Circular economic model - and lots of funding - needed to solve plastic waste problem

THE environmental scourge that is plastic waste and pollution cannot be overstated. Plastic production is said to have soared from 2 million to 348 million tonnes in the last 70 years, while 11 million tonnes of plastic waste are flowing into our oceans each year. The impact isn’t restricted to marine life; scientists recently reported discovering microplastic particles in the blood and lungs of living humans.

With plastic flows into the ocean projected to nearly triple by 2040, to 29 million metric tonnes per year — or an equivalent of 50 kilograms of plastic per metre of coastline worldwide — the time to act has to be now.

In an earlier article (BT, “Asia well-poised to harness potential of plastics circular economy: Circulate Capital”, May 16, 2022), this paper touched on how investors can play a key role in solving the problem, and how investment opportunities exist across the entire plastic value chain. Today, we look at the scale of investment needed to bring about meaningful change, in the form of creating a plastic circular economy — arguably humanity’s best hope for a sustainable solution.

Reducing waste, creating jobs

The United Nations Environment Programme (UNEP), the global authority for the environment, has said that a shift to a circular economy can reduce the volume of plastic production by 55 per cent and the volume of waste in the oceans by 80 per cent, while reducing greenhouse gas emissions by 25 per cent.

The transition is also expected to save governments US$70 billion by 2040, and create 700,000 additional jobs.

A key milestone in this transition was reached when the United Nations Environment Assembly (UNEA) — the world’s highest-level decision-making body on the environment — adopted a resolution in March that would pave the way to a legally binding global treaty to end plastic pollution.

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Agreed upon by leaders and representatives from 175 nations, the resolution addresses the full life cycle of plastic, from its production, to its design and disposal.

Inger Andersen, executive director of the UNEP, said the move offers a “huge opportunity to transition to a new circular plastics economy, one where businesses innovate across the plastics value chain”.

Jacob Duer, president and chief executive officer (CEO) of the Alliance to End Plastic Waste (Alliance), says financing will be critical to the success of the new global agreement. “Traditional financial institutions, as well as new financing players such as the Alliance, can capitalise on the surging global demand for recycled plastics to fund solutions at scale that could turn billions of investment capital into a US$1 trillion circular economy for plastics that supports both developed and developing countries globally.”

Funding the circular economy

Speaking to The Business Times, Duer stressed that significant investments are needed to accelerate solutions across the plastic value chain for circularity. He cited a recent report, Unlocking the Plastics Circular Economy, by Global Plastic Action Partnership (GPAP) — which comes under the auspices of the World Economic Forum — which said the transition to a circular economy for plastic will require investments of US$1.2 trillion by 2040.

A report by Google, Closing the Plastics Circularity Gap, out in March, estimated that more than US$430 billion needs to be invested over the next 20 years to ensure circular supply chains can meet the growing demand for plastics.

And, according to Breaking the Plastic Wave, a study by The Pew Charitable Trusts and Systemiq, the collection and processing of plastic waste between 2021 and 2040 will cost at least US$510 billion; though, it added, with plastic not able to be collected in isolation, the actual government cost for waste management could amount to US$3.1 trillion.

Duer says transitioning to a plastic circular economy starts with putting in place a proper collection and sorting of plastic waste generated, which should include financially sustainable waste management models that can be replicated to meet demand, unlock investible opportunities, and generate recycled material. 

He pointed to the “Clean Indonesia: Elimination of Plastic Waste” programme that the Alliance launched in Indonesia in May together with local authorities; it aims to deliver financially sustainable waste management systems that can be replicated across the country and beyond.

Phase One, in the Malang Regency in East Java, comprises 5 materials recovery facilities and 4 transfer stations. When fully operational, the system aims to collect 300,000 tonnes of municipal solid waste annually, including 50,000 tonnes of plastic waste, with an annual recycling rate of over 60 per cent. 

But these programmes don’t come cheap, and governments have to be prepared to make such investments a priority. In Indonesia alone, Duer estimates that capital investments of about US$18 billion are needed for waste management and recycling between 2017 and 2040, with US$1 billion per year in additional operational financing for solid waste management required by 2040.

“These numbers will be similar for other countries across Asia facing similar challenges,” he said.

“Mobilising capital for waste management, which has traditionally relied on government budgets and bilateral and multilateral development aid, is therefore a key priority in developing markets in the region, including China, the Philippines, Thailand, and Vietnam.”

Challenges and contributions

A particular challenge in this part of the world is that open dumping is the most commonly deployed waste management approach, with many landfill sites not operated according to scientific or health standards, Duer points out. 

“This is why the Alliance’s focus is on improving the collection, sorting, processing, and recycling of plastic waste by implementing projects, investing in innovative solutions and enabling education that develops or enhances waste systems.

“Throughout our work, we have found significant demand for practical, scalable solutions to address plastic waste in neighbourhoods, communities, and cities. People want to address the issue, and need viable options to do so.”

Duer says the Alliance firmly believes in the private sector’s catalytic role of accelerating innovation and channelling capital to develop effective and scalable solutions that end leakage of plastic waste into the environment. 

As an example of this, he said, it recently teamed up with Lombard Odier Investment Managers to launch a circular plastic private equity fund. With a target of US$500 million, the fund aims to accelerate scalable solutions to remove plastic waste from the environment, increase recycling, and drive the global transition towards a circular economy for plastic. 

“We are also looking beyond traditional funding mechanisms to prioritise new types of blended finance, private equity, venture capital, and other private sector funding to drive our work,” Duer said.