California has given plastic producers until 2032 to make all covered packaging recyclable or compostable — the most aggressive deadline of any state — and the regulations finalized at the start of this month have already drawn threats of litigation from both environmental groups and industry.

The Natural Resources Defense Council and Californians Against Waste announced last week that they plan to sue the state, arguing the rules break the law by allowing recycling methods that generate significant toxic waste and by letting some plastics escape the requirements entirely. Plastic manufacturers push in the opposite direction: the rules go too far, they say, and will raise consumer prices.

The regulations implement Senate Bill 54, the Plastic Pollution Prevention and Packaging Producer Responsibility Act that California passed in 2022. The law shifts end-of-life responsibility from consumers and local governments to producers of plastic food service ware and nearly all single-use packaging — from pallet wrap to toothpaste tubes and the cardboard boxes around them.

"This was the product of a compromise, and it was not perfect, and everybody walked away from the table, you know, unhappy about various aspects," said Sen. Ben Allen, the coastal Los Angeles County Democrat who authored the law. The program still "massively moves the needle on this really major problem," he said.

The material stream problem

The rules arrive against a dismal recycling baseline. The U.S. plastic recycling rate stood at 6% in 2021, down from 8% in 2018, according to a report by the advocacy group Beyond Plastics — a decline driven partly by China's import ban on scrap materials. A 2025 CalRecycle report puts most California plastic packaging recovery rates in the single digits or below. Even milk jugs and detergent bottles, among the most commonly recycled containers, reached only 19%.

CalRecycle has appointed the Circular Action Alliance, a nonprofit that administers extended producer responsibility programs, as the producer responsibility organization. Producers — defined as companies with more than $1 million in sales that make or sell products packaged in plastic — must join the alliance and pay fees to fund waste management. They can comply by using less plastic, switching to alternative materials, or investing in recycling infrastructure.

"The biggest challenge is the scale and coordination required to modernize a complex recycling system across a state as large and diverse as California," alliance spokesperson Sheila Estaniel said in an email.

California's law stands out nationally for requiring outright reductions in single-use plastic and for mandating that producers pay $5 billion over a decade to address environmental damage to communities. The state does not expect to begin distributing those funds until 2027 at the earliest.

A rocky implementation path

The regulations took a troubled route to finalization. CalRecycle's first draft, developed in 2024, expired before finalization. In 2025, Gov. Gavin Newsom directed regulators to restart the process — a move some advocates attribute to food and agriculture lobbying. The resulting second draft contained a broad exclusion for FDA- and USDA-jurisdictional plastics, including packaging for fresh produce and supplements, which advocates said would have gutted the law.

CalRecycle submitted that draft to the Office of Administrative Law in August 2025, then withdrew it to narrow the carve-out. The final version excludes only plastic that federal law requires for food safety.

"Governor Newsom was clear when he asked CalRecycle to restart these regulations that they should work to minimize costs for small businesses and families — while ensuring California's bold recycling law can achieve the critical goal of cutting plastic pollution," said Anthony Martinez, a spokesperson for the governor. "That's exactly what these draft regulations do."

Two mechanisms still draw fire. Materials with technical challenges can apply for exemptions under specific criteria. Separately, plastics federally mandated for food safety escape the rules entirely once producers complete an application to CalRecycle — with no timeline and no obligations.

"In practice, this allows exclusions to remain in effect … even for notices that ultimately fail — creating strong incentives to submit weak or legally unsupported claims simply to delay (and effectively filibuster) compliance," Tony Hackett, a policy associate at Californians Against Waste, wrote in a public comment letter.

Advocates also object that the regulations let certain technologies the law explicitly excluded — because they generate significant hazardous waste — count as recycling, provided the operator holds a hazardous waste permit. The category includes chemical recycling processes long promoted by the oil industry. Attorney General Rob Bonta has sued ExxonMobil, alleging the company misled the public about recycling's potential to address the plastic crisis.

"These regulations ignore explicit limits on recycling technologies and create permanent escape hatches the law never authorized," said Nick Lapis, director of advocacy for Californians Against Waste. CalRecycle spokesperson Rhonalyn Cabello said the agency does not comment on pending or potential litigation.

The capacity gap

Industry groups argue compliant alternatives simply do not exist at scale. Investments needed to meet the law's first target — a 25% reduction in single-use plastic by 2032 — could cost up to $15.4 billion, according to CalRecycle estimates.

Kevin Kelly, chief executive of Emerald Packaging, sells film plastic to farmers who bag salads and baby carrots in it. Paper packaging that can replicate plastic's oxygen and carbon dioxide regulation remains in early development, he said, with mass production decades away. "You have to build tens to hundreds of billions of dollars in infrastructure to actually produce something at the level that would be needed to replace plastics," Kelly said.

The Dairy Institute of California puts the cost of switching a single mid-size packaging line at roughly $40 million, a cost producers would pass to consumers. The industry also faces a labeling conflict: Senate Bill 343 bars the chasing-arrows symbol unless the material meets recyclability criteria. "If we lose the right to use (recycling labels on) dairy cartons, our members are going to have to expand their plastic use, because that is the only other packaging type that can take a shelf stable product," said executive director Katie Davey.

USC's Joe Árvai, director of the Wrigley Institute for Environmental Studies, dismisses the feasibility argument. "Whether they like it or not, these changes are coming," he said. "In the end, there are going to be players in the industry that are going to be better able to respond."

What happens next

The decisive milestone arrives in June, when the Circular Action Alliance must submit to CalRecycle its plan for how producers will meet the law's goals. Oregon, which passed a similar law and also faces an industry legal challenge, offers a possible precedent: grant funding there is already flowing to reuse and refill infrastructure despite the litigation.

"Despite the fact that there's a lawsuit in Oregon, money is moving out of the door," said Anja Brandon, director of U.S. plastics policy for the Ocean Conservancy. "We'll all be waiting with bated breath" to see how producers interpret the requirements, she said. The NRDC is waiting for CalRecycle to post additional documents before filing its lawsuit, while CalRecycle begins deciding who qualifies for exclusions and exemptions — the decisions that will determine whether SB 54 holds or, in Allen's words, becomes "a Swiss cheese of exemptions and non-compliance."