In the Plastic Crisis, Economics Is Our Friend

The world has produced about 9 billion metric tons of plastic since the 1950s. Today, only 9% of plastic waste is recycled. The vast majority of it, 72% in fact, is landfilled, dumped, openly burned, or ends up in the environment. And consumption is growing each year.  

Even if we were to reduce plastic production by 40% from today’s levels by 2050, the world would still produce another 11 billion tons of plastic that needs to be responsibly managed. To do this, the UN Environment Programme (UNEP) estimates an additional $1.64 trillion of capital investment is needed. We are nowhere near these levels. And nearly 90% of the low level of investment since 2018 went to North America and Europe despite the top 20 countries for ocean plastic leakage being in developing economies.

So how do we address these gaps? Through market forces. 

For businesses, costs are unavoidably an important factor. If virgin plastic became a pricier option than it is today relative to the alternatives, business leaders would naturally have to reconsider their packaging options and think about how they could be a part of the solution in a more proactive manner. 

I would know. I was a public company officer and Board member before coming to lead PCX. I’ve seen first-hand that companies want to transition to better materials and reduce their plastic footprint. But there is a harsh reality they often face: how do you justify the additional economic costs that come with alternative materials or changes in supply chains while avoiding ineffective direct investments in recycling infrastructure? 

Today corporate buyers must choose between recycled plastics, which have very limited supply and significant price volatility, or low-cost virgin plastic, where supply is greater than demand. 

In 2023, we saw this play out. Because petrochemical production in the US and China skyrocketed, the cost of virgin HDPE plastic, which is commonly found in household items like soap bottles, plastic bags, milk jugs, and cereal box liners, nearly halved. In 2021, it cost just over $1600 a tonne; in 2023, it was at $943. Meanwhile, the cost of recycled HDPE still sits at $1631 a tonne -- nearly double that of its virgin counterpart. We’d like to flip this equation.

Plastic credits can be one tool in the fight against cheap virgin plastic by making it more expensive. 

In 2020, we launched PCX to create a marketplace that would enable funding of efforts to remove plastic waste from nature in a transparent and economically efficient way. A “credit” is awarded for every metric ton of plastic waste that is collected and responsibly processed. Credits allow companies to take responsibility for the plastic waste they produce while incentivizing capital investment in much-needed recycling infrastructure, and encouraging moves towards alternatives. 

Through the effective application of plastic credits, we’ve recovered and responsibly processed over 100 million kilograms of plastic waste worldwide. Still a drop in the bucket, but a great start.

The project operators doing the hard work of collecting and processing plastic waste benefit from this model as well. They have consistent access to multiple buyers, which helps them justify longer-term investments in facilities, tools, and labor needed to process even more plastic waste.

For example, in the Philippines, Royal Rainbow, a PET recycler, has seen higher demand for credits, minimizing revenue volatility, giving them the confidence to invest in additional capacity, pay more to community-based suppliers of used bottles, and increase their output by over 15% just this year. Plastic credits can also drive social impact. Aling Tindera, also in the Philippines, provides women entrepreneurs who run small shops with the infrastructure needed to buy and sell plastic waste in their communities. The project has expanded from four to 146 sites between 2020 and 2024, delivering 7 million kilograms of plastic waste diversion from nature, and over $300,000 of income to the participating communities, a 48% increase in the annual income of the women at the heart of the program. 

We’re seeing the economics of plastic shift. But to speed it up, we need more companies to get on board. This transparent market-based approach has immediate results: plastic that would have otherwise entered nature is removed. And in the process, communities are empowered, especially those in developing nations who are dealing with the deluge of plastic waste on their doorstep. 

Over time these market mechanisms encourage corporations to include the cost of responsibility in the unit cost of virgin plastic. This helps close the gap between the cost of virgin and recycled materials and encourages more companies to reconsider their overall plastic usage.

This isn’t an entirely new idea. We’ve seen how market economics can transform industries in the past. For instance, a decade ago, renewable energy was significantly more expensive than fossil fuels. It was cheaper to build a coal-burning power plant than one that relied on solar or wind. However, in 2019 the price of solar had dropped by 89% compared to 2009. For onshore wind, there was a reduction of 70% in cost. More countries and start-up businesses have invested in solar and wind infrastructure; companies are using renewable energy credits to support this transition. The same can happen with plastic.

As the global community convenes this September in New York for Climate Week and in Busan in November to discuss the UN Global Plastics Treaty, we need to reinforce this fundamental message to the business audience: We need to reduce the use of plastics because it is choking our waterways, destroying wild spaces, affecting human and animal health, and even threatening food security. But we also MUST take control and responsibility for the plastic waste already in our environment as well as that being newly generated. 

Taxes (typically applied in developed markets), philanthropy and moral imperatives will not be enough and won’t deliver in time. Applying market-based solutions can support more rapid development of a circular economy, while also addressing the needs of shareholders who expect it to be done in a cost-effective manner. 

Plastic has long been a cheap commodity. It’s time to put a new price tag on it---one that reflects its true cost, and that delivers both immediate and long-term impact. 

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