New economic study reveals major contributions of plastic industry to global economy

Limiting global plastic production will have unintended negative impacts on the global economy, particularly for those least able to afford it, a new report from economic research firm Oxford Economics says.

The report was commissioned by the International Council of Chemical Associations (ICCA), and explores the potential socio-economic and environment impacts of a cap on virgin plastics production, revealing its negative effects across industry in general and on broader global economies.

“Plastic makers are innovating, investing and driving smart policies to help end plastic pollution, and we’ve been constructive stakeholders in bringing solutions and expertise to the negotiations,” said Chris Jahn, ICCA’s Council Secretary. “This economic study fills in critical data gaps to help inform negotiators of the wide-reaching consequences a cap on plastic production would have on society.”

The study, entitled “Mapping the Plastics Value Chain: A Framework to Understand the Socioeconomic Impacts of a Production Cap on Virgin Plastics,” provides several important insights, including:

• The plastics value chain is a complex and sophisticated engine of the global economy.It contributes trillions of dollars to global economies and employs millions of workers worldwide. It is defined by capital intensive activities, significant R&D spending, and a highly skilled, technical, transferable workforce.
• The implementation of a proposed plastics production cap would have unintended global implications going beyond the plastics industry. Cost increases resulting from limited supply and more expensive alternatives would disproportionately affect lower-income people.
• Recycled plastic production is now growing faster than virgin polymers production.Production of recycled plastics has grown by 19% over the past five years, more than twice as fast as the growth in total plastics produced (8% during 2018- 22).
• A large fraction of the recycled plastic volumes are produced in the developing world.The Asia Pacific region, for example, was the global leader in recycled plastic production volume in 2022, equivalent to approximately 55 per cent and 20 million tons. This demonstrates the value of plastics recycling in the developing world.
• All major economies have significant exposure to change in plastics production and consumption.Assessed by economic value and employment, differing levels of exposure were recorded globally across the plastics value chain in both upstream and downstream elements of the value chain.
• A very low fraction of plastic waste generated is currently traded internationally.Just two per cent of plastic waste is traded internationally due to existing national regulations and international agreements. There is an opportunity for global trade to help advance circularity.
• The use of currently available alternatives may put upward pressure on global carbon emissions.Because of the increased weight, high energy inputs needed for recycling, and higher rates of waste associated with alternatives to plastics (e.g., metals, glass and paper), switching to alternative materials could have negative environmental implications across multiple sectors, from healthcare to tech or clean energy.

“In most cases, economic policies entail trade-offs and carry potential risks for unintended consequences,” said Henry Worthington, director of economic consulting at Oxford Economics. “It is my strong belief that policy decisions should be informed by high-quality economic modelling and analysis, which can be used to gauge the extent to which any intervention or set of interventions would achieve its intended objective and to evaluate the direction and likely scale of wider economic, social, and environmental consequences. This knowledge, in turn, can support more effective decision-making.”

The study ultimately shows that the introduction of a production cap on virgin plastics would carry major risks, both in terms of economic costs and unintended environmental consequences.

“Ahead of the fourth session of the Intergovernmental Negotiating Committee (INC-4) in Ottawa next week, ICCA encourages policymakers to consider holistic, comprehensive approaches as they evaluate the implementation of production caps to avoid unintended consequences for consumers, economies big and small, and the environment,” Oxford Economic officials said.

The full report and summary can be found on Oxford Economics’ website.