“Rethinking how we obtain, use, reuse and optimise the world’s resources is the right path at the right time. This is how the next revolution begins.”Stefan Ranstrand, President and CEO, TOMRA Group
The war on plastics truly commenced in 2018 and we expect it to rage just as hard in 2019, creating both opportunities and risks for investors.
Impax has been investing in the transition to a more sustainable global economy for more than two decades now. During that time, we have witnessed a handful of moments where public opinion, technology, economics and external pressures combined to prompt swift policy responses around the globe. And yet we have never seen anything quite like 2018’s response to plastic pollution by policy makers.
EU leads the way
The EU led the way here and the strength of the policy response we saw in 2018 was extraordinary. The European Strategy for plastics in a Circular Economy, adopted in January 2018, was designed to change the way plastic products are designed, used, produced and recycled in the EU. This was followed in October with the EU announcing it was setting out “tough new restrictions on single-use plastic products”. The new rules ban the use of certain throwaway plastic products where alternatives exist, and specific measures will be introduced to reduce the use of the most frequently littered plastic products, particularly those found washed up on beaches. This included items like disposable plastic plates and cutlery, plastic straws and cotton swabs. Bans are to apply from 2021, with 90% of plastic bottles to be recycled by 2025. It was particularly encouraging to see that the EU was clear that alternatives to plastic needed to be sustainable. This was not to be a case of replacing one concern with an alternative that, in time, would prove equally problematic in another way. We are already seeing increased interest in solution providers from investors and expect this trend to continue, with some clear winners, like reverse vending equipment manufacturers, water dispenser companies and fibre based packaging alternatives, already evident.
A rubbish problem is beginning to pile up
Of course, the elephant in the room here is China. Since China declared it would no longer take the world’s rubbish, more than 50% of the paper and plastic and other ‘recyclable’ waste from all around the globe needs to be dealt with. This has largely meant that these materials are piling up in the areas and regions that once recycled by shipping waste materials elsewhere. The unfortunate side-effect has been that the disruption caused to the global recycling market resulted in a temporary correction in recyclate prices. In the past this has meant landfill or incineration, but policy makers are keen to cut down on this sort of response. The question is who will pay for it?
It is looking like it is time to share waste responsibility
We expect more answers in 2019 and if other regions follow the UK’s example (as set out in the UK Waste Strategy in December 2018, with a stated intention to tax plastic manufacturers not using at least 30% of recycled content in packaging and a plan for a deposit scheme in 2023), the answer is likely to be a spread of responsibility. To date, focus has been on tax payers for the ‘clean up’. In 2019 we think more attention will be paid by policy makers to the full ‘plastic chain’ – manufacturers, service and goods providers, consumers and public entities. There is both risk and opportunity in this for investors. Taxation can facilitate change, but if companies can’t pass costs on to customers, it will have a negative impact. Of course, for solution providers taxation could create an increase in opportunities and, in turn, investor interest.
So, what else are we expecting in 2019? We are very interested in bottle deposit schemes and how policy makers move from intention to application, particularly in the UK and France. We are also interested in the detail on the ‘phase out’ for single use plastics from the EU. Whilst the EU’s response in 2018 was most noteworthy it wasn’t alone. A UN Plastic ban was signed by nearly 200 countries and there were significant rumblings suggesting a move in the right direction from India too. In 2019 we will be looking for more from Asia and China in particular.