Table of Contents

  • Plastics are inexpensive and durable materials which easily can be shaped into a variety of products in a wide range of applications. As a result, production and consumption of plastics have increased significantly since the 1960s. Also waste plastic generation has grown significantly over the last decades creating the need for recycling in a sustainable circular economy. Recycling rates of plastics are currently relatively low in all Nordic countries. Plastics tend to be recycled into low grade products at the same time as at least Sweden, Denmark and Norway have relatively high incineration rates for waste plastics. Achieving a high quality of waste materials and recycling processes is a key challenge in closing resource loops for plastic. The Green Paper by the European Commission suggests looking at how economic instruments could be used to complement existing policy instruments in steering the waste flow through the waste hierarchy such that collection and material recycling of plastics can increase towards sustainable levels.

  • This report summarizes the results from the project “Evaluation and design of economic instruments for increased recycling of plastic waste” initiated by the Working Group on Environment and Economy (MEG) and Nordic Waste Group (NAG). The purpose of the project is to evaluate and to identify overall design features of suitable economic policy instruments that may contribute to achieving socially efficient levels of recycling rates of plastic waste in Denmark, Norway, Sweden and Finland.

  • Recycling rates of plastics are currently relatively low in all Nordic countries. Plastics tend to be recycled into low grade products at the same time as at least Sweden, Denmark and Norway have relatively high incineration rates for waste plastics. The treatment of waste plastic could move up in the waste hierarchy to be in accordance with EU legislation and in line with the EUs Green Paper “On a European Strategy on Plastic Waste in the Environment”. Achieving a high quality of waste materials and recycling processes is a key challenge in closing resource loops for plastic. This report reviews the findings in economics research literature on policy instruments that may have potential to lead to socially optimal recycling rates of waste plastics.

  • Plastics are inexpensive, lightweight and durable materials, which easily can be shaped into a variety of products that find use in a wide range of applications. Not surprisingly, production and consumption of plastics have increased significantly over the last 60 years (Hopewell et al., 2009). As a result, waste plastic generation has grown significantly over the last decades.

  • This chapter contains an overview of existing policy instruments in Denmark, Finland, Norway and Sweden which have relevance to recycling of plastic waste. The first section starts with a short overview of EU legislation relevant to recycling of waste plastics as this will be a binding framework also for implementing national polices in Nordic EU countries. Denmark, Finland and Sweden are EU Member States and must implement EU legislation. While not a Member State of the EU, Norway must, via the European Economic Area agreement, implement all environmentally related EU Directives. An overview of the green paper of plastic waste by the EU commission as well as an outlook to made EU initiatives affecting plastic waste is also included.

  • The chapter compares the use of policy instruments in Denmark, Finland, Norway and Sweden. The last section gives a brief evaluation of experiences on the use of economic incentives as well as experiences of main challenges when designing policy instruments for recycling of plastic waste in the four Nordic countries of this study.

  • The chapter illustrates a simple overview of private actors and their positions in a circular economy of plastic. Chapters 6–8 then refer to potential market failures that may occur in this system.

  • Several theoretical and empirical studies in the economics literature seek to explain and understand how, and to what extent, household decisions are affected by different designs of policy instruments in the search for policy instruments that may achieve optimal recycling rates. Reviews of the theoretical literature on the economics of household waste management can be found in Choe and Fraser (1998) and Fullerton and Kinnaman (2002). As first best solution, a majority of the theoretical results identify deposit-refund schemes, a system with a tax or charge at production or consumer purchase and a refund to consumers that recycle and/or firms that collect or reprocess recycled materials. As an alternative first best solution (when illegal disposal such as dumping is not a problem), the results usually support the use of a virgin material tax or a tax on households’ disposal choices. Even though deposit-refund systems generate the first best solution in resource allocations they have relatively high transaction costs and is in general more costly to administrate (monitoring and verifying for charging and refunding). This implies that large waste flows or other economies of scales in waste management systems (e.g. standardised product design such as a beverage bottles) are often needed for cost-efficiency. It is therefore not surprising that deposit and refund systems are usually implemented for goods with large waste flows such as packages and specifically beverage containers. There exist also several empirical studies in the economic literature on household responses to policy instruments and how household waste generation and recycling behaviour are influenced by attitudes and socio-demographic attributes in the context of present policy instruments. These studies often rely on community- or household-level data using probit or tobit models to estimate the frequency of recycling as a function of different policy instruments and household attributes (e.g. income level, value of time, education, and number of persons in the household, age, renting or ownership). Most studies that are presented here are from the 1990s and the 2000s.

  • Recyclers take “upstream” decisions about the design of recycling program, collection infrastructure and pricing policies for collection services (which affect inconvenience costs and the incentives of households and industry for sorting and separation). Recyclers also take “downstream” decisions about treatments in the recycling process or incineration, landfill or even export of waste plastics. Market failures in these decisions may occur since recyclers often only take into account their own operating costs and not the social externalities (figure 6 in chapter 5). The market conditions or its actors, recyclers and plastic manufacturers, are not so well studied in the economics research literature as households. A literature review as well as a survey to 62 managers in recycling and plastic manufacturing industry in Sweden was implemented as part of the actor analysis in this project. Due to the limited size and time constraint of the project it was not possible to make a survey in all four Nordic countries. Sweden was chosen because IVL could use its existing contact lists to find managers in the plastic recycling and manufacturing industry. However, we imagine that these managers are representative also for the other Nordic countries since markets of recycling and manufacturing are international.

  • The chapter contains a review of the economics research literature on economic policy instruments for achieving socially optimal allocations of recycling rates. The review covers both theoretical and empirical results and covers the policy instruments that are most commonly highlighted in the literature on waste and recycling as potential instruments for efficient recycling.

  • This chapter summarizes the results from the overview of existing policy instruments and main challenges in chapters 2–4 and the literature review on economic policy instruments for recycling and the analysis in chapters 6–8. It also provides policy recommendations for the Nordic countries connected to prevailing market failures which can be illustrated by simplified figure 6 in chapter 5.