2026 Regulatory Outlook: Advanced Recycling

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 cannot process, converting materials like 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 into circular-economy strategies. Modern applications are quickly gaining momentum as brands pursue circularity, states enforce waste-reduction measures, and artificial intelligence-driven efficiencies enhance processing. What started as a promising concept is quickly 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 would reach US$7.26 billion by 2035, with a compound annual growth rate (CAGR) of 13.16%.¹ Meanwhile, Future Markets, Inc. projected market revenues to exceed US$15 billion by 2040, with CAGRs exceeding 25%.² Evaluating the broader chemical recycling-service market, Knowledgeable Sourcing Intelligence projected a US$196.2 billion valuation by 2035 based on market growth at a CAGR of 25.8%.³

However, despite these optimistic 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. Key challenges to be faced in 2026 are outlined below.

The Clean Air Act: How Should Advanced Recycling Operations Be Regulated?

How advanced recycling operations are regulated under the Clean Air Act (CAA) depends on the technology employed. Currently, the US Environmental Protection Agency (EPA) regulates facilities that combust nonhazardous waste in a starved-air primary chamber and afterburner—such as those using pyrolysis, gasification, or other thermochemical conversion technologies—as solid waste incinerators. These facilities must meet the strict Other Solid Waste Incineration (OSWI) standards outlined in Section 129 of the CAA. This includes adhering to Maximum Achievable Control Technology emission limits for nine specific pollutants, conducting performance tests, continuous emissions monitoring, maintaining operating limits, keeping records, submitting reports, and often obtaining Title V permits.

While facilities complying with the OSWI standards face significant compliance costs and operational challenges, in contrast, facilities that utilize non-combustion-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.

Notably, this regulatory framework could undergo changes in the near future. Under the Trump administration, the EPA has signaled possible revisions to how pyrolysis and similar units are regulated under the CAA.⁴ 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 dramatically reduce compliance costs 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 similar to traditional incinerators, and that removing pyrolysis units from OSWI classification or creating a separate category with customized standards will weaken air protections.

RCRA: Is Advanced Recycling Waste Disposal or Manufacturing?

The Resource Conservation and Recovery Act (RCRA) sets the federal framework for managing both hazardous and non-hazardous waste. RCRA applies when the material being processed qualifies as “solid waste” under 40 C.F.R. § 261.2 and, if so, whether it is classified as hazardous. A material is considered solid waste if it is discarded—whether abandoned, recycled in certain ways, or inherently waste-like. It becomes hazardous waste if it exhibits hazardous characteristics or appears on the EPA’s hazardous waste lists. 

Because advanced recycling typically uses waste plastics 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 may classify these operations as manufacturing rather than waste management. This classification can significantly reduce the applicability of RCRA requirements.

Opponents argue that this approach weakens environmental protections by removing stringent waste management standards and creates inconsistencies compared to other recycling operations. According to the opponents, while converting old plastics into new plastic products can reasonably be considered recycling, advanced recycling operations that convert plastic waste into fuels or energy rather than new plastic products is 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 would otherwise be landfilled or incinerated without energy recovery. Despite these concerns, since 2017, 25 states have taken this approach to encourage innovation and cut landfill use. They now treat 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 waste into valuable feedstock—such as a solvolysis plant breaking down PET bottles into monomers—the plastic may not meet the definition of “solid waste” under RCRA Subtitle C. That could exempt the material from RCRA waste management requirements.

A manufacturing designation can also help operators argue that their entire process counts as a single Manufacturing Process Unit. This allows them to manage certain hazardous wastes without triggering strict permitting and tracking rules. It may also help recyclers avoid being classified as a Treatment, Storage, or Disposal Facility, or TSDF, which carries heavy compliance burdens.

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

Toxic Substances Control Act: Are Chemical Products Derived From Advanced Plastics Recycling “New Chemicals Substances”?

Like the Clean Air Act and RCRA, advanced recyclers face uncertainty under the Toxic Substances Control Act (TSCA). The big question is whether chemicals made from recycled plastics are classified as “new chemical substances.” If they do, they must undergo rigorous pre-market review. If not, they’re treated like existing regulated products.

Under TSCA, any chemical not listed on the EPA Inventory is considered new. Before it can be sold, the company must file a Pre-Manufacture Notice (PMN). EPA then reviews the chemical for safety. If data is lacking or risks appear serious, EPA issues a Section 5(e) order. That order can restrict or stop production until more information is provided. Later, EPA often formalizes these limits through Significant New Use Rules (SNURs), which require companies to notify EPA before using the chemical in new ways.

In August 2022, the EPA issued a Section 5(e) Consent Order to a major fuel producer for five PMN substances made from plastic waste. A community group challenged the order in court, citing cancer risks from contaminants. By mid-2023, EPA proposed SNURs for 18 similar substances. These SNURs targeted feedstocks with PFAS, heavy metals, dioxins, BPA, and other toxins. The rules would have required prior notice before using these plastics in advanced recycling or downstream manufacturing, or in fuel applications. However, due to ongoing litigation, the EPA withdrew both the Section 5(e) Consent Order and the proposed SNURs. That move left the industry in limbo. Future SNURs could reshape compliance obligations for recyclers, refiners, and manufacturers.

The Trump administration has indicated it plans to require impurity testing for new chemicals from waste plastics on a case-by-case basis. So far, that has not happened. Many PMNs remain pending. Companies do not know what rules will apply. Manufacturers, importers, and businesses in biotech, advanced materials, and consumer products need to stay alert. EPA’s next steps could change the game.

The Clean Water Act

The Clean Water Act (CWA) governs pollutant discharges into US waters, and advanced recycling facilities, particularly those using chemical processes, are subject to its requirements. Operations that discharge process water or wastewater must obtain a National Pollutant Discharge Elimination System permit, which sets limits on pollutants and requires monitoring and reporting. Facilities also need to manage stormwater runoff from feedstock storage and chemical handling to prevent contamination during rain events or spills. 

Environmental groups are calling for stronger water protections, arguing that current CWA standards do not adequately address chemical contaminants associated with advanced recycling processes, including PFAS, heavy metals, and dioxins. They urge the EPA to update effluent guidelines and to require comprehensive monitoring and reporting for wastewater and stormwater discharges. Advocates also emphasize the need for advanced treatment technologies to ensure hazardous substances are removed before water is released into the environment. In their view, exemptions or relaxed standards would undermine public health and environmental integrity, making robust oversight essential. Additional concerns include stormwater runoff from feedstock storage, accidental spills, and thermal pollution from process water—issues critics believe demand stringent monitoring, treatment standards, and transparent reporting to prevent contamination of surface and groundwater.

How Might Federal Legislative Proposals Impact Advanced Recycling

Lawmakers on Capitol Hill are pushing initiatives to boost recycling and clarify rules for advanced recycling. One proposal, 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% recycled content by 2030 and defines advanced recycling as a manufacturing process, not waste disposal. If passed, this would standardize definitions and reduce regulatory uncertainty.

Another bill, the Cultivating Investment in Recycling and Circular Local Economies (CIRCLE) Act, takes a financial approach. It offers a 30% 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—harmonized federal standards and new financial incentives—could open doors for growth and reshape compliance strategies, investment plans, and market positioning.

Extended Producer Responsibility: How Extended Producer Responsibility Laws Are Affecting Advanced Recycling

States are taking bold steps on waste management, with Extended Producer Responsibility (EPR) laws leading the way. By late 2025, California, Colorado, Maine, Maryland, Minnesota, Oregon, and Washington had rolled out EPR programs for packaging. These laws make producers responsible for post-consumer packaging and link costs to recyclability and environmental impact, thereby pushing investment into technology that tackles hard-to-recycle plastics. Advanced recycling is emerging as a game-changing solution. It turns materials traditional recycling rejects into valuable components, helping producers hit sustainability targets, and cut fees under certain regulations.

Advanced recycling stands out as a transformative, converting materials that traditional recycling rejects into valuable components. This not only helps producers achieve sustainability goals but also reduces fees under certain environmental regulations.

California’s SB 54, the Plastic Pollution Prevention and Packaging Producer Responsibility Act, exemplifies this trend. By 2032, all regulated packaging must be recyclable or compostable, plastic use must decline by 25%, and recycling rates must reach 65%. While SB 54 does not directly regulate advanced recycling, its ambitious requirements make advanced recycling an attractive compliance tool. Proposed regulations would allow producers to leverage advanced recycling to meet reduction and recyclability goals without completely redesigning packaging. Still, companies must navigate federal rules under RCRA and TSCA, since chemical recycling feedstocks can trigger hazardous waste or new substance reviews. 

To succeed, businesses need a proactive strategy—partnering on advanced recycling, tracking lifecycle impacts, and staying on top of regulations.

Conclusion

Advanced recycling has huge growth potential. But in 2026, success depends on agility. Companies that anticipate changes, adapt quickly, and work with policymakers will lead in this evolving market.