Tuesday, March 2, 2010

D.C. Bag Fee: Focus on Trash, not Tax?

D.C.'s plastic bag issue, in brief:
(1) businesses bag items
(2) customers discard bags
(3) bags end up in the Anacostia River

D.C.'s solution: tax each bag 5 cents.

I ran across an article from the San Francisco Chronicle from 2005 talking about a 17-cent bag fee that was under consideration at the time:

Under the grocery bag proposal, there would be no refunds for shoppers who return bags and thus no motivation for people to paw through trash bins plucking bags out of the waste stream.

"There is no incentive on the back end," says Margaret Walls, a resident scholar and economist at Resources for the Future, a nonprofit think tank in Washington.
But why can't there be such an incentive? There are two phases of the bag pollution process: customers getting the bags and afterward disposing of them improperly. Why can't we subsidize solutions to the latter (namely, through recycling) instead of taxing the former?

Recycling of plastic bags, it turns out, is inefficient and far too expensive. According to one source, recycling a ton of plastic bags costs about $4,000, while manufacturing the same amount from scratch costs about $30.

In addition, to motivate any substantial amount of recycling of plastic bags, customers would have to receive a decent sum in return. The cost of a new bag to a grocery store is less than 1 cent, but it would take much more than that to get people to recycle. If we factor in the subsidies necessary to get people to recycle, the cost is far more than $4,000 a ton. So perhaps D.C. is right in trying to address the bag collection step instead of the bag disposal step.

Besides, one could argue that small monetary rewards have already been proven not to work. For years, grocery stores (at least in California) have knocked a few cents off your bill if you brought reusable bags, yet the vast majority of customers choose not to. Interestly, this is essentially the same as a bag tax, but the only difference is the framing or anchoring. A 5-cent subsidy for bringing your own bag is analogous to a 5-cent tax for not bringing your own bags, yet the compliance rate under the former is drastically lower than it is under the latter. Traditional economics is not very good at explaining this inconsistency, and it must defer to psychology or behavioral economics and discussions about risk aversion, or how a small loss brings out much more of an emotional response than does the equivalent small gain.

I've written a few other things about the D.C. bag fee, which you can read under my Environment and Recycling label.


charlie said...

Oh dear lord, there is so much wrong here.

The estimates for the cost of recycling are way off. They come from an advocacy group, not a real source. $4000 a ton has to include the labor costs of gathering the bags, which isn't the case with an organized recycling program at stores. In any case, we could agree the recycling would cost more, but not at the order of magnitude that you posted.

Second, you are misstating how the bag fee rebate works. You get 5 cents off if you bring your own bag. You don't get 5 cents off for EACH plastic bag you would have saved.

Third, a "bag deposit" program would get far more bags off the street because discarded bags would have some value. To quote an onion headline, 90% of the nation's can value in the hands of just 1% of the people".

And let's be honest, the entire point of this exercise isn't to get rid of bags and clean up the anacostia. Those bags are coming in from Maryland, not DC. The point is to raise revenue to pay for the clean up so the general fund can be used for something else. IF you taxed them high enough to get people to stop using them you would remove that revenue.

Greg said...

Very fair points, Charlie.

The $4,000 figure the group cited came from San Francisco's Department of the Environment. I probably should have tracked down the original source.

You are right in that under a rebate, you don't get 5 cents back per plastic bag you don't use (in fact, it would be impossible to tell how many bags you aren't using without doing all the bagging), but I would argue that a program where you get a 10-cent rebate should have about the same effect on people as one where you can avoid a 50-cent tax. To most people, 10 cents and 50 cents feel about the same.