Carbon emissions and the toll of plastics recycling

How a new wave of emissions standards aligns with sustainability goals

Matt Slutzker, Yuliya Nam-Wright, Andrew Brown, January 2023

Trusted Intelligence woodmac.com

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Businesses in plastics industry are facing a dual challenge of

decarbonising and reducing plastic waste…
…while navigating through evolving regulatory requirements that address these challenges.

 The pressure for mandatory emissions disclosure continues to grow as the world strives for net zero and
scrutiny builds over true carbon costs.
 Responding to public and consumer pressure, brand owners are targeting emissions reductions, pushing
the pressure further up the value chain.
 Recycling has been at the forefront of the industry sustainability agenda for several years now. It is one of
the primary economically viable options to decarbonise available in the short term.
 However, supply growth will be constrained in the next few years, and increasingly, imports will be
considered in order to meet policy mandates and brand commitments.
 There are important questions the industry must answer when considering the intercontinental flow of
recycled materials, including:
» How do ocean shipping emissions impact the green credentials of rPET1 for brands and carbon-reduction targets?
» Are there advantages to moving bales vs flake, and how does this compare to virgin equivalent?
» What’s the impact of CBAM2 – the European Union’s framework for accounting for imported carbon emissions – on
recycled material trade flows and market dynamics?
1 – Recycled polyester terephthalate 2
2– Carbon Border Adjustment Mechanism
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Companies in the plastics value chain are targeting emissions reductions

responding to public and consumer pressure

Brands are looking for reductions for the entire While near term targets are set on Scope 1 & 2,
product and are pushing pressure up the chain chemical producers are starting to measure Scope 3

Major FMCG brand carbon reduction commitments Major chemical producers carbon reduction commitments

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 Insight: Carbon Emissions & the Toll of Plastics Recycling
Pressure for mandatory emissions disclosure will grow as the world
strives for net zero and scrutiny builds over true carbon costs
New revisions proposed mean that the Scope 3 disclosure may become mandatory as soon as
2023 or 2024 in Europe and the US and there is a drive for implementation of global standards.
Global initiative
• International Sustainability Standards Board (ISSB) published proposal that requires disclosure of Scope 1,2,and 3 emissions regardless of materiality with the
ambition to implement in 2023.
North America
• Status: EPA requires reporting of major point sources’ emissions.
• Proposed legislation SEC’s climate-related rule (May 2022). If
adopted, may come into effect in 2024 tax year.
• Scope: is more narrow – registered companies will be required to
report audited Scope 1 and 2 emissions, and Scope 3 if they are
material or if the filer has a target.
Source: Wood Mackenzie Chemicals
woodmac.com
Europe
• Status: Mandatory scope 1 and 2 reporting under Emissions Trading
System.
• Expected to come into effect in 2023: CSRD (Corporate
Sustainability Reporting Directive, rev. 2022).
• Scope: Includes climate (scopes 1 and 2 and, where relevant, scope
3 Green House Gases) disclosure requirement, but also concerns
the circular economy and wider environmental impacts.
• Applicable for all large EU companies.
• Disclosure is also required of non-EU companies if they generate
over EUR150 million in annual turnover in the EU or have a branch
or subsidiary with annual turnover over EUR40 million.
• Carbon Border Adjustment Mechanism, recently adopted as part
of carbon regulation package, is intended to reduce ‘carbon leakage’
and shadow ETS.
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Recycling is one of the few economically viable and impactful

decarbonisation levers available immediately…
…capable of delivering material reduction of the lifecycle emissions.
Plastics pathways to net zero (identified by Energy Transitions Commissions sectoral analysis, 2018)
Est. abatement cost Max. CO2
per tonne of CO2 reduction potential TECHNOLOGY AVAILABILITY
DEMAND

Banning of key single use items

-USD50/t -56%
mechanical of lifecycle
USD60/t emissions
chemical
Mechanical and chemical recycling
ENERGY

-15–20% Energy efficiency improvements in monomer production

of production
emissions
Naphtha catalytic cracking
PRODUCTION

-100% Biomass/waste for heat generation

USD80–300/t -90%
depending on route Carbon capture
-100%
of production
emissions Furnace electrification

-50% Switch from coal to gas

FEEDSTOCK

-50% Use of recycled plastics

-100%
USD160– of end-of-life
emissions
Use of bio or synthetic feedstock
1000/t
biobased feedstock

2020 2030 2040 2050

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Source: Energy Transitions Commission, IEA, Wood Mackenzie Chemicals
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Supported by strong policy mandates, recycling has been at the forefront

of the plastics industry sustainability agenda
However, uneven legislative timelines in Europe and the US mean that imports will be needed
in the near term for bale and flake material.
Current legislative efforts
 EU Packaging Levy to come into effect in 2023 with €800/t of
US policy overview non-recycled plastic waste for member states. European policy overview
 EU outlined 30% recycled content for drinks bottles by 2030.
 UK instituted a £200/t tax for material with less than 30%
recycled content in 2022.
 Mismatch of country-level policies involving taxation, Deposit
Return Schemes (DRS), content, collection, consumer habits
within EU.
 National US “bottle bill” efforts have (to date) yet to gain
traction past individual sate commitments.
 Of the 10 US states with “bottle bills” the last, Hawaii,
implemented it in 2005.
 Several states have struggled with packaging Extended
Bottle-bill state Producer Responsibility (EPR) bills save for two states do
Deposit Return Schemes
have carpet EPR schemes.
EPR legislation Plastic Tax
Minimum content mandate  US legislation has primarily focused on rigid plastic packaging Future Deposit Return Schemes
Bottle-bill, ERP & content mandate (bottles for example) rather than thermoform or fibre.
Plastic Tax & Upcoming DRS

Source: Wood Mackenzie Chemicals 6

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Mechanically recycled plastics are significantly less carbon-intense

compared to virgin alternatives
The reduced carbon intensity is largely due to lower emissions associated with the raw
materials production.
CO2 Emissions RPET vs Virgin Material
1
 With a scope of post-consumer bales as a single feedstock,
+205%
recycled pellet material shows a 67% reduction of emissions
compared to virgin PET.
 Analysis sharing an emissions footprint across the two useful
lives of the product – both virgin and the recycled use – shows
a 34% reduction compared to solely virgin use.
 Total emissions for virgin material were 2.78 kg CO2 per kg PET
produced compared to 0.91 for rPET when analysed as
independent lifecycles.
 Technological improvements in sortation and conversion will
further reduce the environmental impact of recycled polymers
as legislation and brand spur investment.
 Collection for recycled content will ideally come from domestic,
local markets to supply material to minimise CO2 emissions and
reduce domestic waste from consumer packaging.

1- Comparison is made on cut-off basis, where all initial carbon burdens are assigned to first use and are not allocated to recycled material
Source: Wood Mackenzie Analysis, Association of Plastic Recyclers 7
RPET market woodmac.com

However, shortfalls of domestic supply will lead to trade of bales and flake
which incur higher emissions per tonne of finished product
Flake has more economical yields and better quality control than bales; however, both
materials fall short of virgin packing factors.
Estimated Volume per 40HQ Container
 A manual review of a sample data set of PET waste trade data
50 +75% confirms that most PET waste imported is flake and not bale,
either via the long-text material description or details such as the
transport of waste in bags (indicating flake) rather than bales.
40 42  Many fibre and thermoform producers have established histories
+25% of importing flake based on its cost-advantaged nature or desired
quality.
30 
Metric ton

High-quality flake from some Asian countries is often utilized in

particular fibre applications while others, such as geotextile
producers, import flake consistently from Latin America.
20 24
 Several countries in Central and South America inquire and seek
19.5 to import US bales – often rejected by domestic reclaimers – and
will reprocess the material and reclaim it into flakes for export.
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 Flake material has more economical yields and better quality
control than bales. However, both materials fall short of virgin
packing factors of 21 to 24 mt per 20 ft container compared to
0 bale and flake transportation in 40 HQ containers.
Bale Flake VPET

Source: Wood Mackenzie 8

 Insight: Carbon Emissions & Recycling woodmac.com

While imported feedstock may increase emissions significantly over

domestically supplied material, it will maintain an advantage over virgin PET
Imports will likely remain an attractive option for the brand owners to meet recycling and
decarbonization targets until local supply catches up with demand.
Jakarta to New York Emissions
5

Equivalent kg CO2 per kg PET

+6%
4

+43%
3 2.70 2.86

2
1.19 1.30
0.91
1

0
Domestic Import Import Domestic Import
rPET flake bale vPET vPET
Production Freight
0
Source: Wood Mackenzie Chemicals 9
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Source location will soon play some role in emissions comparisons in near
as domestic rPET supplies will not be sufficient for pellet feedstock
The bale trade increases emissions standards as result of yield losses which vary greatly with
origin, while flake emissions are slightly more favourable.
Trade Routes: kg CO2 emissions/kg PET produced
 Baled material potentially adds emissions at a similar level to Los
flake to pellet conversion (0.36 kg CO2 per kg PET) if material is Bale Trade New York
Angeles
Rotterdam Valencia

sourced from Asia to the US or Europe. Shanghai, China 0.32 0.18 0.32 0.27
 Asian bales typically have lower process losses at 17% driven
Jakarta, Indonesia 0.30 0.29 0.32 0.26
by East Asia with only 14% loss. However, South American
material tends to have more quality issues with nearly 26% Santos, Brazil 0.18 0.27 0.20 0.17
process losses.
Mumbai, India 0.30 0.37 0.23 0.17
 Flake trade shows slight advantages it has already undergone
yield loss domestically before shipment, although additional
emissions range from 14% to 31% of domestically sourced and Los
Flake Trade New York
Angeles
Rotterdam Valencia
produced material.
Shanghai, China 0.28 0.15 0.28 0.24
 By comparison, virgin PET has higher emissions in production.
But can be shipped in 20 ft containers at compared to 40 HQ for Jakarta, Indonesia 0.28 0.21 0.23 0.19
flake, effectively reducing transportation emissions by nearly
Santos, Brazil 0.13 0.20 0.15 0.13
50% for shipments aboard similarly sized vessels.
Mumbai, India 0.22 0.27 0.17 0.13

Source: Wood Mackenzie Analysis, ECTA 10

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The EU plans to reduce “the carbon leakage” and impose economic costs
on high-carbon imported materials, although the scope of plastics included
has yet to be agreed
If applicable, comparison will be made on scope 1 and 2 bases, where rPET’s process emissions
are higher emissions than virgin PET, although the impact is likely marginal compared to the solid
economic incentive associated with a plastic tax.
 The European Parliament adopted the CBAM in 2022 as part of Product carbon footprint, rPET and PET, Europe1
the carbon legislation package. There will be a transition period 2.5
for reporting (between 2023 and 2026), with full implementation in

Equivalent kg CO2 per kg

2027. 2.0
 The CBAM is designed to encourage the development of similar
policies abroad and protect industrial competitiveness by 1.5
reducing the incentive for businesses to move production abroad.
1.0
 The scope has extended from original proposal to other products,
including organic chemicals and plastic polymers, although
0.5
those are subject to a commission assessment of their
specificities. 0.0
rPET virgin PET
 Border adjustments would typically apply fees on imported goods
based on the greenhouse gas emissions generated during their Scope 1 and 2 Scope 3
1– Comparison is made on a cut off basis, for rPET breakdown, in the absence of the publicly available benchmark
production and indirect emissions derived from the electricity data, estimates were derived from the recent US study published by the American Recyclers Association
(Scope 1 and 2).
Source: CPME, Wood Mackenzie 11
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Importing recycled material will incur additional costs and emissions over
domestic material, but will maintain an advantage over virgin PET
In a supply-constrained market, it is likely to remain an attractive option for consumer-facing
companies to meet recycling and decarbonization targets.
 Collection infrastructure lags behind pellet capacity in western markets, and bale and flake material will be sourced from
Asia and South America as regional demand for post-consumer recycled material continues to build.
 While imported feedstock may increase emissions significantly over domestically supplied material, it will maintain an
advantage over virgin PET, and is likely to remain an attractive option for the brand owners to meet recycling and
decarbonisation targets until local supply catches up with demand.
 The EU plans to reduce “the carbon leakage” and impose economic costs on high-carbon imported materials, although the
scope of plastics included is yet to be agreed.
 If applicable, comparison will be made on scope 1 and 2 bases, where rPET’s energy intensive process yields higher
emissions than virgin PET. However, the impact is likely to be somewhat offset by the solid economic incentive associated
with plastic tax.
 How the carbon and recycling legislative frameworks will align and impact recycled markets is yet to be seen as policies
continue to evolve, as do methodologies and reporting standards, leaving considerable room for interpretation. This
uncertainty is even more true when it comes to chemical recycling, where markets and policies are just emerging, and
which we will consider in our following insight.

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Matt Slutzker
Senior analyst – PET/RPET
Connect with Matt
Biography
Matt Slutzker is a Senior Analyst with Wood Mackenzie covering PET and RPET in the Americas to
analyse the dynamic regional markets via insights, presentations, and commentaries. Contributing to an
integrated view of the polyester value chain, he also supports assessments for broader plastics markets
and sustainability areas within the circular economy. More recently, he has been investigating how the
plastics industry will develop key infrastructure to support future demand within RPET markets.

Matt recently joined Wood Mackenzie in June 2022 within the Chemicals Research team based in Matthew.Slutzker@woodmac.com
Baltimore, Maryland. Prior to Wood Mackenzie, he worked in Corporate Development with Alpek Polyester
in Charlotte, North Carolina with a focus on market analysis, M&A activity and strategic planning.
+1 704 607 0993
Matt holds a Bachelor of Science in Chemical Engineering (magna cum laude, Outstanding Senior) from
Virginia Tech and is completing his Masters of Business Administration at Wake Forest University.

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Yuliya Nam-Wright
Principal polymer sustainability analyst

Connect with Yuliya

Biography
Yuliya is a principal analyst with Wood Mackenzie responsible for expanding the coverage of recycled
markets as well as researching wider sustainability challenges affecting the plastics industry. Yuliya
recently joined Wood Mackenzie’s Chemicals teams in September 2022 and is based in London.

Prior to Wood Mackenzie, Yuliya was a sustainability manager in INEOS Aromatics in Europe, developing
and managing sustainability initiatives on carbon reduction strategy and circularity. She also worked as
marketing manager for INEOS Acetyls Europe, designing and delivering marketing strategy and yuliya.nam-wright@woodmac.com
developing sustainable offers. Earlier in her career, she also held a variety of roles in price reporting
agency and management consulting firm.
+ 44 7917793257

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Andrew D. Brown
Head of plastics and recycling

Biography Connect with Andrew

Andrew heads the plastics and recycling team and integrates Wood Mackenzie’s sustainability and recycling
views across chemical value chains. He leads coverage for our Films and Flexible Packaging services,
Recycled PET products and our Material Applications Platform. Andrew joined our Chemicals team in May
2018, and also played a crucial role in creating market research products for chemistries throughout the
chlor-vinyls chain.

Prior to joining Wood Mackenzie, he was an Integrity Engineer for National Fuel Gas Company, managing
2,000 miles of transmission pipeline facility risk and supporting business strategy development. Andrew andrew.brown@woodmac.com
holds a Bachelor of Science in Mechanical Engineering from Grove City College.
+1 346 998 9504

Relevant experience includes:

• Scenario modelling for Wood Mackenzie’s AET (Alternative Energy Transition) outlooks on how more +1 713 470 1600

aggressive energy transition pathways are likely to affect plastics.

• Global study of polymer exposure to end-use markets to trace consumption patterns through the chain to @WoodMackenzie

material converters and producers.

• Development of chlor-vinyls market research products to drive growth and expand Wood Mackenzie
Chemical’s coverage portfolio.
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