OPINION: ‘The political risks of record PRN prices’

OPINION: Plastic PRN prices have reached levels few would have predicted a few years ago. For waste management companies, this represents a potentially lucrative period. For obligated producers, it represents a major compliance cost shock. For the four governments, it raises an uncomfortable question: at what point does market pressure become politically unsustainable?

Nobody involved in packaging recycling wants to see policies or targets weakened but when compliance costs rise dramatically, it becomes necessary to ask when and how policymakers will intervene. While recent calls to scrap the system are highly unlikely to be heeded given the impact it would have on recycling businesses, there are less nuclear options for how the UK administrations could collaborate to deal with these unprecedented times.

PRN prices are a consequence of supply and demand principles, primarily driven by the amount of packaging reported by producers and the amount recycled by reprocessors and exporters. Taken at face value, the recent dramatic price rises simply demonstrate that the market is functioning correctly as a response to scarcity.

However, prices have moved beyond the usual volatility due to significant changes to the system for 2026. The biggest impact has come from new export rules that mean export PRNs can only be raised when they are received by an accredited overseas reprocessor. These commendable changes have helped to ensure that exporters take greater responsibility for where recycling ends up but means that a considerable number of PRNs have effectively been removed from the 2026 year. This is simply a consequence of shipment timings and annual accounting cycles, rather than an indication of poor recycling performance.

The plastic recycling targets have increased by 2 percentage points, compared to the last year. When this policy decision was taken, it was thought that local authorities would be rolling out new flexible plastics collection services in time for a 2027 deadline. Essentially, the targets were set well before impacts of the new EPR regulations and Simpler Recycling were fully understood. In hindsight, the increases were very punchy considering all the policy changes, particularly for PRN exports.

The UK government and devolved administrations are now grappling with the reality that PRN prices have moved into levels that will do little to stimulate greater volumes of
recycling in this second half of the year. They are simply a consequence of target being set too high. It is easy to make this assessment with hindsight, a wisdom that was not afforded to policymakers at the time.

None of this will come as a shock to policymakers as they have been meeting for ongoing, regular discussions with industry experts throughout this year to monitor the situation. To have intervened earlier would have been high risk. Now that they can analyse the data and understand how policy has impacted packaging recycling, they can be more certain of the need to act.

Their ambition to drive more and better-quality recycling should be commended. However, given the cost burden to business, wider economic conditions and the market’s instability, consideration should now be given to what can be done to ensure there isn’t widespread non-compliance at the end of the year.

There has been much discussion over recent years about the legislative need for an alternative compliance mechanism, including in the four governments’ own public consultation this year. Even if there had been widespread support for it, legislative amendments would have taken too long for it to have been used this year. Therefore, there are only two credible, realistic options for action that can be taken.

Firstly, a Regulatory Position Statement (RPS) could be issued by enforcement agencies to outline the conditions under which no enforcement action will be taken. If this solution was to be deployed, a percentage threshold would be set for schemes and producers to reach. While the recycling targets enshrined in law remain in place, this lenient enforcement approach would effectively lower the target that needs to be reached. Thresholds would likely be calculated on a material specific basis as it isn’t only plastic recycling that has been affected by changes this year. Likewise, some materials do not require intervention at all. It is a neat and fair solution that targets the issues directly.

A second option is for enforcement agencies to proactively gear up for widespread Enforcement Undertakings from producers and compliance schemes. Enforcement Undertakings are commonly used by producers who did not meet their recycling obligations for a previous compliance year. It is a way of them putting their hands up to submit an offer to enforcement agencies, based on the tonnes of PRNs they did not buy at a certain price, with the proceeds going to environmental causes.

This approach is more akin to a compliance fee seen in the UK WEEE system as it represents a more punitive stance. However, where it differs significantly is that revenues raised often do little to benefit UK packaging recycling as donations are most often made to unrelated environmental charities.