Expert: Taxes beat bans for promoting reusable bags

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A modest tax on single-use plastic and paper bags, rather than an outright ban, would do a better job getting consumers into the habit of using reusable bags, one expert says.

Though it may seem that they’ve always been part of American consumerism and convenience, plastic shopping bags first showed up in grocery stores in the 1970s. And in 2009, Americans used an estimated 100 billion plastic bags a year, and worldwide the total hit 1.5 trillion.

Unfortunately, the rate of recycling for this ubiquitous synthetic material has persistently been low, hovering in the single digits. But in recent years, awareness of the toll the American bag habit takes on our landfills, waterways, and streets has finally led to new restrictions.

In 2010, Washington, DC became the first city in the US to implement a disposable bag regulation: a five-cent tax on disposable shopping bags.

“When designed correctly, small incentives can have large effects on behavior.”

These changes had a big impact: a similarly modest grocery bag tax instituted in a neighboring Maryland county led to a 42 percentage point decline in the proportion of customers using disposable bags—or about 18 million fewer flimsy bags used in the county annually.

Such well-intentioned policies are not all equally effective, and the differences in how they are implemented matter, says Tatiana Homonoff, assistant professor of economics and public policy at New York University.

For example, Homonoff found that incentivizing reusable bags with the help of a tiny bonus—five cents per reusable bag—does not effectively reduce use.

Instead, she says, a modest tax on single-use plastic and paper bags works best to get consumers into the habit of bringing along a reusable bag on shopping trips. “When designed correctly, small incentives can have large effects on behavior,” she says.

New York State will take aim at single-use plastic bags with a ban starting March 1. Here, Homonoff discusses what types of policies are likely to stem the tide of pollution, and how we might all contribute to the effort:


What will New York State’s coming ban entail?


If you live in New York, you will no longer be able to get a plastic bag of less than 2.25 mils in thickness. In other words, the familiar flimsy grocery bag is to be banned. Customers can still get a brown paper bag.

But if you live in New York City—home to nearly half the state’s population—you will have to pay a tax of five cents for each paper bag. The goal of the new law is to cut into the more than 23 billion plastic bags used each year throughout New York State.


Are there any exceptions?


None for supermarkets, corner grocery stores, or takeout purchases, unless you rely on food stamps, in which case you will not be charged the paper-bag tax.

But here’s the thing: the New York State law does not require counties to charge the five-cent fee for paper bags. And many counties are choosing not to. As a result, a large portion of the state may end up with just a standalone ban on disposable plastic bags.


How do you think customers and businesses will respond to the policy?


My research from a newly completed study of Chicago’s experience shows that standalone bans on thin plastic bags do not reduce the amount of plastic going into the environment because these bans leave other types of environmentally harmful bags unregulated.

In 2016, Chicago implemented a ban on thin plastic bags—just like the New York State policy—to reduce the use of single-use plastic. However, in response to the policy Chicago retailers began to offer free thick plastic bags that were not covered by the regulation.

As a result, many customers switched to using these thicker plastic bags or increasingly relied on the use of paper bags. Paper bags have an environmental impact too, as they’re heavier than plastic, and to transport them to stores causes more pollution, not less.

Chicago repealed the original ban in 2017 and implemented in its place a tax that looks like DC’s, except it was a little higher, at seven cents per disposable bag.


And how did that work out?


The Chicago tax had an impact that was very similar in magnitude to what was seen in the DC area, or a roughly 33 percentage point reduction in the proportion of customers using a disposable bag. This provided more evidence that these small taxes lead to large decreases in disposable bag use.


What makes these small taxes so effective?


We potentially see these striking effects in response to very small financial incentives because many people are on the margin of using a reusable bag instead of a disposable bag—in other words, they mean to use a reusable bag, but they just need a little bit of an incentive to actually do it. It’s why I would describe these taxes as a “nudge.” When people are already motivated, the incentive can be very small and yet still effective.

It’s interesting that such a tiny fee can make so large a difference. One principle of behavioral economics called “loss aversion” can help explain why. Essentially, the theory says that the painful prospect of loss has more influence than the possibility of gain. This is true whether the consumer is affluent or poor.

My study in the DC area, for example, compared the effect of a nickel tax to a store policy that rewarded customers with five cents if they used a reusable bag. You might imagine that if you’re incentivized to use a reusable bag with a five-cent tax, you should also be incentivized by a five-cent bonus—both are a five- cent incentive to use a reusable bag instead of a disposable bag.

But what I found is that there’s a very big asymmetry in the responses to those two policies. Again, we see a very large decrease in disposable bag use in response to the tax, and almost no difference in behavior in response to the bonus.


So what does this all mean for the New York law, which seems like a hybrid of the others you studied?


I think the impact is going to vary by county dramatically. Research on “hybrid bans,” which are common in California, shows that coupling a thin plastic ban with a paper-bag fee, as in New York City, can be quite effective. That research suggests that we might expect to see a 30- to 40-percentage point decrease in the proportion of customers using a disposable bag as a result.

However, in the New York counties that are choosing not to implement the accompanying paper bag fee, my research in Chicago suggests that the new law is not going to be effective—it might, in fact, increase the environmental impact associated with disposable bag use.

Even if retailers do not offer thicker plastic bags as they did in Chicago, the policy may merely change the type of disposable bag that consumers use from plastic to paper rather than cause them to forgo using a disposable bag altogether.

Source: NYU