FRF and ZWE put circular leverage on the European agenda

The EU uses around 55 million tonnes of plastic each year, or 105 kilograms per person. To limit global warming, plastic consumption must be drastically reduced. If we continue on our current path, plastic will emit a total of 7 Gt CO2e per year by 2050, and this sector alone would consume approximately one-third of the entire 1.5°C budget.

Fossil plastic is cheap, and it is precisely for this reason that it became a driving force behind single-use products such as packaging and fast fashion. Recycled and bio-based alternatives struggle to compete: bio-based resin typically costs 1.5 to 2 times as much as the fossil-based alternative. Circular business models such as reuse, repair, and refurbishment are often labour-intensive and are therefore heavily taxed.

Circular leverage makes fossil contribute to sustainability

Supply-side measures alone cannot bridge the price gap between fossil plastic and other materials or circular business models. In the Netherlands, the Plastic Table—a collaboration of industry, recyclers, producer responsibility organisations, and civil society organisations—has proposed 'the circular leverage': a tax on the virgin fossil plastic content in a product. The more fossil plastic a product contains, the higher the levy. Products made from recycled or bio-based materials, or systems designed for reuse, repair, and sharing, pay less.

The revenues go towards a circular economy transition fund that supports innovation, improves the quality of recyclates, and assists companies that keep materials in circulation. As more companies make the switch, the fund shrinks and eventually phases out. And because the tax applies to everything placed on the Dutch market, domestic producers are not placed at a disadvantage compared to foreign competitors.

Sounds good, but how do you regulate it?

How does the levy know what is in a product? Through the European Digital Product Passport, which can provide regulators with reliable, standardised data on material composition. The paper develops a hypothetical example for textiles to demonstrate how such a levy would work in practice.

The proposal has not yet been tested under real market conditions, and our briefing therefore also addresses the risks and points of concern. These include:

• The Digital Product Passport is being introduced by product group and is not planned for packaging, a sector that consumes a significant amount of plastic (35% of all plastic in the EU).

• The mass balance approach allows products to claim they contain more recycled content than is actually present. This not only leads to misleading claims, but could also become a way to avoid the tax.

• Replacing fossil plastic with bio-based materials without safeguards carries the risk of creating new pressures on land use and conflating the concepts of circular and bio-based.

• Revenues must support reuse, repair, and prevention, not just recycling.

• The levy must be linked to the environmental objective of reducing plastic consumption to get us back on track for 1.5°C, rather than solely to closing the price gap with recycled material.

This could become a blueprint for the entire EU

If it works, the circular leverage could serve as a blueprint for other countries and for the EU as a whole. Coordinated action could pave the way for a harmonised EU-wide plastics tax, prevent internal market fragmentation, and be expanded to cover other virgin raw materials.

A price on the use of virgin raw materials is the missing piece of the puzzle in European circular economy policy. Targets for recycled content, public procurement, and extended producer responsibility are all important, but they lack real clout as long as the use of primary raw materials remains too cheap.

The policy briefing contains six concrete recommendations for policymakers to deliver this transition.