Does Economics Have the Answer to the Global Problem of Plastics Pollution?

Every year, approximately 19 billion pounds of plastic is collected in the ocean. This amounts to over 2 million pounds of plastic every single hour. Unfortunately this value is only expected to increase (Atkin). These plastics harm ocean life and contaminate our food as microplastics rise up the food chain and spread throughout the ecosystem and will continue to do so as long as we fail to act. With the environment and humans at risk, we are in dire need of a timely response to the issue of plastic pollution. One possible response comes from the field of economics.

Economics can not only help to identify the causes of plastics pollution but it can be key in the development of an effective solution. The over­production and over­consumption of plastics is a form of the economic phenomenon - market failure. Market failure occurs when output or production is at a level greater than the socially efficient level of output, creating a welfare loss, in this case the detriments to the oceans, air and soil, all known to be common access resources (CARs).

CARs are resources that aren’t owned by anyone, do not command a price, are non­excludable and rivalrous. As a result, they are often depleted or degraded, posing a threat to sustainability. Economists call this the tragedy of the commons: a theory that explains how consumers often take advantage of natural resources without considering the implications for society. In this case, the tragedy befalls oceans, air, and soil which are also contaminated through the production and leaching of toxins from the plastics.

The over­production and consumption of plastics occurs when individuals and firms are only concerned with their personal utility (marginal private benefit) and costs (marginal private cost). Using this idea, the Prisoner’s Dilemma framework helps to understand why individuals and countries are not implementing solutions to combat plastics pollution, particularly in the oceans (Perman).

Assume we have two countries ­ Country X and Country Y ­ both of which are polluting the oceans with plastic. Assume that the cost of combating the plastic pollution is 7 and the benefits received if a solution is implemented is 5. Since oceans cross borders, if one country implements a solution, both countries reap the benefits. All possible outcomes are listed in Figure 1. 

Figure 1.

First, we examine the results of a non­cooperative strategy, from the perspective of Country Y. If Country X were to continue to pollute then the best option for Country Y is also to pollute as a value of 0 is better than a value of ­2. Equally, if Country X were to combat the pollution, it is still best for Country Y to pollute again since a value of 5 is greater than a value of 3. Therefore, when the countries are only concerned about their individual benefit, they will continue to pollute. Under the Prisoner’s Dilemma, individual countries do not have an incentive to unilaterally make economic investments in combating pollution because they will find themselves in a situation represented by Box 2 or Box 3.

The solution will only work when countries cooperate to simultaneously combat pollution. If the countries cooperate, they would attain the Nash equilibrium, or in other words, the optimal outcome (Box 4). We live in a world that heavily relies on interdependence and therefore we should use economic principles to implement solutions through international and multilateral agreements. The current “nation-state” system puts countries at odds with one another, but in order to solve these global issues we must rise above the physical borders and cooperate in order to achieve the solution. Collaboration must replace competition.

Luckily, steps are already being taken towards collaboration. In December 2017, nearly 200 countries agreed to sign a UN resolution in Nairobi to eliminate plastic pollution in the oceans (Ndiso). However, unless this agreement is converted into a binding law, no action can necessarily be expected from countries. Just as in the Prisoner's Dilemma, countries may choose to continue to pollute in fear that they will otherwise carry the cost for all other countries as well. A second layer is added to the dilemma as it must be decided who should pay to clean parts of the ocean, since there are no borders to determine this.

Even if international cooperation is achieved, individual countries still need to enforce regulations at the national level to reduce plastics pollution. In the UK, for example, consumers are charged 5 pence per plastic carry bag to disincentive consumers from using them. This charge, introduced in 2015, has reduced plastic bag consumption by 85% for major retailers, as the average number of plastic bags used per person annually reduced from 140 to 25 (Jowit). This solution works similar to a tax as it disincentives people from using a demerit good through an increase in price. However, there are always individuals willing to pay more for the convenience of plastics and whom the tax will not impact at all. All nations need to take similar steps, especially since if not all nations charge for the usage of single use plastics, a grey market will emerge in the form of imports. Thus an international cooperative strategy will be needed to eliminate alternative options.

Government sponsored bans on plastic consumption can also be used to combat pollution. In fact, in Mumbai, one of India’s biggest cities, has banned single used plastics with a fine of up to INR 25,000 for violation (Safi). Regulations like this are easier to implement on a local scale, but much harder to enforce on a national scale as the chances of loopholes increase. Additionally, there is a cost to monitor and an opportunity cost of other budget items such education and healthcare, and welfare programs is created. It is possible that over time, places like Mumbai, who are putting in the cost to combat the problem, may find that their attempts are not being replicated by neighbouring cities placing them in the sub­optimal position of Box 2 or Box 3.

Lastly, governments can decide to directly allocate funds to combat the problem of global plastics pollution. In the UK, over GBP 60 million has been budgeted to tackle the problem of plastics in the ocean (Staff). Government spending can be beneficial, but as mentioned before, comes with an opportunity cost. Additionally, it can take a long time to implement, as the government budget must be decided annually and cannot be altered throughout the year.

Through modeling the Prisoner’s Dilemma it is evident how economics can be advantageous in identifying the cause of plastic pollution and developing a viable solution. There are an array of economic solutions that can follow though they have their limitations. Although economics may not be enough to combat this problem alone, in conjunction with solutions from other disciplines, a real impact can be made to combat the global problem of plastics pollution.

Written By Aditi Rudra, Undergraduate Economics Student

1. Atkin, Emily. “The Global Crisis of Plastic Pollution.” The New Republic, 16 Apr. 2018, newrepublic.com/article/147988/global­crisis­plastic­pollution.

2. Jowit, Juliette. “Drop in Plastic Bags Littering British Seas Linked to Introduction of 5p Charge.” The Guardian, Guardian News and Media, 5 Apr. 2018, www.theguardian.com/environment/2018/apr/05/drop­in­plastic­bags­littering­british­sea s­linked­to­introduction­of­5p­charge.

3. Ndiso, John. “Nearly 200 Nations Promise to Stop Ocean Plastic Waste.” Reuters, Thomson Reuters, 13 Dec. 2017, www.reuters.com/article/us­environment­un­pollution/nearly­200­nations­promise­to­sto p­ocean­plastic­waste­idUSKBN1E02F7.

4. Perman, Roger, et al. Natural Resource and Environmental Econoics . 4th ed., Pearson Education Limited, 2011.

5. Safi, Michael. “Mumbai Bans Plastic Bags and Bottles.” The Guardian, Guardian News and Media, 25 June 2018. www.theguardian.com/world/2018/jun/25/mumbai­india­bans­plastic­bags­and­bottles.

6. Staff, PN. “New £60m Government Fund to Tackle Global Plastic Pollution.” Packaging News, 16 Apr. 2018. www.packagingnews.co.uk/news/materials/new­60m­government­fund­tackle­global­pla stic­pollution­16­04­2018.