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January 26, 2005
Taxing plastic bags
According to MSNBC, San Francisco is considering putting a $.17 tax on plastic grocery bags:SAN FRANCISCO - City officials are considering a proposal to slap a 17-cent surcharge on paper or plastic shopping bags, a debate sure to be watched as a bellwether for other communities across the United States.While no other U.S. city imposes a shopping bag tax, such a strategy has been successfully employed in the nations of Ireland, South Africa, Bangladesh, Australia, Shanghai and Taiwan.
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Environmentalists say plastic bags jam machinery, pollute waterways, suffocate wildlife, use up finite supplies of fossil fuels and often end up as eyesores in trees or bushes.
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The environment commission says the 17-cent figure represents an estimate of the costs to the city to clean up and dispose of each plastic bag.
We would be setting a trend, certainly, of a city of our size to be issuing this kind of supplantation of plastic bags for an alternative, something more environmentally friendly, Mirkarimi said.
The first question we need to ask is: what does "successfully employed" mean? Presumably what they mean is that it's reduced the number of people using plastic garbage bags--or of plastic garbage bags littered--but let's take a step back: there's got to be some right number of plastic bags used. Now, it's quite possible that the people writing this ordinance think the number is zero, but obviously that's not the intention of that ordinance, since then you would simply make them illegal. So, in order to know whether this is being successfully employed we first need to know what the right number is. The Irish example that's being positively cited here is claimed to have produced a 95% reduction in plastic bag use. If that's the right number, wouldn't it be simpler to ban them entirely?
The size of the tax makes it pretty clear what the intention is here: it's set to be the claimed price of cleaning up the bags. Clearly, then, this is intended to be some sort of primitive Pigouvian tax where the cost is set to match the externalities. If you're using this strategy, then the appropriate metric is that the efficient number of bags being used. I wonder if anyone involved has any idea what an efficient number is.
In principle, of course, an appropriate Pigouvian tax should produce an efficient result. The only problem is, this particular Pigouvian tax is being executed in a fairly incompetent fashion: if you're going to have a tax like this, you want it to disincentivize the behavior you don't like, which in this case is presumably littering. The problem here is that everyone who uses plastic bags is paying, even if they don't litter, so it's not a very efficient incentive. What would be an efficient incentive would be a deposit. A deposit is superior in two respects. First, it incentivizes people not to litter. Second, it incentivizes other people to pick them up, just as currently happens with cans and bottles.
What a tax of this kind does is disincentivize all use of plastic bags. Now, that makes sense if you think that the primary negative externality with plastic bags is the environmental cost of producing them. I'm fairly skeptical that that's the case but even if it were, they're far from the only kind of plastic that's widely used, and I suspect they all have similar environmental impacts per barrel of oil used, so why not simply tax the use of fossil fuels for plastic production in general?
Credit: Kevin Dick alerted me to this story.
Posted by ekr at January 26, 2005 8:12 PM | Filed under:
Comments
FWIW, the Irish tax works nicely; plastic bag litter, which was a pretty common eyesore, is a thing of the past. 95% sounds about right.
regarding whether it should be a tax on receipt or disposal of the bag -- I think you're overlooking the cost of running the scheme. If the scheme involves *giving* people money for used bags, as a deposit would, then you have a need for an infrastructure to support payments in the opposite direction -- and given possibilities of fraud by unscrupulous consumers, there's more overhead involved for payments in that direction.
Posted by: Justin Mason at January 26, 2005 11:33 PM
i'm living in ireland and the whole thing surprised me how easy it was to introduce.
we're also amazed how the euro introduction and smoke ban worked so easilly...but then we are having some problems getting used to the switch to metric speed limits which happened last week.
the way the bag tax worked out is that the supermarkets etc. made better quality reusable canvas bags so that people tend to be able to reuse them and feel they have some value over the traditional throwaway plastic.
I think the supermarkets will replace any worn out or very old ones.
its 15c euro tax on every bag.
Posted by: neil c at January 27, 2005 6:20 AM
Again, you've utterly failed to define "works nicely". The reason that people use plastic bags is that they are *convenient*. If canvas bags were more convenient then people would purchase and use them already. So, a shift to using canvas bags imposes a cost to consumers. The right amount of plastic bag use is the one th balances that convenience with the negative externalities efficiently. What reason do you have to believe that practically noone using plastic bags is efficient?
As for the need for an infrastructure to support deposits, we alread have such an infrastructure for aluminum cans.
Posted by: EKR at January 27, 2005 6:41 AM
Regarding convenience -- I think the cost to consumers turned out to be lowered than most consumers (myself included) expected. Instead of being a major inconvenience, it became a matter of relearning some minor habits, and quickly became second nature and no longer inconvenient.
Many people I've talked to about the ban support it, even though it imposes a direct cost on them, because they see the benefit to their environment -- in that there's less plastic to dispose of, and less plastic-bag trash on the streets. In other words, they're taking the benefit to their environment, as a benefit for themselves (or for the group).
BTW, one factor that may differ between Ireland and SF is that, in Ireland, we're keenly aware of the costs of rubbish disposal. It's a small island, and space for dumping rubbish is at a premium; many new dumps are being opposed by nearby residents, shipping rubbish overseas is expensive, and that's become a major issue for local and state-wide government, and one that's in the public consciousness. So as a result, the benefit in reducing rubbish output is seen as a major benefit *to ourselves* in our minds.
The US is a lot bigger, with plenty of room for new dumping grounds, and I have little doubt that the trash output of most cities here is hardly considered an issue by their inhabitants. (Can't say I've ever heard any LA residents ever mention it, at least.)
Posted by: Justin Mason at January 27, 2005 10:21 AM
Even without a deposit, it sounds like the problem is that the $.17 is too high, based on the assumption that every plastic bag will be littered. It's more likely that only perhaps 10% of them are littered, in which case they should set the tax correspondingly lower. They should be able to get a good estimate of how many plastic bags are used in the city every day. It's probably harder to estimate how many of them become litter, but they could probably come up with an order of magnitude anyway. Based on this they can determine the fraction that become litter, and from that they can set the rate that would balance the externalities.
I think there would be a lot of problems with setting up a deposit system for plastic bags. They don't maintain their integrity as well as bottles and cans, so it would be harder to count them. You could redeem them on a per-pound basis but they are so lightweight that contamination would make a substantial difference. Taxing them is far simpler.
Posted by: Cypherpunk at January 27, 2005 3:10 PM
Since I like language: Begging your indulgence, I'm going to comment
on the words, here, rather than on the content.
you want it to disincentivize the behavior you don't like
What a tax of this kind does is disincentivize all use of plastic bags.
Is there something wrong with "discourage"?
First, it incentivizes people not to litter. Second, it incentivizes other people to pick them up
Why not "motivates"?
Is there a reason we've felt a need to create a verb out of "incentive"? I have to say that I dislike "incentivize" slightly less than I dislike "incent". Ever so slightly, though.
Posted by: Barry Leiba at January 30, 2005 7:47 PM
Uh, it's a technical term from economics?
More to the point, motivate/encourage/discourage all refer at least in part to the attitudes of people. Incentivize only refers to altering the cost/reward structure that results from their actions.
Posted by: EKR at January 30, 2005 8:50 PM