Charting the regulatory road map

The recycling industry, traditionally seen as stable, is in an era of innovation and growth.

A class of advanced recycling technologies is emerging to address plastics that conventional recycling methods otherwise cannot process, converting materials such as mixed film and multilayer packaging into reusable chemical ingredients. While some of the core processes have been around for decades, what’s new is how these technologies are being refined, scaled and integrated.

Modern applications are quickly gaining momentum as brands pursue circularity, states enforce waste reduction measures and artificial intelligence- (AI-) driven efficiencies enhance processing. What started as a promising concept is becoming one of the most closely followed growth stories in the materials sector.

To provide context for this growth, it is notable that Precedence Research recently projected that the advanced recycling market will reach $7.26 billion by 2035, with a compound annual growth rate (CAGR) of 13.16 percent. Meanwhile, Future Markets Inc. projected market revenues to exceed $15 billion by 2040, with CAGRs exceeding 25 percent.

Evaluating the broader chemical recycling market, Knowledgeable Sourcing Intelligence projected a $196.2 billion valuation by 2035 based on market growth at a CAGR of 25.8 percent.

Despite these projections, the industry must contend with opposition from traditional recyclers and environmentalists, as well as with a complicated, ever-changing and frequently uncertain regulatory landscape characterized by changing definitions, fluctuating state and federal regulations and continuous discussions about classification and oversight.

Successfully managing compliance and innovation depends on effectively navigating this framework. There are many challenges industry participants will face this year.

The Clean Air Act

How advanced recycling operations are regulated under the Clean Air Act (CAA) depends on the technology employed.

Currently, the U.S. Environmental Protection Agency (EPA) regulates facilities that combust nonhazardous waste in a starved-air primary chamber and afterburner—like those using pyrolysis, gasification or other thermochemical conversion technologies—as solid waste incinerators. These facilities must meet the Other Solid Waste Incineration (OSWI) standards in Section 129 of the CAA, including adhering to the Maximum Achievable Control Technology emission limits for nine specific pollutants, conducting performance tests, continuous emissions monitoring, maintaining operating limits, keeping records, submitting reports and obtaining Title V permits.

While facilities complying with the OSWI standards face major compliance costs and operational challenges, in contrast, those that use noncombustion-based decomposition methods, such as solvolysis or enzymolysis, or physical purification techniques, like dissolution, are subject to less stringent, category-specific emission standards under the National Emission Standards for Hazardous Air Pollutants.

This regulatory framework could undergo changes soon. Under the Trump administration, the EPA has signaled possible revisions to how pyrolysis and similar units are regulated under the CAA. Specifically, in 2021, the EPA issued an Advance Notice of Proposed Rulemaking (ANPRM) to gather feedback on whether to continue classifying pyrolysis units under OSWI rules. Possible outcomes of the ANPRM include maintaining the current standards, streamlining permitting and monitoring requirements or establishing a new category for advanced recycling with customized standards.

A decision not to regulate thermochemical conversion technologies as solid waste incinerators could reduce compliance costs dramatically and accelerate innovation for thermochemical technologies. However, it remains unclear if the EPA will take such action. Environmental groups are opposed, arguing that pyrolysis and gasification units combust waste and emit pollutants like traditional incinerators and that removing pyrolysis units from OSWI classification or creating a separate category with customized standards will weaken air protection.

Understanding the RCRA

The Resource Conservation and Recovery Act (RCRA) sets the federal framework for managing both hazardous and nonhazardous waste. RCRA applies when the material being processed qualifies as “solid waste” under 40 C.F.R. § 261.2 and whether it is classified as hazardous.

Materials are considered solid waste if they are discarded, whether they are abandoned, recycled in certain ways or inherently waste-like. They become hazardous waste if they exhibit hazardous characteristics or appear on the EPA’s hazardous waste lists.

Because advanced recycling typically uses plastic scrap as feedstock to produce new materials, these operations often fall within RCRA’s scope. However, states that administer their own waste programs have significant discretion to define what constitutes “waste” and determine whether specific processes are regulated as waste management activities.

If a state concludes that advanced recycling turns discarded plastics into feedstock for new products without creating major disposal concerns, it could classify these operations as manufacturing rather than waste management. This classification can reduce the applicability of RCRA requirements significantly.

Opponents argue that this approach weakens environmental protections by removing stringent waste management standards and creates inconsistencies compared with other recycling operations. According to opponents, while converting old plastics into new products reasonably can be considered recycling, advanced recycling operations that convert plastic scrap into fuels or energy rather than new products are not recycling. They contend that labeling these processes as “recycling” is inconsistent with standards applied to other materials and warn that applying a different standard to plastics risks undermining recycling integrity and environmental protections.

Industry advocates counter that converting plastics into fuels or energy should still count as recycling because it recovers value from hard-to-recycle plastics that otherwise would be landfilled or incinerated without energy recovery. Since 2017, 25 states have taken this approach to encourage innovation and cut landfill use, now treating advanced recycling as manufacturing instead of waste disposal.

This shift offers big advantages. Facilities labeled as manufacturers often face fewer hazardous waste rules under RCRA. For example, if a recycler converts plastic scrap into feedstock—such as a solvolysis plant breaking down polyethylene terephthalate bottles into monomers—the plastic feedstock might not meet the definition of solid waste under RCRA Subtitle C. That could exempt the material from RCRA waste management requirements.

A manufacturing designation also can help operators argue that their entire process counts as a single manufacturing process unit, allowing them to manage certain hazardous waste without triggering strict permitting and tracking rules. It also could help recyclers avoid being classified as a treatment, storage or disposal facility, which has compliance burdens.

Not all states agree. Some explicitly regulate advanced recycling as solid waste management. One state even has banned certain advanced recycling facilities. So, location plays a critical role in determining whether an operation will succeed.

Federal legislative proposals

Lawmakers on Capitol Hill are pushing initiatives to boost recycling and clarify rules for advanced recycling.

The Accelerating a Circular Economy for Plastics and Recycling Innovation Act would set national standards for plastics recycling. It calls for plastic packaging to include at least 30 percent recycled content by 2030, defines advanced recycling as a manufacturing process, not waste disposal and would standardize definitions and reduce regulatory uncertainty.

The Cultivating Investment in Recycling and Circular Local Economies (CIRCLE) Act takes a financial approach. It offers a 30 percent investment tax credit for recycling infrastructure, including advanced recycling facilities. This could lower capital costs and speed up adoption of advanced recycling technologies, making them more competitive.

Together, these legislative changes could open doors for growth and reshape compliance strategies, investment plans and market positioning.

K&L Gates LLP is a global law firm based in Pittsburgh. For more information, visit www.klgates.com.