Global Plastics Treaty headwinds

Emissions, Plastic, Greenwashing, Policy, Multi-Asset

Negotiations for a Global Plastics Treaty are soon to enter their third round; there are significant headwinds. Unsurprisingly, oil and chemical giants are keen to focus on downstream plastics pollution solutions rather than upstream production. Politically, there are major economies, notably in the G20, unwilling to push for a transition away from fossil fuels while continuing to provide subsidies. Looking forward, if global economic growth resumes, plastics demand can be expected to rise while at UNFCCC COP28, plastics is struggling to make the agenda. Whether all of this was factored into the International Energy Agency’s (IEA) recent oil forecast, which expects petrochemicals – the feedstock of the plastics industry – to keep oil on an upward demand path, is unclear. Meanwhile, global plastics pollution increases. We need a meaningful Global Plastics Treaty.

Plastics treaty negotiations update

In November 2022, negotiations began for a legally binding Global Plastics Treaty, scheduled for completion by the end of 2024. The third of five rounds of the Intergovernmental Negotiating Committee (INC-3), taking place in Nairobi, Kenya, is two months away.i

On the 4th of September 2023, the INC Secretariat released the first text of the Treaty, known as a “Zero Draft”,ii which reflects countries opinions and provides a basis for discussion for future meetings. While some important points are not yet included in the text (including timeframes and global targets), the draft suggests that governments could agree on a target for ‘prevention, progressive reduction and elimination of plastic pollution throughout the life cycle of plastic by 2040’ (Option 2 Sub-option 1.3). This and other goals proposed in the Zero Draft aim to limit global plastics production with a focus on the most harmful materials for both the environment and public health. Will the main oil & gas and petrochemical producing countries and the plastics industry be aligned with such goal?

Petrochemicals push up oil demand (2022-2028)

In the International Energy Agency’s (IEA) ‘The Future of Petrochemicals’ reportiii in 2018, the Executive Director, Dr. Fatih Birol, stated that ‘the market for petrochemical products [is] set to expand further as the global economy develops, the future of the petrochemicals industry is of major significance for both global energy security and the environment’. Using established trends, the IEA predicted then that the chemical sector will demonstrate a rate of growth in oil demand that will be higher than that of any other sector, accounting for more than a third. It will also play a significant role in gas demand, for which it is forecasted to account for 7% of by 2030.

Recently, the IEA released ‘Oil 2023 – Analysis and forecast to 2028’.iv Although the report predicts that the world oil demand will ‘lose momentum over the 2022-28 forecast period […] led by continued increases in petrochemical feedstocks, total oil consumption growth will remain narrowly positive through 2028’ – see Figure 1.

Figure 1 Annual oil demand growth, 2022-2028. Note: Fossil oil combustion is total demand minus feedstock use, other non-energy uses and biofuels consumed. Source: IEA (2023)

Over the forecast period of 2022 to 2028, petrochemicals are expected to account for 40% of overall oil demand growth. The IEA sees petrochemical growth ‘with scant opportunities for efficiency gains and circular economy initiatives only offering a limited restraint on upward momentum’ and suggests that the petrochemical sector is forecasted to be the key driver of global oil demand growth, with liquified petroleum gas (LPG), ethane and naphtha accounting for more than 50% of the rise between 2022 and 2028 and nearly 90% of the increase compared with pre-pandemic levels. By 2028, the Agency forecasts that petrochemicals will account for 17% of world oil demand – see Figure 2.

Political backdrop

On 9 September 2023, the G20 leaders gathered in New Delhi, India, and adopted a joint declaration covering issues ranging from climate change and sustainable development to gender equality and countering terrorism. On the topic of plastics pollution, it welcomed the development of the legally binding instrument on plastics pollution, emphasizing marine pollution, but failed to set a timeline to end the use of oil and gas. The text only mentioned that they ‘will increase [their] efforts to implement the commitment made in 2009 in Pittsburgh to phase-out and rationalise, over the medium term, inefficient fossil fuel subsidies that encourage wasteful consumption and commit to achieve this objective, while providing targeted support for the poorest and the most vulnerable’. In the 34-page declaration, this is the only reference to fossil fuels. v

A study published in August 2023 by the International Institute for Sustainable Development (IISD), revealed that in 2022, G20 member countries spent a record ‘USD $1.4 trillion in the form of subsidies, investments by state-owned enterprises (SOEs), and lending from public financial institutions (PFIs). While much of this was support for consumers, around one third (USD 440 billion) was driving investment in new fossil fuel production’.vi

Prior to the G20 meeting in New Delhi, the United Nations Framework Convention on Climate Change (UNFCCC) Secretariat published a Synthesis Report on the Technical Dialogue of the First Global Stocktake,vii which is based on inputs received by parties and identifies key areas for further action to bridge gaps and addressing challenges and barriers in the implementation of the Paris Agreement. Emissions gaps are the difference between the emission levels implied by the NDCs and the average emission levels of global modelled mitigation pathways consistent with limiting warming to 1.5 °C or 2 °C. Implementation gaps refer to how far currently enacted policies and actions fall short of reaching stated targets. Based on current NDCs, the gap to emissions consistent with limiting warming to 1.5 °C in 2030 is estimated to be 20.3–23.9 Gt CO2 eq.2While the text recognises the urgency for countries to phase out all unabated fossil fuel, it does not mention ‘plastics’ or ‘petrochemicals’. The report, however, warns that the window to set ambitious climate policies and implement existing commitments to limit global warming to 1.5C1 above pre-industrial levels is “narrowing rapidly.”

Corporate messaging

In August, Planet Tracker measured the risk as perceived by corporate management teams of 59 plastic-related companies, by scrutinising over 8,200 management filings, transcripts and statements. See ‘Exposing Plastic Risk’.

It revealed that the vast majority of plastics risk disclosures focus on circularity, accounting for 73% of all risk disclosures. References to feedstock and pollution were the rarest. This trend is largely mirrored in each of the three value chain stages analysed (single use plastics producers, containers & packaging converters and fast-moving consumer goods companies (FMCG). – see Figure 3.viii

Figure 3 : Plastics risk disclosure by general theme, by segment. Source: Planet Tracker

Although, the circular economy term should capture all three R’s: reduce, reuse, recycle, currently management teams tend to focus on the recycling element.

This is mirrored by the Alliance to End Plastic Waste (AEPW), a body funded by over 70 global plastic-related companies to push the recycling messaging. In its 2022 Progress Report, the CEO of the AEPW stated ‘Preventing plastic waste from entering the environment and advancing a circular economy for plastics remain at the core of our mission.’ix

Looking forward

Crucial to plastic demand is economic and population growth. Historical analysis from 2005-19 suggests a strong correlation between single-use plastics consumption per capita, and population and GDP growth with an R-squared (goodness-of-fit) of 0.85.x In the latest OECD forecast, in 2023 GDP growth of 2.7% is anticipated, with a modest improvement to 2.9% foreseen in 2024. Annual OECD GDP growth is projected to be below trend in both 2023 and 2024, although it is projected to gradually pick up through 2024 as inflation moderates and real incomes strengthen.xi

Presently, the thematic agendaxii and the Letter to Partiesxiii of the United Nations Framework Convention on Climate Change (UNFCCC) COP28 UAE Presidency, provides little comfort of a commitment in the process to address plastics production and pollution reduction. The UAE COP28 Presidency could argue that it is leaving the discussion on plastics to another UN agency, but we note that the Kunming-Montreal Global Biodiversity Framework did affirm in Target 7 its commitment of ‘preventing, reducing, and working towards eliminating plastic pollution’.

We are faced with a major opportunity to end plastics pollution. The UN is providing the opportunity for sovereign states to tackle the global plastics pollution crisis. The Zero Draft option paper quite rightly includes a reduction in fossil-based plastic as part of the solution. The UN deserve more support from politicians to ensure that the fossil fuel industry does do assign this opportunity to the waste pile along with the plastics it produces.

1 “Emissions gaps are the difference between the emission levels implied by the NDCs and the average emission levels of global modelled mitigation pathways consistent with limiting warming to 1.5 °C or 2 °C. Implementation gaps refer to how far currently enacted policies and actions fall short of reaching stated targets. Based on current NDCs, the gap to emissions consistent with limiting warming to 1.5 °C in 2030 is estimated to be 20.3–23.9 Gt CO2 eq.2 “, for more information see Technical dialogue of the first global stocktake

viii Planet Tracker (2023) Exposing Plastic Risk

ix Alliance to End Plastic Waste (2022) Progress Report

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