Australia's Plastic Recycling System Has a Market Failure Problem, and EPR Is the Fix
- Renata Daudt
- May 4
- 5 min read
If you follow the packaging industry at all, you've probably seen the headlines. Early this year, Rennie Advisory, the Australian Council of Recycling (ACOR), and the Australian Packaging Covenant Organisation (APCO) released a report that confirmed what many of us in the industry already suspected: Australia's plastic recycling system is in serious structural trouble. The report is called Securing Australia's Plastic Recycling Future, and it's worth understanding, not just as a policy document, but as a signal of where packaging regulation in this country is heading and what that means for your business.
The Problem with Australia's Plastic Recycling Is Not What Most People Think
When people hear that Australia's plastic recycling rates are low, they usually assume the problem is infrastructure. We don't have enough recycling facilities, or households aren't separating their waste properly, or councils aren't collecting the right materials.
The reality is more frustrating than that, as Australia actually has the physical capacity to recycle more plastic, but the problem is that nobody is buying the output.
Domestic recycled plastic costs more to produce than imported virgin or recycled material, and there are no mechanisms currently in place to drive demand for the local product. So the recycled material sits unused, the facilities operate well below capacity, and the economics of running a recycling business in Australia deteriorate further every year.
The report found that without regulatory reform, the utilisation of existing Australian plastic recycling facilities could fall to just 32 per cent within the next five years, resulting in facility closures, job losses, and a stalling of investment in the circular economy.
This is a market failure, the recycling infrastructure exists, and the intention to recycle exists, but the gap is that virgin imported plastic is simply cheaper, and without a policy signal, brand owners have no financial incentive to pay more for Australian recycled content.
The Numbers Behind the Problem
Australia uses more than 1.3 million tonnes of plastic packaging each year, most of it imported and with more than one million tonnes ending up in landfill or littered.
Without policy intervention, the report projects plastic waste reaching 4.9 million tonnes annually by 2050, with environmental costs exceeding $32 billion. That is not a future any brand wants to be associated with, and it is not a future any government will be able to ignore.
Only 18 per cent of plastic packaging is currently being recycled in Australia, a long way short of the 2025 National Packaging Target of 70 per cent. The gap between ambition and outcome here is enormous, and voluntary action alone has not closed it.
Why EPR Is the Right Policy Response for Australia's Plastic Recycling
The report's central recommendation is an Extended Producer Responsibility (EPR) scheme for packaging. I want to spend a moment explaining what that means in practice, because the term gets thrown around a lot without much explanation.
Under an EPR scheme, brand owners and producers take financial responsibility for what happens to their packaging after it leaves the shelf. Specifically, folloin the European model with eco-modulated fees, meaning the fee you pay is linked directly to how recyclable your packaging is and how much recycled content it contains. If your packaging is designed well for end-of-life recovery and uses recycled material, your fee is lower. If it isn't, you pay more.
This matters because it changes the economic calculation. It creates a financial reason to invest in better packaging design. It also creates demand for Australian recycled content, because brands using recycled material would receive a lower fee. That demand signal is precisely what the recycling industry needs to justify ongoing investment and capacity.
The report determined that introducing a fee-based EPR scheme would have a negligible cost impact, adding just 0.1 per cent to product costs. That figure is worth sitting with. We are talking about a fraction of a per cent of product cost to fix a system that currently sends over a million tonnes of plastic to landfill every year.
What This Means If You're a Brand Owner
Here is the practical reality: if you sell a product in packaging in Australia, this reform is coming for your business. The question is whether you get ahead of it or react to it.
Brands that have already invested in packaging design for recyclability and increased recycled content are well-positioned. They will benefit from lower eco-modulated fees under an EPR scheme, and they will have less remediation work to do when mandatory requirements kick in.
Brands that haven't started yet are facing a tighter timeline than they might think. National packaging regulations are expected to come into effect in 2026, and moving from a packaging portfolio that doesn't meet recyclability standards to one that does takes time. Material changes, supplier engagement, ARL (Australasian Recycling Label) compliance, and testing all have lead times. Waiting until regulations are finalised to start that process is a risky approach.
There are a few concrete places to start.
Audit your packaging portfolio against the APCO Sustainable Packaging Guidelines and ARL grading framework to identify your gaps.
Talk to your packaging suppliers now about material alternatives and design-for-recyclability options, before demand peaks and lead times blow out.
If you're an APCO member, use the PREP (Packaging Recyclability Evaluation Portal) to evaluate your current packaging recyclability.
The Broader Shift Happening Here
The Securing Australia's Plastic Recycling Future report is significant not just because of its recommendations, but because of who commissioned it and what it signals. ACOR and APCO represent the recycling and brand owner sides of the packaging system, respectively. The fact that they commissioned joint economic modelling and are publicly calling for mandatory EPR tells you something important: the voluntary approach has run its course, and the industry knows it.
The Australian Government agreed to develop National Packaging Laws in 2023, in response to low plastic recycling rates and the need to shift from a "take, make, waste" model to a circular economy. Currently, only eight per cent of packaging is made using recycled plastic.
Despite years of industry targets, sustainability commitments, and significant investment in recycling infrastructure, only eight per cent. That number makes the case for mandatory intervention on its own.
The shift toward EPR is not a radical idea imported from elsewhere. Europe has been working through various EPR models for years, with useful results. Without strong domestic markets for locally recycled plastic, Australia risks repeating Europe's experience, where falling demand and cheap imports have forced plant closures and left recycling capacity stranded. The report is effectively saying: we can learn from that, or we can repeat it.
The businesses that will navigate this most smoothly are the ones that have already done the internal work: understood their packaging, built relationships with suppliers who can support sustainable material choices, and developed reporting systems to track recycled content and recyclability. That work has value regardless of exactly how the regulation is structured.
What We Do at AWEN
At AWEN Packaging Consulting, we work with brand owners and manufacturers to assess their current packaging against regulatory and recyclability requirements, identify practical improvements, and prepare for the changes coming through national packaging reform.
If you want to understand where your packaging sits today and what you'll need to do to be ready for EPR, we're happy to have that conversation. You can book a call or read the full Securing Australia's Plastic Recycling Future report below
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