When policy meets action: Seismic changes in the plastic recycling market

Few industries receive an independent report card as rigorous as that of plastic packaging. One of the most prominent reports on the state of plastic recycling, published in November 2022, makes for grim reading. The Global Commitment Report, released by the Ellen MacArthur Foundation – which promotes a transition to a circular economy among businesses and policymakers – covered progress towards long-term industry targets of reducing plastic use and boosting sustainability.

Under the 2025 targets, committed to by six of the world’s top 10 fast-moving consumer goods (FMCG) companies, virgin plastic used in packaging must decrease by 5% per annum by 2025. Yet this has been roughly flat in aggregate since 2018¹.

“Whilst the mechanical recycling value chain has grown impressively to deal with specific waste streams, we now need innovative pyrolysis solutions to deal with the rest.”
 

Some headway is being made on raising the recycled content used in packaging. But with the top FMCG companies currently using an average of 11% in their plastic packaging, they must roughly double their rate of progress, on average, to meet their mid-decade commitments, which range from 25-50%.

The wider statistics which illustrate our growing dependence on plastics are eye-popping. Around 40% of the plastic the world has ever synthesised has been made in the past decade. Nearly half of this plastic is used for consumer packaging, around 95% of which is discarded after a single use, by design, according to data from the Ellen MacArthur Foundation. Despite growing awareness of the problem of poorly managed plastic waste, this is only set to get worse. Even if growth in global plastic consumption slows to half its trend rate, the total market size is still estimated by the International Organisation for Standardisation (ISO) to increase by over 2.5x by 2050.

Global policymakers are responding to the challenge

The scale of the challenge is not lost on policymakers the world over. The EU has set ambitious targets for the recycled content in all plastic, and a recycling capture rate of 50% of all plastic waste by 2025. 

This is more than just vague target-setting. A levy of €800 per tonne has been applied to all non-recycled plastic packaging waste since January 2021, although it is up to member countries to decide how to implement it. The choice is whether it lands on petrochemical companies, packaging compounders, FMCG companies, or directly on the consumer. 

Elsewhere, the US is targeting 30% recycled content in plastic packaging by 2025. China has also made some initial moves, by banning the import of unsorted plastic waste in 2018.

Seismic changes

We believe the combination of the demand ‘pull’ from FMCG companies and regulatory ‘push’ will lead to seismic changes in the petrochemical industry over the coming decade. Today’s plastics value chain is built around multi-billion dollar assets, converting fossil fuels into plastics, in a largely non-circular fashion. But beyond 2030, it is estimated that all of the incremental plastic required by the world will come from mechanically or chemically recycled sources.

Mechanical recycling is the easy bit. This involves collecting, sorting, cleaning, and re-melting certain categories of plastic. It is mainly used for PET (clear drinks bottles) and HDPE (cloudy milk bottles). Because it doesn’t change the chemical composition of the plastic, mechanical recycling is a relatively simple process. It also generates fewer GHGs than virgin plastic, by up to 80%.

The disadvantage is it cannot deal with mixed plastic waste, so requires extensive sorting, and the plastic must be relatively clean. Furthermore, each re-melting results in the plastic degrading and being down-cycled, so it usually results in a different end use, such as plastic bottles becoming carpet fibres.

The opportunities in chemical recycling 

The answer to addressing a wider range of plastic feedstock lies in ‘chemical’ recycling, which itself breaks down into two broad technologies: ‘pyrolysis’ and ‘monomer’ recycling. Our analysis leads us to be more excited about the former, since it is a plug-and-play solution which provides circular feedstock to existing, naphtha-based petrochemical complexes.

Pyrolysis breaks mixed plastic waste back into its original hydrocarbon building blocks using heat, in the absence of oxygen. For some plastics, it can produce higher greenhouse gas (GHG) emissions than using virgin resin, because it requires high temperatures. However, it is still better for the environment, when accounting for the fact that much of the plastic feedstock it uses will either be burned in waste-to-energy facilities, or left to slowly decay in landfill. Furthermore, plastic manufacturing accounts for around 8% of oil usage, so any growth in plastic demand which is not satisfied by a circular solution will require a corresponding increase in upstream oil development.

There are several other benefits. Pyrolysis can be applied to the plastics which don’t have established mechanical solutions (such as low-density polyethylene,  polypropylene and polystyrene), and its great advantage is that it can process labels, inks and food residue, so requires less sorting and cleaning. Pyrolysis-derived naphtha also produces new plastics which are chemically identical to those synthesised from fossil fuels. This means they are free from the degradation common in mechanical recycling, and they are suitable for food-grade applications, which is key to FMCG company interest.

The economics, currently, are also strong. Demand for circular feedstocks far outstrips supply, so circular plastic sells at a premium to virgin, while in some cases the feedstock of part-sorted plastic waste is available at a low, or even potentially negative cost (if the seller is otherwise faced with landfill fees).

Some serious targets are now emerging from the petrochemical industry, which will support growth in the pyrolysis industry this decade. TotalEnergies produces 60,000 tonnes of high-value circular polymers today and targets 1.0 million tonnes in 2030. Similarly, INEOS aims to incorporate at least 850,000 tonnes of recycled and bio-sourced polymer into products by 2030, from close to zero today. Both companies have announced pyrolysis partnerships with M&G Catalyst investee company, Plastic Energy.

In conclusion

We are all in the habit of putting all plastic containers in the correct bin, and assuming the recycling industry will do the rest. But whilst the mechanical recycling value chain has grown impressively to deal with specific waste streams, we now need innovative pyrolysis solutions to deal with the rest. This is the route to raising the 14% of plastic which is currently recycled towards the 70-80% seen in the paper and glass industries, levels which are now explicitly targeted both by industry and policymakers.
 

¹ Ellen MacArthur Foundation, “Global Commitment Report 2022”, (ellenmacarthurfoundation.org)
 

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