Could these differences potentially lead to the outsourcing of environmentally harmful pollution from countries with stricter regulation to countries with weaker regulations?

Sommer’s ((Amsterdam School of Economics, Macro & International Economics section) project studies this in the context of waste trade. He received ASF (A Sustainable Future) funding  to purchase microdata on the trading behaviour of French firms to study how these firms reacted to a sudden change in international waste trade.

Waste import ban

As a result of an import ban on waste by the Chinese government in 2018, many countries in Europe had to find new places for their waste treatment on short notice. In this research project, Sommer studied if firms exported additional plastic waste to waste havens within Europe and if the plastic waste trade was based on differences is disposal and recycling costs.

Waste disposal is associated with costs to both the environment and human health. Some European countries actively try to discourage waste disposal through policy instruments like taxing landfills. This, however, could lead firms in these countries to dispose of their waste in countries with cheaper waste disposal costs. This can be viewed as an outsourcing of waste treatment to so-called ’waste havens. Previous literature has also argued that lower costs of recycling in lower income countries, usually through lower wages, could lead to similar waste haven effects for recycling.

The ban's impact on European waste trade

Up until 2017, China was by far the biggest importer of waste, importing about half of all global plastic waste and about a quarter of the plastic waste that European countries exported. Throughout 2017 the Chinese government introduced restrictions on these imports, and from January 2018 on all plastic waste imports were banned. Global plastic waste exports to China were drastically reduced, dropping throughout 2017, and then reaching almost zero in early 2018.

This meant that waste handlers had to suddenly find new places for their waste treatment.  Due to relatively strict export regulations, most of the waste created within the EU had to remain within the OECD (Organisation for Economic Co-operation and Development) region, where waste handlers now had to reallocate this additional waste.

Early results based on country-level data

Early stage analysis based on country-level data already leads to some interesting preliminary results. Firstly, countries with higher landfill costs exported significantly more and cheaper plastic waste to countries with lower landfill costs after the waste ban. This supports the conclusion that countries with lower landfill costs started to take over some of the disposal activities for higher cost countries. Our results also indicate that countries with higher recycling costs started to export more waste to countries with respectively lower costs, but the evidence on this is so far less consistent.

At the same time, countries with low landfill capacities started to export more waste to countries with higher landfill capacities, pointing towards an overall increase in disposal within Europe. This is consistent with other, mostly non-academic, evidence.

The importance for policy

Our results imply that restricting waste exports can lead to an increase in waste disposal as fewer recycling opportunities become available. They also imply that this can lead to distributional concerns: countries with lower costs for disposal can become waste havens for countries with higher costs. This also holds lessons for waste regulation in general. Higher taxes on waste disposal could be circumvented by exporting waste and if these regulations are not coupled with further incentives for recycling it is not guaranteed that recycling will increase if waste outsourcing is strong enough.