The focus of our ESG and Climate report tomorrow will be on recycling and the challenges associated with each proposed solution. The piece that most chemical recycling projects, like the one highlighted below, fail to mention is that the heat required for pyrolysis is significant, and the carbon footprint is very high unless you can heat through renewable power or you can capture the carbon associated with the heat. Given the location of the facility shown below, it could have access to offshore wind-based power and/or could tie into one of the offshore CCS projects that have been proposed. Both pyrolysis and gasification processes have very high emissions.
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.
The exhibit below will come to many as a surprise, and it underlines one of the most significant challenges facing the recycling world. It is the food packagers who want the recycled content, but most food-grade polymer is not easily recycled (mechanically) once it has been in contact with food. Shrink-wrap for example is hard to collect and even harder to clean to a standard that is deemed safe and then hard to regrind because it is thin-film. This is where the polymer industry can really push the benefits of “advanced” chemical recycling as the process can take a mixed and not thoroughly cleaned stream of waste polymers with the recycling process itself (pyrolysis) destroying the contaminants and for the output that gets redirected back to ethylene units an additional shot at 1600-1700 Fahrenheit should remove any fears of contamination. You will not get the pound for pound recycle, but 35% is much better than the numbers suggested in the chart. Plus, in the process, you can destroy and reuse a great deal of plastic waste. See our ACC initiative write-up in yesterday’s ESG and Climate report.
The clear advantage of chemical recycling – as seen in the linked Agilyx headline – is that there are no issues with product cleanliness, etc., to get the material back into the cycle. As the polymers are essentially destroyed in the pyrolysis process and then reused as a feedstock in the traditional polymer production process, the rigors of sorting and cleaning for a mechanical recycling alternative are not needed. From a food contact perspective, chemical recycling is the easiest way to close the loop. What we are seeing in the headlines, however, is still “proof of concept” stuff and there remain plenty of challenges with logistics and/or proof of custody with the feedstocks that are flowing back to the ethylene unit, as well as how much recycling credit is appropriate, given that roughly half of the recycled feedstock does not end up as a polymer.
The Dow, LyondellBasell, Nova, Closed Loop Partners announcement yesterday is worth some thoughts. Closed Loop Partners is a PE company focused on funding recycling opportunities, but by its nature, it is relatively risk-averse as it has return goals to meet for its investors – to date its investments have been low-hanging fruit and niche in nature, but steps in the right direction nonetheless. The investment from the majors perhaps gives Closed Loop some wiggle room to look at projects that are less of a sure thing and maybe require a leap of faith on untested technologies or at least technologies untested at scale – primarily in sorting and identifying polymers and cleaning. We would still expect each project to be small, simply because access to the clean and easily sorted polyethylene and polypropylene in the US is limited by very poor standards of recycling and the vast proportion of unrecyclable polymer that ends up in a waste stream. If the group can find locations with significant supply, it might be wise to build pyrolysis at the same site to deal with everything that cannot be recycled. Our hope for this investment is that it is not simply an ESG PR opportunity for the polymer producers and that it does the following:
Recycling is a fixed cost business – it does not vary with the price of oil or the price of natural gas – and the more willing potential customers are to pay on a fixed cost basis, to cover the collection, separation, cleaning, and re-pelletizing costs, the more recycled material will make it back into the cycle and not into landfill or pyrolysis. The pyrolysis technologies being discussed by the major polymer producers are a solution to the plastic WASTE problem, and they allow for a degree of recycling potentially, but they will never be able to bid waste polymer away from a mechanical recycling alternative if the buyer is willing to cover the costs. We have written extensively on these topics in our ESG and Climate reports and we would point readers back to Unwanted: Chemical Recycling – Necessary Now, Less So Later and the second section of True Blue: Not Green but Likely Good Enough.