SUPD indicates that for many companies currently, increasing the use of recycled plastic is nowhere near the top of their list of priorities,” Tudball writes.

“Investment in recycling and the drive to reduc[e] virgin plastic consumption will most likely take a back seat for now.”