7 Mar 2018

No one benefits from China’s waste imports ban

Fangzhou writes:*

I can still feel my emotions watching "Plastic China," the 2016 IDFA-awarded documentary about two families living and working in one of the thousands of imported waste factories in China. The film was widely discussed by Chinese on social media at the end of 2016, when (coincidentally?) the ’National Sword’ restriction on imported waste came into effect. Seven months later, China gave an official notification banning imports of some types of solid waste to the WTO. The ban went into effect on 1 January 2018.

Social media did not influence the recycling industry, but the ban did. Millions of workers, brokers, transporters and businesses lost income in China and exporting countries. As one of the largest exporters, US already witnessed a 13.5% reduction of plastic scrap exports as a result of the ban's strictness. China's decision to leave the $50 billion plastic waste market also caused tensions domestically. People lost their jobs and some even went to jail for not shutting down recycling factories on time. This lose-lose dilemma makes me think of the world's interdependency.

From an economic perspective, the costs and benefits of the restriction can be briefly illustrated within a simplified bilateral market that looks like this:

In the US, the ban will reduce demand for exported plastic (flow 1) by nearly 290,000 tonnes per year, impacting over 15,000 workers and $3 billion per year of  taxes. The switch to domestic recycling (flow 6) will cost the US over $0.14 billion, or 0.6% of solid waste management costs of all upper-income countries.

China's manufacturers will rely more on virgin plastic to replace lost US supply. Costs saved in purchasing wastes (flow 1, $34 million per year) are not enough to compensate the expense of non-dirty plastics (flow 7). A similar situation took place in 2016 when the US exported less scrap plastic to China but more to India, Vietnam, Mexico, Malaysia and Thailand. It is possible that alternative markets will accommodate the waste rejected by China, but that adjustment will not be easy.

The values above only include purchase, operation, maintenance, and debt service. When taking into account the negative externalities on ecosystems, the costs of the ban could be higher as there is no such thing as ‘clean plastic'! Plastic production increases CO2 emissions, plastic pollution in the ocean, and contamination of water sources.

Who should pay for negative environmental impacts? The producer, the consumer or the recycler? It does not matter when the whole world is suffering from the pollution.

Bottom line: The ban on imported plastic waste reveals the deep interdependence between the Chinese and American markets, but it also shows the social and environmental challenges caused by waste.

* Please help my environmental economics students by commenting on unclear analysis, other perspectives, data sources, etc. (Or you can just say something nice :)


Yanze Yang said...

The figure presents vividly the market linkage between plastic exporters and China, which makes me quickly understand the topic. However, I am not totally seeing this as a lose-lose dilemma.Though you've shown the economic losses of the ban and there are critiques that it is issued to disseminate the argument for not being a plastic waste (p-waste) hosting I have heared that chinese brokers and recyclers prefer recycle imported p-waste much more than domestic ones as the fomer is sorted well with good quality, meaning less costs for them. So I am wondering will the ban and accompanied supportive policies drive the prosperity of domestic reclcling activities , thus reduce global negative externalities?

Kozmo said...

Do you think the import ban was a direct result of the documentary? If so, the government chose to lose money and jobs in order to gain a better public image. If not, there must be some other underlying factor that influenced this decision. Due to the gravity of the consequences, this must have been quite an important reason. Any ideas what this might be?

It's obvious that pollution from plastic production causes environmental harm, but what about the transportation of plastics? Plastics are notoriously expensive to transport due to their low density. Any idea how much this contributes to overall pollution? If it's substantial then perhaps the ban might turn out to be a good thing for the environment.

Have you considered the opportunities this ban could have for the development of plastic recycling technologies? Since the US and Europe will be stuck with large quantities of plastic waste and, as you mentioned, it is unlikely that other countries will easily adjust to this change, perhaps this will incentivize Western countries to find better solutions to their plastic waste problem.

I realize that the ban has grave consequences for Chinese people, but perhaps it will result in some global benefits.

Fangzhou said...

Dear Kozmo,

Your opinions are insightful! Actually, in the beginning, I think the ban is 100% good, for the whole world, especially for China to achieve the goal of the Paris Agreement. But the thing I did not mention in the post( my fault) is, in 2013, there was a similar ban on the foreign wastes. After 5 years, things change little. The Market is still of astonished and hard to adjust.

It is very valuable your opinion on the transportation and technology. I totally agree that solely assess the onshore economic is too narrow for externalities. I will try to find a quantitative way to illustrate them.

Honestly, from my perspective, waste itself is the problem. We produce them so fast that the adjust on policy/recycling methods/technology matter little.The incentives on the market( not only on EU and Europe, but also on China & India as pollution is of common pool) is more like a truth that, human may be incapable to solve the growing pollution, no matter how diligent we try.

It is very sad.

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