for financing solutions to tackle plastic pollution
Earlier this month, the zero draft text of the international legally binding instrument on plastic pollution, including in the marine environment (commonly known as the Global Plastics Treaty), was released. The draft lays the foundations for the upcoming Intergovernmental Negotiating Committee meeting (INC-3) in November. Since the adoption of the resolution to develop the instrument in March 2022, questions have been raised about how it will be financed.
Here are my reflections on some of the key points included in the zero draft text, and how the financing provisions can set the groundwork for upcoming negotiations.
Multiple sources and types of capital will be needed
The zero draft makes clear reference to various types and sources of financing, including public and private capital. Multiple sources of capital will be crucial, given the different stages of development and different investment needs of solutions to tackle plastic pollution. As we explained in our report, growth and patient capital are needed for emerging and early-stage solutions. Catalytic capital is also needed for solutions developed by social enterprises and similar organizations that are not set up to accept equity investments.
Financing technology transfer and capacity building in emerging markets is crucial, but this must be backed by insights to support local conditions
The zero draft highlights the need for financing capacity building and technology transfer for emerging countries. Most emerging markets can benefit from solutions that have been tried and tested in more developed markets; however, these solutions should be customized to the needs of the local context. For example, the type of plastic waste, waste management infrastructure, collection (formal versus informal) systems of plastic waste for recycling, and end-of-life treatment are very different in these countries compared to developed markets. Financial support can be leveraged to build capacity in these countries, thereby avoiding reinventing the wheel, but contextualization of the solutions to the local scenario is critical.
A plastic pollution fee must consider the sources of pollution and a fair, equitable use of the funds
Ahead of INC-2, Ghana shared details of their proposed Global Plastic Pollution Fee. Taking a cue from this and other discussions, in the zero draft, a plastic pollution fee to be paid by producers has been proposed as a means to raise the financial resources for the implementation of the instrument. If imposed, a fair and equitable method of collecting and distributing the money has to be considered. Any formula should keep in mind that plastic pollution does not take place only during production but through its transportation, during, and after its use, all of which may span international boundaries. While the details are yet to be spelled out, this may also mean that the fee may be required to be paid at multiple points in the value chain. Furthermore, if the country imposing the fee is unlikely to benefit from it, it won’t take off at all. There has been limited success imposing a carbon tax even on a country level and it would be a significant milestone if a global plastic pollution fee could be agreed upon and implemented.
Plastic credits have a role to play, but should not be a license to continue to produce plastic
At INC-2, the need for independent verification of plastic credit schemes was raised. The zero draft, however, makes no reference to plastic credits. Plastic credits are beneficial in ensuring that mismanaged plastic waste is collected from the environment, especially in emerging markets where it may not otherwise have been picked up. However, plastic credits should not be seen as a license to continue to produce plastic. While plastic credits may provide some additional capital, other more significant sources of capital will be required to tackle the plastic pollution crisis at scale.
Increased visibility of capital flows can accelerate and encourage capital distribution amongst a wide range of solutions
As stated in the zero draft, countries are expected to “ensure mandatory disclosures from businesses, including the financial sector, on their activities and financial flows from all sources related to plastic pollution and related sustainable finance practices.” Our tools, such as the Plastics Circularity Investment Tracker, which currently tracks private investment in plastics circularity solutions in emerging markets (with tracking in global markets planned for release in Q4 2023), have been prepared precisely with this goal in mind: to provide transparency in capital flows. We believe a tool such as the Investment Tracker will not only provide information needed from a reporting perspective but with its coverage of investments taking place across the plastics value chain, will facilitate a more equitable distribution of the capital for a wide range of solutions.
Released earlier this year, The Circulate Initiative’s Plastics Circularity Investment Tracker report revealed that only US$850 million was invested annually in plastics circularity solutions across emerging economies between 2018 and September 2022, significantly lower than the estimated US$27.5 billion a year needed to fund basic waste management infrastructure in these markets. There is a critical need to plug this financing gap, but at the same time solutions across the value chain must receive the necessary investment. While we wait to see how the negotiations progress, the zero draft has put in place the necessary groundwork to deliberate the critical role financing will play in tackling plastic pollution.