Where Is the Value in the Chain?
The Hidden Costs of Plastic Reducing plastic pollution requires multiple policy instruments to correct multiple market and policy failures throughout the entire plastic life cycle. Markets fail to include external costs of damages in the market prices of plastic products. Most common policy failures are different forms of subsidies that encourage the use of polluting plastic products. External costs of plastics are present not only in the production phase but also in the postconsumption phase when plastic products become waste. This is different from more traditional pollution problems, such as GHG emissions, where external cost is generated mainly in production and emissions of combustion processes represent a single entry point for regulations or pricing. Steel and aluminum products, for example, cause little damage to the environment once they are produced (although paints and coatings are often harmful) because they are mostly recovered and recycled. Plastic products create environmental damage when they are produced and when they are dumped or disposed of, so corrective policies must target upstream and downstream externalities. Failure to reflect the true costs of plastics from their production trickles down throughout the plastic value chain as follows: ••Producers of virgin plastics often fail to pay the full cost of GHG emissions and local air pollution associated with the extraction and processing of oil and gas and the production of virgin plastics. In addition, several countries add policy distortion by subsidizing the oil and gas feedstock to the petrochemical industry (Ollero et al. 2019). These market and policy failures hide the true costs of virgin plastic, making it look cheap for firms further down in the value chain. ••Plastic converters and manufacturers buy virgin plastics below their true cost to society. Their products are therefore unfairly cost competitive with products made from recycled plastic, which is associated with much lower GHG emissions but much higher market costs of labor and materials. Furthermore, converters and manufacturers emit additional unpriced GHG emissions and locally harmful air and water pollutants from their plants. They also add multiple chemical substances to virgin plastics to increase their functionality and make them more attractive to consumer goods companies and retail traders. These additives increase the downstream environmental harm that these products cause when they are processed or disposed of. They also make sorting and recycling more costly and make recycled material less valuable on the market. ••Consumer goods companies, brand owners, and retailers buy plastic materials that, in the absence of environmental regulations, are artificially cheap because they do not include pollution costs. Retail prices do not inform consumers about the downstream environmental costs of waste. Firms at this stage often add
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