Crediting Mechanism to Scale up Local Plastic Waste Projects

The 3R Crediting Mechanism will benefit local communities and the environment. By adding real value to plastic waste, it will boost the supply of recycled content and, therefore, reduce the production of virgin plastic while attracting more investment to the region. The Crediting Mechanism can revolutionise the waste collection process particularly in the plastic waste hotspots, where the recycling infrastructure is facing major logistical and economic constraints. Projects which measurably increase the recovery and/or recycling of plastic waste (as certified under the Project Standard) can issue credits. National and international companies that want to address their plastic leakage and/or offset their plastic footprint can purchase these credits to support specific recovery and recycling activities in their operating regions. The Crediting Mechanism, comprising the Project Standard, registry and transaction platform, will ensure that environmental and social safeguards are fully integrated into the projects while advancing a range of Sustainable Development Goals.

The actual rates of plastic waste recovery and recycling are very low across Latin America and the Caribbean. This is in large part because of the limited incentives to recycling industry, and insufficient resources/investment to develop the necessary recycling and waste management infrastructure.

When it comes to plastic, one of the major barriers contributing to the low rates of recovery and recycling is the zero- or low-value of plastic waste. Even recyclable materials, such as PET, is often undervalued either because of a lack of collection and/or recycling infrastructure or due to uncertain market dynamics and the typically low prices paid for recycled materials, exacerbated by relatively inexpensive competing virgin feedstocks. The 3R Crediting Mechanism would increase the value of waste plastic, thereby catalysing new and expanded waste recovery and recycling activities and making new projects and investments viable, which previously could not be justified financially. The 3R plastic credits constitute a flexible and scalable financial instrument that can drive more capital into local economies by attracting more investment from the packaging producers that need access to post-consumer recycled feedstocks.

Low recycling rates in Latin America and the Caribbean highlight the poor functioning of waste collection and management systems. We believe that rewarding those who collect and recycle plastic waste will make the waste management process much more efficient.

In Latin America, around four million people live off recycling, earning their living by collecting and processing waste such as plastic, paper, glass and metal. They are a vital component of the waste management system and part of the solution. By adding real value to plastic waste, the Crediting Mechanism will incentivise waste collectors, co-operatives, and small companies to maximise their efforts. The Crediting Mechanism will recognize and reward the environmental service they provide (beyond the commercial aspects) by awarding them with easily tradable plastic credits that will increase their revenues and accelerate local clean-up efforts.

The 3R Crediting Mechanism is largely based on BVRio’s reverse logistics crediting mechanism in Brazil: between 2013 and 2016, BVRio engaged with more than 100 waste picker cooperatives facilitating the collection and sale of over 150,000 tons of waste and its reverse logistics credits. The cooperatives sold credits to large consumer goods companies and thus increased their revenues by more than 30% on average.

Our proposed solutions under the Rethink Plastics Challenge entails:

1)       Mobilising Waste-picker & Plastic Recycling Co-operatives in Latin America and the Caribbean.

2)       Piloting the Project Standard on selected plastic waste projects.

3)       Launching the Crediting Mechanism (Innovative Finance) in selected markets (Latin America and the Caribbean). 

    The 3R Solution will help scale-up the following:  

• Infrastructure development – The 3RI will create financial and other incentives to scale up existing, and develop new, waste recovery and recycling projects and infrastructure
• Innovation – The 3RI will demonstrate how a market mechanism underpinned by robust standards can unlock significant action and investment targeting the regions and projects that can deliver the greatest waste reduction impacts. In addition, the 3RI will drive finance to develop and increase the financial viability of new technologies.
• Education and engagement – The 3RI will make it possible for companies to take responsibility for the kinds of plastic waste that they cannot eliminate in their value chains or recover, and also to stimulate new types of recycling. Through direct outreach, the 3RI will educate companies as to their options in this space.
• Transparency and Accountability: The Project Standard will be designed to facilitate investment in, and standardized impact reporting of, plastic waste clean-up efforts around the world, including from natural environments (rivers, beaches, oceans) and urban settings.
• Empowerment of Co-operatives - Generation of compelling social value, including improved, safe and sustainable livelihoods for waste collectors, a highly marginalized and vulnerable community, who would benefit from the additional revenues and safer working conditions.           
  

How it works: Projects verified under the Project Standard could generate credits based on how much plastic is collected and recycled above baseline rates. These credits would be issued under the 3R Crediting Mechanism. To control the process of issuance, transaction and transfer of credits, the 3R Crediting Mechanism will develop rules and tools which include an online registry and a digital transaction platform.  

In Latin America and the Caribbean, large amounts of waste remain uncollected posing serious health risk and polluting the environment. In many countries local governments have very limited financial, and technical resources and therefore insufficient capacity for effective planning or innovating. These gaps are often filled by small businesses, NGOs and co-operatives that strive to make a profit out of collecting and/or recycling waste. Empowering these projects is vital for improving the local waste management infrastructure and transitioning to a circular economy model.  

The 3RI solution has been designed to ensure environmental, economic and social aspects of the plastic waste problem. Incentivising plastic recycling and shifting away from production of virgin plastic should start on the local level where municipalities can use financial incentives, as EPR schemes, to improve waste collection and recycling. The crediting mechanism can be an effective tool for local governments to support these activities while attracting investments and improving livelihoods. The use of technology will help make the process transparent and accountable (registry, transaction platform and data availability). 

The potential impact of the plastic crediting mechanism could be compared to the voluntary carbon market, where corporate climate neutrality commitments have driven more than USD 5 billion of new funding over the past decade to thousands of projects that have collectively kept more than 1 billion tons of carbon dioxide out of the atmosphere, equivalent to the annual emissions of 200 million cars or 250 coal-fired power plants.

Theory of change

Current challenges:

Low plastic collection and recycling rates

Plastic waste polluting oceans and nature

Limited availability of recyclable content undermining circular economy

Precarious working conditions for waste collectors  

The Crediting Mechanism will:

Increase the market value of plastic waste

Finance increased collection and recycling efforts

Help kickstart local and national EPR Schemes  

Increase data collection, transparency and accountability for local plastic waste management

Help attract investment to local economies

The Impact:

Reduction of plastic waste entering the environment and cleaning up existing plastic pollution

Increased use of recycled plastic and reduction of virgin plastic

Establishing a model for how plastic packaging can be produced and (re)used in an environmentally and socially responsible way

Creation of safe, secure and improved livelihoods for waste collectors

Kickstart local markets for plastic waste to benefit communities

The Crediting Mechanism is largely based on BVRio’s Reverse Logistics Credit system that was successfully piloted in Brazil to incentivize the collection, separation and recycling of solid waste. In 2013, BVRio signed a collaboration agreement with the National Association of Catadores to develop a system to support the remuneration of the Catadores for the environmental services derived from the reverse logistics and recycling that they provide to companies, the government and the society. For companies, the credits provided an efficient and cost-effective solution to legal compliance. For the Catadores, the sale of credits provided an additional source of revenue, adding value to their activities and resulting in a tangible social impact.  

1: Joint, estimated impact of the current pilot projects: 20 000 local residents. 

2: Joint, estimated impact of the next 8 pilot projects: 55 000 local residents.

3: In 2025, the fully operational 3R Crediting Mechanism will directly benefit millions of residents across the world and tens of thousands of waste-pickers co-operatives.

The 3RI Standard for Project Accounting (the Project Standard) will enable robust impact assessment of new or scaled-up waste recovery and recycling projects. It will also establish a system for independent project certification. It will set out accounting methods for plastic recovery and/or recycling and establish social and environmental safeguards for stakeholders (i.e. waste pickers and others involved in project implementation and surrounding communities). It will be used for assessment, verification, reporting and, potentially, the generation of credits associated with each project’s measured plastic waste recovery or recycling impacts.

The development of the 3R Standard for Project Accounting will be guided by a multi-stakeholder Project Standard Development Committee (PSDC). The PSDC includes representatives of social groups, environmental NGOs, recycling and waste management experts, government representatives, complementary initiatives, potential project developers, intermediaries, end users and assessment experts. The PSDC will approve the first version of the Project Standard before its release.

The success of the 3R Initiative will be measured by the level of engagement of corporations, project developers, governments and society and the amount and impact of plastic waste reductions, removals and recycling that result from our efforts. The 3RI is expected to support stronger commitments of corporations towards plastic waste reduction, and significant new resources flowing to projects that reduce plastic waste in nature and increase rates of plastic recycling. 

  The 3R Initiative aims to achieve the following goals after five years of operations (i.e. by 2025):

• More than 500 Million USD of capital mobilized by projects listed in the Initiative (Plastic Credit transaction value, Recovered and Recycled plastic sales and investment associated with 3RI projects)
• More than 100 Million USD transferred to recovery and recycling projects (via Plastic Credit transaction value)
• Over 25,000 jobs linked to projects and over 75,000 people benefited by the Initiative
• Over 1.00 Million tons of plastic waste collected and recovered from environment through 3R projects
• Over 500,000 tons of plastic recycled through 3R projects

• More than 300 organizations (including companies, project developers, waste collector associations or cooperatives, governments, NGOs, etc.) engaged with the 3RI

The two most significant obstacles for the 3R Initiative are:

• Funding: The 3RI requires a large upfront investment for the development and implementation of the Project Standard, Pilot Projects and the infrastructure needed to operationalize the 3R Crediting Mechanism.
• Developing a new market: The success of any market mechanism is based on a balance of supply and demand. The 3R Initiative will develop the Project Standard to meet users’ evolving needs, therefore supporting a healthy supply of projects across the globe, strong demand for credits from these projects from corporations, and linkages to existing and emerging government regulations.

Funding: 3RI Founding corporate members (Danone, Nestle, Tetra Pak and Veolia) provided seed capital for the initiative development and implementation of first pilot projects. The 3R Initiative has received a grant from P4G (More details on: https://p4gpartnerships.org/partnership/3r-reduce-recover-recycle-initiative) for the development of the 3R standards and regulatory framework. 

  The 3R Initiative is exploring other opportunities for funding from current and potential partners: new corporate members, development agencies, international donors and foundations. 

  Developing a new market: BVRio and Verra have deep experience in the development and management of environmental markets. In 2020, BVRio is launching a Circular Action Hub (online platform) as the first step in building a global community and connect plastic collectors and recyclers with potential corporate clients in order to stimulate the demand for recyclable content, and introduction of plastic credits. The 3RI corporate members will be the first to buy both the recyclable plastic feedstocks and the 3R plastic credits and thus kickstarting the global market.

The 3R Project Standard will soon be piloted on a recycling project in Bogota, Colombia. We are exploring other opportunities in Latin America (Brazil: the Guanabara Bay, Argentina).

In many developing countries, governments have limited financial and technical resources and therefore insufficient capacity for effective recovery and recycling of waste. These gaps are often filled by individuals, SMEs and co-operatives that strive to make a profit out of collecting and/or recycling plastic waste. These entities have limited access to financial markets. Supporting them is vital for improving the local waste management infrastructure and transitioning to a circular economy model, while decreasing poverty and improving work conditions of millions of people. It also leads to creating jobs, ensuring sustainable livelihoods, and attracting more investments due to an increased supply of the collected/recycled material. In Latin America, around four million people live off recycling, earning their living by collecting and processing waste such as plastic, paper, glass and metal. They are a vital component of the waste management system and part of the solution. The market opportunity in Latin America is immense due to low recycling rates, large amounts of plastic waste being dumped in urban and rural areas, and millions of people working in informal waste collection. There is also an increasing demand for recyclable plastic from national and international corporations.

Full time staff:

BVRio

Rio de Janeiro, Brazil: 4 people (full-time)

Oxford, UK: 4 people (full-time)

Geneva, Switzerland: 2 people (full-time)

Verra

Washington DC: 4 people (full-time)

Development of the Initiative’s tools, systems and standards will rely primarily on the vast experience of the leading organisations.  Verra is a world leader in the development and operation of environmental standards, conducted through multi-stakeholder processes and extensively used worldwide.  BVRio has vast experience in the development of market mechanisms for compliance with environmental obligations, including a waste crediting scheme that will feed into the development of the 3R Initiative.

Additionally, the Initiative will count with technical input from all its founding members: Nestle, Veolia, Danone and Tatra Pak – all of which commited to providing input to its development. 

The 3R Initiative has already engaged four corporate members (Danone, Nestle, Tetra Pak and Veolia) and four Advisory members (Conservation International, Natural Capital Partners, South Pole Group, SystemIQ, and McKinsey.org). The Secretariat (BVRio and Verra) manages the 3RI’s day to day operations.

The members provide some of the resources, advice, expertise, and help facilitate further partnerships. The 3R Initiative will soon be expanding and offering a new partnership scheme for corporations, NGOs and governments.

Among the beneficiaries of the activities described in this proposal are three key groups:

• Recyclers and Plastic Waste Collectors (co-operatives, SMEs, NGOs) can use the Project Standard to generate plastic credits and sell them through the Transaction Platform, creating new sources of revenues and improving the profitability of recycling activities.
• Waste pickers can formalize their activities based on the co-operative model and be assessed by the Project Standard to ensure the appropriate social safeguards (no child labour, safe working conditions, increased participation of women, etc).
• Corporations can use the 3R Crediting Mechanism to flexibly and effectively meet key circular economy goals, pledges and commitments. They can also easily connect with recyclable plastic suppliers across the world (SMEs and co-operatives registered on the 3RI registry platform).
• Governments can use the Project Standard to assess the impacts of their (and their partners’) waste collection and recycling activities, and could promote the replication and scaling up of existing 3R projects to meet national, regional and local circular economy goals.  In addition, governments may decide to allow regulated entities (i.e. corporates with a plastic waste footprint) to use plastic credits to meet some or all of their compliance obligations. Similar successful experiences have been seen with carbon pricing initiatives, where Governments used existing voluntary offset standards as part of Carbon Tax or Carbon Cap and Trade Schemes.

The 3RI is led by two NGOs: BVRio and Verra. During the first three years of its operation, when the 3RI is setting up all the infrastructure (standards, methodologies, registry, transaction platform, connection with government regulations), our funding will come from donors (corporate and others) and other supporters of the 3RI. To ensure long-term sustainability for managing the standards, certification process, registry and transaction platform, administrative fees will be charged to users of these tools after they are launched.

The 3R crediting mechanism will be financially self-sustaining, applying the same non-profit business model (with small levies on project registration, credit issuance, credit transactions, etc.) that has been successfully used by Verra over the past decade to manage the world’s leading voluntary carbon crediting platform (the VCS Program) and by BVRio to manage its environmental credit transaction platform.  The Initiative itself may require additional funding for the development of future applications of the 3R Crediting Mechanism (e.g. for other waste materials such as electronic waste), if demand for those applications arise.

The winning submission, and particularly the main prize (potential funding for a pilot project), could help us pilot the Project Standard/Crediting Mechanism on additional projects in Latin America and the Caribbean. The current recovery and recycling projects under the 3R Initiative are projects already supported by the corporate founding members, which will serve as pilot projects for the development of the 3RI credit mechanism. The Rethink Plastic Challenge prize would be a great opportunity to test on the ground autonomous recovery and recycling projects, in different geographical locations across Latin America. The output of these projects (data and validation) would provide valuable data and knowledge to the 3R Initiative.  While other prizes will also contribute to the further development of the Initiative, we are seeking large institutional partners in Latin America that can provide us with additional funding, resources and facilitate other partnerships or/and access to governments and municipalities.

We shall also use the Prize to further communicate our mission and goals across the continent to identify other opportunities for collaboration and partnership.

The 3R Initiative is expanding and we will soon welcome new corporate and advisory members (corporate entities, NGOs and institutions). 3RI will also launch its Partnership scheme to connect with stakeholders around the world. We would welcome partnerships with intergovernmental organisations, UN agencies, development agencies, development banks and international media. The 3R solutions have a strong technological component and therefore partnering with a tech company as an advisor would be a good step forward. We are considering using the latest tech-based solutions such as blockchain and AI. We are currently in conversation with a major tech giant about a potential partnership.