Common Tragedies

Thoughts on Environmental Economics

Ban the bag?

Posted by Evan Herrnstadt on November 21, 2007

I think I’ve realized that I tend to write about Britain quite a bit because they seem to at least talk about environmental pricing more than we do. A pair of surveys performed shortly before the London councils moved toward banning free distribution of plastic grocery bags address the policy:

BMRB’s poll found that most people would be willing to pay for a sturdy plastic bag that would last up to 10 shopping trips. Most – 61 per cent – would be prepared to pay up to 10p, while 11 per cent would be willing to fork out 20p per bag. Most people would be willing to pay 50p for a reusable woven bag capable of lasting a year.

AC Nielsen’s survey asked one question: whether shoppers would change to a different store if their current supermarket stopped giving bags away. Only 16 per cent said that they would go elsewhere.

The Nielsen question is important because the case could be made that free plastic bags are simply a standard customer service that must be incorporated into the supermarket’s costs. The question didn’t seem to specify a bag price, so the result must be taken with a grain of salt. Still, if people truly aren’t going to switch stores over a bag charge, then it makes no sense to offer free bags.

The BMRB survey displays a disconnect: that consumers are willing to pay 50p for a cloth bag that will last a year implies roughly a 2p bag price (conservatively assuming they go grocery shopping twice a month), not the 20p price that would supposedly deter 8 out of 9 shoppers. For context, if the London Councils don’t ban the bags altogether, they would likely support a 10-15p charge.

This discrepancy probably arises because there are other costs that must be accounted for: people forget their bags, they make impetuous decisions to go shopping, they reuse the plastic bags for other purposes (e.g. lining small trash cans), or maybe they just don’t mind paying a periodic small fee versus a “big” one-time fee. This seems to be another one of those no-brainer decisions, like switching to CFLs, that simply needs some impetus from government to get off the ground.

The proposed London law bans free distribution of plastic bags, but perhaps the government should consider the following policy: Whole Foods “rewards” shoppers (sometimes, if they remember) by giving them a 5-cent discount for each non-plastic bag they use. Is this program more or less likely to work than a simple price on bags? It’s the old carrot vs. stick problem. Will people resent a transparent bag charge on their bill more than they would take pride in a bag reward?

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2 Responses to “Ban the bag?”

  1. I don’t buy the assumption that plastic bags produce unique externalities. The only real externality is litter. A deposit scheme would handle that, but is probably impractical. There’s an extended discussion here: http://austinzoning.typepad.com/austincontrarian/2007/10/ban-plastic-bag.html#comments

    If we use a tax, it should be set just high enough to clean up the litter. And it should be expanded to other major components of litter — fast-food paper bags, bottles & cans, etc. The tax could mostly simply be levied against the store, allowing it to decide whether to absorb it as overhead or customers a per bag fee.

  2. Kristoffer Andersen said

    In Denmark a tax on the plastic going into the production of bags has existed since 1993. The total cost of producing a plastic bag is in the order of 10p (1 DKR) after tax. However the price paid by consumers in most stores is often above 20p (2 DKR). Which means selling a plastic bag must be a pretty good business for the stores.

    I don’t know how the consumption of plastics bags would differ without the tax, but my impression is that most people still buy plastic bags in stores in Denmark.

    Double dividend! Make your costumers pay for the plastic bag: 1) it could help your image as an environmental responsible firm and 2) you might even make a buck.

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