Why we need legal recognition of Mass Balance Accounting for plastics circular economy

Achieving a circular economy is a critical element of the European Green Deal and its net zero climate and circular ambitions. The Single Use Plastics Directive sets a 30% mandatory recycled content requirement for all plastic bottles by 2030 and it has become the flagship policy for circularity in other applications in Europe. Its implementation will mark a precedent for all policies to come.

Mandatory recycled content for plastics products, as proposed by the European Commission, will create a clear demand signal to incentivize industry’s ongoing transition to replace fossil-based raw materials with alternative feedstocks, like those coming from waste. This helps us stopping plastics from being incinerated or landfilled and ensure that we keep them as valuable resources in use for as long as possible. To reach these ambitious targets, the legal recognition of chemical recycling and mass balance accounting, as complementing technologies to mechanical recycling, is an opportunity not to be missed - nothing less than the success of the circular European economy is at stake.

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Dow supports this wholeheartedly and unambiguously. We are working towards our own net zero roadmap by 2050 and we are investing to scale up new technologies, both mechanical and chemical, to process recycled raw materials and produce circular products from waste to meet rising market demand.

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The more we recycle, the less fossil raw materials we use

It is a fact that we will need both mechanical and chemical recycling in the pursuit of a circular economy. While mechanical recycling processes consume less energy, they cannot serve all plastics markets: highly regulated products, such as food packaging, hygiene products and vehicles parts, cannot currently contain mechanically recycled plastics due to performance and safety requirements. The only way to reach recycling and recycled content targets for those sectors at scale will be using chemical recycling, which transforms plastics waste back into the initial raw material (pyrolysis oil or gas). That way we can replace fossil-based plastics with recycled ones that have the same performance and safety characteristics as virgin plastics, enabling the use of recycled plastics in all markets and applications.

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Mass balance needs legal recognition

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Mass balance accounting is a methodology that looks at all inputs and outputs of a particular process. This chain of custody model is used today, for instance, in the energy sector to calculate renewable origins, where this approach was introduced to allow the phase-in of renewables while using existing infrastructure. The inputs and outputs and associated information are monitored as they move through each step in the supply chain. This model can be applied to the circularity of plastics. It is crucial to ensure the credibility and transparency of associated sustainability claims about recycled content at product level to drive consumers' decisions in a credible manner, prevent greenwashing and to allow scale-up of circular solutions.

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Dow is calling for the legal recognition of the fuel exempt allocation method with harmonized mass balance accounting rules which is auditable by an independent certifier to ensure transparency and credibility. Fuel-use exempt means all material outputs except fuels can be counted as recycled content.

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This model will support the EU's environmental objectives:

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1.????It incentivises the chemical and plastic industry to replace fossil virgin feedstocks with waste feedstocks, which is key to meet the 2050 net-zero and circularity goals.

2.????It empowers the transition to a circular economy at scale while keeping products affordable to consumers since it considers as recycled content all the outputs of the recycling process except those that go into fuels.

3.????It enables recycled content targets in all final products where existing recycling technologies cannot – this is needed to address raising demand of recycled plastics and in line with the objectives of the EU's policies on sustainable products, like packaging, construction, automotive and other sectors.

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Scaling up the production of recycled plastics comes with costs. Simply put, the less input we can count as recycled content, the more expensive our circular products get, ultimately impacting prices of consumer products. That, in turn, will slow down consumer demand for recycled products, when we need to increase it instead. It is therefore critical that mass balance methodology doesn’t artificially narrow volumes and recycling rates making the scale up of plastics circularity economically unfeasible. Only the fuel-use exempt allocation model has the potential to support a steady increase in the production of recycled material at the volumes that are needed to meet the supply that will come with the public commitments from the numerous consumer goods companies and automotive manufacturers.

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Consumers across Europe are calling for meaningful recycled content in the products they buy, the fuel-exempt allocation method can deliver this. Other methodologies, such as “proportional allocation” or “rolling averages”, would only enable very little recycled content in the final product at very high costs. This is not enough to meet the ambitious goals of both the EU and the different brands’ which go beyond 30% and therefore, will not encourage sufficient demand in the market, slowing down the transformation to an affordable Circular Economy.

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Recognition of the credit-based fuel-use exempt allocation method with third party verification as a viable means of accounting for recycled content will allow the industry to drastically scale up the circular solutions we need to meet our net-zero 2050 target.

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It's decision time!

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EU Member State governments have the opportunity until Monday 17th 2023 to support an affordable scale-up of circular business models. There is no alternative to chemical recycling in specific plastic products, where existing recycling technologies reach their limits. A mass balance accounting system will enable this scale-up.

?The industry welcomed the clear direction set by the European Green Deal. I am proud of the role Dow is playing in supporting innovation in the sector. Our Transform the Waste goal aims to supply 3 million metric tonnes globally of circular and renewable offerings from plastic wastes, bio-wastes and others by 2030. Now we need policies that support the business case for circularity in Europe, so that the continent is able to leverage the Circular Economy to reinforce its resilience and strategic autonomy. The time is now!