Bioplastics: Packaging that engineers a reduced carbon footprint

Large petrochemical companies are racing to bring industrial-scale production to Brazil’s nascent bioplastics industry, based in the state of São Paulo.

The state is responsible for 70 per cent of the country’s ethanol production, has a developed petrochemicals industry as well as a state government committed to developing ethanol and the strongest logistics in the country, making it the preferred location.

The idea of everyday plastics used in shopping bags, yoghurt pots and shampoo bottles taking carbon dioxide out of the atmosphere fits in well with concerns over global warming.

Yet, it is not clear how enthusiastically the developed world will endorse ethanol-based bioplastics because of fears that sugar cane plantations diminish space for food cultivation. It also remains to be seen how much extra companies and consumers will be prepared to pay.

Supporters point to the strong environmental arguments in favour of bioplastics, which are compelling for their effect on carbon capture.

Over the entire life cycle, ethanol-based polyethylene derived from sugar cane typically removes some 2.5 tons of carbon dioxide per ton whereas its petroleum-based equivalent releases 2.5 tons of carbon dioxide into the atmosphere, notes Carlos Coutinho, a Salvador-based partner and leader of the Latin American petrochemical division at PwC.

Sugar cane-based ethanol is cheaper and more efficient than the wood cellulose or corn-based industries concentrated in the US and Europe, giving Brazil a competitive edge.

The business has already attracted companies in the petrochemicals business, says Mr Coutinho, including homegrown Braskem; American Dow Chemical; and new Brazilian outfit Quattor.

The business models adopted by each are different.

Dow, for example, has been pursuing a vertically integrated business through a joint venture with an ethanol producer, where the bioplastics company produces the sugar cane, ethanol and end product.

This allows selection of the most suitable and sustainable sites for sugar cane planting and avoids the company having to buy ethanol on the volatile spot market, says Bruno Pereira, manager of sustainability in plastics for Dow in Latin America.

The Dow plan was to build the first integrated facility of its scale in the world, expected to start production in 2011, with a capacity of 350,000 metric tons. The joint venture, however, has run into trouble and Dow is reviewing the partnership. Mr Pereira says Dow remains committed to the business.

Braskem started its project in the area in 2007 with plans to produce polyethylene that is 100 per cent derived from sugar cane, says Leonora Novaes, commercial head of the green polyethylene project.

Braskem is building a $300m plant with the capacity to produce 200,000 tons of green plastics a year. Ms Novaes expects demand of three times that level of production.

Producers are reluctant to discuss the costs of bioplastic against its fossil-fuel equivalent, although they admit that large investments in technology and relatively low-scale production mean it will trade at a premium. Much will depend on the fluctuations of the price of ethanol versus petrol.

Reports by the Boston Consulting Group and McKinsey suggest that roughly half of European consumers claim to act green, although only 20 per cent are willing to pay more for green products.

That said, consumers of organic food who are willing to pay extra for green packaging are likely to be early adopters and the trick will be to persuade large packaging firms that they need to be ahead of the curve.

Tax breaks for recyclable packaging in the US and Europe should help. Ms Novaes says the battle for hearts and minds is being won.

Braskem is at pains to educate customers about the sustainability of the Brazilian ethanol programme, which has been endorsed by the likes of the World Bank. Once reassured, clients are enthusiastic about prospects, she says.

New technologies are already emerging. PHB Industrial, a joint-venture between two Brazilian sugar mill groups, based in Serrana, São Paulo, has patented a technology to make bioplastics that not only come from ethanol but are fully compostable and biodegradable, explains Sylvio Filho, executive director.

The bioplastic reacts to naturally occurring bacteria that are found in waste, yet is stable in hygienic settings, Mr Filho says. PHB has been developing packaging applications, including for the Chilean fruit export market. The company is hoping to raise $175m-$200m to build a plant with 40,000 metric tons of production.

New technologies will also push the variety of applications for bioplastics. PVC windows and a wide array of car parts are two possible applications, as the material becomes stronger and more reliable, says Mr Coutinho.

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