Solution 1: Taxation on plastic bags
Imposition of a tax equal to the cost of the negative externality can internalise the externality amongst consumers and producers as it shifts the marginal cost curve right, raising price and reducing quantity and result in an efficient level of output of plastic bags (Hubbard et al. 2009, p474).
Plastic bag consumption falls. This occurred in 2002 when Ireland imposed a tax on plastic bags in retail outlets. Studies showed a 90% decrease in plastic bag use (see Convery, McDonnell & Ferreira 2007 for a further discussion).
Government revenue raised can address other environmental issues, such as in 2010 when a five-cent tax on plastic bags in Washington, DC, raised $150,000 in revenue to clean up the Anacostia River (Craig 2010).
Plastic bags are derived from petroleum (Australian Government:Department of Sustainability, Environment,Water,Population and Communities 2009) so reducing consumption reduces our reliance on oil imports and protects us from price flactuations.
Reduction in plastic bag component of litter, helping reduce floods in countries such as Bangladesh as they block drains (The Economist 2007) and decrease plastic marine litter, which kill over 100,000 marine mammals yearly (United Nations Environment Program 2001).
Increased use of costlier alternatives in place of plastic bags. An example was when the 2002 plastic bag tax in Ireland saw a 400% increase in sales of bin-liners as consumers no longer had free plastic bags to line their bins (Knight 2007)
Is a blunt instrument, affecting the poor more than the rich. A study showed a... [continues]
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