Bootleggers, Baptists, and the Irish Plastic Bag Tax

August 31, 2005

In his classic piece on the politics of regulation (PDF), economist Bruce Yandle describes how vested interests (“bootleggers”) and moral crusaders (“Baptists”) often tacitly join forces to bring about bad policy, since both stand to benefit from it at public expense.

Ireland’s new plastic bag tax provides a vivid illustration of Yandle’s theory. In March 2002 Ireland enacted a nationwide tax of nine pence (15 cents) on the use of plastic grocery bags, to be collected by retailers. Predictably, in just five months the tax cut plastic bag use by 90 percent.

The public face in support of the tax—the “Baptists”—were largely Irish environmental activists, who argued that the tax was necessary to discourage plastic bag littering.

So who were the “bootleggers”—that is, the vested economic interests who tacitly collude with the “Baptists” to push for the tax? Interestingly it appears to have been large grocery retailers, who benefited from a large increase in sales of branded “re-usable” grocery bags, something that likely gave them a competitive edge over smaller retailers unable to afford such complimentary items:

Tesco Ireland, one of the country’s main supermarket chains, said it welcomed the government initiative… Tesco Ireland’s environmental manager, Jim Dwyer said: “Customers are telling us they broadly welcome the introduction of the levy.

“We have seen a marked change in customers’ behaviour in anticipation of the new levy, reflected in the significant increase in sales of our re-usable bags.”

Unfortunately, it’s unclear that the plastic bag tax led to any net environmental gains. For one, plastic bag production is highly energy efficient, so it’s not obvious that the reduction in littering outweighs the boost in carbon-based pollution required to manufacture and ship the heavier and more energy-intensive paper and re-usable carriers that replaced them.

Not to mention the deadweight social loss from the tax itself. Plus the cost of complying with it.

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