The world has a plastic pollution problem – What needs to change?
(Part Two of a Series on Petrochemicals and Plastics)
Plastic pollution is an international environmental crisis and has become a key issue for governments and citizens. Between 1950-2015, the global production of plastics skyrocketed – generating more than 6.3 billion metric tons of plastic waste. Only 9% of that plastic waste was recycled and less than 1% was recycled more than once. Of particular concern is the whopping 60% that has accumulated in landfills or in nature. The situation still looks grim today – recycling rates are abysmally low (no more than 9% in the U.S.) and annual plastic flows into the ocean are projected to nearly triple by 2040 under business-as-usual growth.
As concern about the world’s growing plastic footprint rises, Big Oil is intent on shifting to even greater production of plastics and other petrochemicals to make up for climate-related declines in hydrocarbon demand. The industry knows that new markets must be found to ensure that oil and gas exploration and development will continue. Given these dynamics, investors must scrutinize company actions and be alert to the large and growing landscape of risks presented by a “Hail Mary” bet on plastics. This is the subject of As You Sow’s recent report, “Plastics: The Last Straw for Big Oil?” and the focus of this blog series (check out the previous blog on plastic’s connection to climate).
No “Silver Bullet” Solutions
In its landmark Breaking the Plastic Wave report, the Pew Charitable Trusts and SYSTEMIQ provide a robust analysis of the world’s plastic waste management. The report addresses the sobering trajectory of growth in plastic production and the momentous actions needed to reduce the flow of mismanaged plastic waste. In short, current commitments to abate plastic pollution are dwarfed by the business-as-usual growth trajectory of global plastic production. The scope and scale of the global plastic problem means there are no “silver bullet” solutions, despite the plastic industry’s years-long effort to characterize plastic pollution as a recycling problem. Time has shown that the current mechanical recycling system is not only underfunded but fundamentally inadequate for the scope of the plastic problem.
As the world reacts to the scale of plastic pollution, industry has begun touting both “advanced recycling” (predominantly pyrolysis and gasification) and bio-based plastics. The jury is still out on advanced recycling, which holds the potential for “infinite recyclability” of low-quality plastics, but is plagued by high costs, significant chemical use, increased air and carbon pollution, and the potential for non-circular plastic-to-fuel pathways. It has faced widespread criticism from a variety of stakeholders, even pro-industry groups. In a similar vein, bioplastics can displace virgin plastic production, but may either be chemically identical to their virgin-based counterparts (in the case of bio-based plastics) or face a lack of appropriate composting infrastructure (in the case of compostable plastics like polylactic acid (PLA)). While both technology areas will undoubtedly play a role in the transition to a circular plastic economy, investors should approach commitments to these technologies with scrutiny for these issues and use a wider lens that asks whether company actions are at the scope and scale needed to be impactful. For example, there are few, if any, advanced recycling projects currently at scale and it takes 17 years on average for such projects to reach growth scale.
A critical question then becomes: If there are no “silver bullets,” what actions should be prioritized?
“Turning Off the Tap” of Problematic Plastics
One of the most significant and obvious findings of Breaking the Plastic Wave is that reducing plastic production on an absolute level is the most effective solution from an environmental, economic, and social perspective. It suggests that: “Brand owners, fast-moving consumer goods companies and retailers should lead the transition by committing to reduce at least one-third of plastic demand through elimination, reuse, and new [product] delivery models…” (emphasis added)
The main targets of absolute reduction are single-use packaging plastics and consumer products, which are highly problematic (difficult to recycle and make up the majority of mismanaged plastics) and account for about a third of all plastics produced (the largest segment).
To address the growing problem, and reduce risk for companies, this year As You Sow filed resolutions with ten major consumer goods companies asking them to report on how they can prioritize reductions in the amount of plastic used for packaging, reaching agreement with five companies on cuts to plastic use.
Upstream petrochemical companies that are expanding production capacity for single-use plastics must be engaged as well. This is the subject of the Minderoo Foundation’s recent report, The Plastic Waste Makers Index, which found that single-use plastic production capacity could grow by 30% in the next five years. The report identifies for the first time which petrochemical companies are responsible for the production of single use plastics, much of which ends up in the ocean. In the face of rampant plastic pollution and mounting pressure to address it, major producers of single use plastic resins and feedstocks can reduce growing risk by taking greater responsibility for the plastic products they create and the end-of-life mismanagement of them that so often occurs. Such actions include disclosing to investors their exposure to single use plastics, committing to significant actions that mitigate mismanagement of such plastics, and developing aggressive, near-term goals for shedding reliance on fossil fuel-based virgin feedstocks and shifting to recycled polymers.
Breaking the Plastic Wave also identifies dramatically improved recycling as an essential action and calls for the development of up to 13 million tons of plastic-to-plastic conversion per year. Companies like Dow and Exxon, which were identified as the top two global producers of single-use plastic waste in 2019, currently have plans to expand production capacity of single-use plastics. Investors should ask if such companies have considered a single-use plastic ban scenario or other scenarios where plastic demand falls short of expectations and whether this could lead to stranded asset risk, similar to that seen in the oil and gas industry as an effect of the clean energy transition.
In light of the findings presented in Breaking the Plastic Wave, including the significant global efforts to dramatically reduce plastic use, these companies should consider revisiting plans to increase production capacity and focus on ways to effectively address the plastic pollution problem. Actions could include, for instance, safely and cost-effectively shifting business models to those where the vast majority of plastics are produced from recycled polymers without creating significant new pollution streams. Whatever the mix of solutions, productively addressing plastic pollution must be a top priority for plastics-focused petrochemical companies and their investors.