Finnish refinery Neste has criticized a European Commission draft on plastics recycling that the company says threatens an earmarked Eur111 million investment at its Porvoo refinery, the company told S&P Global Energy on Sept. 1.

Neste was finalizing the investment at its Porvoo refinery to make it one of the largest sites for upgrading pyrolysis oil prior to cracker intake, and this investment is "now under regulatory threat," said Jori Sahlsten, Executive Vice President for Oil Products (including renewable and recycled plastics) at Neste.

"The draft rules put at risk the EU's competitiveness in the scale-up of chemical recycling and introduce unintended competition with mechanical recycling. That's because the draft fails to enable existing refineries to be a part of the value chain for EU recycled content targets," Sahlsten said.

Specifically, Neste said that the current draft proposal effectively excluded existing refineries from the chemical recycling value-chain for EU recycled content targets with several critical impacts, according to its submission to the consultation feedback on Aug. 19.

Sahlsten further added that Neste was finalizing an Eur111 million investment at its Porvoo refinery to make it one of the largest sites for upgrading pyrolysis oil prior to cracker intake and said this investment was "now under regulatory threat".

Finland's Neste previously announced that it made the final investment decision to build upgrading facilities for liquefied plastic waste at its Porvoo refinery on June 15, 2023.

Extensive response to EU proposal

The European Commission launched a public consultation on July 8 to establish new regulations for calculating, verifying, and reporting recycled content in single-use plastic beverage bottles. The consultation is particularly focused on establishing guidelines for the incorporation of chemically recycled materials into these bottles.

Following the conclusion of the consultation on Aug. 19, an overwhelming amount of 158 feedbacks had been received, including from chemical players Exxon Mobil, Eastman, ORLEN, OMV , Evonik among others like The European Chemical Industry Council (CEFIC) and chemical recycler Quantafuel.

"A restrictive mass balance approach risks hindering the scale-up of chemical recycling, limiting affordable access to recycled materials. This could prompt the European Commission to introduce derogations and exceptions for contact-sensitive applications, as foreseen in Article 7 of the Packaging and Packaging Waste Regulation, ultimately delaying the transition to plastic circularity," said Exxon Mobil, according its consultation feedback submitted on Aug. 19.

However, there are also some supporting the advocates for a more restrictive approach in mass accounting calculation.

"The draft puts a strong emphasis on mass balance accounting and attributed amounts, ensuring transparent attribution of renewable feedstocks, accounting for process losses, and excluding fuel uses," said Renewable Carbon Initiative, according to its consultation feedback submitted on Aug. 19.

This comes after the Intergovernmental Negotiating Committee on Plastic Pollution (INC-5.2) – failed to agree on an international legally binding treaty to end plastic pollution, including in the marine environment -- in Geneva in August, amid entrenched positions.

A group of about 100 countries -- including the EU, UK and a number of African and South American nations -- supported a cap on virgin plastics production, and other countries, mainly oil producers with large petrochemical industries -- such as Iran, Russia and Saudi Arabia -- argued that a treaty should focus on eliminating plastic waste.

The petrochemicals and plastics industry, not surprisingly, opposes a production cap and is calling instead for a focus on circularity, not least because plastics recycling rates, still only about 10%, remain alarmingly low.

Globally, production of petrochemicals will require more than one in every six barrels of crude oil produced by 2030, according to the International Energy Agency's latest medium-term oil outlook.

Buying appetite for R-PET remains weaker-than-expected

In addition to acknowledging the role of chemical recycling technologies for difficult-to-recycle plastics, the draft also added that it is the responsibility of individual Member States to collect and calculate on an annual basis whether market players meet the targets set by the SUPD. Member States are to weigh the recycled plastics in beverage bottles placed in the market and calculate the resulting proportion of recycled content in the bottle.

However, despite reiterating that the responsibility of Member State for the compliance of the targets, it did not mention any penalties or fines for players who fail to meet the 25% recycled content target in beverage bottles.

Market participants also point toward low recycled polyethylene terephthalate buying appetite due to the current price spread between recycled and virgin PET. Sellers have added that without significant penalties or legal obligation to include 25% recycled content in plastic beverage bottles, consumers will prefer to buy the most cost-effective material.

Platts, part of S&P Global Energy, assessed the R-PET FD Northwest Europe food-grade pellet spot price at Eur1,630/mt on Sept. 1, stable from the end of July, at a Eur700/mt spread to Virgin PET FD NWE.