This is the first of a series of blog posts where I will examine the environmental paradigm shift and what it means for the petrochemicals industry. This first post deals with the bottom end of the value chain, the plastic packaging business, and the pressure being exerted upward on petrochemicals producers to change how they behave. Part Two will look at the pressure from the feedstock angle, how the arrival of Peak Oil Demand is radically upending the cost and nature of petrochemical raw materials. Wave after wave of refinery closures are imminent. In Part Three, I will consider the competing forces within petrochemicals companies and how CEOs need to manage the naysayers versus the visionaries or leaders. Part Four will examine the geopolitical aspects to both climate change and the plastic rubbish crisis and consider scenarios for how they will change trade flows and investment patterns. This post will factor in the outcomes of the critical Fifth Plenum meeting in China between 26 and 29 October, when China is set to outline a blueprint for major investments in renewable energy and plastics recycling as it pushes towards its target of being virtually carbon neutral by 2060.
By John Richardson
THE BEACHES In Bali and Phuket haven’t suddenly emptied of disgusting piles of plastic rubbish because the pandemic has reduced some of the momentum behind the recycling industry, said an executive with a packaging manufacturer. “And now the beaches are about to fill with mountains of discarded facemasks, empty disinfectant bottles and flexible packaging from packets of disinfectant wipes,” he added. The detritus of our new pandemic lifestyles will make the plastic-rubbish crisis in the developing world even worse.
Many of us cannot physically visit the beaches, but this doesn’t matter a jot. A billion and one smartphone photos will circle through social media as a reminder that our plastic lifestyles remain unsustainable. This will add to pressure for adequate collection, storage and recycling of plastic rubbish in the developing world.
You need to start with the fact that some 2bn people lack any kind of rubbish collection and so they have no choice but to dump plastic waste in the open environment. I could get into a lot of trouble here. I heard one speech from a petrochemicals industry executive where he blamed the crisis on the public for carelessly discarding plastic rubbish. I shall attempt to put this politely… no, I’ve changed my mind: as far as the developing world is concerned, this view is very badly ill-informed and dodges the responsibility our industry must take for this crisis.
Storage means landfills, the scourge of some environmentalists. Landfills are of course not ideal but are better than the alternative – plastic leaking into rivers and ocean. The leakage is so great that the Ellen MacArthur Foundation has warned that there could be more plastic than fish in the sea by 2050, if we carry on with business as usual. Landfills are in effect energy storage systems for a future when, hopefully, chemicals and mechanical recycling technologies are diverse, cost effective and efficient enough to make optimum use of the storage.
I also believe that another scourge of some environmentalists, incineration of plastic waste, has a role here, perhaps even if we cannot greatly improve its sustainability. Decisions will often rest on least-bad choices. It is crazy that developing countries are being forced to import hydrocarbons, at such huge detriment to their economic welfare, when all this unused energy – i.e. plastic waste – is lying around, almost entirely unused. Is this really better from an economic standpoint, and from a carbon balance standpoint, than burning plastic waste? I don’t know the answer. We need truly objective and carefully compiled life-cycle analysis to get to the answer.
The packaging manufacturers and the brand owners I have spoken to (and I have spoken to a great many of these guys) completely get this. They are 100% convinced that we have gone beyond a tipping point where most governments and most of the public will no longer tolerate the way we handle plastic waste. There has not been one iota of doubt amongst the people I have spoken to over the last two years. This has not been PR flannel, as these conversations have been very much off the record with people I know and trust.
The pressure will thus intensify to find more sustainable ways to dispose of plastic waste in all regions, but in the developing world especially as this is where most of the waste problem resides.
The pressure will also grow to simplify the design of packaging. An executive at a brand owner I spoke to last year said that his company spent 35-40% of its time on redesigning packaging to make it more sustainable, in partnership with retailers and converters. “Five years ago, we spent virtually none of our time on redesigns,” he added. Wow!
Redesigning packaging challenges the some 70- year-old innovation model that has enabled the petrochemicals industry to make many bucket-loads of money. Ever since plastic film was first used to wrap food in the 1950s, the focus of the polymer scientists, working with the converters, the brand owners and the retailers, has been to complicate designs for performance and aesthetic reasons.
Once nearly of all the basic needs in the rich world had been met, following post-Second World War reconstruction, our lifestyles became ever-more indulgent. As Yuval Noah Harari wrote in his brilliant book, Sapiens, our ancestors would be amazed, and probably a little bit disgusted, at the richness and variety of our diets. What were once meals reserved for wedding feasts have become weekly occurrences.
Air-flown Indian mango (I‘ve never understood this phrase. How else do you fly except through the air?) has become the staple of many a respectable dinner party in North London. Serving in-season British apples or strawberries is out of the question. You don’t get fresh Indian mango to North London dinner tables without sophisticated and complex packaging solutions, where the environmentally sustainability of the solutions is rarely questioned. The damage includes not just the packaging, but also flying the mango a quarter-way around the world.
Packaging solutions have greatly contributed to food security in the developing world and have reduced methane emissions from rotting food. Agriculture is the second-biggest human emitter of methane behind the hydrocarbon industry. But so man of the packaging solutions we use are for reasons of frippery and self-indulgence. The demand for sophisticated packaging is thus no doubt one of the reasons why the hydrocarbon industry is the biggest human emitter of methane.
Designs will be increasingly simplified. Plastic packaging that performs as well, or almost as well, will be made from two layers of different polymers rather than eight. Less layers will increase the chances of recycling. Packaging is being designed to use less total polymer by weight. If the right solutions cannot be achieved by using plastics, brand owners and retailers will turn to paper and aluminium.
Equally important is the push to make packaging less “all singing and dancing” as another executive with a brand owner told me. “Designs are becoming plainer with less ability to produce colourful, eye-appealing packaging surfaces. It is all about less is more,” she added.
Polymer scientists have returned to laboratories to simplify designs. Engineering is being de-engineered to make surfaces less able to hold exotically patterned printing inks, as the scientists also attempt to meet brand owner and retailer demands for packaging with lower total polymer weight and fewer layers of different polymers.
The pressure will intensify on petrochemicals companies to take responsibility for the externalities, the environment costs of their operations. They will have to pay for the clean-up, and, if they don’t, they will increasingly face taxes on the plastic rubbish that they have helped to create.
Sure, the cost should be shared from the oil and gas producers down to the supermarket shopper. But the degree of sharing may hinge on public perceptions of who is most to blame, regardless of the rights or wrongs of judgement calls.
This puts the onus on petrochemicals companies to do much more than talk. Walking the talk will help change the perception that we are an old and very conservative industry – the equivalent of a giant oil tanker that takes a long time to turn around.
But what is remarkable is that some of the energy companies upstream of us, some of whom also of course also make petrochemicals, are defying the oil tanker stereotype as this excellent Insight from my colleague, Joseph Chang, details. They are leading the charge into renewable energy now that we have reached Peak Oil Demand.
The charge will have major implications for the availability and nature of petrochemicals feedstock – the subject for my second blog post in this series. To put it simply here, even if you remain sceptical about the continued strength of the downstream pressures, it might still be the case that you run out of hydrocarbon feedstocks to make petrochemicals in the conventional way. This might by itself force a major shift to renewables and plastic waste as the biggest sources of raw materials.
This leads me onto the chart at the beginning of this post, from BP’s Energy Outlook 2020. It shows four scenarios for the volumes of plastics and fibres that will be made from oil by 2050. In that year, extrapolation of past trends is at 17.5m bbl/day, 15m bbl/day under business as usual, 11.7m bbld/day under Rapid and just 7.2m bbl/day under Net Zero.
“Extrapolation of past trends and business as usual are inconceivable,” said the executive with the packaging producer, whom I quoted at the beginning of this post, when I showed him the BP chart. “The outcome will be somewhere between Rapid and Net Zero.” Hear, hear.