Exploring Plastic Waste Externalities and Policy Interventions: A Global Case Study
Overview
This paper examines plastic waste as a negative externality with significant environmental, economic, and social costs. It analyzes market failures resulting from the divergence between private and social costs, and evaluates policy interventions including producer responsibility schemes and international agreements to mitigate the crisis.
What this case study covers
- Global Concern and Negative Externalities - explores the scale of plastic pollution, impacts on marine life and ecosystems, and quantified economic losses to fisheries and tourism
- Efficiency Implications of Plastic Waste Externalities - analyzes market failures, deadweight loss, and violations of allocative and productive efficiency
- Policy Interventions and International Collaborations - discusses the Global Plastics Treaty, national bans, EPR schemes, and outcomes in countries like Kenya and the EU
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Exploring Plastic Waste Externalities and Policy Interventions: A Global Case Study
Donald Ngonyo
University of the People
BUS 1103 – Microeconomics
Ogochuku Fisher
March 23, 2026
Exploring Plastic Waste Externalities and Policy Interventions: A Global Case Study
Plastic waste and marine pollution represent one of the most pressing environmental crises of our time. According to the UNEP (2021), annual plastic production exceeds 400 million tonnes, with 8–14 million tonnes entering oceans each year. This mismanagement creates widespread negative externalities that impose uncompensated costs on marine ecosystems, economies, and human health. This report examines the global concern, efficiency implications, and policy interventions aimed at mitigating these market failures.
Global Concern and Negative Externalities
Improper plastic disposal generates significant negative externalities. Single-use plastics and microplastics harm marine life through ingestion and entanglement, affecting over 800 species including turtles, seabirds, and whales. Ecosystems suffer from habitat degradation and disrupted food chains as microplastics enter the base of the marine food web. Economically, fisheries and tourism industries lose billions annually; the UNEP estimates global costs at $13 billion per year in damaged fishing gear, beach clean-ups, and lost tourism revenue. Producers and consumers pay only private costs (production and purchase), while society bears the full social costs of cleanup, biodiversity loss, and health impacts such as microplastic contamination in seafood. This divergence creates a classic market failure where the private marginal cost is lower than the social marginal cost, leading to overproduction and underinvestment in sustainable alternatives.