This chapter presents the economic consequences of the policy scenarios explored in the previous chapters. It focuses on macroeconomic implications as indicated by the change in Gross Domestic Product (GDP), as well as the changes in costs for the collection, sorting and treatment of plastic waste. It highlights that a balanced package that combines policy action to reduce plastics use and waste flows with improved waste management is more cost-effective than policy scenarios that focus purely on downstream policy actions.
Policy Scenarios for Eliminating Plastic Pollution by 2040
Abstract
The implementation of policies modelled in the policy scenarios presented in the previous chapters comes at a cost to the economy. For instance, increasing the collection of plastic waste has a cost, recycling tends to be more expensive than landfilling or incineration and taxes on plastics lead to higher prices.1 One possible exception is the policy pillar on eco-design, which mostly entails facilitating better design, and enabling shifts from shorter-lived products to products with a longer lifetime and repair services. It would thus involve reduced economic activity (and value added) in some sectors, but a compensating increase in economic activity (and value added) in other sectors.
Generally, macroeconomic costs implied by a policy increase with its stringency. Economic impacts also depend on the type of policy instrument chosen to achieve the ambitions of a specific policy pillar: choosing alternative instruments in the policy mix could significantly alter the economic implications. The policies chosen in this report rely heavily on economic instruments, as these can be considered a cost-effective benchmark against which alternative policy options, such as regulatory measures, can be evaluated. Furthermore, the policy instruments modelled are the same across all scenarios (albeit with differing levels of stringency), allowing for a comparison of costs across scenarios.
This chapter presents and compares the macroeconomic costs of the ten policy instruments modelled in each policy scenario. The environmental costs of inaction are not within the scope of this chapter.
Reduced ambition in policies across the plastics lifecycle could generally lead to lower macroeconomic consequences of policy packages, but this would translate into additional economic costs if the policy package is unbalanced (i.e. characterised by a focus on selected interventions along certain stages of the lifecycle only) and into higher environmental costs (Figure 6.1). The Global Lifecycle Low stringency scenario represents the outcome of a less ambitious international agreement. While a lower level of policy stringency may reduce costs relative to higher policy stringency (in the narrow sense of GDP impacts excluding avoided costs of inaction), lower policy stringency also reduces the benefits of policy action, including lower waste management costs when waste volumes decline. The Global Downstream High stringency and Advanced economies Lifecycle High stringency scenarios show that an unbalanced policy package can lead to excessive costs, including due to costs of waste management that would be higher in the presence of larger plastics production, use and waste.
Percentage change in GDP (left axis) and in plastic leakage (right axis) compared to the Baseline in 2040
Note: The lower reduction in leakage in OECD countries compared to non-OECD countries in the Global Lifecycle Mixed stringency and Global Lifecycle High stringency [Global Ambition] scenarios reflects their lower share of mismanaged waste, not a lower ambition level.
Source: OECD ENV-Linkages model.
The Global Lifecycle Mixed stringency scenario, which bundles the policy actions contained in the three partial ambition scenarios, also leads to larger macroeconomic costs than necessary, especially in non-OECD countries. In this scenario, non-OECD countries focus on downstream action, and thus combine ambitious targets for recycling and plastic waste management with large volumes of plastic waste generation. This implies significant costs, as well as persistent plastic leakage.
For OECD countries, both the level of ambition and the macroeconomic costs are comparable across the three most ambitious scenarios (Advanced economies Lifecycle High stringency, Global Lifecycle Mixed stringency and the Global Lifecycle High stringency [Global Ambition]), as all involve the implementation of stringent policies in OECD countries. However, the two high ambition policy scenarios come at a lower macroeconomic cost in OECD countries compared to non-OECD countries because the policy packages are more balanced across regions. As a result, firms do not lose as much competitive position relative to their non-OECD competitors.
The macroeconomic consequences of the ambitious package of policies envisioned in the Global Lifecycle High stringency [Global Ambition] scenario are limited to 0.5% of global GDP by 2040. These macroeconomic costs only reflect costs that could be included in the modelling framework, i.e. the expected costs of implementing the envisioned policy instruments and their indirect economic effects. However, substantial economic benefits would materialise from reduced pressures on the environment and human health along the plastics lifecycle. Even if such economic benefits have not been quantitatively assessed within the scope of this analysis, it is expected that they would largely offset the quantified costs of implementing the considered policy packages (OECD, 2022[1]).
While global costs are modest overall in the Global Lifecycle High stringency [Global Ambition] scenario, especially in light of the strong environmental benefits, macroeconomic costs are on balance higher in non-OECD countries (slightly more than 0.6% loss in GDP compared to the Baseline scenario in 2040) than in OECD countries (less than 0.4% GDP loss). One driver of this is the less developed waste management systems in place in many developing countries, and the costs implied in improving these systems (see also Section 6.3). Section 7.5 in Chapter 7 will dive deeper into the support needed for policy action in developing countries, including financing.
Significant differences in the macroeconomic impacts of the Global Lifecycle High stringency [Global Ambition] scenario are evident across policy pillars.2 Policies to enhance recycling are the largest contributors to macroeconomic costs, and are comprised of both improving waste management systems to increase recycling rates, as well as establishing recycled content targets. Depending on the country, a tax-and-subsidy scheme implemented in the model to reduce primary plastics and stimulate secondary plastics comes at a higher cost of plastic products for consumers.3
Policies to design for circularity include some policies that can bring both economic and environmental benefits, as they focus on improving the economic efficiency of plastics use (i.e. reducing the plastics intensity of the economy) and shifting economic activity towards more durable goods and repair services. These measures are not profitable in the Baseline scenario, where plastics remain cheap, but they become cost-effective when combined with policies that increase the costs of primary plastics use (e.g. plastic taxes contained in the curb production and demand pillar).
The macroeconomic costs associated with the curb production and demand pillar, i.e. the taxes on plastics and packaging, lead to a small reduction in GDP as consumers and industry shift away from using cheap plastics. The macroeconomic effect of this shift is particularly strong in non-OECD countries, such as developing countries in Sub-Saharan Africa and Asia. The plastics intensity of these economies is on average higher than in OECD countries (see Chapter 2), mostly due to relatively low GDP levels and a less diversified economy with a smaller share of services. Thus, increased costs from taxes on plastics use are more difficult to avoid by adjusting economic activity towards less plastics-intensive sectors. Furthermore, economic development tends to be associated with a boom in infrastructure development and construction, typically accompanied by significant plastics use, before shifting toward a more services-oriented economy and a resulting decline in plastics intensity.4
Finally, the projected macroeconomic costs associated with closing leakage pathways, the fourth pillar of the policy package, are rather small. As explained in detail in Section 6.3, this policy pillar induces higher costs for collecting, sorting and treating waste. However, the incremental costs of implementing policies in this pillar, after other policies have already contributed to lowering total waste streams, are very modest, especially at the macroeconomic level.
Contribution of policy pillars to variations in global GDP in percentage changes compared to the Baseline, Global Lifecycle High stringency [Global Ambition] scenario
Source: OECD ENV-Linkages model.
Enhancing waste collection, sorting and treatment, i.e. improving waste management, accounts for a substantial portion of the macroeconomic costs of the policy scenarios, as shown in the analysis of the macroeconomic costs by policy pillar above. In the Baseline scenario, OECD countries would already jointly invest more than USD 1 trillion in plastic waste management between 2020 and 2040. Non-OECD countries would invest a similar amount, amounting to USD 2.1 trillion globally (Figure 6.3; see also Figure 6.4, Panel A). A large portion of these costs are related to waste collection, which is characterised by relatively low unit costs that constitute a sizeable amount in aggregate. Further treatment of plastic waste for incineration or recycling has higher unit costs but significantly lower volumes. Furthermore, per-capita costs of plastic waste management vary widely across countries, with relatively high costs in the USA and Canada, and the lowest costs in Sub-Saharan Africa.
Per capita cumulative waste management costs for 2020-2040 by region and category in USD, Baseline scenario
Note: Total cumulative waste management costs are presented as data labels above the bars.
Source: OECD ENV-Linkages model.
Policy packages have two distinct effects on waste management costs (Figure 6.4). On the one hand, the upstream and midstream policy measures can reduce total plastic waste volumes, thereby reducing the costs of collection, sorting and treatment. On the other hand, downstream policy measures imply that larger shares of waste (and litter) are collected and that more expensive waste management options are used, such as for recycling. The changes in waste management costs incurred in the policy scenarios, also referred to as “investment needs”, are calculated as the difference in costs between the policy scenario and the Baseline scenario, and are attributed to different waste management categories, namely recycling, incineration, (sanitary) landfilling, collection and municipal litter collection.
Source: OECD ENV-Linkages model.
On balance, the net policy-induced changes in plastic waste management costs tend to be small in OECD countries, but positive in most non-OECD countries. In the former, cost increases are almost exclusively due to increased recycling, while in many emerging and developing economies significant increased costs are also entailed for the collection of plastic waste, especially in the absence of sufficient upstream and midstream measures to reduce waste volumes.
For OECD countries, where mismanaged waste levels are already minimal in the Baseline, the additional costs are concentrated in recycling activities, amounting to more than USD 120 billion between 2020 and 2040 in both the Global Lifecycle Mixed stringency and Global Lifecycle High stringency [Global Ambition] scenarios. These values don’t represent a net cost due to the fact that upstream and midstream measures also reduce waste volumes and thus lower the operational costs of waste management. The same result applies to China.
Growth in waste generation in the Global Lifecycle Mixed stringency scenario exacerbates the scale of the problem to be managed and threatens to strain waste collection and management systems, especially in rapidly growing low- and middle- income economies. As plastics use and waste remain unchecked, some countries face considerably higher costs and investment needs, while plastic leakage persists. In the Global Lifecycle Mixed stringency scenario, the costs required to establish needed waste management systems in non-OECD countries at requisite scales (i.e. the costs associated with recycling waste collection and litter management), would reach USD 174 billion, while the avoided costs of incineration and landfilling is limited to USD 20 billion.
In countries with significant mismanaged waste shares in the Baseline scenario, such as those in Sub-Saharan Africa and emerging economies and developing countries in Asia (Rest of Asia region), increased collection costs outweigh the lower waste volumes even in the Global Lifecycle High stringency [Global Ambition] scenario, leading to a total cost increase of USD 18 billion in Sub-Saharan Africa and USD 14 billion in Rest of Asia (Figure 6.5). Nevertheless, the effects of combining measures all along the lifecycle contribute to limiting increases in the net costs of waste collection, sorting and treatment in non-OECD countries in the Global Lifecycle High stringency [Global Ambition] scenario. The net costs of waste management increase by a relatively modest USD 50 billion in this scenario over Baseline levels. Box 6.1 further illustrates how changes in waste management costs are associated with the different policy pillars.
Cumulative waste management costs for 2020-2040 by category in deviation from the Baseline scenario (in USD billion), Global Lifecycle High stringency [Global Ambition] scenario
Source: OECD ENV-Linkages model.
Finally, technical uncertainties could complicate the viability of over-reliance on downstream measures and increase the costs of policy implementation beyond the projections presented here. Technological constraints, including the time needed to establish sanitary landfills or recycling facilities, may impede their rapid development. Additionally, as the Global Lifecycle High stringency [Global Ambition] scenario assumes rapid recycling expansion across all regions, concerns emerge regarding the availability of sufficient scrap materials and the functioning of international scrap markets to sustain this ambitious recycling effort.
In conclusion, although prioritising downstream policy interventions has the potential to contain mismanaged waste, this approach is likely to fall short in tackling the root drivers of plastic pollution. This is due in part to the significantly higher investment needed to manage growing amounts of waste and the possible technical constraints that could hinder the development of advanced waste management systems. Considerable uncertainty exists regarding the possible viability and cost-effectiveness of a downstream-oriented strategy. Downstream-focused strategies in low- and middle- income countries hinge on assumptions that nations that currently lack robust waste management collection and management systems can swiftly implement the necessary policies and investments. A shared recognition of the need for whole-of-lifecycle approaches is likely to be the most cost-effective strategy to achieving the global goal of eliminating plastic pollution.
Changes in plastic waste incineration costs as presented in Figure 6.5 are driven by three factors: (i) total waste volumes decline as a result of upstream and midstream policy measures (to curb production and demand and to enhance eco-design); (ii) the share of waste that is incinerated declines due to policies to enhance recycling; and (iii) closing leakage pathways implies higher waste collection rates as well as lower litter loss rates, thus increasing the amount of waste that is treated (Figure 6.5). Figure 6.6 decomposes waste management costs according to these three policy effects.
Cumulative waste management costs 2020-2040 by policy driver, deviation from the Baseline scenario (in USD billion)
Note: Totals are identical to those in Figure 6.5.
Source: OECD ENV-Linkages model.
Especially in countries with currently minimal mismanaged waste shares, the effects of the upstream and midstream policies to reduce waste are roughly similar to the negative cost categories in Figure 6.5, as the reduction in incineration costs is largely driven by the reduction in the total generation of plastic waste.
However, in countries with significant levels of mismanaged waste, the cost savings from upstream and midstream policies are larger than the change in waste collection costs suggested in Figure 6.5, as the latter are comprised of reduced waste generation (a saving compared to Baseline) and increased costs of collection (additional costs, mainly for additional waste collection and recycling, compared to Baseline). In the alternative decomposition presented in Figure 6.6, these additional costs reflect the costs associated with closing leakage pathways, defined as the increased costs of collection (incl. litter) and management in absence of the effect of the upstream policies.
Finally, the additional waste management costs associated with enhanced recycling largely consist of the additional recycling costs, which are partially offset by lower incineration and landfilling costs.
The figure above shows that the lower waste management costs in the Global Lifecycle High stringency [Global Ambition] scenario, relative to the Global Lifecycle Mixed stringency scenario, stem from the effect of policies to curb production and demand, and policies to promote the eco-design of products. The costs of enhancing recycling are very similar (as the policy package is largely the same), while the costs associated with closing leakage pathways are somewhat higher, but also more effective as mismanaged waste shares are reduced to zero.
Policy packages that focus on downstream measures, especially the Global Downstream High stringency scenario, would reduce plastic leakage while total plastic waste increases, leading to a significant increase in total waste management costs. The absence of upstream policy measures is therefore not cost-effective for waste management (Figure 6.7).
Percentage change in plastic leakage compared to Baseline in 2040 versus cumulative waste management costs for 2020-2040 (in USD billion)
Source: OECD ENV-Linkages model.
In contrast, high policy ambition throughout the plastics lifecycle in Advanced economies only will have very limited effects on global waste management costs, as most advanced economies already have very high waste collection rates. Correspondingly, reductions in global plastic leakage also remain small. The Global Lifecycle Low stringency scenario, which balances measures across all four policy pillars but with partial ambition levels, has impacts that fall somewhere in between.
Combining the three partial ambition scenarios in the Global Lifecycle Mixed stringency scenario helps to avoid the largest costs of the pure downstream scenario, by incorporating the ambitious upstream and midstream policies in Advanced economies Lifecycle High stringency and the Global Lifecycle Low stringency policies for emerging and developing economies. However, this integrated policy scenario cannot eliminate all plastic leakage and is still characterised by an over-reliance on downstream policies.
As a result, the Global Lifecycle High stringency [Global Ambition] scenario improves the Global Lifecycle Mixed stringency scenario by further aligning upstream and midstream policies, eliminating plastic leakage and simultaneously reducing total global waste management costs.
The above findings regarding the cost-effectiveness of balanced policy packages hold at global level, but can still incur costs in countries that have a low capacity to raise the required investment for waste management. Therefore, the globally efficient solution could benefit from flanking policies to help developing countries create capacity for policy implementation and waste management, and to provide international support for the required investments. This issue is discussed further in Chapter 7.
The speed of policy implementation in the Global Lifecycle High stringency [Global Ambition] scenario stretches the economy, and especially waste management systems. Targeting an end to plastic pollution after 2040 could potentially lower the transitional costs. The Global Lifecycle Delayed stringency policy scenario explores this possibility by modelling the same policy package as the Global Lifecycle High stringency [Global Ambition] scenario but over a longer timeframe, aligned with a 2060 target for the elimination of macroplastic leakage.5 Delayed action could generate short term economic benefits but with significant repercussions for plastic pollution and negative effects on the well-being of current and future generations.
Indeed, implementing the policies over a longer timeframe (as in the Global Lifecycle Delayed stringency scenario) could limit macroeconomic costs by 2040 to 0.2% of global GDP, compared to 0.5% for Global Lifecycle High stringency [Global Ambition] (Figure 6.8). Longer-term costs to 2060 would be very similar across both scenarios. Reduced ambition levels by 2040 could contain macroeconomic costs to 2040 in all countries due to slower policy implementation, as well as a slower restructuring of waste management systems. Furthermore, when the ambition to eliminate plastic leakage is delayed, some countries can reap temporary competitiveness gains when they have relatively modest targets and significant capacity to enhance recycling. This is due to the assumption that policy stringency is tightened faster in OECD countries than in non-OECD countries, which causes a smaller rise in production costs for some exporting sectors in Asia (notably China) than in most other regions, allowing them to benefit from the consequent temporary increase in competitiveness (OECD, 2022[1]). This is an exceptional case, however, and is not expected to persist in the long term as countries gradually increase policy stringency to meet the global target. The temporary rise in GDP also does not take into account the externalities associated with a delayed target, namely through missed opportunities to reduce plastics production and plastic waste and to avoid additional leakage to the environment and pollution. These externalities would imply higher clean-up costs in the future, as well as significant negative effects on well-being through health and environmental damages.
Impact on GDP of policy scenarios by region, expressed in percentage change compared to the Baseline in 2040
Note: The dashed lines represent average impact on GDP for OECD (left) and non-OECD (right) countries.
Source: OECD ENV-Linkages model.
Importantly, delayed action would impose a significantly larger environmental and health burden on present and future generations (Figure 6.9; Box 6.2). Mismanaged waste volumes would fall relatively slowly and 64 million tonnes (Mt) of waste would still be mismanaged in 2040. Similarly, levels of macroplastic leakage would only fall by 1.1% annually over the 2020-2040 period (versus 13% in Global Lifecycle High stringency [Global Ambition]), meaning that around 16 Mt of macroplastics would still leak into the environment annually by 2040. The slower pathway to zero macroplastic leakage results in an additional 38 Mt of macroplastics accumulated in aquatic environments alone over the 2020-2040 period. As more plastics accumulate in these environments, they tend to degrade into smaller microplastics and become harder, or virtually impossible, to remove and thus the additional aquatic leakage poses more severe environmental consequences. Finally, a slower pathway would also imply an additional 3.9 Gt CO2-eq. of plastics-related greenhouse gas emissions between 2020 and 2040, compared to Global Lifecycle High stringency [Global Ambition] scenario.
Stocks of macroplastics accumulating in aquatic environments by 2040, million tonnes (Mt)
Source: (Lebreton, 2024[2]), based on OECD ENV-Linkages model projections.
Delaying policy ambition from 2040 to 2060 implies that plastic leakage continues after 2040, leading to a range of negative outcomes between 2040 and 2060. These include more plastic accumulated in the environment, including in rivers and oceans, and higher greenhouse gas emissions.
Source: OECD ENV-Linkages model.
References
[2] Lebreton, L. (2024), Quantitative analysis of aquatic leakage for multiple scenarios based on ENV-Linkages, unpublished.
[1] OECD (2022), Global Plastics Outlook: Policy Scenarios to 2060, OECD Publishing, Paris, https://doi.org/10.1787/aa1edf33-en.
← 1. Tax revenues can be recycled to households and firms, e.g. through lowering other taxes or by increasing lump-sum transfers to households. The macroeconomic costs of a tax policy are therefore not the cost of the tax itself, but the costs associated with the tax shift, which are much lower.
← 2. The distribution of costs over the various pillars differ across scenarios depending on which pillars are emphasised.
← 3. The policy is implemented in the model such that the tax revenues on primary plastics cover the subsidy expenditures on secondary plastics in a manner that is in principle budget-neutral to governments (apart from indirect effects). Depending on the specific country circumstances, however, this may increase or decrease the consumer price of plastics.
← 4. The Global Plastics Outlook (OECD, 2022[1]) shows that this inverse U-curve exists for macroplastics, but not for microplastics.
← 5. The ambition for the global plastics recycling rate by 2060, as aligned with the Global Plastics Outlook. is higher than the ambition for 2040 in the Global Lifecycle High stringency [Global Ambition] scenario, reflecting the fact that technological barriers to recycling are likely to diminish over time.