On June 30, 2022, Governor Newsom signed SB 54, the Plastic Pollution Prevention and Packaging Producer Responsibility Act (“Act”), into law.  The Office of the Governor described the Act as “the most significant overhaul of California’s plastics and packaging recycling policy in history.”  Along with setting specific plastic reduction and recycling levels for plastic packaging, the bill also prescribes creation of non-profit entities, Producer Responsibility Organizations (“PROs”) to ensure producer compliance.  The Act is intended to shift ultimate responsibility from consumers to the plastics industry and has significant impacts to producers of covered material under the Act.

Producers of Covered Material

The Act applies to “producers” of “covered material.”  Covered material includes: (1) single-use packaging, i.e. not limited to plastics, that is routinely recycled after the contents have been used, and (2) plastic single-use food service ware – examples include plates, bowls, utensils, straws, and wrappers – that are plastic-coated or where plastic is intentionally added in the manufacturing process. There are categories of exemptions to covered material outlined in the Act including beverage containers subject to the Beverage Container Recycling and Litter Reduction Act, packaging for products regulated by the Federal Insecticide, Fungicide, and Rodenticide Act, and medical products among others.  Producers include those who manufacture a product that uses covered material and those who own or license the brand or trademark under which the product is sold in a commercial setting or distributed in California.

Specific Reduction and Recycling Levels

The Act requires producers of covered material to, pursuant to regulations to be adopted by the Department of Resources Recycling and Recovery (“CalRecycle”):

(1) reduce all plastic covered material pursuant to a yet-to-be-formed plan to achieve 25% reduction by weight and 25% reduction by plastic component source for covered material sold, offered for sale, or distributed in California;

(2) ensure covered material offered for sale, distributed, or imported in California be eligible for being labeled “compostable” by January 1, 2032; and

(3) ensure covered material offered for sale, distributed, or imported in California achieve the following recycling rates:

• Not less than 30% of covered material on and after January 1, 2028;
• Not less than 40% of covered material on and after January 1, 2030;
• Not less than 65% of covered material on and after January 1, 2032.

PRO and Enforcement

Producers of covered material are also required to “form and join” a PRO by January 1, 2024.  PROs are to act on behalf of their approved-participant members to: (1) develop source reduction plans to achieve the reductions of 25% by weight and 25% by source; (2) evaluate recycling technologies that will be used to achieve recycling requirements; and (3) identify and establish enforceable agreements with participants to gather data to be reported to CalRecycle and further enforce the Act through the PRO’s producer responsibility plans.  Part of the producer responsibility plans include fee schedules for participants as the PROs will be required to remit a $500 million surcharge each year to be deposited into the California Plastic Pollution Mitigation Fund.  Failure to participate in a PRO prohibits producers from selling, offering for sale, importing, or distributing covered materials in the state, unless certain individual requirements are met for alternate compliance with the Act.  Failure to comply with the Act can result in CalRecycle imposing administrative civil penalties up to $50,000 per day per violation.

Environmental Justice

As identified above, the Act establishes the California Plastic Pollution Mitigation Fund, which is intended to split the money:

• 40% to state agencies to monitor and reduce the environmental impacts of plastic pollution; and
• 60% to the Strategic Growth Council, the California Environmental Protection Agency, the Natural Resources Agency, and the Department of Justice to monitor and mitigate the impacts to communities affected by the public health effects of plastic pollution.

This is consistent with the increased efforts of the Biden Administration to prioritize and address environmental justice, which has already been at the forefront of many federal environmental laws.

Impact

The Act greatly expands the obligations and potential liabilities of producers of covered material.  Entities that fall within the scope of the Act should closely monitor formation and development of PROs and forthcoming CalRecycle regulations.  The comprehensive nature of the Act and the potential for severe penalties indicate that the industry could experience a significant uptick in CalRecycle enforcement action.

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