A new ‘grocery tax’ targeting packaging utilized by retailers and manufacturers may lead to an increase in shopping expenses by as much as £1.4 billion.
The goal is that the environmental levy, intended to facilitate the government’s net zero objectives, will assist in reducing the vast amount of packaging utilized in the UK.
The government estimates that the initiative – known as the Extended Producer Responsibility for Packaging (EPR) – will culminate in an annual expense of £1.4 billion for businesses.
An impact assessment report released by the Department for Environment, Food and Rural Affairs (Defra) anticipates that between 85% to 100% of this expense will be transferred to consumers, raising household costs by £28-£56 in 2025.
Companies will incur higher charges for utilizing plastic packaging compared to more eco-friendly materials like paper or cardboard.
Both the British Retail Consortium and the Food and Drink Federation expressed approval of the initiative but urged the government to allocate the funds generated by the scheme to enhance the nation’s recycling infrastructure.
Lord McKinlay, a Tory peer and chair of the Net Zero Scrutiny Committee, criticized the proposal, stating to the Telegraph that the ‘grocery tax’ measures will impose ‘unnecessary charges on consumers’.
This scheme was first proposed by Conservative Michael Gove when he held the environment secretary position but was temporarily suspended due to pushback from Tory MPs.
However, Keir Starmer’s government adopted the secondary legislation earlier this month, and the new levy will take effect on January 1.
How will it function?
Based on fees disclosed last week by Defra, in 2025 businesses will be charged £215 per tonne for using paper or board packaging – the least expensive option, while plastic – the priciest material – will incur a cost of £485 per tonne.
Costs for all other materials will fall between these two, based on their sustainability.
Companies will only incur charges the first time packaging is introduced to the market. Glass, for instance, can be reused, which is why there is hope that more companies will opt for this material when applicable.
Defra indicates that revenues from EPR will be utilized to ‘enhance local collection and disposal services, including recycling operations’.
What is the perspective of the manufacturing and retail sectors?
Jim Bligh, Director of Corporate Affairs and Packaging at The Food and Drink Federation, stated: ‘Manufacturers of food and drink back the government’s zero waste aim and are dedicated to fostering a cleaner environment.
‘We appreciate the much-anticipated announcement of baseline fees for Extended Producer Responsibility (EPR), which aids manufacturers in taking greater responsibility for packaging and allows them to prepare for 2025 expenses.
‘With EPR projected to cost at least £1.4 billion in 2025, it is essential that the funds are allocated to enhance recycling infrastructure.
Andrew Opie from the British Retail Consortium mentioned that the initiative could serve a ‘crucial role’ in mitigating excessive packaging, adding: ‘Ultimately, consumers and enterprises will shoulder the expense of these improvements through elevated costs, which is why it is vital that EPR facilitates a significant advancement in recycling that justifies its £2 billion annual expenditure.’
Lord McKinlay accused Labour of being ‘fixated on green politics’ and ‘willing to impose these new challenges on businesses, which will escalate inflation and increase food prices for every household’.
A Defra spokesperson commented: ‘This administration is committed to ending our throwaway culture and preventing the mountain of waste that is cluttering our streets by enhancing recycling rates, minimizing waste, and tackling waste crimes.
‘The Extended Producer Responsibility for packaging is a crucial initial phase of our packaging reforms, which will create 21,000 jobs and generate over £10 billion in investment within the recycling industry over the next decade.’
‘We continue to collaborate closely with businesses, including the glass sector, regarding these reforms. The proposed fees are lower for almost all categories compared to the original proposal, including for glass.’
What does net zero entail?
Net zero means balancing the amount of greenhouse gases emitted into the atmosphere with the amount removed. Greenhouse gases encompass carbon dioxide (CO2) and methane.
CO2 is emitted when fossil fuels like oil, gas, and coal are burned in homes, factories, and to power vehicles. Methane is generated through agricultural practices and landfills, as well as other sources.
What are the UK government’s net zero objectives?
The UN asserts that global carbon dioxide emissions must reach net zero by 2050.
The UK government has made a series of commitments to meet this target, which include:
Ceasing the sale of new fully petrol and diesel vehicles by 2030
Investing in technologies to capture and store CO2
Enhancing wind and solar power to achieve ‘clean’ electricity by 2030.
Installing 600,000 electric heat pumps by 2028.
Last year, the UK’s greenhouse gas emissions were approximately 50% lower than in 1990. Under the Paris climate agreement, the UK needs to reduce emissions by 68% by 2030.
The Climate Change Committee (CCC) warned in July that the UK risks missing this goal.
During the COP29 climate summit in Azerbaijan, Prime Minister Sir Keir Starmer revealed a new target to decrease the UK’s emissions by 80% compared to 1990 levels by 2035.
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