A recently launched environmental commodities asset management firm in India says the emerging market for plastic credits holds great promise for the South Asian nation, despite regulatory developments restricting market potential.

Founded in 2022, Calculus Carbon – despite the name – is working to establish itself as an intermediary, connecting plastic credits project developers and plastic waste generators interested in investing in the industry.

The market has been emerging over the past couple of years, aiming to address the global plastic pollution crisis, which is wreaking havoc on terrestrial and marine biodiversity and negatively impacting human health.

It has been estimated that up to $40 billion in annual funding is needed between now and 2040 to get the situation under control, with the plastic credit market hoping to play a role in addressing the situation.

However, compared to other emerging environmental markets, such as that for biodiversity credits, the plastics market has been moving fairly slow so far despite having a head start.

“The market has stagnated due to a funding gap, a lack of clear structure, and huge information asymmetry. We thought we could bridge that gap,” Calculus CEO Neelesh Agrawal told Carbon Pulse.

Verra, the world’s biggest standard for voluntary carbon credit projects, and the Plastic Credit Exchange (PCX) – active primarily in North America and South and Southeast Asia – have established themselves as early frontrunners in plastic credit issuances.

While Calculus Carbon has yet to join PCX, the company is buoyed by the fact that Indian projects make up about 90% of the Verra pipeline.

A challenge for Indian developers to qualify for one of Verra’s two plastic credit types – Waste Collection Credits (WCCs) and Waste Recycling Credits (WRC) – is the additionality requirement that recycling projects must take place in regions where current recycling penetration rate is below 20%.

India is among the countries that have introduced so-called extended producer responsibility (EPR), meaning corporations are required to recycle at least the same amount of plastic that they themselves generate each year.

While the EPR means that many projects that could potentially qualify to generate plastic credits won’t meet the additionality criteria, but potential is still high, according to the startup.

“There has not been enough incentives for recyclers to go out of their way to cater to more recycling projects,” Calculus analyst Aniket Kumar said.

“What plastic credits will do is, it will bring together these different small-time recyclers and collectors who will collect and recycle that plastic waste because they now have an additional incentive to do so.”

He noted that in developing its crediting scheme, Verra has assumed that each plastic credit – which represents one tonne of collected or recycled plastic – will cost around $200-1,000, which Kumar said will provide a huge incentive for different players to work together towards.

PROSPECTS

It is early days still for Calculus Carbon, though the company is building up its own portfolio of projects and assets.

Last month, it signed an exclusive one-year contract for four projects with Reyckal, an Indian clean-tech startup.

“Recently, we signed [with] the largest plastic recyclers in the country, in northern India … to a one-year agreement to market their products,” said CEO Agrawal.

Those projects include collection, channelisation, and recycling of plastic across several states with a total potential of over 44,000 tonnes.

Yet, the company is hopeful that more methodologies will emerge to help market participants deal with a bigger part of the country’s plastic pollution issue.

“Verra only has two methodologies, but there is no methodology for waste channelisation, which is a huge problem in India as we [get] waste collected in so many high-altitude regions,” said the analyst Kumar.

Waste collected in such remote areas often can’t be recycled in the location itself due to a lack of manpower or heavy machinery, and the waste instead gets transported over great distances to major cities, which in turn expands the project region or boundary beyond the scope of Verra’s current methodologies.

THE DEMAND CONUNDRUM

As in many other environmental markets, a major question is who will step up on the credits that are being generated.

In the Philippines, PCX has announced deals with companies such as L’Oreal and PepsiCo, but in most developed countries, polluters are facing increasingly stringent domestic regulations and are not necessarily looking to do much beyond that.

Even so, optimism reigns in the market, and Verra itself recently told the UN that a crediting market should play an integral part of the global plastics treaty that is currently being negotiated.

“European corporations, which generate a huge amount of plastic waste, will be the perfect buyers of these plastic credits that are being generated out of [South and] Southeast Asia,” said Kumar.

“[Because] over there, recycling is a very costly affair. Moreover, collecting waste and recycling it is government mandated.”

The company is also backing a model under which plastic credits can complement EPR, which would make fast moving consumer goods (FMCG) companies – the biggest producers of plastic – the biggest buyers of plastic credits as well.

By Nikita Pandey – nikita@carbon-pulse.com

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