Flexible Film Packaging Diversion Options Joseph Hall CPIA June 5, 2013 - Some parts of Canada moved to EPR funding some time ago. (ontario – 50%; Manitoba 80%; BC – 100%) - While these systems (are growing) have become mature, they are under constant need for improvement due to changing packaging – types and quantitities. - So CIF has undertaken a major assessment in Ontario to describe how the processing element may change.

Project Scope Examined: Film and multi-layer packaging composition and trending Current & future reprocessing markets Sorting technologies Collection and processing methodologies LCA and alternative designs Energy Recovery

The Issue

Film Diversion is in its Infancy Film Type Ontario Residential Generation (tonnes) Recycling (tonnes) Recycling Rate Polyethylene carryout bags 14,900 2,400 16% Polyethylene film 37,400 2,800 7% Biodegradable film 250 Negligible 0% Plastic laminates – beverage 440 Laminated/Other plastic film and bags 34,700 1 Includes estimates of film carryout bags that are collected through return-to-retail programs and municipal programs as reported by the Ontario Plastic Bag Reduction Task Group and Stewardship Ontario. 2 Includes bags collected for recycling and homeowner reuse for trash can liners/other reuse applications based on Stewardship Ontario waste audit data. 2 Based on 2010 U.S. and 2011 Canada estimates. 3 Based on 2011 U.S. resin use, increased by ten percent to provide an estimate for combined U.S. and Canadian consumption. reality some two-thirds of bags are estimated to be either recycled or reused

Key Packaging Trends Results tend to be market specific Stand up pouch growth projections for 2016 ranged from 5.1-11% Changes such as resin switching and packaging design impacts total consumption Growth projections for biodegradables have been moderated Continued growth in multi-laminates is expected over single resin films “global industry growth at over 11% per year” for stand-up pouches to 2016 lower 5.1 percent annual growth rate to 2016 for pouches in the United States Stand-up pouches are believed to represent significantly less than ten percent of the tonnage of flexible packaging in Ontario substituted a tougher material such as polypropylene for polyethylene, allowing down-gauging biodegradable materials generally do not have a superior environmental profile compared traditional resins Brand owners have invested hundreds of millions of dollars in capital for North American package filling lines. Replacing these lines with new lines designed for flexible film packaging will occur slowly over

Marketing Capacity

Markets Overview Approx 50% reprocessed domestically in 2011 38% of domestic capacity used higher film grades No need for wash lines Ontario recovered film used primarily for new film and sheet US recovered film used for composite lumber Multi-laminates are considered contamination Disposed or used for low value applications

Markets Overview (Cont) Curbside film recycling costs are greater than market value Chinese export market is changing No projected future growth Demand for lower quality film grades is expected to decline Energy recovery will remain a key player in this market Washing is the most costly phase of recycling, at approximately $440 per tonne. So the problem is that the cost to clean up curbside film makes it more expensive than commercial film as a raw material source thus even though there was 5000 mt of wash capacity in Canada and the US in 2011 only 3000 mt of curbside film was purchased There is growing interest from a few U.S. reclaimers in the potential to recover polypropylene, polylactic acid, or nylon film scrap but, at this time the market is PE based and everrything else is viewed as a contaminant

Processing Conclusions No cost effective means of sorting PE and non-PE films identified Two stream systems options: Vac systems or air separators Single stream: Pre-sort

PE Film Collection Costs   Recovery Scenario Annual Tonnes Collection Cost (millions) Processing Market Value Net Cost per Tonne Depot on-site baling + processing 10,084 $ 2.9 $ 2.1 $ 2.8 $ 2.2 $ 221 Depot loose back-haul (no processing –> direct) $ 0.6 $ 0.8 $ 75 Curbside low recovery $ 0.1 $ 3.7 $ 0.3 $ 3.6 $ 357 Curbside high recovery 20,168 $ 10.1 $ 7.5 $ 0.5 $ 17.0 $ 847

All Film Collection Costs   Recovery Scenario Annual Tonnes Collection Cost (millions) Processing Market Value Net Cost per Tonne All Film – depot on-site baling 20,168 $ 5.7 $ 4.2 $ 2.4 $ 7.6 $ 378 All film – depot loose back-haul $ 1.3 $ 4.7 $ 233 All film - curbside – low recovery $ 0.2 $ 7.5 -$ 0.2 $ 7.8 $ 387 All film - curbside – high recovery 40,335 $ 20.2 $ 15.0 -$ 0.3 $ 35.4 $ 878

Conclusions Sufficient market capacity exists to accept more PE No technology identified to separate film in MRFs efficiently Further investment required for reprocessing curbside film Depot collection offered the best price point

Next Steps Final Report is now available www.plastics.ca Explore findings to determine possible projects CPIA is considering anchor store project Pac Next – may consider design for environment discussions Refine……points on what we plan to do next