A Solid-Waste Solution to Climate Change? A Macro-Financial Strategy around Sovereign Gold and ESH Bonds
Energy, Environmental and Mineral Economist
Disclaimer: This manuscript explores an industrial policy from a wider, Social-Finance perspective, for which reason, it is necessary to examine the matter without the horseblinds imposed by PV-Finance. The author makes no claim about reliability of the proposed design, or the assuredness of indicated outcomes.
Plastics have turned an ubiquitous raw-material, intermediate- and consumer ‘product’ in our society. Its quality, diversity, and niches have expanded the breadth of applications, but engendered a large and exacerbating solid waste externality. Concomitantly, iron and steel-making, a primary resource and infrastructure sector across the world, continues to be a pollution-intensive industry despite significant gains in recycling of iron scrap. The significance of the environmental footprint from these sectors cannot be over-stated as societies around the world pursue an infrastructure-intensive, LQ-maximizing, nominal economic paradigm.
In recent decades, many technologies have sprung up that have, on one hand, increased the feed-flexibility of blast-furnace based iron making, and on the other, enhanced the recycle, and re-use of processed and composited plastic waste a technical feasibility. Together, these technical developments present a hitherto unrecognized opportunity for policy makers to devise financial and economic strategies that ‘hatch’ these technical developments in to the market by defensibly manipulating lumpsums, lines, rents and prices through an appropriate macro-mechanism. This paper broaches one such design centered around a resource-prudential, macro-societal and micro-pricing strategy. The strategy exploits a 3-way, induced strategic pareto between iron-makers, plastic recyclers, (tyre recyclers) and coal interests to put together a Sovereign Gold and Bond-centered strategy that leverages market forces to re-align incentives and secure multiple goals concomitantly and efficiently.
Many recent innovations and technologies – from nano-science and IT, to robotization, are indiscriminate in bestowing their benefits between the Closed-cycle and the Open Cycle. The Open Cycle economy, characterized by production inefficiency, use of fossil fuels, and hence environmental externalities, is, paradoxically, benefited more than is the Closed-cycle by such technologies that enhance its efficiency, reduce costs, turn it more competitive, and hence extend the longevity of constituent firms and industries1, albeit at the cost of exacerbating externalities. Thus, Steel-making, or rather its intermediate product, iron-making with Pulverized Coal/Coke as fuel/reductant – one of the more environmentally-injurious processes, has turned more production-efficient for the myriad technological innovations and reliability-enhancements, and consequently, has leveraged its status as a crucial infrastructure sector within and across nations. Similarly, Coal mining has expanded scale and lowered costs with new technologies, and successfully countered, both, its environmental and economic disadvantage relative other fuels. Reductions in costs of iron-making and coke manufacture due the new wave of innovative technologies, would, logically, enhance profitability, and extend, if not enlarge externalities associated with these processes.
The above context presents a challenge, even an opportunity. The opportunity lies in devising a strategy that leverages societal values for Closed-Cycle and Climate Sustainability by ‘closing’ the iron-making production cycle, that simultaneously resolves the exploding solid-waste externality due plastics, and which also compensates Coal interests for the de-classification of their proved, economic reserves. The challenge involves the design of a macro-strategy that turns iron-making 3-way sustainable - a) by enhancing the economics of recycling plastics and its composting in to coal- and coke substitutes, b) by offering financial incentives to iron-makers to adopt these substitutes, even if it means varying operational and quality parameters, or adding to costs, and c) ensuring further, that Coking Coal interests are compensated for the consequent loss of economic reserves. Such design, if successful, would incentivize sustainable recycling of Plastic solid-waste globally, and abate externalities associated with mining of metallurgical coal, and its processing in to Coke. But how’d one placate Coal for the loss of production and its not inconsiderable reserves, incentivize recyclers to recycle plastics in to composites, and persuade iron-makers to substitute coal fines and coke with plastic composites, while taking on the risk of cost increments and product quality variations? This manuscript outlines a strategy that anticipates the financial and economic stumbling blocks that might confront policy-makers, and offers a defensible, ESH-prudent, sovereign, macro-financial strategy that obtains desired outcomes efficiently through market-based instruments.
Interested in more than just the Intro and the Conclusions? Here's the pdf: GP Social Macro Finance
The Nominal Paradigm, coupled to a per-capita economy administered by a populist government comprised of Political parties in nexus with stock market capitalists and purveyors of open-cycle technologies, causes environmental and social externalities to explode and threaten societal sustainability1. Post producer- and post-consumer Plastics waste is a very obvious and enlarging externality of modern times. Concomitantly, Coal mining and Coke production, is beset with its own externalities in production, processing, and in use. This manuscript perceives an emerging pareto opportunity around, on one hand, developments in Plastics Recycling and Compositing, and on the other, in the use of re-processed Plastics waste as Reductants in Blast Furnace Iron-making. Though demonstrated technically, these innovations remain largely in the realm of niche, government-supported programs. This proposal offers a financially-defensible, economically-robust, market-based design to incentivize CC-technologies at multiple points in the economy, and thus brings about a quantum jump in the recycling and re-use of plastics beyond furthering Closed-Cycle goals.
1. Plastics convert iron-ore to Steel: Feedstock recycling in blast furnaces, Plastics Europe.
2. Recycled Mixed Plastics as Reductant in Iron-making, Dankwah, Amoah, Dankwah and Fosu.
3. Recycling of Waste Plastic Packaging in Blast Furnace System, Yojiogaki, Koichi Tomioka, Watanabe, Koji Arita, Kuriyama and Tetsuro Sugayosh, NKK Technical Review No. 84 (2001).
4. McKenna, Phil. ‘New Life for Old Tires’. MIT Technology Review.