Taxes
Given the huge structural challenges our economy still faces and with the government still borrowing around £100 billion per year, it felt somewhat trivial for Queen’s Speech day to be filled with debate on a proposed 5p charge on plastic bags in supermarkets and large shops.

For most people, it is difficult to get animated about this. Many simply shrug their shoulders and say, ‘well, plastic bags are bad for the environment … and in the grand scheme of things 5p per bag is not going to have a dramatic impact on my wallet’. If the figures from Wales and elsewhere are correct then this charge is also likely to act as a significant deterrent to plastic bag use – possibly reducing usage by 75 per cent. This is surely, unambiguously a good thing, right?

Not quite. The reason we should care about this relatively trivial policy is that it provides an excellent case study in the narrow thinking that surrounds much government regulation. It also shows how regulations become captured and shaped according to the interests of certain groups.

To see why, consider the justification behind the plastic bag charge. Plastic bags, it is said, take 1,000 years to degrade. There are 8 billion of them used per year (a very big, scary number –currently about the number of pounds our government is borrowing every 29 days) and they blight the landscape, particularly in coastal areas. The eventual presence of plastic bags in the oceans also has significant negative impacts on marine life.

In other words, plastic bags have what many economists would describe as ‘negative externalities’. The social cost of plastic bag use is greater than the marginal cost to an individual bag user (who will pay within his broad shopping bill for the bags), meaning that there is overuse relative to some social optimum.

Given this social cost, the textbook ‘Pigouvian’ solution would be to apply a tax on plastic bag use in order to ‘cost in’ or ‘internalise’ this social cost and reduce the amount used closer to the socially optimal level. Hence, a per bag charge of 5p.

The problem is that in public debate we only hear about the benefits of the charge. Our analysis is incomplete. The costs, the behavioural changes which may result and the broader inconsistencies of the policy do not get a look in.

The reason we use lots of plastic bags is because they are incredibly cheap and convenient to use, both for customers and supermarkets. Making the carrying of shopping more expensive or difficult, even if the overall per bag charge is small, therefore has economic costs. This is so directly, through the charge. But there might also be a minor effect in terms of slower moving check-out processes, as shoppers attempt to squeeze more goods into each bag, shop assistants tally up the number of bags used and so on. There is a reason why supermarkets give out bags free – they are cheap and to charge for them would be time consuming.

Empirical work on the effects of a plastic bag ban on grocery and convenience stores in Los Angeles was undertaken in an NCPA study two years ago. This found that areas with the bag ban on average saw sales decline by 3.3 per cent over a one year period, compared with an average increase in sales of 3.4 per cent in areas without the ban. Of course, given that ours is a charge, not a ban, and is applied to all supermarkets across the country we might expect the distortive aggregate effect to be much smaller. Yet the government evidently thinks it will have a detrimental effect on some businesses, otherwise it would not have exempted small businesses and independent stores from the legislation.

Indeed, the most baffling part of this sort of legislation is its inconsistencies. If plastic bags are the thing we want fewer of, then why are some shops exempted? More importantly, if it is plastic per se we want less off, why are we only imposing charges on plastic bags? What about plastic pots and food containers? Will not imposing charges on the bags simply lead to adjustments to packaging to make the goods easier to carry in the first place?

In reality, it’s rare for the public discourse to seem to be concerned by plastic per se. Perhaps this is just because of the visual effects of plastic bag pollution. But one gets the sense that the anger surrounding their use is more to do with opposition to the casual consumption they represent, considered ‘vulgar’ by some.

Then there are the environmental trade-offs, of course. Since people still need some sort of means of carrying their shopping, we cannot only consider the humble plastic bag in isolation. One of the reasons why plastic bags are so cheap, for example, is precisely because they are extremely energy and water efficient to produce. For an equivalent amount of groceries, the NCAP study finds that production of paper bags consumes three times as much energy as plastic. Paper bags also produce substantially more landfill waste, whilst both paper bags and reusable bags lead to much higher greenhouse gas emissions than their plastic cousin.

In fact, an Environment Agency study found that cotton bags would need to be re-used over 100 times before they yielded net environmental benefits. But it found that cotton bags are only re-used around half that amount, making them worse than plastic on net for the environment. This is before considering the energy and water required to clean and maintain them, and the potential for negative health effects in relation to bacteria brought about by repeated use.

The case for the charge then is much more ambiguous when all these unintended consequences, inevitable carve outs for special interests and costs associated with the intended consequences are considered. Absent government regulation, supermarkets already have incentives to purchase bags as cheaply as possible (which often means less energy intensive to produce) or indeed to encourage their customers to bring their own bags. We should therefore be suspicious of heavy-handed government attempts to intervene, particularly at a national level.

Though I would not wish to live in a local area that imposed a plastic bag charge, if this really is regarded as an essential policy then surely it should be delivered at a local level. Almost without exception, the main social costs of plastic bag use are local – very local. Local competition would help ensure that local authorities only imposed charges to the extent that they reflected the true social costs to the local inhabitants of plastic bag use.

Quite simply, almost all activities have external costs and benefits. Yet we do not attempt to calculate optimal taxes for all of them at a national level, for good reason – it’s hard to quantify and there are a broad range of potential consequences to consider. It’s time our regulatory efforts stopped pretending behaviour occurs within a vacuum.

Ryan Bourne

Head of Public Policy and Director, Paragon Initiative

Ryan Bourne is Head of Public Policy at the IEA and Director of The Paragon Initiative. Ryan was educated at Magdalene College, Cambridge where he achieved a double-first in Economics at undergraduate level and later an MPhil qualification. Prior to joining the IEA, Ryan worked for a year at the economic consultancy firm Frontier Economics on competition and public policy issues. After leaving Frontier in 2010, Ryan joined the Centre for Policy Studies think tank in Westminster, first as an Economics Researcher and subsequently as Head of Economic Research. There, he was responsible for writing, editing and commissioning economic reports across a broad range of areas, as well as organisation of economic-themed events and roundtables. Ryan appears regularly in the national media, including writing for The Times, the Daily Telegraph, ConservativeHome and Spectator Coffee House, and appearing on broadcast, including BBC News, Newsnight, Sky News, Jeff Randall Live, Reuters and LBC radio. He is currently a weekly columnist for CityAM.

6 thoughts on “Plastic bags – why should we care?”

  1. Posted 07/06/2014 at 19:28 | Permalink

    Points well made, however I would add that the stated use of this tax (that comes into effect in October in Scotland) is to use the bulk of the proceeds to give to worthy causes.

    http://www.civilsociety.co.uk/finance/news/content/16693/plastic_bag_tax_to_raise_70m_for_charity

    As yet I have not seen which charities will benefit. My gut tells me some will be diverted to fakes like CRUK and ASH.

    All the more reason to keep it local and allow customers of individual supermarkets to decide which charity, or worthy cause, in their area should benefit.

    Furthermore if the Irish example is anything to go by, the tax has had to be increased at regular intervals to maintain their “donations” to worthy causes. Something I expect to see in Scotland by 2016.

    But folks will find a way round this. And all are massively more wasteful.

    http://www.allaboutbags.ca/irelandandlitter.html

  2. Posted 09/06/2014 at 10:23 | Permalink

    A shoplifter’s dream as the lug their capacious bags round the store.

  3. Posted 09/06/2014 at 10:32 | Permalink

    Given all the “single use” transit & shelf display card & paper packaging that still exists in supermarkets why not recycle this into paper carrier bags. They could be of thicker quality to offset fact they are paper & not plastic so as not to give way on a first (single trip)

    Any that weren’t wanted could then be put out with the “green” waste (food & garden) collection to be composted for the Biogas via AD process. With dry food waste they could even have the food put inside them so as to help to keep bottom of green bin clean & smell free

  4. Posted 05/10/2015 at 07:50 | Permalink

    Quote: It also shows how regulations become captured and shaped according to the interests of certain groups. Comment: Who cares at the end of the day there are too many bags clogging up the system and encouraging waste as they are simply just thrown into landfill. Forget the damage done to wildlife, and the universe, we need to be more conscious of recycling generally.
    Quote: The costs, the behavioural changes which may result Comment. Living in Wales where it has been in force for a while now, the only behavioural changes have been very positive. Every shopper you see people entering shops with reusable bags. Plastic bag use is down dramatically and by default so is the environmental impact.
    Quote: But there might also be a minor effect in terms of slower moving check-out processes, as shoppers attempt to squeeze more goods into each bag, Comment: Wrong, just go to a checkout at Aldi in Wales, in fact it is even faster. Also Tesco are pirating a trusted shopper scan system at my local supermarket, where as you pick goods off the shelf, you scan with a hand held scanner and place it directly in your own reusable bag in the trolley, then at checkout, just download the whole shop and pay, without even ever touching the goods.
    I would love to go on showing how pitiful this complaining piece is but I have much better things to do. I will however leave a closing comment, NO WONDER ENGLAND LAST WON THE FOOTBALL WOLD CUP IN 1966 and are the FIRST HOST NATION TO NOT MAKE IT THROUGH THE FIRST ROUND THIS YEAR IN RUGBY, WHEN YOU CANNOT EVEN GET YOUR HEADS ROUND THE BENEFITS OF NOT WASTING PLASTIC AND POLUTING THE ENVIROMENT.

  5. Posted 05/10/2015 at 07:51 | Permalink

    Quote: It also shows how regulations become captured and shaped according to the interests of certain groups. Comment: Who cares at the end of the day there are too many bags clogging up the system and encouraging waste as they are simply just thrown into landfill. Forget the damage done to wildlife, and the universe, we need to be more conscious of recycling generally.
    Quote: The costs, the behavioural changes which may result Comment. Living in Wales where it has been in force for a while now, the only behavioural changes have been very positive. Every shopper you see people entering shops with reusable bags. Plastic bag use is down dramatically and by default so is the environmental impact.
    Quote: But there might also be a minor effect in terms of slower moving check-out processes, as shoppers attempt to squeeze more goods into each bag, Comment: Wrong, just go to a checkout at Aldi in Wales, in fact it is even faster. Also Tesco are pirating a trusted shopper scan system at my local supermarket, where as you pick goods off the shelf, you scan with a hand held scanner and place it directly in your own reusable bag in the trolley, then at checkout, just download the whole shop and pay, without even ever touching the goods.
    I would love to go on showing how pitiful this complaining piece is but I have much better things to do. I will however leave a closing comment, NO WONDER ENGLAND LAST WON THE FOOTBALL WOLD CUP IN 1966 and are the FIRST HOST NATION TO NOT MAKE IT THROUGH THE FIRST ROUND THIS YEAR IN RUGBY, WHEN YOU CANNOT EVEN GET YOUR HEADS ROUND THE BENEFITS OF NOT WASTING PLASTIC AND POLUTING THE ENVIROMENT.

  6. Posted 05/10/2015 at 09:40 | Permalink

    I live on a small rural Council estate in the shires. About twice a month i.e. 24 times a year, we receive plastic bags within plastic bags from charities asking for them to be filled with unwanted clothes. If unused, the charities ask that the bags be placed outside addresses in order that they might be re-collected and (presumably) re-used. Never, in 5 years of living at my address have any of these empty bags been collected. Consequently they are dumped in with general waste. If we assume that, say, 40 million of the 60 million homes in this Country are similarly visited, the number of bags that go to landfill in this scenario are, the calculator on my mobile tells me, “Out of range”.

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