Does Ebay Shipping Hurt the Environment?

A recent New York Times story explores how eBay is trying to market an environmental appeal for buying used goods. The story ends with some economic discussion:

EBay hired Cooler, a company that calculates carbon footprints, to determine how much carbon shoppers save by buying something used instead of new. They say that the leather handbag, for example, saves as much energy as a flight from London to Paris.

Cooler calculated the total cost of creating a new item, including materials and manufacturing, and factored in the cost of packaging and shipping eBay items via fuel-guzzling planes or cars, Ms. Skoczlas Cole said.

I doubt that the shipping of eBay items hurts the environment much, on the margin.

New items also have to be shipped: from the manufacturer to the retailer and from the retailer to the customer's home. It's unclear that shipping used items requires more fuel, so a shift from new goods to eBay goods isn't necessarily bad for the environment.

Additionally, shipping is dominated by fixed costs--a certain number of trucks and delivery routes exist regardless of whether you send your item, so mailing one more package probably isn't going to burn more gas.

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.

D.C. Bag Fee: Just Make the Decision for Me

I've recently switched jobs, and I noticed a peculiar thing about how two Subway restaurants are dealing with D.C.'s bag fee. Since January 1, District merchants have been required to charge five cents per plastic or paper bag they give to customers, in an effort to keep the bags from ending up in the Anacostia River.

My old Subway, by L'Enfant Plaza, gives customers their sandwiches without the plastic bag (though they are still wrapped in the paper). My new Subway, by McPherson Square, always bags the sandwiches and subtly adds the 5 cents to the bill.

While these approaches are opposites, I prefer either to a third option: being asked each time whether I want a bag and having a tinge of guilt no matter what I decide. While classical economics tells us it's better for consumers to have as many choices as possible, behavioral economics and psychology have increasingly suggested that perhaps we're better off not thinking about certain options (Barry Schwartz's "The Paradox of Choice" deals with this phenomenon in depth).

This has certainly been true for grocery stores; I know more than a few D.C. residents have gone out of their way to shop in the Maryland or Virginia suburbs to avoid the bag tax, even though they could get 20 bags for a dollar and hardly be out any extra money at all.

I've written previously on the D.C. bag fee here and here.

D.C. Bag Fees Do Indeed Hurt Merchants

One D.C. council member is amazed at the notion that the 5-cent fee for plastic bags may be hurting retailers (Washington Post):

Council member Tommy Wells (D-Ward 6), the sponsor of the bill, said the regulations are closely aligned with the legislation the council passed in June.

However, Wells is concerned about a provision in the bill calling for a study on whether the city should make a hardship exemption for "certain types of retail establishments." Wells said he's baffled by the provision because the tax doesn't cost the businesses any money.

"I have not heard it being a hardship on retail establishments," he said. "There has been some customer concerns, but it seems since the fee is charged to the customer and not the business, that really doesn't make any sense," Wells said.

Let's be clear: Anything that makes it more inconvenient or expensive for your customers to shop at your store hurts your business.

To start with a more abstract example, imagine that a city institutes a "Safeway tax," so that all Safeway customers have to pay a 50-cent fee that they don't have to pay elsewhere. Or imagine that Safeway's parking lots must by law be located several blocks away from the stores. In both cases, the store's customers are the ones paying the price (in money in the former case and in inconvenience in the latter), but arguing that these proposals wouldn't hurt Safeway is asinine.

The D.C. bag tax functions the same way: it forces customers to either pay a fine or suffer a major inconvenience. Either way, it makes grocery shopping in the District less pleasant.

The magic of capitalism is the ability to find substitutes when the price of one good rises relative to others. Many customers will instead do their grocery shopping in Maryland or Virginia. Additionally, many people will now find grocery shopping more of a chore and will instead eat out more.

To combat some of these effects, some D.C. stores are now giving away reusable bags. Of course, this is an additional expense that they did not face previously.

By the way, I've written previously on this topic here.

If You Loved the Environment, You Would Get Your News in Print (Or Not)

So argues an environmentalist described in a post by Dead Tree Edition:

“It doesn’t take electricity to read my paper,” she said in a video posted recently at PBS' Mediashift site. “I’m too informed about what’s going to happen to my computer when I’m done with it and too concerned about that” to rely on the Web for news.

Perhaps computers are hard to dispose of in a non-toxic way, but that's missing the point.

If online news were banned (for some reason), the vast majority of computers in use today would still exist. On the margin, online news adds almost nothing to the toxins of computers. Sure, reading a newspaper online uses a marginal amount of electricity, but so does turning on the lights in your home to read a printed product, or doing something else on your computer.

Newspapers, on the other hand, have many obvious environmental drawbacks, such as the paper required to print all the copies and the gas needed to deliver them. But again, one more subscriber isn't going to have much of an impact. However, each additional online reader creates less pollution than each additional print reader, so online news reading is that way to go if you already use a computer for other tasks.

More Trash, Bigger Bill

A pay-per-volume trash scheme could be coming to Frederick County, MD, according to WTOP.

The details of the program will be worked out with trash haulers, but it looks like county officials favor haulers offering several different trash can sizes, with a higher price for the biggest one.

Recycling would be offered on an unlimited basis, encouraging residents to put recyclables there instead of in trash bins.

The spirit of the program is to improve recycling rates. I will set aside the discussion of whether this is a worthy goal, in order to focus on how the program may be more difficult to implement than some imagine.

Ever since Ronald Coase's "The Problem of Social Cost" (1960) (PDF), economists have increasingly paid attention to the role of transactions costs. Transactions costs are those required to make a transactions outside of the money exchanged. For example, if the only way to get milk is to take the bus for 20 minutes each way, the true cost of the milk is not only what you paid for it but also the bus fare and the value of your time.

Some transactions cost problems I see for the proposed trash program:

(1) How will the city enforce the trash can size? What if residents have already purchased several trash cans from Home Depot or elsewhere? Will the city refuse to service these cans and insist that residents buy city-approved cans? Perhaps the city can give residents stickers to indicate that previously purchased cans have been approved; would garbage collectors have to check for the presence of these stickers every week?

(2) What if the amount of trash you need to throw away varies per week? Do you just have to pay the "big trash can" rate, even on the weeks you don't need it? Do you get the smaller garbage plan and keep the excess trash in your backyard on the weeks you go over? Will the garbage collectors individually document how many of each type of garbage can they collect at each house, and have an accountant bill you accordingly? Do most households even know how much garbage capacity they should buy?

I think that the program will prove to be more hassle than its worth. To steal an example from a professor, this is analogous to why restaurants don't charge for ketchup. Sure, some customers may have to subsidize the "heavy ketchup users," but the costs of monitoring the ketchup disbursement would far outweigh the few cents that would be saved in reduced ketchup consumption.

D.C. Bag Fee, or What We'll Do to Save 5 Cents

Beginning Jan. 1, grocery stores and several restaurants must charge customers 5 cents for a plastic bag. By informal measures, this has cut bag usage by over half, with some bit of consternation. The Washington Post reports many people awkwardly lugging groceries to their cars, sometimes dropping their items a few feet from the store.

Normally no penny-pincher, she now maps her day's travels to avoid having to shop in the District; she has abandoned her beloved neighborhood grocery store, Harris Teeter on Capitol Hill, in favor of stores near her Virginia office -- even though she pays an extra 2.5 percent food tax there. And twice she has unwisely carried an armload of bagless food out of D.C. restaurants, with calamitous results.

As alluded to in a prior post, many times in life, it makes sense to pay a small fee to avoid a major inconvenience. Perhaps drying our clothes on outside clotheslines would save electricity, but all of us bear the trivial expense of running the dryer because it saves us so much time. You would think that paying a few cents for the convenience of a bag would be a similar no-brainer, but it's causing a lot of stress for locals.

The article quotes Dan Ariely, a behavioral economist and author of "Predictably Irrational":

Because plastic bags have always been free, Ariely said, shoppers have come to see them as a kind of entitlement. Adding even a tiny fee is an affront to what they cherish as the natural order of things. "When it goes from zero to even a very small charge, it can feel very bad," he said. "It creates a very small financial burden but a very big emotional reaction."

Economic theory tells us that a tax should have the same effect regardless of whether it's the customer or the business sending it in (see here for a more extensive discussion (PDF)). However, this situation would have been much different if firms were taxed. I'd imagine they would suck up the 20-cent hit to their profit margins for each customer instead of getting a reputation for inconvenience. That way, the D.C. government would collect a lot more tax money but hardly make a decent in bag consumption. I wonder what the government would prefer: more tax revenue, or the use of fewer bags?

I've often been fascinated by how "free" is a drastically different price than some nominal amount, even if people can easily afford it. I'll likely have more on this topic in the future.

UPDATE 02/08: I've written more on this topic here.