In addition, end users likely will shift their focus more broadly to carbon emissions targets rather than putting plastic usage under the microscope, the report stated. RaboResearch is part of Rabobank, a financial services company based in the Netherlands.
“Many companies are recalibrating their commitments, now focusing on carbon emissions reduction or extending packaging goals by about five years in most cases,” the authors wrote. “Progress has been made, but the value, scale, purity and consistency of PCR resins have not yet reached the levels needed for higher adoption rates.”
European Union regulation has pushed recycled content demand in the region, but U.S. regulation is almost entirely in the form of state initiatives and voluntary company pledges, the report noted.
“The challenge in the broader space of sustainability, conversations often shift to the competing ideas of ‘good,'” Jim Owen, senior packaging and logistics analyst based in the U.S., told Plastics Recycling Update. Owen co-wrote the report with RaboResearch analyst Regina Mestre, who is based in Europe.
“That space is one you can go in circles for hours or weeks on end, the competition of good versus good, and you’ll see more people shifting to carbon emissions goals, because they have to, and the foggy greenwashing stories are difficult to quantify,” he said. “Carbon emissions are difficult to calculate, but there are ways to do it, where your sustainability story on using some new material may not equate to your carbon footprint being reduced, or it may depend on locality. It’s really difficult to make blanket statements and have it be true across the board.”
This position echoes recent comments made by the CEO of U.S.-based Dow, a global powerhouse in PE production.
“I feel that over time, you’re going to see more focus on low-carbon fossil approaches, like we’re doing with Alberta,” said Jim Fitterling, Dow CEO, during a January investor call. Dow’s Path2Zero project in the Canadian province will include the world’s first net-zero emissions ethane cracker to produce ethylene feedstock for its integrated PE production at the site.
The project will decarbonize about 20% of Dow’s global feedstock ethylene capacity while growing PE supply by about 15%. Global oversupply of virgin PE already has pushed down pricing and encouraged end users who are not bound by PCR mandates to choose the most cost-effective material – and contributed to lower demand and pricing for recycled HDPE in particular.
Nevertheless, the packaging targets global brand owners set years ago for 2025 and 2030 are arriving quickly, without the infrastructure to support them.
In Europe, the recently passed Packaging and Packaging Waste Regulation‘s “ambitious targets necessitate equally ambitious investments in collection and recycling infrastructure,” according to Rabobank’s report. To meet the 2030 goals, Europe must triple its recycled plastic production from 2021 levels – PP and PE will require a nearly fivefold increase and RPET volumes will need to double, the report said.
Meanwhile, in the U.S. the fragmented and rapidly evolving nature of extended producer responsibility policies has further complicated a sluggish recycling ecosystem.
“Things are still being determined for EPR laws,” Owen said. “If you’re producing across all 50 states, you need to understand all the fees faced across the U.S. versus the cost of recycled material.”
But these challenges can also provide cover for brand owners, he said.
“If you’re trying to source the PCR and you can’t, you have an excuse for a period of time: The quality is a concern, concern about contamination and the cost. If you want food-grade material, it’s certainly going to come at a premium to virgin,” Owen said.
Brand owners must balance profit margins and market share with assuming responsibility for the effects of packaging, Owen said. In the past 18 months or more, virgin PET resin, for example, has been so competitively priced that RPET has struggled to maintain market share, much less increase it, in the absence of widespread mandates.
“In this world of high inflation, adding PCR is a big challenge,” Owen said.
And brand owners may be tempted to pick their poison, so to speak, when it comes to striking that balance.
“Will it be death by a thousand cuts, or would it be worth it to pay the money to a state and just keep chugging along because the cost of including PCR is more expensive than the state penalties?” he noted. “There’s a reasonable way to approach it at a smaller threshold and not break the bank, and still be moving toward their goals of PCR inclusion.”
Even so, Owen acknowledged that brand owners have multiple headwinds, including consumers demanding change and the threat of voting with their money.
“Consumers are a real challenge. They think there are easy solutions, and some of them don’t make sense,” he said. “But it’s this very nebulous sentiment of ‘be better’ when we don’t really know what better is. We don’t have a plastics problem, but we have a recycling problem. We continue to make things cheap and disposable, and now we need to find a way to address them.”
He added that recycling is “a hard story to sell: ‘I know we’re terrible at this and fixing it is going to cost you more money, and may be thrown away in the end anyway.'”
In addition, the definition of sustainability is different from person to person and company to company, he said.
“Someone’s sustainability story is ocean plastic, and another is bioplastics, another uses glass. You could refute each one a thousand different ways, because there’s not just one version of the truth,” he said.
U.S. companies invest in Europe
Along with company and consumer buy-in, legislation plays a crucial role in shaping the future of packaging, Owen and Mestre wrote in the report.
In Europe, “the PPWR mandates improve collection and sorting systems and prioritize recyclate access for applications that achieve greater circularity, such as closed-loop bottle systems,” they said.
Indeed, Eastman and Dow have both prioritized investing in the EU as a result of governmental support. However, in its Q2 2024 earnings call, Eastman called into doubt the future of its France PET chemical recycling plant due to lack of recent financial incentives.
“The French project, as we said before in the first quarter call, is moving along a bit slower than we originally expected,” said CEO Mark Costa. “We do have incentives in Europe, too, but not quite at the same size as the IRA (Inflation Reduction Act). So it’s really about those customer contract discussions.”
Eastman’s second U.S. chemical recycling plant in Longview, Texas, leapfrogged ahead of its French project, after the company was awarded up to $375 million in federal incentives. Eastman also received state and local tax incentives for the project of approximately $70 million.
Dow’s Fitterling also credited EU policies for investment, such as a partnership with Mura Technology that includes a new chemical recycling plant in Teesside, U.K.
“We started there (in Europe) because the enhanced producer responsibility schemes are there. Some of the mandates are there, and the demand from the downstream is very strong,” Fitterling said in the January investor call.
Owen added that company buy-in depends heavily on legislation and tax incentives on where you see it go. “If suddenly they have something planned and then the state comes out against it, that’s never going to go,” he said.
This story has been updated to correct a typo in Jim Owen’s name.
