The plastics industry has a strong interest in monitoring the development of domestic climate change regulatory policies. In Congress, both chambers are conducting record numbers of hearings on all aspects of the climate change issue and a bill has been passed out of committee in the Senate. In the 2008 Presidential race, all three leading major candidates have indicated support for legislation containing mandatory emissions limits. Even the Supreme Court of the United States has determined CO₂ is a pollutant subject to regulation under the Clean Air Act.

In this environment, any meaningful legislation is likely to have direct impacts on the plastics industry and its customers. Consider the following:

• Reliance on regulated feedstocks: Plastic and resin manufacturing relies heavily on oil and natural gas feedstocks to develop its diverse range of polymeric materials. The costs and availability of these feedstocks will be affected by any regulatory structure that places a cost on such materials.
• Reliance on regulated energy sources: Plastics manufacturing is an energy-intensive process, using significant quantities of both natural gas and electricity to fuel the manufacturing process. Depending on how climate change legislation allocates emissions control costs and obligations among energy-intensive sectors of the economy, plastics manufacturers and their customers could face significant increases in costs of production.
• Susceptibility to changes in demand from a changing marketplace: Manufacturers and retailers face increased regulatory and public pressure to adopt product design, manufacturing, and packaging practices that reduced the perceived impact of products on the climate. These changing attitudes may affect the downstream demand for plastic materials and product lines – particularly if the public perceives such products to have an undesirable, or overly costly, carbon footprint.
• Competing Regulatory Mandates. The plastics industry must also consider (and remind Congress of) the interplay between a new climate change regulatory regime in the US and other contemporaneous mandates hitting industry, like the impending implementation of the European Union’s new REACH regulation (Registration, Evaluation, Authorization and Restriction of Chemicals). While REACH contains certain exemptions for polymer materials, key provisions of the regulation may still have direct impact on plastics manufacturing operations involved, directly or indirectly, in overseas export markets.
• Opportunity to develop new markets: On the positive side, a carbon-constrained economy will create new markets and opportunities in the plastics industry. As energy costs rise, plastics manufacturers may find that they can reduce their carbon footprint, lower operating costs, and increase their bottom line and competitiveness by making energy-efficiency investments. In addition, with adequate research and development (and presuming a supporting legislative framework) the plastics industry also has an opportunity to develop a new generation of polymer materials and products that are less energy intensive to create, more energy efficient to use, and that may even provide carbon sequestration opportunities.

The details of any final domestic climate change legislation will determine the balance of costs and opportunities imposed on the plastics industry and its customers. Congress is debating these costs and opportunities right now. For industries and companies that want to help shape, rather than just react to, the impending climate change regulatory revolution, now is the time to get involved.

For a more detailed look at why climate change legislation matters to the Plastics Industry, see the article published in Plastics News.

For further information about this topic, please contact Akin Gump.