[Initial Insight] Regulatory Reform of the New Government... Speed Is Life

[Image source=Yonhap News]

[Asia Economy Reporter Oh Hyung-gil] Plastic waste is piling up all over the Earth. The Organisation for Economic Co-operation and Development (OECD) estimated that in 2019 alone, 353 million tons of plastic were discarded worldwide. This is an enormous amount equivalent to 14,000 dump trucks each carrying 2.5 tons. Most of this plastic does not decompose naturally and is difficult to recycle, resulting in the majority being landfilled or dumped into the ocean.

The amount of plastic waste continues to increase due to the spread of COVID-19 and the rise in single-person households. Although the use of disposable straws and plastic cups is being restricted, these measures alone are insufficient to slow down the rate at which plastic is discarded. The solution must be found in recycling. According to market research firm MarketandMarkets, the global plastic recycling industry market is expected to grow from approximately 34 trillion KRW last year to 53 trillion KRW by 2026, with an average annual growth rate of 9%.

However, the current level of plastic recycling technology in South Korea lags behind the European Union (EU) by 3.5 years and the United States by 2.5 years. This is why more support is needed for domestic companies dedicated to developing plastic recycling technologies.

A representative example is pyrolysis oil derived from waste plastic. This method extracts oil from plastic originally made from petroleum and uses it as a raw material for petrochemicals or as fuel in steelmaking processes. It is a technology that can increase recycling rates and accelerate the era of sustainable plastics. Not only does it reduce discarded plastic, but it also lowers dependence on petroleum in times of high oil prices, making it a next-generation eco-friendly business.

[Image source=Yonhap News]

However, regulations are holding back progress. Under the current Petroleum Business Act, petroleum refiners are only allowed to use petroleum and petroleum products as refining raw materials, so pyrolysis oil from waste plastic cannot be refined for commercial use.

Although there is an attempt to use pyrolysis oil from waste plastic as a raw material replacing crude oil or naphtha, the Waste Management Act stipulates that it can only be used as fuel. Furthermore, facilities allowed to use waste plastic as fuel are limited to cement kilns and incineration heat recovery facilities, so steel mills cannot use it as fuel either.

Pyrolysis oil produced domestically has a flash point below 20℃ due to its characteristics, but the manufacturing standards for refined fuel oil require a flash point of 30℃ or higher. This means that even if pyrolysis oil is produced, it cannot be commercialized. In contrast, Japan has set manufacturing standards into three types tailored to the characteristics of pyrolysis oil, encouraging commercialization, which is a significant difference.

Fortunately, since last September, through the regulatory sandbox, three companies?Hyundai Oilbank, SK Geocentric, and GS Caltex?are conducting demonstration exceptions for the use of pyrolysis oil as a raw material. The government’s plan to revise subordinate laws under the Waste Management Act within this year to allow pyrolysis oil from waste plastic to be used as a raw material for petroleum products, although late, is a welcome move.

All past governments have made efforts to improve regulations that suppress corporate activities. Representative examples include President Kim Young-sam’s administrative reform innovation, President Kim Dae-jung’s regulatory guillotine, and President Roh Moo-hyun’s regulatory cap system. Presidents Lee Myung-bak and Park Geun-hye each promoted deregulation campaigns called “removing utility poles” and “thorn under the fingernail,” respectively. President Moon Jae-in also attempted regulatory reform through the sandbox, but high barriers remain a reality.

New regulations continue to emerge, such as the Serious Accident Punishment Act implemented this year. According to the Regulatory Reform Committee’s regulatory information portal under the President’s office, from May 10, 2017, when the current government took office, to the past four years, a total of 3,919 regulatory-related bills were proposed in the National Assembly through member legislation. The inauguration of the new government is just a month away. Voices calling for regulatory reform are rising in various sectors, including industry. It is time to tighten the reins on regulatory reform that can revitalize businesses once again.