12 min read 27 May 21
Summary: with the majority of the plastics produced globally ultimately ending up in landfill or polluting nature, how can the industry address the issue and be part of the solution in reducing waste and pollution?
If we want to understand the future of the plastics industry, we need only look as far as Twickenham Stadium and the post-match scramble for empty cups. Since 2014, Twickenham has sold drinks in re-usable plastic pint ‘glasses’, at an initial cost of £1. Return the cup, and reclaim your pound, discard it, and someone else will do it for you.
So-called ‘deposit return schemes’ are not new, having been rolled out nationwide for plastic bottles in Scandinavia and Germany in recent years, and even before that were used to recover glass bottles here in the UK. Studies show they double collection rates of waste material and are the only method that exceeds a 90% capture rate. We are about to see them become a lot more widespread.
New and ambitious targets are being set which will radically alter the plastic industry and create new value chains for sorted plastic waste:
Fast-moving consumer goods (FMCG) companies such as Nestlé and Unilever are also in on the act, setting ambitious medium-targets both for recycled content of the plastic they use in packaging and for its subsequent recyclability.
It is rare to see an industry this big, and this ingrained in our daily lives, on the cusp of such dramatic change.
Globally, the plastics market is huge, totalling US$600 billion annually, and having grown at an 8% Compound Annual Growth Rate (CAGR) since plastics were first commercialised in the 1950s. Although growth has slowed in recent years, to 4% p.a., it remains resilient and only really wavers during of periods of severe economic weakness, such as the Global Financial Crisis (GFC). It is also still a comparatively new industry: 40% of the plastic the world has ever synthesised has been made over the past decade.
Although it’s understandable that we focus on plastic’s pitfalls, it is in some respects unfairly maligned. Plastic is not evil; no material offers the range of end-uses of plastic (does anyone really miss wooden televisions?) and its production process often has a lower carbon-intensity than alternative materials such as glass, aluminium, or even paper. The problem is there is not an adequate supply chain in place to recover it. This means plastic waste has a dual negative effect on the environment.
First, much of it ends up being incinerated, which is terrible in terms of life-cycle carbon emissions, and second, a proportion of the remainder finds its way into the environment where it breaks down into micro-particles.
Big industries tend to create big problems. A 2017 study by Roland Geyer et al1 estimated that only ca. 9% of plastic waste ever generated has been recycled. Roughly 12% has been incinerated, with the rest either now being in landfill or somewhere else in the open environment.
This means that 80% of plastic packaging you have touched in your lifetime is still somewhere on earth, either buried underground or circulating somewhere in nature.
Awareness of these issues has been growing in advanced economies, and clear regulatory changes are accelerating, led by China. As of 2018, China effectively closed down its massive waste import industry, which had, hitherto, been the largest in the world. Up until this point, many advanced economies were collecting waste in a ‘single stream’ and shipping it, unsorted, to China where it was partly recycled, but mostly ended up in landfill.
The result of this was that China's largest landfill site was operating at four times the planned levels and reached capacity 25 years earlier than planned. Under ‘Operation National Sword’, unsorted waste imports were banned and the permissible percentage of contaminants of recyclable material, by weight, was cut from 5-10% to 0.5%.
Further, in 2019, an international treaty called the Basel Convention was amended to treat plastic as a regulated waste stream, meaning advanced economies had to begin to find a solution for their own waste.
This means a series of unconnected pieces are falling into place: paying other countries to deal with plastic waste is being removed as an option, while nudging people to sort and/or return their own plastic waste has been shown to work, and FMCG companies are creating ‘demand pull’ for recycled material. This means the conditions are in place to incentivise a technological solution. But how early-stage is the technology, and how far off are the economics from fossil-fuel-based plastic? In the parlance of Bill Gates, what is the ‘green premium’ for recycled plastic?
The vast majority of what happens today is ‘mechanical’ recycling. This involves collecting, sorting, cleaning, and re-melting certain categories of plastic. It’s mainly used for PET (polyethylene terephthalate e.g. clear drinks bottles and food containers) and HDPE (high-density polyethylene e.g. cloudy milk bottles). It’s a relatively simple technical process because it doesn’t change the chemical composition of the plastic, it just re-shapes it. It also generates fewer Greenhouse gas (GHG) emissions than virgin plastic, by up to 80%.
The disadvantage is it cannot deal with mixed plastic waste, so requires extensive sorting, and it needs the plastic to be relatively clean. Further, each re-melting results in the plastic degrading and being down-cycled, so it usually results in a different end use – for example, plastic bottles becoming carpet fibres.
The answer to the world’s growing need for plastic recycling comes from the second bucket, ‘chemical’ recycling which, in turn, is split into two main approaches:
Pyrolysis can be applied to a wide range of plastics and its great advantage is that it can process labels, inks and stickers, so requires less sorting and cleaning. Since pyrolysis is producing a basic hydrocarbon, it can be used to turn plastics into fuel, but given environmental concerns about fossil fuels, the focus is shifting to plastics-to-plastics, rather than plastics-to-fuels.
Mechanical recycling keeps the plastic closest to its original form, so is the simplest, but does not produce a like-for-like end product. Pyrolysis takes mixed plastic all the way back to the original feedstock, but requires the most energy. Monomer recycling is somewhere in between.
Although monomer and pyrolysis processes are technically feasible, they are only just now being developed at commercial scale. Currently, only a handful of countries use monomer recycling or pyrolysis, and it accounts for ca. 0.1-0.2% of the overall market.
Nonetheless, it is clear that these processes will grow strongly in penetration given their higher versatility, being applied to a wider range of plastics than mechanical recycling, and the fact that they can be applied to partially-sorted and partially-cleaned waste streams.
Much excitement currently swirls around ‘bioplastics’, which will no doubt be part of the future landscape, and will eat into fossil-fuel plastic demand. But, it is here that bioplastics’ disadvantages become clearer. Chemical recycling is plug-and-play with existing petrochemical infrastructure. If you are a PET manufacturer, you want to keep your current infrastructure in place as much as possible, but switch to recycled sources of the building blocks – which can be achieved by installing a chemical recycling module (e.g. breaking old PET down into PTA (purified terephthalic acid) and MEG (monoethylene glycol), and recombining to make new PET). Bioplastics require greater investment, as new industrial facilities must be built to produce at scale. Secondarily, not all bioplastics are themselves biodegradable without industrial composting, and so they do not resolve the ocean waste issue.
For now, the economics of chemical recycling are extremely attractive. If a company is receiving plastic waste as a feedstock for a chemical recycling plant, it is quite often taking a liability away from a waste processor, since they would have to pay landfill fees to get rid of the plastic. At the same time, the market price of recycled-PET trades at a premium to regular PET, since demand for recycled material is growing.
It’s not clear that this will remain the case in the long-term: as chemical recyclers begin to compete for waste feedstock, the price will surely rise, but at the moment the favourable economics provide a clear incentive to add capacity across mechanical and chemical recycling.
In other words, there is no ‘green premium’ for this technology, there’s a ‘green margin’.
It's not all good news though, and we clearly must do better at capturing and recycling a wider range of plastic waste, as the below chart from the Ellen MacArthur Foundation shows. Pyrolysis and monomer recycling are sorely needed, since mechanical recycling has settled on the plastics which are the easiest to sort, melt and re-form, namely PET and HDPE.
Plastic labelling must also improve significantly. Here’s a handy guide for the next time you are hovering over your bin.
The symbols on the left hand side of the below are known as ‘resin identification codes’, which commonly appear on plastic packaging. Although they appear friendly and have a strongly ‘circular’ motif, they do not mean the plastic you are holding can currently be recycled. As we’ve explored, practically speaking, only PET and HDPE are recycled using today’s technologies. Although, of course, the goal is for this to change. Confusingly, triangular arrows on paper or metal do connote recyclability.
On the top right, is the ‘The Green Dot’ which, again, does not mean the packaging you’re holding is recyclable, it just means the company that sold it to you made a contribution to a recycling scheme somewhere.
Finally, bottom right, there’s the ‘Tidyman’ who, unfortunately, mainly indicates the item will go to ‘incineration or landfill’, if indeed the object makes it through a waste processing system.
In summary, increasing regulation points to greater waste collection. Greater collection, in turn, leads to higher consistency, which means a market can be established for recycled plastic feedstock.
Technologies are now being developed and trialled at commercial scale which can transform waste plastic back into hydrocarbon feedstock, working ‘plug and play’ with existing petrochemical technologies.
The value chain is complex and finding investee companies exposed to the upside created by these changes, and insulated from the downside, requires some thought. However, what’s clear is that the plastics industry as we know it is about to be turned on its head.
As the window of discourse shifts, there’s probably a bit of room for deflation in the £1 per cup fee at Twickenham too.
1Roland Geyer, Jenna R Jambeck and Kara Lavender Law (2017): Production, use, and fate of all plastics ever made, Science Advances; 19 Jul 2017, vol. 3, issue 7.
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