Erste Asset Management Investment Blog

The Life of Plastics – Investment Board

The Life of Plastics – Investment Board
The Life of Plastics – Investment Board
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Plastic is number one: since 1960, global plastics production has increased by a factor of more than 20x. 322mn tonnes have been produced worldwide. According to current estimates, this number will double again over the coming 20 years.
The most important reasons are the wide variety of uses and the low cost involved. Modern plastics can also come with positive applications from a sustainable perspective and facilitate significant CO2 savings throughout their lifecycle, particularly in the field of light-weight design in aviation or car design.
That being said, the basic input material in this context continues to present a problem. At the moment, plastics are mainly produced from fossil raw materials. Bio-plastic only accounts for 1% of global plastics production. This, however, has to be seen in the context of the fact that only a relatively small share (i.e. 6%) of the oil produced globally is used for plastics production. Still, for the oil industry, the petrochemical treatment of crude oil and the production of plastics provide a high-margin alternative to the production of fuel and its CO2-intensive combustion.

No real alternative yet

This remains a necessary state of affairs, given that bio-plastics do not offer a real alternative at this point. N.B. bio-plastics are plastics that come with at least one of two features: a) they are based on renewable raw materials and/or b) they are bio-degradable. While the use of bio mass reduces the dependence on crude oil, the process also sets up a potential competition with food production, for example when corn starch or potatoes are used as basis. This means that the use of renewable raw materials is to be regarded as positive in particular when they are of the second or third generation, i.e. wood waste or algae.

The high degree of bio-degradability of bio-plastics at the same time limits their use. Plastics are often used for their high durability. Bio-plastics, on the other hand, are mostly used for disposable items that have a limited life. This contradicts the sustainable avoidance of plastics and waste and potentially harms the consciousness among consumers for the recyclability of products.

Bio-degradability is still an enormous advantage. Plastic can theoretically be recycled, but in practice a large part tends to be dumped in the environment, putting the ecosystems at risk (e.g. in the form of microplastics). According to estimates, a third of all plastic waste worldwide ends up in the soil or the ocean.

Disposal is a socio-political problem

The improper disposal of plastic waste is a socio-political problem that is particularly severe in South-East Asia, where lack of effective waste disposal systems is profound. Given that plastic turns into a problem especially when it ends up in the environment, our research partners believe that companies have limited clout when it comes to contributing to the improvement of the situation. That being said, the avoidance of disposable packaging and the sensitisation in favour of more recycling are important steps that need to be taken so as to prevent the plastic islands from growing any more in the oceans.

Even if the collection of plastic waste works, recyclability has to be a crucial parameter in the product design stage already. At the moment, the collected plastic is very inhomogeneous. The various polymers have other substances mixed in such as pigments, ink, or adhesives. This makes clean recycling harder and creates a downward spiral, i.e. the downcycling to more and more low-grade kinds of plastic. The cradle-to-cradle principle counters this tendency by facilitating a real closed loop economy on the back of intelligent product design. With this kind of product, all input materials can be recycled in their original quality.

A pilot project by OMV called ReOil goes down a similar route. Instead of burning or “downcycling” plastic waste, it is recycled into crude oil that can then be refined into any desired product.

Still, the focus of a sustainable plastic economy is on avoidance, as the New Plastics Economy Initiative by the Ellen MacArthur Foundation highlights. Only then will collection, compostability, or recycling be of real relevance.



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