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Europe plastic tax may be hard for consumers to digest

What we can learn from the EU's example in circular economy?

Midway through 2020, the European Union passed a tax of €0.80 (about $1.00) per kilogram on nonrecycled plastic packaging waste, effective January 1 of this year. At the time it was heralded as a win for the recycling industry and environmentalists.
The legislation enables individual countries to decide whether to implement plastics taxes of their own to recover the levies paid to the EU. Meanwhile some governments at the moment have opted to pay the tax to the EU out of their own pockets.

However, experts claim that the tax is unlikely to give a boost to recycling rates in Europe in either the short or medium term.

This is because the tax is part of the EU’s €750 billion ($900 billion) COVID-19 economic recovery package and it’s paired with other new taxes on, for example, financial transactions and imports of carbon-intensive products.

In a report on the tax, Deutsche Bank states that it is meant “to create incentives for member states to reduce waste and increase recycling,” but the report authors have noted that the tax also has a less idealistic motive: raising about €7 billion annually to help pay for the recovery package.

Auditing firm KPMG head of trade and customs for Germany and Europe, the Middle East, and Africa Gabriel Kurt explained recently to Chemical and Engineering News, (C&EN) that even though the plastics tax was now in place, Europe’s consumers and companies that use plastics won’t necessarily see big changes right away.

This lag is because member states pay the levy to the EU on the basis of their plastic recycling rates. The countries aren’t obliged to recover the money through plastics taxes of their own.

Kurt said that Austria, for example, plans to pay out of its general budget while Italy and Spain, on the other hand, are in the process of passing plastics taxes.

But these taxes may be hard for consumers to swallow, particularly as COVID continues to rage throughout Europe. C&EN reports that IHS Markit director of polyolefins for Europe, the Middle East, and Africa Kaushik Mitra, did an analysis of the tax that assumed a 42 per cent recycling rate for Europe and that the tax would be broadly enforced.

He found it would increase the cost of plastic packaging by 20–60 per cent and the cost of consumer goods by 3–8 per cent—amounts that consumers “are unlikely to accept.”