Infernal Ramblings
A Malaysian Perspective on Politics, Society and Economics

A Tax on Plastics

Written by johnleemk on 11:02:59 am Jun 16, 2007.
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One of the most popular environmental causes (but alas, still not popular enough) is the movement for a carbon tax to stop global warming. The economic basis for this proposal is sound.

However, there are other applications for the economics behind the carbon tax which can be relevant to the environment. One such area is plastics.

The production of plastics involves that old bugaboo, petroleum. However, the carbon tax does not apply to plastics, because no combustion of petroleum is involved in churning out plastic goods.

However, this does not mean that plastics do not create problems for our environment. Thousands of tonnes of unused plastics are rotting at a snail's pace in landfills around the world, taking up valuable space which could be used for other purposes, creating an eyesore for the public, and in general posing problems for the environment and our ecosystem.

The typical solution to non-biodegradable plastics has been awareness campaigns to get people to use paper or cloth instead of plastic bags, and other such generally ineffective measures.

Why should we not tax plastics? People respond to incentives, so if we want to reduce the wanton discarding of plastic goods, all we have to do is tax the discarding of plastics.

The economic basis for this idea is essentially the same as that for the carbon tax — the idea of externalities. When you pollute the air with combusted carbons, you impose a cost on society not accounted for in the price you pay. Exactly the same thing happens when you throw plastics away without thinking.

Of course, there could be practical problems with enforcing a tax on disposing of plastics. Instead of dumping their refuse in landfills or incinerators and paying a tax, people may simply discard their plastics by the roadside.

Some might thus suggest just imposing a tax on all purchases of plastic items. This would pose a problem, however, because it does not create a disincentive to throw plastics away. It creates a disincentive to buy plastics in the first place, which is not what we want to achieve.

Those who do end up buying plastics in such a situation would probably be no less inclined to throw them away once their usefulness had run its course. (Thus, the government would have to proportionally subsidise the recycling of plastics to correct the problem.)

Despite these technical problems, it seems clear to me that there should be a tax to limit the damage done to our environment by the thoughtless discarding of plastics. It's the right thing to do, economically and environmentally.


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