Production Caps vs. Recycling: The Economic Trade-offs of Plastic Policy

The report, commissioned by the International Council of Chemical Associations, contrasts restrictive production limits with strategies aimed at optimizing waste management infrastructure. While a production cap forces plastic prices up by roughly 8.5% due to the material's inelastic demand, focused recycling incentives could actually lower total prices by 0.2%.

Researchers identified that the primary driver for progress lies in expanding collection systems for the 2.7 billion people currently lacking access to basic waste services. By directing resources to regions with the highest potential for leakage reduction—specifically South and East Asia—the industry could generate 68% more recycled plastic than a production cap would allow.

Alice Gambarin, an associate director at Oxford Economics, noted that because plastics are deeply embedded in global supply chains, restricting supply does not shift demand to other materials but rather inflates costs for businesses and consumers. The findings indicate that the most effective path toward a circular economy involves mobilizing global finance to build local capacity, rather than implementing broad output constraints that disproportionately impact household welfare across North America, Europe, and Asia.