Jean-Loup Masson, Circular Solutions Director at the Alliance to End Plastic Waste, argues that governments hold the key to unlocking private capital for flexible plastics recycling through stable policy, EPR reform and targeted financial incentives.
Open your fridge, your bathroom cabinet, your utility cupboard – you will find flexible plastics. Accounting for roughly 50% of the total plastic packaging market, these versatile materials have become integral to modern life.
Yet these same materials that deliver remarkable functional performance create enormous challenges at end of life. Lightweight, multi-layered, and often contaminated with food residue, flexible plastics represent one of the most stubborn obstacles to achieving a truly circular economy for packaging. The reality is that most flexible plastic waste currently ends up in landfills, incinerators or leaks into the natural environment.
While reduction, reuse, and materials substitution all have important roles to play, recycling remains a credible solution. Viable recycling solutions already exist. The challenge now is mobilising the capital needed to deploy them at scale.
The investment gap
Building the waste management infrastructure needed to tackle flexible plastic waste is extremely capital-intensive. Both rigid plastics, such as PET bottles, and flexible plastics benefit from sophisticated secondary sorting infrastructure equipped with advanced detection technologies like digital watermarking or AI-based recognition systems, which help deliver cleaner, single fraction waste streams. Chemical recycling facilities, which offer a pathway to virgin-quality output for demanding applications like food-contact packaging, require even greater capital outlays.
Private investors evaluating these projects must navigate a number of challenges which increase the risk of investment. Upfront capital requirements are substantial and payback periods are long, often stretching beyond typical investment horizons. The absence of clear policy frameworks, compounded by technological uncertainty around which recycling pathways will prove most effective for different feedstock streams, creates another hurdle. On top of this, investors must contend with volatile recycled commodity markets – where recyclates must compete against virgin plastics produced at massive scale – which makes revenue projections unreliable.
The result is a significant investment gap – one which we must bridge in order to make meaningful progress toward advancing a circular economy for flexible packaging.
Stable policy: the foundation for investment
Governments have a significant opportunity to reduce risk for investors and unlock private capital at scale through stable and enabling policy frameworks.
Extended Producer Responsibility (EPR) schemes, when designed with consistency and transparency, provide reliable funding streams for recycling infrastructure. However, frequent changes to EPR fee structures create uncertainty that chills investment. Governments can avoid this by announcing any adjustments to EPR fees well in advance – ideally with multi-year notice periods – allowing investors to plan with confidence. Similarly, post-consumer recycled (PCR) content mandates can drive demand for recycled materials, but only if targets are set with sufficient runway. Announcing ambitious long-term targets with clear interim milestones gives investors the visibility they need to commit capital today.
For emerging technologies such as chemical recycling – an important solution to flexible plastic waste – regulatory clarity is paramount. Uncertainties around mass balance attribution methods, recycled content claims, and the overall legitimacy of these technologies create barriers that deter investment. Clear regulations that define how chemical recycling outputs can be counted toward recycling targets can remove this significant hurdle to capital deployment.
The role of direct financial incentives
In addition to creating a predictable, favourable environment for investment through these policy frameworks, governments have a role to play in creating more direct financial incentives – including energy and labour subsidies, concessional loans and corporate tax relief.
By offering reduced energy tariffs or direct labour subsidies to recyclers, governments can lower operating costs and improve margins. Germany has taken this approach, providing energy subsidies to plastic recyclers to help offset one of the most significant variable costs in recycling operations. Labour subsidies, including wage support programmes or reduced payroll taxes for green jobs, can further enhance the financial viability of recycling operations while creating employment opportunities.
Concessional loans – financing offered at below-market interest rates or with favourable repayment terms – provide an additional pathway for governments to de-risk investment. By reducing the cost of capital, concessional lending makes marginal projects viable and accelerates deployment timelines. California’s Recycling Market Development Program exemplifies this approach, providing low-interest loans to businesses that use recycled materials or develop recycling infrastructure. Such programmes demonstrate that strategic public financing can play a vital role in crowding in private investment.
Corporation tax relief offers another powerful mechanism. By reducing a government’s claim on profits, tax relief increases the cash flows available to investors and shortens the time needed to recoup initial outlays. For infrastructure projects with long development timelines and revenues that take time to build, this is crucial.
Some governments are already using this tool to their advantage. The UK’s ‘full expensing’ policy, for example, allows businesses to deduct the full cost of qualifying plant and machinery investments from taxable profits in the year of purchase (rather than spreading this out over several years). In practical terms, this means a recycling facility investing £10 million in new sorting technology could reduce its corporation tax bill by up to £2.5 million that year, dramatically improving project economics and shortening effective payback periods.
The path forward
By creating a stable regulatory landscape and using targeted policy levers, governments have a huge opportunity to help facilitate the flow of private capital into flexibles recycling infrastructure. That said, government action is just one piece of the puzzle. Unlocking investment is necessary, but not sufficient alone. Achieving true circularity for flexible plastic packaging demands nothing less than a systemic transformation across the value chain, with governments, industry, and citizens each playing their part. The solutions exist. Now is the time to act.
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