Plastic credits should be used wherever there’s a financing gap to make plastic collection happen and as a bridge to extended producer responsibility regulation, while they should be sufficiently expensive to dissuade plastic makers from producing the waste in the first place, according to a developer of track and trace software for waste recovery.
The sale of plastic credits helps CleanHub to fund its network of waste recovery projects around the world in places currently lacking in waste infrastructure, where one plastic credit equates to one tonne of plastic collected, thereby preventing it from reaching the natural environment.
The organisation has so far collected more than 3,000 tonnes of plastic-heavy waste and so issued more than 3,000 credits, with about 80% of that sold, mostly to small, eco-conscious brands in the cosmetics and apparel industries.
The price per tonne ranges from €400-1,000, depending on the project type and location, said Joel Tasche, founder and co-CEO of CleanHub.
“The credits should be expensive because the idea behind it is that you pass on the cost to the producers and you actually create an incentive to reduce the waste. If it’s just a cheap way out, then you’re running into issues,” he told Carbon Pulse.
Pressure is mounting to include plastic credits in the UN plastics treaty, for which the fourth round of negotiations is taking place Apr. 23-29 in Ottawa, Canada.
The Intergovernmental Negotiating Committee (INC) is tasked with developing an international legally binding instrument on plastic pollution, including in the marine environment, with the process first starting with a UN Environment Assembly resolution in Mar. 2022, and 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.
MARKET DIVERGENCE
For its part, CleanHub only generates plastic credits for unrecyclable plastic because recyclable plastic is a commodity and so can be economically processed without the sale of plastic credits, said Tasche.
“A tonne of PET trades from $600-1,200 depending on the quality, so you don’t need credits to improve the margin on that,” with the exception of some very remote places where the transportation alone would make plastic recycling uneconomical, he explained.
Instead, CleanHub focuses its efforts on non-recyclable plastics that can’t otherwise be sold or monetised in any way, leading to their often-improper disposal in rivers and the sea.
“Putting a plastic credit behind it means that the collection and scientific disposal of the waste will be paid for,” and CleanHub’s track and trace technology proves that every step of the waste management process has been done correctly, he said.
As a software company for waste management, CleanHub provides evidence that the work has been done, which solves the key issue with waste management, which is that there is typically no proof of the work having been done, said Tasche.
CleanHub’s track and trace technology monitors the entire waste management chain using GPS, photos, QR codes, and weighing scales to ensure that the amount of waste taken at the point of collection is the same amount that gets disposed of, either via waste-to-energy facilities or via landfills.
“There’s no good way of disposing of unrecyclable waste because it means destroying resources, but each and every method costs money, except for dumping the waste in the natural environment,” said Tasche.
CleanHub’s collection network and track and trace system prevents the last option from occurring, funded by the sale of plastic credits, with the credit only paid out to the waste management company once all data points are in place to prove that the waste collection chain occurred, he explained.
The fact that the waste collection and process wouldn’t otherwise have occurred without the sale of plastic credits proves the additionality of the model, he added.
CleanHub currently operates nine waste collection projects globally, across Southeast Asia, India, East Africa, and South America, and is in the process of building a new large-scale centre that will process 6,000 tonnes of waste a year in Kerala, India.
Its credits are sold and immediately retired, so they aren’t tradeable, and neither are they listed on a registry such as Verra or PCX, said Tasche.
A BRIDGE TO BETTER
Tasche stressed that CleanHub’s sale of plastic credits is a way to finance the waste collection process, evidenced by its track and trace technology, but that in the long term, regulation around Extended Producer Responsibility (EPR) should be the preferred option.
“Plastic credits should be used as a bridge to EPR, where regulations are not happening fast enough” in order to provide companies with a voluntary option to account for their waste production, but should only really be seen as a stepping stone because they come with lots of complications, said Tasche.
For example, some plastic credits specifically focus on funding recycling efforts, such as the Voluntary Recycling Credit (VRC) being developed by management consultancy Roland Berger alongside the International Solid Waste Association (ISWA) and Beeah Group.
When issued, VRCs will be tokenised as applying blockchain technology to guarantee a transparent, auditable, and secure record of recycling credits and transactions.
This arguably counters Tasche’s statement that plastic recycling is often already economically profitable, negating the need for plastic credit sales.
The introduction of EPR schemes in places like Germany and the Philippines provides the conditions for waste management companies to prosper as they are funded by robust corporate-backed EPR schemes, said Tasche.
Though he pointed out that EPR schemes often do not go far enough to fostering a completely circular economy.
The introduction of EPR often also encourages companies to go further than what the regulation sets out, such as is the case with L’Oreal in the Philippines, which partnered with PCX last summer to offset its entire annual plastic footprint in the country.
The France-headquartered firm will recover, sort, and recycle plastic equivalent to its own footprint in the Philippines, though has not disclosed how many tonnes would be involved.
Its commitment goes well beyond the requirement from the Philippines government, which for obliged enterprises under its EPR programme is to provide suitable and effective recovery, treatment, recycling, or disposal of 20% of their plastic footprint in 2023, rising gradually to 80% in 2028.
A LEVEL PLAYING FIELD
CleanHub’s plastic credits are sold more to small-scale, ‘’challenger’’ brands like sports clothing company Vuori and solid shampoo maker Disruptor than they are to multinationals, which are often more focused on the insetting approach of sourcing more recycled feedstock in their own value chains anyway, said Tasche.
Larger brands have more power to influence change on recycling in their own supply chains than smaller-scale brands, he pointed out.
A coalition of FMCG (fast moving consumer goods) companies are calling for EPR to be part of the INC framework, but for there to be a level playing field to ensure their competitiveness in the market, said Tasche.
“If you’re producing plastics at the level of big FMCG at the scale of millions of tonnes and you as the only company in the market take on the cost for recycling, then in the public markets you’ll have a disadvantage over others,” he said.
“So, they are coming together to demand a level playing field for EPR, which is understandable.”
Some 160 financial institutions, with $15.5 trillion in collective assets under management, recently called for an ambitious international treaty to end plastic pollution, including disclosure on plastic-related risks for the financial sector.
By Bryony Collins – bryony@carbon-pulse.com
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