Evaluating Recycled Plastic Investment under Policy Uncertainty: An Analysis Using the Real Options Binomial Model

This paper evaluates the investment value of a proposed rPET recycling plant by Carbios in France under conditions of price and policy uncertainty, using a real option model. Unlike traditional NPV methods, the real options approach captures the value of flexibility in investment timing. The analysis incorporates rPET price volatility and different subsidy arrival scenarios to simulate optimal investment decisions under delay options. The results demonstrate that early and substantial subsidies significantly increase strategy value. Specifically, the optimal strategy is to wait when policy implementation is uncertain, as premature investment may lead to substantial losses due to sunk costs and volatile returns. The model shows that the flexibility to delay investment generates meaningful additional value, validating the superiority of dynamic option-based methods in uncertainty policy environments; however, waiting too long instead decreases the strategy value to the detriment of the investment. In the case of Carbios, when subsidies are insufficient, delaying investment for two years would be the optimal decision; however, with adequate subsidies would be no meaning to postpone investment. These findings provide both theoretical support and practical tools for investors and policymakers to make more informed and adaptive decisions in the recycled plastics sector.