The linked Covestro headline from today's ESG & Climate report is a reminder that the chemicals and polymer makers are dealing with more than just recycling and product lifecycle management. Customers are equally focused on the carbon footprint of the products they buy and the green hydrogen move by Covestro (assuming that affordable green hydrogen is possible) would replace hydrogen made from fossil fuels and replace other fuels for heat in some cases. Germany has some considerable issues with decarbonizing, as the blue hydrogen route will be challenging in a country that will likely not allow onshore CCS. Covestro and others may have little choice but to buy green hydrogen and/or green power, even if supplies come up short of plan and costs are higher as a result. This is a good illustration of why we believe that the right policies in the US could drive some additional competitive edge while meeting climate objectives. Cheap hydrocarbons coupled with cheap CCS may only be matched in some parts of the Middle East.
We have spent a lot of time over the last few weeks talking about polymer recycling and renewables and the chart below is another look at where plastic waste is coming from. Packaging is the big piece and it is also the area where customers, i.e. the packagers, are looking for the largest increase in the use of recycled materials quickly. As we noted in our ESG and Climate piece this week, increasing volumes of this packaging waste is moving into different use applications, such as building products and durables, and even more could potentially flow into chemical recycling – note that there are 7 headlines on chemical/advanced recycling in today's daily report. The packagers have little chance of meeting their near-term recycling content goals in our opinion, but they have zero chance if they do not accept chemical recycling as part of the mix. It will be important to accurately audit the chain of custody of chemical recycling to avoid double counting. The separate challenge with chemical recycling is the now increased focus on carbon footprints, as the pyrolysis process is energy-intensive, whether direct heat from burning fossil fuel or electric power-based heat.
It is interesting to watch the pivot between recycled versus virgin polymer to the carbon footprint of the various options as outlined in the chart below. We are assuming that the numbers in the chart are averages as there is a sizeable range for everything. As we note in today's daily report, ethylene feedstock will impact the carbon footprint of ethylene and consequently, the footprint of polyethylene – HDPE made from ethane based ethylene in the US where the ethylene producer is recycling hydrogen back into the furnaces, will have a much lower carbon footprint than HDPE made from naphtha based ethylene in Europe, for example. On the recycling side, there will also be a range based on transportation costs for collection and sorting and then distribution to a customer.
We highlight more from the IEA on the importance of EVs versus other vehicles to bring down “well to wheel” carbon footprints and the second (not unexpected) “kick in the pants” chart that shows the World woefully short in terms of its projected EV adoption rate. There are – probably expensive – hurdles to reaching the IEA net-zero goals with respect to EVs. The first is going to be the need to pay or tax consumers enough for them to give up a perfectly good ICE vehicle long before the end of its natural life.