Aligning the value chain to decarbonize plastics

Global plastics production was estimated at approximately 400 million metric tons (Mt) as of 2023,¹Including fibers. “Plastics—the fast facts 2024,” Plastics Europe, 2024. with estimated annual process emissions of about 1,000 to 1,200 MtCO₂, according to McKinsey analysis. This results in a typical emissions intensity of 2.5 to 3.0 metric tons of CO₂ per metric ton of plastics produced. In addition, the carbon contained in plastics is equivalent to another approximate 1.0 billion to 1.2 billion metric tons of fossil CO₂ annually. However, it's important to recognize that there is considerable variance in the carbon footprints of different plastic types. Some plastics, due to their applications and more energy-efficient production, exhibit much lower carbon footprints than others.

Process emissions are generated across the value chain, with a typical split as follows:

• Raw materials. About 20 percent of emissions come from upstream production of chemical feedstocks for plastics production, such as naphtha or natural gas. A large share of these emissions stem from the methane leakage connected to the extraction of crude oil and natural gas.²Behrang Shirizadeh et al., “The impact of methane leakage on the role of natural gas in the European energy transition,” Nature Communications, Volume 14, Number 5756; Global methane tracker 2023, International Energy Agency, February 2023.
• Monomer production. About 25 to 50 percent of emissions come from the high-temperature processes (such as steam cracking and steam methane reforming) that produce the basic monomers needed to produce most plastic types. Such processes can entail temperatures of more than 850°C, which can only be achieved by burning fossil fuels.
• Plastics production. About 30 to 55 percent of emissions come from final processing (such as polymerization) into various plastic types.

This split can vary significantly depending on the complexity of the chemical production pathway. For example, polyethylene is the largest plastic product by volume³Mehmet Demirors, “The history of polyethylene,” in 100+ Years of Plastics: Leo Baekeland and Beyond, ACS Symposium Series, Volume 1080. and has a higher emissions share in the monomer production, whereas plastics that are more complex, such as polycarbonate, have a higher emissions share in the actual production of plastics.⁴McKinsey Value Chain Twin.

Today, there is a significant spread in emissions intensity between different players and regions, primarily driven by four factors:

1. Plastic type. The many different plastic types can have vastly different emissions footprints.
2. Production pathways. For a single plastic type, there are often different production pathways that can have vastly different emissions profiles depending on their specific energy requirements and process engineering.
3. Energy efficiency. Energy-efficient measures in the various production steps, such as heat recovery, can affect a plastic’s total emissions.
4. Energy mix. The energy sources used in plastics production processes also affect emissions. The three typical energy supplies are direct heating (through burners), steam, and electricity. These can result in very different footprints depending on which fuels are used in generating that energy supply.

For the same plastic type, these variations can lead emissions to vary by a factor of two to five, in extreme cases.

Recycling pathways (mechanical and chemical) can address the carbon equivalent contained in plastics because recycling does not consume additional fossil feedstocks for raw materials.

In addition, recycling technologies can enable producers to skip many steps in the linear plastics value chain, which can also lead to much lower energy consumption and thus lower emissions. However, this is by no means a guarantee. There are also plastics recycling pathways that do not have better process emissions than the respective virgin-plastics value chain.

Additionally, not all plastic types can be recycled using every method, and for many types, recycling technologies are still not operating at full industrial scale. On the other hand, some plastic types, such as polyethylene terephthalate, have notably high recycling rates and well-established recycling infrastructures in many countries, underscoring the progress that’s already been made toward a circular economy and the opportunities potentially in store for other plastics.

Almost every plastic type—from commodity plastics such as polyethylene to engineering plastics such as polycarbonate—requires specific production systems and technologies. However, some factors for achieving both decarbonization and circularity hold true across all plastics value chains.

First, both the linear virgin-polymer value chain and the circular-recycling value chain can be decarbonized with levers available today and at relatively incremental cost. Available abatement levers include the following:

• energy efficiency and waste-heat recovery
• change of fuels (to renewables or hydrogen, for example)
• use of biobased feedstocks to eliminate carbon emissions from production yield losses¹In petrochemical conversion processes, yield losses often lead to direct CO₂ equivalent emissions in the waste treatment process as the fossil carbon feedstock converts to CO₂. These losses can be compensated for when using biomass feedstocks.

Second, the shorter the circular loop, the better the carbon footprint of the system. Investments in technologies that enable shorter loops will always beat other solutions—including biomass solutions, whose long loops go through the atmosphere—in terms of decarbonization potential.

As a rule of thumb, the more that processing steps are skipped in the virgin chain, the better the footprint of the recycling route. Conversely, the longer the recycling pathway, the more decarbonization is needed along the production chain to reduce emissions, compared with the virgin route.

Decarbonization at scale will thus require massive investment into innovation and assets. The industry still faces fundamental technological bottlenecks that, if overcome, would decarbonize large shares of emissions in one go. For example, the electrification of the high-energy processes (and running them with renewable electricity) is still a technological challenge, and replacing the existing assets will take significant time after the technology is mature.

In addition to decarbonizing processes, plastics companies can work to increase their access to secondary plastics to ramp up circular value chains.

To illustrate the potential of this opportunity, we can look at a select example of an engineering polymer. For this polymer, 70 percent of today’s postconsumer scrap is not collected, and 70 percent of collected scrap is not recovered and not recycled. These unrecovered and unrecycled volumes come from various industries, including consumer goods, construction, automotive, packaging, and medical.

To increase collection and recovery rates for this polymer in each of these industries, stakeholders will need to contend with the specific dynamics that are at play. For example, recovery rates are low in construction, and the goods that are recovered are often contaminated (and thus unrecyclable by conventional mechanical recycling). Therefore, stakeholders can focus their efforts on such areas to have the greatest effect in unlocking additional scrap streams for advanced recycling technologies.¹Chris Musso, Zhou Peng, Andrew Ryba, and Jeremy Wallach, “Beyond the bottle: Solutions for recycling challenging plastics,” McKinsey, November 14, 2022.

From a global perspective, two of the biggest opportunities to access more postconsumer scrap for this example polymer are consumer goods and automotive products in Europe and China. These opportunities stand out due to the large overall volumes of waste in these regions, combined with the potential to augment the subscale circular value chains that already exist in Europe and China for this polymer.

Similar analyses can be done to size the opportunity for other polymers, with solutions tailored to the specific factors affecting the waste and value chains of those polymers.