Let me state at the outset that plastics, per se, are not the problem. Plastics are essential to modern life and provide countless benefits in transportation, healthcare, food storage and so much more. The real problem is plastic waste. Environmentalists and NGOs have long warned of the impact that plastic waste has on land, water and air. Today, regulators, industries and society alike recognize the need to limit waste and identify solutions.
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Recent years have seen heightened interest in the potential for circular technologies to break, or at least mitigate, the adverse effects of plastic waste in the environment. However, these solutions can’t handle all types of plastic waste, especially plastics blended with other materials such as adhesives. And in many markets, the economics favor new-use or single-use plastics over recycling, while others lack the necessary collection and sorting systems. As a result, single-use flexible plastics, such as bags and packaging—which account for about 50% of all plastics consumption and half of total ocean litter—mostly end up being incinerated, landfilled or just thrown away.
Boston Consulting Group (BCG; Boston) recently completed several comprehensive analyses of global waste markets, collection systems and recycling regulations, including business cases for mechanical recycling and conversion technologies. BCG examined the plastics-to-fuel (PTF) value chain, including an in-depth analysis of pyrolysis, a common PTF technology that uses heat in an oxygen-starved environment to convert plastic waste into synthetic oil and gas without emitting a lot of greenhouse gases. “We examined the costs of the pyrolysis process and its market potential as well as its environmental impact and shortcomings,” said Udo Jung, senior advisor to BCG and one of the authors of the study, “A Circular Solution to Plastic Waste.”
“Pyrolysis leads to liquid feedstock that can be used again to produce plastics, leading to a true circular solution,” explained Jung, citing BASF’s ChemCycling approach. “The quality of the plastic waste input and the specific pyrolysis technology determine whether the products can be used to produce plastics again or be used as fuel.”
BCG studied how various factors and trends play out in three types of markets around the world, ranging from largely unregulated and immature markets to highly regulated ones with well-developed collection chains. The analysis was reviewed by experts from the chemical industry, waste management companies, circular-economy organizations and academe.
Chemical recycling of plastics to fuel, or plastics regeneration, can fill a big gap on the disposal-reuse spectrum. The ultimate solutions will involve a combination of judicious consumption and disposal measures as well as the development of cost-competitive and environmentally friendly alternatives. Most observers would agree, however, that these changes are years away. In the meantime—over the next decade or two—circular solutions can be implemented to reuse or repurpose plastic waste in the most efficient way.
BCG’s main conclusion is that while the economics and business challenges vary, conversion technologies such as pyrolysis are economically viable in all the market types described in the study. In some, pyrolysis can have an immediate and substantial impact—it has the potential to treat up to two-thirds of the plastic waste generated in Jakarta, for example. In others, the business case is feasible only if governments act to make inexpensive and environmentally detrimental means of disposal—principally landfills—less financially attractive.
“There is a clear hierarchy from top to bottom of addressing the problem of plastic waste,” Jung explained to PlasticsToday. “Avoiding unnecessary plastic packaging is at the top of the hierarchy. Reuse is next, then mechanical recycling and the case for pyrolysis or chemical recycling, which is suitable for anything that can’t be mechanically recycled.”
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| The pyramid of plastic waste management, courtesy Boston Consulting Group. Click for PDF: BCG-pyramid-pdf.pdf |
BCG’s study noted that conversion into fuel or petrochemical feedstock can be realized through a variety of technologies, the most common of which is pyrolysis. Pyrolysis has some distinct advantages over other recycling and recovery technologies. It is adept at handling a variety of plastic types that mechanical-recycling centers typically reject. While pyrolysis uses heat, the only carbon dioxide it emits is from the energy source that generates the heat. As a result, its carbon footprint is much lower than incineration.
Santosh Appathurai, Principal in BCG’s Houston office and co-author of the study, told PlasticsToday that a pyrolysis chemical recycling process could be used to treat all plastics except PET and PVC. Flexible plastics are the most significant material for chemical recycling because they don’t go to mechanical recycling. “We have had examples of companies partnering in the collection and chemical recycling of flexible household plastic waste, like the Hefty EnergyBag program [with Republic Waste Services], in which non-recyclable plastic waste is collected and sent to a pyrolysis plant,” said Appathurai.
Depending on the mix of inputs, the output from pyrolysis is 70% to 80% oil, which can be used for a variety of purposes, and 10% to 15% gas, which is usually recycled to provide the pyrolysis heat, said the BCG study. Only about 10% to 15% of the output is char, an inert solid that can be recycled for roads or sent to landfills, although some usage of char as a fuel has also been demonstrated. Using the liquid output from pyrolysis as fuel or inputs for petrochemical plants prolongs the original plastics’ lifecycle to at least a second round when used for fuel and potentially to several more when used for inputs, depending on the ultimate usage and disposal.
Like any chemical process, pyrolysis has its challenges. The biggest are scale and operational complexity. Pyrolysis reactors require near-continuous operation, and downtime is costly. A plant typically comprises a single unit with additional units added in parallel to increase capacity. Some players are exploring continuous-process reactors of smaller size to gain scale.
Pyrolysis also requires a sustained and consistent amount of good-quality feedstock to function effectively. This is one of the major challenges of the process because the plastics must be sorted and cleaned in advance to avoid contamination (although the cleaning and processing standards are less stringent than those required for mechanical recycling).
“If there’s one magic bullet, it’s getting quality separated plastic waste and using it in every dimension,” commented Appathurai. “Waste is intermingled. If we can figure out the supply chain to segregate it and get it to recycling facilities, we would have a better solution.”
These and other issues raise a key question with respect to whether pyrolysis can contribute in a meaningful way to plastic waste solutions: Is it economically viable? Four factors directly determine the economic viability of pyrolysis, and they can vary considerably by region and market:
- The addressable volume of plastic waste;
- feedstock acquisition and treatment costs;
- capacity and operating expenses of pyrolysis plants;
- potential revenues from the sale of pyrolysis liquid and gas.
To assess the financial viability of pyrolysis as a business, particularly for energy and chemical companies, BCG researched eight markets, each with its own distinct characteristics. The markets can be divided into three representative categories: Mature, moderately regulated and nascent. For each market, BCG used two criteria to determine economic viability:
- Margin—revenues from the sale of pyrolysis liquids minus the costs to acquire feedstock, the cash costs of operation, and capital expenditures.
- Volume—estimated number of 30-kt/y plants that can be run given the addressable volume of plastic waste in the market. (To obtain a higher throughput, more units typically are added in parallel.)
BCG established an arbitrary nominal internal rate of return (IRR) hurdle of 12% as the minimum return that a company would need to justify investment. Its analysis indicates that, of the eight markets, six exceed this IRR and four of them do so substantially, including one nascent market, Jakarta.
Mature markets
These markets have established, mature collection systems and limited landfill use because of regulations or space constraints, near-term recycling targets with stringent monitoring, and near- and medium-term plans to reduce single-use plastics consumption. The study included Singapore and the Seine Maritime province of France. Both have attractive IRRs (more than 20% and 25%, respectively), but they are based on very different business cases.
In Singapore, the market offers an ample supply of mixed-plastic feedstock, but the high cost of collection and cleaning could have a big impact on profitability. Singapore generates some 2,200 tons of plastic waste per day; about 50% of it comes from residential sources. Most of it goes straight to incineration centers. Only approximately 12% to 20% enters recycling sorting centers, and just half of this is actually recycled, with the balance rejected principally because of contamination. Given that it offers the potential to acquire 120 to 300 tons a day of discarded plastic from sorting centers, Singapore could provide the necessary scale for a 30-kT/y pyrolysis plant. (Regulatory changes that favor pyrolysis could divert additional plastic waste from incineration, making an even greater supply available.)
In Seine Maritime, feedstock costs are substantially lower. A pyrolysis operator could expect to achieve a profit margin of almost $130 a ton, or nearly 30%. But Seine Maritime generates only about 150 to 190 tons of municipal solid waste (MSW) a day, most of which (110 to 160 tons) goes to incinerators or landfills. To ensure sufficient supply for a 30-kT/y plant, an operator would need to either look beyond the Seine Maritime province for supply or use plastics extracted from landfills, which would require cleaning and sorting.
Moderately developed markets
These are markets with established waste-collection systems, little pressure on reducing landfill use because of favorable economics and some long-term recycling goals (including data collection to support them), but no firm regulations related to reducing plastics consumption.
The U.S. Gulf of Mexico coast is representative. Plastic waste is both ample (about 25,000 tons a day) and inexpensive (approximately $125 a ton). Of the five states in the region (Alabama, Florida, Georgia, Louisiana and Texas), only Florida recycles a significant percentage of its MSW (37%); the other states are in the single digits, with 90% or more of their MSW going to landfills. We estimate that pyrolysis plants in the Gulf Coast states could operate with a profit margin of about $135 a ton, or 30%. Continued fallout from China’s decision to restrict imports of recyclables adds to addressable volume and reduces costs for potential operators. Improved sorting efficiency could cut costs further.
Nascent markets
These markets are characterized by inadequate plastic waste collection systems, few recycling targets and no firm regulations related to reducing plastics consumption. The study authors looked specifically at several regions of Indonesia (Jakarta, Ambon and Batam) and at the Chinese provinces of Guangdong and Zhejiang. Overall, China spans the nascent and moderately developed categories: Many cities have developed formal collection systems, and incineration of waste to generate electricity is common.
The regions of Guangdong and Zhejiang share very similar characteristics. A small group of cities in each generates 80% of the plastic waste. Private companies manage waste collection and processing, but mechanical recycling depends on an informal network of waste pickers, collectors and traders. These provinces have the potential to provide ample supply for pyrolysis facilities, but the feedstock acquisition cost is high—more than $200 a ton in both regions. This results in total plant operating costs of more than $400 a ton. Estimated margins would be about $40 a ton, or 8% to 9%.
Balancing environmental impact and profit potential
In all markets, the biggest single challenge for pyrolysis is achieving the scale necessary to have a significant impact on the plastic waste problem and generate sufficient revenues and profits to justify investment. Some important limitations and risks have to be addressed. The most immediate limitations are the current small scale—a typical plant handles 25 to 30 kt/year—and challenging technical operations. Potential unintended consequences also need to be considered. Several chemical companies are putting major effort into research and development of plastic products that have a greater ability to be mechanically recycled. Promoting pyrolysis, a means of plastics regeneration, could eliminate the incentives for these R&D efforts.
That said, pyrolysis offers energy and chemical companies the opportunity to explore profitable new business models while simultaneously improving their environmental, social and governance performance. Pyrolysis can have an immediate and significant impact in immature markets such as Jakarta (where pyrolysis could handle more than half and potentially up to two-thirds of all plastic waste), Guangdong (a quarter of all plastic waste) and Zhejiang (one-fifth of all plastic waste). Pyrolysis also is economically viable in many mature markets. In regions such as the U.S. Gulf Coast, however, where pyrolysis competes on cost with ample landfill capacity, governments need to decide whether they want to use their legislative and regulatory authority to discourage landfilling and provide incentives for alternatives.
Governments have an important part to play in incentivizing the development of plastic waste solutions. Europe has been a leader in this area through its promotion of and investment in new processes and technologies as well as through its regulation of plastics usage and disposal in general. All governments need to shape policies to create guiding frameworks that help define a clear waste management hierarchy and incentivize recycling to address all plastic types. Such frameworks can aid the development and successful implementation of innovative product design, waste management infrastructure and mechanical recycling, as well as plastics regeneration technologies. All levels of government can contribute, from local or regional legislative bodies to national assemblies, executives and agencies.
Within the current hierarchy of solutions, PTF can play an important role in mitigating the environmental impact of plastics in the near to medium term. The more companies, governments and institutions invest in or support conversion technologies, the greater their ability to contribute to solving this global environmental problem.
“We’re hitting on a lot of the right pieces of this puzzle,” Appathurai told PlasticsToday. “What we need is cross-industry participation, where we’re able to streamline collection with one goal as opposed to different industries with different goals. We need to create the right incentives to solve the issue of collection and disposal and for viable ways to sell products in end markets.”
