Plastic bags: industry-based solution versus regulation

Foodstuffs have recently announced that they will voluntarily introduce a 5c charge per plastic bag consumed through their New World and 4 Square supermarkets, with the revenue generated being used for an “environmental initiative” (previous post on the issue here).

Foodstuffs account for over half of all supermarket sales in New Zealand through their New World, 4 Square and Pak ‘n’ Save brands, while supermarkets in general account for 80% of plastic bags.

This move follows the likes of the Warehouse and Borders who already charge for plastic bags (and North Island Pak ‘n’ Save stores have long charged for plastic bags, albeit for different reasons).

One might assume from this positive action by Foodstuffs that an industry-based solution to the perceived problem of plastic bag over-consumption would negate the need for any regulation. But the thing that jumped out at me from the article was this quote from the Greens Russel Norman:

“What we need now is for the Government to back up Foodstuffs’ good initiative by introducing mandatory product stewardship for plastic bags”

Why would the Government need to mandate anything to do with plastic bags when the industry is clearly finding a solution to the perceived problem? Regulation is costly, not just in terms of resources needed to enact a bill or other measure, but also due to unforeseen outcomes that may arise from such intervention. Regulation should always be a last resort. In this instance I think regulation is blatantly unnecessary.

One might argue that it is due to the threat of regulation that Foodstuffs took this action in the first instance. This may be true, we don’t know. But given the moves made by Foodstuffs and other retailers I think that to now clamour for regulation is just plain silly and unfortunately seems to be a reflection of the Greens approach to everything – regulate!

No matter what the issue, you should always give industry a chance to resolve a perceived problem before intervening.

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  • I agree there’s no need for the government to get involved.

    Off on a tangent: if donating most of the profits from bag sales to help environmental causes is good, why stop there?

    Would donating most of the profits from food which doesn’t meet healthy eating guidelines to eg the Cancer Society or Heart Foundation also be good?

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  • I have to say that I find the overall point of the post unconvincing: what incentive does a firm have to ensure that MC=MSC? It reminds me of the fishing industry’s claims that it has the best interests of the fish at heart and doesn’t need a quota system to help it manage them sustainably. I’m not claiming that’s analagous to plastic bags, just that I don’t see firms’ promises to ‘be good’ as particularly credible.

  • rauparaha :
    I have to say that I find the overall point of the post unconvincing: what incentive does a firm have to ensure that MC=MSC? It reminds me of the fishing industry’s claims that it has the best interests of the fish at heart and doesn’t need a quota system to help it manage them sustainably. I’m not claiming that’s analagous to plastic bags, just that I don’t see firms’ promises to ‘be good’ as particularly credible.

    The proposed intervention was for a 5c charge on bags. The industry is moving towards a 5c charge on bags. Whether the 5c charge correctly assigns MC=MSC is not particularly relevent. What is relevant is that the same outcome is being achieved in the absence of regulation and therefore regulation is not necessary.

  • @goonix
    I think you’re presuming that 5c is the ‘correct’ charge. THAT regulation may not be necessary now, but I don’t see proposed govt regulation as the benchmark for how well we can do. If industry players have no reason to set MC=MSC then we can probably do better than their voluntary action most of the time, which makes it worth investigating irrespective of their commitment.

  • I’m not assuming 5c is the correct charge. But I think there are two considerations here that are important. Firstly, regulators probably aren’t going to be able to determine the exact social cost of a bag (hence estimates like 5c being thrown around). Secondly, the amount charged must be practical (12.3c per bag would not be, for example). It’s all very well going for a ‘pure’ approach to tackle the problem but practical considerations are also important.

  • Having said that, one would think 10c per bag would be more practical than 5c. 😛

  • As a practical matter, I think that a heuristic of regulating only when the industry has failed to take action would do a poor job of fixing market problems. Certainly, in the case of plastic bags, it is likely that 5c exceeds any identifiable externality. However, in other situations, I’m not so sure that the circumstances would lead to anything approximating an ideal outcome, if such a rule were to be used.

  • Just because industry might get it ‘wrong’ is no reason to not given them a chance first.