We are in the middle of an energy transition. Renewable energy and electric vehicles are getting cheaper, the grid is getting greener, and the oil and gas companies are getting nervous.
That is why the fossil fuel giants are looking towards petrochemicals, and especially plastics, as their next big growth market.
“Plastics are Plan B for the fossil fuel industry,” said Judith Enck, founder and chairman of the nonprofit advocacy group Beyond Plastics.
Plastics made from fossil fuels are set to drive nearly half of the growth in oil demand by the middle of the century, according to the International Energy Agency. It surpasses even difficult to decarbonize sectors such as aviation and shipping.
“If you look at their capital budgets for the next two to three years, they are all talking about expansion plans,” says Ramesh Ramachandran, CEO of No Plastic Waste, which is an initiative of the association. Mindaroo Foundation, which works to create a market-based approach to a circular plastics economy.
Yet much of the developed world is already flooded with plastic. So fossil fuels and petrochemical companies depend on emerging economies in Asia and Africa to drive growth.
Plastic is flooding developing countries
Alan Gelder from Wood Mackenzie predicts that every year until 2050, there will be 10 million tons of growth in the market for petrochemicals used to make plastics and other products. He says much of it will be sent abroad.
“We do not expect growth in demand in the United States, but it may be the places where facilities are built to meet the growth in global demand.”
A sanitation worker is handling an influx of plastic bottles at a recycling center in Serbia
Alongside Middle Eastern oil giants such as Qatar, Saudi Arabia and the United Arab Emirates, the United States is a leading manufacturer and exporter of plastic materials and polymers. Asia in general, and China specifically, are the largest importers of these plastic building blocks.
But Enck doubts that consumers actually want more plastic. “So what drives this is just this abundance of fracked gas and the fossil fuel industry going along with the chemical industry just to screw more and more plastic out.”
In fact, an Ipsos survey of more than 19,000 adults found that 71% of consumers worldwide want to ban disposable plastic surgery.
However unpopular as they may be today, plastic became ubiquitous for a reason.
“Petrochemicals are amazingly good at what they do in terms of lightweight flexibility, durability, versatility,” Gelder said. And thanks in part to subsidies for fossil fuels, they are also generally the cheapest solution available.
The problem is that most plastics end up in landfills or as land or sea waste. Only 9% of all plastics ever made have been recycled, because in general, making virgin plastic is the cheapest solution.
China used to recycle much of the world’s plastic with a surplus, but stopped accepting plastic waste imports in 2018, as much of it was too polluted to be recycled. So now that waste is being diverted to poorer nations that do not have the infrastructure to process or recycle it.
Africa saw a quadrupling of plastic waste imports in 2019, the year after China closed its doors. Plastics also flowed into India, Malaysia, Thailand, Indonesia and Vietnam, which have since implemented their own import restrictions. But the United States is still sending its waste there.
Meanwhile, the domestic petrochemical build-up often has detrimental effects on the communities where these plants are located, as factory pollution can affect the surrounding air, water and soil.
“So this now makes plastic and plastic production a very serious environmentally fair issue,” Enck said, “because this petrochemical buildup is happening in low-income and color communities, mostly in Texas, Louisiana, Ohio and Pennsylvania.”
Sharon Lavigne understands these issues well. She lives in St. James Parish, Louisiana, located along a stretch of the Mississippi River, often referred to as the “Cancer Alley.” It is 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.
Signs protesting the construction of a Formosa Plastics petrochemical plant in St. James Parish, Louisiana
“I found out it was the plants that poisoned us, made us sick and with cancer, mostly cancer,” Lavigne said. “And then I found out that when they come in here, they do not hire anyone from Saint James.”
In 2018, she founded Rise St. James, with the aim of stopping the petrochemical expansion. The organization successfully halted construction of a $ 1.25 billion plastic 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 the project will continue.
The 5th district is 91% black.
“Once they wanted to build a facility in the White District, and a ward council voted it down. They said no,” Lavigne said. But when similar facilities were proposed in the 5th District, she said they were approved.
Overall, the climate-focused think tank Carbon Tracker estimates that the externalities of plastic production are between $ 800 to $ 1,400 per liter. metric tons of plastic produced, a cost that includes CO2 emissions, air pollution, waste management and ocean cleaning efforts.
An uncertain future
But even as manufacturers prepare for growth, there are many signs that plastics alone cannot save the fossil fuel industry.
Firstly, the EU Disposable Plastics Directive recently entered into force in Europe, and it intends to significantly reduce the amount of new plastics produced.
It requires all PET plastic beverage bottles to contain at least 25% recycled content by 2025, bans a wide range of disposable products and implements an extended producer responsibility scheme to cover plastics producers’ waste management costs. and cleanup.
Ramachandran expects this will lead to worldwide changes in the way plastic packaging is manufactured.
“I think within a year, at most two, in Europe, you’ll definitely see mandatory recycling content in all packaging. And once that happens, it’s going to be like California’s mileage standards. It’s very unlikely that people will have one package for Europe and another package for other parts of the world. So I think it would accelerate and spread everywhere else. “
Maine and Oregon also recently enacted EPR laws that make plastic manufacturers pay for recycling programs, and other states, including California and New York, want to follow suit.
Companies are also showing signs of change. Ahead of the UN Environment Assembly conference, more than 70 companies called for a global pact to reduce plastic production and decouple it from fossil fuels. The signatories included AMCOR, one of the world’s largest plastic packaging manufacturers, and major brands such as Unilever, Walmart, Pepsi and Coke.
“I do not expect ExxonMobil or Dow DuPont to change. I expect the big brands that buy all this plastic packaging to change quickly,” Enck said.
Finally, plastics are simply a much smaller market segment than oil and gas. Petrochemicals accounted for only 13% of ExxonMobil’s revenue in 2020 and 6.5% of Shell’s 2020 revenue.
“So if you say we’m suddenly stopping driving petrol cars and we’re trying to divert all that material to petrochemicals, then you’re just drowning out the petrochemical market and reducing its attractiveness and profitability,” Gelder explained.
Basically, the plastics industry is too small to keep oil and gas companies afloat, although demand continues to grow.
So while plastics benefit from the enormous power of the fossil fuel lobby, the scale of the petrochemical industry, combined with regulatory and corporate efforts to stem new plastics production, means that the oil and gas industry’s investment in plastics may not materialize. they hope.
Watch the video to learn more.