CO₂ pricing-CO₂ costs money

28 September 2022

The concept of CO₂ pricing has been around for some time. Energy and industrial companies in the European Union have had to pay for the CO₂e emissionsthey cause since 2005. To this end, the EU has launched the European Emissions Trading Scheme. The idea is that companies must purchase certificates for the emissions generated during energy production and can trade these among themselves at market-based prices. The number of new certificates made available by the EU member states is decreasing year on year. As a result, the supply of certificates is falling and prices are rising. This increases the economic pressure on companies and creates an incentive to invest in climate-friendly technologies. Since 2021, the transport and heating sectors in Germany now also have a CO₂-price. The new CO₂-pricing is at the heart of the German government’s 2030 climate protection program. Companies that put heating oil, liquid gas, natural gas, coal, petrol or diesel into circulation must obtain emission rights in the form of certificates for the greenhouse gas emissions caused by their products from the German Emissions Trading Authority (DEHSt) at the Federal Environment Agency. The costs for the certificates are paid by the fuel suppliers and then passed on to consumers. The national emissions trading system started on January 1, 2021 with a fixed price of EUR 25 per tonne of CO₂e. It will gradually increase to 55 euros in 2025. A price corridor of at least EUR 55 and at most EUR 65 is to apply for 2026. After this introductory phase, companies can purchase the certificates at auction. The total quantity of certificates for the CO₂-emissions are limited in line with the climate targets. The price is then formed on the market by supply and demand.

Where the CO₂ in plastic comes from

But what does the CO₂ price have to do with plastics production? Quite a lot, because greenhouse gases are produced during the entire life cycle of a ton of plastic, as energy is required for every step: during the production of the primary plastic and its precursors, during the processing of the plastic into products and during disposal. A study published by the Swiss Federal Institute of Technology (ETH) Zurich in February 2022 in the paper “nature sustainability” shows that the carbon footprint of plastics was 2 GtCO₂e in 2015, which corresponds to 4.5% of global greenhouse gas emissions. At 1.7 GtCO₂e, the combustion of fossil fuels to generate energy for global plastics production accounted for the lion’s share. The carbon contained in plastics is equivalent to 890 MtCO₂e- the amount that would be produced if all plastics from 2015 were incinerated.

In other words, twice as much carbon is required as fuel for plastic production than is contained in the plastic itself. The reason for the high amount of CO₂e generated during plastics production is easy to explain. Between 1995 and 2015, plastics production increasingly shifted to coal-based economies such as China, Indonesia and South Africa. These generate a large part of their energy from coal. These countries then export the plastics produced there — primarily to the EU and the USA. The study also found that the majority of greenhouse gas emissions from plastics — around 96% — are generated during the production of plastics. Burning the material and the energy required for recycling, on the other hand, only account for 4%.

Ways to reduce CO₂ and lower costs

There are only two ways to reduce greenhouse gas emissions from plastics: firstly, by recycling plastics. The only CO₂ emissions are the energy input from fossil fuels required to melt and compound the material. The second way is to use renewable energies. This is because they do not generate any greenhouse gas emissions. The ideal solution is obvious: recycling combined with renewable energies. By way of comparison, the production of one tonne of the recyclate PA6.6 ENTRON eco A generates 0.285 kgCO₂e if grey electricity — i.e. electricity of unknown origin — is used. In contrast, one tonne of PA6.6 produces an average of 7000 kgCO₂e when new. If electricity from renewable energy sources is used, CO₂e emissions from the production of ENTRON eco A are close to zero.

The calculation for the end customer is simple: if one ton of CO₂e costs 30 euros in 2022, then the CO₂-pricing for PA6.6 virgin material will generate average additional costs of EUR 210 per tonne — and this will increase every year as CO₂-price more expensive. With ENTRON eco A, on the other hand, it is only 8.55 euros/t, even with gray electricity. As ENNEATECH has been relying on renewable energy from wind and hydropower and using process heat since 2022, this saves a further 1.7% of the demand for fossil fuels. This reduces the CO₂-The carbon footprint of the products is also directly reduced by this factor.

In Italy, it is already the case that the state grants a tax reduction in line with the lower amount of CO₂e granted by ENTRON eco A. The lower the greenhouse gas emissions compared to new goods, the higher the refund. A plastics tax is also to be expected in Germany. The basis for this is the EU Taxonomy Regulation, which is a central component of the EU’s Green Deal. DIN Spec 91446 can be seen as a step in the direction of a plastics tax. It regulates the information on the quantity of CO₂e of recycled goods compared to virgin material and thus creates the basis for future taxation of plastic.