Opinion

How will the EU plastics levy change the flexible packaging market?

The EU is getting tougher on non-recycled plastic packaging waste

Around €6-8 billion per year is expected to flow into the European Union’s general budget from a new levy on non-recycled plastic packaging waste.

Our analysts have assessed the impact of the levy across EU nations, and what the changes mean for various packaging types. For the full insight, fill in the form on this page. Or read on for an introduction.

The implications of the new EU plastic tax

The new levy, implemented on 1 January 2021, is calculated on the weight of non-recycled plastic packaging at €0.80/kg. Contributions will vary greatly across member countries.

National governments are yet to decide how to collect additional revenue. Broadly speaking, the options for each member state to collect the necessary funding are:

  • Subsume into general contributions
  • Raise taxes on non-recycling disposal routes (such as landfill or energy recovery)
  • Pass the tax on to packaging companies and/or plastics producers

In practice, most countries will try a combination of some or all of these options. As a result, we could see different plastic tax collection schemes from country to country – alongside an increased emphasis on reducing the amount of plastic going into the waste stream.

One of the more obvious targets is the flexible packaging industry, with the European Council making specific mention of “plastic packaging waste” in its approved proposal.

What will the levy mean for individual countries? Read the full insight for more analysis.

The EU levy could lead to more sustainable packaging options

The industry is already moving towards more sustainable choices. These are recyclable, mono-material structures, often polyolefin-based, and post-consumer recycled (PCR) content. However, despite a significant amount of discussion, there is a degree of hesitance from the major converters to commit large volumes, and therefore large investment. But the new EU levy could boost converters’ confidence (or pressure them) to make more sustainable switches in bulk. 

While not all plastic-based packaging will be able to switch from multi-material to mono-material structures, we expect the trend will start to gather pace, and we could see a more rapid switch across the board in the future.

The flexible packaging sector could lose its relative cost advantage

Despite the switch to more sustainable plastic-based packaging, the new EU levy will result in an increase in plastic packaging cost, regardless of how the tax is collected.
This could mean that flexible packaging will lose its relative cost advantage, and we could see a shift to other materials to avoid additional plastic costs.

Which materials could provide an attractive alternative? Read the full insight to find out more.

Cost increases will eventually be passed on to the end consumer

Products that are heavily reliant on multi-material flexible packaging structures are likely to see a packaged product price increase due to the levy. Even if EU countries decide to impose a tax on packaging producers, they will typically try to pass the additional costs downstream in the supply chain. Eventually the tax should ripple down and reflect in the price of these consumer goods.

Will the levy support a more circular economy in the EU? Find out more in the full insight.

Fill in the form on this page for a complimentary copy.

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Wood Mackenzie Chemicals provides extensive short and long-term insight and analysis for flexible packaging markets around the world.

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Mariana Santos Moreira, Senior Research Analyst, Films & Flexible Packaging