Subscription, Debt Repayment and Issue of Shares

31 January 2011

Environmental Recycling Technologies plc (the "Company")

Subscription, Debt Repayment and Issue of Ordinary Shares

The Company today announces a subscription, the repayment, in full, of all outstanding loans due to YA Global Investments Limited ("Yorkville") and the issue of ordinary shares of 2.5 pence each ("Ordinary Shares").

The Subscription

On 31 January 2011, the Company entered into a subscription agreement with a new investor to raise £540,000 (the "Subscription"). Pursuant to these agreements, the Company has agreed to issue a total of 13,500,000 new Ordinary Shares at a price of 4 pence each ("the Subscription Price"). The Subscription is conditional upon the admission of the new Ordinary Shares to trading on AIM and it is not underwritten.

As part of the Subscription, the Company has also agreed to issue warrants over 6,000,000 new Ordinary Shares exercisable at par value (the "Warrants") to the subscribers. These Warrants are exercisable until 28 April 2011. Following the issue of Warrants, there are a total of 10,568,185 warrants outstanding in the Company to subscribe for new Ordinary Shares.

In addition to the above, the new investor has also indicated in writing to the board of directors of the Company (the "Board") that it would be willing to subscribe for a further 13,500,000 Ordinary Shares at a price of 4 pence at any time up to 20 April 2011.

Repayment of Convertible Loan Agreement

Following the Subscription, the Board has resolved to repay in full its convertible loan with YA Global Investments LP ("Yorkville") entered into on 28 December 2006 (the "Convertible Loan Agreement").

In accordance with the Convertible Loan Agreement, and following receipt of conversion notices (the "Conversion Notices"), the Company will issue two tranches of Ordinary Shares to Yorkville (the "Conversions"). The first tranche is for 8,459,492 Ordinary Shares which will be issued at a price of 3.76 pence each. The second tranche is for 214,136 Ordinary Shares which will be issued at a price of 4.38 pence each. The Conversion will satisfy £259,400 of loans owed to Yorkville.

The remaining outstanding amounts due under the Convertible Loan Agreement of £540,000 will be repaid by the Company using the cash proceeds from the Subscription (the "Repayment").

Following the Conversions and the Repayment, the Convertible Loan Agreement will be terminated and the debenture secured against the assets of the Company will be removed.

Issue of Ordinary Shares

In accordance with a settlement agreement with Mr Sean Daley, announced on 2 February 2010, the Company announces that it has issued to Mr Daley 992,063 Ordinary Shares at 5.04 pence each (the "Settlement Agreement"), which represents a discount of 10 per cent. to the closing middle market price of the Company on 28 January 2011.

Board Overview

The Subscription, the Conversions and the Repayment are in line with the Board's on-going strategy to reduce the current liabilities of the Company. The Directors believe the benefits of reducing the liabilities of the Company justify the discount to the mid-market price per Ordinary Share that the new Ordinary Shares have been issued at under the Subscription and Conversions. Following the Subscription, the Conversions and the Repayment the Company will have total borrowings of £1.77m, compared to £3.1m at 31 December 2009 and £2.4m at 30 June 2010.

Admission of new Ordinary Shares

The new Ordinary Shares to be issued under the Subscription, the Conversions and the Settlement Agreement will rank pari passu with the existing Ordinary Shares in the Company. Application has been made for the new Ordinary Shares to be admitted to trading on the AIM market of the London Stock Exchange ("Admission"). It is expected that Admission will become effective on 4 February 2011.

In total 23,165,691 new Ordinary Shares are being issued under the Subscription, the Conversions and the Settlement Agreement. Following Admission, the Company will have 517,992,754 Ordinary Shares in issue. The new Ordinary Shares will represent approximately 4.47 per cent. of the issued share capital of the Company immediately following Admission.

The new Ordinary Shares to be issued as part of the Subscription, the Conversions and the Settlement Agreement are being allotted under the existing authorities of the Company granted to the Directors at the Annual General Meeting of the Company on 14 September 2010.