Plastic bags have become an ever-growing issue with the increasing predicament of pollution into today’s society. Single use plastic bags are made from petroleum products and therefore affect fossil fuel supplies. The sourcing and manufacturing process of this product plays a part in environmental pollution, and is therefore a contributing threat to the environment (Clapp & Swanston, 2009). This critical economic overview of a plastic bag tax shall examine and analyse both the positive and the negative impacts that plastic bags play in our society.
The economic, social and environmental aspects are key to examining whether or not a plastic bag tax is right for Australia. Plastic bag consumption has become an increasingly prominent issue. The amount of single use plastic bags has increased, however subsequent recycling of these products has not kept in step. Estimates of today’s worldwide plastic bag consumption range from 500 billion to 1. 5 trillion each year (Spokas, 2008).
While the amount of plastics entering the marketplace every day is huge, it is the lack of recycling of the plastics which causes the greatest issue. In 2002, between 50-80 million plastic bags were littered in our environment causing damage to wildlife, increased landfill while also being aesthetically displeasing to society (“NLA Australian Government Web Archive”, 2016). With such a large amount of plastic bags being produced and circulated it is no wonder that the negative impacts of plastic bags arise (Clapp & Swanston, 2009).
This has become a growing issue and there has become increasing pressure put on countries who have not yet introduced a plastic tax or ban. There are various acts in place to try and protect the environment including the National Waste Policy 2009, Australian Packaging Covenant 2010, National Environment Protection (Used Packaging Materials) Measure 2011, Packaging Impacts Consultation Regulation Impact Statement 2011, as well as many others, however there has not yet been an Australiawide tax introduced on plastic bags.
In saying this, lightweight plastic bags have been banned in the ACT, Northern Territory, South Australia, and Tasmania (NSW Parliamentary Research Service, 2013). In order to thoroughly examine the economic theory behind this analysis an economic model must be constructed. Figure 1 illustrates the supply and demand curve, which indicates that at a cost of $0 for plastic bags, marginal benefit does not equal marginal cost, and therefore the market is not at equilibrium. However at a cost of 10c, marginal benefit equals marginal cost.
The reason behind this inefficiency in the market is that when plastic bags are considered free, overconsumption occurs, thus creating an inefficient market. Even if the marginal benefit is very low, overconsumption can occur should the marginal cost be lower than the marginal benefit. Only minimal marginal analysis is required in a transaction where the marginal cost is seen as zero. Consumers may realise that the cost of the plastic bags are included in the goods sold by the retailer, and therefore want to maximise their marginal benefit by taking multiple plastic bags.
If consumers are very aware of the cost of the plastic bags and are asked directly for money to purchase the product then consumers will weigh up the cost benefit of the product and are less likely to consume the product if marginal cost is greater than marginal benefit. This is clear from Figure 1, as plastic bag consumption was 15 million when considered free by the consumer, however at a price of 100 each people had to weigh up the cost benefit, and the consumption reduced to 5 million.
This then reduces supply and manufacturing which consequently reduces negative impacts that are caused by the product and overconsumption. Therefore it is clear that decreasing plastic bag consumption will create a more socially efficient market. Figure 1: Plastic Bag Economic Model The plastic bag tax will be an effective practice in correcting market inefficiency, as it has already proved for many markets around the world. In fact if the Irish plastic bag levy were to be removed, it would be politically damaging, as it is so popular (Convery, McDonnell, & Ferreira, 2007).
The policy introduced in Ireland lead to a reduction of around 90-95% of plastic bag usage (Clapp & Swanston, 2009). Should Australia benefit from a simular effect, the damage that plastics are currently doing to Australia’s cherished wildlife should reduce. Plastic bags are incredibly hazardous to Australian waters and all around the world, as many animal species mistake them for food and once the species eats the bag they are unable to digest it and it therefore gets stuck and can lead to death depending on the animal’s sensitivity (Ayalon, Goldrath, Rosenthal, & Grossman, 2009).
While the introduction of this policy could positively impact wildlife, landfill usage and aesthetics, there are potential limitations that must be considered. These include the inconvenience and extra cost to customers, loss of the benefit of reusing the bags as bin liners, a potential switch to paper bags, which also has negative impacts, retailers may incur shoplifting of trolleys to transport goods, and the compromise of food safety in the packaging of meat and fresh foods (Westcott, 2010).
One of the largest issues surrounding the plastic bag tax is the unhygienic reuse of reusable bags, especially with fresh food and meat. An alternate policy that has been considered by Israeli parliament members is to prohibit plastic bags, and encourage the use of multi-use bags (Ayalon, Goldrath, Rosenthal, & Grossman, 2009). An exception in this policy is to allow plastic bags only for fresh food products to maintain hygiene (Ayalon, Goldrath, Rosenthal, & Grossman, 2009).
This policy would dramatically reduce plastic bag usage, however the consumers will still purchase bin liners, which may be seen to contradict the policy and the risk of retailers switching to paper bags as a cheap alternative to multi-use green bags. Another issue that also faces customers is if they forget their multi-use bags and after shopping are forced to buy the more expensive green multi-use bags. This is less of an issue if it is implemented as a plastic bag tax as you can still purchase the plastic bags at a price, but a much lower price (e. g. 0c) in addition to the option to purchase the multi-use bags.
However, the ban on plastic bags entirely except for fresh food is likely to decrease the circulation at a greater rate than the selling of the plastic bag at 10c, as it is still available and cheap for customers to purchase. There are both positive and negative social and economic outcomes for both possible solutions however the plastic bag tax has been proved to work incredibly well in the Ireland and surrounding countries and is most likely to move the Australian marketplace to equilibrium.
In summary, it is evident through critical economic analysis that a plastic bag tax would be beneficial to Australia, and its environment as well as ridding the marketplace of overconsumption and inefficiency. As proven throughout the world, this tax could bring the Australian plastic bag marketplace back into equilibrium at maximum efficiency, where marginal benefit equals marginal cost.