PARIS (ICIS)--Global recycling rates are set to boom in coming decades but demand for crude oil from the petrochemicals industry is set to continue rising as emerging economies urbanise, the International Energy Agency (IEA) said on Wednesday.
In its annual World Energy Outlook (WEO), the Paris-based Agency said that plastics recycling will be key to reducing chemicals material demand, which would in turn contribute to cutting carbon dioxide (CO2) emissions emanating from materials production.
The chemicals industry will need to adapt to the fact that improving recycling rates of plastics could “displace considerable chemicals sector” demand, the agency said.
Plastics are produced with key petrochemicals’ derivatives called polyolefins, like polyethylene (PE) and polypropylene (PP).
The IEA’s outlook includes two scenarios. What it calls Stated Policies Scenario, which considers the current pledges made by countries regarding energy use, although as climate warming becomes more of a factor those policies may change in the future.
The other route, which the IEA has termed the Sustainable Development Scenario, “provides a strategic pathway to meet global climate, air quality and energy access goals in full” as per the 2015 Paris Agreement to limit global warming.
In both scenarios, petrochemicals’ demand for crude oil is set to increase.
Under the projections countries have made in the last decade to limit global warming, crude oil use as a petrochemicals feedstock is likely to be particularly strong until 2025 on the back of new capacities, notably in the US, China, and the Middle East.
The US is set to become a petrochemicals powerhouse on the back of polymers capacities build thanks to abundant feedstock coming from shale gas.
“Today around 15% of plastics are recycled globally and an increasing number of countries aim to curb single-use plastics. However, most future growth in plastics comes from developing countries with relatively low levels of recycling and so the global average remains less than 20% in 2040,” said the IEA.
“If the average global recycling rates were instead to reach 35%, this would avoid around 1.7m bbl/day of oil demand in 2040; even in this case, however, the use of oil as a feedstock would still increase by 3m bbl/day between 2018 and 2040.”
Annual average change in global crude
oil demand by sector
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The IEA said that both governments and industry should promote durability and long lifetimes for the construction industry and goods, except in cases where doing so "would lock in CO2 emissions and lead to higher" lifecycle emissions.
Some methods to increase the reuse and recycling materials could be better supply chains integration, mandating the use of a share of recycled materials in products, as well as adopting landfill disposal fees, or expanding the coverage of recycling requirements.
“Designers and manufacturers should take into account the trade-offs between production and use-phase emissions, and design for long lifespans, repurposing, reuse and recycling,” it said.
“Governments may wish to consider the case for underpinning this by moving towards life-cycle based requirements in emissions regulations.”
Even in the more sustainable assumptions, in which countries adopt measures to greatly contain CO2 emissions to limit global warming, petrochemicals will continue to devour crude oil.
According to the IEA, in this scenario petrochemicals would be the only sector to post demand growth for crude oil, because even if plastics recycling were to double from around 15% currently to 35% in 2040, the demand for crude would still increase by nearly 3m bbl/day to 2040.
In fact, the use of crude oil as a petrochemical feedstock would still grow under this scenario to total nearly 15m bbl/day in 2050.
“Plastic recycling is a key underlying source of emissions reduction in the Sustainable Development Scenario, which sees a substantial increase in waste plastic collection rates, recycling yield rates and displacement rates (the extent to which recycled plastics displace demand for their virgin counterparts),” said the Agency.
“Recycling yield rates increase from an average of 75% in 2017 to nearly 85% in 2050. Displacement rates double, from about one-third today to two-thirds in 2050. However, achieving the improvements is dependent on significant technical advances in recycling processes.”
Global crude oil demand and production
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CRUDE OIL GLORY DAYS ARE OVER
Petrochemicals will be one of the few sectors, together with some transportation subsectors which exclude passenger vehicles, which are set to increase demand from crude oil.
The IEA expects under the Stated Policies Scenario that demand global growth would slow after 2025, before flattening out in the 2030s.
“Oil demand for long-distance freight, shipping and aviation, and petrochemicals continues to grow. But its use in passenger cars peaks in the late 2020s due to fuel efficiency improvements and fuel switching, mainly to electricity,” said the IEA.
“Lower battery costs are an important part of the story: electric cars in some major markets soon become cost-competitive, on a total-cost-of-ownership basis, with conventional cars.”
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