California’s plastic law doesn’t need a delay. It needs well-designed fees.

This month, as CalMatters reported, more than two dozen state legislators asked California’s leaders to delay the fees under SB 54, the state’s landmark packaging law, for two years. Industry groups warn the law could cost households hundreds of dollars a year; environmental advocates and the law’s author counter that a pause would squander years of progress. Both sides have a real point, but both are also arguing about the wrong thing.

The question that will decide whether SB 54 works is not whether it starts in 2026 or 2028. It is how the program’s fees are designed to drive the impact everyone hopes for, and that piece is still being written.

Under the law, producers that miss source-reduction targets pay “malus” fees, which in turn fund bonuses for those that beat them. As CalMatters noted, the Circular Action Alliance, the nonprofit implementing the law, has not yet said how large those fees and bonuses will be. That undefined number may be the single most consequential decision in the entire rollout.

Here is why. If the fees are flat and modest, and affect all producers the same regardless of their efforts to reduce plastic, they become exactly what critics fear: a small, unavoidable surcharge that companies pass straight to consumers, with little change in behavior. That is the worst of both worlds; cost without progress. But if the variable rates are steep, representing a substantial penalty for missing reduction targets, and an equal if not greater reward for beating them, the same dollars stop being a tax and start being an investment signal. They make it pay to cut plastic at the source through refill, reuse, and material substitution, and they pull private capital toward the companies and technologies that can deliver those alternatives at scale.

That distinction matters most for the very affordability worry driving the delay effort. Today, recycled and alternative materials often cost more than virgin plastic, which is why producers hesitate and consumers foot the bill. The way to close that gap is not to pause the program, but to design incentives strong enough to draw investment into alternatives — because as those alternatives scale, their costs fall. We have watched this happen in energy, where policy-driven demand turned solar and wind from luxuries into the cheapest power on the grid. A well-tuned fee structure can set the same curve in motion for packaging, so the cleaner choice becomes the cheaper choice over time. Flat fees never bend that curve; escalating, variable ones can.

None of this is a criticism of the Circular Action Alliance, which is doing hard implementation work under state oversight, or of the legislators raising affordability concerns, which are legitimate. It is a case for using the moment before the fee schedule is finalized to calibrate it ambitiously. Higher variable malus and bonus rates, tied explicitly to source reduction, would do more to protect consumers over the long run than a two-year delay ever could, and they would keep California’s momentum intact.

I have a stake in this: I run a plastic-responsibility platform that includes a recovery marketplace and EPR compliance software, so I believe in market-based tools. But the underlying principle holds regardless of who profits. Incentives that reward measurable reduction will always outperform flat fees that reward nothing.

California spent four years and countless negotiations building this law. The debate over when to start it has crowded out the more important debate over how to design it. Get the incentives right, and the state can turn a fight over cost into an engine for investment — and show the rest of the country that cutting plastic and growing an economy are not opposing goals.

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Sebastian DiGrande is CEO of PCX Markets, a plastic-responsibility platform and plastic-credit marketplace. He previously spent two decades as a senior partner and managing director at the Boston Consulting Group and served as executive vice president of strategy and chief customer officer at Gap Inc.