Plastic packaging tax backfires on green firms

The UK’s Plastic Packaging Tax encourages businesses to use recycled plastic rather than more sustainable alternatives. The tax applies to packaging containing less than 30% recycled content, treating bio-based plastics the same as virgin plastic despite their lower carbon footprint.

Tax incentives drive demand for recycled plastic

Since the tax began in April 2022, businesses have declared about 5.8 million tonnes of plastic packaging with at least 30% recycled material, according to HMRC data. Duo estimates this packaging has a carbon footprint of 13.9 million tonnes of CO₂e—approximately 3.26 million tonnes less than virgin plastic would have produced.

But the manufacturer argues the savings could have been much larger. If those same 5.8 million tonnes had been made from its I’m green bio-based plastic, the net carbon impact would have been negative: -12.3 million tonnes of CO₂e.

Zoe Brimelow, Duo’s director, said the tax created an unexpected outcome. Before 2022, the company’s GreenPE mailing bags—made from plant-based materials—were among its top-selling products. Demand fell after the tax started, while sales of recycled-content packaging increased.

“We’ve seen customers move away from bio-based mailing bags to tax-compliant options because they can’t justify the higher price,” Brimelow said. “Many brands resisted the switch, but market pressure left them with little room to choose.”

Bio-based plastics face challenges

The problem extends beyond cost. Bio-based plastics, sourced from renewable materials like sugarcane, often have a smaller carbon footprint than recycled plastic. Some, including Duo’s I’m green material, are carbon-negative, absorbing more CO₂ during production than they release.

Because the tax doesn’t differentiate between bio-based and fossil-based plastics, companies lack financial motivation to pick the more sustainable option. Duo says the system discourages progress in eco-friendly packaging.

Retailers, especially in price-sensitive markets, now prioritize tax compliance over carbon reduction. The change has been clear: Duo’s bio-based packaging sales declined after 2022, while demand for recycled-content alternatives rose.

Policymakers may need to adjust the tax to reflect the actual carbon impact of different materials. Until then, the system continues to disadvantage bio-based plastics, even when they offer a better environmental outcome.

HMRC has not indicated whether it will review how the tax treats bio-based materials. In the meantime, packaging firms face regulations that conflict with their sustainability efforts.