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WHEN POLICY MEETS ACTION: SEISMIC CHANGES IN THE PLASTIC RECYCLING MARKET


Michael Rae is a climate solutions fund manager at M&G Investments.


With many companies trailing their targets for reducing new plastic use and increasing the recycled contents of packaging, governments are implementing more ambitious targets for the use of recycled plastic content as the plastic pack- aging market continues to grow. Pyrolysis, a form of chemical recycling, could offer an innovative solution for dealing with hard-to-process mixed plastic waste.


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 transi- tion to a circular economy among busi- nesses and policymakers – covered pro- gress 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 con- sumer 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 using an average of 11% in their plastic packag- ing, they must roughly double their rate of progress, on average, to meet their mid-decade commitments, which range from 25% to 50%.


The wider statistics which illustrate our growing dependence on plastics are eye-


34 | portfolio institutional | July-August 2023 | Issue 125


Recycled plastic – current use and targets


35% 30% 25% 20% 15% 10% 5% 0%


Changes in virgin plastic packaging production 2021 2025 target


Average current recycled content used in plastic packaging


3% 2% 1% 0% -1% -2% -3% -4% -5% -6%


2019


2020


2021


Annual decline needed to meet 2025 target


Annual change in virgin plastic packaging production. Source: Global Commitment Report, Ellen MacArthur Foundation 2022.


popping. Around 40% of the plastic the world has ever synthesised has been made in the past decade. Nearly half of this plas- tic 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 poorly managed plastic waste, the problem is set to get worse. Even if growth in global plas- tic consumption slows to half its trend rate, the total market size is still estimated by the International Organisation for Standardisation (ISO) to increase by more than 2.5 times 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 con- tent in all plastic, and a recycling capture rate of 50% of all plastic waste by 2025. This is more than just vague target-set- ting. A levy of €800 (£688) per tonne


has been applied to all non-recycled plastic packaging waste since January 2021, although it is up to member coun- tries to decide how to implement it. The choice is whether it lands on petrochem- ical companies, packaging compound- ers, FMCG companies or directly on the consumer.


Elsewhere, the US is targeting 30% recy- cled 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 during the coming decade. Today’s plas- tics value chain is built around multi-bil- lion 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


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