In August last year, the Legislative Assembly approved a law concerning the usage of plastic bags in commerce. The law came into force by mid-November. As a rule, plastic bags were provided freely or, more precisely, they did not come with a price attached. Making consumers pay for them follows a trend observed in various countries.
The new law imposes and makes explicit a cost that was not usually apparent. Now, the consumer is ‘forced’ to make a choice. The main objective of the new regulation is evidently to reduce the usage of plastic bags, seen as significant sources of environmental pollution.
The economic reasoning behind this approach is well based on economic analysis. Pollution costs are a typical case of the adverse effects of economic activities that may often be inadequately priced by the market. They constitute an example of what economists call externalities. The latter is not possibly the most felicitous expression for what we might more plainly describe as external (or unintended) effects of economic activities, arising from both consumption and production. That means that there are costs of the operation – often real expenses incurred by others to deal with the impacts of pollution – that are not reflected in the market price. The ‘polluter’ does not have to compensate those affected, does not pay the price for the burdens, monetary or otherwise, imposed on others.
The idea of introducing polluting taxes as a way of reducing polluting effects is not new. One century ago, the issue was already being addressed in the economic literature. The main reasoning behind the introduction of such taxes is straightforward. They make a good more expensive and should, therefore, encourage a decrease in its usage. It should bring it to the level where it should be if all costs, including the ‘social’ ones mentioned earlier, were accounted for.
The rationale for the type of taxes is relatively plain. The practical difficulty is to say a level of taxation that does not impose more costs than the expected benefits. That is a complicated matter we leave aside here.
Admittedly, the law fits broader international policy approaches. Two issues remain, however, unexplained. First, the charge is not designed as tax, but as a fixed-price sale. Second, the sale amount was set at one pataca, regardless of bag size or composition. Their rationale and impact assessments, if they exist, do not seem publicly available. Both options deserved a suitable explanation.