In Brief: Plastic Materials, Waste & Circularity
Kilara Capital
Investment managers, dedicated to providing sustainable investment opportunities for a low carbon future.
Our reliance on plastic for everything from medical supplies to food packaging, toys and technology is pushing our planet to breaking point.
While we need to rethink material use across the spectrum, a task high on the global agenda is to reduce the production, use and waste of petrochemical-based plastic and increase our use of more environmentally-friendly products.
This presents impact investors and organisations like Kilara with a variety of investment prospects. However, understanding the scope of the plastic problem, and the limitations of current and new technologies in the space, is key to identifying the most profitable opportunities with the widest impact.
The challenge: reducing traditional plastic use and waste, and improving circularity
More than 99% of plastics are manufactured from non-renewable petrochemicals - primarily petroleum and natural gas and are energy- and emissions-intensive in production, manufacture and disposal. For example, cracking virgin materials into polymers releases significant emissions, and the plastification of polymers requires 2-6 KwH/kg of electric power for thermal energy, depending on the type of polymer produced. None of the commonly used plastics are biodegradable, meaning that they accumulate, rather than decompose, in landfills or the natural environment. The only way to permanently eliminate plastic waste is by destructive thermal treatment, such as combustion or pyrolysis - which again require huge amounts of energy and emissions.
Recycling then comes to mind - and it has come a long way. But unfortunately, according to Statista, only 11% of plastics were recycled in Australia in 2019. This is due to a number of factors, primarily that 1) not all plastics are recyclable, 2) not every municipality has the resources or facilities to recycle plastic, 3) consumers either put non-recyclable plastics into recycling bins, causing contamination, or fail to use recycling bins either at home, at work, or at designated retail sites.
We need to develop new, low-cost and readily available technologies that improve the circularity of current plastic products in addition to creating new types of non-traditional plastic products that require fewer materials for production and disposal, are environmentally friendly, and release fewer emissions throughout their lifecycle.
Furthermore, we need alternatives that are as durable, safe, practical, light-weight and low-cost as current petrochemical-based versions.
Undoubtedly this is a tough challenge, but without taking urgent action, we face dire consequences.
Why reducing our reliance on plastic matters
Ecological congestion and damage
Once manufactured, most plastic is rapidly discarded - this is because the overwhelming majority of plastic is used in plastic packaging which becomes waste within the first year. Plastic makes up 12% of total waste (242 million tonnes in 2016), while a staggering 32% of plastic packaging escapes collection systems, clogging waterways and degrading the soil. The rest ends up in a landfill. Worse still, the volume of plastic waste is projected to triple by 2040 if no action is taken to reduce it.
This has contributed to a global waste crisis in which the productivity and safety of vital natural systems such as the ocean and our agricultural land are being reduced and urban infrastructure is being damaged. Microplastics and chemicals leached by plastics in our ecosystems are taken up by animals and plants, affecting their health, and ours if we consume them.
Greenhouse gas emissions
Waste of any type contributes to GHG emissions in several ways. The energy in embodied material that is discarded is largely lost to the economy, while more energy is lost on end-of-life processes: sorting, reducing, destroying, storing etc. In addition to emissions created in producing these materials, it is estimated that 1.6 billion tonnes CO2-e GHG emissions were generated from solid waste treatment and disposal in 2016 (5% of the global total), largely from open dumps and landfills without gas collection systems. Solid waste–related emissions are anticipated to increase to 2.38 billion tonnes of CO2 equivalent per year by 2050 if no improvements are made in the sector.
Across their lifecycle, plastics alone account for 3.8% of global greenhouse gas emissions, which is almost twice the emissions of the aviation sector. Life-cycle GHG emissions of conventional plastics in 2015 were 1.7 Gt of CO2-equivalent (CO2e). Broken down across three life-cycle stages, this equates to: resin-production (61%), conversion into products (30%), and end-of-life (EoL) the treatment and disposal processes (9%).?
The worst culprit: plastic packaging
The overwhelming majority of plastic is used in single-use plastic packaging. Plastic packaging is globally problematic on several levels and has become the focus of significant regulatory turmoil in many countries as well as cross-value-chain collaboration.
Plastic packaging is both a significant use of resources—food packaging accounted for 5.4% of all annual food-related emissions in 2014, for instance —and a disproportionate source of land and water pollution that is rapidly swamping the developing world. It also causes significant economic losses throughout its lifecycle. The Ellen Macarthur foundation summarised the situation thus in their seminal 2016 report Rethinking the Future of Plastics:
“After a short first-use cycle, 95% of plastic packaging material value, or $80–120 billion annually, is lost to the economy. A staggering 32% of plastic packaging escapes collection systems, generating significant economic costs by reducing the productivity of vital natural systems such as the ocean and clogging urban infrastructure. The cost of such after-use externalities for plastic packaging, plus the cost associated with greenhouse gas emissions from its production, is conservatively estimated at $40 billion annually – exceeding the plastic packaging industry’s profit pool.”
System-wide, multistakeholder collaboration on plastic packaging reduction, replacement and circularity
It has been broadly agreed internationally that we cannot recycle our way out of the plastic crisis. Rather, we must redesign the entire plastics system in a way that promotes growth while facilitating the creation of solutions at speed and scale.
In October 2018, the New Plastics Economy Global Commitment united more than 500 organisations behind this vision and an ambitious set of targets to address plastic waste and pollution at its source, by 2025. Signatories include companies representing 20% of all plastic packaging produced globally, as well as governments, NGOs, universities, industry associations, investors, and other organisations have committed to three actions:
As of 2020, significant advances have been made in the incorporation of recycled content in plastic packaging, and the phase-out of the most commonly identified problematic categories of plastic packaging, such as PS, PVC, undetectable carbon black, single-use plastic bags, and straws in many countries.
However, there has been limited progress on increasing the recyclability of plastic packaging and on reducing the need for single-use packaging altogether: progress on shifting towards reusable packaging is limited, and elimination efforts remain focused on a relatively small set of materials and formats.
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Progress is being hindered by:
The ideal path to a lower-plastic future
The PEW Charitable Trusts and SYSTEMIQ funded a research study in 2020, which reports that plastic waste is entering the ocean at a current rate of about 11 million metric tons a year, which will triple by 2040 without action. Tackling the 5 million metric tons per year of plastic leakage that is not covered by existing industry and government reduction commitments demands significant innovation across the entire value chain. The report maps the five major components of the global plastic system: (1) production and consumption; (2) collection and sorting; (3) recycling; (4) disposal; and (5) mismanaged waste to the following interventions and targets:
While having a clear plan and targets for plastic reduction and waste management is helpful, making these a reality requires a unified global effort which is being hindered by budgetary, behavioural, physical and technological limitations.
Where the investment opportunities lie
Design-level opportunities
Upstream solutions at the design level include rethinking the packaging, product and/or system to eliminate, reuse or recirculate materials. Elimination can be direct or indirect (e.g. edible substitute); reuse can be achieved through refilling or returning from home or on the go, as well as B2B packaging and reuse models; and materials can be circulated through a technical process of recycling or through a biological process of composting (and for some materials, anaerobic digestion).
To ensure any of these design-level opportunities make a significant difference to waste and emissions, renewable materials and renewable energy must be used throughout the product lifecycle (extraction, production, distribution, disposal). Furthermore, cost efficiencies have to be taken into consideration: if a solution is too expensive for either the producer or the end customer, it is unlikely to be adopted at a wide enough scale to have any impact.
Material opportunities
There are a number of candidate solutions to replace current single-use plastics, the diversity of which is a source of confusion and uncertainty to consumers and municipal waste handlers. In addition to furthering the technologies below, innovation is needed in terms of education and waste management processes.
Oxo-degradable plastics have chemical additives that cause the plastic to break down and disintegrate into smaller pieces of plastic over time when exposed to sunlight and heat. While this reduces the visual impact of plastic waste, it neither addresses the emissions nor the impact of the waste on waterways, oceans and soil. This is both a problem and a potential opportunity for technology that neutralises or uses disintegrated plastic waste.
Bio-based plastics made from biodegradable sources such as wood, corn starch, and sugar cane are a growth industry. The materials themselves are carbon neutral, although renewable power is essential to eliminate the climate impact of energy costs during production, transport and waste processing.
It’s important to note that although made from plants, not all bio-based plastics are biodegradable. For those that are compostable, the process is most effective at warm temperatures and high oxygen rates - more than what the average consumer can offer at home. When compostable packaging breaks down in a landfill with low to no oxygen, it produces methane just like other food waste.
That said, bio-based plastics have the potential to significantly decrease emissions overall. A comparative analysis of ten conventional and five bio-based plastics and their life-cycle GHG emissions under various mitigation strategies show that estimated that a complete replacement of fossil fuel-based plastics with bio-based plastics would reduce global life-cycle GHG emissions of plastics to 5.6 GtCO2e by 2050 under the current energy mix and the projected EoL mix, which is 1.0 GtCO2e (or 15%) less than the baseline. [iv]
Reuse opportunities
Another solution is to increase the reuse of plastics that have been recycled. Industry research from the North American Association of Plastic Recyclers (APR), suggests that compared to virgin pellets (including feedstock energy), using recycled plastic reduced total energy consumption by 79% for PET, by 88% for HDPE and by 8% for PP. Using recycled plastics also limited emissions by 67% for PET, by 71% for HDPE and by 71% for PP[v].
How Kilara is accelerating the transition to a low-plastic future
Through the Kilara Growth Fund, we partner with scalable small to medium businesses, with proven track records in the energy transformation, circular economy, future food and environmental markets to deliver sustainable returns to our partners and investors and impact at scale for our planet. This includes working with organisations like Grounded, an innovator in packaging materials who helps businesses replace plastic with more sustainable options. If you’re interested in joining us as an investor, or as an investee company in the plastic alternatives, recycling or reuse space, get in touch.
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Representative Director at Taewon Corporation Co.,Ltd
2 年Very useful