In March 2002, the Irish Government introduced a €0.15 environmental levy on all plastic shoppings bags previously provided free of charge at the point of sale. The incentive for introducing this legislation was to reduce the consumption of plastic bags and the resulting effects of littering on the landscape. The effect of the product tax on the consumption of plastic bags was dramatic—a reduction of over 90% in the first year and the associated reduction of littering in rural landscapes (Convery et al., 2007). Costs of administration amounted to 3% of total revenues collected, partly because it was possible to integrate tax collection into the existing Value Added Tax reporting systems. In 2007, in response to a slippage in performance,
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It seems strange that policymakers focused on regulating plastic bags. However, their motivation for addressing plastic bag consumption and ultimately littering was their visibility throughout the countryside and along the coastline (DEHLG press release 20/12/2001). In addition to a direct ban on littering (Litter Pollution Act of 1997), policymakers introduced an additional levy on plastic bags. By implementing a plastic bag levy to target the consumption of plastic bags, regulators aimed to address the visibility of plastic bags on the rural landscape, send a strong price signal to consumers in order to change behavior towards more sustainable modes of consumption, and increase public awareness of littering (Convery et al., …show more content…
Pigou (1960) first made the case for such a levy. He noted that external costs of pollution could be internalized by imposing a tax on the pollutant at the level which reduces emissions to identity the marginal external costs and determine the optimal level of taxation. This tax, however, is not Pigouvian. It is a product tax explicitly aimed at changing consumer’s behavior. In fact, the tax, set at €0.15, is more than six times higher than the average maximum willingness to pay, around €0.024, suggesting that the levy far exceeds the optimal Pigouvian tax threshold (Drury 2000, pg. 17). Furthermore, a downstream tax has the added benefit of sending a strong price signal directly to the consumers, including having the choice of paying the levy and getting a bag. A key policy design of the levy is the ‘double-dividend’ effect. Revenues are ring fenced into an environmental fund operated by the Department of the Environment, Heritage, and Local Government, to be used for defraying the costs of administration of the levy and the support and promotion of a variety of environmental programs (Convery et al.,
It seems strange that policymakers focused on regulating plastic bags. However, their motivation for addressing plastic bag consumption and ultimately littering was their visibility throughout the countryside and along the coastline (DEHLG press release 20/12/2001). In addition to a direct ban on littering (Litter Pollution Act of 1997), policymakers introduced an additional levy on plastic bags. By implementing a plastic bag levy to target the consumption of plastic bags, regulators aimed to address the visibility of plastic bags on the rural landscape, send a strong price signal to consumers in order to change behavior towards more sustainable modes of consumption, and increase public awareness of littering (Convery et al., …show more content…
Pigou (1960) first made the case for such a levy. He noted that external costs of pollution could be internalized by imposing a tax on the pollutant at the level which reduces emissions to identity the marginal external costs and determine the optimal level of taxation. This tax, however, is not Pigouvian. It is a product tax explicitly aimed at changing consumer’s behavior. In fact, the tax, set at €0.15, is more than six times higher than the average maximum willingness to pay, around €0.024, suggesting that the levy far exceeds the optimal Pigouvian tax threshold (Drury 2000, pg. 17). Furthermore, a downstream tax has the added benefit of sending a strong price signal directly to the consumers, including having the choice of paying the levy and getting a bag. A key policy design of the levy is the ‘double-dividend’ effect. Revenues are ring fenced into an environmental fund operated by the Department of the Environment, Heritage, and Local Government, to be used for defraying the costs of administration of the levy and the support and promotion of a variety of environmental programs (Convery et al.,