Chemical recycling in Europe is at a critical juncture, with developments in regulation and industry fundamentals. Argus spoke with Valentijn de Neve, president of the Chemical Recycling Europe (CRE) association, whose members include chemical recycling technology developers, ahead of its upcoming forum in Brussels, about the association's view on these topics.
What is the mood of CRE members regarding the development of plastic-derived pyrolysis oil (PPO) capacity in Europe, which has experienced delays in recent years?
We are all aligned on the fact that too much plastic is incinerated or landfilled — this needs to change and we need to make that change.
I personally believe that there are multiple reasons and not just one, for delays, especially in relation to new technologies and complex projects.
And in all transparency, if I look at the overall mood, it is one of conviction in driving further regulatory clarity and empowering the industry to bring more recycling capacity to the market.
I would love the process to go faster, but its heading in the right direction. And the next three years are crucial.
One of the unique things that the member meetings of CRE is that we all applaud the other competitors if they're successful with startup and ramping up, because we all see that is key for the industry. And this is an important year where a number of flagship projects will start.
The CRE Forum is an excellent moment to get together, for the industry to reflect what we have all submitted to the recent EU mass balance consultation, to hear about recent feedstock announcements and to see what we can still achieve for the rest of the year.
What can drive higher demand for chemically-recycled polymers, and are the current prices in the market for PPO and circular naphtha sufficient to drive further investment in the industry?
One of the complexities is that recycled content requirements for contact-sensitive plastic packaging in the EU will go from zero to 10pc in one go in 2030.
If there would have been a more staggered increase of recycled content requirements ahead of 2030 it would have been much easier to build the capacity to make the value chain work.
We do see that in some countries EPR schemes provide an incentive for those that bring packaging on the market that has recycled content. We need a couple of creative solutions ahead of the 2030 deadline that supports the full value chain to start adopting and working with higher percentage of recycled content and I actually think that this EPR eco-modulation, which will be discussed at the CRE forum, is an excellent example which can sustain much higher premiums [for circular feedstocks and polyolefins] than Argus currently sees in the market*.
Does CRE support EU draft mass balance rules, recently put out to public consultation, that would allow steam cracker operators processing PPO to allocate recycled credits to their highest value products on a fuel-use exempt basis, but force credits from PPO to be allocated proportionally to different outputs at prior processing steps?
Yes. As CRE, we fully support this "proportional allocation within fuel-exempt" mass balance, but believe that for the industry it's key that the rules are very clear and can't be interpreted in different ways.
So we advocate adding some more clarity on which of the sub-articles [on mass balance] apply to which processing step, and tightening of some of the definitions.
I believe it's fair that there's a proportional allocation to measure how much of the material you put in becomes a high-value chemical. We see proportional allocation as fundamental to have credible claims on recycled content and as favouring technology development and innovation to improve yields to improve oil quality.
This approach would appear to effectively rule out co-processing PPO in a standard refinery to produce circular naphtha, which is a drop-in replacement feedstock for polymer production. If that's the case, will enough circular polymer be available to meet the 2030 recycled content requirements?
It's definitely possible to partly co-process PPO with fossil products in refineries [under this mass balance approach].
But, realistically, where there is proportional allocation at the pre-treatment step, any process where most material will not end up in high value chemicals [such as co-processing PPO in a standard refinery] will result in a larger yield loss.
There may still be opportunities to use hydrotreater solutions at existing refineries where you can come closer to having a dedicated hydrotreater for PPO upgrading. Some smaller refineries have plans to convert some of their hydrotreaters, which is an excellent step.
And we also see local solutions being developed for on-purpose upgrading. It's clear that several chemical players are contemplating this as well as a number of traders.
And, from what we see, the economies of scale are there, so I do believe that the upgrading capacity investment will come.
On PPO production, we also see increasingly that projects become financeable by banks and more interest from capital markets, with greater maturity of technology and value chains. So I think that in the next 12 months there will be more announcements across the sector of projects who have secured third party financing.
As and when more PPO projects start up, is there still urgent need for investment in the feedstock supply chain?
Investment is needed in sorting plastic waste feedstock further and preparing it. But I see growing involvement of waste management companies such as Green Dot, Tomra Feedstock and Source One as positive for the market.
In the past a lot of chemical recycling companies were looking at sorting waste themselves. But I think what we now see is that sorting and preparing waste is a different capability than running a chemical recycling plant.
The timeline for building a sorting plant is often slightly faster than the pyrolysis installation, so with the plans that multiple players have announced I don't see a limit on the feedstock. I think they can gradually build up at the same time.
Multi-colour — slightly contaminated — flexibles will be the key feedstock for a lot of players in the market, because for rigid waste there's often also mechanical recycling. These films could be post-commercial or from residential collection, and this might depend on how these are treated by the EPR schemes and governments in different countries.
In the end, the chemical recycling installation does not look at whether waste is commercial or household, it just looks at the polyolefin content.
What might hold investment in the whole supply chain back?
What we see holding investments back is, firstly, clarity on mass balance which I believe we're close to. But I think clarity on two key points in PPWR will really help to get the capacity online prior to 2030.
In PPWR there's a clause saying that in 2028 there will be a revision whether there's enough capacity build up for the 2030 targets, and that's very difficult to ask from the industry to invest significantly when we all know that there is a revision in the plan to the PPWR.
And we need clarity on how the "mirror clause"** will be enforced and what are the details, which will really show how much of a level playing field there will be for producers in Europe versus those abroad.
As long as those loom over the market and there's not full clarity it's hard for a lot of investment decisions to progress, and I would argue that having clarity on them is as much needed as the clarity on mass balance. A decision on both is planned by the end of 2026.
* Argus' spot price assessment for refinery grade plastic-derived pyrolysis oil has averaged €1,208/t fca Europe so far in 2025
**The "mirror clause" in PPWR states that recyclates from outside the EU will only be eligible to count towards recycled content targets if coming from a facility following emissions and environmental performance standards that are equal to those that would apply to an analogous EU recycler.
