Economic policy instruments for plastic waste

A review with Nordic perspectives

image of Economic policy instruments for plastic waste

Achieving a high quality of waste plastic materials and recycling processes is a key challenge in closing the resource loops for plastics. This report reviews the status and trends for plastic waste flows and treatment in Denmark, Finland, Norway and Sweden. Furthermore, it gives an overview of existing policy instruments and the main challenges for designing policy instruments for improved recycling of plastic waste in these Nordic countries. The report identifies potential market failures associated with closing the resource loops for plastics. It reviews the economics research literature on policy instrument design for achieving optimal recycling rates and makes policy recommendations from the Nordic perspective. Finally, it presents results from a survey on market conditions to managers in the recycling and plastic manufacturing industry in Sweden.



Household Behaviour and Recycling

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.


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