Plastic bag tax

The government is considering a tax on plastic bags. The rationale is clear: they cause waste with costs that neither supermarkets nor shoppers currently internalise. Apparently, there is some skepticism that this will actually result in a desired change in behaviour; the argument being that it could just become a straight out tax.

Fortunately, the Irish did the world a favour and introduced a similar tax back in 2002 (a 15 cent Euro charge). And the results have been studied. For instance, a paper published in Environmental and Resource Economics found that:

The effect of the tax on the use of plastic bags in retail outlets has been dramatic—a reduction in use in the order of 90%, and an associated gain in the form of reduced littering and negative landscape effects. Costs of administration have been very low, amounting to about 3% of revenues, because it was possible to integrate reporting and collection into existing Value Added Tax reporting systems. Response from the main stakeholders: the public and the retail industry, has been overwhelmingly positive. Central to this acceptance has been a policy of extensive consultation with these stakeholders. The fact that a product tax can influence consumer behaviour significantly will be of interest to many policymakers in this area. This paper analyses the plastic bag levy success story and provides insights and general guidelines for other jurisdictions planning similar proposals.

This is as strong as an endorsement as you are ever likely to get. Basically, in Australia, retailers argue that the reduction will only be about 30 percent. The Irish experience suggests that that is a dramatic under-estimate. The only potential bad news is that there won’t be much revenue for possible uses on environmental clean-up. But let’s face it, that is the best bad news one could hope for.

[Update: Peter Garrett has ruled out a bag levy. Terrific. ;( ]

10 thoughts on “Plastic bag tax”

  1. You found the PC report wanting, but you also found that ‘it does tell us that policies designed to reduce overall plastic bag usage might be hitting at the wrong end of the problem. Instead, we likely need to spend money limiting the amount of plastic bags that enter into streams. That would directly hit upon the cost.’ So, why are you going on about a tax now?

    I’m very dubious about relying on an abstract of an article that refers vaguely to ‘an associated gain’ as an answer to the PC report’s concerns.

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  2. True but compared to an outright ban it seems like a better move. Also, who knew that a small tax could lead to such a large change in behaviour. That suggests to me that plastic bags aren’t really that much of a consumer boon.

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  3. And, when you read the actual article, the claims of an associated gain come down to: (a) a citation of unrefereed ‘surveys’ by an interest group, with a link to a website where the surveys don’t seem to be available; (b) consumer surveys where consumers say that they don’t see plastic bags around much (c) Ireland’s National Litter Survey, which found a massive drop in the ‘percentage’ of plastic bags in litter with the introduction of the levy (which is kinda surprising given the claims about the longevity of plastic bags in the environment) but only slight immediate drops in actual litter pollution in 2002-2003 and a rise in 2003-2004. In their breakdown of types of litter pollution, plastic bags don’t even rate as an individual category. The main litter culprit: cigarettes. Hey, how about we tax cigarettes?

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  4. We seem to be cross-posting. I dunno about the ‘consumer boon’ claim. Everytime someone tries to charge for access to internet websites (apart from porn), no-one pays. Does that mean that the internet isn’t really that much of a consumer boon?

    I hate to say it, but not all consumer responses to price changes are rational. Witness the success of Coles and Safeways ‘4 cent’ discount vouchers for petrol.

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  5. Wouldn’t the best solution be to enforce that if plastic bags be used, they be biodegradable? Shops then pass the costs of these (more expensive) bags onto consumers, or consumers opt to use the re-usable bags. Seems pretty straightforward to me.

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