Opportunities and Challenges of a Cap-and-Trade System for Plastics

Abstract

Recently, the rapid increase in global plastics production has caused various ecological and economic issues, worsened by poor material and waste management. Among the market-based instruments that could help mitigate the environmental impacts of plastics throughout their life-cycle, we evaluate the advantages and limitations of incorporating a cap-and-trade (CAT) system into future policy mixes. Our aim is to inspire further investigation of CAT’s feasibility rather than presenting it as the ultimate solution. Drawing from past CAT implementations in domains such as water resource management and carbon emissions, we outline three key policy design considerations: (1) material and target group identification, (2) cap establishment and permit allocation, and (3) development of a competitive market environment. We explore a three-tiered approach with global, national, and sectoral caps covering the plastic lifecycle from cradle to grave. While there are viable reasons to consider a plastics CAT, significant challenges persist, which may ultimately limit its implementation. In the context of ongoing UN Plastics Treaty negotiations or future policy developments, this evaluation of CAT can be beneficial for assessing when and how this tool can address the negative externalities of plastics.