Missed opportunity: By the time PPWR 2030 goes into effect, hardly any recycling business in Germany will still be in operation!

Harsh criticism of new packaging law from cleaning product manufacturer Werner & Mertz

Wednesday was a dark day for the recycling industry in Germany and for the circular economy in Europe when the German cabinet approved the draft of the new Packaging Implementation Act (VerpackDG). Prior to the vote, many appeals were made for the creation of a level playing field, particularly for high-quality recyclate in Germany. The Cabinet ignored those calls and disregarded the proposed solutions for a fair incentive system in the new law. This is all the more regrettable as effective incentive systems already exist in many other European countries.

The Mainz-based cleaning products company Werner & Mertz sees the future of the plastics recycling industry in jeopardy. “Instead of high-quality recycling, the new law promotes downcycling if anything, but that’s a dead end. With eyes wide open, BMUKN (Federal Ministry for Environment, Nature Conservation and Nuclear Safety) and BMWE (Federal Ministry for Economic Affairs and Energy) made a decision that prolongs the delay in investment for the entire recycling industry in Germany,” says Werner & Mertz owner Reinhard Schneider.

The Packaging Implementation Act stipulates higher recycling rates. However, as there is no incentive for high-quality recycling, the recycling industry will remain reluctant to invest in it. Instead, the decision will lead to increased downcycling in order to meet the quotas. Downcycling refers to recycled material being used in inferior products, which themselves often cannot be reused – thus ending the cycle. Some examples are sewer pipes or brown-gray mixed plastics. The lack of recyclability of these products is a problem, as is the low demand in the small market for such goods. Consequently, downcycling for the sake of meeting quotas will yield products that won’t even be used. That’s a disaster from an economic point of view. The market for high-quality applications is much larger as it includes virtually all packaging in the WPR sector and cosmetics industry. In addition, food packaging may contain five percent recycled material from household waste collections—enormous potential, about half of which remains untapped.

Politicians point to the European Packaging Waste Regulation (PPWR), which is intended to promote the use of high-quality recyclates. However, large portions of it will not go into effect until 2030. “The Packaging Implementation Act is completely at odds with the PPWR and will prevent us from meeting the quotas for high-quality recycling in 2030. On the contrary, with the measures that have just been adopted, there will hardly be any functioning infrastructure for high-quality recycling in Germany by 2030,” says Schneider.

The German recycling industry is already suffering. In recent months, several sites in the plastics recycling sector have been closed, facilities shut down, and bankruptcies filed as industrial demand for high-quality recyclates has continued declining due to price factors. Recyclers, most of which are small and medium-sized enterprises, need incentives and security for investments in high-quality sorting technologies right now. They cannot wait until 2030 because the financial dry spell is too long for companies already struggling financially, and setting up sorting facilities requires a long lead time.

Werner & Mertz has repeatedly presented a concrete solution for promoting high-quality recycling in Germany. The idea is to introduce a bonus-malus system managed by a central authority. Companies that use virgin plastic made from cheap petroleum pay penalties (malus) into the system, while companies that use high-quality recyclate in their products receive financial compensation (bonus) which is counterfinanced by the penalties. The financing of an adequate bonus for recyclate users requires a very low penalty per unit of virgin plastic because much more virgin plastic (“malus material”) is being placed in the market at this time. In the future, the more recyclate that’s used—which is the point of this system—the greater the penalty for every tonne of virgin material as the ratio of virgin/recyclate will shift. If these transformation incentives are largely successful, the bonus per tonne of recycled material can be reduced again as the mass production of high-quality recyclate generates cost-reducing economies of scale. This incentive model ensures that an economically unreasonable penalty is not imposed at any time and certainly not at the beginning of the transformation. Instead, the model achieves an effective aid to scaling for the circular economy.

“This system is neither overly complex nor unreasonable,” says Schneider. “It creates exactly the financial incentive needed to increase industrial demand and trigger the necessary investments in high-quality recycling.”

The new Packaging Implementation Act is problematic not only from an ecological and economic point of view, but also in light of the current global political situation. Schneider says, “Resilience is a key factor for Germany and Europe, and it is particularly important now to free ourselves from our dependence on and vulnerability to extortion over fossil raw materials. To that end, the Packaging Implementation Act must be revised at once.”