Environmental market standards are intensifying their push to establish an international framework for plastic credits under the UN plastics treaty, even as experts raise concerns over the viability of recycling at scale.
The fourth round of negotiations on the treaty will take place over Apr. 23-29 in Ottawa, Canada, with the Intergovernmental Negotiating Committee (INC) tasked with developing an international legally binding instrument on plastic pollution, including in the marine environment.
The process started with a UN Environment Assembly resolution in Mar. 2022, and is slated to conclude by the end of the year at the INC-5 session, scheduled to be held over Nov. 25-Dec. 1 in Busan, South Korea.
Japan, Canada, and the EU are urging binding requirements to reduce the use of virgin plastic polymers and restrict toxic plastics, while the plastic industry and major oil and petrochemical exporters, including Saudi Arabia, argue that the text should focus on waste management.
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.
Credit standard Verra is an accredited UN observer and active participant in the negotiation process. Along with Plastic Credit Exchange (PCX) and Plastic Bank, it 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, poised to reach an estimated $40 billion by 2040.
CREDITS CLUB
“We believe it is our responsibility to educate the stakeholders about how plastic credits can be used to meet various objectives of the treaty,” Komal Sinha, Verra’s director for plastics and sustainable development policy and markets, told Carbon Pulse.
Verra and PCX are among the early movers in the plastic credit space, verifying and issuing units.
“Our role is to make everybody aware of what this instrument is, what is its potential, and what are the benefits,” Sinha said.
Similarly, Canada-based platform Plastic Bank has recently joined the market, arranging for collecting plastic in Southeast Asia, Latin America, and Africa, and then verifying units.
David Katz, founder and CEO of Plastic Bank, argued that formalising the recognition of plastic credits as a viable solution within an international framework could encourage widespread adoption and participation from governments and businesses.
He highlighted a standardised framework would ensure consistency, transparency, and accountability across all plastic credit projects, regardless of location or scale.
“This inclusion would not only provide legitimacy to the plastic credit system but also ensure its integration into broader efforts to address plastic pollution and promote regeneration on a global scale,” Katz told Carbon Pulse.
“It would provide clarity on how credits are generated, traded, and verified, thus building trust among stakeholders and facilitating broader adoption.”
About 430 million tonnes of plastic is produced yearly, according to the UN Environment Programme (UNEP), with single-use plastic products accounting for one-third of the total.
EARLY MARKET
To date, most of the credits issued by Verra, PCX, and Plastic Bank are linked to waste collection or recycling activities, with a specific focus on areas that are disproportionately impacted by plastic pollution.
“Even if we are able to reduce plastic production by 40% by 2050, we will still produce another 12 billion tonnes of plastic,” Sebastian DiGrande, CEO of PCX, told Carbon Pulse.
An estimated 8.3 bln tonnes of plastic waste has been generated between 1950 and 2015, and plastic production has doubled since 2000 to nearly 400 mln metric tonnes per year.
“In light of that, we believe that the treaty needs to incorporate downstream actions such as plastic credits,” DiGrande said.
According to Verra, the Plastic Waste Reduction Programme (Plastic Program) has helped catalyse finance for projects allocated to more than 15 countries – spanning Indonesia, Thailand, India, Mexico, and Australia – with over 3 mln tonnes of plastic waste to be collected or recycled.
PCX developed a credit scheme – though the company prefers to call it a “model” – to drive impact and economic investment in much-needed areas as well.
Calling itself the “Airbnb of plastic”, PCX doesn’t own projects, but manages a marketplace that serves as an intermediary to facilitate the transaction between the project partner and the credit purchasers, and to provide verification.
On one side of its marketplace, the company engages with project partners who have been fully accredited either for the Plastic Pollution Reduction Standard (PPRS), or on Verra’s standard.
At the same time, PCX engages with corporations, institutions, or individuals for voluntary action or mandate compliance related to their footprint.
According to DiGrande, the more progress in the global treaty for a regulatory framework to allow financial instruments like credits to be made, the more the demand will increase.
PCX is working actively in the Philippines, where a 2023 law required companies with a total asset of over $1.8 mln to recover 40% of their plastic waste by the end of 2024, with a 10% annual increase up to 80% by 2028. The law includes the usage of credits as one of the ways to meet the targets.
“Similar to what happened in carbon, another major bucket is the voluntary market,” DiGrande said. “Impact from plastic cleanup is much easier to verify if done properly and transparently, and allows companies to take responsibility for their plastic footprint in a trusted manner.”
“Companies involved in the voluntary plastic market through PCX are hoping that there will be at least some signs of a global framework.”
According to Katz, the bulk of the demand for Plastic Bank’s credits come from manufacturers seeking to fulfill corporate social responsibility goals, with an increasing interest from businesses in the consumer goods, food and beverage, and cosmetics sectors – which are heavily reliant on plastic packaging.
Plastic Bank’s credit represents the verified assignable value to collect one kilogram of plastic from the environment, the company explained.
“Through our blockchain-secured platform, we assign unique ownership of the entire transaction chain, starting from the member who gathers the plastic to the processor who recycles it,” Katz said.
“Each transaction is assigned a unique claim ID number, ensuring that only one purchaser can own it.”
SPARKING INTEREST
The debate on plastic credits has been closely followed by all the stakeholders involved in the negotiations in the lead up to the fourth round of talks.
Jayne Paramor, strategic technical manager at the UK-based NGO WRAP, said that their potential inclusion in the treaty is sparking interesting conversations, though steps must be taken to avoid the mistakes made in the voluntary carbon credit market.
“They’re putting forward that idea as a potential financing mechanism under the treaty. There’s an interesting dialogue emerging in that space, but it’s still developing,” she told Carbon Pulse.
“There are lessons to be learned from carbon credits, though plastic is a little more tangible, more easily trackable, and measurable.”
In 2018, WRAP launched the UK Plastics Pact, a collaboration between businesses, governments, and NGOs to address the issue of plastic waste.
Under the initiative, businesses committed to working towards eliminating problematic plastics, reducing the amount of packaging, and promoting innovation.
“We’re taking that model to INC-4. The work that we’ve done has helped very much in terms of crystallising the shape of the global plastics treaty,” Paramor said.
The pact’s main goal was to ensure that plastics remain in the economy and do not harm the natural environment, and to establish a stronger recycling system in the UK.
BEYOND OFFSETTING
Recycling is at the core of Verra and PCX’s strategies to address waste pollution through credits, although specialists and experts have raised concerns about their effectiveness in the last few years.
Speaking to Carbon Pulse, Sinha rejected the term offset in relation to Verra’s scheme and added: “We believe that Plastic Credits can be used as a compensation tool, as well as be used for making financial contribution to waste management infrastructure development and for increasing collection and recycling rates, needed to address plastic pollution.”
“We do not believe that terms such as plastic offsets and plastic neutral appropriately convey the impact of plastic credits.”
Neil Tangri, founding member of the Global Alliance for Incinerator Alternatives (GAIA), emphasised the need to learn the lessons from the carbon credit market and avoid compensation mechanisms.
GAIA was among the authors of a 2023 report which criticised plastic credit projects backed by Verra and PCX, labelling them as “the main proponents of plastic offsetting”.
“Based on my experience, I believe that offset markets, whether they’re carbon, plastic, or biodiversity, are not really fixable,” he told Carbon Pulse.
“The main reason is that you need to be very precise in predicting the additionality of a project, but in many cases you see inflated baselines.”
Tangri is also a former member of California’s task force for reforming the state’s carbon market and worked for many years on the UN-administered Clean Development Mechanism (CDM).
“The times that we’ve seen a market mechanism successful in reducing pollution, for example, in the US sulphur dioxide cap and trade programme (the world’s first large-scale pollutant allowance trading system), there was no offset,” he said.
Sinha rejected the criticism on additionally, claiming that “since plastic credits are a form of outcome-based finance, we make sure that the credit is not generated for an anticipated or an estimated activity”.
“The activity [that generates the credits] has already happened and has been verified, and results are made public.”
VIABLE AT SCALE?
Globally, as reported by the OECD, 46% of plastic waste is landfilled, 22% is mismanaged and becomes litter, 17% is incinerated, and 15% is collected for recycling, with less than 9% actually recycled.
As DiGrande of PCX too underlined, not all plastic is recyclable. However, beginning around 2017, the plastic industry started to use the term “advanced recycling” or “chemical recycling”, referring to a so-called technological breakthrough that would address hard-to-recycle plastics.
“If chemical recycling becomes economically viable, that would be a great opportunity to tackle pollution,” DiGrande said.
The treaty is poised to establish a financial mechanism to ensure the transfer of these technologies to developing countries.
“Many countries don’t have that sort of infrastructure in place at the moment, but they still need it,” Paramor explained.
Yet, according to Davis Allen, investigative researcher at the US-based Center for Climate Integrity (CCI), there’s “very little evidence” to suggest advanced recycling could be scaled up.
A recent CCI report led by Allen deemed plastic recycling as a “fraud”, and revealed how big companies, including the plastics industry, have “deceptively promoted recycling as a solution to plastic waste management for more than 50 years, despite their long-standing knowledge that plastic recycling is not technically or economically viable at scale”.
“We’re seeing technologies emerging which are addressing that, but costs are relatively high. We have to support the rest of the global marketplace to ensure that they benefit from the same technologies we have access to,” WRAP’s Paramor said.
“The real reason why people talk about the cost of recycling being too high is because the cost of virgin plastic is too low,” DiGrande added.
“That’s the secondary benefit of credits, in our view, that they can help reduce that price gap between virgin and recycled plastic,” he said.
“If plastic producers are required by law or a global treaty to take responsibility for plastic footprint, the cost of every tonne or kilo of plastic they produce will incorporate the price of the credit and thus lead to an increase in prices.”
ACCOUNTABILITY ISSUES
Instead of betting on plastic credits related to recycling or waste management, Allen of CCI suggested filling the financial gap needed to solve the crisis by making big companies accountable for their polluting activities and focusing on decreasing plastic production.
“We’re hoping that this round of negotiation will lead to some legal accountability efforts,” he said. “Ultimately, I do think that we have to produce less plastic.”
The annual global production of plastics reached 460 mln tonnes in 2019 up from 234 mln in 2000, and it is forecast to triple under a business-as-usual scenario to an estimated 1,231 mln tonnes in 2060.
By Giada Ferraglioni and Sergio Colombo – news@carbon-pulse.com
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