How Plastic Credits are Supporting the Global Plastics Treaty

Plastic is one of the most impressive human inventions. Mass-produced plastics have helped bring food security, hygiene, life-saving medical innovations and low-cost/energy storage and logistics solutions to billions of people. These benefits cannot be denied, but with them has come overconsumption and mismanagement, leading to a wide range of hazards for people and our planet.

We must innovate and invest in the development of alternative materials, transform deeply entrenched supply chains, and change our consumption models. Each of these require creativity, courage, and concerted action. These efforts must be initiated immediately, as they will take time to fully come into effect and turn the tide of plastic waste entering nature.

However, we must not wait for these structural changes alone. At the end of the value chain, each piece of plastic that was not designed out or avoided too often finds its way into our environment. This tap must be closed, immediately, and what has been leaked already must be cleaned up.

To accomplish this requires vast amounts of organized activity, infrastructure and associated funding. Plastic offsets tap into new sources of funding and can be integrated with desirable investments to deliver benefits beyond the traditional return on investment, such as increased wages for the informal waste sector and socioeconomic empowerment of women. Credits, as a mechanism to fund these offsets, constitute a critical financing mechanism to ensure we can address the legacy and growing amount of plastic waste entering our environment today. Properly vetted credits also create incentives to invest in longer term tools for reduction, reuse and circularity in the plastics supply chain.

1. We must act on plastic pollution today

The global UN treaty on plastic pollution is a crucial policy framework but needs many tools and many years to implement and be effective

Over the last 100 years, the world has produced more than 8.8 billion tonnes of plastic, 465M (or 5%) just in the last year. 12 million tonnes of plastic are leaking into the ocean every year. By 2040, the flow of plastic into the ocean is projected to nearly triple.

The three primary threats to our planet today — plastic pollution, climate change and biodiversity loss — are highly intertwined and exacerbating each other. This becomes particularly evident in our oceans, our world’s greatest carbon sink: Plastic waste is extensively harming marine ecosystems, with almost every species in the ocean having encountered plastic pollution. Due to their proximity to rivers, coastal ecosystems — also known as blue carbon ecosystems — such as mangroves, seagrass and coral reefs are especially affected by this pollution. Adding further stress to these already threatened ecosystems is hindering their role as important climate solutions and natural barriers against rising sea levels and storms. Virgin plastic, a petroleum product, also adds directly to the climate crisis: mainly through its production and conversion from non-renewable sources, it is responsible for 1.8 billion tonnes of greenhouse gasses (GHG) equivalent to 3.4% of global emissions. Further emissions are generated at its end of life through incineration and in the form of methane when exposed to sunlight.

Recent studies show that we have exceeded the ‘planetary boundary’ for chemical pollution — it now threatens the entire operating system of the planet. As it degrades into microplastic, it can be found in the air, the freshwater system, our food system, and even in our bloodstreams, negatively impacting human health in ways we do not yet fully understand.

In addition, the socio-economic effects of plastic pollution are distributed unevenly around the world. Wealthier nations produce more plastic waste. In 2019, for example, a US citizen produced 220kg of plastic waste on average while their Indian counterpart produced just 14kg. Moreover, such waste is often shipped to poorer, less regulated countries, a phenomenon also referred to as ‘waste colonialism’. And finally, due to a lack of proper waste infrastructure and government support, poorer countries often cannot stem the flow of plastic waste into the environment.

In particular, women, children, coastal communities, Indigenous Peoples and people who depend on the ocean feel the impacts more intensely, particularly when handling mismanaged waste. These communities’ health and economic stability suffer as they are drowned by plastic waste.

If we want to tackle the climate crisis, stem the loss of biodiversity, and improve our ecosystems, human health and social justice, we have to boldly and holistically address the issue of plastic pollution on a global scale.

2. We can achieve a circular plastic economy

Businesses must take responsibility for their plastic use and waste through voluntary action and compliance with EPR schemes being implemented around the globe

The plastic pollution crisis is complex and multifaceted, but that does not mean we cannot solve it. We need an integrated, transformational change agenda towards a circular plastic economy that delivers impact both in the short and medium term and is enabled by all ecosystem players — from governments to businesses, consumers and civil society. As of today, only 7.2% of the global economy is considered circular, accounting for all materials cycled back into the economy after the end of life. To raise this figure by an order of magnitude we must take action today and utilize all of the tools in our toolbox in a clearly orchestrated way.

Governments

The role of governments in tackling plastic pollution is absolutely crucial. On an international level, a historic decision was taken at the UN Environment Assembly (UNEA-5) in Nairobi in March 2022 to forge an international legally binding agreement to end plastic pollution. The resolution established an Intergovernmental Negotiating Committee (INC), which began its work in 2022, aiming to complete a draft global legally binding agreement by the end of 2024.

When this is achieved, it would be a tremendous improvement in both impact and speed relative to its counterpart in carbon (COP). It “would reflect diverse alternatives to address the full lifecycle of plastics, the design of reusable and recyclable products and materials, and the need for enhanced international collaboration to facilitate access to technology, capacity building and scientific and technical cooperation”. A common set of rules will especially help lower-income countries so that they are not forced to develop their own unique and disparate regulatory frameworks, standards and definitions, while providing all stakeholders with more predictability and control over plastics entering their countries, thereby reducing their national waste management burden.

One highly effective policy tool already implemented or planned in many countries is Extended Producer Responsibility (EPR). It is defined as “an environmental policy approach in which a producer’s responsibility for a product is extended to the post-consumer stage of a product’s life cycle”, with that responsibility met in the form of financial transactions or through physical collections.

In well-crafted EPR schemes, the desire to reduce such liabilities results in businesses being encouraged to reduce their footprint, develop more sustainable product and packaging designs, and increase reuse, collection, and recycling. Governments can partner with the private sector through market-driven vs. tax and penalty-driven models (see section 3).

Businesses

Beyond compliance, private sector players take environmental and social responsibility increasingly seriously, seeking to make a positive impact while responding to growing customer and stakeholder demands for accountability and action. Materials use and waste reduction should be a crucial part of every company’s sustainability strategy, not in the least for companies with a substantial plastics and packaging footprint.

The first step for companies to reduce their plastic footprint is to measure it. Several tools are available, such as the standardized plastic footprint methodology being developed by the Plastic Footprint Network. Eventually, these tools can and should be incorporated into Enterprise Systems for real-time reporting and action.

Once their footprint is clear, companies should work on its reduction. Following the waste hierarchy (see graph below), they should primarily prevent the use of virgin plastic as much as possible, e.g., through better design and manufacturing, as well as reduction of any unnecessary plastics and packaging. Businesses can also innovate their business models to allow more reuse and repair, refurbishing, renting, and sharing. They can invest in research for alternative materials and increase recycled content in all materials used to allow a circular flow.

The actions described in the Waste Hierarchy should not be seen as mutually exclusive or only sequential, however. We can and must address all of these actions in parallel if we want to stem the flow of plastic waste entering nature today as well as bend the curve on plastic consumption over time.

Companies must therefore also take immediate and tangible action to help improve waste management infrastructure to allow their products and packaging to be disposed of safely and ensure its reuse. In some situations, this comes in the form of support for government policies and investments. In other cases, companies may be best placed to make such investments through market-based solutions that leverage their own or others’ distribution and operating infrastructure. Where government-led infrastructure investment is lacking, well-managed, vetted and fully traceable plastic offsets can funnel much-needed funds to infrastructure in local communities. Through the purchase of these fully “verified” plastic credits, businesses are able to reduce or completely offset their net footprint in parts of the business where they are currently not yet able to reduce or switch to better alternatives.

Civil Society

Consumers, communities, non-government organizations (NGOs), institutions and event organizers are also important stakeholders in solving the plastic crisis. While awareness has grown in the last several years, the need remains to inform and educate the wider public on plastic pollution and its impacts, and the actions they can take to address these, directly and indirectly.

Proper segregation and recycling of household waste is crucial but the complexity of this process, a lack of knowledge, inconvenience, and missing infrastructure are still significant barriers for consumers. The term ‘wish-cycling’ has emerged to illustrate the common practice of placing items in recycling bins that cannot be recycled. This shows the public’s skepticism on whether “recyclable” items will be recycled at all, and reinforces the limits of these practices in addressing the problem holistically.

Consumers can certainly make a difference by reducing their plastic footprint directly, they can buy products with less packaging and recycled content, and avoid single-use items (e.g. by utilizing their own reusable containers, bottles, bags and cups). Consumers can also play a meaningful role by raising their voices to influence businesses and policy action at scale and by choosing brands with high sustainability standards and published, verifiable progress in reducing plastic consumption and waste. Consumers increasingly see businesses in the driver’s seat for creating change: An average of 85% of people interviewed across several countries agree that manufacturers and retailers should take responsibility for reducing, reusing, and recycling plastic packaging.

3. Plastic credits are a critical part of the solution

Plastic credits help solve both environmental and social issues, and incentivise capital investment in long-term circular solutions

The plastic pollution crisis presents a tremendous opportunity for humanity to demonstrate its ingenuity, creativity, and resilience. With the right public policies, technology innovation, and market-based solutions, we have all the tools needed to transform our relationship with plastic.

Voluntary producer responsibility through verified credits

Luckily, many necessary solutions already exist. But they have not been deployed with the coverage, scale, and quality that is required to address the problem. The industry faces numerous roadblocks. Upstream, the availability of recyclables is highly variable. This is especially true in geographies where recycling collection programs depend on the health of municipal budgets. Downstream, recycled commodity prices, too, suffer from fluctuations — closely following the vagaries of primary commodity markets.

These pressures and uncertainties do not help the recycling industry when seeking to secure finance for upgrades and/or expansion of its capacity. The transition to a circular economy in the historically underfunded waste management sector will require investments of $1.2 trillion USD to reach the scale of infrastructure needed by 2040. Finance flows will need to be redirected through regulatory action, multilateral development aid, and new investment mechanisms such as plastic credits.

Accredited and fully tracked plastic credits can help deliver near-term impact from collection, transportation, and processing of plastic waste, through both voluntary and compliance-driven producer action. They can generate funding for a wide diversity of projects (plastic type, collection, processing, geography) that enables a more balanced diversion of waste streams. Credits will also incentivize longer-term, sustained investments in circular solutions and infrastructure such as upcycling and recycling facilities as these end-of-life solutions become economically attractive.

Unlike carbon emissions and the challenges that come with carbon credits, plastic is a tangible material that can be more easily collected, weighed, and measured. In combination with blockchain technology, this means we are able to deliver additional, traceable and verifiable immediate impact.

Maintaining a very high bar for the efficacy and verifiability of plastic credits will be critical to scale impact. With this in mind, PCX Markets has established the only fully-integrated and transparent plastic waste diversion platform, enabling stakeholders to take action through 3rd party verified project partners globally and to confidently make claims on the associated impact.

Clear, rigorous and transparent standards for this work are important.The publicly available Plastic Pollution Reduction Standard (PPRS), which is managed by the non-profit PCX Solutions, was the first standard to accredit projects that generate plastic credits. It requires the assurance of additionality of waste diversion and compliance to safeguard systems that aim to protect the people involved in waste management projects. This includes aspects such as occupational health and safety, gender equality, social inclusion and feedback and grievance mechanisms — all of which must be verified by third-party auditors.

PPRS further provides a framework for the implementation of a credible and verifiable plastic offsetting program, where every ton of plastic waste diverted is recorded on our publicly accessible registry, with associated certificates of authenticity.

Another driver of voluntary action is the ability for companies or brands to make a commitment to join PCX Market’s Plastic Cleanup Partner Program, which is designed to help partners fund, and communicate, a significant level of impact in the fight against plastic waste. Plastic Cleanup Partners receive guidance on how to communicate the tangible, measurable impact they are delivering through fact-based claims – such how many kilograms the company helps clean up and divert from nature each year by purchasing verified cleanup credits, or how many kilograms of plastic waste their own consumers are helping clean up with every product purchase.  Customers who see the PCX Plastic Cleanup Partner label can be assured that the brand they are purchasing products from is truly committed to building a future where no plastic waste ends in nature.

To ensure that access to credits does not incentivize “greenwashing” or result in a lack of focus on footprint reduction, we encourage and support companies to pursue plastic reduction in their value chain. Progress against these “in-house” targets must be reported through the calculation and 3rd party verification of their annual plastic waste footprint.

This comprehensive approach to matching supply and demand through a marketplace solution enables a safe and transparent means for businesses to support project partners’ efforts to divert plastic waste from entering nature that best meets their needs while formulating and implementing longer-term strategies to eliminate and reduce plastic use.

Plastic credits help to accelerate EPR impact

Properly incorporated plastic credits can enable and accelerate EPR schemes based on the ‘polluter pays concept’. This is most effective when EPR regulation explicitly includes offsetting and credits as an approved approach to delivering impact.

We have an early example of the potential complementary role of credits in EPR regimes, delivering immediate and tangible impact today. The EPR regulation in the Philippines is one of the most aggressive policies in the world, requiring companies to take responsibility for 80% of their plastic packaging waste footprint by 2028 (starting with 20% in 2023). Offsets (defined similarly to plastic credits) offer a way for businesses to comply with the EPR program, while the cost of these credits also presents an incentive for obligated companies to develop and implement upstream strategies for the avoidance and reduction of plastic in their supply chains.

Early signs are very positive in driving action and impact. Offset purchases from obligated companies are already incentivizing additional investment in upcycling and recycling infrastructure to meet growing and clear demand. This model should serve as a blueprint for more countries to follow, and for the INC process to incorporate into the global framework under development. PCX Solutions has begun to share their direct experience as an independent and trusted Producer Responsibility Organization (PRO), in the implementation of the Plastic Pollution Reduction Standard (PPRS) and in operating our Plastic Credit Marketplace Platform with other governments, the Solutions team is actively engaging with policy makers to ensure that the law and its implementation require transparency, integrity and credibility.

Data for better policy making

Innovation and entrepreneurial drive are needed to solve this crisis. Countless startups, technology companies, and solutions providers have already collected large amounts of highly valuable field data that can be leveraged to both: guide the creation of new policies and help monitor compliance towards regulations at every level. A system of verified plastic credits can contribute by accumulating and analyzing relevant data spanning the entire value chain to increase transparency and credibility in the waste management sector.

This data can then inform where resources and capital can be most effectively and efficiently deployed to address the problem globally.

The social side: Supporting the informal waste sector

As importantly, plastic credits place an economic value on plastic waste that can help to lift up the informal waste sector and incentivize capital investment in long-term solutions. It is estimated that at least 15–20 million people globally are working in the marginalized, informal waste sector.

The credit and offsetting system can help bring visibility and recognition to this important population and strengthen its voice in the international sustainability debate. Through rigorous but not burdensome due diligence requirements and reporting processes, waste collectors can benefit through better wages, working conditions and upskilling.

The value generated through credits must be shared equitably through the entire value chain, and third-party auditors should track the socio-economic impact of schemes on participating informal waste collectors over time.

Women represent the majority of the informal waste sector, often working at the lower end of the value chain (e.g. in waste picking and separating at landfill sites). Plastic credit schemes should seek to eliminate existing gender inequalities and help increase the socioeconomic empowerment of women engaged in informal waste management activities.

For example, one of PCX’s project partners, Friends of Hope, Inc. (FOH) runs a community-based waste-to-cash program called “Aling Tindera” which empowers and provides female micro-entrepreneurs with the infrastructure, equipment and capability to collect and buy plastic waste from their communities, then sell it to FOH for a profit.

The program not only enables them to create awareness in their communities but also provides additional income to both the women micro-entrepreneurs and their communities. It has also become one of the most valued programs with corporate sponsors as they value the dual impact that they are able to deliver through the purchase of Aling Tindera credits.

Let’s get to work!

There is no silver bullet that solves the plastic pollution crisis, particularly as the use cases and applications for plastic continue to grow faster than the alternatives. Plastic offsets and credits constitute a powerful, immediately available mechanism to inject capital into the plastic waste market, and should therefore be part of the solution mix. Importantly, market-based solutions such as credits complement rather than substitute comprehensive policy frameworks. Credits should be used as a complement to, rather than a replacement for, corporate action to reduce plastic waste.

At PCX, our mission is to accelerate the short-term impact of diverting plastic waste from nature, as well as to drive investments in long-term solutions for the circular plastic economy, where plastic is reduced, reused and recycled rather than discarded. It is critical for all stakeholders in this battle against the ravages of plastic waste to work together constructively toward these longer-term solutions. With bold action and optimistic determination, we can be the generation that solves the plastic pollution crisis.

Nanette Medved-Po is the Founder of PCX Markets and PCX Solutions.  Sebastian DiGrande is the CEO of PCX Markets.  Stefanie Beitien is the Managing Director of PCX Solutions.