INTERVIEW with Tobias Dan Nielsen | Policy Expert at IVL (Swedish Environmental Research Institute). For further expert opinions please use the question-level hyperlink.
There have been significant investments going into expanding the production capacity for plastics. Key oil and gas actors are seeing petrochemicals and in particular plastics as an opportunity to compensate for the slowing demand for transport fuels. However, there is a risk of overcapacity on the production side which could led to a form of stranded plastic asset in the future.
Other important risks to consider are exposure to current legislative trends. There is a strong awareness of the problems with plastics amongst the public and politicians. The European Commission has made plastics a key topic and countries across the world are increasingly taking legislative measures on plastics. Simplified there are a few global trends that structure policy makers response to plastics. On the international scene in particular (marine) plastic pollution and circular economy have gathered momentum. The recent awareness of the scale of plastic pollution has put a lot of public pressure on efforts to reduce this. Public policy responses often come in bans or levies on certain plastic objects such as single-use plastics and plastic bags.
Circular economy is setting the scene at the EU, but there are also a number of international initiatives and China also working with circular economy for dealing with plastics. Currently, a far too small percentage of plastic is being recycled or reuses. Even in countries with developed waste management systems. In Sweden, where I’m based, less than 10% of plastic waste is recycled. On a global scale this number is much lower, which is a big problem when we produce close to 400 million tonnes of plastic annually. Here the focus is not on, necessarily, on reducing the use, but increasing the amount of plastic which is recirculated in the economy, just like we do with other materials. We need to value it more both in how we use and dispose of it and in economic terms. Cheap virgin plastic reduces incentives for boosting the market for recycled plastics.
A third trend, which is starting to gain more attention is on reducing the carbon footprint of plastics. Plastic related emission are concentrated around production/conversion and incineration and a recent study (CIEL) argued that in 2050 if the situation continues as today, plastics will take up 10-13% of the remaining carbon budget. A more circular plastic system and changes in our behaviour can reduce some of this, but we need to also think of reducing the carbon lock-on of plastics. At the moment 99% of plastics is made from fossil feedstocks.
Lastly, toxicity related to plastics is another key concern which legislators are working on. This includes banning certain chemicals of concern and increasing traceability and safety of substances in plastics.
Overall, when it comes to plastics there is growing demand for legislators (and others) to mitigate the risks of leakage, climate impact, toxicity, and lack of resource efficiency. Investors need to keep this in mind when investing in plastic. Actors that are not able or unwilling to change their ways in accordance to these risks pose a potential key risk. On the other hand, there is a strong demand for sustainable plastics that are able to mitigate these risks and there are a lot of innovative and committed companies that are taking up the plastic challenges.
| Already back in 2017 scientists warned of what they termed ‘circular economy rebound’, arguing that ‘circular economy activities can increase overall production, which can partially or fully offset their benefits’. Against the backdrop of the sustainable recovery discussion in EU, do you find that the respective risks are properly considered?
There are no silver bullets to solving the challenges of plastics and unfortunately circular economy will not be one either. Addressing design and waste management side of plastics are key areas, but won’t necessarily reduce our use of plastics nor its carbon dependence. This is why circular economy strategies need to be integrated with other types of solutions such as those that look towards reducing the use of (certain types) of plastics or substituting towards alternatives that do not lead to high environmental impacts.
Unfortunately, when trying to solve as complex problems as plastic, you always run the risk of solving one issue but exacerbating another. Therefore, solutions to the challenges of plastics need to have a holistic approach where circularity, sustainable consumption, and other areas like leakage and toxicity are considered. Plastic is a relative new challenge for legislators, so there is the risk that some will focus on specific issues, but miss the larger picture.
| You mentioned a range of further circular economy-related plastic risks the Mistra Information Brief for Investors (2019/1). Would you please elaborate on your research findings and suggestions on how to tackle the respective challenges properly?
One key challenge with circular plastic economy is that we still have a very long way to go. In Sweden as I mentioned less than 10% of plastic is recycled. The number of somewhat higher for plastic packaging in part because of the PET deposit scheme, but in order to reach the plastic strategy 50% recycling target for plastic packaging by 2025 will take a colossal effort, improving waste management infrastructure, aligning and upgrade collection and separation systems, and rethinking and interconnecting the various steps of the plastic lifecycle.
I think sustainable plastic offers a significant investment opportunity. A recent McKinsey report projects a very profitable plastic recycling industry worldwide. Plastic is here to stay, it is an integral part of our everyday lives, offering significant opportunities and benefits, and is a key part of a sustainable transition in general. However, finding ways to make plastics more sustainable is pivotal and something that a lot of countries and actors have a strong interest in achieving and are already engaging in.
I believe, that investors have a critical role to play in facilitating some of the significant systemic changes needed. We need smart investments in sustainable production, design innovations, new types of uses, better waste management, boosting the case for reuse and recycling markets, and ensure that plastics does not end up where it does not belong. A lot of the solutions are already there but we need to scale them up.
Investing in plastics offers not only a great investment opportunity but also a unique chance for investors to make a real impact on sustainability right now.
| brief bio
Tobias Dan Nielsen is a policy expert at IVL (Swedish Environmental Research Institute), where he has a key focus on how to govern a sustainable transition of the plastic system. He has worked on several plastic projects for amongst others the European Environment Agency, the Swedish Environment Agency, and MISTRA. He was part of a WSH on plastics for Principle of Responsible Investment. He has authored several academic publications and reports on plastics, including Plastics and Sustainable Investments: An information brief for investors. He holds a PhD from Lund University, where he amongst other worked on the Sustainable Plastics and Transition Pathways (STEPS) project.
IVL was jointly founded in 1966 by the Swedish state and national business interests to carry out research on industrial air and water issues. Today it is one of Sweden’s leading research environmental agencies working in the interaction between ecological, economic and social perspectives. It combines applied research and development with close collaboration between industry and the public sphere. IVL’s consultancy is evidence-based, and its research is characterized by interdisciplinary science and system thinking.