Estonian government's planned plastic tax would drive up food, drink prices

Plastic packaging in Estonia.
Plastic packaging in Estonia. Source: Priit Mürk/ERR

The Estonian government is planning on imposing a plastic packaging tax in order to encourage packaging manufacturers to use more environmentally friendly materials. According to Estonian Food Industry Association (ETL) chair Sirje Potisepp, however, no good alternatives to plastic packaging exist in the food industry, and the planned tax would only lead to even more rapid price increases at the grocery store.

Plastic packaging currently accounts for a significant share of all waste. Sigrid Soomlais, director of the Environmental Management Department at the Ministry of the Environment, highlighted that packaging makes up one third of all mixed municipal waste — one third of which, in turn, consists of plastic packaging.

As is the case with municipal waste in general, Estonia is likewise falling short of its plastic packaging recycling targets. As an EU member state, Estonia has taken on the commitment to recycle at least half of all plastic packaging waste by 2025. Currently, however, the country is only capable of recycling just 41 percent thereof.

According to Soomlais, the state intends to step up plastic packaging recycling using a three-pronged approach.

First, the ministry intends to bring packaging waste collection systems closer to people's homes in order to make it more convenient for them to sort their plastic waste. Second, the state plans on providing EU funding to entrepreneurs to invest in technology and thus increase their recycling capacity.

Regarding the third prong, Soomlais said that entrepreneurs need to be further encouraged to design packaging better suited for recycling, noting that it's not currently possible to recycle all the types of packaging people are currently sorting at home.

"In reality, we need to be motivating that initial leg as well, where this packaging is entering the market, and thereby boost entrepreneurs' motivation," the ministry official explained. "This charge on plastic packaging could be where we motivate a company to produce better packaging."

The Ministry of the Environment had proposed a plastic charge two years ago as well, but it together with other environmental charges failed to gain political approval in the government. Now the taxing of plastic and packaging is included in the government's action program. According to the plan, Minister of Climate Kristen Michal (Reform) should submit his proposals for environmental charges in September.

Two years ago, the ministry had proposed a fee for plastic packaging that goes unrecycled. Under the new concept, however, packaging companies should pay fees for all plastic packaging to reach the market.

The fee rate would depend on how easy it is to recycle a specific type of plastic packaging. For example, PET plastic, which is used to produce many water and soft drink bottles, and HDPE plastic, which is used to make trash bags, for example, are easier to recycle. More difficult to recycle, on the other hand, is PVC plastic, which is used in the production of bottles used for window cleaning solution and detergents.

Under the bill that reached the government's desk two years ago, the Ministry of the Environment had proposed a plastic fee rate of €370 per ton. According to Soomlais, however, the average fee should now be higher. She noted that quite a few EU member states have implemented similar plastic fees by now, highlighting that the rate is around €450 per ton in Italy, Spain, Portugal and the U.K., for example.

"What's crucial here is that this fee must be incentivizing," the ministry official explained. "That difficult to recycle packaging has to be so much more expensive that it's worth it for the company to produce packaging that is easier to recycle. That's the crux of the matter."

Plastic fee would further spur price hikes

Estonian Food Industry Association (ETL) chair Sirje Potisepp, meanwhile, lost her temper when she heard about the government's plans. According to Potisepp, Estonian companies aren't currently capable of taking the planned plastic packaging fee on themselves, meaning the cost would end up being passed on to consumers.

She warned that a plastic packaging fee would only further spur price hikes, which in the food and drink sector have yet to let up.

"Our government has lost all touch with reality because for members of the government and MPs, money grows on trees, obviously," Potisepp said. "I don't think they are remotely interested how the people of Estonia are even going to cope at all, but we're already seeing very clearly how the people of Estonia aren't getting by."

Recycling service provider Eesti Pakendiringlus board member Alder Harkmann noted that the state currently pays the EU around €11 million a year for unrecycled plastic packaging. Should this fee now be collected by packaging producers, he believes it would around double the price of plastic packaging in stores.

According to Potisepp, packaging accounts for 20-80 percent of the price of a product, and the greater the amount of packaging around the product itself, the greater the portion of the product price for which it accounts.

She highlighted that the government is already planning on increasing VAT from 20 to 22 percent as it is, and while other countries have found ways to financially support businesses during the energy crisis, Estonian businesses haven't received any help whatsoever from the government.

The industry association chair warned that as Finland, Latvia and Lithuania have no such plastic packaging fees, the competitiveness of the Estonian food industry stands to lose even more.

No good alternative in food industry

Pilleriin Laanemets, CEO of the Estonian Plastics Association (EPL), believes it is fundamentally right to charge fees on plastic packaging according to plastic type, which would push packaging producers to use more sustainable packaging.

According to Laanemets, changing packaging is easiest for those companies whose packaging doesn't come into contact with food. In the food industry, however, where both food safety and preservation are crucial, there often aren't any good alternatives to plastic, she acknowledged, adding that she doesn't believe a plastic packaging fee would serve its purpose in that sector.

The plastics association chief noted that in order for a food industry producer to vacuum pack food such as ground meat or cheese, it has to use vacuum packaging made from composite materials that is difficult to recycle. Should the producer not use this type of material, moisture and oxygen would come in increased contact within the packaging, reducing the product's "best by" date, and according to Laanemets, this could lead to people wasting more food.

Another issue with alternatives to composite materials, she continued, is that if you replace a composite with some mono-material, you would have to use significantly larger volumes thereof as well, such as when swapping out a thin film for some sort of hard plastic.

"Our producers have done a lot of testing in an effort to achieve both: to reduce the amount of plastic on one hand, but layers on the other," Laanemets explained. "Unfortunately, though, that has never been technologically possible; as soon as you decrease the compositeness of the packaging, the food's 'best by' time is immediately reduced as well."

"We have researchers come speak and they even say that there are currently no alternatives to plastic as an excellent packaging material," Potisepp said. "There is talk about about cellulose alternatives or to make edible packaging from corn or sugarcane, but then we ask them to show us the environmental footprint of these types of packaging and how much this will cost. No one cares."

Fee should compensate money paid to EU

It has been agreed in the EU that each member state must pay €0.80 per kilogram of unrecycled plastic packaging waste to the EU's common pot. The more plastic packaging a member state recycles, the less they have to pay the EU.

According to Soomlais, Estonia paid approximately €11 million to the EU on unrecycled plastic packaging waste last year. Currently, this money is coming from the state budget, but according to the ministry official, the aim of the proposed fee is to collect this money from packaging companies instead.

Margus Vetsa, visiting lecturer of environmental management at Tallinn University (TLÜ), said that by paying the EU from the State Treasury like this, the state lacks leverage for motivating entrepreneurs to use more sustainable packaging. Thus he finds the approach of basing fee rates on type of plastic a reasonable one.

Vetsa also noted that this approach is in line with the "polluter pays" principle.

Adopting better packaging will require further investments in production on entrepreneurs' part. Soomlais said that the over the next five years, the state plans to direct some €100 million in EU support to entrepreneurs which would allow companies to, among other things, update packaging designs as well as develop waste management.


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Editor: Aili Vahtla

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