Ryan Vrabec
10/10/2014
Economics of the Public Sector
Project #1
The State of California’s SB 270 is the first of its kind, while several cities in
California such as San Francisco as well as others abroad like Chicago and Seattle have
adopted citywide plastic bag bans, the State of California has decided to take it a step
further. Signed into action on September 30th 2014, the new law is the first statewide ban
on the sale of single use plastic bags from any retail or grocery stores. Under SB270
grocery and retail stores in the state of California are not permitted to distribute single use
plastic bags without charging a ten cent fee per bag, and are to eventually phase out the
use of all plastic bags over the next couple years, to leave only reusable plastic bags or
disposable paper bags which will also have a ten cent fee. The intent of the bill is to
discourage the use of single use bags in order to help eliminate litter and pollution from
streets, sewers and surrounding ecosystems (Huffington Post).
When looking at the merits of this legislation it is important to remember that the
government’s intent is to reinforce social equity while still promoting economic efficiency.
When looking at the bill in terms of economic efficiency, the states clear cut explanation that
is that its intent in banning single use plastic bags is to help minimize the negative external
costs that are associated with the use of the bags, namely pollution in the form of litter.
According to mediamatters.org plastic bags are the sixth most common form of litter found
in beaches “Plastic Grocery Bags Are 6th Most Prominent Trash Found on Coasts.”(Media
matters.org) This contribution to the amount of litter provides a good example of how large
the costs of cleaning up the bags can be. In addition to this, plastic bags that are disposed
of properly to be recycled (roughly 3%) end up hindering traditional recycling plants, “plastic
bags can cause problems for recycling facilities, they wind up down at the recycling plant
and they wrap around a lot of the recycling equipment”.
By making it so that it is illegal to sell single use plastic bags without paying the ten
cent per bag fee, the government is implementing a typical Pigouvian tax to both discourage
consumption as well as account for the marginal damage that occurs per bag. As can be
seen in figure one, when this fee, or marginal tax is imposed, the quantity of single use
plastic bags being consumed drops. This in turn will allow for economic efficiency to rise,
with less money being spent on litter collection, and less downtime being inflicted on the
recycling plants within the state, meaning that more refuse can be recycled for the same
amount of money. In addition the state will also be able to generate some tax revenue out of
the increased income from stores earnings on the plastic bag fees. In addition, when the
plastic bags are eventually removed entirely, the demand for plastic bags will fall to very low
levels because people will still want some, but will either have switched to reusable bags or
will continue to pay the ten cent fee to use paper bags.
Looking at social equity, the government’s intervention in an attempt to reduce the
amount of pollution is a good enough reason for intervention. While a person’s day might be
made easier for the trip from the grocery store to the car, and from the car to the house, the
damage that bag ends up doing after it is discarded far outweighs what it had contributed.
Obviously, plastic bags are a very common form of pollution, we see them every day, in the
streets, tucked in bushes or blowing across empty parking lots. However, what is not so
obvious to us is the damage that they do to our surrounding ecosystem, and the costs those
damages impose. The first cost that is imposed on society, is the simple cost of collecting
the discarded bags and discarding them properly for processing at a landfill. By removing
plastic bags, which are 6th among the top ten most collected litter items (media
matters.org), governments can significantly cut down on man hours of litter collection and
processing at local landfills. Another social cost that is included with the use of plastic bags
is their production cost and use of natural resources. By implementing a governmental ban
on the use of plastic bags, the quantity demanded for the plastic bags should drop
significantly, thus reducing the social cost that the plastic bag manufacturers are imposing
on the population by producing said bags. According to a nonpartisan study; a plastic bag
ban in San Diego could indeed reduce Co2 emissions, Solid Waste per year and total
annual energy consumption as seen below (mediamatters.org). This, in terms of equity
shows the sense behind imposing a plastic bag ban. CO2 emissions are not good for the
human respiratory system, and can even be deadly. Solid waste both takes up room in
landfills and time to break down at said landfills. Finally, in an era in which energy
consumption is already becoming an issue, in terms of equity it doesn't make sense to
contribute so much energy to a product that will only later to harm to the human population.
(From media matters.org)
A final cost that leads to inequity throughout the population, is the cost that the production
and consumption of plastic bags has on the animal population in the surrounding area. In
areas such as California, there is a vast amount of money involved in the surrounding
ecosystem in things such as fishing and tourism. “We know that plastic litter causes the
death and injury of tens to hundreds of thousands of marine mammals, turtles and seabirds
around the world every year” (Media matters.org).Because of this, Californian jobs are at
stake, both in the resource and tourism industries. If marine animals are being killed in the
thousands, the fishing industry will take a hit because there will be that much less likelihood
that there will be a profitable catch. As for the tourism aspect, if there are no animals to
come see, or if the beaches look disgusting because they are covered in litter, then the
likelihood that people will come for a return trip will be less likely, thus removing potential
new money from the local economy. This is a good example of inequity because while there
are people that are involved in industries being harmed by the use of plastic bags, those
that create the plastic bags are experiencing no negative effects and still making money.
Government intervention was needed in this situation, and the government was correct in
making a policy to combat this inequity.
This new law will most likely not be very difficult to maintain political support for, so long
as California does not lose a large amount of manufacturing jobs. From the information that
can be found on the politics surrounding the new law, the primary concern of the opposition
party is that by prohibiting the consumption of single use plastic bags, the state government
is jeopardizing thousands of Californian manufacturing jobs (Wall Street Journal). If the
State can maintain the employment of those who work to produce single use plastic bags by
employing their labor elsewhere then it will not be difficult to maintain political support for
this new law. In addition to this, California should not have a lot of difficulty maintaining
political support for this bill because of how many local and county governments already
had plastic bag bans in place before the state ban occurred.
While this government policy was and is needed to help make for a more efficient and
more equitable market. There are a few implementation problems that are associated with
it. The first and most obvious, is that while there may still be some need to produce some
single use plastic bags for individuals who are willing to pay the ten cent fee, there is going
to be a strong decrease in demand for plastic bags. Because of this, many people who work
for plastic bag producers are going to become unemployed and either go on unemployment
benefits or find a new job. Another problem that is associated with the implementation of
this bill is that those on fixed incomes may find it difficult to pay for the new reusable bags,
or pay the ten cent fee every time they go to shop at the store.
To account for these implementation problems there has been some political
compromise built into the signing of the bill itself. One compromise that won over lawmakers
to SB270’s side was the two million dollar loan that will be distributed to plastic bag
producers. This will in a sense subsidize the cost put on the plastic bag manufacturers of
changing their production lines to producing reusable bags (Huffington Post) (Figure 2). In
doing this the government is providing a benefit to the public by both helping to maintain
jobs, as allowing for the production of reusable bags which will in turn make them cheaper
to purchase. This compromise was likely targeted at lowering the potential unemployment
that was associated with banning plastic bags. By doing this, there is a better chance that
some factories will be able to remain open and keep people employed. The bill has also
made compromises to avoid putting unnecessary pressure on those that do live on fixed
incomes, “The bill was amended to waive fees for customers who are on public assistance”
(Huffington Post). It was also amended to limit how much the grocers can use the funds
generated from the fees they are charging (Huffington Post).
In conclusion, California’s choice to ban the consumption of single use plastic bags
is good public policy. The reason it is good public policy, is that it is aimed at improving both
socioeconomic equity as well as economic efficiency, by accounting for new economic
growth in the green industry, controlling pollution, as well as improving efficiency for
recycling programs, all while still accounting for some of the problems that will be
associated with the implementation of this policy. SB 270 is a good public policy because in
the process of forcing people into doing something that will slightly inconvenience them at
first, the government put in a few things to make the law appealing to the populous. First
and foremost, they did not altogether do away with the bags right away, and for the next
year will allow the bags to be used in order to allow the people to prepare for the changes
that they are going to have to make. The law also takes into account the potential for job
loss, and has posted a two million dollar loan to plastic bag producers to refit their factories
to begin creating reusable bags instead, in order to maintain their business and their
employees. It also made it so that those who live on fixed public incomes will not be
charged any fees for the use of plastic bags so as not to make life more difficult for them.
California’s new plastic bag policy will promote economic efficiency by lowering costs on
public finance while also leading to more output in publicly funded industries such as
recycling plants. It will also lead to a healthier environment for both the people and animals
that live in the area. It may also lead to higher tourism rates which could lead to higher
revenues for the state itself.
Sources;
Gerken, James. "California Becomes First State To Ban Single-Use Plastic Bags." The
Huffington Post. TheHuffingtonPost.com, 30 Sept. 2014. Web. 15 Oct. 2014.
<http://www.huffingtonpost.com/2014/09/30/california-plastic-bag-ban_n_5904766.html>.
Lazo, Alejandro, and Zusha Elinson. "California Is First to Ban Plastic Bags Statewide." The
Wall Street Journal. Dow Jones & Company, 30 Sept. 2014. Web. 15 Oct. 2014.
<http://online.wsj.com/articles/california-is-first-to-ban-plastic-bags-statewide-1412095427>.
Robbins, Denise, and Shauna Theel. "California's Plastic Bag Ban: Myths And Facts."
Media Matters for America. Media Matters For America, 8 Oct. 2014. Web. 15 Oct. 2014.
<http://mediamatters.org/research/2014/10/08/californias-plastic-bag-ban-myths-andfacts/201064>.