A new study by Eunomia, conducted on behalf of Fauna & Flora, analyses plastic credit schemes and explores the scope, risks and uncertainties. Plastic credits have been gaining prominence in discussions relating to the United Nations Plastics Treaty as “innovative instruments” to channel funding towards tackling global plastic pollution.
Plastic credit schemes have emerged as a way of channelling funds to projects that collect, recycle or manage plastic waste, particularly in low- and middle-income countries. The schemes work by issuing a plastic credit to a project for a specific amount (typically one tonne) of plastic waste collected, recycled or otherwise managed. These credits can then be sold, so the funds from its purchase go to the waste management project. Plastic credits typically operate in the voluntary market, but some governments accept them as a way of demonstrating compliance with producer responsibility regulations.
Our findings in our recent report Plastic Credits – Exploring Plastic Credit Schemes: Scope, risks and uncertainties show that, where a buyer for the credit can be found, the price paid does not necessarily cover the costs of the underlying waste management activity. This lack of cost coverage, and the fact that credit schemes channel funding towards projects on an individual basis, means they are not able to play the same role as well-designed Extended Producer Responsibility (EPR) schemes in developing effective systems for managing waste plastic packaging alongside other forms of waste.
Our study reviewed plastic credit schemes around the world and analysed how they work in practice through desk-based research on key sources and through interviews with a wide variety of stakeholders that engage with the plastic credit market.
The research identifies areas of concern and highlights the differences between EPR based on cost recovery and credits.
Areas of concern identified in the plastic credit scheme market include the following:
- In the voluntary market, a challenge faced by a number of schemes relates to the question of additionality, where, for example, credits are presented as only being issued to project developers for activities that go beyond ‘business as usual’, and that the activity wouldn’t have occurred without the incentive offered by the credit. However, our analysis shows that many projects have been up and running long before they are issued credits, and the lack of a guaranteed purchase means credits issued may never be sold.
- Terminology used by some (but not all) credit schemes, such as ‘plastic offsets’ and plastic neutrality’, also creates the potential for consumers to be misled if the purchasing companies then use these labels to promote their products. Even if all costs of the underlying collection and management activities were covered (which is not the case under plastic credits where the price of credits depends on the balance of supply and demand for those credits) and 100% of plastic waste were collected and appropriately managed, there would still be environmental impacts from production and end of life management. Use of words such as offsetting, or neutrality, however, conveys the impression that impacts are, indeed, fully offset, or ‘neutralised’, which is not the case.
- Because their price relates to supply and demand rather than the actual costs of managing waste, credits do not provide a reliable income stream for waste management projects; this can hamper the scaling up of systems and infrastructure, particularly in countries that need it most.
Chris Sherrington, Head of Environmental Policy & Economics and Project Director commented: “In the run up to INC-5, any claims by proponents of plastic credits about the role they might play in treaty implementation deserve careful scrutiny. Waste management has to function as a system. It needs costs to be covered (net of material revenues), a clear view as to how the system can grow and improve performance over time, and co-ordination in terms of the strategic development of facilities. To attract investment, there needs to be a reliable counterparty. EPR schemes based on cost recovery can meet all of these requirements, credit schemes do not.”
The research concludes with a series of recommendations for policy makers, those operating credit schemes and potential buyers of plastic credits.
You can download the report here: https://eunomia.eco/reports/plastic-credits-exploring-plastic-credit-schemes-scope-risks-and-uncertainties/
