The Plastics Policy Simulator: Architecture and Methodology

The IPR scenario presents an opportunity to put Indonesia’s plastic management system on a commercially sustainable path and deliver on government targets while creating new growth and employment opportunities without creating major burdens on government and household budgets. The next section provides essential information on the architecture and methodology of the PPS model, through which these results and insights were obtained.

The Plastics Policy Simulator: Architecture and Methodology

The PPS is a techno-financial model to help governments navigate public consultations about highly complex, sometimes controversial policy interventions to manage plastic pollution and increase its circularity. The PPS builds on and extends the model developed for the Breaking the Plastic Wave study (Pew Charitable Trusts and SYSTEMIQ 2020). The original model was built to find the most feasible and the least costly technical measures to address plastic pollution from a social planner's viewpoint rather than from the perspective of economic actors operating in the plastic value chain. For the needs of the Pathways out of Plastic Pollution model, it was thoroughly redesigned to simulate the expected impacts of alternative combinations of plastics policy instruments from the point of view of these economic actors (firms, households, and governments) in the marketplace (hence the name of the model, Plastics Policy Simulator). It is a universal model that can be applied in any country at the national or subnational level, and it does not replace detailed policy design.

Key Functions and Outputs of the PPS Comparing alternative policy reform scenarios helps to understand their environmental and social impacts, the financial impact on different actors in the plastic value chain, and the fiscal impact on government budgets. The PPS identifies potential winners and losers of alternative policy reforms, informing policy makers about the potential political tensions with their implementation. In particular, it helps stakeholders negotiate agreeable policy action plans by quantifying ex ante the impacts of alternative mixes of specific policy instruments on the following:

• Distribution of the major revenue gaps, and hence the key bottlenecks in the plastic value chain • Incentives for firms and households to change plastic flows through the economy and environment: volumes and types of plastic and plastic products that are reduced, reused, collected, recycled, landfilled, incinerated, burned on the ground, imported, and dumped into the environment • Commercial viability of firms’ investments and operations of sustainable plastic management measures

• Households’ consumption choices and waste management behavior • Distribution of costs, revenues, and profit margins between formal and informal firms in different segments of the plastic value chain (Who would pay, who would gain?) • Government budgets—fiscal revenues and expenditures at national and subnational level • Households’ expenditures on plastic products, their substitutes, and waste management fees • GHG emissions in the plastic value chain • Direct employment in formal and informal firms in the plastic value chain

Architecture of the PPS

The architecture of the PPS defines the key actors operating in the plastic value chain and how they are interlinked through plastic product and financial flows.

The PPS Takes a Whole-System Approach to the Plastic Life Cycle. The effective, cost-effective, and socially and politically implementable solutions to plastic pollution require a whole-system approach along the entire plastic value chain. Therefore, the PPS is based on a national plastic system map covering multiple actors interacting in upstream and downstream segments of the value chain (figure 4.13). It encompasses all important stocks and flows of plastic products through the economy and environment, starting from production and importation of virgin plastics, their conversion to materials and products, and imports of such products. Then, the plastic value chain system map traces how plastic products flow to the firms that use them (for example, as packaging) and then to retail traders who sell final consumer goods to households. Households are represented in their role as consumers who make cost-minimizing choices about whether and what products to buy and whether to reuse plastic products instead of buying new ones. Households are also actors who decide whether to transfer their waste to formal collection systems or throw it out in the environment; whether to sort waste at a source or bring used plastic products to deposit refund systems.

Once plastic products enter the downstream waste management system, different types of firms come into play—those who collect (formal and informal), sort, recycle, or otherwise recover materials from plastic waste, and eventually those who operate sanitary landfills, incinerate waste with heat recovery, or convert waste to liquid or gaseous fuels. Finally, the value chain map captures waste that leaks from the managed systems to the environment, where it is either burned in the open or becomes terrestrial and ocean pollution.