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Plastic credits: a transitionary tool towards a circular economy

The plastic credit market needs to engender trust and credibility. Only then can it rise to its potential as an impactful tool to address plastic leakage.

The current discourse on plastic credits holds a dizzying sea of standards coupled with conflicting opinions. At its core, plastic credits or offsets are payments in exchange for plastic waste collection or recovery services. Activities that qualify for plastic credits are typically those that occur outside of the producers’ value chain, ranging from beach clean-ups to municipal waste collection.

Critics dismiss plastic credits as yet another way producers greenwash their customers while diverting attention from meaningful solutions to reduce their plastic footprint. Others promote plastic credits as a catalytic tool to channel much-needed investments into a chronically underfunded waste sector.

Regardless of the discourse, voluntary efforts to take stewardship over the plastic that companies put on the market go on and are scaling up. These efforts are most impactful when they take place in areas with high leakage and low collection capacity, and often where these activities would not be economically viable otherwise. However, measuring the true impact of these activities can be difficult as there is no universally-accepted, standardised and credible way of reporting these efforts.

In an ideal world, producers would be mandated to comply with Extended Producer Responsibility (EPR) schemes while cutting waste at source. Though, realistically,  mandatory EPR schemes typically take five years to implement. Hence, voluntary plastic credit markets are a valuable interim tool to crowd-in private sector investment while complementing efforts to set up mandatory schemes.

So, the question is, not whether plastic credits should be allowed, but rather, how to develop a fair and effective plastic credit market, i.e., one which

  1. Measurably contributes towards plastics recovery related to the status quo
  2. Incentivises producers to design out waste at source, and
  3. Provides transparency and credible comparisons between different producers’ who seek to mitigate their plastic footprint

Revisiting the basics of plastic credits

Organisations providing waste recovery services (eg, Seven Clean Seas, Second Life) are eligible to generate plastic credits. Plastic credits generated are sold directly to buyers or through a platform (eg, Plastic Exchange, RePurpose, or Verra). Buyers of plastic credits are typically producers such as major brand owners but can also be individuals who seek to offset their plastic footprint.

World Wide Fund for Nature (WWF) has set out several guiding principles to create a credible plastic crediting system, evolving from the existing fragmented system today.

Among these principles, three are most critical:

Measurable additional impact: Sellers of plastic credits must prove that their activities contribute to additional impact beyond the baseline, be it the volume of waste recovered or employment. In other words, credible plastic credits must be a positive, not zero-sum game.

Demonstration of additionality can follow a ‘positive’ screening. For example, an offset activity is considered additional only when it takes place in an area with an extremely low penetration rate of waste collection services to avoid the risk of crowding out other players.

Prevent double claiming: Every plastic credit issued must be attributable to a single party. The risk of double claiming is more significant in a fragmented market, where it is difficult to monitor and trace the ownership of plastic credits.

Marketplaces or registries are therefore a critical complement to plastic crediting to certify, register, transfer, and retire offsets from the market. Once the end buyer (eg, brand owners) pays and receives the offset, the buyer gets credit for the impact created (waste or emissions reduction), and the offset cannot be resold. The buyer may also pre-finance a specific offset activity through investments in set-up costs in exchange for a stipulated volume of credits over an agreed duration.

Ethical supply chain: Equally important to its environmental mission is a social mission. Plastic credits should be priced high enough to support a living wage for workers that are involved in offset activities. Thus, the process of certifying plastic credits should ensure stringent checks across the supply chain to promote stable and safe working conditions for all workers involved.

Plastic credits as a broader strategy

While plastic credits could become an integral tool to managing a brand’s plastic footprint, it must be stressed that it should only be part of a broader strategy that aims to design out waste. Corporate must prioritise plastic waste reduction by adopting re-usable packaging, alternative materials, or designing 100 per cent recyclable or compostable plastic packaging over plastic offsetting.

Nevertheless, packaging transformation, especially for large industries, is a slow process. Factory lines need to be changed, new retail models need to be developed, and innovative technologies need to be commercialised. Palliative clean-ups and widening of essential waste collection services, unfortunately, remain necessary in the meantime.

If the plastic credit market abides by common core principles (such as additionality, ethical supply chain), it can accelerate companies to shift towards circular production. The cost of plastic credits, when internalised, can accelerate a company’s journey to design out waste.

An internal plastic or carbon price can already be applied today to start informing investment decisions. The price of plastic credits should be high enough to incentivise producers to prioritise reduction at source.

Guidelines are needed to ensure plastic credits are communicated about in a proper context. For example, Guidelines for Corporate Plastic Stewardship by the 3R Initiative intends to set a benchmark for standardised reporting of plastic footprints and mitigation methods.

A formal, agreed-upon standard embraced by the industry would inculcate a common measure of progress, reducing the risk of greenwashing. In addition, the Plastic Waste Reduction Standard is a current effort to implement a uniform, transparent reporting methodology to compare the impact of different offset activities, including additionality criteria. 

Conclusion

The world has not yet reached a circular plastic economy. Till then, stakeholders, including buyers and sellers of plastic credits, expert groups, and NGOs, must steer the nascent plastic credit industry in the right direction. The industry can learn a lot from the decades of debates, iterations, failures, and successes in the carbon world.

The plastic credit mechanism should leapfrog as far as possible, while also acknowledging the imperfections that will arise at the beginning. In the transition to a full EPR system, the plastic credits market can be integrated into the mandatory scheme and continue to channel much-needed funds from producers to waste recovery and recycling entities. Furthermore, the credit mechanism can remain relevant for ambitious companies that wish to go further than government-mandated targets.

Tze Ni Yeoh is an economist turned circular economy specialist, now consulting on projects related to circular economy and plastics. The views expressed in this article are those of the author and do not necessarily reflect the views of affiliated organisations.

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