On April 6, 2023, the United States Environmental Protection Agency (US EPA) announced a proposal to strengthen its existing New Source Performance Standards (NSPS) and National Emission Standards for Hazardous Air Pollutants (NESHAP). The proposal targets hazardous air pollutants at chemical plants that produce synthetic organic chemicals and polymers.
Specifically, the updated regulation would aim to reduce the emissions of ethylene oxide (EtO), chloroprene, benzene, 1,3-butadiene (butadiene), ethylene dichloride, and vinyl chloride. Under the proposal, companies that make, store, or use these materials will be required to monitor the levels of air pollutants, including those entering at facilities’ property lines. The inclusion of this fence line rule will require the use of monitoring technology which companies will be liable for procuring without subsidies.
Typically, companies are only required to assess emissions such as process vent emissions for basic process unit operations within a facility. The new fence line ruling will ensure such estimates are accurate and help detect leaks. Companies will be required to act if the annual average air concentration of chemicals is higher than the proposed action levels for fence line emissions, or from emitting sources like flaring or leaks.
At their own expense, noncompliant facilities will be required to control emissions levels and EPA monitoring data will be made public. As plastics manufacturers are reliant on synthetic organic chemicals as essential inputs, they are likely to face disproportionate disruptions due to the revised standards. Medical device and automotive sectors also rely on the targeted chemicals and are likely to see disruptions.
Plastics disruptions likely to cause downstream industry impacts
The U.S. is the world’s second-largest plastics producer, with 99% of production relying on oil and natural gas compounds. Synthetic organic chemical and polymer facilities, which manufacture many precursors necessary for plastics, are at risk of disruption due to the new emissions compliance requirements. Commercial plastic products rely on a variety of inputs for production, including polyethylene terephthalate (PET or PETE), polyvinyl chloride (PVC), low-density and high-density polyethylene (LDPE/HDPE), and polystyrene (PS). Each of these inputs is used to make different plastics products which are available for consumption in the food and beverage, cosmetics, home goods, and construction materials sectors.
PET, for example, is commonly used to make bottles for beverages, shampoos and soaps, and take-home food containers. Reports suggest that more than half of all ethylene oxide production goes toward the production of PET plastic bottles in the packaging industry.
Simultaneous EtO regulations put medical device and automotive sectors at risk
The proposed chemical plant standards would reduce overall EtO emissions by about 63%. To meet these stringent figures, the EPA estimates that EtO producers will face the highest compliance costs of the affected chemical producers. This is due in large part to the expected necessity of add-on control technologies including thermal oxidizers to comply with the requirements.
On April 11, the EPA issued a separate proposal on EtO emissions specifically from commercial sterilization facilities. If passed, companies will likely need to comply with this rule by the end of 2025. EtO is used to sterilize an estimated 20 billion medical devices per year, and the FDA indicated that this method of sterilization is the safest and most effective.
EtO is also used to produce essential compounds for the automotive sector, and the industry has the largest revenue share in the global EtO market. One compound is ethylene carbonate, a key input in the development of electrolytes necessary to manufacture rechargeable lithium-ion batteries used for electric vehicles. Solvents make up about 75% of the electrolytes used in lithium-ion batteries by volume, and of these solvents, ethylene carbonate is the most common.
The U.S. is one of the world’s top five ethylene oxide producers, so ethylene carbonate producers dependent on the country’s exports could see disruptions. Any disruptions to the ethylene carbonate industry would greatly impact the automotive sector, which leads the end-use market for the compound with over 40% revenue share.
The EPA is in a period of public review with comments accepted until June 26, 2023, and finalization of the standards is not likely to take place until March 2024. Once finalized, facilities constructed before April 25, 2023, will have up to three years to comply with the new requirements. Those constructed after this date will have only 60 days for compliance. All facilities will only have one year to begin fence line monitoring. Firms that fail to comply could face court-determined penalties in response to EPA- or citizen-led enforcement action. In total, the proposed regulatory change is expected to result in a combined $1.9 billion (€1.7 billion) in changed operating costs across all industries.
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