Key Takeaway: Europe’s drive to deal with plastic waste recycling may be a billion-dollar boon for an emerging chemical recycling technology that turns old plastic into high-grade material that can be used again in food packaging.
Where one person sees trash, Spanish entrepreneur and engineer Carlos Monreal envisions a potential market worth billions — giving a second life to waste plastic.
Monreal founded Plastic Energy, which uses a chemical process to turn waste plastic into new, reusable raw material. Unlike traditional methods of recycling, Plastic Energy takes bags, straws, and other objects that usually get incinerated or dumped, and turns them back into a raw material appropriate for making fuel or things like food-grade plastics.
Much of Europe’s plastic is mixed with other trash or otherwise contaminated and can’t be recycled with traditional methods. It can’t be used to wrap food or in other places where only new plastics can get the job done. Plastic Energy’s process is a form of pyrolysis where the plastic is heated in the absence of oxygen, which separates out naphtha and diesel.
The opportunities are vast for the company as Europe’s plastic problem grows and the European Union demands sustainable recycling.
“In Europe, we want to do it better than what we are doing already,” Monreal said.
Production of plastics is expected to double in the next two decades, and in Europe, plastic is seen as a resource much like paper, aluminum, and glass. Recycling is a crucial piece in the puzzle to get CO2 emissions under control, and the European Commission estimates that energy savings from recycling all global plastic waste would take 3.5 billion barrels of oil out the equation per year.
Barely a third of collected waste plastic is recycled in Europe — most is incinerated and the rest is dropped in dumps. Europe wants to spur demand for recycled plastics and its goals in its plastic strategy for 2025 mandate that, among other things, at least 10 million tons of recycled plastics are sold each year.
In 2016 it reached roughly four million tons. The European Commission admonished earlier this year that action was necessary “to bridge the gap” between supply and demand.
Half of that gap will be handled by mechanical recycling activities, Monreal thought, which leaves two million tons of plastic to be processed with other types of technologies like his. His plants in Sevilla and Almeria, Spain process up to 25,000 tons a year, meaning more than 100 plants would have to be built to meet demand, he said.
“Which is impossible,” Monreal told Karma.
London-based Plastic Energy has plans to construct many more plants, and hopes to process 200,000 tons of plastic by 2020. New plants take two years to build.
Other companies are looking to turn recycled plastic into raw material. U.K.-based Recycling Technologies, ReNewELP, Fuenix Ecogy Group, Ioniqa in the Netherlands and Norway’s Quantafuel are among those vying for a slice of a growing pie with similar approaches and technologies.
Closing the gap means all of these companies are looking to scale fast to meet growing demand for recycled plastic. Quantafuel recently clinched a $22 million investment from chemicals giant BASF; Fuenix signed a deal with Dow, to feed its production facilities in the Netherlands while ReNewELP and Recycling Technologies are commercialising. Ioniqa raised $13 million, backed by Coca Colaby and others, to get its first plant off the ground.
“Huge” Market Potential
Multinationals Unilever, Nestle, Mondelez, Coca Cola and others have all signed on to the European Commission’s voluntary Circular Plastics Alliance, agreeing to find ways to put more recycled plastics into packaging their snacks and household soaps.
These global companies are complying with the EU’s drive to treat plastic more like paper or aluminum and get them to take responsibility for the waste they generate. The lightweight material is also a visible polluter of oceans and waterways around the world so European consumers too, are demanding more plastic-free packaging alternatives.
“In Europe, we want to do it better than what we are doing already.”
If these multinationals combined diverted only 25% of their resources to using recycled plastics by 2025, the market potential would be “huge,” Monreal said. Treating plastic waste as a resource could unlock between $77 billion and $116 billion annually, which is lost to the economy after a short first-use cycle, the European Commission estimates in its plastic strategy report. Monreal has seen global estimates for a plastic waste recycling market reach as high as $220 billion.
“Extended producer responsibility” rules in Europe are pushing the industry ahead, said Anthony Schiavo, a senior analyst at Lux Research in Boston, and a material’s engineer who has been looking into the future of plastic.
Such rules “requires the producers of a certain type of good, be that a packaged good or a durable good like a shirt, to be responsible legally for what happens at the end of life,” he said.
Money and Waste Not the Problem
Monreal, via his investment vehicle Greenland Capital, has already sunk over $100 million into the venture since starting out five years ago.
Its plants are generating revenues, and it has 20 planned projects in the pipeline, he said, half of which are in Europe, the other half in Asia. It could break-even as early as next year if all goes to plan but will need fresh capital in about three years, he added.
Plastic Energy won’t have a problem finding waste for its operations as a pilot showed that it could easily pull together 14,000 tons of waste plastics in three months.
Having recovered the oil from the plastic waste, Plastic Energy’s feedstock is then handed over to partners, such as SABIC, the Saudi Arabian petrochemical company and world’s fifth-largest plastics producer, who then turns it back into consumer packaging.
It has also drawn up a feasibility study to collaborate with Petronas, Malaysia’s government-backed oil and gas giant Petronas. It agreed with Indonesia’s province of West Java to build five chemical recycling plants and partnered with the WWF to divert 100,000 tonnes of plastic waste per year away from the island nation’s landfills and oceans.
The plastics industry had combined sales of $398 billion (€360 billion) in the EU last year, according to Plastics Europe, a European association that represents plastics manufacturers. Packaging accounts for the majority of the EU’s demands but is also responsible for more than half of its waste. By 2030 the EU’s goal is to make all plastics packaging reusable or easily recycled.
Can Corporations Lead?
The European Commission is looking at ways to support the development of economic incentives to reward the most sustainable packaging design choices, which is driving corporations to adopt reused plastic in their packaging. Their requirements in turn drive SABIC’s reused plastics production volumes.
Signing up to the European Commission’s voluntary Circular Plastics Alliance is certainly good public relations for multinationals, but behavior changes are real, if limited. Unilever released a Magnum ice-cream container made from recycled plastics with ingredients similar to those Plastic Energy and SABIC will offer.
Nestle is switching to a plastic-free Smarties packaging and rolling out a host of alternative packaging over the next five years. Still, these steps are small, considering the real challenge lies elsewhere.
The growth in plastics is “not in Europe, not in the USA, but in developing markets because they want to live better,” Monreal said, speaking at an airport in Bali on his way to Malaysia. He travels many times each year to Southeast Asia where plastic pollution is more significant, collection methods are rudimentary and Plastic Energy projects more risky and challenging.