16 Dec 2023

To Tax or Not to Tax: That is the Question…

On Wednesday, the German government announced plans to eliminate climate-damaging subsidies and reallocate the EU "plastic tax" to the domestic value chain. This tax, introduced after Brexit to fill the EU budget gap, charges €800 per tonne of non-recycled plastic packaging, costing Germany €1.4 billion annually. Previously funded by taxpayers, the tax hasn't reduced poorly recyclable packaging as intended. This blog post explores the impact of this shift, the challenges in plastic recycling, and the need for a national plastic tax that promotes sustainable practices.


On Wednesday, the German government announced that, as part of budget consolidation, it would abolish environmentally harmful subsidies and implement the so-called “EU plastic tax” across the value chain in Germany. The industry's outcry is loud, even though the exact details are still unclear. What exactly is behind this? Here’s an attempt to provide some context within the recycling and plastics debate.

Since Brexit, the EU Commission has levied a new membership fee to finance the EU budget, compensating for the lost revenue from the UK (colloquially known as the “EU plastic tax”). This fee is based on the amount of non-recycled plastic packaging per member state, set at €800 per ton. For Germany, this amounts to a staggering €1.4 billion per year. Until now, this contribution has been financed from the regular federal budget—in other words, by all taxpayers.

However, this has not created an incentive to reduce poorly recyclable plastic packaging. Individual consumers cannot influence the recyclability of the packaging that enters the market. Yet, they bear the cost. Taxation without plastic packaging representation.

Despite all efforts, recyclability is still, unfortunately, a secondary priority for brand manufacturers and packaging developers. This is evident in why "Recycling Champion Germany" still incinerated a shocking 64% of all plastic waste in 2021, while the recycled content rate stagnates or even declines (Source: Conversio Market & Strategy GmbH, Stoffstrombild Kunststoffe 2021). In other words, we burn crude oil and euphemistically call it "thermal recovery."

In short: all taxpayers are covering the externalities of an industry without the polluters having an incentive to make their production processes more sustainable.

A well-thought-out national “plastic tax” must address this and should consider multiple dimensions:

1. Creating a Unlevel Playing Field for Sustainable Plastics: For decades, the production of new plastics has been privileged and kept artificially cheap. Manufacturers do not have to pay the energy tax (formerly the mineral oil tax), even though their product is still 99% made from crude oil worldwide. We need to reverse this so that sustainable plastics (those made primarily from mechanical recyclates and non-fossil raw material sources) are relatively favored over new products. And this must be done massively because the circular economy remains a lofty illusion as long as new products are cheaper on average than recyclates. Eliminating the energy tax privilege would be a crucial step.

2. Avoiding Discrimination Against Plastics as Such: Plastics from non-fossil sources and with high reusability/recyclability are central to achieving a fully regenerative chemical and circular economy. Avoiding a shift to other packaging materials or composite packaging is essential. This is not rocket science if legislators keep it in mind from the start. The work of the Central Packaging Register Office (ZSVR) around the minimum standard should set a precedent throughout Europe; penalizing packaging plastic that is easily recyclable—and actually recycled—is counterproductive.

3. Using Life Cycle Assessments as the Basis for the Sustainability of Plastics: Often, life cycle assessments for plastics are very positive in the production and use phases compared to alternative materials. Unfortunately, this fact is often not adequately considered in the emotionally charged public debate. But it also applies: Trust no life cycle assessment that does not consider the specific "end of life" of a packaging. Here, plastic packaging still does not fare well enough: incineration and export (15% to other EU countries) instead of reuse and recycling is still too often the fate of single-use plastic packaging. It needs to be the other way around.

4. Anchoring Recycled Content Quotas at the European Level for All Industries: The price and demand for circular plastics are crucial in a market economy to avoid waste, promote reuse and recycling, and realize a sustainable plastics economy. Virgin plastic production has a technological and organizational lead of at least 40 years over the circular economy. This leads to low marginal costs for the next ton of new plastic and a careless handling of this valuable material, rightly termed a "throwaway mentality." In a plastics economy that moves away from linear production processes, this technology and scale effect differential between new and circular plastics must be overcome through a "technology and investment booster" from legislators.

Recycled material prices and sales volumes have only moved in one direction in the last 18 months: downwards. Here’s an example with LDPE films: a price drop of almost 40% compared to July 2022. Source:

PE-LD price development graph from 2020 to 2023

Recycled content quotas are a suitable means for this, as they are currently being discussed in the context of the European Packaging Regulation (PPWR) and End-of-Life Vehicles Regulation (EOLR). They should follow a strict subsidiarity principle to avoid technological misdirection. Only producers who are significantly engaged at the ecologically most sensible level (expressed in CapEx and R&D spent) should benefit from the quotas. This ensures that value chain participants redefine their roles in the circular future and do not carry over their old "silo thinking" into the transformation process.

5. Establishing Digitalization and AI as Key Technologies for a Genuine Circular Economy: The fact is, of the approximately 52 million tons of processed plastics in Europe, between 8-15 million tons of plastic (waste) are unaccounted for (Source: Systemiq Ltd., Reshaping Plastics, 2022). The waste industry is literally a "black box": once consumers hand over their plastic packaging or old cars to the disposal industry, we as a society lose track of what exactly happens with the plastics.


Graph that shows plastic demand and waste figures 2019

And even when this waste is collected and sorted, a recycler must sort it and enrich it with data to decide if and in what quality the waste can be recycled. The complexity increases further when dealing with materials that are durable and become waste at different times. High-quality recycling requires as homogeneous material streams as possible in continuous quantities. This complexity can only be managed in a scalable circular economy with the help of digitalization. Building on a fundamental digitalization of the material flow from production through processing, use, and finally disposal, reuse, or recycling, many applications are conceivable where artificial intelligence can help establish reliable supply chains for circular plastics on a global scale. A tax with a steering effect thus addresses not only the price differential between new and old products. It also leverages the opportunity to catapult the circular economy into the digital future.

All in all, a good week for the regenerative plastics economy if these dimensions are considered.

I wish the German government the best of luck in now crafting a well-executed national plastic tax that takes these dimensions into account. It could make a real contribution to the sustainability shift in the plastics industry.

Author: Christian Schiller, CEO Cirplus