INOM EXAMENSARBETE INDUSTRIELL EKONOMI,AVANCERAD NIVÅ, 30 HP

, STOCKHOLM SVERIGE 2017

From Plastic to PaperMapping the real cost of plastics

NILS LINDSTRAND

KARL THUNELL

KTHSKOLAN FÖR INDUSTRIELL TEKNIK OCH MANAGEMENT

www.kth.se

From Plastic to Paper Mapping the real cost of plastics

by

Nils Lindstrand Karl Thunell

Master of Science Thesis INDEK 2017:51 KTH Industrial Engineering and Management

Industrial Management SE-100 44 STOCKHOLM

Från plast till papper Plastens egentliga kostnad

Nils Lindstrand Karl Thunell

Examensarbete INDEK 2017:51 KTH Industriell teknik och management

Industriell ekonomi och organisation SE-100 44 STOCKHOLM

AbstractDue to rising concerns of the litter resulting from linear production models, the circular pro-duction model has gained increasingly widespread attention. The circular value chain promotesbetter resource utilization within closed system boundaries and aims to minimize the use of vir-gin feedstocks. This, in turn, could help to lower the impact of hidden costs, i.e. externalities,caused when applying linear production models.

The packaging industry has had a strong growth over the last decades and is expected toincrease even further over the coming decades. The most common type of packaging materialis plastic, followed by paper. However, the purchasing prices for each material does not reflectthe full impact imposed on the global economy, when incorporating costs from end-of-life.Therefore, a cost-comparison between plastic and paper bags will be made by quantitativelyinvestigating the costs that the materials incur in the following areas, when not being disposedcorrectly: Beach cleanup, City cleanup, Fishing Industry, and CO2 impact. Moreover, thefollowing aspects have been identified as being affected, but due to difficulties in quantifyingthe measures, have only been assessed qualitatively: Tourism industry, Agriculture, Wildlife,and Health concerns.

The results show that in a high cost scenario, paper bags outperforms their plastic equivalentsin the quantitative categories. However, when including the qualitative aspects, the resultsindicates that paper bags outperforms plastic alternatives in low, average, and high cost sce-narios. Furthermore, if the packaging industry were to improve infrastructure for after-use,strengthen recycling incentives and reduce plastic material use, current best case scenariospredicts that a reduction of plastic leakage by 45 % by 2025 would only result in a steady-state. Thus, the conclusion is that a transition towards truly biodegradable materials, suchas paper, is crucial in order to reverse the deterioration of vital ecosystems and reduce thenegative economic impacts.

Keywords: Circular Economy, Externalities, Life Cycle Assessment, Litter, Plastic packaging,Paper packaging

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SammanfattningI och med okad oro for avfall fran linjara produktionsmodeller, sa har den cirkulara produktion-smodellen fatt alltmer uppmarksamhet. Den cirkulara vardekedjan foresprakar battre resur-sanvandning inom stangda systemgranser och minimerar anvandandet av jungfruliga ravaror.Det i sin tur skulle innebara en minskning av paverkan fran dolda kostnader, m.a.o. exter-naliteter, som uppstar i linjara produktionsmodeller.

Forpackningsindustrin har haft en stark tillvaxt de senaste decennierna och forvantas att okaytterligare over de kommande aren. Det vanligaste forpackningsmaterialet ar plast, foljt avpappersprodukter. Dock speglar inte inkopspriserna for ovan namnda material den totala kost-naden som de orsakar den globala ekonomin, genom att analysera hela livscykeln. Saledes kom-mer en kostnadsjamforelse undersokas genom att kvantifiera kostnaderna som materialen or-sakar inom foljande omraden, da de inte hanteras korrekt: Stranduppstadning, Stadsrengoring,Fiskeindustripaverkan och CO2-paverkan. Dessutom har ytterligare aspekter identifierats ochkommer att analyseras kvalitativt, da dessa varit svarberakneliga, namligen: Turistindustrin,jordbruksindustrin, djurliv och manniskohalsa.

Resultaten pavisar att i ett hogkostnadsscenario sa overtraffar papperspasar motsvarandeplastpasar i de kvantitativa kategorierna. Dock, vid en inkludering av de kvalitativa aspek-terna indikerar resultatet att papperspasar ar billigare i lag-, medel- och hogkostnadsscenari-erna. Dessutom, om forpackningsindustrin skulle infora forbattringsatgarder for infrastruktur,oka incitamenten for atervinning och minska plastanvandningen forutspar man i basta fallatt avfallsutslappen kan minska med 45 % till 2025, som enbart innebar att man uppnar ettstationart tillstand (”steady state”). Darfor dras slutsatsen att en overgang mot verkligt biol-ogiskt nedbrytbara material, sasom papp, ar nodvandigt for att minska miljoforstoringen ochreducera de negativa ekonomiska konsekvenserna.

Nyckelord: Cirkular ekonomi, Externaliteter, Livscykelanalys, Avfall, plastforpackningar,pappersforpackningar

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ForewordThis master thesis was conducted during the spring of 2017 at the Royal Institute of Technology(KTH), Stockholm, Sweden, at the department of Industrial Engineering and Managementwithin the unit of Sustainability and Industrial Dynamics (SID).

AcknowledgementsWe would like to express our gratitude to our supervisor Jon Haag at BillerudKorsnas forthe valuable support and advice throughout the whole project. His experience and insightsprovided us with many useful ideas. Furthermore, the constructive criticism received at thefocus group seminars led by Cali Nuur helped us to refine the thesis. Finally, we would like tothank our supervisor from KTH, Michael Novotny, who gave us guidance and feedback in howto form the academic thesis.

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AbbreviationsAPEC - Asia-Pacific Economic Cooperation

BK - BillerudKorsnas

CE - Circular Economy

COP - Conference of Parties

CO2 - Carbon Dioxide

tCO2e - ton Carbon Dioxide equivalent

EIA - Energy Information Administration

ETR - Environmental Tax Reform

ETS - Emission Trading System

GDP - Gross Domestic Product

GHG - Greenhouse Gas

GWP - Global Warming Potential

HDPE - High Density Polyethylene

IVL - Institutet for vatten- och luftvardsforskning (Swedish Environmental Research Insti-tute)

LCA - Life Cycle Assessment

LDPE - Low Density Polyethylene

MRQ - Main Research Question

OECD - Organisation for Economic Co-operation and Development

PPP - Purchasing Power Parity

PSS - Product Service Systems

SDG - Sustainable Development Goals

UNEP - United Nations Environment Programme

USD - United States Dollar

VAT - Value Added Tax

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Contents

1 Introduction 11.1 Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.2 Problematization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.3 Aim & Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.4 Research Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.5 Delimitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

1.5.1 Data Collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31.5.2 Data Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

2 Industry Overview 52.1 The Packaging Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52.2 Plastic Packaging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

2.2.1 Biobased- and Biodegradable Plastics . . . . . . . . . . . . . . . . . . . 72.3 Fibre-based Packaging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

3 Methodology 93.1 Research Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

3.1.1 Pre-study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93.1.2 Literature Review and Quantitative Study . . . . . . . . . . . . . . . . . 103.1.3 Qualitative Methods - Interviews . . . . . . . . . . . . . . . . . . . . . . 103.1.4 Data Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

3.2 Reliability and Validity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123.3 Generalizability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

4 Literature Review 144.1 The Circular Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

4.1.1 The Circular Economy in Business . . . . . . . . . . . . . . . . . . . . . 154.2 Externalities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154.3 Life Cycle Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164.4 Carbon Pricing Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

5 Mapping the Externalities 185.1 Case Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185.2 Identifying the Externalities Using United Nations’ Sustainable Development

Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185.3 Measuring Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

6 Assessing the Externalities 216.1 The Externalities from Paper and Plastic Bags . . . . . . . . . . . . . . . . . . 216.2 CO2 Impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216.3 Marine Debris . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236.4 Beach Cleanup . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266.5 City Cleanup . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286.6 Fishing Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 306.7 Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316.8 Tourism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316.9 Wildlife . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316.10 Health Concerns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

7 Results - Cost of Externalities 347.1 Cost of CO2 Impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

7.1.1 Cost of CO2 Impact Indonesia . . . . . . . . . . . . . . . . . . . . . . . 34

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7.1.2 Cost of CO2-impact U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . 357.2 Impact on Fishing Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

7.2.1 Fishing Industry Indonesia . . . . . . . . . . . . . . . . . . . . . . . . . 367.2.2 Fishing Industry U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

7.3 City Cleanup Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 377.3.1 City Cleanup Jakarta . . . . . . . . . . . . . . . . . . . . . . . . . . . . 387.3.2 City Cleanup London . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

7.4 Beach Cleanup Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 407.4.1 Beach Cleanup Cost Indonesia . . . . . . . . . . . . . . . . . . . . . . . 407.4.2 Beach Cleanup Cost U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . 41

7.5 Annual Direct Cost Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . 437.6 Cost Per Bag Comparison - Indonesia . . . . . . . . . . . . . . . . . . . . . . . 447.7 Cost Per Bag Comparison - United Kingdom . . . . . . . . . . . . . . . . . . . 44

8 Analysis - Internalization and Comparison 468.1 Quantified Externalities - Direct Costs . . . . . . . . . . . . . . . . . . . . . . . 468.2 Including Other Externalitites - Indirect Costs . . . . . . . . . . . . . . . . . . 47

9 Discussion 509.1 The Packaging Industry’s Circumstances and Future Prospects . . . . . . . . . 509.2 The Circular Economy Perspective . . . . . . . . . . . . . . . . . . . . . . . . . 51

9.2.1 Circular Model for Policymakers . . . . . . . . . . . . . . . . . . . . . . 52

10 Conclusion 5310.1 Answering the Research Questions . . . . . . . . . . . . . . . . . . . . . . . . . 5310.2 Academic Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5410.3 Industry Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5510.4 Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5510.5 Future Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

10.5.1 Externalities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5610.5.2 The Circular Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

11 References 57

Appendices 62

Appendix A - Gantt-chart 62

Appendix B - Interview Scheme 63

Appendix C - Assumptions and Estimations for Quantitative Study 64

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List of Figures

1 Packaging material types, distribution and end markets . . . . . . . . . . . . . 52 Project Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 Linear vs Circular Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144 United Nations’ sustainability goals . . . . . . . . . . . . . . . . . . . . . . . . . 195 Value chain and negative externalities caused by paper and plastic packaging

products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206 Grams CO2-equivalents per bag type throughout the value chain . . . . . . . . 227 Source of marine litter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 248 Where Plastics End up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259 Concentration of plastics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2610 Most frequent items collected during the International Coastal Cleanup Day in

2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2711 Share of Cleanup Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2912 Plastic ingestion and bioaccumulation along the food chain . . . . . . . . . . . 3213 Cost of CO2 per bag in Indonesia according different pricing models . . . . . . 3414 Cost of CO2 per bag in the U.K. according to different pricing models . . . . . 3515 Annual cost of damages incurred by plastic bags to the fishing industry in Indonesia 3616 Cost per plastic bag sold in Indonesia to compensate fishing industry damages 3617 Annual cost of damages incurred by plastic bags to the fishing industry in U.K. 3718 Cost per plastic bag sold in U.K. to compensate fishing industry damages . . . 3719 City cleanup cost of plastic and paper bags in Jakarta . . . . . . . . . . . . . . 3820 City cleanup cost per sold bag Indonesia . . . . . . . . . . . . . . . . . . . . . . 3821 City cleanup cost of plastic and paper bags in London . . . . . . . . . . . . . . 3922 City cleanup cost per sold bag United Kingdom . . . . . . . . . . . . . . . . . . 3923 Annual beach cleanup cost for plastic bags in Indonesia . . . . . . . . . . . . . 4124 Beach cleanup cost per plastic bag sold in Indonesia . . . . . . . . . . . . . . . 4125 Annual beach cleanup cost for plastic bags in United Kingdom . . . . . . . . . 4226 Beach cleanup cost per plastic bag sold in United Kingdom . . . . . . . . . . . 4327 Aggregated societal cost per plastic and paper bag in Indonesia . . . . . . . . . 4428 Aggregated societal cost per plastic and paper bag in United Kingdom . . . . . 4529 Aggregated cost per plastic and paper bag in Indonesia, including purchasing

price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4630 Aggregated cost per plastic and paper bag in United Kingdom, including pur-

chasing price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4731 Estimated societal cost for plastic and paper bags . . . . . . . . . . . . . . . . . 4832 Estimated full cost for plastic and paper bags . . . . . . . . . . . . . . . . . . . 4933 Gantt Chart of Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

List of Tables

1 Classes of Plastics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 Most common type of plastics . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Results from the International Coastal Cleanup Day in 2007 in the APEC region

(McIlgorm et al. 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 404 Results from the Great British Beach Clean in 2016 . . . . . . . . . . . . . . . 425 Total annual cost and per bag cost incurred by plastic bags . . . . . . . . . . . 436 Total cost per bag and material type including direct costs . . . . . . . . . . . 53

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1 Introduction

The introductory chapter provides the reader with an overview of the report and includes back-ground and problem formulation. This will then lead to the purpose and the research questionsthat are to be investigated and finally the delimitations and expected contribution of the the-sis.

1.1 Background

Plastic is arguably one of the most useful and versatile materials ever invented, and the modernsociety would not be possible without it. Plastics are today used in everything from spaceshipsto clothing (Sustainable Packaging Coalition, 2009). The fastest growing segments of plastics ispackaging, which is almost exclusively single-use plastic packaging. With a rising middle classin developing countries, the consumption of consumer goods will increase and the packagingindustry will naturally grow with it (Boyce and Palmer, 2015). Packaging is utilized to prolongproducts durability as well as to preserve them, which minimizes wasted resources. Mostpackaging material such as glass, paper and carton board are organic materials, which meansthat they also decompose organically. Plastics, however, are manufactured from fossil fuels anddo not decompose organically and also have a significantly higher impact on the environment(Dahlgren et al., 2016). Since they do not decompose organically, they persist for a longerperiod of time. To put this in perspective, a plastic bottle can survive for roughly 400 years(Surfers Against Sewage, 2014; World Economic Forum et al., 2016) whereas a paper bag isfully dissolved within six months (Science Learning Hub, 2008; Haag, 2017).

Poor recycling systems and collection of packaging materials has today meant an abundanceof litter and linear production models have unfortunately, depending on the material used inthe packaging product, resulted in an environmental disaster of gigantic proportions (Avio etal., 2016). With a 95 % first-use cycle of plastic packaging material globally, an estimated $80-120 billion is lost to the global economy annually. Because of the abysmal recycle rate ofplastic, the after-use externalities associated with littering reduces the productivity of vitalsystems (e.g. oceans and urban infrastructure) and is conservatively estimated to be $ 40billion annually, thus exceeding the packaging industry’s profits. The amount of plastic wastein oceans is roughly estimated to be somewhere between 100-200 millions of tons and if thetrend continues, plastic will outweigh fish by 2050 (World Economic Forum et al., 2016).

The ‘take, make, dispose’ economic models are currently being challenged by what is known asthe Circular Economy (CE). CE is an economic model that is restorative and regenerative bydesign and seeks to ultimately decouple global economic development. Having been adoptedby the European Union and companies such as H&M, Dell and Energizer, the CE approach hasan opportunity to become the new norm for companies (Ellen MacArthur Foundation, 2015).CE is attractive as the concept of resource productivity enables a new way of analyzing thefull system cost and the value associated with any product. Resource inefficiencies are mostapparent within companies in the form of incomplete material utilization and poor processcontrols, which result in unnecessary waste, defects, and stored materials. By focusing onthese, companies have the opportunity to not only reduce costs but also to become moreinnovative. After all, pollution is, in its essence, a representation of a missed opportunity andresources being used incompletely and inefficiently (Porter and van der Linde, 1995).

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1.2 Problematization

Over the past six decades, contamination and pollution of the oceans have become a growingproblem. Materials that are non-biodegradable, such as plastics, cause a wide range of problems(Avio et al., 2016). The more recognized issues of ocean pollution are associated with theimpact on marine wildlife, aesthetic issues and public perception (Gregory, 2009). Thereare however additional issues associated with marine litter, such as harm to ships, fisheries,agriculture, tourism as well as human health concerns (Gregory, 2009; Mouat et al., 2010).These areas have either not been quantified properly, or have had a single-measure focus thatmakes the holistic overview of the total cost of packaging materials, including after-use negativeexternalities, difficult to assess (World Economic Forum et al., 2016).

This poses significant challenges to alternative packaging materials, which are traditionallymore expensive for businesses but do not have the same socio-economic costs. There are plentyof proponents of plastics who argue that it is a cheaper and more sustainable material thanpaper, despite being manufactured from oil or natural gas and having significant environmentaland health effects (Stockwell and Smith, 2005; Muthu et al., 2011). Paper, although not alwayshaving the equivalent qualities of plastics, is a competitive alternative since it derives fromrenewable feedstocks and decomposes naturally, hence not inducing the same costs as plastics(Haag, 2017).

1.3 Aim & Purpose

The purpose of this study is to conduct a cost-comparison of plastic bags with fibre-basedequivalents by including end-of-life aspects. The comparison will consist of a quantitativesegment as well as a qualitative segment of factors that are not easily quantified, with the aimof creating an accumulated cost-impact evaluation. The evaluation will be applied on a lessdeveloped country, Indonesia, and a developed country, United Kingdom.

1.4 Research Questions

Given the outline of previous segments and with regard to the purpose of the study, the mainarea of investigation of the study will encompass the following question:

MRQ: What insights can the packaging industry provide into the prerequisites of the successof circular business models?

In order to answer this question, the following sub-questions have to be assessed:

RQ1: How does the accumulated costs of plastic and paper bags compare in a developed(United Kingdom) and a less developed country (Indonesia)?

RQ2: What does an inclusion of end-of-life aspects for plastic and paper bags reveal aboutthe societal costs and the most cost-effective choice of material?

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1.5 Delimitations

The convergence of the project has been made to encompass a size that is manageable andapproachable given the time frame of the project. The delimitations set up encompasses thedata collection and data analysis.

1.5.1 Data Collection

Since the impact, damage and direct connection of the externalities on this macro-level scale isdifficult to determine, there are few reports that have made an attempt to put numbers to theproblems. The reports that have quantified the externalities are extensively referred to, bothin organizational reports as well as academic ones, thus increasing the trustworthiness of usingthese in this thesis. It should be noted that it will not be possible to account for all externalitiesand costs caused by the packaging industry. As described by Nguyen et al. (2016), mapping theexternalities and accounting for them has in itself a conflict between keeping uncertainty lowand creating a comprehensive model. This is further complicated by the subjective preferenceof value (Inaba, 2013). Because of these issues the authors have chosen to use the numberspresented in the reports and adjusted these where possible and prudent.

Since there is a wide variety of plastic materials and areas of implementation, this report willspecifically focus on plastic carrying bags and paper bags that have the same attributes andare competitive substitutes. However, when calculating the externalities, such a limitation tomaterials are close to impossible to determine precisely, since materials found in ecosystemscould come from any moment in time due to the longevity of plastic materials. Therefore, tokeep the analysis unbiased, low, average, and high cost scenarios will be made for both materi-als. Another delimitation is that the comparison between plastic and fibre-based materials willnot encompass bio-based or biodegradable plastics, since these are still relatively new on themarket, thus representing a smaller proportion of the total amount of plastics leaked (WorldEconomic Forum et al., 2016; Haag, 2017). This is also further complicated by the fact thatavailable data is limited.

The initial cost, i.e. purchasing price for retailers, for plastic bags are set at ce4 and an equiv-alent performing paper bag costs ce8 (Haag, 2017). The prices do not account for purchasingpower parity or varying prices in different regions and is thus assumed the same regardless ofregion.

The evaluation and comparison of plastic and fibre-based products’ costs will then be assessedfor two case countries to illustrate the difference in exposure to the plastic problem, as wellas regional abilities to deal with it. This will also highlight the different economic possibilitiesto rethink packaging materials in the chosen regions. The comparison is delimited to thetwo countries of U.K and Indonesia and will provide an overview of how a developed regionmight differ from a less developed counterpart. The case countries have been chosen partiallyon data availability, and partially since both are island nations in two varying parts of theworld, meaning that the conditions are different in regards to economic situation, geographicalpositions, and recycling infrastructure and habits.

1.5.2 Data Restrictions

The study is delimited to one product (carrying bags) and two types of materials (fibre-basedand plastic materials), it raises concerns of when and how to distinguish costs that are directlyassociated to these two products alone. The reviewed reports revealed that quantifying certainexternalities tend to bunt all plastic materials into one category and all paper or fibre-basedones into another category, making it difficult to extract and pinpoint numbers to one productor one material alone. The precision of the input data in this report is therefore limited,partially due to the lack of research on the macro-level externalities caused by the packaging

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industry and partially due to a mixture of different annual reports, estimates and assumptionsmade. Since the research is dynamic and ever-changing it is hard to keep a congruent and up-to-date data collection methodology, so it is a trade-off between the extent of information anddata collectivity v.s. precise and up-to-date data availability. For more in depth understandingof assumptions made, we refer to Appendix C.

Furthermore, in order to make an impartial and reasonable comparison, the same approachand measuring tools are used in the comparative analysis. In order to strengthen the validityof the outcome, various cost scenarios based on different estimations, will form a span wherethe cost of externalities will lie within. The chosen aspects for carrying out the value chains’environmental impacts have been decided to delimit only to carbon dioxide equivalents, sincethis is the only measure, as for now, that has a price tag to it, which for example sulfur andnitrogen do not have. Additionally, the environmental impacts that are highlighted from thepaper products will be based solely on the products that BillerudKorsnas produces in Sweden,thus not accounting for other energy mixes. It has not been possible to retrieve raw input datafrom the LCA-studies quantifying the value chains for the packaging materials that have beenused at face-value. For the chosen case countries, the transportation of material distances differslightly from what the LCA-studies have accounted for. However, the CO2-pollution causedby transportation accounts for less than 5 % of the total value chain’s CO2-pollution, hencethe impact from this variable will not affect the outcome vastly.

As for the negative externalities linked to the packaging industry, it has been chosen to delimitit to areas that are recurring in reports reviewed. The most common externalities have beenlisted as the following in literature found: Cleanup cost of beaches or coastlines, Cleanup costfor cities, Fishing industry, Agriculture, Wildlife, Tourism and Human health (Li et al., 2016;McIlgorm et al., 2008; Mouat et al., 2010). Wildlife and human health concerns are two areaswhere efforts has been raised as to how littering affects them, however quantifying them havenot yet been explored fully, thus these areas will only be covered qualitatively. Agriculture hashad a case study on the Shetland Islands based on 11 farmers survey answers as to how litteringaffects them (Mouat et al. 2010), however the data material is considered to be to vague inorder to make a thorough assessment on the chosen case countries for this study, meaning it willonly be evaluated qualitatively. Tourism has had reports and surveys listing several negativeexternalities, however it has been decided that littering and pollution affects local communitiesand municipalities, thus making a quantitative assessment biased, since tourists will choose analternative site, meaning that one community loses (costs) due to negative externalities fromthe packaging industry whilst another community gains (profit) visitors that goes to their siteinstead. Finally, cleanup cost and the fishing industry’s costs are areas where it is possibleto find common and clear patterns as to how the packaging industry affects them, thus theseareas will be quantified.

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2 Industry Overview

In this chapter an overview of the packaging industry is presented, including an introductionto the two most common types of packaging materials, namely plastic and paper.

2.1 The Packaging Industry

Packaging serves many purposes. Some of its benefits are physical protection of the product,prolonging the lifespan, marketing and branding, convenience, and portion control. Dependingon the intended usage area, many of these factors may decide the packaging design and ensureit meets the requirements of modern packaging (Sustainable Packaging Coalition, 2009).

The global packaging market is estimated, as of 2012, to be valued at $ 500 billion wherethe consumer packaging market stands for $ 400 billion and industrial end-markets makes upthe remaining $ 100 billion. In consumer packaging, plastic packaging is the most commonmaterial used and is expected to continue its strong growth. From a yearly production ofapproximately 300 million tons in 2014, plastic packaging production is projected to reachabout 1,100 million tons by 2050 (World Economic Forum et al., 2016). This is mainly due toan increasing middle class in the large countries BRIC: Brazil, Russia, India and China - whichwill have both increased consumption of consumer goods and a higher demand on packagingproducts in general (Neil-Boss and Brooks, 2013). The packaging sector consists of five maintypes of packaging, where two of them constitutes the majority of the shares (N.B. statisticsfrom 2012): Paper packaging (including bags and carton boards) with a 34 % market share,the fastest growing segment which is rigid plastics (pots, jars, bottles, etc.) with 27 % , glass11 %, flexible plastics 10 %, and beverage cans 6 % (Neil-Boss and Brooks, 2013). The chartsin Figure 1 below illustrates the packaging industry’s distribution, end market and packagingtypes.

Figure 1: Packaging material types, distribution and end markets(Neil-Boss and Brooks, 2013)

In the report “Future of Global Packaging to 2020” by Boyce and Palmer (2015), it is statedthat rigid plastics and flexible packaging products are the segments that will increase theirmarket share whilst the rest of the materials will account for a relatively smaller share. Theflexible packaging materials includes plastics, papers and foils where bags, sacks and pouchesare the main constituents and where flexible plastics stands for 70.5 % of the total flexiblepackaging consumption (Boyce and Palmer, 2015). The differences in recycling rates betweenpackaging materials are large. Only a staggering 14 % of all plastic packaging is collected forrecycling, and when accounting for additional value losses in sorting and reprocessing, only5 % of material value is retained for subsequent use. To put this in perspective, the globalrecycling rate for paper is 58 %. It should be noted that the recycling rates varies a lot indifferent parts of the world (World Economic Forum et al., 2016).

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2.2 Plastic Packaging

Plastics exists in many forms, but can be categorized into four major types with respectto biodegradability and the natural resource used in the manufacturing process. The fourtypes are: conventional plastics, bio-based plastics, biodegradable plastics and biodegradablebio-based plastics. As displayed in table 1, the four different types are outlined based onthe natural resource used and whether or not the final materials are biodegradable, more onbiodegradability under section 2.2.1 (Gomez and Michel, 2013).

Table 1: Classes of Plastics(adopted from Gomez and Michel, 2013)

The feedstock of conventional plastics is based on crude oil or methane gas with possibleadditives. In the process of making plastics, the crude oil or methane gas is refined throughdifferent steps by using chemical processes to create the resins of plastic, ethylene, propyleneand butylene. These molecules are then combined, depending on the desired characteristicsof the plastics and further handled to eventually create a wide arrange of plastic materials.(Plastics Europe, 2017).

Another classification can be made based on the composition of the plastic material. Themost commonly used polymers (plastics) are high-density polyethylene (HDPE), low-densitypolyethylene (LDPE), polyvinyl chloride (PVC), polystyrene (PS), polypropylene (PP) andpolyethylene terephthalate (PET) which are displayed in table 2 below. When accumulatingthese different types, they account for approximately 90 % of the total global plastic production(Li et al., 2016). For the value chain analysis in this thesis, or life cycle assessment excludingend-of-life, the LDPE bags will be assessed. The difference between HDPE and LDPE isthe pressure in the manufacturing process but the emissions during this phase are practicallyequal. Another difference is that the HDPE bags are smaller and therefore carry less weight.HDPE plastic bags can be thought of as the bags used in the fruit and vegetable departmentin grocery stores whilst the LDPE plastic bags are the larger ones, bought when leaving thestore (Stripple, 2017).

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Table 2: Most common type of plastics(adopted from Li et al., 2016)

Plastic packaging holds many benefits as a material in comparison with other packaging so-lutions because of its lightweight and durability, which protects the product and makes itlast longer, and also decreases GHG emissions in transportation. (World Economic Forum etal., 2016). Plastic packaging is almost exclusively used for what is referred to as single-use-packaging, which means that the lifetime of a plastic packaging product intentional use existsbetween packaging for distribution and unwrapping at the point of consumption (NewInnoNet,2015). Its success as a packaging material has led it to be used in everything from carrier bagsto candy wrappers and through continuously finding new uses in packaging, plastic packagingvolumes are expected to continue their strong growth. The World Economic Forum et al.(2016) predicts the plastic output to increase twofold by 2030 and fourfold by 2050 comparedto today’s levels.

2.2.1 Biobased- and Biodegradable Plastics

Due to the environmental pollution that plastic materials causes there have been, during thelast couple of years, several initiatives to introduce and implement additives in plastics. Theaim with this is to increase the biodegradability and moreover to produce bio-based and nat-ural fiber composites. This, in combination with the fact that plastics are derived from non-renewable feedstocks and have a high persistence during organic recycling, has fastened thedevelopment of finding plastic materials that not only can match the performance of conven-tional plastics, but that also have reasonable prices and are produced from renewable feed-stocks. Finally, the “new” plastics could hopefully undergo a quicker biodegradation with theaim of not leaving toxic residues (Gomez and Michel, 2013).

Even though biodegradable bio-based plastics are meant to decrease the environmental impactand emit less GHG, complete life-cycle analyses are lacking and the extent of biodegradability isquestioned, making it uncertain whether or not biodegradable plastic really is a valid solution.

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The same goes for conventional plastic products amended with additives with the purpose ofenhancing the biodegradability. As for now, there are no research as to whether the materialstruly degrade. Furthermore, there are few studies on the performance, e.g. how fast thedegradation occurs when undergoing processes such as composting, anaerobic digestion or innatural settings due to plastics longevity. In the most recent study, conducted by Gomez andMichel (2013), experiments were made, testing the biodegradability of bio-based plastics andplastics amended with additives with the intention of improving the degradation. It was provento not increase the process of breaking plastics down to a great extent, thus still having a longafter-use life-expectancy. The bio-based plastics however, showed to break down faster but,unfortunately, for some it was shown that they generated methane during anaerobic incubation.Methane gas is particularly devastating as the GHG has 21 times the warming potential ofCO2, meaning that it can be of more harm than the conventional plastic materials that donot decompose and release methane (Gomez and Michel, 2013). Bio-based plastics appear tobe more environmentally friendly than their petroleum-based counterparts, but as shown byGomez and Michel (2013), this might not be the case with the release of methane. Furthermore,it has been shown that the bio-based plastics being used commercially in 2010 had geneticallymodified organisms for feedstock and generate several toxic chemicals as byproducts in themanufacturing process (Alvarez-Chavez et al., 2011).

2.3 Fibre-based Packaging

The other material which will be compared to plastics is fiber based packaging. While havinga smaller market share than plastics, Boyce and Palmer (2015) predicts that flexible paperpackaging materials (i.e. fibre-based packaging) will experience an annual growth rate of 2.0% between 2015-2020. Whilst still growing, it is below the expected rate at which packagingmaterials will increase (3.5 %) and also far below flexible plastics’ expected growth of 3.8 %during the same period.

Fiber based packaging, naturally also contributes to pollution, which differ greatly dependingon where pulp and paper products are manufactured. Steam and electricity are the typicalenergy forms used for pulp and paperboard production (Sustainable Packaging Coalition, 2009).Because the process of producing pulp and paper creates residues which can be used to generateelectricity, the pulp and paper companies heavily rely on bio-fuels for electricity, a sustainableand carbon neutral energy source. For example, as of 2015, the Swedish pulp and papercompany BillerudKorsnas had 97.6 % of the energy consumption during production processesin biofuels and the remainder, 2.4 %, was fossil fuels (Essen, 2016).

The main environmental issues with fibre-based packaging products in general are: The useof additives and coating that may reduce the recyclability of corrugated materials, the wa-ter intensity used in virgin processes (primary production) and potential for organic effluentdischarge into waterways, thus causing contamination and pollution. Furthermore, paper-board production in some Asian countries are utilizing unsustainable management practices,contributing to deforestation, soil erosion and degradation, habitat destruction, loss of biodi-versity, and loss of high value forests and old growth forests (Sustainable Packaging Coalition,2009). However, the methods for virgin fibre production are regulated and does not pose thesame type of threats experienced in Asia. Overall there is an abysmal proportion of the pulpand paper industry which contributes to deforestation (Haag, 2017).

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3 Methodology

This part of the study will explain what tools and approaches that are to be used in order toreach the aim and answer the research questions proposed in the introductory chapter.

3.1 Research Design

The general methodology of this study will follow the 4-phase model, an iterative workingmethod adding sections throughout the whole process (Blomkvist and Hallin, 2015). Elementsthat are relevant for this particular type of study, such as empirical approaches and interviewmethodologies, will be assessed and applied in order to form a clear structure and foundationfor the study as a whole.

Since the purpose of the study is to map and quantify the cost of two plastic and fibre-based materials, and there have not been any extensive attempts to accumulate the costs ofexternalities directly linked to the chosen products, it is plausible to assume that the dispositionof the work will follow an inductive approach. This is because the theories will help to developa better understanding of the findings rather than being a driver of conducting the study. Theinductive approach has its foundation in observations that will be analyzed and eventuallytransform into a theoretical concept based on the conclusions drawn from the observations(Collis and Hussey, 2003). In Figure 2 below, a scheme of the working process in the thesis ispresented.

Figure 2: Project Process

3.1.1 Pre-study

The first part of the study is a pre-study where the key issues are formulated and clarified.When a preliminary literature review has been made, meetings with representatives from one ofthe industry leaders, BillerudKornsas, have been made. The first round of interviews was withthe following persons in order to conduct the pre-study: Jon Haag, Director Consumer Insights;Louise Wohrne, Sustainability Developer (both BillerudKorsnas) followed by a tutorial meeting

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with the supervisors from Kungliga Tekniska Hogskolan in order to outline what theories andconcepts that are of relevance, setting the foundation of the empirical study and literaturereview.

3.1.2 Literature Review and Quantitative Study

When the initial phase has been finalized, the next part is a literature review in combinationwith a simultaneous empirical study. The literature and theoretical concepts that are to bereviewed have been chosen accordingly to the purpose and research questions, hence keepingvaguely related theories out of context. The examined literature will be retrieved from GoogleScholar and KTH B Primo (including Web of Science and Scopus). Keywords used for theliterature review has been: life cycle assessment, value chain analysis, circular economy, exter-nalities, environmental economics, economic instruments and carbon pricing. Furthermore, forthe packaging industry and the explorative study the following keywords have been utilized:plastic waste, plastic litter, microplastics, biodegradable plastics, paper packaging, fibre-basedpackaging, marine debris and ocean pollution. Lastly, combinations of keywords both fromthe literature review and the explorative study has been made together with a limitation toenvironmental sciences and engineering in order to pinpoint the intended research area andnarrow down the number of sources collected to a feasible number. Since the subject of plasticpollution is highly debated, dynamic and rapidly changing, it has been decided not to collectdata more than ten years of age in order to keep the relevance and data up to date. Theproblems associated to the packaging industry on the other hand have been present over alarger time period, hence literature that has conducted qualitative studies older that ten yearsare reviewed, but not necessarily included in the thesis.

It should be stated that this area of research is relatively new and difficult to quantify. Mostof the available material comes from pioneer researchers or organizations that have an interestin the development of this field of science. Since it is an exploratory phase to find the costsof externalities caused by the packaging industry, case studies are the appropriate tool forthis phase of the investigation. The strengths displayed by a case study is that it has anability to deal with a variety of evidence - documents, artifacts, interviews and observations -cannot be fully used in this report due to lack of information and direct observations not beingmade (Yin, 2009). Another complicating dimension is that exponential leakage of plasticsis causing more and more problems, putting pressure on the research material to keep upwith the continuous changes and development within the field. Therefore, reports from publicorganizations will be included, since these are the ones that have made extensive efforts in orderto quantify certain externalities. These elements have been difficult to attempt to quantify froman academic standpoint, due to financial power, time perspective and effort for initial studies tobe developed, and the degree of uncertainty in reliability and validity. The academic literaturewill help to confirm certain elements found and highlighted by organizational reports and keepinformation less subjective and biased, however the macro-level quantifications of i.e. leakageand waste are mostly estimates that are close to impossible to determine exactly. This is dueto the dynamic nature and size of the research area.

3.1.3 Qualitative Methods - Interviews

Interviews have been conducted with experts from academia, that have applicable knowledgefrom a scientific perspective, and industry experts. The intention with conducting the inter-views have been to gain insights on where problems lie in data collection and analysis regardingthe packaging industry’s externalities. It has also helped to refine the problem formulation sincecritical aspects have been assessed during the interviews. The meetings with the supervisorsand the conducted interviews have mainly been unstructured, meaning that there is an over-arching topic and just a few questions have been prepared beforehand. This has been thechosen interview methodology since it has been desired to gain a deeper understanding on the

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views on the packaging industry’s externalities without locking the interviewees in to a specificmindset but also to keep an unbiased point of view (Blomkvist and Hallin, 2015). Even thoughit is suggested to record the interviews, in order to afterwards analyze answers given since therange of topics and questions are flowing during unstructured interviews, it has not been thecase for this study (Collis and Hussey, 2003).

Apart from the information retrieved during the tutorial meetings, listed in Appendix B, threeinterviews have been conducted.

Two contacts have been through e-mail communication where the thesis has been presentedfollowed by questions related to the specific area of investigation that the person has conducted.Furthermore, questions of certain numbers related to e.g. plastic consumption, leakage havebeen posed in order to confirm what has been read. It has been a mean of validation for theinput of data for the quantitative model used in order to calculate the results. Lastly, requestsof recommended reports, further readings and other contacts has been made.

One telephone interview has also been conducted with one of the authors of the LCA-studiesconducted by IVL. The purpose was to partially to confirm and pose questions regardingexternalities and environmental impacts of the packaging industry as well as to get the rawinput data for the studies conducted. Unfortunately, the software used for the calculationsrequired personal log-in information combined with classified material, which means that themethodology of calculations has not been confirmed. However, the reports reviewed for theLCA have been approved in accordance with IVL’s audited and approved management system,which is seen as a reliable and independent organization.

3.1.4 Data Analysis

When data has been gathered and analyzed a proposed model of the quantification of negativeexternalities will be made. The analysis is not determinant to an exact cost, since numerousassumptions and delimitations are made. However, the assumptions are double-checked andtriangulated between first and second sources in order to keep the estimations rational withina certain margin (Karakaya, 2016). The general outline has been to gain an understanding of aphenomena by reading up on available literature and then verifying these with other reports butalso by interviewing experts, which is a method of evaluating the validity (Collis and Hussey,2003). Furthermore, different total cost estimations and industry related externalities will beput into scenario categories and then be calculated and linked to each packaging material type.This will allow varying methodologies from different reports to form an entity of as to what theenvironmental costs might be. The different scenarios for the different externality groups listedin the results section will then be assessed in low and high cost scenarios based on the varyingdata estimations collected. An average cost based on the low and high cost scenarios will alsobe put up, having a certain deviation and margin of error, which is inevitable. As proposedby Blomkvist and Hallin (2015), inspiration from earlier studies methodology rationales canbe made. In this study it has been done regarding, for example, the evaluation of the beachcleaning costs of externalities based on items collected, weight collected and salaries for thevolunteers. Lastly, in order to retain credibility for the calculations, the notion of MECE(Mutually Exclusive, Collectively Exhaustive) will be used. The approach has its standpointin not accounting for the same factors twice in separate calculations, which could lead to ahigher estimated value than the actual reality (Rasiel, 1999).

The aim has been to keep a quantitative approach, since it is objective in its nature and con-centrate at measuring phenomena (Collis and Hussey, 2003). However, when having finalizedthe pre-study, it was found that there was a lack of quantitative data available. Therefore,the analysis of the externalities are partially quantitative and partially qualitative. This iswill be a constraint in the quantitative results, but as Collis and Hussey (2003) explains, itis important to recognize that one particular project can be described in a number of ways,relying on the purpose, process and logic of the outcome. The externalities that are quantified

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have been assessed partially from reports that have made estimations based on case studies orsurveys, but also from adding and combining variables found in other reports. This leads todifferent scenarios being presented. The externalities that have been left out from the quanti-tative assessment are evaluated qualitatively, either because of lack of research (e.g. effects ofadditives in packaging materials on human health) or lack of information or data on the coststhat can be directly related to the packaging industry as such.

Finally, the environmental costs that are calculated will be presented in terms of how large theannual costs are for respective case country in terms of expenditure, welfare, and revenue lossescaused by marine debris. Furthermore an add-on of the environmental cost on the retail costper bag and packaging material will be made. In some quantifications it has not been possibleto find exact data for the two case countries, the methodology has then been to extract andconvert numbers and data from similiar areas. For deeper information, see Appendix C.

3.2 Reliability and Validity

In order to evaluate the scientific quality of the report, the validity and reliability have tobe assessed. The validity of the thesis measures to what extent the research material andperformance corresponds to the intended research area. Reliability refers to the precisionand replicability of the study, meaning that given the same means to reach the objective,it is plausible to assume that the same outcome would be achieved (Blomkvist and Hallin,2015).

The reliability of the quantitative study in this report is considered to be relatively low. Giventhe macro-level perspective and the extent that data relies on organizational reports, questionscould arise as to how impartial the outcome will be. In order to minimize these errors, numerousstudies’ estimations of data regarding externalities have been included, as well as low and highcost scenarios in order to keep the report as unbiased as possible. As explained by Blomkvistand Hallin (2015), the quantitative study provides a good overview of a phenomenon, which isthe intention in this report. On the other hand, the authors also point out that quantitativestudies can reduce the complexity of what is being studied and by omitting certain factors itcan certainly affect the outcome of the results and what is being studied. But as stated before,the system boundaries are necessary to provide an overview, and will be supported by high andlow cost scenarios. The quantitative study also works well as a second phase of an inductiveexplorative study to serve the purpose of this study (Blomkvist and Hallin, 2015). However,it cannot be assured that all data and reports have been covered, and assessments of earlierresearchers quantifying methodologies have not been done thoroughly, but efforts have beenmade in validating second sources by double-checking data with independent sources to verifyif the estimates are recurring and objective. Numbers used for the calculation models havebeen triangulated with a minimum of three literature sources (to the best extent possible) incombination with what industry experts have encountered and read, in order to strengthen thereliability of input data. The notion of multiple sources of evidence is one of three principlesto follow when collecting data that will enhance the validity (Yin, 2009).

Moreover, environmental initiatives on regional levels might change the input data for variousareas in the study and the changes of litter from the packaging industry in the nature is fastmoving, dynamic and rather unpredictable (van Sebille, 2017). However, this does not meanthat the validity is weakened since the delimitations are necessary to make in order to reach afeasible solution.

The literature review of concepts and theories is both valid and reliable, since academic elec-tronic libraries and databases are exclusively utilized for this part of the thesis. For the reli-ability of the quantitative study it is difficult to attain a high level since the calculations andestimates are scarce and the reports that have attempted to quantify environmental impactsare using different approaches and assumptions, which will make the input of data somewhatmixed. However, in order to strengthen the reliability, the principle of maintaining a chain

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of evidence throughout the data collection process and when conducting case studies on U.K.and Indonesia will be followed. By listing a step-by-step calculation-model in Appendix C, areader may trace the evidentiary process backwards, thus increasing the reliability (Yin, 2009).Furthermore, the available data often tend to bulk materials into one category, making it diffi-cult to extract product categories like packaging materials. This difficulty has been confirmedthrough interviews conducted both in the pre-study and the quantitative study, and it is hasbeen strongly recommended to make initial rational assumptions that later on can be verifiedwith available data in order to better grasp and wholly understand the relevance of the results(Haag, 2017; Stripple, 2017).

3.3 Generalizability

The expression generalizability determines how well results and findings in a study can beextended to natural settings or a greater population. In quantitative studies the generalizabilitydepends on how the sampling has been done and what methodologies that has been used inorder to assess how well one can generalize over the results. The size and representativenessof a heterogeneous sample will determine if a quantitative study can be generalized into widerterms (Blomkvist and Hallin, 2015). In this study generalizability is hard to achieve, meaningthat the results from the quantitative study will have a low estimate scenario that can beverified by multiple sources and therefore be accurate in its generalizability. The high costscenario will provide insights of how large the environmental costs might be, but will requirefurther research to validate.

Since the quantification of environmental impact of plastics have not been fully covered inprevious research, generalizability will be hard to reach given the scale and time of the project.However, when assessing and conducting the quantitative part of the study the aim is tostrengthen the validity by triangulating the information collected. Triangulation is the ratio-nale for using multiple sources of evidence. This means that reports handed from the casecompany in combination with previous research will be compared and analyzed with what issaid in interviews and put into perspective before interpreting and drawing conclusions (Yin,2009).

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4 Literature Review

In this chapter, theoretical concepts that are necessary to gain better insights of sustainabilityissues are presented. These include the concept of circular economy, externalities, life cycleassessment (LCA) and carbon pricing.

4.1 The Circular Economy

Popularized in China in the 1990s, the circular economy model and framework developed asa response to the rapid use of exhaustible natural resources without regards to recyclable orre-use at the time. It has since been widely adopted by governments and organizations alike(Murray et al. 2015; Winans, 2017). The circular economy (CE) is mentioned as one of themost effective instruments for transitioning society towards a more resource-efficient one andto integrate economic activity and environmental well being (Tukker, 2013).

The theoretical concept of a circular economy is not yet fully stated and determined, but thegeneral idea is to promote greater resource productivity aiming to reduce waste. As describedby Esposito et al. (2017):

”To put it simply, the circular economy’s goal is to preserve our current way of life by makingit technically viable for the longer term by producing within a closed system, or loop, wherefirms reuse by a process of disassembling, recouping and recovering, reinforcing, and, finally,repurposing materials already in use. On a fundamental basis, the circular economy recognizesand addresses the problem of low utilization.”

Figure 3: Linear vs Circular Economy

There are two types of material flows suggested in a circular economy: 1) Biological nutrients,designed to reenter the biosphere safely and 2) Technical nutrients that are restorative andregenerative by design (Murray et al., 2015). For companies striving towards circular businessoperations, this means identifying and creating more value for the products already paid for, bynot only viewing the first iteration of a value chain but rather the entire value chain, includingsystem boundaries with additional iterations in mind (Esposito et al., 2017).

In industrial ecology the circular economy also provide benefits obtained by minimizing the useof virgin feedstocks for economic activity and accordingly, minimizing the use of the environ-ment as a sink for residual waste (Andersen, 2007). By using a predictive scenario, researchers

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have estimated that the CE could mean cost savings on materials of $ 1 trillion by 2025 forthe United States alone (Ellen MacArthur, 2015).

4.1.1 The Circular Economy in Business

For businesses the circular economy provides a very interesting and new approach to operationaldecisions. Arguably the circular economy concept have the possibility of becoming a necessityfor companies wanting to stay competitive. As argued by Porter and Van der Linde in “ Greenand Competitive: Ending the Stalemate” (1995) adopting a CE mindset in a business canresult in significant cost savings as well as promote innovation in organizations. As exemplifiedby Porter and Van der Linde (1995), companies in a non-closed loop are responsible for thecostly and non value-adding task of handling storage and disposal of discharge. Not onlydoes this mean an inefficient organization as resources are not fully utilized but companiesmust also pay an additional cost to handle the waste. Focusing on greater resource utilizationhowever, decreases variable costs as well as promotes innovative methods to increase bothresource efficiency and to reduce waste (Porter and Van der Linde, 1995).

Resource productivity has become an even more important in the global competitive climate.Today, the nations and companies that are most competitive are not those with access to thelowest-cost inputs but those that employ the most advanced technology and methods in usingtheir inputs. However, if environmental initiatives that focus on resource conservation andinnovation are so profitable, why are not they being embraced more enthusiastically by allbusinesses. They point to the limits of time and attention as well as the inability of managersto fully grasp the opportunities with becoming more circular. In many instances, companies donot even track their environmental spending, but rather judges them as standalone investments.For this, they argue that government interventions are necessary to clearly communicate tocompanies the costs involved. This to help companies make the right decisions to become moregreen, innovative and efficient in terms of resources (Porter and Van der Linde 1995).

4.2 Externalities

The definition of an externality, or market failure, is the notion of an additional cost or benefitof a transaction upon a third party not directly involved in the transaction. The market failurecan either be classified as a positive or a negative externality, depending on if it provides anadditional benefit or a drawback to the third party. When the additional cost is not takeninto account, the lower price result in an over-consumption at the marginal cost rather than atthe levels of marginal societal cost, where the cost of the marginal external effect is included(Ahlersten, 2006).

Negative environmental impact is such an externality that needs to be included in the coststo avoid an excess consumption and a negative welfare loss for society as a whole. EIA (1995)narrows down to seven approaches to do so; qualitative treatment, weighting and ranking, per-centage adders, cost of control, damage function, monetization by emission, and multiattributetrade-off analysis.

Internalizing costs (i.e. accounting for them) is according to Prud’homme (2001), necessaryto make economic agents aware of the costs they inflict upon society, prompting them toalter their behavior towards socially optimal production and consumption. In general, thereis currently no consensus about how to assign the relative weight for each impact categoryor damage category in monetary terms within the scientific community. Undoubtedly, thereis uncertainty associated with the factors used to weight or monetize the impact in differentimpact/damage categories due to subjective preference for value (Inaba, 2013).

Internalization of external costs can be achieved by a variety of instruments, among othersecological fees, bonus–malus systems, tolls, and above all ecological or environmental tax re-

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forms (ETR), as listed by Soliwoda and Paw lowska-Tyszko (2015). These can be summarizedinto two major approaches to impose the costs caused by negative externalities. The firstapproach is introducing a corrective tax or cost to adjust the marginal private cost of a goodor service to internalize the externality (Hyman, 2010). The second one is to apply reducedVAT (value added tax) rates on more environmentally friendly competitive alternatives, givingthem a price advantage over conventional products (Albrecht, 2006). Because of the limitedreports and their various research methods, both of these approaches will be used and bothare viewed as valid.

4.3 Life Cycle Assessment

To monetize emissions, the Life Cycle Assessment (LCA) is recognized as a standard andstructured method for evaluating the environmental impact throughout the entire lifecycle of aprocess or product. LCA is particularly helpful as it allows clustering of activities into differentsteps as well as grouping impact categories, which facilitates the monetization of the environ-mental impact. After the different steps of the value chain have been identified the impactscould then either be weighted or normalized. Normalization in this regard refers to the abilityto show the significance of the calculated impact category on the overall environmental impact,whereas weighing is to aggregate the midpoints into a single endpoint indicator (Nguyen et al2016). To monetize and to understand the societal cost of these emissions it is necessary todetermine a cost for CO2-pollution.

4.4 Carbon Pricing Models

There have been numerous studies aiming to quantify and put a price on the environmentalimpact of CO2. The main difficulty has so far been to set the system boundaries as well asto calculate the effects on the environment (World Bank, 2016). For this study we attempt tofind the analysis on the study performed by Stipple et al. (2016) by including all parts of theLCA, including end-of-life. Today there is currently no all-covering international system tocompensate for the pollution of CO2 although there exists several estimates of what the costof CO2 should or could be.

There are two approaches to set up a system to decrease or limit the emissions of GHG andother hazardous emissions. The most common system that is used in the European Union,Liechtenstein, and Norway is the Emission Trading System (ETS) or “cap and trade”. Inan ETS there is a fixed amount of carbon emission rights, i.e. the right to emit a certainamount of GHG, which are bought and sold depending on demand. Which entities that arerequired to possess a carbon emission right varies between each system. For example in thecurrent European system all entities whose activities or products cause emissions are requiredto possess emission rights. The other alternative is to apply a tax to all carbon emissions(World Bank, 2016).

Both these systems provide several challenges when attempting to use them in practice. Forexample, the ETS system results in fluctuating prices that makes the basis of an averagequestionable (Ellerman Joskow, 2008). For the carbon tax, it is arguably a highly politicalquestion where partisanship and party politics play a role and is therefore also not deemedto give a desired representation on the price of carbon emission. A carbon tax is thereforedependent on various variables not attached to the environmental cost or impact of CO2.Because of this, a normative approach to the price of CO2 is necessary and preferable.

In the Paris climate conference in 2015, governments accounting for 96 percent of all GHGemissions, representing 98 % of the world’s population were present and committed to keep theglobal temperature increase below 2 degree Celsius from what they were before the industrial

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revolution in the 19th century to the year of 2100. To reach this goal the World Bank (2016)estimates that the price of CO2 pollution needs to be between $ 80 - 120/tCO2e by 2030.

Additional pricing models used in the calculations are the taken from the “Temperature impactson economic growth warrant stringent mitigation policy” by Moore and Diaz (2015) as well asthe United States Environmental Protection Agency (EPA) social cost estimations. Their costestimations vary from $ 37- 220/tCO2e. The reason for the large discrepancy is that the EPAstudy fully disregards the fact that increasing environmental pollution will not inhibit or affecteconomic growth and therefore has a rather low price of $ 37 compared to the other models.The CO2 price estimated by EPA is therefore regarded as only partially including the costsand will not be included as a basis for calculations.

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5 Mapping the Externalities

In this chapter the externalities linked to the packaging industry will be presented, more specifi-cally the ones related to the two materials investigated, as well as the two case countries UnitedKingdom and Indonesia.

5.1 Case Countries

In order to understand the economic effects of both plastic and paper packaging productshave on individual countries, two case countries will be studied further. The chosen countriesare United Kingdom and Indonesia, since both are island nations heavily affected by theincreasing ocean pollution, their differing geographical positions, their differing recycling habitsand different packaging consumption. Furthermore, they have also been chosen due to dataavailability and to see if there are different magnitudes to the problems occurring in respectivecountry due to their different prerequisites.

United Kingdom

As an island nation the United Kingdom is heavily exposed to the issues of ocean litteringand was one of the first countries to report of microplastic findings in their beach sediments(Thompson et al., 2004). Since then, the issue has gained much attention, producing extensiveresearch into the effects of leakage and alarming reports that it is currently very difficult tofind animals in the UK which has not ingested plastic. This issue of littering in the UK is alsoespecially important as the leakage from the U.K. is transported by ocean currents into theArctic where it has the potential to do extreme harm to the fragile polar environment (Levey,2016).

Indonesia

As an island nation too, Indonesia is also heavily exposed to the issue of plastic pollution,but unlike the U.K., Indonesia is currently one of the biggest contributors to ocean pollution,representing one of the five countries responsible for half of all land based leakage of plas-tics. The issue of marine pollution poses a significant threat to both vital growth industriessuch as fishing and tourism as well as the unique indigenous biodiversity in Indonesia (OceanConservancy, 2015).

5.2 Identifying the Externalities Using United Nations’ SustainableDevelopment Goals

Aside from the direct pollution from the value chain, the packaging industry is responsible forsignificant environmental impact because of what happens with the packaging material afterconsumption. Unfortunately it is not possible to map or identify all of these effects during thisstudy. The negative externalities examined have been limited to those that can be derived fromthe United Nations’ Sustainable Development Goals (UN, 2015) as presented below

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Figure 4: United Nations’ sustainability goals(UN, 2015)

The SDGs that have been identified and related to the packaging industry are the follow-ing:

• 3. Good Health and Well-being

• 8. Decent Work and Economic Growth

• 12. Responsible Consumption and Production

• 13. Climate Action

• 14. Life Below Water

• 15. Life On Land

From these six categories, the externalities listed in section 5.3 have been identified as areasaffected by the packaging industry. The details concerning each area is described in chapter6.

5.3 Measuring Areas

There have been numerous studies mapping the externalities of the packaging industry, mainlyrelating to the after-use aspects of packaging materials. What has been commonly noted isthat littering affects a wide range of industry sectors, wildlife, ecosystems and possibly humanhealth. Mouat et al. (2010) highlight the following areas as being affected: agriculture, aqua-culture, fisheries, harbors, industrial seawater users, marinas, municipalities, power stations,rescue services, voluntary organizations and water authorities. McIlgorm et al. (2008) includesthe following areas in their study of the costs of marine debris: the fishing, transportation,tourism, and insurance industries, and damage to leisure crafts. Lastly, Avio et al. (2016) liststhe negative repercussions from plastics in the marine environment as the following: aestheticissues, beach cleaning, and adverse biological and ecological effects. However, in these three

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studies, it is only marine litter that is the area of investigation. This reason for this, as de-scribed in the reports, is that the oceans functions as a collection for all land based litter. Forthis report, the chosen areas will be put forward in relation to the relevance and connection tothe packaging industry as a whole, thus covering a larger spectrum.

The externalities that are to be mapped and quantified are therefore, as seen in Figure 5below, covering slightly different areas compared to McIlgorm et al., 2008; Mouat et al., 2010& Avio et al., 2016. It shall also be noted that each area might include additional sub-relatedpoints since the concrete interrelation is complex due to system interconnectivities and onesource/type of litter cannot solely account for the problems and costs caused by littering as awhole.

Figure 5: Value chain and negative externalities caused by paper and plastic packaging products

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6 Assessing the Externalities

In this section, the externalities identified will be presented and evaluated qualitatively.

6.1 The Externalities from Paper and Plastic Bags

When paper and plastic packaging have been used and disposed of, the materials start todecompose and break down into smaller pieces. The key difference between the two materialsis how long this process is, and what the residues are. Plastic packaging can have a lifespanup to 500 years, depending on type of plastic, before it is fully decomposed. During that time,the plastic packaging product will break down into smaller pieces that cause problems for itssurrounding environment (McIlgorm et al., 2008; Science Learning Hub, 2008). The negativeexternalities that are linked to plastics are concentrated into three main areas:

• Degradation of natural systems, the ocean in particular, as a result of leakage.

• Greenhouse gas emissions stemming from production and after-use combustion.

• Health and environmental impacts from substances

(World Economic Forum et al., 2016).

Paper materials on the other hand have a far shorter lifespan, decomposing much quicker thanplastic bags. The paper bags examined in this study, made from virgin kraft paper or recycledfiber (85%) are fully dissolved in roughly 6 months (Dahlgren and Stripple, 2016; Haag, 2017).During this time, it will have dissolved into microscopic pieces, ending up either as sediment orbeing ingested by animals. There are no scientific studies or indications that paper materialshave a significant negative impact on ecosystems or wildlife. The impact from paper bagsare reduced even further as pulp and paper companies mostly use renewable feedstock (Haag,2017).

6.2 CO2 Impact

The two studies that will be used for determining the CO2 impact from the materials’ valuechains are the IVL studies “Life Cycle Assessment - Comparative study of virgin fibre basedpackaging products with competing plastic materials” (2015) and “A comparative LCA studyof various concepts for shopping bags and cement sacks” (2016) both commissioned by thepulp and paper company BillerudKorsnas. In Dahlgren et al. (2016) paper products arecompared with competitive plastic alternatives and measures the environmental impact fromfour perspectives;

1. Global Warming potential

2. Eutrophication potential

3. Acidification potential

4. Photochemical ozone creation potential

In order to make a thorough comparison between plastic and fibre-based materials, it hasto be based on the same performance indicators and quantifying measures. These are calledfunctional units, which means that a standardized set of factors set the foundation for theevaluation and makes the different value chains and product systems comparable (Dahlgrenand Stripple, 2016). The impact categories include various substances limited to: CO, CO2,SO2, CH4, NOx. For our purposes, the economic comparison of plastic and paper will be donebased on their Global Warming Potential (GWP), since it measures the impact in terms ofCO2-equivalents that can be quantified with the help of the carbon pricing models presented

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in section 4.4. The pollution of Global Warming Potential measured in CO2 equivalents refersto the emissions released from human activities that contributes to the augmentation of theglobal temperature.

In the LCA analysis carried out by (Dahlgren and Stripple, 2016), comparing various conceptsfor shopping bags with competing plastic materials, the comparison between shopping bagswill primarily be used. For the United Kingdom, the conversion place for all bags was selectedto be Frankfurt with the final use in England. The study examined the value chain from fivedistinct approaches: material production, material transport, packaging production, packagingtransport, use and end-of-life (Dahlgren and Stripple, 2016).

• Recycled LDPE (50%)

The recycled LDPE bag (50%) was modeled as 50% post-consumer and 50% consumerplastic. In the study IVL used data from “Miljosack” for the pre-consumer and post-consumer, which was approximated with virgin material. The study also included asensitivity analysis with 100% post-consumer, meaning the entire bag was manufacturedfrom recycled plastic (Dahlgren and Stripple, 2016).

• Renewable LDPE

For the renewable LDPE bag the polyethylene was assumed to be produced from sugarcanes. The study assumed the material origin (sugar cane cultivation) to take placein Brazil, currently the largest sugarcane ethanol producer in the world (Dahlgren andStripple, 2016).

• BillerudKorsnas shopping bag

The BillerudKorsnas product used for comparison is a shopping bag made from virginKraft produced at Skarblacka Mill as well as a recycled paper alternative.

• Recycled Paper Bag (85%)

The recycled paper bag is assumed to be manufactured in Germany with up to 85%recycled fiber.

Figure 6: Grams CO2-equivalents per bag type throughout the value chain(Dahlgren and Stripple, 2016).

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In Figure 22, the results from the are displayed. It was found that BillerudKorsnas’ baghas a remarkably lower environmental impact compared to other bags. In the base case, ithas a 59 % lower global warming potential than the recycled LDPE bag, followed by therecycled paper bag which has the second lowest impact. Furthermore, it was found that thechoice of material as well as the material production had the largest impact out of the overallenvironmental impact for the different products. The clear advantage BillerudKorsnas haveover other compared products, in environmental terms, is the almost completely renewableproduction at Skarblacka, which means that the environmental impact becomes substantiallylower for the BillerudKorsnas bag (Dahlgren and Stripple, 2016).

In the LCA analysis comparing virgin fibre-based packaging products with competing plasticmaterials, it is found that they have a significantly higher energy content than the paperalternatives, which means that it is far more effective to produce heat or electricity fromplastic than from paper. However, as it is a fossil based material, the energy released fromincineration emits a significant amount of CO2, which makes it a less environmentally suitableoption. It is also worth noting that plastic is a much lighter material that can be packedand transported more effectively than paper. However, the transportation represents a merefraction of the overall global warming potential.

Because the (Dahlgren and Stripple, 2016) is based on the United Kingdom the results alsoneeded to be adjusted to also be representative for Indonesia. This is done with the help ofDahlgren and Stripple (2015) which includes an analysis of cement sacks sold in Indonesia. Theconverting for the Indonesia market was assumed to take place in Indonesia as the convertingoften takes place as close to the final consumers as possible (Haag, 2017). The assumptionsare further specified in detail in Appendix C.

6.3 Marine Debris

Marine debris is defined as the following by McIlgorm et al. (2008):

“Marine litter, marine garbage and ocean debris, is defined as any manufactured or processedsolid waste material that enters the marine environment from any source whether on land orat sea”

McIlgorm et al. (2008) states that the following materials are the most commonly found marinedebris:

• Plastics (fragments, sheets, bags, containers)

• Polystyrene (cups, packaging, buoys)

• Rubber (gloves, boots, tyres)

• Wood (construction timbers, pallets)

• Metals (beverage cans, oil drums, aerosol containers)

• Sanitary or sewage-related items (condoms, tampons)

• Paper and cardboard

• Cloth (clothing, furnishings, shoes)

• Glass (bottles, light bulbs)

• Pottery/ceramic

• Munitions (phosphorous flares)

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The sources of marine litter stems from numerous activities, as illustrated in Figure 7. Thefollowing sources of marine litter have been identified by Surfers Against Sewage (2014):

1. Sewage related debris

2. Litter dropped in towns and cities

3. Poorly managed bins and landfill sites near the coast

4. Lost fishing equipment

5. Shipping materials lost overboard

6. Poorly managed industries

7. Litter dropped at the beach

Figure 7: Source of marine litter(Surfers Against Sewage, 2014).

Plastic is, by far, the most common type of marine litter, estimated to comprise 60-80 % ofthe total waste encountered in the ocean (Allsopp et al., 2006; McIlgorm et al., 2008; UNEP,2014). Roughly 10% of the annual production of plastic ends up in oceans (Avio et al., 2016),resulting in an annual leakage of 9.1 million tons estimated by Jambeck et al. (2015) althoughthis is debated. Others believe that the leakage is much higher, estimated to 12.2 million tonsby Eunomia (2016) or 20 million tons estimated by Gold et al. (2013). 80 % of the plasticwaste leaking into oceans derives from land-based sources, such as from landfills or littering.The remaining 20 %, stems from marine-based activities such as shipping, cruise lines andfishing (Allsopp et al., 2006; UNEP, 2014). Paper materials on the other hand is not listednor as to what extent and percentage of items found in the ocean that derives from paperproduction. It has been assumed in this thesis that the paper bags decompose or break downinto smaller pieces relatively quickly (maximum of 6 months), where paper bags decomposefaster than cardboard and thicker paper materials for example (Haag, 2017).

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Far from all plastics washes up on shore and there is no determinant way to state where theplastics actually end up. According to Eunomia (2016) roughly 1% of all plastic that endsup in the ocean floats on the surface whereas 94 % sinks into the ocean and 5 % ends up onbeaches, as displayed in Figure 8. UNEP (2014) on the other hand, states that 70 % of thedebris sinks to the seabed, 15 % floats and the last 15 % is located in the water column. Lastly,Barnes et al. (2009) & Eriksen et al. (2014) states that 70 % of the marine litter is located onthe seabed, 15 % in the water column and that 15 % ends up on beaches. For our purposesall different scenarios have been used in the calculations, for more information, see AppendixC.

Figure 8: Where Plastics End up(Eunomia, 2016).

Whether plastic sinks or not affects its decomposition rate, as lower temperatures and lowerdegree of sunlight further decreases decomposing rates (Eunomia, 2016). Generally, physicalabrasion, such as wave action and sand grinding, leads plastic to degrade into smaller em-brittlement and fragmentation eventually becoming microsized plastics i.e. microplastics, notvisible to the naked eye (Avio et al., 2016). These microplastics are now a commonplace inthe oceans, found in both fish and wildlife. The concentration of microplastics vary by region,mostly centered around five accumulation zones, gyres, as illustrated below in Figure 9 (Cozaret al., 2014).

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Figure 9: Concentration of plastics(Cozar et al., 2014).

The highest concentration of plastics is found in the South Pacific, due to the high concentrationof people living in coastal areas as well as the size of the gyre (Cozar et al., 2014).

The costs related to marine litter can be divided into different sub-segments, depending on thecomplexity and uncertainty related to each segment. There are the direct costs that are easierto evaluate in economic terms, e.g. increased costs of cleaning and removing plastic waste.Others are more complex and indirect, such as ecosystem deterioration or reduction in qualityof life. Furthermore, differentiation can be made for costs linked to biodiversity (species andhabitats), damages to ecosystem services, e.g. food provision, water and waste purification,tourism and recreation. Estimations on the existing amount of marine litter is composed ondynamic and complex processes, which in turn makes quantifying the costs on global levelsdifficult to investigate. In this segment the general outline will be measuring and quantifyingof economic costs of expenditure, welfare losses and revenue losses caused by marine debris. Ithas become more apparent that marine waste causes environmental issues as well as economicimpacts, reducing economic benefits derived from marine and coastal activities. Areas suchas human health concerns and ecosystem degradation have not been economically assessedthoroughly, thus presenting difficulties in attempting to quantify the costs (Newman et al.,2015).

6.4 Beach Cleanup

The difficulty when using studies to assess the cost of beach/coastal cleanup is that this doesnot capture the entirety of the problem. For instance, basing calculations on past or currentcleanup efforts does not give the full cost of removing coastal litter today. Another difficulty isthat if one country simply ignores marine debris in coastal areas, this is not recorded as a costdue to plastic pollution. On the other hand, if a tourist resort spends a lot of money keepingbeaches pristine, this does not reflect the cost for the rest of the country. Because of this, thelabor cost per item and unit of weight for cleaning beaches and coastal areas have been basedon the universal cost estimates made by McIlgorm et al. (2008). This has then been quantifiedusing the total marine leakage from each individual country to illustrate what cost they imposeat local level.

However, it is worth noting that not all marine leakage will eventually end up beaches. Exactlywhat happens to materials entering the ocean is not fully understood and there are different

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opinions as to what percentage washes back up on shore. The studies which will be used as abasis for the calculations are UNEP (2014), Eriksen et al. (2014), and Eunomia (2016). Thesethree studies determine the level of marine debris that washes up on shores ranges from 5-15% of total ocean leakage. This cost is not something that would necessarily affect the specificcase country but could affect nearby countries due to the streams and accumulation zonespresented by Cozar et al. (2014). However, in this thesis the debris is considered to be ratherstatic due to the complexity of determining the origin of the debris.

Indonesia

In the study conducted by McIlgorm et al., (2008) an estimation of the total cost of marinedebris in the Asian-Pacific (APEC) region was carried out. The study was based on dataavailable from 2006, thus it is likely that the costs have been elevated since. The studyconcluded that marine debris (where plastics account for up to 80 %) has a damage value ofe1.2 billion/year for the region. This includes damaging to the fishing, shipping and tourismindustries. Furthermore, the cleanup cost in the APEC region has been estimated to be e1200-1400/ton. This value is an average based over a six-year period and has been confirmed bydata from outside the APEC region. It should be noted that less developed regions have lowercleanup associated costs per item or weight of debris collected, due to lower labor cost, varyingtype of debris, geographical debris density and depending on mechanical or manual cleaningmethods.

The McIlgorm et al., (2008) study based their beach cleanup cost on an analysis upon theInternational Coastal Cleanup (ICC) initiative, in which 14 APEC economies cleaned up theshorelines and recorded the result. The 14 APEC economies participating in the ICC consti-tuted of 314,207 people who collected 6,107,258 items, weighing a total of 2,293,326 kilogramsduring a weekend. Excerpts of their findings are listed below:

Figure 10: Most frequent items collected during the International Coastal Cleanup Day in 2007(McIlgorm et al., 2008).

Bags represented 7.25 % of all debris found, and most of these bags are assumed to be plastic,due to the durability of the material. It is likely that paper materials would break down intosmaller pieces, which would make them difficult to identify as bags for volunteers (McIlgorm etal., 2008). These findings are used as a basis for calculating the average cost per item collected

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in combination with the total of 0.5-1.3 million tons of waste reported being leaked into theocean annually from Indonesia (Havas Oegroseno, 2016; Jambeck, 2015).

United Kingdom

For the U.K. there have been an extensive case and survey study carried out by Mouat etal. (2010), which aims to map all separate cost associated with marine litter. All coastalmunicipalities was estimated to spend e 18-19 million annually on coastal cleanup efforts,which equates to an average cost of e 146,000 per municipality. The most part of this costwas accounted for by the labor cost. An average cost of litter removal calculated per km andyear was also estimated by the researchers and was set between e,000-7,300 although with alot of variation (e71-82,000). The cost variation differs a lot as beach cleaning is performed bymunicipalities and/or voluntary organizations, meaning that the labor cost is different.

In cleanup initiatives and efforts, volunteers have fairly low or no pay. However, their work canbe put in terms of opportunity cost, meaning they could have performed other work insteadof cleaning beaches. As mentioned earlier, the cost per worker is therefore set to e47, e94,and e142 per day, as proposed by McIlgorm et al. (2008) and will provide three differentcost scenarios. Furthermore, based on the Great British Beach Clean performed in 2016, thenumber of items collected by the number of workers provides an estimation of what each itemcosts to pick up by a worker. The percentage of plastic bags collected during the beach cleanupinitiative was 7 bags per 100 meter or 1.1 % of the total number of debris collected (MarineConservation Society, 2016) and is assumed to be true for the whole region in the calculations,whilst Lee (2015) estimates that 2 % of all debris on beaches are plastic bags.

According to a survey conducted by Marine Conservation Society (2016), there are on average2,300 items found for every km of coastal line in the U.K., which equates to a total estimateof 41,000,000 pieces of marine litter along the British mainland coast. These estimates onthe percentage of plastic bags and estimated number of waste will form the basis for thecalculations.

6.5 City Cleanup

Since 80 % of the marine debris stems from land-based sources, cities and communities playsa vital roll in minimizing and preventing waste from entering oceans (Allsopp et al., 2006;UNEP, 2014). Most of the responsibility for managing waste falls on local governments, andcommunities themselves experience direct and significant expenses in reducing and preventingmarine debris. Monroe et al. (2013) who studied plastic packaging’s economic effects onCalifornian cities and communities categorized the costs into six separate categories:

• Waterway and Beach cleanup

This category refers the cost of waterway and beach cleanup efforts. The cost is usu-ally higher for coastal cities and communities as the outlet of rivers often causes largelitter concentrations. Inland communities often do not realize their responsibility, whichexplains why the cost of litter for these communities is lower.

• Street Sweeping

Street sweeping is partly made for aesthetic reasons but is also necessary as it removessediment and protect waterways from contamination from litter.

• Stormwater Capture Devices

Of the trash entering and generated in a community, some eventually ends up in thestorm drains. The more trash, the more complex a device the community will need tocapture litter (and costs can vary accordingly, ranging from $75,000 - $300,000).

• Storm Drain Cleaning and Maintenance

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In order to function properly, the storm drains need to be maintained and free from litter.

• Manual Cleanup

Manual cleanup programs are the initiatives to remove litter not covered in the street orcoastal cleaning categories. These could be performed on a regular or responsive basis.

• Public Education

To limit and decrease littering in communities; municipalities and cities spend resourceson public education to prevent the negative effects of littering.

Figure 11: Share of Cleanup Cost(Monroe et al., 2013).

Out of the total cleanup cost, Monroe et al. (2013) reported that 8-25 % of the cleanup cost canbe directly attributed to plastic bags. They also found that the cleanup cost varied significantlybetween cities depending on a wide set of factors. For example, whether or not they city orcommunity is situated close to large bodies of water, the storm drainage systems, propensityto recycle, if a city is concerned with clean public spaces, etc. Monroe et al. (2013) points outthat there were communities in the study where there was no concern over littering and wherethe mentality was that the litter eventually becomes someone-else’s problem. This means that,depending on the community, the cost of plastic packaging could be very high or essentiallynon-existent. However, Monroe et al. (2013) singles out Los Angeles and San Diego as morerepresentative as to what the cost per year is to combat and cleanup litter. Their findings aredescribed below:

• Los Angeles with a population of 3.8 million, spends e 8.5 per capita and a total of e34 million per year.

• San Diego with a population of 1.3 million, spends e 9.6 per capita and a total of e 13.2million per year.

• The average for the six largest cities investigated (including Los Angeles and San Diego)is an annual cost of e 13.2 million and a per capita cost of e 10.7.

Indonesia (Jakarta) & United Kingdom (London)

For the city cleanup cost for Indonesia (Jakarta) and United Kingdom (London), the cleanupcost will be calculated based upon the numbers provided by Monroe et al., (2013), adjustedfor Purchasing Power Parity (PPP) and city size. This will be done for the interval of damages

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caused by plastic bags as well as the different cost per capita levels. For more information,Appendix C is referred.

6.6 Fishing Industry

The fishing industry is affected by marine debris as it can get stuck in nets, entangle and foulpropellers, and/or block intake pipes and valves on vessels. This means that the litter incurcosts in forms of having to replace destroyed fishing gear and cleaning of litter in nets whichleads to lost fishing time and a reduction in potential harvestable catch (Mouat et al., 2010;Newman et al., 2015). In this report the focus will lie on the direct costs affecting the fishingvessels, which includes repairing of gears and losses in earnings due to replacing and cleaningnets (McIlgorm, 2011). Indirect costs to the fishing industry such as ecosystem deterioration,wildlife and human health concerns will not be quantified within this segment, but will beexplored qualitatively in later sections.

United Kingdom

It has been estimated that each fishing vessel in Scotland lost between e 17,000-19,000 peryear due to marine litter, where two-thirds was incurred by time spent cleaning waste fromthe nets. Aggregated, the total cost was e 11.7-13 million per year, representing 5 % of theScottish fleet’s total revenue (Mouat et al., 2010).

To scale the cost up for the entire U.K., the Marine Management Organisation’s 2015 officialstatistics are utilized in combination with the cost estimations made by Mouat et al., 2010. InScotland the total number of fishing vessels was 2,075 with 607 of them representing vesselslarger than 10 meters. With the starting point of e 11.7-13 million per year, an assumptionthat all costs occurs in the large vessels and with the average cost per vessel being e 18,000,the total leads to e 10.9 million/year, which is roughly the same as the total estimate made forScotland in total by Mouat et al. (2010). The same approach is used to calculate the cost forthe U.K. as a whole; the number of fishing vessels larger than 10 meters was 1,374 in 2012 andwith the average cost of e 18,000/vessel, the total revenue loss due to cleaning nets, repairinggears and rescue boats for entangled propellers is e 24.7m/year. Lastly, an estimation of Lee(2015) is utilized where it is stated that marine debris and microplastics incur damages tofisheries and aquaculture of e 31.5-41.8 million every year, where plastics represent 60-80 % ofthese costs and 40 % out of all plastics are bags, which means that roughly e 18.9-33.4 millionis the annual cost caused by plastic bags to the British fishing industry per year.

Indonesia

For the case of Indonesia, the same issues affecting British fishing fleet is predicted to alsoaffect the Indonesian fishing fleet in a similar manner. Unfortunately there have been nostudies outlining the costs incurred on the Indonesian fishing industry, therefore a comparisonbetween the sizes of the annual fishing industry’s catch and wages will be the base of conversionfrom U.K. to Indonesia. Two cost scenarios are based on the estimations made by Mouat et al.(2010) whilst the other two are based on Lee’s (2015) calculations. The European Maritimeand Fisheries Fund (EMFF, 2014) states that the average annual wage for a British fisherman ise 23,700 whilst the wage in Indonesia is e 5,500 (Salary Explorer, 2017). The fishing industrycatch for respective country is 414,725 metric tons in U.K., based on an average over the years2011-2015 (Marine Management Organisation, 2015), and 6,386,000 metric tons for Indonesiain 2012 (FAO, 2012).

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6.7 Agriculture

The problems that marine litter may cause to agricultural properties in coastal communitiesare: damage to property and equipment, harm to livestock and the cost of removing the litter.In a survey conducted by Mouat et al. (2010) crofters were asked what type of litter that wasfound on their property, 95 % reported that plastics was found, followed by ropes, nets andstrapping bands which were reported to be present in 65-75 % of the cases. The harm incurredon farms stems to a large extent from marine litter that blows onto land and eventually endsup on the farms (Mouat et al., 2010).

Livestock and wildlife were affected by litter by either being entangled in nets or mistakingwaste as food, thus ingesting harmful materials. In some cases this has lead to increasingveterinarian bills for farms with livestock. The cost of damage to property comprises of clearingand repairing fences, removing litter from drainage ditches and in some cases repairing machinesthat were damaged. Furthermore, time spent performing these tasks were on average about80 hours/year per farmer, based on 11 responses. The study was conducted on the ShetlandIslands in Scotland and the cost of marine litter on the agriculture industry here was estimatedto be e 252,000 annually. 85 % of the costs are due to removing litter from land, fences andditches and 11 % was costs of replacing damaged fences (Mouat et al., 2010).

Due to the relatively small selection of the survey, it has been decided not to include harmto the agricultural industry in the quantitative part of the study, since the calculations wouldhave too many uncertainties. However, the problems listed above do affect farmers both inthe U.K. and Indonesia and should be of concern. Particularly for coastal communities wheremarine debris blowing up on land affects them to a larger extent than for inland farmers.

6.8 Tourism

For tourists wanting to visit coastline municipalities, clean beaches are a priority when choosingwhere to visit. Hence marine debris can act as a deterrent for visitors. If a coastal municipalityreceives a reputation for being polluted with marine debris, it will naturally attract fewer vis-itors (Mouat et al., 2010). Furthermore, if marine debris levels remain high in a given touristarea it may discourage new private investments in hotel developments or other tourist attrac-tions since the debris attract less visitors (McIlgorm et al., 2011). However, it is important torecall that tourist organizations do not have direct costs of removing litter, since this usually isthe responsibility of municipalities. Nevertheless, the indirect costs in form of poor reputationcan negatively affect the economic development of such an area (Mouat et al., 2010).

6.9 Wildlife

Plastic litter in the oceans, injures and kills wildlife. Items such as plastic bags, strapping forpackages or abandoned fishing net can cause death to fish and aquatic animals by drowning,suffocation or strangulation (Allsopp et al., 2006). Furthermore, bottle caps, plastic cutlery,cigarette lighters, etc. can be wrongfully perceived as food and harm animals through internaldamage and starvation, since their digestive systems cannot break down the pieces (UNEP,2014). Pieces that cannot be digested will obstruct the animals from escaping from predators,decrease body condition and impairment of locomotion, including migration (Avio et al., 2016).Ingestion of plastics are particularly dangerous since toxicants in the material can reduce thereproduction capability in certain species and cause malnutrition (Allsopp et al., 2006; Flores,2008).

Marine mammals, seabirds, turtles, and fishes are the most impacted organisms by microdebris.In the North Sea, 96 % of the fulmars have been reported to contain at least one piece ofplastic in the stomach. Since plastic leakage is expected to increase, the number of influenced

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species will grow with it. Ingesting waste along with food is the most likely interaction withmicroplastics for many organisms. But for some species, such as shore crabs and filter feedingbivalves, microplastics are also encountered through the gills due to ventilation mechanisms(Avio et al., 2016).

6.10 Health Concerns

Numerous studies have investigated plastic debris’ affect on marine and terrestrial habitats.Not only being an aesthetic eyesore but it has also been concluded that plastic waste containshydrophobic contaminants, meaning they are not dissolved in humid environments. Theseplastic pieces will then be mistaken as food by animals (e.g. birds, fish, marine mammals) someof which are at the lower ranks of the food chain. Eventually this either means that animalsdie due to starvation, since the plastic materials cannot be digested, or that the contaminantsbioaccumulates throughout the food chain and could be ingested by human beings (Teuten etal., 2007). The microplastics might then release plasticizers and adsorbed pollutants after theingestion by a wide variety of marine organisms. The biological toxins and chemicals is yetan area to be explored as to what ecological effects for bioaccumulation and biomagnificationmight have and what societal costs they might incur (Teuten et al., 2009).

In Figure 12 below, it is displayed how marine wildlife can ingest plastic waste and how plasticsbioaccumulate along the food chain, eventually ending up in human bodies (Surfers AgainstSewage, 2014).

Figure 12: Plastic ingestion and bioaccumulation along the food chain(Surfers Against Sewage, 2014).

Besides polymers, plastics usually contains a wide range of other substances or additives. Someof the additives raises concerns as to their effects on human health due to long-term exposureor higher concentrations. The chemical elements’ adverse effects includes various forms of

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cancer, mutations in organisms (defections), or endocrine disruptions that mimics hormones inthe body and can cause e.g. cognitive development disorders, diabetes and/or obesity (SurfersAgainst Sewage, 2014; World Economic Forum et al., 2016). The paper products manufacturedby BillerudKorsnas is no way near of imposing the same kinds of threats as plastic products,since being organic and biodegradable materials (Haag, 2017). However, some products mightcontain additives and therefore it has been decided to include a qualitative assessment of someindirect cost incurred by paper bags.

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7 Results - Cost of Externalities

In this section the calculations of the economic impact of the packaging industry is presented.The calculations have been carried out by using academic literature, interviews with industryprofessionals and using benchmark data.

7.1 Cost of CO2 Impact

The cost of GHG pollution illustrates the cost necessary to compensate for the pollutionemitted during the production, transport and up to final consumption. For the CO2e emittedduring the production and transportation the data from the IVL reports is used. Since thereports only presented the CO2 impact per bag, no country total will be presented. Thequantification, or monetization, of the environmental cost has been based upon the normativeCO2 price estimations made by the World Bank as well as Moore & Diaz (2015). In figures13 and 14, the price scenarios of the World Bank is noted by WB1-2 (80/tCO2e - 120/tCO2e)and Moore and Diaz by M&D (220/tCO2e).

7.1.1 Cost of CO2 Impact Indonesia

The results from applying the CO2 pricing models of the World bank and Moore and Diaz(2015) upon plastic and paper bags with final use in Indonesia is outlined below:

Figure 13: Cost of CO2 per bag in Indonesia according different pricing models

As is visible in figure 13 the overall impact from both plastic and paper bags is higher inIndonesia. This is firstly because Indonesia has a higher share of fossil fuels in its energymix. Secondly, the material production is assumed to take place in Europe giving highertransportation costs. However, when looking at the figure 13 and 14 this does not have enough

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impact to put both products on the same level as material production still has the largestimpact. The difference in cost between plastic bags and paper bag ranges from ce 0.2 to ce0.8, depending on which CO2 price is used.

7.1.2 Cost of CO2-impact U.K.

The results from applying the CO2 pricing models of the World bank (2016) and Moore andDiaz (2015) upon plastic and paper bags with final use in the U.K. is outlined below:

Figure 14: Cost of CO2 per bag in the U.K. according to different pricing models

As is portrayed in figure 14 paper bags have on the whole a significantly less damaging impactto the environment and are therefore less costly than plastic bags in the case of U.K. The paperalternative is approximately ce 0.2 - 0.8 cheaper in regard to the aggregated value of each stepof the value chain. The main advantage of the paper products is the material productionprocess where they are responsible for less CO2-equivalents. This is true both for the caseof the BillerudKorsnas bag and the recycled paper bag, which both emit less CO2 in theirproduction stages. In material production the paper products are consequently approximatelyce 0.3 - 0.9 cheaper than the plastic alternative per unit. Also noticeable is that the plasticproducts perform somewhat better than paper bags during transportation. As previouslystated, this is due to the lighter weight as well as the ability to be packed more tightly (WorldEconomic Forum et al., 2016). However, Dahlgren and Stripple (2016) argues that, althoughthese advantages of plastics are favorable, they are negligible in such short distances and failto decidedly impact the overall environmental pollution.

7.2 Impact on Fishing Industry

The cost estimation of the fishing industry has been based on mainly two studies conductedby Lee (2015) and Mouat et al. (2010). Both authors have estimated the annual cost of

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damage incurred by marine debris to the fishing industry. The results presented by themhave been supplemented with data used from Allsopp et al., (2006); McIlgorm et al. (2008);UNEP (2014) regarding plastic bag concentration in the sea and lastly Marine ManagementOrganisation (2015) for statistics regarding the sizes of the fishing industry in United Kingdomand Indonesia. The results from the low, average and high cost scenarios used for respectivecountry are presented below.

7.2.1 Fishing Industry Indonesia

In Indonesia the cost ranges from ce 0.23-0.42 per bag between the lowest and highest costscenario, and an annual national cost between e 22-41 million. The fishing industry represents3 % of the GDP in Indonesia and is therefore highly affected by littering.

Figure 15: Annual cost of damages incurred by plastic bags to the fishing industry in Indonesia

Figure 16: Cost per plastic bag sold in Indonesia to compensate fishing industry damages

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7.2.2 Fishing Industry U.K.

The results indicate that the cost per bag for United Kingdom is in the low cost scenario ce0.86 and the high cost scenario ce 1.33, with an annual national cost between e 8.6 - 13.3million.

Figure 17: Annual cost of damages incurred by plastic bags to the fishing industry in U.K.

Figure 18: Cost per plastic bag sold in U.K. to compensate fishing industry damages

7.3 City Cleanup Cost

The City Cleanup cost for Jakarta and London is used to give and indication of the cost ofplastic and paper bags impose on cities. The estimation are based upon Monroe et al. (2013)cleanup cost investigation of Californian cities and their estimates of how much of that wasdirectly related to plastic bags. To find the cost imposed by paper bags, the sales data for each

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product was compared and used as a basis for the calculations. Paper bags were not singledout by Monroe et al. (2013) but would reasonably contribute to the city cleanup costs.

7.3.1 City Cleanup Jakarta

The total estimated Cleanup costs for Jakarta are presented below:

Figure 19: City cleanup cost of plastic and paper bags in Jakarta

In figure 19 the annual city cleanup cost for Jakarta is displayed. The high cost scenario yieldsa cleanup cost for Jakarta of approximately e 15 - 19 million per year.

If the cleanup cost of plastic bags to the city of Jakarta were to be distributed onto every soldplastic bag the following result would be achieved:

Figure 20: City cleanup cost per sold bag Indonesia

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7.3.2 City Cleanup London

For the city of London the following results were achieved for the annual cleanup cost:

Figure 21: City cleanup cost of plastic and paper bags in London

For the city cleanup of London the cost per plastic bag would have the following results:

Figure 22: City cleanup cost per sold bag United Kingdom

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7.4 Beach Cleanup Cost

The beach cleanup cost aims to include the cost of cleaning up plastic bags that ends upon beaches and coastal areas. The calculations are based on the total leakage from each ofthe case countries respectively. For the APEC region, the results and estimations of cost forbeach cleanup was specifically adjusted for Indonesia. For the U.K. there existed regional andnational estimates of the beach cleanup cost incurred by marine debris. The result from thesestudies have therefore been used or adjusted to include the entirety of the U.K.

The beach cleanup externality is analyzed as something that is imposed on society as a wholeregardless if the affected country engages in the costly business of actually picking up the litteror not.

7.4.1 Beach Cleanup Cost Indonesia

The beach cleanup cost of Indonesia was based upon the results for the International CoastalCleanup day and on the ocean debris leakage from Indonesia. This, to illustrate the cost theyimpose on other Asia-Pacific economies with their plastic pollution.

The cleanup cost estimated by McIlgorm et al. (2008) was originally based on the cost pertons, however, when using weight units for marine leakage, it gives a false cost estimation dueto the weight of items picked up. For example, the cost of picking up one plastic item weighing1 kilogram on a beach is less than picking up 53 candy wrapper weighing 19 grams each onthe same beach. Therefore, the findings on the International Coastal Cleanup day in 2007, a”standard” item, weighing 0,38 kg has been used as a basis instead. The cost per item wascalculated as follows:

Table 3: Results from the International Coastal Cleanup Day in 2007 in the APEC region(McIlgorm et al. 2008)

From the calcuations portrayed in table 3 the average cost of item pickup varies between e2.4-7.3 per 0.38 kilogram of items collected.

Out of the 0.5-1.3 million tons of plastic leakage originating from Indonesia every year (Jam-beck, 2015; Havas Oegroseno, 2016), the cleanup cost for this according to the different washup scenarios and the different cost scenarios put forward by McIlgorm et al. (2008) the annualcost for Indonesia due to picking up plastic bags on beaches would be e 26 - 79 million asshown in figure 23.

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Figure 23: Annual beach cleanup cost for plastic bags in Indonesia

Depending on how much of the plastic bag leakage that eventually will wash up on shore, thecost to clean them up varies. Based on the yearly sales data of 9.8 billion plastic bags as of2016 in Indonesia (The Jakarta Post, 2016), this would result in the following cost per plasticce 0.27 - 0.80 displayed in figure 24.

Figure 24: Beach cleanup cost per plastic bag sold in Indonesia

7.4.2 Beach Cleanup Cost U.K.

The beach cleanup cost for the U.K. was calculated similarly to Indonesia based on the samecost for volunteers participating in the cleanup initiative. The average cost per item picked up

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ranges from e 2.1-6.3 per item collected.

Table 4: Results from the Great British Beach Clean in 2016

Out of the 41 million pieces estimated to be along the British coastline, 1.1 % is plastic bags(Marine Conservation Society, 2016), which means that plastic bags along coastlines costs e0.7-1.6 million to clean up every year, as displayed in figure 25.

Figure 25: Annual beach cleanup cost for plastic bags in United Kingdom

Based on the annual sales of plastic bags in the UK of 1 billion bags as of 2016 (Smithers,2016), the the final cost per bag ranges from ce 0.07-0.16, as seen in figure 26:

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Figure 26: Beach cleanup cost per plastic bag sold in United Kingdom

7.5 Annual Direct Cost Comparison

Even though the externality costs are higher per plastic bag in United Kingdom comparedto Indonesia, the annual cost to respective economy has been calculated in order to showthat the economic impact is larger in Indonesia. The costs presented in table 5 includes theannual costs for cleaning beaches, city cleanup costs of the capitals and damage incurred tothe fishing industry due to plastic bags. The results provides an indication of the magnitudein a developed country compared to a less developed one and the annual costs are larger whenconsidering the indirect costs not included in the calculations.

Plastic bags incur a cost of e 50-124 million per year in Indonesia with an average calculatedcost of e 87 million, whilst the U.K. has a cost of e 14-30 million with an average cost esti-mate of e 22 million. The costs for respective country have included purchasing power parity,meaning that Indonesia is even further affected by the debris when speaking in magnitude ofnegative impacts caused by the debris. With an average scenario comparing the two case coun-tries e 22 million vs. e 87 million the impact induced on Indonesia due to plastic bag debrisis larger than fourfold as the cost suggests, after adjustments being made for the purchasingpower parity. The results are displayed in table 5 below.

Table 5: Total annual cost and per bag cost incurred by plastic bags

However, one should not forget that CO2-impact cost from the value chain is not included inthe annual cost. Moreover, the city cleanup cost is based only on the capital cities Jakarta and

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London and the annual cost for the country is thus higher. The reason for only including thecapital cities is partially due to lack of data and time in order to encompass the country as awhole, and partially due to the aim of getting a cost per bag impact rather than a nationalannual cost for the city cleanup scenarios.

7.6 Cost Per Bag Comparison - Indonesia

In figure 27 below, the quantified externalities (direct costs) are displayed for Indonesia. Thecosts for plastic bags ranges between ce 1.53-4.17 whilst the paper bags have an additionalcost of ce 0.55-1.54. The cost imposed on society by plastic bags is therefore at least threefoldcompared to paper bags.

Figure 27: Aggregated societal cost per plastic and paper bag in Indonesia

7.7 Cost Per Bag Comparison - United Kingdom

In figure 28, the comparison of plastic and paper bags are displayed for United Kingdom. Theper bag societal costs for plastic bags ranges between ce 2.04-4.72 and for paper bags ce0.50-1.41. In U.K. the cost is at least fourfold, and is probably larger when accounting for allexternalities bags impose on the economy.

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Figure 28: Aggregated societal cost per plastic and paper bag in United Kingdom

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8 Analysis - Internalization and Comparison

In this section the results laid out in the previous section will be further analyzed.

8.1 Quantified Externalities - Direct Costs

For the incurred costs that have been quantified in chapter 7 it is evident that plastic bagshave a significant societal cost, far higher than paper bags as shown in Figures 27 and 28. Thecost advantage paper has over plastic, is mainly due to the fact that it decomposes organicallyand is derived from biobased and renewable feedstocks, not affecting wildlife, fishing industry,coastal areas etc. to the same extent. In the LCA-studies it is also possible to conclude thatfibre-based bags have a far lower CO2 impact than plastic and therefore a lower economic costdue to pollution.

For the quantifiable economic effects of plastic and paper bags there is a clear negative spillovereconomic effect placed upon third parties such as municipalities, governments, the agriculturalindustry, the tourism industry, the fishing industry, marine wildlife, citizens in general, and theenvironment as a whole. However to put this in perspective and illustrate the competitive costsituation between the two bag solutions, the externalities described in 8.1 are added to the thegeneric purchasing price of 4ce and 8ce for plastic and paper respectively. These costs areadded to the purchasing price of each respective product using the method of internalizationdescribed in section 4.2. The results achieved for the Indonesia and United Kingdom arepresented respectively below.

Figure 29: Aggregated cost per plastic and paper bag in Indonesia, including purchasing price

The results in Figure 29 show that the costs are the following in the low, average, and highcost scenarios in the U.K. (plastic being presented first, followed by paper):

• Low: ce 5.5 vs ce 8.5

• Average: ce 6.8 vs ce 9.0

• High: ce 8.2 vs ce 9.5

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Figure 30: Aggregated cost per plastic and paper bag in United Kingdom, including purchasingprice

The results in Figure 30 show that the costs are the following in the low, average, and highcost scenarios in Indonesia (plastic being presented first, followed by paper):

• Low: ce 6.0 vs ce 8.5

• Average: ce 7.3 vs ce 8.9

• High: ce 8.7 vs ce 9.4

When calculating the total cost, including externalities in the purchasing price, the two ma-terials are priced more equally than when just accounting for purchasing price. This is trueboth in the case of Indonesia as well as in the U.K. However, plastic still holds a slight fullcost advantage in these cases. Therefore, it should be noted that in addition to the externali-ties included in the figures above, four other aspects have been identified as also affecting theoutcome. These are included in the following section.

8.2 Including Other Externalitites - Indirect Costs

The additional costs identified in the study, are referred to as the indirect costs. These arenot as easily quantified, since the direct impacts are harder to determine. However, they dohave an indirect impact in one way or another, which makes them inevitable to exclude inthe total cost comparison. In the reports reviewed in this study, plastics are overwhelminglythe main denominator of concern, whereas paper materials have little to no impact upon thirdparties. This means that the total cost displayed in all three of the low, average and highcost scenarios have even more hidden costs that are yet to be quantified and explored morethoroughly on a societal level. For example it is not yet known what happens to a majority ofall the plastic materials leaking into the oceans, nor the exact implication of plastics ingestedby humans.

In this study the additional externalities have been identified as: Agriculture, Wildlife, Humanhealth concerns, and Tourism industry. There is most likely more areas and industries thatare affected indirectly, but these four have frequently been brought up in literature reviewedas being affected the packaging industry.

Figure 31 aims to include these aspects, when accounting for all identified externalities basedupon three scenarios. It should be noted that the hidden costs added do not represent a precisecost of what these aspects might impose, and should therefore be assessed with a certain degree

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of moderation. The additional indirect costs serve as a visualization for the economic lossesimposed by the aspects that have not been quantified in this report. The graph below isintended to provide a visual representation of what the additional externalities might be, thusbeing faded. In order to retain objectivity, it is assumed that the paper materials also incurnegative cost effects to e.g. the tourism industry, by being an aesthetic burden when endingup as waste. However, there are no indications that the materials have an impact on wildlife orhuman health when consumed, since the material is organic, posing no real threat to wildlifeor human health when ingested.

Figure 31: Estimated societal cost for plastic and paper bags

When including the hidden cost of plastic it is evident that plastic industry have a devastatinglyhigher societal cost than paper bags, than already revealed in the previous section. Literatureconfirms this, but estimating the real costs of the externalities is yet to be done and needsmore thorough investigation.

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Figure 32: Estimated full cost for plastic and paper bags

For the estimated full cost, including the purchasing price and the externalities mapped inthis thesis, paper bags outperform its plastic counterpart in both the average and high costscenario whilst being similar in the low cost scenario. With reservation, the full cost is mostlikely to be even higher for plastic bags but needs more thorough investigation for a definitiveconfirmation of the hypothesis.

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9 Discussion

This section will discuss the insights gained from the literature review, results, and analysis: Itwill outline the prerequisites of the packaging industry from a general point of view and from acircular economy perspective

9.1 The Packaging Industry’s Circumstances and Future Prospects

Analyzing the packaging industry from the circular economy perspective provides insights tothe issue which has resulted in arguably, the worst environmental disaster to date. In itsessence the case of single-use plastic packaging is the failure of actors involved in the valuechain to realize the cost that the packaging industry imposes on others. By not including thecost of externalities, companies using plastic packaging materials are exposing themselves tosignificant market risks as well as missed opportunities. This is because the aggregated costof plastic materials are, according to our calculations, vastly under-priced. By calculating andestimating the direct and indirect costs discarded plastic bags impose on society, it is revealedthat the externalities, according to our study, are two to three times higher than the initialpurchasing price. If this insight would be realized and be borne by the brandowners, a moreconcrete and fair comparison of plastic and paper bags would be assessed before choosingpackaging material.

After internalizing the cost of externalities onto the two bag solutions, it is realized that the costsituation of which is the least costly material changes radically. The issues coupled to single-useplastic packaging will most likely increase in the near future, due to the low recyclability andincreasing consumption of consumer goods worldwide. The reason for the low recycling rate isfirstly that plastic packaging is relatively expensive to recycle. This means that an economicdisincentive exists to collect and recycle the sold plastic materials. Furthermore there is aparadoxical situation between the light-weight innovations applied on plastic materials. Plasticmaterials have decreased its weight over the last decades and this manufacturing innovationstill has a great impact on the industry, providing material savings in production and usage.However, there is a tension existing since the after-use value decreases when the plastic materialhave lower content (World Economic Forum, 2016). The same arguments could be put forwardto paper packaging, however, when discarded it would result in an even faster biodegradationbut could on the other hand lower the incentives of attaining a circular business model.

Even though efforts are being taken against reducing plastic packaging use, the transition ismoving too slowly if ecosystem degradation, environmental concerns and health issues are tobe evaded. Achieving radical reductions require large-scale coordinated efforts along threemain dimensions: 1) improving the infrastructure for after-use purposes in less developed andhigh-leaking regions (increase the recovering rate) 2) Strengthen the incentives of recycling,reusing and keeping the materials within the system boundaries (i.e. adapting the circulareconomy) 3) reducing the dependency of plastic materials and steer innovation towards trulyrenewable and biodegradable materials (e.g. paper packaging) (Van Sebille et al., 2016; WorldEconomic Forum et al., 2016).

However, even then, the best case scenarios predict that a 45 % decrease by 2025 of globalplastic leakage would only stabilize the outflow, meaning that the total accumulated volume ofplastics would remain the same. A scenario of reducing the global leakage from the current 32% to 1 % would still be equivalent to one million tons of plastic escaping the collection systemevery year (World Economic Forum et al., 2016). Based on this information, it is arguedthat even though substantial efforts are required to combat the negative externalities incurredmainly by plastic materials, a transition towards renewable and biodegradable materials arecritical.

The societal costs in this report has had their baseline from the Sustainable Development Goals,

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namely the following: Good Health and Well-being, Decent Work and Economic Growth,Responsible Consumption and Production, Climate Action, Life Below Water, Life On Land.It has been clear that the packaging industry is affecting each and one of the categories listed,some more than others. This insight could help to provide policymakers on higher instances toemphasize the issues related to linear production models and single-use products. If the goalsare to be achieved, reducing the impact from the packaging industry would mean substantialgains on all three pillars of sustainability - economic, environmental, and social.

9.2 The Circular Economy Perspective

The circular economy provides many benefits for enterprises. These include radically limitingrisk, optimizing resource utilization and the ability to seize new opportunities. One of the keyrisks for the packaging industry is the regulatory risk, i.e. the risk of new legislation banningor adding taxes on certain materials. In recent years the continuous efforts of policymakersto minimize and price the negative externalities have grown and the efforts are projected tosustain (Ellen MacArthur, 2015). For example, the countries that have a carbon trading systemare increasing, as well as the annual number of climate change laws passed all over the world(World Bank, 2016). This increasing risks of regulation is especially disruptive as it has thepotential to change the conditions of an industry without notice (Bauer et al., 2017). In thiscontext, the circular model of growth, decoupled from the consumption of finite resources andcapable of delivering resilient economic systems, is increasingly looked upon as the next waveof development (Ellen MacArthur Foundation, 2015).

We argue that this demands new and increased attention regarding the impact one’s businessimposes upon the surrounding. For businesses using the circular economy framework, thereare arguably three costs, which affect the real cost of plastics in comparison to other packagingmaterial. The first and most obvious cost is the purchasing price, reflecting the price tocustomers buying the plastic bags. The second price observed is the quantifiable price presentedin section 7. This cost illustrates the cost as a direct effect of pollution and production of thedifferent packaging materials. As previously described above, this put the costs of these twopackaging solutions at even levels. However, it is worth noting that the direct costs presentedin section 7 is all-covering nor exhaustive.

The third cost identified was the indirect costs where difficulties in quantifying the measuresoccur. In section 8 these were illustrated as an added cost to the direct and purchasingprice. The indirect costs, have and will be difficult to quantify properly, thus having multipleinterpretations and a divergence of how large the costs might be. It should also be noted thatbecause they are unknown, they are further affected by the public perception of packagingmaterials. This cost is also subject to discrepancies, since it is individual and depending oneducation and relation to a product category. If one is aware of the problems associated withplastic packaging and/or have a strong relation to sustainability, they might perceive plasticmaterials as being far more costly than others. These variable costs have the potential toradically change the business landscape for companies. Arguably, in the case of plastics, as thepublic perceives the cost of plastic as higher, there will be more incentives for policymakers totake a tougher stand against plastic packaging. Furthermore it could mean a risk for businessesthat use plastic packaging for their products if the incentives and/or perception costs exceedthe benefit that the material offers.

Assuming that plastic packaging will be too costly, realizing a paradigm shift towards trulysustainable and biodegradable materials from a circular production perspective could makeincremental innovation and capital investments in plastic technology development superfluousand irrelevant if alternative packaging materials will become the dominant design. For compa-nies applying the circular economy mindset, it is essential to not only consider the costs thatare associated with the traditional production levels but to design the value chain by includingthe entirety of costs in a life cycle analysis. This entails the cost of externalities; direct and

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indirect, perception cost, and the cost associated with traditional decision-making.

9.2.1 Circular Model for Policymakers

As described above there is an inherent conflict between the decision making of companies andthe reluctance of policymakers to assign costs and curtail externalities. Admittedly, this is anarea that has grown in significance but is today arguably the area holding back the widespreadimplementation of the circular economy. The reason for this is twofold. Firstly, there must existbusiness incentives to apply a circular model concept. Secondly, without proper price signalingit is not possible for companies to really understand the choices before them. With false pricesignals it unknowingly, encourages them to use materials, or engage in activities, that are not inaccordance with a circular business model exposing themselves to market risks. The issue withplastic pollution provides a grim example for what happens when price signals are lacking. Itis therefore possible to draw the conclusion that government price signaling must be objective,quicker and more dynamically communicated to polluting companies. This new approach frompolicymakers is essential for the circular economy concept to work as intended.

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10 Conclusion

This chapter presents the conclusions drawn from the findings of the study and will outlineconcise answers to the research questions, the contribution, limitations of the results and sug-gestions on future research within the area.

10.1 Answering the Research Questions

The main area of investigation of this thesis has been to answer the following research ques-tion:

MRQ:What insights can the packaging industry provide into the prerequisites of the success ofcircular business models?

Based on our findings from the quantitative and qualitative study, the following insights havebeen found:

• The real cost of packaging material in a circular economy perspective consist out of threecosts; Purchasing Costs, Direct Costs and Indirect Costs. Companies who engage incircular models must take all of these costs under consideration when making strategicand operational decision, or face increased risks and loss of resources

• In order for the circular economy to be properly implemented, there must exist accurateor close to accurate price signals, otherwise companies could potentially choose inferiorpathways or technologies

• Companies engaging in the circular economy approach have the possibility to createsignificant competitive advantages through increasing resource utilization and innovation

Two additional sub-questions have also been researched in this thesis, where the conclusionsdrawn from the research conducted are presented below:

RQ1: How does the accumulated costs of plastic and paper bags compare in a developed (UnitedKingdom) and less developed country (Indonesia)?

• The purchasing price ce 4 and ce 8 for plastic and paper bags respectively does notreflect the full impact. By including end-of-life aspects the following estimates have beenconcluded in a low, average, and high cost scenario:

Table 6: Total cost per bag and material type including direct costs

• The annual costs for each country are according to the average scenario approximatelyfour times larger in Indonesia than for the U.K. (e 87 million vs e 22 million)

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• Due to an increasing middle-class in less developed regions in the future in combinationwith lower infrastructure standards, the problems are most likely going to increase in thefuture, if no interventions are implemented (tax levies, bans)

• The fishing industry is in absolute numbers affected similarly in the two countries. How-ever, in relative terms, Indonesia experiences larger problems, but it is not as evidentsince the PPP-adjustment lowers the total imposed cost for the industry

• Plastic bags found on along beaches and coastal areas are proven to be far lower in theU.K. than for Indonesia (1.1 % vs 7.3 % of all items of debris collected) based on cleanupinitiatives’ waste collection data. The plastic bag waste thus impose a greater problemfor Indonesia

RQ2: What does an inclusion of end-of-life aspects for plastic and paper bags reveal about thesocietal costs and the most cost-effective choice of material?

• The inclusion of end-of-life aspects reveal that there are significant societal costs andthat these have the potential to give a new perspective as to which material is the mostcost effective. Three main costs have been identified apart from the purchasing price:

– The quantitative aspects: The aspects that have been quantified and directly appliedto the purchasing price per bag

– The qualitative aspects: The aspects that have been assessed but not calculated.These needs more research in order to determine their socio-economic impact andmagnitude

– The perception cost : This cost is individual and cannot be generically applied to aper bag cost. An individual’s perception of a product type or material is complexand rather indecisive since the number of underlying reasons may differ as to whyone determines a material as not being a viable option. This cost may prove decisive

• When excluding the purchasing price from the equation, the societal costs incurred byplastic materials are two to three times larger than those incurred by paper bags whenaccounting for the quantified aspects

• However, the quantitative comparison does not reveal the full picture of the actual costof the packaging material types

• When assessing the additional qualitative aspects, not included in the calculations, thecomparison will most likely favour for paper bags as the most cost-effective choice

• The aspects that have not been quantified in this report needs further investigation inregard to their magnitude and societal, economic, and environmental impact in order todraw determinant conclusions of the most cost-effective choice of material

10.2 Academic Contribution

This study has provided better insights to what extent two product types, plastic and paperbags, within the packaging industry might have. Furthermore, the study has applied the costson two case countries, Indonesia and United Kingdom, giving insights that developing coastalregions will suffer more from the societal costs due to poor recycling systems and incentives,lower educational level and a higher dependency of maritime industries and activities.

This study also provided better insight into research gaps within the circular economy modelespecially those related to business decisions within organizations. Since the circular economymeans new production models, companies need to structure their decision making to considerthe different aspects.

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Finally, the thesis has revealed the complexity of both mapping and aggregating externalitiesonto material types with certainty. The system boundaries and the dynamic nature of marinedebris and the mapping of plastic materials makes it difficult to assess all identified externalitiesquantitatively.

10.3 Industry Contribution

Our research has provided insights on the cost-comparison of plastics for packaging purposesand fibre-based alternatives, as well as a more concrete understanding of the cost from a holisticpoint of view. As stated in previous sections, there is no thorough comparison of the price thata retailer pays and the actual cost when accounting for environmental impacts for packagingproducts. Thus, this thesis has provided an indication of how large these costs related topackaging materials might be.

It is worth noting that there are existing reports that has determined the environmental impactof plastic bags and paper bags, however these studies tend to be heavily focused on linearproduction models that have non-existing to little regard to the end-of-life aspects, as wellas total environmental impact over the product’s lifetime (Muthu et al, 2012). Moreover,an accumulation of the total costs with the add-on of externalities connected to packagingmaterials have not previously been done.

Governments and lawmakers around the globe are aware of the externalities and environmentaland have in some cases put a fix tax on plastic bags, but this tax have no precise foundationin the cost of environmental impact. The taxes and bans are thought more of as incentiveprograms in order to reduce the usage of plastic packaging and the environmental problemsassociated with it (Dikgang et al., 2012). The expectation is therefore that an academicperspective based on an empirical quantitative study supported by qualitative aspects canstrengthen the claims and incentive programs that exist today and push more countries intoimplementing similar programs of their own. Policymakers could benefit from more calculationsand estimations like this report and strengthen the arguments of implementing taxes, levies orbans instead of having an approach where the levies are based on guesstimations.

10.4 Limitations

It is important to mention that the cost estimates found in this study is by no means extensivenor exhaustive. The excessive difficulty with adding a price or cost to any activity or productis that there are many approaches and methodological approaches to do so. It is for examplepossible to base the calculations on the cost of cleaning up all plastics or simply to compen-sate for the actual damages. This of course dismisses aesthetic aspects which are themselvesextensively difficult to value in monetary terms. To make matters more complicated the citedstudies consistently use different approaches to estimate the cost.

Furthermore, the methodological approach in this study has been rather static, for a subjectthat is highly complex and dynamic. The numbers used for the calculations are based ondifferent years for different parts. For example the 5p plastic bag charge introduced in theU.K. reduced plastic bag consumption by 80 % in the first year. This changes the final resultsfor the cost per bag drastically, using the methodological approach in this study. This is whylow, average and high cost scenarios has been applied in the calculations, in order to retainvalidity and reliability of the output.

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10.5 Future Research

10.5.1 Externalities

The calculations made in this study needs revising and a more strict and methodologicalapproach. The difficulty is to find congruent and up-to-date data and to validate the credibilityof the sources utilized, since the most part of the calculations are made from non-governmentalorganizations that could have a certain agenda when presenting results. Furthermore, widercase studies of specifically coastal regions needs to be investigated more, in order to confirmthe magnitude of the societal costs.

There needs to be more thorough investigations into the socio-economic indirect costs thatthis report has identified to determine the effect of all externalities. These include harm towildlife, human health concerns, damage to agriculture, and tourism industry. Furthermore,the perception cost could be an area of investigation as to how end-consumers perceive thedifferent materials both when excluding and including societal costs. Businesses’ perceptionsof the choice of packaging material when accounting for externalities could be interesting toinvestigate in regards to public image, and environmental and societal responsibility.

Furthermore, other end-of-life aspects than leakage to the ocean and on land should be ad-dressed within a linear and circular value chain perspective. The linear consumption couldlead to open-burning, which in turn would release toxicants that are harmful both to theenvironment and to human beings when inhaled.

A cost comparison of biobased and biodegradable plastic materials is also an area of investi-gation. The technologies of biobased plastics is still relatively new, but could mean a decreasein after-use societal costs. Research regarding the carbon footprint induced by biobased andbiodegradable plastics also needs more assessments, in order to better evaluate the material ina total cost comparison of conventional plastics and paper products.

10.5.2 The Circular Model

For the circular model, several areas in need of further exploration have been discovered.Firstly there is a need to further develop what the system boundaries for companies acting ina circular model are or what they should be. Secondly there is a need to further develop andexplore what strategies companies should or can use to navigate within the circular economymodel. Thirdly, it is also necessary to further explore what other factors that have arisen orchanged, with respect to the linear production model. Fourth, it is also viewed as imperativethat policymakers take a more active role to communicate the correct costs of materials and ac-tivities. This also necessitates more exploration as to the governments role and responsibilitiesin regards to the circular economy. The research area of system boundaries is considered to beespecially important as it will be necessary for policymakers to communicate the real costs ofactivities and materials to companies. Lastly, an investigation to what extent paper packagingcould overtake the industry in terms of supply as well as the applicability and possibility ofpaper packaging becoming the main packaging material within circular production models isan intriguing opportunity that needs further assessment.

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Appendices

Appendix A - Gantt-chart

Figure 33: Gantt Chart of Project

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Appendix B - Interview Scheme

Pre-study:

2017-02-15, 13:00-14:30 (Introductory meeting) Jon Haag, Director Consumer Insights, Billerud-Korsnas AB

Louise Wohrne, Sustainability Developer, BillerudKorsnas AB

Qualitative study:

2017-03-17, 13:00-14:00 (Telephone conference) Hakan Stripple, IVL Svenska Miljoinstitutet

2017-03-23 (E-mail conversation) Erik van Sebille, Oceanographer and Climate Scientist. As-sociate Professor at Utrecht University’s Institute for Marine and Atmospheric Research

2017-04-10 (E-mail conversation) Arif Havas Oegroseno, Deputy Minister, Coordinating Min-istry of Maritime Affairs Indonesia

Tutorial meetings:

KTH:

2017-01-24, 13:30-14:00 (Introductory meeting) Cali Nuur

2017-02-06, 10:00-10:30 (Feedback from thesis proposal) Cali Nuur

2017-02-17, 13:15-13:45 (General meeting and introduction to new supervisor) Cali Nuur,Michael Novotny

2017-04-06 11:00-12:00 (Mid-term feedback) Michael Novotny

2017-05-08 (Review of Results, Analysis and Discussion) Michael Novotny

BillerudKorsnas:

2017-03-07, 13:00-16:00 (Value chain and mapping of costs in society by packaging) JonHaag

2017-03-24, 09:00-12:00 (Creation of quantitative model) Jon Haag

2017-04-03, 13:00-16:00 (Case study: UK Indonesia) Jon Haag

2017-05-02 13:30-15:00 (Review of Results) Jon Haag, Daniel Badman - Director SustainabilityPublic Affairs

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Appendix C - Assumptions and Estimations for Quantitative Study

The assumptions made in the calculations are listed below:

Exchange rates

Different reports lists costs in different currencies. For this report it has been chosen to convertall currencies to Euro (e). The exchange rates has been chosen from currency-converter.netas of 2017-03-01.

1 EUR (e ) = 1.06 USD ($) = 0.85 GBP (£) = 14200 IDR (Indonesian Rupee)

Marine debris

• 60-80 % of global marine debris is plastic materials (Allsopp et al., 2006; McIlgorm, 2008;UNEP, 2014). Assumed to be true for both U.K. Indonesia

• 40 % out of the plastic materials in the ocean are plastic bags (Euractiv, 2014).

• The numbers regarding what type of plastics that this fraction comprises of has beentaken from various estimations, one stating that 40 % of the plastic marine debris isplastic bags for the U.K. (Euractiv, 2014).

• Plastic material are assumed to have a degradability that is infinite in the externalitycalculations, since the decomposition rate for plastic bags is stated to be 400-500 years(Science Learning Hub, 2008; Surfers Against Sewage, 2014; World Economic Forum etal., 2016)

• The fibre-based solutions are assumed to biodegrade up to a maximum of six months(Science Learning Hub 2008; Haag, 2017). However, once leaked into the ocean it isassumed that the material dissolves and do not damage wildlife or fishing vessels.

Beach Cleanup

The cleanup scenarios outlined for coastline/beach cleanup are based on two different extensivecleanup initiatives conducted in the Asia-Pacific region and the U.K. respectively. The onein the Asia-Pacific region was the “2007 International Coastal Cleanup day” (McIlgorm etal., 2008), and the one conducted in U.K. was the “Great British Beach Clean” (MarineConservation Society, 2016).

• Volunteers working are assumed to have three different salary pays per day, outliningthree different cost scenarios.

• The salary per person and day are e 47, e 94, e 142 as proposed by McIlgorm et al.(2008)

• Every volunteer is assumed to have equal pay per day, regardless of hours put down

• This leads to an average cost per item found by dividing the total value of labor withthe total number of debris collected.

• The average cost per item ranges between e 2.24 - 7.28 depending on salary and country.

• The cost per item is equivalent to the pay for picking up an item based on the cleanupday initiatives

Indonesia

• 7.25 % of the total number of items collected were bags (McIlgorm et al., 2008), for thisscenario it is assumed that all of these are plastic bags

• The total waste produced in Indonesia were 150,000 tons per day in 2011 and 175,000tons in 2014 (Havas Oegroseno, 2016).

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• The annual leakage is calculated from Havas Oegroseno (2016) and it is further statedthat 14 % of the waste is plastics and that 7 % out of the waste leaks to the ocean, givingan estimated 500,000 - 600,000 tons of plastic waste being leaked to the ocean annuallyin Indonesia (Havas Oegroseno, 2016)

• The ocean leakage is validated by including Jambeck et al. (2015) estimation of 0.48 -1.29 million tons being leaked in Indonesia annually and also Havas Oegroseno (2017)claiming 1.3 million ton is leaked annually in the archipelago.

• Based on the average weight per item from the international cleanup initiative conductedin the Asia-Pacific region in combination with the weight leaked into the ocean annually,an estimated number of items are calculated (McIlgorm et al., 2008)

• Number of plastic bags sold in UK is set to 1 billion and in Indonesia 9.8 billion (Smithers,2016; Jakarta Post, 2016)

UNEP (2014) scenario:

• UNEP (2014) estimated that 15 % of all the debris leaking into the ocean ends up floatingon the surface

• An estimation made by ourselves is that 50 % out of this waste ends up on beaches dueto flows and streams

• Based on the three cost scenarios on the salaries and pay per picked up item (McIlgormet al., 2008) an annual cost is calculated for all the plastic marine debris

• 7.25 % of all the plastic waste is considered to be plastic bags (McIlgorm et al., 2008)

• The total cost of plastic bags on beaches and coastlines are estimated to be 22-66 emillion/year for Indonesia

Eunomia (2016) scenario:

• 5 % of all the debris leaking into the ocean is estimated to end up on beaches (Eunomia,2016).

• The calculations follows the same outline as the UNEP (2014) scenario.

Eriksen et al. (2014) scenario:

• Eriksen et al. (2014) estimates that 15 % of all items leaked into the ocean ends up onbeaches.

• The calculations then follows the same outline as the UNEP and Eunomia scenario.

United Kingdom

• Based on the Great British Beach Clean (2016) weekend initiative, the composition ofdebris collected had 1.08 % number of items that were plastic bags.

• Surfers Against Sewage (2014) has estimated that the total number pieces of litter thatends up on the shores in the UK are about 41 million

• The total annual cleanup cost of this, based on the three different salary scenarios peritem described earlier (McIlgorm et al., 2008), then ranges between e 91-276 million/year

• The costs associated to plastic bags are 1.08 % of this cost

Fishing industry

Four different scenarios, from different sources, formed the foundation for the calculationswhere low and high cost scenarios were outlined for each base scenario. General assumptionsvalid for all four scenarios are the following three:

• 60-80 % of the litter is assumed to be plastics (McIlgorm et al., 2008; UNEP 2014)

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• 40 % out of the plastic waste is assumed to be bags (both LDPE and HDPE types)

• Number of plastic bags sold in UK is set to 1 billion and in Indonesia 9.8 billion (Smithers,2016; The Jakarta Post, 2016).

United Kingdom:

Scenario 1

• The annual cost incurred to the fishing industry and aquaculture due to littering wasestimated to be e 31.5-41.8 million by Lee (2015).

Scenario 2

• Annual cost for the Scottish fishing industry was estimated to be e 11.7-13 million byMouat et al. (2010).

• The Scottish fishing fleet account for 63,25 % of the annual revenue in the UK (MarineManagement Organisation, 2015)

• The annual cost e 11.7 and 13 million for the Scottish industry is therefore divided by0.6325 in order to get the total cost of littering for UK

• This leads to an annual cost of e 18.5-20.5 million for the U.K.

Scenario 3

• The average cost per fishing vessel due to revenue losses was estimated to be e 17,000 -19,000 annually for United Kingdom (Mouat et al., 2010)

• Two thirds of this cost was incurred from income losses and repairing costs of clearinglitter from nets and a decrease in harvestable catch (Mouat et al., 2010)

• The total cost to the fishing industry is then calculated by multiplying the average costper fishing vessel with the number of vessels in the British fishing fleet

Scenario 4

• An assumption that fishing vessels larger than 10 m accounted for all costs to the fishingfleet is made

• The total cost e 11.7-13 million/year estimated by Mouat et al. (2010) is comparedwith a calculation where the number of fishing vessels larger than 10 meters in Scotland(Marine Management Organisation, 2015) is multiplied by the average cost per fishingvessel e 17,000 19,000 (Mouat et al., 2010).

• The calculations leads to a cost of e 10.3 - 11.5 million/year and verifies the result ascompared to e 11.7 - 13 million/year estimated for Scotland by Mouat et al. (2010).

• When the calculation has been verified, the number of vessels larger than 10 meters inthe UK is multiplied with the average cost per fishing vessel, leading to a total cost of e14-20.8 million/year

Indonesia

• No estimates from previous research has been made for the debris’ effect on the Indonesianfishing industry

• Estimates has been benchmarked from U.K. and the estimations made in scenario 3 and4

• According to the estimations made by Mouat et al. (2010) the cost incurred to the fishingindustry is mainly due to revenue losses and thus labor expense, therefore a feasiblecomparison with Indonesia is made based on the average annual salaries for fishermen.

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• Indonesian vessels might suffer the same outcome as the British, however an assumptionis made that the economic value is less due to lower salaries.

• Salary fisherman: UK: e 24,706 /year. Indonesia: e 5,516 /year

Scenario 1

• Based on a comparison of the GDP for U.K. and Indonesia and the fishing industry’srespective revenue a relative size can be calculated

• GDP as of 2012 is $ 2,630 billion for U.K. (MSEP, 2014) and $ 918 billion for Indonesia(FAO, 2014).

• Percentage of GDP from the fishing industry is 0.07 % for U.K. and 3 % for Indonesia(MSEP, 2014; FAO, 2014).

• The relative size is then calculated to being 15 times bigger in Indonesia than for U.K.

• By benchmarking Lee (2015) cost estimate from U.K. and the concentration of plasticmarine debris, 60-80 % (Allsopp et al., 2006; McIlgorm et al., 2008; UNEP, 2014) andplastic bag concentration of 40 % in combination with the relative size, a cost for iscalculated for Indonesia

• The total cost for this scenario is e 68-160 million/year

Scenario 2

• Average cost per fishing vessel related to plastics stems from time clearing nets ( of thetotal cost, Mouat et al., 2010) where plastics represent 60-80 % of all litter in the ocean

• A fractional relationship between Indonesia vs UK is then calculated based on the annualsalaries and the cost per fishing vessel in UK

• An assumption that the non-artisanal/industrial fishing fleet accounts for all damages ismade (representing 5 % of the total number of vessels in Indonesia)

• The annual cost according to this scenario is e 49-73 million

Scenario 3

• This scenario is based on the annual cost incurred on the fishing industry in U.K. fromMouat et al. (2010), fractions of the salary relationship (FAO, 2014) in combination withannual fishing industry harvest (in metric tons) between U.K. and Indonesia (MarineManagement Organisation, 2014).

• The fractional relationships are multiplied with the estimation of the costs on the UKfishing industry made by Mouat et al. (2010)

• The annual cost for this scenario is e 39.5-58.5 million

Scenario 4

• Like scenario 3, the fractional relationships of average annual salary for a fisherman andthe annual fishing industry harvest between respective country is multiplied with theestimation made by Lee (2015)

• The annual cost for this scenario is e 67-119 million

City cleanup

• The cost of cleaning up cities are based on Monroe et al. (2013) estimates made for thetwo largest investigated American cities Los Angeles & San Diego in combination with anoverall average cost for the six ”large cities” (population ¿ 250,000) since the calculationsare to be made on London and Jakarta that falls into the same ”large city” category

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• The report has calculated a cleanup cost per capita based on various variables accountingfor ”all levels of managing aquatic debris, and litter that could become aquatic debris”(Monroe et al., 2013)

• The number of plastic bags sold in the investigated cities by Monroe et al., 2013, isconverted to London and Jakarta based on data for bag consumption per capita andannual plastic bag sales

• The conversion to the cities Jakarta (Indonesia) and London (U.K.) is then made basedon population and PPP for respective country

• 8-25 % of the cleanup cost is estimated to come from plastic bags (Monroe et al., 2013)

• The paper bags are assumed to have a sale being a third of plastic bags

• The cost incurred due to paper bags is assumed to be 10 % of the plastic bags, due tothe low decomposing rate compared to plastics

Indonesia - Jakarta

• Jakarta population is 9.8 million (Globaldata Intelligence Center, 2016)

• The PPP is 10,432 compared to the U.S. 56,116 (Globaldata Intelligence Center, 2016)

• The total number of bags consumed is 9.8 billion and the population is 250 million peoplein Indonesia, which gives a consumption per capita of roughly 40 bags per year

• The consumption per capita in the capital Jakarta is assumed to be slightly above theaverage consumption, thus 50 plastic bags per capita is used for the calculations

• The cost per bag is then calculated by dividing the cost from cleaning all plastic bagswith the total plastic bag consumption in Jakarta in a low, average and high cost scenariobased on the 8-25 % incurred costs by plastic bags as stated by Monroe et al. (2013).

• The cost for paper bags is then calculated as a third of the bag per capita consumptionand 10 % of the incurred cost from the three plastic bag scenarios

United Kingdom - London

• London population is 8.7 million (Globaldata Intelligence Center, 2016)

• The PPP is 39, 150 for England (Globaldata Intelligence Center, 2016)

• Plastic bag consumption is for the city cleanup scenario 7 billion annually (British Gov-ernment, 2016), the UK population is 64 million leading to a capita plastic bag consump-tion of approximately 110 bags per year in the U.K. and an estimated 120 bags per capitaand year for London

• The paper bag cost is calculated in the same way as for the Jakarta case

CO2 Impact

• The different CO2-pricing models are listed below in ceg in order to asses the valuechain’s environmental cost (Material production, Material transport, Packaging produc-tion, Packaging transport)

• World Bank (2016) sets a CO2 price of 80 - 120 $/ton 0.0075 - 0.0113 ceg CO2

• Moore and Diaz (2015) sets a CO2 price of 220 $/ton 0.0208 ceg

• Each step of the value chain’s CO2-emissions are listed in the report by Dahlgren et al.(2015; 2016)

• However, the material and packaging transport had to modified for the paper bags, sincethe report had calculated on the distance Sweden to Germany

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• For the transportation to United Kingdom, the same distance was assumed. The CO2released due to transportation to Indonesia were modified and eventually multiplied witha factor of 1.7 to account for the longer distance

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