Investing in the 2025 Plastics Pact Deadline and the Tech Needed to Meet It
Feb 22, 2023
Feb 22, 2023
Countries around the world, and the businesses that operate within them, have been signing on to the Plastics Pact. Including the United States and Canada Plastics Pacts, they all share the same goals to be accomplished by 2025, just two years from now.
- Define a list of plastic packaging that is to be designated as problematic or unnecessary and take measures to eliminate them.
- 100% plastic packaging designed to be reusable, recyclable or compostable.
- 50% of plastic packaging is effectively recycled or composted.
- 30% recycled content across all plastic packaging.
These goals are admirable, and ambitious, and dependent not only on high level societal changes but, at the very base level, on technological innovation. The fact is that, regardless of how many people commit to recycling plastics across the globe, a high percentage of the plastic manufactured today is not able to be recycled through current technologies.
Current Technology Not Sufficient
The problem is largely driven by the wide variety of plastics, their unique chemical compositions, the need to sort all of the types from each other, and the problems contaminants such as food waste and labeling present. Add in the fact that plastic recycling with current technology is energy- and heat-intensive, making it environmentally and economically impractical in many cases and especially in more sparsely populated areas, and you have a quagmire of barriers to widespread recycling.
Recycling has historically been accomplished by grinding up and melting plastics after an extensive sorting process - it is costly, energy intensive, difficult due to sorting and contamination issues, limited to a few plastic types, and reliant on very high volumes of plastic inputs to make the economics work. More recently, chemical recycling has taken center stage, and the idea is often to turn plastic into usually low-quality fossil fuel utilizing high heat and more chemicals. According to investigations by Reuters, the promise of this chemical approach, often referred to as ‘advanced recycling,’ has not translated into commercial viability.
What is needed is a lower cost, lower energy, scalable technology capable of processing imperfectly sorted (or unsorted) and cleaned plastics. This is the type of solution being advanced by Aduro Clean Technologies, Inc. (CSE: ACT) (OTCQB: ACTHF) (FSE: 9D50), a Canadian company with a water-based technology, the Hydrochemolytic™ (or HCT) platform, that checks all of these boxes. Aduro is in the early stages of pilot programs it hopes will prove the scalability of its system, with the technology already proven in the laboratory and in smaller scale customer engagement units. The company’s commercialization efforts happen to be timed up pretty well with the 2025 deadlines set by the various Plastics Pacts.
The Current Market Players
Because of the plastic pollution problem and the 2025 deadline, plastic producers like Dow Chemical Company, ExxonMobil, Shell, and LG Chem, are scrambling to find a solution. They already told the world that they will have a solution or chosen technology by that deadline. Consequently, they are financially backing chemical recycling companies such as Agilyx, Mura Technology, or PureCycle Technologies, in order to achieve that. They are plowing hundreds of millions of dollars into these chemical recycling companies. Some of these chemical recycling companies are publicly traded. Their market caps are in the hundreds of millions and even billions of dollars without any meaningful revenues. They don’t even have commercial plants. They just have pilot plants.
Here is a glance at public companies operating in the plastic and hydrocarbon recycling industry.
- PureCycle Technologies (NASDAQ: PCT) = $1.1 billion market cap, no revenue
- Agilyx (OTCQX: AGXXF) (OSE: AGLX) = $250 million market cap, $4.2 million of revenue
- Quantafuel (OSE: QFUEL) = $100 million market cap, $500k of revenues
- Gevo (NASDAQ: GEVO) = $432 million market cap, $700k of revenues
- Cielo Waste Solutions (OTCQB: CWSFF) (TSXV: CMC) = $43 million market cap, no revenue
- Aduro Clean Technologies (CSE: ACT) (OTCQB: ACTHF) = $49 million market cap, no revenue
On the surface, Aduro and Cielo stand out as low cap outliers, but they have taken very different paths to a similar place. Cielo sported a market cap in the $580 million range at its peak in the summer of 2021 as plans were announced for a demonstration facility to be followed by two commercial facilities capable of turning garbage including all types of plastic into diesel fuel. The facilities never materialized and the company is now focused on using wood biomass as its feedstock, the plastic story receding into the background.
The Aduro Difference
In comparison, Aduro has been delivering on every step of its incremental approach to commercialization, perhaps even flying under the radar of investors as a result of the company’s aversion to hype. Aduro’s CEO, Ofer Vicus, believes that in the worst case scenario of an emergency sale, the company could sell its patented technology for a minimum of $100 million, roughly equivalent to double its market cap. At this price, it’s a fairly derisked proposition with a lot of headroom indicated by its peers.
Aduro also stands out for the nature of its technology. In contrast to the other companies listed here, Aduro’s HCT platform offers distinct advantages.
- Chemically recycles plastic by using water as the medium and cellulose, ethanol, and glycerol as chemical agents
- Operates at lower temperatures than traditional technologies, resulting in less energy use
- Has lower OPEX and CAPEX than existing systems
- Works with all types of plastics
- Is highly scalable, small or large
- Does not need governmental subsidies to make it economically viable
- Is capable of converting waste plastic to gas, liquid, or solids
Peer companies listed above are operating existing insufficient technologies, or are focused on one kind of plastic, or capable of generating only certain kinds of outputs, or operate at much higher temperatures, or require government subsidies to make projects work economically, or require massive scale with equally massive CAPEX just to get off the ground.
Aduro is currently moving through its small and large scale pilot plant stages, actively engaging potential customers and proving its technology with varied feedstocks at progressively larger scales. The technology has been validated in the lab, by independent third parties, and was chosen for the Shell GameChanger program in which Shell has promised investment of both money in expertise in speeding Aduro’s path to commercialization while further perfecting the technology.
All the pieces are in place, and 2023 promises to be full of major developments for the company. With the Plastics Pact 2025 deadline looming, don’t be surprised if some major players in the plastics industry put their eggs in Aduro’s basket in a much more definitive way than Shell already has. Keep an eye out for further developments.