In 2017 China banned the import of plastic waste, which led to large reallocations of plastic waste between countries. This column discusses the lessons that can be drawn for the planned EU reform of the EU Waste Shipments Regulation. While the overall trade of waste within Europe did not increase as a result of the ban, there is strong evidence for a ‘waste haven’ effect in disposal. Harmonisation of regulations within Europe could help to reduce outsourcing to low-regulation countries, while a mandatory content requirement for recycled material could address the concern that bans might increase waste disposal relative to recycling.
In 2017, China announced that it would ban the imports of several types of waste, including all plastic waste, from January 2018. This presented a huge shock to the global waste trade system, as at the time China imported about half of all globally traded plastic waste (based on data from Comtrade; see United Nations 2023). In this column, I discuss the effects on European countries, which had been sending half of the plastic waste that left the continent to China (see Figure 1). These countries now had to quickly reallocate this waste and, due to policy constraints, most of this reallocation had to happen within Europe itself and the OECD.
Figure 1 Cross-border trade of European plastic waste, by importer group
Note: Vertical bar indicates beginning of import restrictions in China.
Source: Based on Comtrade data (United Nations 2023).
The potential effects of this ban might resemble those of changes in policy regarding the exports of plastic waste that are currently planned in the EU, which will see all exports of plastic waste to outside the OECD banned for a three-year period (May 2026 to May 2029). 1 After this, they will be subject to strict regulations. Like the Chinese import ban, this policy could lead to significant relocations of waste processing within Europe.
Economic theory would predict that most of the reallocated waste would, after both policies, be sent to countries with low waste-processing costs, making these countries ‘waste havens’ for countries with respectively higher costs. The regions that might become waste havens within Europe would likely see an increase pollution, as was also the case for respective regions in China (Unfried and Feicheng 2024). This is especially worrisome as lower cost processing corresponds strongly to weaker environmental regulation stringency.
Kellenberg (2012) and Teshima et al. (2022) have found such pollution haven effects for waste and (battery) recycling, respectively, in the past. But for other types of pollution it has proven hard to find causal evidence for such effects, 2 making it unclear whether we should expect them in this setting.
Another potential problem of such bans is highlighted by Sigman and Strow (2024), who show that the import ban has led to an increase in landfilling activities in the US. This could therefore also be expected within Europe, both after the import ban and because of the export restrictions.
In recent research (Sommer 2024), I use a difference in difference design to study the causal effect of the import ban on intra-European waste trade. This allows me to assess whether the ban led to a pollution haven effect within Europe, or if changes in waste trade were driven by other factors.
Data and methodology
One of the key advantages of studying waste trade within Europe is the access to the private average costs of disposing a tonne of waste in a landfill (consisting of a tax and an average gate fee), proxying for the general costs of disposal. 3 I also proxy for the costs of recycling by using the wage in the waste treatment sector, and can capture a country’s remaining disposal capacity, both for landfilling and incineration, alongside other relevant control variables. I then study the monthly, bilateral trade in plastic waste, focusing on the HS codes that China explicitly banned as an import.
In Figure 1, one can also see that waste imports by other European countries did not pick up the entire decline in Chinese imports, indicating that more waste was absorbed domestically. This, however, does not imply that there were no changes to the patterns of trade within Europe.
This is what is shown in Figure 2, which plots the relation between processing costs and waste trade within Europe. For this, I split all countries in my sample at the median of these measures, respectively for one variable in each panel. I then indicate the average increase in waste imports, after the ban, for the country group for which I expect an increase. The left panel shows that the uptake in waste imports is mostly based on the uptake of imports from countries with low landfill costs, while those with high landfill costs do not see such an increase. The same can be observed for countries with lower recycling costs, albeit to a smaller extent.
Figure 2 Intra-European trade in plastic waste, by importer characteristics
Note: Vertical bar indicates beginning of import restrictions in China.
Source: Based on Comtrade data (United Nations, 2023)
In my paper, I study if this correlation represents a causal relationship, by disentangling these cost differences from other potential drivers. In the difference-in-difference setup, I use the trade of other, non-affected goods to control for trade between country pairs in the absence of the import ban. I study the effect of the import ban on intra-European waste trade, first in the aggregate and then, more importantly, differentiated by country pair characteristics. For this, I use the differences in waste processing costs, as well as in disposal capacities.
Results
In accordance with the descriptive Figure 1, I find that the overall trade of waste within Europe did not increase as a result of this ban. I do, however, find strong evidence for a waste haven effect in disposal. After the ban, countries with higher disposal costs started to export more waste to countries with respectively lower costs. This relationship is absent before the ban and does not disappear if I control for other country-pair characteristics like GDP per capita. For recycling costs, the estimates point into the same direction but are statistically insignificant.
The magnitude of these effects is sizeable, implying that a country pair with a mean difference in landfill costs started to trade about 20% more plastic waste towards the lower-cost country, compared to before the ban and compared to trade in other goods. At the same time, I find that the quality of the waste that went from high- to lower-cost countries decreased. This could also imply an increase in the negative externalities that result from waste processing in the importing countries.
I also find the expected effect for disposal capacities, indicating that countries with lower capacities started to export more towards countries with higher capacities. This could indicate that countries became constrained in the amount of waste that they could handle domestically and could further hint at an overall increase in the disposal rate (relative to recycling) of plastic waste.
In Figure 3, I show what these effects imply for individual countries, with two key insights. First, countries that became waste havens after the ban generally exhibited much lower environmental performances than countries that mostly reduced their imports. This is worrisome, as an increase in waste imports in these countries is therefore likely coupled with an increase in pollution. Second, Türkiye played an extraordinary role in this analysis, becoming a crucial importer of European plastic waste. Separating the effect for Türkiye from the rest of the sample, however, does not significantly alter the described results.
Figure 3 Predicted change in European plastic waste imports as result of the Chinese import ban
Note: Based on results in Sommer (2024) and (Block et al. 2024) for data on environmental performance
Conclusions for policy
My results have important implications for policy. Most notably, they indicate two potential side effects of a European waste export ban. First, even if these regulations aim to prevent waste haven behaviour by forbidding exports to countries outside the jurisdiction, such regulation can still pose concerns regarding the distribution of waste processing and its related externalities within Europe and the OECD.
Second, such bans might increase waste disposal relative to recycling, at least in the short run, as I find that waste trade responded strongly to both disposal capacities and prices.
To overcome the first of the two concerns, a substantial harmonisation of environmental regulations within Europe and the EU could help to prevent some of this outsourcing to low-regulation countries. A mandatory content requirement for recycled material, or more extensive EPR schemes, could help to target the second concern, when implemented alongside an export ban.
Source : VOXeu
