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Since its invention, plastic has been and still is vital to global development. Plastics have been on a straight-line trajectory of growth and prosperity – injecting immense amounts of fortune into the global economy. More than a century later and plastics still have endless possibilities. Today, half the weight of the Boeing Dreamliner 787 – which is one of the most advanced planes – is comprised of plastic. The digital revolution that ushered in the information age is driven by bits and bytes housed in plastic. Through contact lenses and prosthetics, plastics have even gifted people with sight and limbs. It is no doubt that plastic has been the critical enabler for sectors as diverse as packaging, construction, healthcare, and electronics. However, through human exploitation and ignorance, plastics have had severe and dire consequences. These negative impacts of plastics are becoming more apparent by the day.
Economic Problem
Plastic production has surged over the past 50 years, from 15 million tonnes in 1964 to 311 million tonnes in 2014. (ellen) Due to improper disposal of these plastics, approximately 8 million pieces of plastic end up in the oceans every day. It is predicted that there may now be around 5.25 trillion macro and microplastic pieces floating in the ocean (surfers). These figures are bound to increase to such an extent that by 2050, there will be more plastic in the ocean than fish. Not only is this affecting the ecosystem, but it also has had a severe impact on the economy. Plastic pollution has negatively affected the well-being of different sectors of the economy such as; fisheries, agriculture, and recreational/ tourism activities. This has caused a global decline of 5% in the benefits that humans derive from oceans – costing the global economy $2.5 trillion every year.
Causes and effects
The high degree of household and industrial improper disposal of plastic, in conjunction with the fact that plastic is not easily degradable, has created negative externalities of significant proportions. These externalities include; degradation of natural systems as a result of leakage, especially in the ocean; greenhouse gas emissions resulting from production and after-use incineration; and health and environmental impacts from substances of concern. The aesthetic damage created by landfills and hazardous emissions resulting from incineration are two examples of undesirable effects of the inefficient management of plastic waste. Externalities such as these result from failing to internalize costs associated with inefficient recycling. This then causes the marginal social cost to be greater than the marginal private cost creating (refer to diagram)
Inefficient recycling creates a serious aesthetic quandary in urbanized areas of the world. The chemical stability of plastic obviates plastic waste from decomposing at a rate commensurable to the rate of waste generation. As plastic waste accumulates, damages will elevate, and the economy will be negatively impacted. These damages include the quantified market and nonmarket welfare effects of plastics through their effects on the population of harvested marine species and species with significant conservation value (reference) E.g. the great barrier reef is considered a natural treasure of Australia. It injects $6.4 billion into the economy every year through tourism and currently supports 64000 jobs in Queensland. However, as plastic waste has been damaging the coral at an alarming rate, this $6.4 billion will be lost and 64000 jobs will be at risk. Loss of these jobs will then go against the economic objectives by increasing unemployment hence lowering the standard of living. If production and use continue within the current linear framework, these negative externalities will be exacerbated, as laid out in the figure
The major market failure from inefficient plastic disposal is the waste of materials and resources resulting from the relatively low recycling rate of 25%. This low plastic recycling rate implicatively insinuates that the great majority of polymer-based materials utilized for plastic products enter the waste stream never to be used again. This broadens the issue as there is a diminutive value placed on such a versatile material made from a finite resource – whose environmental legacy lasts decades after its brief use. This is a result of the current linear economic model of plastic production as shown in the figure (effects of plastic)
In this model, raw materials are processed into a product and thrown away straight after use – which wastes the finite resources that are available and is not an ecologically sustainable development.
Solutions
Solution 1
The US$ 2.2 trillion annual external cost of plastic pollution is not reflected in the production costs of the linear plastics economy, indicating a major market failure. Although measures such as Extended Producer Responsibility (EPR) and plastics-related legislation (reference) have made some positive steps towards reducing plastic pollution, a system-vast change is required to rectify this market failure. A pragmatic solution would be a government-based contribution, whereby consumers are offered incentives (cashback) for properly recycling the plastic. The supply chain will pass on this price premium on raw plastic resin equitably through to the trillions of plastic items purchased each year by end consumers, converting plastic waste into a cashable commodity. In coherence with this, the government should also start a properly funded recycling program. This then has the greatest potential to drive global manufacturing toward a circular economy. (refer to figure)
A number of countries today apply these strategies and have acquired positive results. These countries include Germany, Austria, and South Korea – the world’s leading recyclers.
Alternative Solution.
The government can also create certain regulations, taxes, and bans on plastics. Taxing plastics will increase the private costs of producers and encourage them to innovate and find new ways of reducing the amount of plastic used in the products. Taxing plastic producers will ensure that the external costs are internalized. Unless the producers find new ways of reducing the plastic content, their costs will rise, and their profits will fall. Although in theory taxing plastic will help correct the market failure, in practice it may not as producers will pass the tax onto the consumer by increasing the cost.
Employment
- The government funding recycling programs will create new jobs and employment opportunities for society.
- Countries like the UK initiated this solution and found that 29,400 new jobs were created.
- Increasing taxes on producers might cause them to cut some of the laborers in order to account for the increased costs.
Standard of Living
- Increasing the number of jobs will mean that people will start earning wages hence increasing their standard of living.
- Government incentives (Cash backs) will reward consumers with money hence improving their standards of living
- The funding for these programs will be from taxes which means the government will have to increase taxes. • Producers can pass the tax on to the consumers by increasing the cost of the product. A tax on suppliers will cause an inward shift of the supply curve which will lead to an increase in retail prices. When prices rise, the real income of consumers will fall lowering their standard of living.
- The money gained from the taxes can be used for schools and hospitals.
Economic Growth
- An increase in employment and standard of living will result in an increase in consumer spending resulting in economic growth
- Taxing plastic will result in producers increasing the price of the product which will lead to cost push inflation. Increased Inflation leads to negative economic growth.
Assessing the solutions with the above criteria, the best solution would appear to be solution one; which is incentives and proper funding to start recycling programs. It will create new jobs; a better standard of living and economic growth. With that said; it would be better to implement both solutions as it will balance the positives and negatives of each solution. The revenue gained from the increased tax of producers can be used to initiate incentives and recycling programs. If producers decide to cut laborers, solution one will provide new jobs. If producers pass the taxes to consumers by increasing costs, the incentives can be used to cover the higher prices.
Conclusion
Plastic has been a beneficiary of economic development. However, due to improper disposal, plastic pollution threatens the global economy. If this issue is not addressed, it will damage the economy. Therefore, it is recommended that both the above solutions are implemented simultaneously to acquire the best results.
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