Can we tax people into more sustainable behaviour?

If you look at consumption habits in history, you will find that until about the Second World War, our consumption was very sustainable. We used to crest much less waste and re-used and recycled our clothes, household goods, and equipment all the time. But after the Second World War, the plastics industry and other factors created a drive towards ‘fast consumption’. Buy stuff. Use it, and then throw it away and get something new. 

That kind of consumption used to be impossible to finance in the past and is the reason why one of my ancestors used to say ‘we are too poor to buy cheap things’. The problem with cheap things being that they break too easily, and the family didn’t have the money to buy a replacement. But with higher incomes and the mass production of furniture (IKEA), cars (Ford Model T), Clothes (H&M, Zara) the cost of replacement came down while disposable income increased. And our societies turned into linear societies, where stuff moved from the factory to households and onto landfills.

Today, we are trying to return our consumption habits back towards a circular economic model where stuff lasts longer and we re-use and recycle more things to reduce the environmental and social impact we create with our consumption. 

Moving towards a more circular economy is a good thing and governments, smelling a potential new source of tax income, have jumped on the bandwagon and introduce taxes to incentivise people to choose products with longer durability or recycle existing products to a higher degree.

I am not against these efforts but if the tax isn’t designed properly, it might not work or might even be counterproductive. The link in the first paragraph of this post will take you to my discussion of the ban on plastic straws, which in the greater scheme of things did nothing to reduce waste and plastics usage but instead shifted focus away from alternative ways to reduce plastics consumption that would have had a substantial impact.

Another well-intentioned government intervention that I am doubtful of is the bags for life concept implemented in many countries across Europe. Essentially, shops are required to charge customers for plastic bags. The idea is that consumers can either pay for the cost of producing the plastic bags and the landfill they create or alternatively bring their own bags to carry their groceries or buy a more expensive ‘bag for life’ which is often a bag made out of cloth (though sometimes it is made out of plastic) that is supposed to last a lifetime. 

The idea is supposedly that people will happily pay more for a bag for life and then bring that one back to the stores every time they go shopping. Raise your hands if you have ever bought a bag for life and then never took it out of your house again to buy groceries. 

I thought so.

The problem with the bag for life concept is that it ignores the concept of maintenance costs. The maintenance cost of a plastic bag is practically zero. You take it home, unpack your groceries and then throw it away. It is infinitely convenient.

A bag for life you take home, unpack your groceries, and then you put it in a closet or in the corner of a room where your other bags are. But the maintenance costs are quite high for that bag because if you want to use it as intended, you have to remember every time you go shopping to look in the closet for the bag, take it out of there and then carry it all the way to the shop. And once you have returned home, you have to put the bag for life back in the closet and it all starts over again.

Additionally, a bag for life doesn’t last a lifetime. They all tend to break after a couple of months or years before they break. Or you buy groceries and your eggs break inside the bag at which point it becomes soiled and smelly and you throw it away anyway. Personally, I have found the famous blue IKEA bags to be true bags for life. They never break and they can carry enormous weights. But they are ugly, and I wouldn’t be seen dead with them at my local grocer. So, I have invested in one of these jute bags that so far has lasted 5 years without any damage or problems and looks pretty much like new despite me using it all the time to haul home heavy stuff from the shops. 

But these bags are much more expensive than your typical bag for life and the problem with the bag for life concept in practice is that the cost of plastic bags relative to the cost of bags for life is just too low. Regular plastic bags cost a few pence in the supermarket, while a so-called bag for life may cost twice as much. But the maintenance costs of the bag for life are so high that it is simply cheaper for people to buy the throwaway plastic bag instead of the more expensive bag for life that they then don’t re-use anyway. This analysis shows that if consumers underestimate the durability of a good they implicitly increase the maintenance costs in their heads for that good and are then more reluctant to buy it instead of a disposable item. So bags for life need to be much more expensive and durable than disposable plastic bags, which is why I recommend buying the jute bag above. It is so expensive that I make sure I carry it with me every time I go shopping because otherwise, it would feel like I wasted money on it.

But there is another twist to the story. The cost of disposable bags should be much higher to begin with. There is a famous experiment in Israeli day care centres that complained about parents being late to pick up their children. So, to incentivise the parents to pick up their children they introduced a small fine for parents who were late. And guess what, once the fine was introduced, more parents were late in picking up their children than before. The act of paying a small fine was to the parents like paying the day care centre for the additional work. And if they are paid for their overtime, the parents feel less guilt about being late and start being late more often.

Similarly, paying a few pence on a disposable bag absolves your conscience from the feeling of guilt of having bought a disposable bag. So you just continue to buy them because, well, they are just so convenient.

The way out of this is simple. Either increase the price of disposable bags to a level where it hurts to pay for them and similarly increase the price differential between disposable bags and bags for life. Or simply ban disposable bags altogether and go back to the pre-war period where we all went to the shops with our shopping baskets and the grocers used paper bags and glass jars to store their goods.