Blogs | October 26, 2011

Do plastic bag taxes work?

Kay asks: “I see Wales in the United Kingdom now has a tax for plastic bags. Do you think it will actually encourage shoppers to use fewer plastic bags?”


Ian answers:
The Welsh government has indeed introduced a user pays fee for new “single use” carrier bags this month and says the bag tax is aimed at changing the way people behave. Interestingly, I’ll be trying out this tax first hand next holiday season, when I travel to Wales again. In the meantime, I have been thinking about how it ties in with the behavioural economics idea of using small nudges to encourage bigger changes in life. It also brings to mind experiments to see if penalties are more effective than incentives when it comes to changing the way we act.

Carrot or stick?
In this case, the penalty is a tax for using a plastic bag. Is that likely to be more effective at cutting plastic bag use than an incentives-based scheme, such as putting reusable bag owners in a prize draw? Studies of waste collection suggest that penalties – charging – do seem to be particularly effective. For example, parts of Sweden that imposed pay-by-weight household waste schemes collected 20% less household waste per person, according to a research paper issued last year. Similarly, a phenomenon known as the “Seattle stomp” arose when charges for household waste disposal in Seattle, in the United States, started. The volume of waste collected was reported to have reduced by 37% but the weight of that garbage was reduced by only 14%. The “stomp” was the term for people compacting their garbage before disposal.

A popular tax
Despite the fact that people don’t usually like having to pay for something they are used to getting for free, plastic bag taxes appear to be relatively popular. A 2007 paper examining Ireland’s plastic bag tax asks if it’s “the most popular tax in Europe” and that the response to it “has been overwhelmingly positive”. It says reasons for its popularity is that the reason for it was well understood and the revenues were directed to environmental issues rather than to general revenues. Arguably, shoppers in Ireland also see value in reducing plastic bag use and therefore are getting something for their money. Experiences around the world have varied, however, with a study from South Africa finding plastic bag use dropped when a levy started but crept up – possibly as shoppers got used to paying. In China , effectiveness varied depending on the degree of enforcement and public education.

Easy to carry lessons
Time will tell how effective the Welsh tax is – but there are positive precedents. The general ideas behind the tax can be applied to other areas in life, including saving and investing. Like paying for plastic bags, saving is not necessarily instantly pleasant. It diverts the pleasure of spending now in the hope of obtaining something in the future. Once saving and investing goals are set, have frequent reminders of the plan to boost understanding of why you’re doing it. After all, it’s what I’ll be doing to save for my trip to Wales.

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Ian Bright
Ian Bright

Senior economist at ING
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