Exploring Plastic Credits: Developing a Strategy and Legal Framework for Sustainable Waste Management in Indonesia
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Plastic pollution represents one of the most pressing environmental challenges, especially in regions with underdeveloped waste management systems. This issue is particularly acute in developing or undeveloped countries, which often generate significant amounts of plastic waste but lack the necessary infrastructure to manage it effectively. The impact of this pollution is disproportionately felt by vulnerable communities, including informal workers who are frequently exposed to hazardous conditions without adequate protection or compensation
Indonesia stands at a critical juncture in its battle against plastic pollution, a pervasive issue that hinders its ecological and economic prosperity. According to The World Bank Report on Plastic Waste Discharge in Indonesia, Indonesia generates approximately 7.8 million tons of plastic waste annually, with 4.9 million tons being mismanaged—e.g. uncollected, disposed of in open dumpsites, or leaked from improperly managed landfills. Rural areas bear the brunt of this mismanagement, accounting for two-thirds of mismanaged plastic waste due to limited waste collection rates. Direct disposal of plastic waste into water is often due to limited waste collection services.[1] An estimated 346.5 kton of plastic waste is discharged into the marine environment annually from land-based sources, with two-thirds originating from Java and Sumatra. Rivers are responsible for 83% of this discharge, highlighting the pressing need for comprehensive strategies to manage plastic waste and safeguard Indonesia's environment. [2]
Significant investments in waste management infrastructure are crucial to address this issue and transition towards a circular economy, which aims to eliminate waste and promote resource reuse. However, these investments face financial challenges, with insufficient incentives for waste management development. This hinders the establishment of effective systems to manage plastic waste and combat pollution effectively.
To combat these challenges, plastic credits have emerged as a promising solution. This market-driven approach allows companies to purchase credits that fund waste management and recycling efforts. Each credit represents the recovery or recycling of one ton of plastic waste, incentivizing the adoption of sustainable practices by industries reliant on plastic. Plastic credits offer a verified and effective way to finance the transition towards a circular economy, turning plastic pollution into an opportunity for environmental and economic advancement.
Internationally Binding Instrument – Global Plastic Treaty
In response to the escalating plastic pollution crisis, the United Nations Member States took a significant step forward in 2022 by establishing an Intergovernmental Negotiating Committee (“INC”). This committee was tasked with the ambitious goal of drafting a Global Plastic Treaty, aimed at addressing plastic waste on a worldwide scale. The preparation for this treaty is currently in progress, with the INC set to complete its negotiations by 2024.
The Global Plastic Treaty aims to tackle plastic pollution through both upstream and downstream interventions comprehensively:
- Upstream Actions: These focus on preventive measures to curb the generation of plastic waste before it enters the environment. Strategies include reducing the production of new plastics, reusing materials whenever possible, and redesigning products and packaging to be more sustainable. These actions address the root causes of plastic pollution and aim to transform the lifecycle of plastic products.
- Downstream Actions: These are concerned with enhancing the effectiveness of waste management systems after plastic has been used. Improving local waste management infrastructure and capacities ensures that plastic waste is managed in an environmentally sound manner. This includes developing better collection systems, increasing recycling rates, and investing in technologies that can effectively process recyclable and non-recyclable plastics.
The treaty represents efforts to create a unified global response to plastic pollution, aimed to create a holistic approach that can significantly reduce the impact of plastics on the natural environment and human health. This initiative underscores the necessity of international cooperation in tackling environmental issues that transcend borders, offering a blueprint for collective action against one of the most pervasive environmental challenges.
As of 2024, 175 nations have agreed to develop the Global Plastics Treaty by the end of INC-5, the fifth and final negotiation meeting, in November at Busan, South Korea, to be implemented as soon as 2025. [3] This soon-to-be treaty aligns with Indonesia's National Plan of Action on Marine Plastic Debris, which aims to reduce 70% of plastic waste by 2025. [4] Indonesia's commitment to this treaty reinforces its national strategy to combat plastic pollution and creates momentum for the country to play a leading role in the global effort to address this pressing issue.
Achieving the goals of the Global Plastic Treaty requires a variety of approaches across the lifecycle of plastics. Plastic credits, are vital to this strategy.These credits drive investments in waste collection and recycling infrastructure, ensuring plastic waste is effectively recovered, repurposed, or managed. By financing certified waste projects, plastic credits help scale necessary waste management systems and incentivize sustainable practices, promoting a circular economy where materials are reused.
Plastic crediting programs participate as accredited observers in INC sessions, contributing to the global strategy against plastic pollution. Integrating plastic credits into the treaty framework enhances waste management capabilities and fosters innovation in recycling technologies, crucial for reducing plastic pollution and its environmental and health impacts.
The Concept of Plastic Credits
Plastic credits, as defined by the World Wildlife Fund (WWF), are transferable units that represent a quantified amount of plastic waste, which has been collected and is likely to be recycled from the environment. [5] These credits offer a structured pathway for companies to take responsibility for their plastic output by ensuring an equivalent amount of plastic is removed from the environment. Typically sold by organizations or entities engaged in plastic waste collection and recycling, companies can purchase these credits to offset their own plastic use.
Plastic credits was inspired by the carbon credit mechanism established under the 1997 Kyoto Protocol, which was designed to reduce global carbon emissions. Similarly, plastic credit is sold to companies that find it challenging to completely eliminate their plastic emissions or those aiming to achieve a “plastic neutral” status. Being “plastic peutral” means that a company has purchased plastic credits equal in weight to their plastic footprint, thereby funding projects that recycle an equivalent volume of plastic waste.
• Chart 1 : Plastic Credit Concept [6]
Source: Circularity Concepts “Plastic Credits : Evaluating the Opportunities and Benefits of Plastic Credit in a Circular Economy”. 2022.
Plastic Credit Programs
Plastic credit programs are emerging as a key tool in the fight against plastic pollution. These programs operate on the principle of issuing credits for collecting and recycling plastic waste, which can then be purchased by companies and individuals looking to offset their plastic use or waste generation. The process typically begins with establishing standards that define the materials, methodologies, and mechanisms for issuing credits. Project development and operations are then undertaken to collect and recycle plastic waste, overseen by relevant actors. Validation ensures that project activities meet the standards set out, leading to the certification or issuance of credits.
Marketers play a role in promoting and brokering the purchase of certified materials and credits, while buyers, such as brands, investors, or consumers, purchase these credits to offset their plastic use or generation elsewhere. Plastic claims and labels certify the source and/or process used to produce a material, such as "recycled" or "ocean-bound," encouraging the procurement of post-consumer plastics and diverting plastic pollution from the ocean.
Plastic offset credits offer assurances that plastic waste is being kept out of the ocean and redirected into recycling and circular supply chains. These credits provide a tonne-for-tonne offset for plastics production or waste generation, contributing to environmental sustainability efforts.
Additionally, plastic credits can serve as a source of funding for underfinanced waste management in developing countries. However, the lack of clear, uniform definitions and standards for plastic credits programs poses a challenge to their effectiveness and credibility.
Risks Considerations for Plastic Credit
While plastic credits offer a promising solution for managing waste and fostering environmental sustainability, they also come with inherent risks that must be carefully managed to ensure they benefit all stakeholders, particularly those in the informal waste management sector. Further risks to consider are: [7]
• The lack of clear definitions and standards leads to inconsistencies and reduced credibility; it might also lead to plastic credit being used for greenwashing without any relevant positive impacts.
• Tracking plastic waste is challenging due to its diverse sources and types. Effective but costly monitoring systems are needed, especially in regions with limited infrastructure.
• Plastic credits may allow companies to maintain current production and consumption levels without reducing plastic usage, undermining pollution reduction efforts.
• The market for plastic credits is small and volatile, leading to uncertain financial returns for projects. Market expansion requires increased awareness and viability of plastic credit schemes.
• Plastic credit programs often lack transparency and clear governance, leading to inefficiencies and potential misuse of funds. Transparent governance and regular audits are crucial.
Current Legal Framework of Plastic Credit and Management in Indonesia
Indonesia does not yet have a specific legal framework dedicated solely to plastic credits. Nonetheless, the government has enacted regulations, such as Law No. 18 of 2008 on Waste Management and Government Regulation No. 27 of 2020 on Specific Waste Management, aimed at reducing single-use plastics and promoting recycling.
In Indonesia, waste management is primarily the responsibility of provincial governments, with support and oversight from the central government. Local governments are tasked with the collection, transportation, processing, and final disposal of waste within their jurisdictions. The central government provides regulatory frameworks, guidelines, and financial support to ensure effective waste management across the country. [8]
Private sector involvement is encouraged to complement public efforts. Companies are required to manage the waste generated from their products and operations, promoting recycling and reducing plastic usage. This includes extended producer responsibility (EPR) initiatives, where businesses take responsibility for the entire lifecycle of their products, including post-consumer waste. [9]
The private sector is encouraged to support public efforts through extended producer responsibility (EPR) initiatives, managing waste generated from their products and operations. The plastic credits market, though nascent, is growing with private organizations funding waste management services, particularly for hard-to-recycle plastics. Companies like Danone-AQUA invest in plastic credits to finance ocean-bound plastic collection. [10]
Challenges include the lack of standardization and transparency in the plastic credits market, and the need for better waste management infrastructure, especially in rural areas. As a major contributor to oceanic plastic waste, Indonesia has the opportunity to lead in the plastic credit market, reducing pollution and fostering economic opportunities in the waste management sector.
Plastic Credits Opportunities
• Environmental impact : Plastic credits offer a direct method for removing plastic waste from the environment, demonstrating tangible impacts by recovering significant amounts of waste. This mechanism supports environmental cleanliness and bolsters coastal communities where mismanaged waste has severe consequences. By improving safety protocols and offering training, plastic credits enhance the working conditions of informal waste pickers, thereby safeguarding their health and livelihoods.
• Economic incentives: Plastic credits provide financial incentives to both waste managers and companies. These incentives can fund better waste collection and recycling infrastructure, making it more feasible for waste management entities to handle larger volumes of plastic efficiently. Companies investing in plastic credits not only contribute to environmental sustainability but also gain a competitive edge in the consumer market. [11] With 91% of customers expressing concern about plastic waste, businesses that engage in plastic credit initiatives can distinguish themselves as environmentally responsible, attracting conscientious consumers and enhancing their brand reputation. [12]
• Global awareness and innovation: Plastic credits raise global awareness about the pressing issue of plastic pollution. This heightened awareness drives innovation in waste management solutions, inspiring new ways to tackle plastic waste and fostering a culture of sustainability.
However, plastic credits are not a standalone solution to plastic pollution. Solely relying on them risks greenwashing, where companies appear environmentally responsible without significant changes to production and consumption. Plastic credits must be part of a broader strategy, including reducing plastic use, improving product design, and implementing robust waste management systems, to ensure genuine sustainability.
Exploring the potential of plastic credits in Indonesia highlights challenges and opportunities in the current environmental and regulatory landscape. Facing significant plastic pollution, Indonesia sees plastic credits as a promising tool to bridge the gap between current capabilities and the desired outcomes of waste reduction and recycling. These credits serve as a financial incentive, motivating the private sector to invest in the necessary infrastructure and processes that could lead to substantial environmental improvements.
East Asian and Pacific Region: MARINE PLASTICS SERIES “Plastic Waste Discharge in Indonesia”, The World Bank, 2021. ↩︎
East Asian and Pacific Region: MARINE PLASTICS SERIES “Plastic Waste Discharge in Indonesia”, The World Bank, 2021. ↩︎
United Nations “Historic day in the campaign to beat plastic pollution: Nations commit to develop a legally binding agreement” https://www.unep.org/news-and-stories/press-release/historic-day-campaign-beat-plastic-pollution-nations-commit-develop ↩︎
Kemenko Bidang Kemaritiman dan Investasi “Indonesia’s Plan of Action on Marine Plastic Debris” https://maritim.go.id/konten/unggahan/2018/03/NAP_Marine_Plastic_Debris_Indonesia_Summary.pdf ↩︎
WWF Position Paper: Plastic Crediting and Plastic Neutrality. 2021. ↩︎
A Plastic Waste Recovery/Recycling Project begins by undergoing a third-party audit (Step 1) to ensure it meets certification standards. Once certified, the project tracks and manages plastic waste (Step 2). The project then generates Plastic Credits (Step 3a), which are sold to purchasing companies (Step 3b). These companies fund the projects (Step 4) and can claim offsets for their plastic use. This system supports better waste management and promotes a circular economy by reusing and recycling plastic effectively. ↩︎
Prevent Waste Alliane “Discussion Paper Plastic Credit Schemes and EPR – risks and opportunities” https://prevent-waste.net/wp-content/uploads/2023/05/PREVENT_Discussion-Paper_Plastic-credit-schemes-and-EPR.pdf ↩︎
“Gov’t Issues Regulation on Specific Waste Management” https://setkab.go.id/en/govt-issues-regulation-on-specific-waste-management/ ↩︎
World Wildlife Fund : Extended Producer Responsibility Guideline on Plastic Products and Packaging for Industries in Indonesia. 2022. ↩︎
“Project Pioneers Plastic Program in Indonesia” https://www.reciki.co.id/plastic-credit ↩︎
Macquarie: Financing waste infrastructure in Indonesia. September 2020. ↩︎
“Report: Consumers and business concerned about plastic waste but expect governments to do more” https://www.unep.org/news-and-stories/press-release/report-consumers-and-business-concerned-about-plastic-waste-expect#:~:text=Consumers are concerned about plastic,focus on recycling is increasing ↩︎
Disclaimer:
This client update is the property of ARMA Law and intended for providing general information and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. ARMA Law has no intention to provide a specific legal advice with regard to this client update.
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