Italian virgin plastics tax postponement welcomed by industry, raises questions on recycling capacity

LONDON (ICIS)–There have been mixed reactions from players in the polymers markets to the recently announced postponement of Italy’s proposed €450/tonne tax on virgin plastic.

Sources from different sectors including polyethylene (PE), polypropylene (PP) and polyethylene terephthalate (PET) see it as both a positive and negative move depending on where they sit in the chain.

“The lifting of the anti-plastics tax is something that will help the industry,” a distributor of PE and PP said on Thursday.

“We’ve had a huge increase in volume in recent weeks. The government could make a lot of money [introducing the tax] but they don’t want to squeeze the economy even more,” the distributor added.

“Applying an additional cost the the industry now would be a disaster…these days they shouldn’t be asking for money, they should be handing it out. Also, demand is slowing down a little,” a PET trader said, speaking in Italian.

There were some less the positive views heard as well, however.

“If you are in the recycled business, it is not good news for us. If you are in an industry that benefits from plastic tax, you are very disappointed,” a PET trader said.

The delay comes as no surprise since lockdowns began. The tax has been hailed as a poor decision by industry trade groups, some of whom formed an alliance to oppose the implementation of a tax in Italy.

Historically, the poor image of PET has been a longstanding barrier to the industry in the war against plastic waste.

A ban on plastic or a tax on plastic is appealing to the man on the street, and may win elections. The plastic industry is ‘a very easy target’.

“They aren’t cleaning an environment, they are killing an industry,” a trader said.

There are also issues around current availability of recycled material in Italy, usage of which should increase if the tax comes into effect.

“The principle of the tax, to support the use of recycled material, is laudable but it must be married with support of the supply chain to expand in order to be able to provide viable recyclate volumes for the industry to access,” ICIS Senior Analyst for Recycling, Helen McGeough said.

“Supply [of recycled PET] currently cannot match demand should all PET-based applications require even a minimum 20% recycled content”

“Potentially a spike in demand for a supply-constrained product will result in higher prices and therefore pulls the taxation level closer to parity with the delta between virgin and recycle, thereby losing its incentive.  Understandably measures to encourage greater circularity of resources are needed, but the incentive has to work with the entire supply chain or risk its intended effect,” McGeough added.

The health aspect of lockdowns has raised demand for single use plastic and virgin PET that packages food and large bottles of water. The economic turmoil that comes with it has also sparked fears that essential goods could run out.

It also waits to be seen if the consumer’s perception of single use plastic, and plastics in general, will change as a result of the coronavirus pandemic.

In a similar move, the UK Government announced on Tuesday it was extending the consultation period on its proposed £200/tonne Plastics Packaging Tax to 20 August 2020 due to the coronavirus.

Focus article by Caroline Murray, Linda Naylor and Matt Tudball

Click here to see regulatory targets and a list of chemical and mechanical recyclers on the ICIS Circular Economy topic page