Plastic credits can support the implementation of extended producer responsibility (EPR) schemes in emerging markets and developing economies (EMDEs), according to a new report by carbon standard Verra.

The new discussion paper “Plastic Credits as an Innovative Financial Instrument” highlighted four key ways that the fledgling plastic credit market could support the rollout of inclusive EPR, by mobilising extra financing, speeding up waste collection, gathering key data, and supporting a just transition of waste pickers.

The paper comes ahead of the intersessional expert group meetings that will take place Aug. 24-28 in Bangkok, Thailand, which aim to advance work on developing an international legally binding instrument on plastic pollution and has broad support from actors across the plastic value chain, academia, NGOs, and governments.

Plastic waste is projected to triple, rising from 460 million tonnes in 2019 to 1.3 billion tonnes in 2060, the OECD estimates, with widescale detrimental impacts on ecosystems, economies, and communities worldwide.

Verra’s Plastic Waste Reduction Programme has been in place since Feb. 2021, with more than 60 projects in over 27 countries globally either registered or in the process of registering through it.

The programme allows two types of credits to be issued – Waste Collection Credits (WCCs) and Waste Recycling Credits (WRC) – which establish a framework for these activities and allow corporate finance to be channeled back to the project collecting or recycling the plastic waste.

One example is the Plastic Waste Reduction-Linked Bond issued by the World Bank in January, which will channel capital towards community-led plastic waste collection and recycling efforts in Ghana and Indonesia, with investors receiving a financial return linked to the sale of plastic and carbon credits issued on the Verra registry.

The World Bank estimates that the burgeoning plastic credit market could bring about $30 million a year to plastic pollution interventions within the next five years.

Verra’s paper looks specifically at how plastic credits could support the implementation and effectiveness of EPR schemes in EMDEs, which are often disproportionately burdened by plastic pollution and lack the financial and administrative firepower to expand waste management infrastructure and roll out EPR schemes.

It outlines the following four benefits of plastic credits in helping to implement extended producer responsibility in emerging markets and developing economies:

• 1: Plastic credits can bring in additional financing required to overcome the infrastructure deficit. Ending plastic pollution by 2040 is estimated to require $1,884 billion in annual investment, 93% of which to come from private sources, the paper noted, so plastic credits are a great way to attract private investment for the upfront capital needed by plastics reduction and removal projects, particularly when used within a blended financial mechanism. The World Bank Plastic Waste Reduction-Linked Bond is a good example of this as it channels private funds into plastic waste reduction efforts while offering investors plastic credit-linked returns, stated Verra.
• 2: Plastic credits can speed up waste collection and treatment efforts – helping to bridge the time gap for scaling up EPR schemes. Credit sales can also accelerate the implementation of EPR by boosting the financial resources available to establish the infrastructure required for effective EPR implementation. And the market can also play a key roll in jump-starting local and national initiatives, creating momentum behind plastic reduction efforts.
• 3: Best-in-class plastic credit systems require robust data and monitoring that can subsequently help inform governments about plastic waste collection and recycling. This data can then be used to design effective EPR schemes and the existence of a global framework for measuring these outcomes can relieve governments of the administrative burden of verifying the data or establishing their own measurement methodology, said Verra.
• 4: The plastic credit market can support a just transition and equitable inclusion of waste pickers through social and environmental safeguards that protect everyone involved. For example, all projects under Verra’s Plastic Programme must demonstrate the mitigation of any negative health or safety risks, no income displacement resulting from the activity, no forced or child labour and payment of “regionally prevailing wages”, and that a stakeholder consultation has been conducted in the project’s design phase.

Verra underlined that plastic credits are an innovative financial instrument that can complement the suite of tools required in a blended financing approach to achieve the ambitions set out under the International Legally Binding Instrument (ILBI) on Plastic Pollution.

They can operate either independently, through a blended/innovative finance approach, or integrate with EPR schemes to mobilize large-scale capital to address plastic pollution, the report said.

As much as 78 million tonnes of mismanaged plastic waste leaks into the natural environment every year, with a further 318 Mt going unrecycled into landfill and incineration, according to OECD estimates.

Efforts to tackle the spiralling plastic issue have significantly increased, spearheaded by the Intergovernmental Negotiating Committee on Plastic Pollution, which in its latest round of negotiations on a UN plastics treaty wrapped up at the end of April with shy steps forward on a draft text, due to be finalised by the end of the year.

The fourth Intergovernmental Negotiating Committee (INC-4) meeting in Ottawa, Canada, concluded with countries weighing the proposal of a target for 40% reduction for plastic production by 2040 submitted by Rwanda and Peru, even as a final agreement was not reached.

Countries agreed on a series of expert meetings aimed at catalysing convergence on key issues in the lead up to the final round of talks (INC-5), scheduled to be held over Nov. 25-Dec. 1 in Busan, South Korea.

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 bln by 2040.

Verra’s most recent plastic credit report comes ahead of a more detailed case study that will look at the specific opportunities for plastic credits to support the implementation of inclusive EPR in Ghana, which Verra will use as an archetype of other EMDEs.

The report is expected to be published before INC-5 later this year.

By Bryony Collins – bryony@carbon-pulse.com

** Click here to sign up to our twice-weekly biodiversity newsletter **