This problem is depicted clearly in the graph below, which shows the price of recycled plastic minus that of ‘virgin plastic’ between 2009 and now. This relates specifically to the price of PET (polythylene tereftalate), commonly used to package soft drink. Until 2019, the price of recycled PET was higher than that of new material.
In 2020, recycled PET was cheaper than its virgin counterpart for the first time ever. In 2021, we’ve seen the balance shift once again and the prices of the two products more or less equalize.
Nevertheless, it looks like recycled plastic will become the cheaper version again in the coming months. Firstly, because on 1 January 2021 the EU introduced a new plastic tax – a call rate of EUR 0.80 per kilogram new plastic packaging waste that isn’t recycled – which makes it more appealing for packaging companies to purchase recycled plastic.
Secondly, considerable work is underway to improve the recycling infrastructure as well as recycling techniques. Of particular note is the growing share of chemical recycling. Instead of tearing up plastic into small pellets in shredders, chemicals are used to convert the plastic back into its original ingredients. What is more, chemical recycling means that many more types of plastic can be recycled.
A third reason why recycled plastic can become cheaper again is that the industry is maturing. Now that China is setting very strict requirements for the waste flows it imports, we are seeing a growing number of other countries becoming more critical about their own waste flow. Instead of simply exporting rubbish, they are better mapping local waste flows, so that they can be used to keep driving profits from recycling.
According to Eurostat, around 40% of Europe’s plastic waste is currently recycled. But as a result of new rules, that percentage is set to increase in the years ahead – significantly, we expect.
Plastic waste is playing an increasingly bigger role for investors. In 2019, Robeco began a three-year engagement theme as part of which we hold regular discussions with ten companies on their use, processing and reuse of single-use plastic. We are very enthusiastic about the approach taken by some companies since starting this dialogue. Increasingly, we see companies adopting a proactive attitude when it comes to reducing the use of plastic in their products.
We’re also seeing more and more other investors around the world ramping up requirements and making their voice heard more often. For instance, American DuPont de Nemours were recently surprised when more than 80% of their shareholders (including Robeco) voted in favor of the company reporting on its role in plastic pollution.
A world without plastic is simply inconceivable. But thankfully, we can do a lot by tackling single-use plastic. By recycling more, and more efficiently, we can reduce and eventually eradicate plastic pollution from the world. And as investors, we can reap the fruits of this by seizing the opportunities offered in the longer term by companies that adapt their business model accordingly.
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