Effective policy or the nanny state? Plastic bag use plummets in the UK

plasticbag

Plastic waste often ends up in the ocean

Some good news for the environment: following the introduction of a 5p plastic bag charge in England in October 2015, consumption has dropped dramatically, by 83% by the end of 2016 if current trends continue. This is surely an example of how a simple policy can be effective in changing behaviour, or incentives, as economists like to say. Note that the charge is not a tax, and is meant to be reused by the companies to which it applies. Many will give the money to charity, certainly if they care about their ‘social responsibilities’.

Plastic bag waste and pollution are an example of what in economics is called an externality. This is when the social cost or benefit of behaviour is not reflected in the price charged for a good or service. This results in economic inefficiency. If businesses or consumers are polluting but are not in some way paying for the cost imposed on society and the environment, then there is the potential for a charge or a tax on production or consumption to improve the economic outcome.

English consumers are now charged 5p for each plastic bag used when buying from any firm with over 250 full-time employees. This follows the successful introduction of the same policy in the rest of the UK.

While some might grumble about the charge being another example of the ‘nanny state’ interfering in individual decision-making and reducing freedom, the counter-argument from economists should be that the market is now working more efficiently, and in a way that should please those concerned with the environment. This is a result of using market forces to alter behaviour in a way that benefits society, and it seems to have been effective.

On one estimate, eight million tonnes of plastic ends up in the oceans each year, harming birds and marine life, so this is a small price to pay for helping to reduce such impacts.

This success story could embolden environmentalists and environmental economists to make the case for similar such policies in the future, with regards to all sorts of market inefficiencies which result in negative externalities. In fact, much of mainstream environmental economics is based on the theory of externalities.

The effect in global terms may be small, but if it encourages other countries not already doing so to do the same, more widespread improvements to our environment would be possible.

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