Atanu Dey On India's Development

Monkey See, Monkey Do: Plastic Bag version

Back in September 2005, the government of Maharashtra had decided to ban plastic bags. The problem they were trying to address was of trash clogging up the storm drains in Mumbai resulting in the flooding of the city during the monsoons. Yes, the city does get flooded but banning the plastic bags was not the right response. A little bit of reasoning would have revealed that the proper thing to do is to charge user fees for the plastic bags — that would let the market solve the problem and enforcement would be much easier than enforcing a ban.

I wrote a post outlining the solution in Sept 2005: Banning Plastic Bags.

The mechanism that I would recommend is simple. For every plastic bag manufactured, collect a disposal fee. Let’s say it is Re 0.10. This fee gets passed on to the consumers – the people who ultimately decide whether to accept a plastic bag at the store or to bring their own re-usable bag, the people who decide whether to chuck the plastic bags on the streets after use, etc. The next step is to have collection centers where for every plastic bag turned in, Re 0.08 is returned.

What happens if this method is used? First, the number of plastic bags used will go down. Simple econ 101: price goes up, quantity demanded goes down. This is good for the economy since plastic bags are made out costly petroleum.

Second, discarded plastic bags are a source of income for those who take the trouble to collect them and turn them in. From what I have seen in Mumbai, in a couple of hours, one can collect 500 of them and thus make Rs 40 by turning them in. My conjecture is that following this sort of scheme, you will not find a single plastic bag in the streets of Mumbai.

They did precisely that in Ireland, as the NY Times reports. Motivated by a Tax, Irish Spurn Plastic Bags:

There is something missing from this otherwise typical bustling cityscape. There are taxis and buses. There are hip bars and pollution. Every other person is talking into a cellphone. But there are no plastic shopping bags, the ubiquitous symbol of urban life.

In 2002, Ireland passed a tax on plastic bags; customers who want them must now pay 33 cents per bag at the register. There was an advertising awareness campaign. And then something happened that was bigger than the sum of these parts.

Within weeks, plastic bag use dropped 94 percent. Within a year, nearly everyone had bought reusable cloth bags, keeping them in offices and in the backs of cars. Plastic bags were not outlawed, but carrying them became socially unacceptable — on a par with wearing a fur coat or not cleaning up after one’s dog.

I hope that the movers and shakers in Mumbai will learn from example even if they cannot follow the simple economic argument.

Curiously, the end of that NYTimes story ends with the line: “This year, the [Irish] government plans to ban conventional light bulbs, making only low-energy, long-life fluorescent bulbs available.”

Bloody hell, they did not learn from their own experience that banning does not work, whereas taxing an activity that has negative externalities helps. Truly mind-blogglingly strange. If conventional light bulbs cause damage, include the cost of that damage and the people will themselves figure out whether to buy CFs or incandescents.

Deva! Deva!

  • malapati

    Hello

    “that banning does not work, whereas taxing an activity that has negative externalities helps.”

    The idea of taxing instead of banning sounds sensible. But in India, I am not sure how far it works.

    It has not made any difference when cigarettes and other forms of tobacco along with alcohols were taxed heavily compared to the other goods.

  • saileshganesh

    Taxing instead of banning sounds like a great idea. But the tax of 10 paise sounds too low to make a difference. On the other hand, imposing a very high tax might open up a black market for plastic bags. What do you suggest to make sure this doesnt happen?

  • http://www.deeshaa.org Atanu Dey

    The 10 paisa tax per plastic bag is just an approximation. For arriving at the real figure, one will have to do some real figuring (heh), and that would also include working out the mechanisms which would prevent people from by-passing the tax.

    For starters, the tax has to be sufficiently high that it will make people choose to bring their own re-usable bags. I notice that the typical visit to the kirana store involves at around 4 or 5 little plastic bags — mostly for stuff that the store has in bulk and retails in measured quantities. These are often staples such as sugar, rice, etc. These little bags end up causing the most problem.

  • http://www.aseem.net/blog/ aseembajaj

    Dear Malapati,

    > But in India, I am not sure how far it works.
    > It has not made any difference when
    > cigarettes and other forms of tobacco along
    > with alcohols were taxed heavily

    Taxing as a form of discouragement works if there are alternatives. Bags are still being used by people in Ireland, except they are not plastic bags any more.

    If someone smokes, it’s unclear if further taxation would discourage her. Smoking is not utlitarian. It’s hard for people to change their brand of cigarettes, leave alone quitting. So, I don’t think that the real reason for tobacco tax increase is discouragement.

  • Amit

    In the US, some stores (mostly co-operatives) offer a 5 cent discount for each bag that you bring and have had this policy in place for more than a decade now. Whole Foods recently announced that they would stop offering plastic bags to customers during checkout. Stores are increasingly offering reusable bags for sale to customers.

    And the practice in India that I grew up with (70s, 80s) was to bring your own cloth bags when going grocery shopping. Looks like we’re finally coming to a full circle after all the scientific research, economic theories and what not and realizing that environment does matter. :)

    Also, China recently announced that it’d ban plastic bags. I’m sure economists won’t be happy with the “banning” part but if it helps the economy grow, maybe they will. What do you say, Atanu? ;)
    http://www.thedailygreen.com/environmental-news/latest/china-plastic-bags-47010907

    I personally am fine with such bans if it is proven that they do harm the environment and/or people, and the reason behind such bans is shared with people. An example is banning of gasoline with lead for on-road vehicles in the US. AFAIK, after the deleterious health effects came into view, it wasn’t decided to continue offering the leaded gasoline at a higher price. I can see a similar parallel here. Many of the plastic bags end up in oceans suffocating turtles, marine life and birds.

  • PJ

    Ireland probably has enough state capacity to enforce an outright ban on conventional light-bulbs.

    The energy-efficiency imperative, in that case, likely supercedes the economic-efficiency imperative.