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Favorable Economics of Recycling in various Industries: Time to Shift into High Gear

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Two decades ago, it was hard to imagine that the share of renewables (including hydro) in global electricity generation could touch ~30% in 2023. The energy transition in India has been in an accelerating phase, thanks to the favorable government policies. Why has it suddenly become more important than ever? Well, COVID-19 accelerated the clean energy adoption trend and also made us realize that the shift to green energy is fueled by necessity. In addition, the Russia-Ukraine war also highlighted the importance of a quick shift to renewables. Countries like India and Europe, which are fuel dependent on other nations, did realize the need to fill in the gaps after the energy supply disruptions for greater security after the pandemic and the war period. Hence, definitely, it’s a long-term and integral play for any economy to achieve sustainable growth. Continuing cost declines confirm that competitive renewables are a low-cost climate and decarbonization solution that aligns with short-term economic needs while keeping long-term sustainable goals intact. The more these technologies are deployed, the more their costs could fall.

A big factor in this journey has been the optimum usage of resources, a pivotal concept in stock market commonly referred to as operating efficiency. Haven’t we observed companies emphasizing reducing waste while manufacturing, optimizing resource utilization to its fullest extent, and transitioning to raw materials that offer a higher yield. These indicators suggest that the recycling industry is poised for healthy growth, with unit economics increasingly becoming favorable. Frequently, we express the adage, “What goes around, comes around,” and it is now imperative to transition from the conventional linear model of produce, use, and dispose to the circular model of reuse and recycle.

Although the recycling industry has been in existence for several years, the pace of its adoption has significantly quickened over the last 2–3 years. ESG (Environmental, Social, and Governance) compliance is not confined to this sector alone; it is now prevalent in various other industries.

Latest Trends in Recycling Industry:

Recycling plays a crucial role across various industries, fostering sustainability, reducing environmental impact, and driving economic benefits. Here’s an overview of its relevance in different sectors:

  1. Fashion Industry: Brands like Patagonia, Zara, and H&M have embraced recycled materials, such as PET bottle recycling, to create sustainable and eco-friendly clothing. The fashion industry increasingly values the concept of a “circular economy,” where products are recycled and reused, reducing waste and environmental impact.
  2. Plastic recycling: Extended Producer Responsibility (EPR) schemes for plastic packaging require a certain percentage of recycled content in products, like PET bottles. Coca-Cola is planning to increase its recycled content from 9-10% to 50% by 2025, reflecting the global trend toward sustainability and ESG compliance.
  3. Refractory Industry: Over the past few years, the refractories industry has re-evaluated material recycling due to pollution concerns and raw material scarcity. Companies that engage in material recycling can save up to approximately 30% of their total costs.
  4. Steel Industry: Electric Arc Furnace (EAF)-based steel production serves as a means to reduce carbon emissions in the steel industry, offering the additional advantage of requiring lower capital investments. In the United States, the EAF’s share of total steel production was 25% in 2012, but this figure surged to 70% by 2020. Similarly, in India, it stands at 55.5% steel production.
  5. Aluminum Recycling: Recycling aluminum is environmentally and economically favorable. Nearly 70% of aluminum cans are recycled globally, with an impressive 85% recycling rate in India. Each ton of recycled aluminum saves energy, water, reduces GHG emissions, and minimizes solid waste.
  6. Reclaimed Rubber: The introduction of EPR policies places importance on reclaimed rubber, encouraging manufacturers to increase its usage. This helps meet recycling targets and boost overall production. Global players like Bridgestone and Michelin are incorporating sustainable materials, with plans to increase their usage to 80% by 2050. This indicates significant growth potential for the industry.
  7. Lead Recycling: In India, 65% of the demand for lead is met through recycled sources, with the remaining 35% relying on primary lead production. An essential aspect is that nearly 100% of primary lead can be recycled, effectively removing impurities without any deterioration in its properties.

Efforts are ongoing to enhance the structure of the recycling industry, making it a vital component in achieving sustainability and reducing environmental impact. This demonstrates the vast potential for growth in recycling practices across various sectors, aligning with global trends towards sustainability and environmental responsibility.

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Favorable Economics of Recycling in various Industries: Time to Shift into High Gear
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