Plastics has long been the ‘odd one out’ in terms of recycling. Steel, aluminium, glass, cardboard, rubber and paper routinely have up to a 70% rate of recycling. But plastics has been stuck at around 10% for a long time. President Biden’s Earth Day Summit is likely to change this picture, and quickly.
The reason is that Biden has committed to cutting US greenhouse gas emissions in half by 2030. So the plastics industry is going to face pressure from two directions to move quickly to using recycled plastic as a feedstock:
- Biden’s commitment to accelerate the growth of Electric Vehicles means refineries will close. So the naphtha needed to make plastics will disappear. Shell, for example, have said they will have just 6 major refineries by 2025, compared to 54 as recently as 2005
- It is also a major contributor to the CO2 problem, creating around 250 million tonnes of CO2 emissions – equal to 50 million cars. And with 40% of plastics being single-use, around 7.5 million tonnes of emissions are then generated in waste incineration*
Plus, of course, there is the mounting pressure from consumers and brand owners to tackle the problems caused by plastic waste. As former senior Dow executive and CEO of Equate/MEGlobal, Ramesh Ramachandran warned last week:
“Public policy will likely force action, restricting the sale and export of virgin plastic. Basically don’t allow exports unless the pellets have a recycled content of at least 30%. Then by default you force recycling at the origin. Then things will change very quickly.”
The chart highlights the new business model that will be needed to move forward, based on a circular value chain.
The key difference is that competitive advantage will no longer be based on low-cost supply, with demand assumed to be a multiple of GDP growth. Instead the model will be demand-led and based on recycling/reuse:
- High collection rates, efficient sorting and an integrated supply chain involving ‘hub-and-spoke’ processing will be critical for success
- A laser-like focus on consumer needs will also be critical, in order to optimise supply/demand balances and price/quality metrics
Essentially the model will work on a distributed ‘hub-and-spoke’ basis, with efficient and effective collection key to success.
In Europe, the European Commission’s Holy Grail project will facilitate this, by bringing together the major brands to adopt digital watermarking. This will allow consumers (household and industrial) to easily identify individual plastics and allow accurate sorting at the collection point.
Initial processing will then take place on a local basis. Today’s Waste Centres will be converted to become Resource Centres, with mechanical and chemical recycling facilities. And in the short-term, the pyrolysis oil produced from chemical recycling will be sold as feedstock to existing crackers.
In the longer-term, however, producers will likely move away from today’s global supply chains to a distributed model. They are no longer fit for purpose – they are expensive, unreliable and very inflexible. The new carbon border taxes likely to be introduced by the EU and other regions will also make them uneconomic.
So in the future, the output will move to a local hub. Polymer production will take place on an integrated basis alongside polymer convertors. And they will create a circular business by using 3D printing and other modern technology to provide the products needed for sale into the local community.
The plastics industry now needs to move quickly. It has a golden opportunity to develop a new and likely highly profitable circular business model over the next 12-18 months. Pilot schemes need to be established this year in major cities, to understand the key issues ahead of moving to full implementation.
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