27 Nov 2014

How to get the (plastic) soup out of the ocean?

Koen L writes:*

More and more plastic is ending up in the oceans and seas, causing environmental degradation, economic losses and lower oxygen supply. Ocean pollution receives more and more public attention through i.e. the plastic soup foundation. The problem of ocean-pollution is that the oceans are not owned by one individual or state. States manage their parts with little concern for the ocean as a whole, which causes problems over the the distribution of costs and benefits.

The table below displays a simplified 2-player game of this problem. Cleaning up the ocean costs money and if only one country cleans, the non-cleaning countries experience positive externalities from this (as their water is cleaned too). As countries cannot be sure of the other’s cooperation, countries have an incentive not to clean. This results in a compete-compete outcome, in which none of the countries actually takes measures to clean up the plastic.

Recently, a possible solution for the problem has been proposed by Boyan Slat, a 19-year old student. His solution is the only technically and financially viable method proposed thus far. By attaching a system of long floating arms to the seabed, the oceans can clean themselves. The arms would collect the plastic and hold it, to be taken out at a later moment. At the moment, a team of international experts is building and testing large-scale operational pilots. This solution, however, collects only half of the plastic, doesn’t solve the influx of plastic and needs the plastic to be collected and disposed of elsewhere.

The question is therefore how the different entities co-owning the ocean will be incentivized to cooperate and each contribute to financing the arms, collecting the plastic and preventing the influx or more plastic. The problem is of immense scale as about 44% of the world population lives in coastal areas and 148 out of the 196 countries in the world border one or more seas or oceans. This scale impedes collective action, as the payoff of free riding is high given uncertainty over other countries' actions. Furthermore, the complexity of the issue is high, as the impacts of plastic pollution are very difficult to estimate. This results in a tendency of countries to be passive towards this issue.

The money necessary for Slat’s plan could be raised by, for example taxing polluting companies, but individual pollution and the effect of taxes on economic output might lead to resistance. A possible measure to reduce further pollution may be to (implement and) enforce territorial property rights and either sue or bargain with those polluting a country’s territorial waters. This, however, will be a long-term solution (if a solution at all) and is not likely to reduce pollution if individuals and companies do not face additional incentives to minimize plastic pollution. These additional incentives might be created through public campaigns raising awareness, taxation or fining and trying to incorporate pollution costs in the prices. They will, however, produce side-effects and negative outcomes the public might not be willing to face to clean our oceans

Bottom Line: A plausible means of cleaning plastic from the oceans exists, but the complexity of assigning responsibility among countries, companies and citizens makes it difficult to put this solution into practice.

* Please comment on these posts from my environmental economics students, to help them with unclear analysis, other perspectives, data sources, etc.

1 comment:

Anonymous said...

Dear Mr. Koen L,
This is a very good example of collective action problems that take place due to a prisoner’s dilemma. However I want to add to your post that economics can help improve one of the problems you highlighted: how will ‘entities’ cooperate to finance the arms?
Unless every single person (who has ever thrown away some plastic) donates money to clean the oceans; then not all people who are part of this collective action problem will have financed the project. So inevitably, a positive externality will be created along with a ‘free riding problem’.
I also want to add that the two foundations you mention in the text have different but complementary aims. “The Ocean Cleanup” provides a practical solution, while “Plastic Soup Foundation” creates a political platform to promote awareness.
Let’s look at it through a demand/supply-side point of view. Plastic Soup Foundation assumed the burden of taking a political approach. Their aims are directed towards changing tastes and preferences for goods that are bought and produced by individuals (demand) and industries (supply). “PSF wants to shape and support a movement that using social media encourages citizen’s active participation and involve them in working on solutions and collecting good practices”, “wants to see a ban on plastic goods” [http://plasticsoupfoundation.org/en/mission/]. Despite the importance of changing production practices, and consumer values, it does not help answer Koen’s question. But The Ocean Cleanup does.
Boyan created a positive-externality-generating business. And additional details about the project’s viability are important. Namely that it also aims to find a way to dispose of the plastic that simultaneously finances the project. The two options that seem viable so far are to either recycle or turn the plastic into petroleum. The second option appears to be more cost-efficient than the first according to their report. “Marine fuel is more attractive due to its substantially higher yield of 77% for the target fraction when compared to the gasoline producing process with a final yield of 53%” page 21 [http://plasticsoupfoundation.org/en/mission/]. And so returning to Koen’s question: how will ‘entities help finance the arms’? My answer is that entities (people who are willing to overcome the prisoner’s dilemma) will finance the kick-start of the project. In fact 2 million USD have been donated by 38,615 people. And ideally, the continuation of the project will be self-financing. By selling the raw plastic material, the recycled product or the processed petroleum.
Now that we are near a self-financing technological solution to clean the oceans, we need to think about the possible outcomes that solution will bring. A more important dilemma that will come up is: should we use plastic waste to create more oil or to recycle? What is worse? Creating more CO2 or recycled-plastic waste that will go back to the oceans anyway? A cost-benefit analysis would be useful.
Bottom line: the collective action problem is not important if the project becomes self-financing, but the environment will continue to suffer. Unless entities like states can a) overcome the prisoner’s dilemma (coordinate), b) finance the project and c) use the plastic waste on environmentally-friendly undertakings.



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