It’s great to see the government taking economic incentives seriously. Their latest initiative considers imposing a 5c/bag tariff on plastic bags in supermarkets. The idea is that the market price for the bags doesn’t take into account the full environmental cost of non-biodegradable bags. By taxing the bags the government can adjust the market price of the bags to match their social cost.
What gets me so excited about it is that green regulations usually seem to take the form of rather arbitrary quotas and limits. A look at the Green’s manifesto reveals how preferable direct control is to them. This is an excellent example of a political party trusting economic incentive instruments to do the job. Nick Smith says,
I don’t see this is as some sort of cash cow, what’s important is changing consumer behaviour.
Music to my ears! The one concern I might have is whether there is an externality at all. If consumers pay for their rubbish, the rubbish company pays for landfill space and the landfill pays for any environmental harm it creates then where’s the inefficiency? I would guess, without actually knowing, that not all of these things hold in most places. As a consequence, taxing the bags might be the easiest way to get us closer to an efficient outcome.