The environmental impact of plastics and why we need to act

Citi Research

Roughly one-third of the 400 million tonnes of plastics produced each year is used for packaging with eight million tonnes a year estimated to find its way into our oceans. The proliferation of plastic products and the extent of their escape into the environment means one day it will form a noticeable line in the sedimentary layers of the future.

Plastics have become a staple of daily life in the modern world, steadily gaining share from other packaging materials over the last 50 years based on their low cost, durability, convenience, and malleability. However, environmental concerns around landfill contamination have grown steadily alongside increased plastics use, with a great deal of recent attention on ocean contamination and the growth of microplastics.

Some estimates suggest the sea contains some 52 trillion microplastic particles or about 500 times more stars than in our galaxy.

While debate around the sustainability and recyclability of plastics has been long-running in Europe and the Americas, the Chinese government took a revolutionary approach earlier this year, deciding it would no longer import 50 per cent of the world’s scrap plastic and paper. As China has been the dominant importer of plastic scrap with an annual plastics consumption of 8 million tonnes, this has led to a collapse in the price of various recovered plastics materials, and a glut of oversupply piling up in Western ports.

Echoing China’s actions, national and local governments have launched their own plastics bans. The U.K. has taken the lead position on preventing plastics waste with proposed bans on plastic cutlery, straws, and cotton buds/swabs. The EU has followed with their own ban, indicating once fully implemented in 2030 the changes could cost businesses over $US3.5 billion a year. Some of the most aggressive bans have been in emerging market countries; given these countries’ per capita plastic use is very low, the bans have the potential to sharply impact future consumption growth of plastics.

In response to increased environmental scrutiny, the plastics industry is not standing by idly. Chemical companies are adapting their portfolios and practices towards more environmentally conscious strategies, focusing on light-weighing their products, investing in plastic recycling companies, improving recycling systems, and creating bio-based polymers. Almost 1 million tonnes of biodegradable plastics capacity has been built, and with appropriate legislation, the economic incentives could be established to build-out these higher-cost product capacities, addressing the environmental concerns.

As plastics face increased regulatory and consumer scrutiny, alternatives including metal, glass, and paper may gain back some market share. We see a few potential ‘battleground’ packaging products, including soft drink bottles, coffee cups, protective packaging for e-Commerce, and retail bags.