Price of recycled plastic doubles as green pledges meet reality

The rush to abolish single-use plastics in response to public alarm over the effects of plastic pollution has sent the price of recycled plastic soaring as drinks companies including Coca-Cola, PepsiCo, and Nestle among others pursue green strategies; however, potential damage to the bottom line will show whether companies and their investors are willing to put their money where their mouths are.

Why it matters

Sustainability pledges aren’t worth the pixels they’re posted to if they evaporate on contact with unfavourable economics. A sector-wide rush toward cleaner, recycled plastics was always likely. It also points to a core problem that companies’ ability to produce plastics way outpaces any recycling firm’s ability to process and redeploy those plastics.

The increases

• The Financial Times reports that the price of post-consumer polyethylene terephthalate (better known as PET) has increased 103% versus January 2021. This is largely because companies across fast moving consumer goods (FMCG) and apparel sectors brought in stringent plastic usage targets en masse, reports ICIS, whose data the story is based on.
• Ironically, the price of recycled PET is now more than fresh PET, as prices have surged even faster than the price of the fossil fuel used to make it.

Targets

• The targets are not solely self-imposed, with the EU mandating 25% or more recycled content in packaging by the middle of this decade. Some firms are being more aggressive still. However, ICIS is now observing that some firms are cooling those efforts amid the high prices.
• Of course, there are some radically different options, like the German-style deposit return schemes for used bottles, which prefers reuse to recycling.

Scope 3

In part, this is a story about getting ahead of likely rules around producer responsibility, an effort that many countries are taking up to tackle what are known as ‘Scope 3’ emissions. These are the hardest to measure but also the most important, as they include waste disposal, supplier emissions, and the effect of a company’s investments.

But, it’s also worth pointing out that this is good news: companies are making an effort, and, if capitalism is working properly, will grow the market for recycling and bring down prices. While it’s a tough ask now, it’s nothing compared to what’s waiting for us.

Sourced from the Financial Times, Carbon Trust