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Why Recycling Credits are a Better Solution Than Mass Balance Approaches

Anthony Schiavo, Research Director
May 17, 2021

The current regulatory systems surrounding plastics waste aren't designed to manage the complexity of emerging advanced recycling and bio-based plastic systems. They face many issues – accounting for the output of novel systems that produce oil or other chemical inputs rather than plastics, ensuring transparency, and determining what counts as "recycling" for the purposes of taxes or recycled content mandates.

One result is growing industry advocacy for so-called "mass balance" approaches. This is where the post-consumer waste and/or biomass inputs are physically mixed with conventional fossil oil or gas, but the recycled or bio-based content can be attributed only to chosen portions of the overall output from the process.

Major industry groups like the American Chemistry Council and PlasticsEurope are pushing for the recognition of these standards at a regulatory level. Similarly, companies like BASF have adopted these practices based on standards from groups like REDcert and ISCC.

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Another approach is recycling credit programs that rely on a transferable unit representing a specific quantity of plastic that has been collected and recycled. Credit approaches are at a much earlier stage. A recent report by the Circulate Initiative identified 32 programs with elements of credits or waste offsets but no real standardization or cohesion among these programs. Most actual credit approaches are in the test or pilot phase

Both approaches seek to tackle at least some of the same fundamental issues and can be used separately or in concert with each other. In this blog, we break down the pros and cons of each approach to determine which ones are a better fit for solving the issues of plastic waste.

Mass balance 

Pros:  Mass balance approaches have clear benefits in that they...

  • Help define recycling: Mass balance approaches implicitly answer the question "Is pyrolysis of plastic waste recycling?" by giving a fairly clear "yes." They also effectively answer the question of how to account for the outputs – essentially, any plastics produced with pyrolysis oil (or another recycled input) have a recycled fraction, and any other product does not. Having an answer to these questions that's broadly accepted will help reduce uncertainty and enable brands and recyclers to better plan for the future.

  • Ease integration of circular materials into refinery operations: Mass balance approaches are not necessary for a refinery that runs on 100% recycled inputs. However, that's unlikely to ever actually occur in the foreseeable future, and any given refinery is likely to run on a very low percentage of recycled inputs (1% or less) for at least the next five years, potentially longer. Mass balance approaches are very well-suited for this situation, as physically tracking such a small volume of input is not practical.

  • Enable brands to meet content pledges: Many brands have recycled or sustainable content pledges or regulatory obligations. The adoption of mass balance approaches would give these brands another tool to meet these obligations.

Cons: However, mass balance has drawbacks in that...

  • Free attribution is not reality-based: In practical terms, the recycled content put into a refinery will contribute equally to all output products (there are cases where this is less true, but it's true in general). Mass balance approaches allow the sustainable portion of the feedstock to be assigned to a specific product or output – a principle known as free attribution. Hence, products can be advertised as having a recycled (or bio-based) content that is substantially higher than the share of the actual atoms that originated in waste or biomass. This attribution is done because only a few refinery outputs – certain specific fuels and polymers – have markets or incentives for sustainable content. Producing bunker oil or pitch with recycled content is of no benefit to petrochemical companies, so all the sustainable fraction is assigned away from these products. Ultimately, this "free attribution" is not based on the physical reality of the product and could be considered deceptive. It's worth noting that this issue is much more prevalent for recycled content than for biomass – as there is value in attributing biomass content to fuels, there's less incentive to have attribution that's different from reality.

  • The approach only benefits certain technologies: Free attribution addresses the impracticality of tracking inputs through complex refinery operations. By the same token, though, it doesn't add any value for recycling approaches that don't produce refinery inputs – which is to say, everything other than pyrolysis or gasification. While one could comply with mass balancing bookkeeping for a mechanical recycling or depolymerization process, there's no confusion over how much recycled content is produced or later incorporated into products, so there's no need for free attribution. Mass balance approaches are effectively a subsidy for pyrolysis and gasification (and thus existing chemical players) rather than a unifying regulatory framework for the circular economy. In addition, as catalytic pyrolysis (which produces single products rather than oil) becomes more common, the benefits of mass balance will decrease.

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Recycling credit schemes

Pros: In contrast, credit approaches have clear benefits in that they...

  • Directly address landfilling: Plastic pollution and landfilling are the major pain points from the perspective of consumer brands. Customers are more motivated by the potential ecological damage of plastic waste in the environment than by CO­2 emissions or overall recycling rates. Credit schemes clearly address this issue by directly monitoring and rewarding groups that divert plastic from landfills.

  • Can incentivize collection: While the regulatory approval of chemical recycling techniques and mass balance approaches would create new markets for plastic waste, it would do nothing to directly fund collection and sorting. Collectors – materials recovery facility (MRF) operators or smaller independent players – would have to negotiate with chemical companies to set rates for waste. Under a credit scheme, collectors and recyclers are both directly financially incentivized for collecting and separating waste, either by selling credits to brands or by receiving government subsidies per credit.

  • Easily support many different types of recycling: A credit scheme would still allow pyrolysis players to get value for their efforts (assuming a separate regulatory recognition of pyrolysis as recycling – see more on this below), without needing to worry about where the recycled content ends up. Mechanical recycling and depolymerization players would also benefit from a credit system, though they would not benefit from mass balance approaches. Credit schemes would also positively impact a broader range of players, including smaller businesses, rather than just boosting the incumbent chemicals industry.

Cons. On the other side of the ledger, credits have drawbacks in that they...

  • Don't address content targets: Credit schemes generally can't say anything meaningful about the content of a product, limiting their value to those with pledges to use a given share of recycled content in the products. While landfilling and waste is the bigger issue, these targets are important – especially if official recycled content mandates like California's become common.

  • Could complicate the space with multiple credit standards: While there's potentially an issue with conflicting standards for mass balance approaches as well, the tradable nature of recycling credits is likely to exacerbate this issue. In addition, unlike energy markets – which are generally national – plastic product raw materials are produced, manufactured, and shipped to markets around the globe. An international credit trading scheme of some sort will be necessary for the long-term implementation of this approach, which is a major barrier.

  • Fail to address what recycling is or how recycled content is used: Credits not only fail to sidestep this issue but could actually create further complications. For example, a credit scheme could recognize pyrolysis as recycling without creating any recognition of pyrolysis output as recycled content. While, theoretically, that could be a good outcome (allowing for certain alternatives to landfilling to get some regulatory benefits), the potential for confusion and consumer backlash is high.

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#LuxTake

Comparing the pros and cons of both, credit schemes are a better solution than mass balance approaches to solve the issue of plastic waste. While they are in some ways more limited than mass balance approaches, such as not clearly defining recycled content, the specific claims credits enable are more reality-based than the free attribution of mass balance approaches.

More importantly, credit approaches can directly incentivize investment in waste collection and sorting, one of the biggest gaps in today's recycling infrastructure. Of course, it's not necessary to pick just one or the other – a mass balance approach could be used in concert with a credit scheme to fill in some of the gaps. 

Despite this advantage, credit schemes are still substantially less mature than mass balance approaches. Moreover, credits face a much higher hurdle to adoption – mass balance approaches have already been approved in the EU for some limited biomass fuels applications, whereas there's no governmental approval of plastic credits. Those interested should recognize these challenges and be prepared for bumps on the road as credit schemes develop – but given the concerns around mass balance, companies should not build their strategies or business models solely around it either.

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