Corporates are keen to support customised waste collection and recycling programmes that equate to their waste production footprint and potentially tie back to their own supply chain, with the plastic credit model not suited to all circumstances, say market stakeholders.

Brazilian waste management company BVRio, which worked with Verra to develop the Plastic Waste Reduction Standard, says that it is moving away from the model of plastic credits and towards its model of targeted Circular Action Programmes (CAPs) for corporates, where it is sub-contracted to remove a particular amount of waste in a certain jurisdiction on behalf of a corporate operating there.

“In general, our experience is that companies would prefer to have a series of customised projects to their needs, rather than buying plastic credits to offset [their waste footprint]”, said Pedro Moura Costa, founder of BVRio and previous founder of environmental commodities house EcoSecurities, which was sold to JP Morgan in 2009.

“We still strongly believe in attracting plastic recycling finance, but credits are not necessarily the best instrument – there are variations on the theme that may work better,” he told Carbon Pulse.

“We would rather develop specific targeted CAPs for corporates in a location to remove that amount of waste from a jurisdiction on their behalf and at the end of the year, the corporate receives a statement of impact to use for claims or EPR (extended producer responsibility) obligations, as opposed to creating credits and flogging those credits in the market,” he said.

He referred in particular to ongoing criticism surrounding plastic credits often around issues of additionality and potential issues with secondary trading, which some corporates wish to avoid.

ONGOING PROJECTS

Ongoing CAPs run by BVRio include Fishing for Litter, a project to collect over 500 tonnes of ocean waste by artisan fishers funded by Ocyan, a supplier to the oil and gas sector, and ocean cleanup initiative Ogyre, and a waste cooperative project in Rio de Janeiro funded by oil major Petrobras, to collect 1,800 tonnes over the next three years.

BVRio has so far worked with about 10 corporates on its CAP approach and has collected tens of thousands of tonnes of waste, it says.

“A customised Circular Action Programme is where a corporate has a waste footprint in a certain location and we are sub-contracted to remove that from the environment on their behalf. Whereas offsetting is somewhat different, through the use of credits, more distant from the supply chain of corporates,” Moura Costa explained.

That being said, BVRio still sees a place for plastic credits, provided that waste cooperatives are fairly compensated, but Moura Costa sees them more as a “tool in the toolbox” to expediate plastic recycling than a “silver bullet” to tackling the waste conundrum.

“Whichever mechanism is used, the aim is to maximise and optimise waste collection around the world, ensuring that there is social integrity, inclusion, and fair-trade concepts incorporated in the use of that mechanism,” he said.

He added that a fair price for plastic credits to fairly compensate waste collective cooperatives comes in at around $350/t.

Waste recovery project developer CleanHub recently told Carbon Pulse that it sells plastic credits anywhere from €400-1,000, depending on the project type and location.

CREDITS & UN PLASTIC TREATY

The latest round of negotiations on the UN plastic treaty wrapped up this week with shy steps forward on the draft text, due to be finalised by the end of the year.

The final text is set to have large implications for how the world will deal with the plastic pollution crisis and its impact on nature and global biodiversity, as well as for the early plastic credit market.

Negotiations in Ottawa saw the participation of major players in the emerging plastic credit market, with credit standard Verra attending as an accredited UN observer.

Verra is advocating for plastic credits to be included in the treaty as a key financing mechanism to help bridge the funding gap on waste collection and management, slated to reach an estimated $40 billion by 2040.

Credits – whether used independently or along with other financial instruments like outcome-based bonds – can support the financial mechanisms established by the treaty by mobilising financial contributions aligned with measurable results, said Robin Rix, chief of legal, policy, and markets at Verra.

Speaking to Carbon Pulse, PCX Solutions, another early mover in the plastic credit space which verifies and issues units, also said the issue took centre stage at the summit.

“While negotiators touched on financing at INC-4 as one of many topics on a packed agenda, it was a major topic of discussion at side events in Ottawa,” said Stefanie Beitien, managing director of PCX Solutions.

“This was exciting to see, because we need $1.64 trillion by 2040 to beat plastic pollution. Market-based mechanisms like plastic credits, which channel funds from the private sector into recycling, upcycling, and clean-up projects, are an important option for emerging markets which lack funding and infrastructure.”

According to Beitien, while other funding mechanisms may take years to develop and implement, plastic credits can be deployed today.

BVRio’s Moura Costa was involved in helping to create the Verra Plastic Waste Standard back in 2017, but told Carbon Pulse that the standard has become “too cumbersome, too elitist, and too slow to be approved”.

BVRio instead developed its own standard – the Circular Credits Standard – but today refrains from using credits at all, he said.

“We are trying to attract plastic collection finance to provide the service on a wider scale than trying to fragment that into a security called credits,” he said.

For example, BVRio is in the process of creating an inclusive waste collection fund to ramp up its waste collection efforts, which corporates can then join to collect plastic on their behalf. The fund will fairly compensate waste collectors, said Moura Costa.

More than 5,600 credits have so far been transacted through BVRio’s mechanism based on the Circular Credits Standard, plus around 1,400 tonnes collected and processed through its Circular Action Programmes.

INDIA’S EPR CREDITS

In India, GEM Enviro Management operates on behalf of over 125 organisations to collect plastic waste via waste collection centres and pass that waste onto recyclers for recycling and generation of EPR credits.

The system of EPR credits governed by India’s Central Pollution Control Board (CPCB) sees recyclers generate EPR credits on the CPCB portal, with the credits subsequently sold onto brand owners looking to address their obligations under India’s plastic waste management regulations for extended producer responsibility (EPR).

“As per these rules, any organisation who is using plastic packaging has to ensure that the equivalent amount of plastic packaging gets collected and recycled,” said Sachin Sharma, founder and director of GEM Enviro Management.

An EPR credit equates to 1 tonne of plastic recycled, with EPR credits sold for different values depending on the plastic type being recycled.

This ranges from 1 Indian rupee ($0.01) per kilogramme for hard plastics such as plastic bottles, up to 2.5 rupees for compostable plastics, Sharma said.

Last year, GEM Enviro collected about 300,000 tonnes of plastic across all categories in India, passing the waste onto collection centres, which then sort and bail it to be transported to recycling facilities, and has collected over 1 mln tonnes since being established in 2014, he told Carbon Pulse.

In 2022-23, GEM Enviro received several hundred million rupees from the sale of EPR credits to multinational corporations, such as large consumer goods and beverage companies.

The 30 or so collection centres that GEM Enviro works with receive waste material from informal waste pickers, who collect plastic waste in cities across India, and from contractors like hotels and restaurants.

“Almost 85-90% of PET plastic in India is collected because it can then be sold at a 10-15% discount to standard polyester fibre, and so there’s big demand for this product,” with networks of waste pickers and collection rates expected to further increase, said Sharma.

However, the recycling service paid for by the system of EPR credits is not always sound, he said, as CPCB lacks the manpower to carry out thorough auditing of all recycling facilities.

For example, an India-based plastics recycling company generated 900,000 credits last year but was found to be creating false credits, said Sharma. He declined to provide the name of the company.

The generation of EPR credits in an illegal manner pushes down the price of these credits on the market, he said.

MAX & MIN PRICE LEVELS

In a bid to strengthen the market, the Indian government is now looking to develop an exchange mechanism for the exchange of EPR credits between recyclers and brand owners directly, said Sharma.

“It will be something along the lines of a stock exchange with a minimum and a maximum price established for the EPR credits” where the minimum price would be 30% of the environmental compensation, so set at 1.5 rupees/kg, whereas the maximum price would be 5 rupees/kg, covering total environmental compensation, he said.

The mechanism will likely take some time to develop, however, because the CPCB faces lots of infrastructure issues including with its online portal, he added.

By Bryony Collins – bryony@carbon-pulse.com