An Inquiry into the Market Acceptance of Circular Plastics
Loïc De Weerdt
Closing material loops and reducing resource extraction is considered to be the foundation of the circular economy that delivers environmental gains. Today, certain materials with large environmental impacts, such as plastics, are placed high on the circularity agenda.
In this thesis, the market acceptance of circular plastics is analyzed. Firstly, the current – mostly linear – market for plastics in the European Union is analyzed. We find that market failure and uncertainties lead to postponed and scaled down private investments in recycling facilities for plastics. As a consequence, we conclude the failing and uncertain market needs government intervention. Secondly, potential government interventions that alleviate the market failure and reduce the present uncertainties are analyzed. Government interventions can be either incentive-based or regulatory-based. The Flemish government already acts as an incentivizer. For more than two decades already, a tax is levied on the incineration of plastic waste. We find that this tax reduces industrial plastic waste generation, but fails to elicit investments in recycling facilities. Regulatory-based policies are expected to gain in importance in the pursuit of a circular economy. Indeed, in the European Commission’s latest circularity action plan, a policy to mandate the use of recycled plastics is signaled. Mandating the use of recycled plastics can enable the circularity of plastics effectively. However, it would also generate a shock wave on the market, especially because, i.a. the implementation time of such a policy is uncertain. We investigate how firms can invest optimally in the use of recycled plastics under the presence of policy uncertainty.
We conclude that the European market will be able to successfully adopt circular plastics. However, stimulating policies, both incentive-based and regulatory-based, turn out to be essential in this adoption process. Therefore, there will be a need for a combination of policies in order to prevent the incessant mass single-use consumption of plastics, which harms the environment.