A few months ago—before the pandemic stopped economies in their tracks—the biggest sustainability issue seemed to be plastic. Over the past several years, companies have rushed to make commitments to source recycled plastic. The idyllic “waste-free economy” was a hot topic at Davos. Danone pledged its Evian water bottles would be made of 100% recycled content. PepsiCo, Coca-Cola and L’Oreal all promised to increase recycled plastic in their packaging.
Those pledges were seen as key to expanding the recycled plastic market, and not super-expensive to implement. But now, such promises will come with a hefty price tag. One side effect of the global oil price collapse is that the cost of virgin (or new) plastic (which is made from fossil fuels) has plummeted as well. This means it has suddenly become much cheaper to destroy the environment, since the price of new plastic is so much cheaper than that of recycled plastic.
“Momentum seems to be moving back to single-use plastic, but I’m hoping it’s just temporary,” said Rob Goodwin, president of OceanCycle, which works to stop ocean-bound plastic. As new plastic prices fell, recycled plastic suppliers in Asia lost huge orders almost overnight, he said. European companies required by law to use a percentage of recycled plastic in their bottles are some of the only steady sources of demand left, Goodwin said.
Still, in Europe this month it costs a lot more to source recycled plastic than virgin plastic polyethylene terephthalate (PET). It’s a major decoupling, as the two commodities used to be priced much closer together.
The pricing shock couldn’t have come at a worse time for recycled plastic. The industry was already struggling to make a profit after China banned imports of the commodity. And due to coronavirus shutdowns, commercial recycling—which is more efficient than residential collections—has dried up. That’s made supply tight and increased costs for recyclers, making the price differential with virgin plastic even worse.
Globally, humans have never been that good at recycling—only about 9% of all plastic ever produced has been made into something new. Still, recycled materials could be a critical resource as global supply chains face virus-related shocks of their own. And micro-plastics from uncollected waste are still sinking to the bottom of the ocean floor, changing marine habitats in ways we’ve just begun to study. People may still want to stop that.
In the U.S., that places coronavirus bailout policy front-and-center if a waste-free country is still the goal. “If governments are going to bailout manufacturers of virgin plastic, and they don’t provide any to recycling, then people won’t think recycled plastic can be competitive,” said Ron Gonen, chief executive of New York recycling infrastructure investment firm Closed Loop Partners.
Sustainable Finance in Brief
- Moody’s cut its 2020 green bond forecast after a slow first quarter.
- Hong Kong established a cross-agency steering group to coordinate the management of climate and environmental risk to the financial sector, and to boost the growth of green and sustainable finance.
- Replacing corporate board members in a pandemic might take a while. But JPMorgan said it will soon name a new lead independent director to replace former Exxon CEO Lee Raymond, who is leaving the role under pressure from environmental activists.
- Italian private equity firm Ambienta raised $150 million for a hedge fund that will bet on companies based on their green credentials.
- Morgan Stanley Investment Management hired Emily Chew from Manulife as its new global head of sustainability. Nina Chen, a former Nature Conservancy director, will lead financial resiliency efforts at the New York Department of Financial Services.
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