Nova workboard

a blog from young economists at Nova SBE

Taxing plastic bags in Portugal

 

Single-use plastic bags in Portugal used to be handed out for free in every supermarket. In February 2015 a green tax was imposed on these bags and they started costing 10 cents of euro. At the time 466 bags were used per person a year when the European average was of 198.

Despite this abnormal number revenue from the levy was a budget fiasco. The government, accounting with the drop in consumption due to the tax, was expecting to raise 40 million euros but by the end of the year it had collected as little as 1.5 million euros.

Besides raising revenue, a green tax aims to influence consumers’ behaviour. Here this tax appears to have had the intended effect: the use of plastic bags has plummeted. Portuguese people now use nine thin bags per year. More than 18 months after this policy was put into effect only 9% of the big retailers use these bags. This figure was of 74% before the tax.

However, in these big retailers stores a great deal of plastic bags is still being sold and bought everyday, just not thin bags. On the day that bags started being taxed they stopped being handed out. Instead, big retail stores started selling thicker ones. Only plastic bags bellow thickness of 0.05mm, the ones considered to be reused the least, were subject to the levy.

This was something that the government didn’t seem to take into account when predicting such a large revenue. At the time of the design of this policy, the real consumer of thin plastic bags was not the one considered. This is not the supermarket shopper, but the big retail distributors. The retailer’s demand for thin plastic bags was very elastic, i.e. the price would have a large impact on the demand, because there was good close to a perfect substitute: the thicker plastic bags that were not taxed.

Therefore, the use of discardable plastic bags prevailed and big retailers seem to take the best advantage of this tax. They don’t use thin plastic bags anymore and sell thicker ones to consumers that may, in cases, think they are paying for bags due to the tax.

For an improved policy making, considering similar policies in other countries is crucial. The Irish case is a particularly happy one. In 2002 Ireland imposed a levy on plastic bags and their use was diminished by 90%. According to this study it was a policy “so popular with the Irish public that it would be politically damaging to remove it”. The popularity was own to informational campaigns on the impacts of the plastic bags and on the allocation of the revenue collected. Nevertheless, this policy wasn’t popular just amongst consumers.

According to the authors “ensuring stakeholder acceptance of the tax (was) central to the successful implementation of such a tax”. Support from major retailers was secured in the making of the policy by them having actively participating in its design. In the Portuguese case, the big retailers seemed to act in opposite way of government’s intentions, finding a way around the tax. This might be the reason why the measure didn’t achieve all it could have, whether regarding the large discrepancy between revenue expect and actually collected or the impact in consumer’s behavior. Despite the drop in consumption, plastic bags are still used, just different ones.
Sara Amorim Queirós

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Author: studentnovasbe

Master student in Nova Sbe

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