As the plastic packaging tax increases in the UK, Plastribution’s Mike Boswell looks a the wider implications.
With the new financial year has come an increase in the rate of UK PPT of 5.41% taking the price from £200.00 to £210.82 per tonne of packaging produced or imported into the UK. In effect this increases the maximum value of the 30% recycled content required to be exempted from the tax by £36.07 per tonne.
In the context of both benefit to the environment and supporting the economics of recycling this looks like good news. However, this needs to be considered in terms of overall polymer prices and within that the discrepancies in cost base between virgin polymer and recycling; where by virgin polymer production has high fixed cost and low variable costs and recycled polymer economics are the complete opposite.
Since April 2022 virgin polyolefin prices have fallen by around £200 per tonne according to the following graph.
his reduction corresponds with the maximum value of the recycled content, thus rendering the increase in the PPT as meaningless in terms of supporting the economics of recycling, where any such premium may apply.
The coincidental reduction in virgin polyolefin prices and the value of the packaging tax has gone some way to ensure that the PPT has had limited inflationary impact on plastics packaging products. HM Treasury looks like the obvious winner with a higher rate of tax being applied to what is likely to be a similar volume of material.
Looking further afield, Spain introduced its own Plastics Packaging Tax earlier this year, but rather than setting a recycled content threshold it has chosen not to tax recycled inputs. This approach has the advantage that any amount of recycled content up to 100% is incentivised and accordingly rewarded.
Although there is no set threshold, the economics should in and of themselves work providing that the cost of the recycled content is less than the taxed virgin alternative. The tax rate is €0.45/kg (£391 per tonne) and with this comes the risk that Spain will increase imports of recycled materials, if economically viable, which may in turn drive up the price of recycled materials, including from the UK either directly, or through a ripple effect.