Paper & Packaging Report

Chemical Recycling: Plastics Firms Must Move Now or Miss Out

Those who act quickly can secure premium positions as the market ramps up, while those who wait risk falling behind as demand and policy converge.

By Mark Porter, Jeff Wen, Jelle Dhaen, Mattias Banck, and Peter Meijer

First published on maio 27, 2025
min read


Executive Summary Chemical recycling costs remain high, but economically attractive opportunities exist today. Achieving cost parity with virgin production in Europe could take 20 to 30 years and more than €400 billion in cumulative global capital expenditures in a base case. Plastics producers who move rapidly and strategically can build sustainable long-term advantages. Early leaders will develop a flexible strategy and invest in feedstocks, strategic partnerships, and recycling technologies and capabilities. Este artigo faz parte do Relatório de Fusões e Aquisições de 2023 da Bain. Acesse o relatório The question for plastics producers is no longer whether chemical recycling will scale. It’s who will own the critical positions in the value chain when it does. The emerging technologies and processes of chemical recycling, which include gasification, pyrolysis, and glycolysis, alter the chemical structure of plastic waste to convert it into raw materials for making new plastics or other products. They’re part of a broader effort to introduce more advanced recycling methods. Despite looming regulation—particularly in Europe—and ambitious recycling commitments from consumer goods companies, most plastics companies have hesitated to invest meaningfully in chemical recycling. Meanwhile, some have backed away from announced plans. The industry is moving slowly because the economics of chemical recycling haven’t added up to invest at scale. For example, recycling polyolefins—a common type of thermoplastics—via pyrolysis (the chemical recycling method we’ll focus on in this article) in Europe costs more than twice as much as producing virgin polyolefins. In most other regions, the cost gap is even wider, limiting this recycling approach to niche applications with customers willing to pay a premium. Customer demand remains highly price sensitive. Economically attractive opportunities in chemical recycling exist today, but they vary by plastic type and recycling process. At this nascent stage of the market, it’s unclear whether early wins will deliver the learning curve benefits needed to dramatically lower costs in the near term. Many plastics executives are understandably wondering whether it’s prudent to be among the first to get off the sidelines. The answer is yes. The ultimate winners in this nascent market will move rapidly and strategically to build early, sustainable advantages. They’ll capitalize on the near-term applications that are already profitable, focusing on serving forward-thinking customers while preparing their organizations to scale faster than competitors as the market matures. That means securing access now to the lowest-cost, highest-quality recycled feedstocks, testing and learning to develop capabilities in areas such as waste sorting and processing, establishing partnerships with waste companies and consumer packaged goods companies, and proactively addressing any investor concerns. The winners will capitalize on the near-term applications that are already profitable while preparing their organizations to scale faster than competitors as the market matures. The regulatory landscape Chemical recycling won’t achieve cost parity with virgin material production through market forces alone, because volumes will be too limited to generate significant cost benefits. This is a policy-driven market, and current policies likely won’t be sufficient to close the gap between supply and demand. In Europe, for example, the Packaging and Packaging Waste Regulation (PPWR) is a step forward, but its 2030 recycling mandates rely on optimistic assumptions about how quickly industry will increase supply. Furthermore, we’re hearing companies express wariness about the uncertainty surrounding the regulation’s implementation and the implications of potential penalties. This situation creates a risk gap: Market fundamentals remain unattractive, raising the bar for investment while shortening the runway for scaling. Meanwhile, margin pressures on virgin plastics leave limited financial headroom for capital expenditures. The result is that many companies are standing still on chemical recycling, and the industry and customers aren’t on track to hit 2030 recycling targets. Of course, regulators have a delicate balance to strike. Push too hard, and companies may opt for alternative substrates that have a worse carbon footprint or fail to meet usability criteria, which could pose a liability for their brand. There are multiple ways policy could more effectively close the gap between supply and demand. One approach, which Europe has taken with regulations on renewable diesel and sustainable aviation fuel, is to start small and gradually increase recycled material blending requirements. For instance, country-level or regional blending mandates that increase chemical recycling market penetration by 1% to 2% annually could unlock a market share of over 15% by 2040. This pathway can deliver a smooth ramp-up with manageable capital requirements, healthy returns, and minimal margin erosion or unintended substrate switching. A gradual blend mandate could create a parallel market for recycled polymers and decouple prices from virgin plastics, which would reduce the risks of chemical recycling projects and accelerate investments. The journey to cost parity At the same time, maturing technologies and accumulated operational experience will unlock cost efficiencies, eventually closing the gap with virgin plastics. The industry is developing technologies across the recycling process, from waste sorting (e.g., hydraulic sorters, laser-induced breakdown spectroscopy) to pre-treatment of waste (e.g., membrane technologies, enzymatic decontamination). Some of these technologies are in the research and development phase, but as they advance, they’ll help bend the cost curve. In a base case, we estimate that Europe’s plastics sector could achieve cost parity with marginal producers once cumulative global volume reaches 650 million metric tons of polyolefins recycled via pyrolysis, assuming a virgin price of €1,250 per metric ton and depending on gate fees and broader market conditions (see Figure 1). This volume corresponds with approximately 20% to 30% market share of recycled plastics, similar to the penetration levels seen in other industries, such as solar and wind energy, when they reached their tipping points against incumbent technologies. Figure 1 Chemical recycling in Europe could reach cost parity with virgin plastic production in 20 to 30 years, depending on price dynamics and other factors Notes: Chemical recycling includes polyolefins recycled via pyrolysis; costs related to conversion of naphtha to polyolefins assumed to stay constant during the period of the analysis, together with assumed feedstock costs, except for sorting; waste gate fee expected to remain in place even at cost parity and beyond; fuel exempt mass balance approach assumed Sources: Industry interviews; company public statements; industry reports; news articles; Bain analysis Reaching that tipping point will require decades of systematic investments. These global advances will help bring the cost down, and in combination with specific local market conditions, our analysis suggests it could take at least 20 to 30 years to reach cost parity in Europe. The exact timing will depend on several factors, including the price dynamics of virgin polyolefins, the pace of global adoption of chemical recycling, technology advances, and any systematic changes in the waste management landscape (e.g., economic models). Getting to cost parity with marginal producers in Europe would require cumulative global capital expenditures of at minimum €400 billion in a base case, at a cumulative cost premium of approximately €270 billion. That premium includes the sum of price premiums that would be paid by customers, regulatory mechanisms, and margin investment by the value chain. Clearly, one company can’t move the sector forward alone; it will require a systems approach with regulatory support. Once scale reaches critical mass, chemical recycling can transition from a subsidy-reliant push to a demand-driven pull. That inflection point could fundamentally shift the economics, turning chemical recycling into a competitive, market-driven solution. Three imperatives for plastics producers Plastics producers can’t afford to wait for that inflection point; they must prepare to outpace the competition as the market tips. As with any industrial transition, the first companies to act with intention and speed can build durable advantage. Delaying now means ceding ground to competitors, chemical recycling specialists, or even consumer goods companies moving upstream to secure their own supply. The most effective companies will align their strategy around three imperatives. 1. Shape your ecosystem. The winners will capture value today by proactively co-creating offtake opportunities in close collaboration with value chain partners while setting themselves up for long-term advantage. They’ll evaluate investment opportunities on a case-by-case basis, balancing project returns against their company’s circularity ambition, risk appetite, and willingness to invest earlier than peers. Early movers can lock in premium waste streams and serve high-value customers, creating a virtuous cycle of scale and performance. These positions are hard to replicate once established. Sustainability vs. Strong Financials: Now You Don’t Have to Choose Instead of agonizing over sustainability investments, leaders should see them for what they are—a rare opportunity to reorder your industry’s leaderboard. The strongest initial project opportunities will have access to high-quality, cost-effective feedstock as well as sufficient volumes of offtake that justify a price premium. These opportunities include areas where mechanical recycling doesn’t meet the customer’s performance criteria or offer a solution. One example comes from another commodity plastic: PET. Despite prolonged economic headwinds, Eastman Chemical Company made circularity a pillar of its growth strategy in 2021. The leadership team was confident that the company’s innovative technology would not only deliver on environmental ambition but unlock a new, durable source of value. Eastman committed significant capital to construct one of the world’s largest chemical recycling facilities of its kind, now fully operational in Kingsport, Tennessee. The plant converts hard-to-recycle plastic waste into new polymer material using a proprietary methanolysis technology. With the capacity to recycle 110,000 metric tons per year and EBITDA projected to exceed $200 million annually by 2029, Eastman is already generating performance at scale. The company’s early conviction has paid dividends in multiple ways. By securing early access to largely untapped waste streams—including carpet, colored and opaque bottles, and chunks of plastic waste—Eastman is creating a differentiated supply position. It has developed an understanding of end-market demand and built a portfolio of customer relationships across diverse end markets and applications. As Eastman plans additional chemical recycling facilities, the company is translating operational learning into cost reductions and accelerating commercialization. For other companies considering where and how to place their bets, Eastman demonstrates how early, bold action can create both strategic insulation and a strong growth trajectory. 2. Join the discussion. During this phase of policy driving the market, the leading companies will understand which policy levers are most important to their business, and they’ll engage constructively with regulators to make them real. Equally important is reframing the public dialogue around plastics. For years, the industry has taken a defensive posture as consumer sentiment toward plastic has worsened. The opportunity now is to go on offense, not only advocating for circularity but also reminding stakeholders of the material’s unique value and critical role in modern life, from reducing food spoilage and enabling medical safety to providing convenience. Leading companies will step up to articulate a compelling narrative that highlights both the performance benefits and the sustainability potential of plastics when managed responsibly. This shift in tone can reset the conversation and rebuild trust with consumers and policymakers alike. 3. Develop a flexible strategy. Winning in chemical recycling will require the agility to adapt to market changes faster than competitors. This isn’t about chasing every opportunity. It’s about designing a strategy that’s flexible enough to scale fast, shift as needed, and stay ahead. To do that, producers must be willing to rewrite the playbook because traditional tactics won’t cut it in a market still taking shape. Leaders will experiment with new business models, novel sourcing strategies, and unconventional partnerships. That could mean forming 10-year offtake agreements with dynamic pricing mechanisms—the kind of creative moves that may be invisible from the outside but lay the groundwork for future advantage. We’re already seeing companies leapfrog traditional steps, such as consumer goods businesses collecting and processing waste themselves and waste management firms moving into mechanical recycling. For companies navigating this period of uncertainty while the market ramps up, flexibility and a willingness to challenge the status quo will be essential to staying ahead. It’s time to lead Chemical recycling is more than a technology play for plastics companies. It’s a defining moment for their role in the industry’s future. Chemical recycling may not be the only answer to developing circular supply chains, but it’s a critical one. The leaders won’t be the ones waiting for conditions to be perfect. They’ll be the ones shaping the conditions—and the industry—around them. Este artigo faz parte do Relatório de Fusões e Aquisições de 2023 da Bain. Acesse o relatório Resilience and Efficiency Don’t Underestimate the Cost of Overcapacity Transforming Maintenance with Artificial Intelligence It’s Time to Rethink Every Link in Your Supply Chain Customer-Led Growth Luxury Packaging: Resolving the Tension Between Creativity and Impact To Make Money, Follow the Money M&A in Paper and Packaging: Bigger but Fewer Deals Battle of the Substrates Sustainability: Less Talk and More Action Chemical Recycling: Plastics Firms Must Move Now or Miss Out

Executive Summary

Chemical recycling costs remain high, but economically attractive opportunities exist today.
Achieving cost parity with virgin production in Europe could take 20 to 30 years and more than €400 billion in cumulative global capital expenditures in a base case.
Plastics producers who move rapidly and strategically can build sustainable long-term advantages.
Early leaders will develop a flexible strategy and invest in feedstocks, strategic partnerships, and recycling technologies and capabilities.

The question for plastics producers is no longer whether chemical recycling will scale. It’s who will own the critical positions in the value chain when it does.

The emerging technologies and processes of chemical recycling, which include gasification, pyrolysis, and glycolysis, alter the chemical structure of plastic waste to convert it into raw materials for making new plastics or other products. They’re part of a broader effort to introduce more advanced recycling methods.

Despite looming regulation—particularly in Europe—and ambitious recycling commitments from consumer goods companies, most plastics companies have hesitated to invest meaningfully in chemical recycling. Meanwhile, some have backed away from announced plans.

The industry is moving slowly because the economics of chemical recycling haven’t added up to invest at scale. For example, recycling polyolefins—a common type of thermoplastics—via pyrolysis (the chemical recycling method we’ll focus on in this article) in Europe costs more than twice as much as producing virgin polyolefins. In most other regions, the cost gap is even wider, limiting this recycling approach to niche applications with customers willing to pay a premium.

Customer demand remains highly price sensitive. Economically attractive opportunities in chemical recycling exist today, but they vary by plastic type and recycling process. At this nascent stage of the market, it’s unclear whether early wins will deliver the learning curve benefits needed to dramatically lower costs in the near term.

Many plastics executives are understandably wondering whether it’s prudent to be among the first to get off the sidelines. The answer is yes. The ultimate winners in this nascent market will move rapidly and strategically to build early, sustainable advantages. They’ll capitalize on the near-term applications that are already profitable, focusing on serving forward-thinking customers while preparing their organizations to scale faster than competitors as the market matures. That means securing access now to the lowest-cost, highest-quality recycled feedstocks, testing and learning to develop capabilities in areas such as waste sorting and processing, establishing partnerships with waste companies and consumer packaged goods companies, and proactively addressing any investor concerns.

The winners will capitalize on the near-term applications that are already profitable while preparing their organizations to scale faster than competitors as the market matures.

The regulatory landscape

Chemical recycling won’t achieve cost parity with virgin material production through market forces alone, because volumes will be too limited to generate significant cost benefits. This is a policy-driven market, and current policies likely won’t be sufficient to close the gap between supply and demand.

In Europe, for example, the Packaging and Packaging Waste Regulation (PPWR) is a step forward, but its 2030 recycling mandates rely on optimistic assumptions about how quickly industry will increase supply. Furthermore, we’re hearing companies express wariness about the uncertainty surrounding the regulation’s implementation and the implications of potential penalties.

This situation creates a risk gap: Market fundamentals remain unattractive, raising the bar for investment while shortening the runway for scaling. Meanwhile, margin pressures on virgin plastics leave limited financial headroom for capital expenditures. The result is that many companies are standing still on chemical recycling, and the industry and customers aren’t on track to hit 2030 recycling targets.

Of course, regulators have a delicate balance to strike. Push too hard, and companies may opt for alternative substrates that have a worse carbon footprint or fail to meet usability criteria, which could pose a liability for their brand.

There are multiple ways policy could more effectively close the gap between supply and demand. One approach, which Europe has taken with regulations on renewable diesel and sustainable aviation fuel, is to start small and gradually increase recycled material blending requirements. For instance, country-level or regional blending mandates that increase chemical recycling market penetration by 1% to 2% annually could unlock a market share of over 15% by 2040. This pathway can deliver a smooth ramp-up with manageable capital requirements, healthy returns, and minimal margin erosion or unintended substrate switching. A gradual blend mandate could create a parallel market for recycled polymers and decouple prices from virgin plastics, which would reduce the risks of chemical recycling projects and accelerate investments.

The journey to cost parity

At the same time, maturing technologies and accumulated operational experience will unlock cost efficiencies, eventually closing the gap with virgin plastics. The industry is developing technologies across the recycling process, from waste sorting (e.g., hydraulic sorters, laser-induced breakdown spectroscopy) to pre-treatment of waste (e.g., membrane technologies, enzymatic decontamination). Some of these technologies are in the research and development phase, but as they advance, they’ll help bend the cost curve.

In a base case, we estimate that Europe’s plastics sector could achieve cost parity with marginal producers once cumulative global volume reaches 650 million metric tons of polyolefins recycled via pyrolysis, assuming a virgin price of €1,250 per metric ton and depending on gate fees and broader market conditions (see Figure 1). This volume corresponds with approximately 20% to 30% market share of recycled plastics, similar to the penetration levels seen in other industries, such as solar and wind energy, when they reached their tipping points against incumbent technologies.

Chemical recycling in Europe could reach cost parity with virgin plastic production in 20 to 30 years, depending on price dynamics and other factors

Reaching that tipping point will require decades of systematic investments. These global advances will help bring the cost down, and in combination with specific local market conditions, our analysis suggests it could take at least 20 to 30 years to reach cost parity in Europe. The exact timing will depend on several factors, including the price dynamics of virgin polyolefins, the pace of global adoption of chemical recycling, technology advances, and any systematic changes in the waste management landscape (e.g., economic models).

Getting to cost parity with marginal producers in Europe would require cumulative global capital expenditures of at minimum €400 billion in a base case, at a cumulative cost premium of approximately €270 billion. That premium includes the sum of price premiums that would be paid by customers, regulatory mechanisms, and margin investment by the value chain.

Clearly, one company can’t move the sector forward alone; it will require a systems approach with regulatory support. Once scale reaches critical mass, chemical recycling can transition from a subsidy-reliant push to a demand-driven pull. That inflection point could fundamentally shift the economics, turning chemical recycling into a competitive, market-driven solution.

Three imperatives for plastics producers

Plastics producers can’t afford to wait for that inflection point; they must prepare to outpace the competition as the market tips. As with any industrial transition, the first companies to act with intention and speed can build durable advantage. Delaying now means ceding ground to competitors, chemical recycling specialists, or even consumer goods companies moving upstream to secure their own supply.

The most effective companies will align their strategy around three imperatives.

1. Shape your ecosystem. The winners will capture value today by proactively co-creating offtake opportunities in close collaboration with value chain partners while setting themselves up for long-term advantage. They’ll evaluate investment opportunities on a case-by-case basis, balancing project returns against their company’s circularity ambition, risk appetite, and willingness to invest earlier than peers. Early movers can lock in premium waste streams and serve high-value customers, creating a virtuous cycle of scale and performance. These positions are hard to replicate once established.

Sustainability vs. Strong Financials: Now You Don’t Have to Choose

Instead of agonizing over sustainability investments, leaders should see them for what they are—a rare opportunity to reorder your industry’s leaderboard.

The strongest initial project opportunities will have access to high-quality, cost-effective feedstock as well as sufficient volumes of offtake that justify a price premium. These opportunities include areas where mechanical recycling doesn’t meet the customer’s performance criteria or offer a solution.

One example comes from another commodity plastic: PET. Despite prolonged economic headwinds, Eastman Chemical Company made circularity a pillar of its growth strategy in 2021. The leadership team was confident that the company’s innovative technology would not only deliver on environmental ambition but unlock a new, durable source of value. Eastman committed significant capital to construct one of the world’s largest chemical recycling facilities of its kind, now fully operational in Kingsport, Tennessee. The plant converts hard-to-recycle plastic waste into new polymer material using a proprietary methanolysis technology. With the capacity to recycle 110,000 metric tons per year and EBITDA projected to exceed $200 million annually by 2029, Eastman is already generating performance at scale.

The company’s early conviction has paid dividends in multiple ways. By securing early access to largely untapped waste streams—including carpet, colored and opaque bottles, and chunks of plastic waste—Eastman is creating a differentiated supply position. It has developed an understanding of end-market demand and built a portfolio of customer relationships across diverse end markets and applications. As Eastman plans additional chemical recycling facilities, the company is translating operational learning into cost reductions and accelerating commercialization. For other companies considering where and how to place their bets, Eastman demonstrates how early, bold action can create both strategic insulation and a strong growth trajectory.

2. Join the discussion. During this phase of policy driving the market, the leading companies will understand which policy levers are most important to their business, and they’ll engage constructively with regulators to make them real.

Equally important is reframing the public dialogue around plastics. For years, the industry has taken a defensive posture as consumer sentiment toward plastic has worsened. The opportunity now is to go on offense, not only advocating for circularity but also reminding stakeholders of the material’s unique value and critical role in modern life, from reducing food spoilage and enabling medical safety to providing convenience.

Leading companies will step up to articulate a compelling narrative that highlights both the performance benefits and the sustainability potential of plastics when managed responsibly. This shift in tone can reset the conversation and rebuild trust with consumers and policymakers alike.

3. Develop a flexible strategy. Winning in chemical recycling will require the agility to adapt to market changes faster than competitors. This isn’t about chasing every opportunity. It’s about designing a strategy that’s flexible enough to scale fast, shift as needed, and stay ahead.

To do that, producers must be willing to rewrite the playbook because traditional tactics won’t cut it in a market still taking shape. Leaders will experiment with new business models, novel sourcing strategies, and unconventional partnerships. That could mean forming 10-year offtake agreements with dynamic pricing mechanisms—the kind of creative moves that may be invisible from the outside but lay the groundwork for future advantage.

We’re already seeing companies leapfrog traditional steps, such as consumer goods businesses collecting and processing waste themselves and waste management firms moving into mechanical recycling.

For companies navigating this period of uncertainty while the market ramps up, flexibility and a willingness to challenge the status quo will be essential to staying ahead.

It’s time to lead

Chemical recycling is more than a technology play for plastics companies. It’s a defining moment for their role in the industry’s future. Chemical recycling may not be the only answer to developing circular supply chains, but it’s a critical one. The leaders won’t be the ones waiting for conditions to be perfect. They’ll be the ones shaping the conditions—and the industry—around them.