The conclusions from the Special Meeting of the European Council held between 17-21 July to discuss the long-term EU budget, the Multiannual Financial Framework (MFF), included a mention of a "new own resource" to be introduced as of January 1, 2021, composed of "revenues from a national contribution calculated on the weight of nonrecycled plastic packaging waste with a call rate of EUR 0.80 per kilogram with a mechanism to avoid excessively regressive impact on national contributions".
In short, this statement introduces what was rumoured to be a "plastics tax" at EU level. This is in practice additional funds that the member states will have to provide to the EU budget, partly triggered to solve the deficit anticipated by Brexit.
Let's break down what this statement means. The first part of the statement talks about a
- New own resource: Own resources are the EU's main revenue. They consist of duties and levies, VAT, national contributions and correction mechanisms.
- National contribution: the contribution of Member States to the EU budget. They are based on the Gross National Income of the Member States, and overall are the largest source of income to the EU.
So, in this first part of the statement the Council is asking for additional funding that Member States need to provide to the EU. These funds are not being requested from industry, but rather from the individual Member States who will need to figure out how to collect them.
The second part of the statement specified how the amount of the contribution is calculated. The language is very similar to that used in the Commission proposal for a Regulation back in May 2018. Article 5, part 6.b of this proposal specifies how this contribution is calculated, based on the difference between the weight of the plastic packaging waste generated and the amount of plastic packaging waste recycled in a member state. Article 9 mentions a "uniform call rate" which was not established in the proposal, but now the Council set it at €0.80/kg. There is also a mechanism in place to adjust the contribution of the smaller member states.
The measure from the Council also had to be discussed in the European Parliament, which happened on July 23: the EP stated to this effect that "the plastics contribution only represents a first partial step in fulfilling this Parliament’s expectation". In the coming period, the individual member states will need to address how these funds will be made available.
Therefore, at this point it is not possible to say what impact this measure will have in the market. As currently phrased, the proposal does not affect the price of virgin material compared to recycled material, as was proposed by some organizations when the proposal first surfaced, but this is a possibility that could become implemented at member state level. The one clear thing is that this contribution will be in effect already on January 1, 2021, as already proposed in the proposal from 2018, therefore there is likely to be rapid developments in the coming months as Member States will need to have the contribution available in the next year.
We will continue to monitor the development around this topic and keep members informed.
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