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 five-cent bag tax in Columbia put over 100 people out of work (The Beaconhill Institute for Public Policy Research 2011)
Solution 2: Ban on plastic bags
A ban is defined as “An official or legal prohibition” (Oxford Dictionaries 2011). An outright ban on plastic bags may eliminate the negative externalities of plastic bags, but this wouldn't be efficient as plastic bags also generate benefits, such as convenience (easier to carry shopping) and raised efficiency (can carry more things with less effort). Total benefits would be highest in a ban but net benefits would be highest where marginal benefits equal marginal costs (Hubbard et al. 2009, p471).
Plastic bag consumption falls and negative externality is greatly diminished, this occurred when China's ban on free plastic bags reduced consumption by over two thirds in 2008 (Xing 2009) And as previously mentioned when there's a tax on plastic bags: Plastic bags are derived from petroleum (Australian Government:Department of Sustainability, Environment,Water,Population and Communities 2009) so reducing consumption reduces reliance on oil imports. May reduce plastic bag component of litter, helping reduce floods such as in countries like 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).
May cause substitution to more environmentally harmful alternatives. This was illustrated when a plastic bag ban in San Francisco caused a switch to paper bags, which use 70% more energy to manufacture, produce 50% more greenhouse gas emissions and five times more waste than PBs (Jackson 2009). Could impact plastic bag related industries which may lead to increased unemployment. After China's ban on plastic bags, 20,000 jobs were lost when its largest plastic bag producer shut down (Watts 2008).
Solution 3: Subsidy on research & development to improve methane capture...