How the fossil fuel industry is pushing plastics on the world

We’re in the midst of an energy transition. Renewable power and electric vehicles are getting cheaper, the grid is getting greener, and oil and gas companies are getting nervous.

That’s why the fossil fuel giants are looking towards petrochemicals, and plastics in particular, as their next major growth market.

“Plastics is the Plan B for the fossil fuel industry,” said Judith Enck, Founder and President of the nonprofit advocacy group Beyond Plastics.

Plastics, which are made from fossil fuels, are set to drive nearly half of oil demand growth by midcentury, according to the International Energy Agency. That outpaces even hard-to-decarbonize sectors like aviation and shipping.

“Every company who is currently engaged in producing plastic, if you look at their capital budgets for the next two to three years, they’re all talking about expansion plans,” said Ramesh Ramachandran, CEO of No Plastic Waste, an initiative from the Mindaroo Foundation that’s working to create a market-based approach to a circular plastics economy.

Yet much of the developed world is already awash in plastics. So fossil fuel and petrochemical companies are relying on emerging economies in Asia and Africa to drive growth.

Plastic floods the developing world

Alan Gelder of Wood Mackenzie forecasts that every year through 2050, there will be 10 million metric tons of growth in the market for petrochemicals, which are used to make plastics and other products. He says much of that will be shipped overseas.

“We’re not expecting demand growth in the U.S., but it could be where the places where facilities get built to satisfy global demand growth.”

Alongside Middle Eastern oil giants like Qatar, Saudi Arabia and the UAE, the United States is a leading producer and exporter of plastic feedstocks and polymers. Asia in general, and China specifically, are the largest importers of these plastic building blocks.

But Enck doubts consumers actually want more plastic “So what is driving this, is just this glut of fracked gas and the fossil fuel industry teaming up with the chemical industry to just crank out more and more plastic.”

Indeed, an Ipsos survey of over 19,000 adults found that 71% of consumers worldwide want to ban single-use plastics.

As unpopular as they may be today, however, plastics became ubiquitous for a reason.

“Petrochemicals are fantastically good at what they do in terms of lightweight flexibility, durability, versatility,” Gelder said. And thanks in part to fossil fuel subsidies, they’re also generally the cheapest option available.

The problem is that most plastic ends up languishing in landfills, or as litter on the land or sea. Only 9% of all plastic ever made has been recycled, because generally, making virgin plastic is the cheapest option.

China used to profitably recycle much of the world’s plastic, but stopped accepting plastic waste imports in 2018, since much of it was too contaminated to be repurposed. So now, that waste is being diverted to poorer nations that don’t have the infrastructure to process or recycle it.

Africa saw a fourfold increase in plastic waste imports in 2019, the year after China closed its doors. Plastic also flooded into India, Malaysia, Thailand, Indonesia, and Vietnam, which have since implemented their own import restrictions. But the U.S. is still sending its waste there anyway.

Harmful effects

Meanwhile, the domestic petrochemical buildout often has harmful effects on the communities where these plants are located, as factory pollutants can effect the surrounding air, water and soil.

“So this now makes plastics and plastic production a very serious environmental justice issue,” Enck said, “Because this petrochemical buildout is happening in low income communities and communities of color, mostly in Texas, Louisiana, Ohio and Pennsylvania.”

Sharon Lavigne understands these issues well. She lives in St. James Parish, Louisiana, which lies along a stretch of the Mississippi River often referred to as “Cancer Alley.” It’s home to over 150 petrochemical facilities and refineries, and the increased air pollution in the area has been linked to higher levels of cancer in poor communities.

 “I found out it was the plants that was poisoning us, making us sick and with cancer, mostly cancer,” Lavigne said. “And then I found out that when they come in here, they don’t hire anybody from Saint James.”

In 2018 she founded Rise St. James, with the goal of stopping the petrochemical expansion. The organization successfully halted construction of a $1.25 billion plastics plant by Wanhua Chemical, and is currently fighting to prevent Formosa Plastics from building a plant in the 5th district, where Lavigne lives. However, it looks like that project will proceed. The 5th district is 91% Black.

“One time they wanted to build a plant in the white district and a parish council voted it down. They said no,” Lavigne said. But when similar plants were proposed in the 5th district, she said they were approved.

Overall, climate-focused think tank Carbon Tracker estimates that the externalities of plastics production are between $800 to $1,400 per metric ton of plastic produced, a cost that includes CO2 emissions, air pollution, waste management, and ocean cleanup efforts.

An uncertain future

Yet even as producers prepare for growth, there are many signs that plastics alone cannot save the fossil fuel industry.

For one, the EU Directive on Single-Use Plastics recently took effect in Europe, and it intends to greatly reduce the amount of virgin plastic produced.

It mandates that, by 2025, all beverage bottles made of PET plastic must contain at least 25% recycled content, bans a wide variety of single-use products, and implements an extended producer responsibility scheme that makes plastics producers cover the cost of waste management and cleanup.

Ramachandran expects that this will lead to worldwide changes in the way plastic packaging is made.

“I think within a year, maximum two, in Europe, you’re surely going to see mandatory recycled content in all packaging. And once that happens, it’s going to be like the California mileage standards. It’s very unlikely people are going to have one package for Europe and another package for other parts of the world. So I think it would surely accelerate and spread everywhere else.”

Maine and Oregon also recently introduced EPR laws that make plastics producers pay for recycling programs, and other states, including California and New York, want to follow suit.

Corporations too are showing signs of change. Ahead of the UN Environment Assembly conference, more than 70 companies called for a global pact to cut plastics production and decouple it from fossil fuels. Signatories included AMCOR, one of the world’s largest plastic packaging manufacturers, and major brands like Unilever, Walmart, Pepsi and Coke.

“I don’t expect ExxonMobil or Dow DuPont to change. I do expect the big brands that are buying all of this plastic packaging to change fast,” Enck said.

Finally, plastics are simply a much smaller market segment than oil and gas. Petrochemicals comprised just 13% of ExxonMobil’s revenue in 2020, and 6.5% of Shell’s 2020 revenue.

“So if you say, all of a sudden we stop driving gasoline-fueled passenger cars and we try and divert all of that material to petrochemicals, then you just arguably swamp the petrochemical market and reduce its attractiveness and profitability,” Gelder explained.

Basically, the plastics industry is too small to keeping oil and gas companies afloat, even if demand does continue to grow.

So while plastics benefit from the immense power of the fossil fuel lobby, the scale of the petrochemical industry, combined with legislative and corporate efforts to curb new plastic production, means that the oil and gas industry’s bet on plastics might not pan out they way they hope.

Source:https://www.cnbc.com/

Tags: Fossil Fuels, Petrochemicals, Plastics