By Lu Yanan, JLC Chemical

A few days ago, the "China Times" learned from the Ministry of Ecology and Environment that the Ministry is accelerating various preparation works before the launch of the voluntary greenhouse gas emission reduction trading market. At present, the main institutional arrangements for the market have been clarified, and the required infrastructure has been basically built, and the Ministry strives to launch the national trading market as early as 2023.

What is CCER?

CCER (China Certified Emission Reductions) refers to emissions reduction activities conducted by companies on a voluntary basis that are certified by the Chinese government, which is a voluntary greenhouse gases reduction act that is in line with Interim Measures for the Administration of Voluntary Greenhouse Gas Emission Reduction Trading and has been filed by the National Development and Reform Commission and registered in the national registration system. The unit is "tons of carbon dioxide equivalent".

CCER trading, as one of the two main types of China's carbon trading market (the other is the compliance market which is the carbon emission allowances allocated by the government to enterprises), can be regarded as a supplement to the carbon emission allowances. To put it simply, in order to fulfill the contract, enterprises with excess emissions can not only purchase carbon emission allowances from enterprises with excess allowances, but also can purchase a certain percentage of CCERs that is equivalent to the quota. Not only that, the price of CCER is generally lower than the price of quota, which means that the cost of enterprise performance can be further reduced.

The relevance of CCER restart to recycled plastics industry

The Validation/Certification of CCER Voluntary Greenhouse Gas Emission Reduction Project stipulates 16 professional fields for domestic CCER project development (see Figure 1), including waste disposal. Among the participants in the voluntary emission reduction market, besides forestry carbon sinks and methane utilization, renewable energy is also a major emission reduction project.

Figure 1 Validation/Certification of CCER Voluntary Greenhouse Gas Emission          Reduction Project- Division of 16 professional fields

The recycled plastic market includes recycling and reprocessing. According to the demonstration of Circular Economy: The Other Half of the Blueprint to Tackle Climate Change, recycling 1 ton of plastic can reduce 1.1 to 3.0 tons of carbon dioxide emission compared to using fossil raw materials to produce the same amount of plastic. This demonstrates that plastic recycling has an obvious effect in carbon reduction. In the context of the "double carbon" strategy, which aims to reduce carbon emissions to some extent, it is crucial to reduce carbon emissions throughout the production process. Putting aside the reduction in the production and use of primary plastics, the popularization of recycled plastics will become one of the important ways to reduce carbon emissions.

However, according to incomplete statistics, as of now, the National Development and Reform Commission has announced 2 871 CCER-approved projects, 861 filed projects, and there are 254 projects that have obtained emission reduction records. Among them, wind power, photovoltaics, and rural household biogas projects accounted for the largest proportion. Others including waste treatment projects, waste heat power generation, and forestry carbon sinks had a small number of issuances, less than 10, and projects related to plastic recycling have not been included yet.

Recycled plastics industry in tepid development and in urgent needs of effective support

(1) Recycling level

Management in the recycling process should be strengthened and resources from the source should be integrated.. China is a country with significant plastic production and consumption. However, the plastic has low recycling value, and therefore about 70% of plastic waste ends up being incinerated or landfilled alongside household waste. The recycling process plays a primary and vital role in the recycled plastics industry chain. It will effectively improve the re-utilization rate in the later process by implementing waste plastic classification and integrating from the source.

In recent years, China has attached more and more attention to the plastic-pollution control and the recycling and reuse of waste plastics, and successively issued a series of policy documents including the Opinions on Further Strengthening Plastic Pollution Control and the Action Plan for Plastic Pollution Control of the 14th Five-Year Plan. In March, the National Development and Reform Commission's Environmental Resources Department and the Ministry of Ecology and Environment's Solid State Department hosted a liaison officer conference on the special working mechanism for plastic pollution control. During the conference, key tasks for plastic pollution control in 2023 were discussed and deployed. It made clear that it shall scientifically and steadily promote plastic reduction and substitution from the source, further consolidate the effectiveness of waste plastic recycling, cleaning and disposal, and focus on solving problems in key areas such as agricultural film, takeaway, express delivery, etc.

(2) Application level

In the traditional concept, recycled plastics were mainly used to reduce costs. However, with the unveiling of the concepts like "double carbon" and "circular economy", many companies have gradually shifted their focus towards the application and research of recycled plastics on resource utilization and carbon reduction. Especially in 2023, many petrochemical companies begin to pay more attention to the proportion of recycled materials added in the products. To better achieve carbon and emission reduction, it is encouraged to further increase the replacement ratio of renewable resources to primary resources. Taking automobiles as an example, under the boom of "double carbon", the lightweight of automobiles has become a key focus in the industry, leading to an increased use of plastics in automotive applications. And with the environmental protection concept brought by recycled plastics, major automakers have also joined in.

Apart from automobile manufacturing, it can not be ignored in the application of soft and hard packaging, pot injection molding, and home appliance casings. However, in recent years, domestic and foreign demand has been weak, resulting in a decrease in the operating rates of recycled plastic enterprises compared to the same period last year. Enterprises have reduced their supply to mitigate the price decline. Looking back on the first half of 2023, the high prices of recycled plastics were mostly concentrated at the beginning of the year. However, as the off-season arrived in May and June, prices continued to be weak due to the shrinking product orders, so a number of enterprises had increased sales pressure and began to squeeze profit to promote sales. As a result, an increased number of enterprises withdrew from the market. The contradiction between supply and demand became prominent, which led to a negativity for recycled plastics enterprises to enter the market.

Future trend: strengthen cooperation and focus on resource integration

As the economy and society have fully recovered, macro policies began to take effect and the national economy had an upward trend in the first half of 2023. Nevertheless, non-manufacturing, in contrast, had the strong performance. In 2023, China's Manufacturing Purchasing Managers Index (PMI) has been in the contraction range for three consecutive months, and the PMI data in June was 49%, an increase of merely 0.2 percentage points from the previous month, and a year-on-year decrease of 1.2 percentage points (see Figure 2). At the same time, we must see that the risk has been reduced, but the political and economic situation in the world was complicated, and the foundation for the sustained recovery and development of the domestic economy was still not solid. Under the above-mentioned general environment, it is difficult for the recycled plastics industry to see substantial improvement in the short term. Measures, such as extending the industrial chain of some products and realizing the effective integration of resources, are an expansion based on the basic market.

Figure 2 China's PMI trend chart from 2022 to 2023

In addition, the recycling process cannot only rely on the centralized operation of recycling stations. To realize the expectation of standardized recycling stations across the country, we can devote efforts from the source of waste plastic recycling, such as supermarkets, enterprises, hospitals, etc., make a certain amount of management in waste plastics sorting and collecting after they are eliminated, strengthen the cooperation between the recycling stations and the above-mentioned institutions, and carry out relevant internal guidance to help the organization effectively sort, thereby reducing some unnecessary manual sorting costs in the recycling process, and improve the effective utilization rate in use.

The road to the future is arduous and long, and we still need to work hard to move forward

After the restart of the CCER market, it will create an effective way for industries under high pressure on carbon peaking to fulfill the contract at low cost. Recycled plastic-related enterprises, as environmental policy-oriented enterprises, occupy an important part in waste plastic pollution treatment.

Once the CCER transaction is restarted, it is expected to have a positive impact on enterprises by helping to offset their costs, which may alleviate some of the negative sentiment in the market. Currently, the market is under the situation of weak domestic and foreign demand. However, China's economic policy is focused on stabilizing growth, and the policy is also slowly making efforts, so it is better to maintain some optimism for the market outlook.