We need bonds….just not the polyethylene kind

The micro-bead ban. The plastic bag tax. The plastic straw ban. Restriction after restriction is being levied, all in an unsuccessful attempt to eliminate the polymer that has become public enemy number one: plastic.

The problem of plastic pollution is compounding at a rapid rate, with 8 million tons of plastic entering the ocean annually. It can’t be ameliorated by policies centred on negative incentives, as these are unable to change consumer or investor behaviour in the long term. More often than not, employing negative incentives results in a fragmented, piecemeal approach, where select plastic items are taxed: barely enough to make a dent in The Great Garbage Patch. We need to look instead to policies that promote positive action, not curb negative behaviours.

One such policy is the adaptation of the green bond model to establish tax-exempt private green bonds. These would fund projects tackling plastic pollution that have a pre-certified impact. This would not only attract large investors but small scale investors too, as there would be potential for higher, tax-free returns with less risk. Apart from boosting funding, this would create an atmosphere that enables engagement with climate issues in a positive manner, encouraging the uptake of more environmentally-friendly behaviours, without the need for negative reinforcement.

The sustainability bonds market was worth $10.3 billion in 2017, growing to an impressive $18 billion in the space of just a year, demonstrating its enormous potential. However, the power of current green bonds is not being effectively harnessed in the fight against plastic pollution, with only 4% explicitly funding waste reduction.

This may be because, whilst useful investment vehicles, green bonds on the market today present numerous concerns: unpredictable returns, uncertainty surrounding the quantitative impact of the projects being funded and transparency generally, all of which dissuade investors. Tax-exempt private green bonds would fund pre-certified projects meaning that transparency and predictable returns would be guaranteed, thus removing the main obstacle preventing investment.

Moreover, such bonds could enable small-scale solutions to gain traction by eliminating one of the key barriers to growth in such technologically intensive fields: the cost of capital. Decreasing the cost of capital would increase production and cut the cost of the innovation, spurring further investment and creating a sustainable cycle of growth, benefiting both economy and environment. It is evident that tax-free green bonds are the only shackles capable of restraining this polymer, public enemy number one.

Simran Lakhotia is the runner-up of the under-18 category in our Young Writer on Liberty 2020 competition.