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California publishes draft regulations for landmark plastic pollution reduction act

CalRecycle has launched the formal rulemaking process for Senate Bill 54, which will implement a sweeping plan to reduce plastic waste in the state by 2032. The newly released draft regulations, statement of reason and regulatory impact assessment all point to the wide-reaching implications that the rule will have for a variety of industries across the state.

BY WALKER LIVINGSTON, ESQ | MAR 13, 2024 2:33 PM CDT

Background: CalRecycle and plastic waste regulations in California

  • The California Department of Resources Recycling and Recovery (CalRecycle) oversees the state’s initiatives towards reducing waste and reusing materials. California implements a variety of extended producer responsibility (EPR), programs, including programs to address paint, carpet, mattress, pharmaceutical and battery waste. The state defines EPR as a “policy approach that holds producers responsible for product management through the product’s lifecycle,” generally using producer responsibility organizations (PROs).
  • CalRecycle administers the California Integrated Waste Management Act of 1989, which regulates the disposal and recycling of solid waste in the state. The Act sought to promote source reduction of waste, recycling and composting, and environmentally responsible transport and disposal of waste in the state. In 2021, California Senate Bill (SB) 343 set a new standard for what constitutes deceptive labeling surrounding recyclability. The bill required truthful recyclability claims, which should be substantiated by “ competent and reliable evidence to prevent deceiving or misleading consumers” about the environmental impacts of plastic waste.

Background: SB 54 and its requirements

  • On June 30, 2022, Governor Gavin Newsom signed into effect SB 54, the Plastic Pollution Prevention and Packaging Producer Responsibility Act. SB 54 established a set of recycling and source reduction targets for the state to meet by 2032. The act is broadly broken down into sections on producer responsibility, program administration and enforcement.
  • Cutting waste: By 2032, SB 54 requires that the state cut the use of single-use packaging and food service ware by 25%.
  • Improving recycling: SB 54 contains a set of recycling targets that increase between 2028 and 2032. By 2028, the state will require the recycling of 30% of single-use packaging and food service ware. That amount will increase to 40% in 2030 and 65% in 2032.
  • Requiring packaging to be recyclable or compostable: By 2032, SB 54 requires that 100% of single-use packaging and food service ware be recyclable or compostable.
  • Creating a new PRO: SB 54 created a new EPR program to manage the collected and covered material by the law via a PRO. The regulation is focused on shifting the plastic pollution burden from consumers to producers, and requires the PRO to remit $500 million to the state each year between 2027 and 2037 for the California Plastic Pollution Mitigation Fund (totaling $5 billion). Up to $150 million of the $500 million per year may be collected from plastic resin manufacturers who sell plastic covered material to PRO participants. The bill would also prohibit a producer from selling, offering for sale, importing or distributing covered materials unless that producer is part of the PRO. However, a producer may also choose to apply for independent compliance with the requirements.

Proposed implementing regulations

  • On December 28, 2023, CalRecycle published proposed regulations for the implementation of SB 54. The draft rules were accompanied by a Covered Materials Category List for materials subject to regulations under SB 54, as well as a report to the legislature on the implementation progress for SB 54.
  • On March 8, 2024, CalRecycle announced the start of the formal rulemaking process for SB 54, re-publishing the proposed regulations. Self-styled as the “nation’s toughest rule for single-use packaging and plastic recycling,” the regulations seek to implement the legislative charge of SB 54 and meet the targets from the law. The press release also contained a separate set of plans for a new rulemaking to expand beverage container redemption programs to similarly promote the effective recycling of beverage containers.
  • Although the law covers a wide range of materials, several types of materials are excluded. These include packaging for drugs (including prescription drugs) and medical devices, in addition to materials that are considered “reusable” or “refillable.”
  • The proposed regulation clearly defines the concepts of “reusable” and “refillable.” Such packaging must be “designed for durability” – meaning that it can remain usable for its original intended purpose after multiple uses – and “considered capable of being conveniently and safely reused and refilled.” This latter requirement entails that the packaging or ware must retain its form and function when washed, without incurring environmental or public health risks (such as from chemical leaching or shedding of microplastics). The PRO must develop a procedure “for establishing estimates of the average number of uses or refills for particular products or types of products, and those estimates may be used as the observed average number of uses for purposes of this clause.”
  • Also clearly defined – the determination of whether materials may be considered “recyclable” or “compostable.” Producers will be required to demonstrate to their PRO whether a covered material meets the requirements to be considered recyclable, and the PRO must establish relevant processes. PROs will also be required to conduct periodic audits and investigations of covered materials to ensure that those materials meet the requirements for recyclable materials. This “recyclable” definition excludes plastic packaging that has any component, ink, adhesive, or label that renders the packaging non-recyclable. In order to be considered compostable: After January 1, 2026, a material must be comprised of materials that are collected by at least 75% of organic waste recycling programs across the state and accepted by at least 75% of compost facilities in the state which accept mixed materials.
  • Once the regulations go into effect, producers must either join a PRO or become an approved independent producer. A producer is defined as “a person who manufactures a product that uses covered material and who owns or is the licensee of the brand or trademark under which the product is used in a commercial enterprise, sold, offered for sale, or distributed in the state.” Entities that become producers in the state after 2027 must join a PRO within six months or become an approved independent producer under state regulations. Entities with gross annual sales of less than $1 million in California (in the most recent calendar year for which data is available) may be exempted from the regulations.
  • For those choosing to become independent producers, a stringent application process ensures compliance with the regulations. If CalRecycle denies this application, the producer will be instead required to join a PRO within six months or cease selling or distributing covered materials in the state. Approved independent producers will be expected to develop a plan similar to that of a PRO (which must be approved and updated periodically), complete annual reporting and contribute at a prorated rate to the California Plastic Pollution Mitigation Fund.

Estimated impacts of the regulation

  • On March 8, CalRecycle also released a detailed document breaking down the expected impacts of the regulation. The document reviews the benefits and costs of the rule as well as the alternative regulations considered (and ultimately rejected) by the agency.
  • The regulatory impact assessment expects a benefit of over $40 billion in avoided costs. This total considers reduced emissions from the production of virgin plastics, reduced overall source inputs and therefore reduced litter collection, reduced human health effects from toxics, as well as fewer instances of contamination from recycling streams as materials become more recyclable or compostable.
  • The highest single estimated cost avoidance – $25 million – comes from reductions in the use of per- and polyfluoroalkyl substances (PFAS). The agency reached this number by estimating the average damage cost of a kilogram of PFAS at about $20,000, with a reduction of approximately 1.3 million kilograms of PFAS via the regulations and implementation period.
  • Other sources of high cost avoidance include reductions in non-carcinogenic and carcinogenic effects from exposure to toxics, as well as respiratory effects from particulate matter (PM2.5). The regulations are expected to avoid about $7.5 billion in non-carcinogenic effects and about $2.8 billion in carcinogenic effects over the implementation period. Reduced respiratory effects from reductions in particulates is expected to avoid about $2.5 billion in costs.
  • The assessment also details the expected reductions in plastic material disposal and plastic pollution. This includes an expected reduction of 1.38 tons of plastic material due to source reduction requirements and an expected 3.9 tons of plastic covered material that would otherwise be diverted from disposal each year. Although the agency was not able to quantify impacts on other recyclable materials, it expects that the increase in plastic recycling will spur additional recycling for glass and metal.
  • Over the 10-year implementation period, CalRecycle expects the rule to cost about $36.3 billion. A small amount of these costs will be incurred by PRO operations; $5 billion of this cost will be covered via the environmental mitigation surcharge charged to the PRO over the course of that same timeframe.
  • A significant cost from the regulations will be borne due to the source reduction regulations as well as for implementing reuse and refill infrastructure. For source reduction, CalRecycle determined that fragmented approach to reduction would likely cost around $1.4 billion, whereas a collaborative approach would cost about $972 million for producers, in addition to a $934 million cost to implement reuse or refill infrastructure. The remaining source reduction requirements are expected to cost about $6 billion to implement.
  • Achieving the recycling rate required by the regulations will cost approximately $28.6 billion over the implementation period. During this period, about $19.6 billion worth of packages of difficult-to-recover materials will be switched over (representing a change for about 57.4 billion packages). Additional costs will focus on materials switching, as well as assisting producers in meeting required recycling rates.
  • The agency also expects an expenditure of $5 billion related to the development of infrastructure for optimizing recycling and disposal waste streams. This will mostly be focused on building up the necessary infrastructure to divert 2.6 million tons of covered materials from landfills to meet the 65% recycling rate required in 2032.

The regulations will likely meet some challenges, but California has the political will to enforce the regulations

  • Although certain states have begun implementing EPR programs for plastic packaging, California represents the largest (and economically most impactful) state to begin implementation of plastic packaging EPR regulations. Many EPR programs for packaging are informed by the Product Stewardship Institutes 2020 document, Extended Producer Responsibility for Packaging and Paper Products: Policies, Practice, and Performance, which details steps that regulators can take to create product stewardship programs as opposed to building them from scratch.
  • California’s regulations will likely spur other states to begin creating similar EPR programs. Based on the significant spending required from the PRO (and therefore, producers) in California for covered materials, there will likely be a notable increase in the cost of doing business. This will hold true for other states that implement similar EPR programs with similar mitigation funds.
  • An eventual patchwork of state regulations may create a large regulatory headache for multistate or multination organizations. Because each state will have different requirements for what is covered, what is not, and what payments are required, organizations will be required to ensure compliance with various regulatory regimes and also track a wide range of information – from sales to production volumes – to inform any state-based payments.
  • Federal EPR regulation is likely far in the future. Although producer organizations would likely have an easier time dealing with the federal government versus up to fifty state regulatory schemes, the likelihood for federal EPR regulations targeting the plastic industry is slim. The Break Free from Plastic Pollution Act (BFFPPA) was first introduced in 2020 and updated in 2021. Sen. JEFF MERKLEY (D-OR) and Rep. JARED HUFFMAN (D-CA) introduced an updated version of the Act in October 2023 [an AgencyIQ analysis of the act is available here]; however, the current gridlock in Congress likely means that even a bipartisan EPR legislation would have trouble moving through both houses.
  • Consumers may also experience a financial impact from the regulations. Due to the cost of the PRO and mitigation fund, producers will likely increase prices of packaging, which may lead to increased consumer prices on end-use items. However, the knock-on effects to secondary users and consumers will not be clear until the regulations are fully implemented.

Where to provide feedback

  • CalRecycle will host a hybrid public hearing on the proposed regulations on April 23. The meeting will be in-person, as well as hosted virtually on Zoom for contributors and streamed via webcast for observers. The in-person section will be hosted on the 2nd floor of the CalRecycle headquarters at 1001 I Street, Sacramento, CA, 95812.
  • The agency will also accept written comments on the proposal until April 23. Comments can be submitted via the public comment portal here.

To contact the author of this analysis, please email Walker Livingston ( [email protected]).
To contact the editor of this analysis, please email Chelsey McIntyre ( [email protected]).

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