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Context

The UN Environment Assembly meeting in February-March 2022 may finalise a way forward for global cooperation on the emissions of plastic waste into the aquatic ecosystems.

Plastic as a consumption externality

• Plastics represent an example of a consumption externality, which involves many people, rather than a production externality, which involves one or multiple firms.
• Why is it challenging to address? Consumption externality is more challenging to address, as it is difficult to differentiate the behaviour of consumers.

2 Approaches and issues with them

• Imposing the cost of the harm on all consumers may not yield efficient solutions.
• As the number of consumers is high, the cost of controlling them is also high.
• 1] Banning plastic: This approach promotes a sustainable environment, intergenerational equity, saves marine and wildlife ecosystems, and restores soil quality.
• But it also causes inconvenience for consumers, increases substitution cost, and creates unemployment shocks as it affects the production of plastics, leading to less economic activity, less income generation and finally less employment.
• 2] Tax on plastic: Other key aspects that may be considered for global cooperation are the options if plastics are banned, the effectiveness of imposing tax and the potential problems with both these approaches.
• It is difficult to identify the exact tax to be imposed, which may depend on country-specific circumstances.

Way forward

1] Command and control approach

• The environment regulation for plastics may include a ‘command and control’ approach, and fiscal reforms like eco-taxes or subsidies.
• The efficiency of such a regulation depends on its architecture — how well it is planned, designed and executed. It should be credible, transparent and predictable.

2] Fiscal reforms like eco-taxes or subsidies

• Eco-taxes may be imposed in the various stages of production, consumption or disposal of plastics.
• Pollution due to plastics may happen during the production stage.
• That is the logic for imposing tax on polluting inputs, as it forces the producer to look for cleaner substitutes.
• Pollution also occurs during the consumption stage, and thus an eco-tax is recommended to discourage consumption.

3] Estimating the social cost at the local and global level

• Social cost should be evaluated differently in the local/regional and global contexts.
• While health and hygiene are predominant considerations in the former case, climate change is the predominant consideration in the latter.
• Ideally, eco-tax rates on plastics ought to be equal to the marginal social cost arising from the negative externality associated with production, consumption or disposal of goods and services.

Comprehensive policy measures

• Comprehensive policy measures against plastics may generally involve three complementary activities:
• 1] The removal of existing taxes and subsidies that have a negative environmental impact.
• 2] Taking into account the different types or grades of plastics.
• 3] Restructuring existing taxes in an environmentally friendly manner.
• Other suggestions include: Promoting multiple use of plastics through better waste management,
• Educating the public on the harmful use of plastics,
• Providing subsidy for research and development activity for substitute development.
• Appropriate disposal mechanisms and waste management and use of waste for constructive usage like roads.

Conclusion

The key aspects that may be considered for global cooperation are the options if plastics are banned, the effectiveness of imposing tax and the potential problems with both these approaches.

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