White PaperPlastics, the Circular Economy and Global TradeJuly 2020World Economic Forum91-93 route de la CapiteCH-1223 Cologny/GenevaSwitzerlandTel.: +41 (0)22 869 1212Fax: +41 (0)22 786 2744Email: contactweforumweforum© 2020 World Economic Forum. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, including photocopying and recording, or by any information storage and retrieval system.3Plastics, the Circular Economy and Global TradeExecutive summary 41. Introduction 61.1. Context 61.2. Purpose and scope 82. Initial findings 92.1. Regulations 92.2. Standards and data 92.3. Investment 112.4. Processes 123. Towards solutions 133.1. Trade policies 144. Conclusion 17Contributors 18Endnotes 19Contents4 Plastics, the Circular Economy and Global TradeExecutive summaryThis briefing note is jointly written by the World Economic Forums Platform for Shaping the Future of Trade and Global Economic Interdependence, the Forum-led Global Plastic Action Partnership, and key experts and partners of the World Economic Forum. The paper offers an overview of the challenges to developing a circular global plastics economy and trade policy areas that could help tackle the growing issue of plastic pollution. The content is a preliminary assessment, with further research and the trade policy areas suggested meriting further discussion. Every year, the world produces more than 400 million tonnes of plastics, much of which is mismanaged after use, causing untold damage to the environment and societies. The paper acknowledges the importance of addressing this issue across the plastics value chain and taking a holistic approach based on the “three Rs” reduce, reuse and recycle. It then focuses on waste management, recycling and reuse, as stakeholders frequently flagged cross-border friction in these areas. Only 1418% of plastic waste is formally recycled, as a global average, and the percentage is much lower in some countries. Until recently, a large proportion of plastic waste intended for recycling was exported, a source of controversy due to inadequate infrastructure for proper disposal in importing countries. Changes in domestic rules and the international regulatory regime have altered this picture. However, while moves to avoid plastic waste dumping are critical, there is a need for further thinking on how to enable responsible, legitimate trade to establish recycling economies of scale.Insights were gathered for this paper through a series of dialogues, a survey and interviews. The cross-border challenges identified are organized into four buckets: regulations; standards and data; investment; and processes. On the first, some countries have introduced bans or requirements on plastic waste imports. Restrictions on imports of recycled plastic have slowed recycling content use in packaging or products. On the second, differences in standards, whether on recycled plastic production, use or labelling, have created challenges in moving to a more circular economy. Stakeholders did note several standardization efforts under way that could help in this respect. Improved information on quality, performance characteristics and near-term availability of recycled plastics would also go a long way to improving uptake of these over virgin plastics. In addition, companies pointed to the need for greater ease of investment in technologies to deal with growing domestic waste as well as addressing non-tariff barriers linked to chemicals management frameworks. Most types of plastic waste will be subject to Basel Convention import, export and transit processes, starting from January 2021. Several stakeholders confirmed that to date some countries lack the capacity to efficiently review and engage in these procedures. A knock-on effect could be a slowdown of investments in recycling capacities intended for scale. Differences in international legal instruments relating to plastic waste classification could result in implementation ambiguity that further complicates the landscape for recycling as well as industrial reuse initiatives. To scale the shift to a more circular global plastics economy, the community involved in this paper suggests three groups of trade policy actions including border measures, internal mechanisms and increased transparency complemented by regulatory cooperation. Refinement of the international classification system for traded goods, which does not yet distinguish between different types of plastic, would help countries use trade incentives accurately and allow for more exact data collection. Tariffs could also be cut on technologies and inputs into waste management processes, as well as commitments to keep environmental services sectors open to foreign players. Ongoing trade facilitation work could be employed to upgrade countries capacities for clear, safe, legal trade in plastic waste. Transparency on domestic plastic-waste measures through notifications in global forums would help firms planning more sustainable value chains. Interest in tackling plastic pollution has grown among some World Trade Organization members, while bilateral or regional trade deals offer another useful avenue. Although trade policy is not the silver bullet, trade deals have only lightly touched on the circular economy, and there is arguably much more that could be done to influence production and consumption trends. Stakeholders also highlighted the importance of coherence between international governance processes to bring circular economy objectives to the forefront. As the Basel Convention Conference of Parties (2021 and 2023) approaches and the amendment processes advance, stakeholders need to collaborate in creating clear classifications and definitions in relation to plastic waste, such as between hard- and easy-to-recycle plastic waste. The COVID-19 pandemic has increased the complexity of plastic pollution management due to a heightened demand for single-use plastics for personal protective equipment and precautions against mishandling potentially contaminated plastics. To keep infection rates low, some governments have rolled back bans on single-use plastics. 5Plastics, the Circular Economy and Global TradeYet with the drastic plastic pollution problem, policy-makers need to strengthen their commitment to long-term actions across the three Rs. Critical downstream interventions, including recycling and reuse, could be helped by trade policy. Equally, a number of trade policy upstream actions may not yet be fully conceptualized. Further research is also needed on how these interventions could generate sound environmental management jobs in developing countries. To help advance the conversation, business, experts and academia can offer support by presenting insights on the key obstacles and engaging in multistakeholder capacity building where appropriate. Taken together, these steps would contribute to building a more sustainable global economy in years to come. 6 Plastics, the Circular Economy and Global Trade1.1. ContextPlastic is a highly useful material. It is lightweight, functional, durable and, among other things, has been critical in the COVID-19 emergency response through its use in the manufacture of personal protective equipment (PPE). Yet plastic pollution is a major global crisis. The world produces more than 400 million tonnes of plastic every year, much of which is considered mismanaged after use. Concern has grown about the volume of plastic waste accumulating in cities and villages, landfills, dumps and the natural environment. An estimated 25% of plastic waste is incinerated and 56% is disposed of in landfills.1Plastic recycling rates are low at between 1418% as a global average and much lower in some countries, compared with recycling rates exceeding 50% for steel, aluminium, copper and paper.2Numerous causes have led to a leakage of huge amounts of plastic into the worlds oceans.3Plastics resistance to biodegradation has subsequently resulted in the presence of microplastics in fish or drinking water. Plastic litter clogging up sewers has amplified the risk of flooding, contamination and vector-borne diseases. Increased incineration in recent years poses environmental and health risks as dioxins and other toxic pollutants are emitted where combustions plants are poorly regulated. Stakeholders have also flagged concerns on the health and environmental risks of plastic production, while fossil fuel feedstock inputs for virgin plastics add to global emissions. Governments and companies are responding. Around 127 countries have adopted legislation on plastic bags, and many have introduced rules on single-use plastics more generally. New regulations include bans on the use of specific products such as straws, packaging materials such as polystyrene, or production levels. Some countries have opted for taxes or waste-disposal fees on single-use plastics, introduced extended producer responsibility (EPR) requirements, recycling targets, packaging requirements or bans on plastic waste imports. There are also regional and international efforts to reduce plastic pollution often focused on impacts to the marine environment. A growing number of firms have started to disclose plastic packaging volumes, implemented recycling targets, committed to end single-use plastics, incorporated recycled plastics and upgraded waste-management initiatives.4Research, development and investment have increased throughout the plastics value chain, including addressing material design innovation such as biodegradable packaging created from seaweed and cassava, and new business models to encourage reuse and refill schemes, as well as improved waste collection, and sorting and advanced recycling technologies. The concept of the circular economy a systemic approach to decouple growth from the consumption of finite resources where products are always kept at their highest value and waste from one process is input into another has steadily become more mainstream. Yet few government initiatives, business models or collective efforts to date have reached their full intended scale and impact. There is an important cross-border component both existing and potential to tackling plastic pollution and scaling more circular approaches in the plastics sector. The plastics value chain spans from raw materials extraction to final disposal, collection and recycling. However, while plastic production and consumption are global, with an international trade in plastics, plastic packaging and synthetic textiles,5the picture is more complex for plastic waste management. Most plastics are produced in North America, Western Europe and China, with these regions also being major consumers. The largest exporters of plastic and rubber in 2018 by volume were the United States, China, Germany, France and Mexico.6Global trade in plastic waste, meanwhile, is small relative to overall plastic waste generation. The Organisation for Economic Co-operation and Development (OECD) found that, in 2015, just 4% of the 300 million tonnes of plastic waste generated was exported outside the country of origin.7However, researchers have noted that about half of all plastic waste intended for recycling was exported in 2016, with China importing the lions share.8The story told by these figures is twofold. First, plastic waste management has largely been approached locally or domestically to date, although illegal trade and mislabelling of plastic waste is suspected to be rife.9Second, until recently, plastic recycling efforts have nonetheless often involved exports, dominated by flows to China. These trade flows became a source of controversy due to waste dumping and inadequate infrastructure for proper disposal. Researchers also note that some countries waste recycling targets permit exports, but do not meaningfully enforce oversight on treatment at destination, implying that even the limited existing recycling data could be exaggerated.10Changes in domestic rules and the international regulatory regime will now further alter this story. At the beginning of 2018, China introduced a ban on certain plastic waste imports, a move followed by several other countries. Increasing attention to the issue of plastic waste dumping in countries without appropriate treatment facilities resulted in international action in May 2019, with the 187 parties to the Basel Convention a treaty on the transboundary movement and disposal of hazardous and other wastes adding most types of plastic waste to the list of controlled wastes. Specifically, parties to the convention added plastic waste to Annex II (categories of wastes requiring special consideration), as well as clarifications to the scope of plastic wastes covered by Annex VIII (presumptively hazardous) and Annex IX (presumptively non-hazardous and not controlled under the convention).111. Introduction7Plastics, the Circular Economy and Global TradeThe new amendments go into effect from January 2021.12From then on, plastic waste that is sorted, clean, uncontaminated and effectively designed for recycling can be traded freely, while other types will require the consent of importing and transit countries. Parties to the Basel Convention may not trade controlled waste with non-parties, such as the United States, unless an alternative agreement meeting the requirements of Article 11 applies.13Plastic wastes listed under the conventions Annex II are not affected by the Ban Amendment preventing the export of hazardous wastes from OECD economies to non-OECD economies, except for parties such as the EU that would decide to apply the ban to plastic wastes listed under Annex II.14The Ban Amendment entered into force in December 2019.15How the Basel plastic waste amendments will interact with other cross-border mechanisms is unclear. An OECD Waste Agreement, which streamlines import-export procedures and outlines risk-based approaches, includes mechanisms that provide for harmonization with changes to the Basel Convention waste annexes by default.16The US has objected to the Waste Agreement alignment on plastic, however, and discussions have not yet yielded an outcome. The EUs Waste Shipment Regulation (WSR) is another influential legal framework, with revisions ongoing to ensure the implementation of the Basel plastic waste amendments into EU law by January 2021, and specific tools used to ensure non-hazardous plastic waste can still be traded within the bloc.17The EU Strategy for Plastics in a Circular Economy aims to scale plastic recycling, in combination with proposed rules for improved waste management, promoting science, innovation, new products and business models.18The EU has also set a goal of all packaging in its market being reusable or recyclable in an economically viable way by 2030. This will have implications for developing-country traders using plastic packagi