# 16-039/VI (2016-05-19)

Raymond Gradus, VU University Amsterdam, the Netherlands; Rick van Koppen, PricewaterhouseCoopers; Elbert Dijkgraaf, Erasmus University Rotterdam, the Netherlands; Paul Nillesen, PricewaterhouseCoopers
recycling, incineration, plastics, cost-effectiveness analysis
JEL codes:
H43, Q38, Q42

The cost-effectiveness of plastic recycling is compared to energy recovery from plastic incineration in a waste-to-energy plant using data for the Netherlands. Both options have specific benefits and costs. The benefits of recycling are the avoidance of both CO2 that otherwise would be emitted during incineration and the production of virgin (new) material. There are significant costs, such as collection costs and recycling costs involved for plastic recycling by municipalities. The benefits of energy recovery from plastic are heat and electricity production leading to fewer emissions in the regular energy production sector, but this requires a waste-to-energy plant with the associated capital investments. Summing all the costs and benefits results in an implicit CO2 abatement price of 172 Euro per tonne of CO2 in case of plastic recycling. In general, this implicit price is much higher than current (or historic) ETS prices, the estimated external costs of CO2 emissions, or alternatives to reduce CO2 emissions (e.g. renewable energy). A sensitivity analysis shows that this conclusion is robust.