Towards a green economy Box 2: Taxing plastic bags in an emerging market: the case of South Africa

Plastic bags have attracted increasing environmental concern over the last decade, visibly known for their role in littering roadsides, clogging sewer drains and getting ingested by animals and marine life. A number of countries have started to tax their usage or ban plastic bags. At a time when China decided to ban free plastic bags in 2008, the Worldwatch Institute reported that people in China used up to 3 billion plastic bags daily and disposed of more than 3 million tonnes of them annually. It signaled estimates that China refines nearly 5 million tonnes (37 million barrels) of crude oil each year to make plastics used for packaging.

In 2003, South Africa became one of the first countries to introduce a plastic bag levy that targets consumers directly. It addressed the thin plastic bags with handles typically distributed in retail outlets. The regulation tabled under the Environmental Conservation Act noted that the bags are indiscriminately dumped and not collected because the thin plastic film they are made of has little commercial value. It added that the problem is severe in low-income areas where waste collection services are inadequate. Since 2003, shoppers have to provide their own bags or pay for thicker, recyclable bags. Consumers wanting more information or report retailers who are not in compliance have the option of dialing a hotline number run by the Department of Environmental Affairs. Consumers could re-use the thicker plastic bags, paying up to 25 cents for the 10-litre plastic bag, 31 cents for the 12-litre bag and 49 cents for the 24-litre bag. The thickness of the bag was lowered in a compromise agreement with industry. Some retailers agreed to lower food prices in order to compensate poor consumers for the extra expense of the new bags.

not feasible, a distant second-best solution is to allow accelerated depreciation and relatively low taxes on investments in renewably energy and resource-efficient technologies. As a rule, subsidies should really only be used in case of the clear existence of positive externalities and possibly in support of infant industries.

Green manufacturing can also be supported by financial instruments such as revolving funds, green funds, insurance funds, soft loans and other forms of green subsidies. Providing rewards rather than penalties, green subsidies and feed-in tariffs can be important instruments to boost cleaner technologies and green products, as well as waste prevention and recycling schemes. Technology- specific instruments such as green subsidies can help

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The proposed regulation caused extensive debate, involving environmentalists, consumer organizations, industry and labour unions. Developmental considerations included the position of poor households in rural areas, who more typically use plastic bags available free of charge, and the concerns of workers involved in the manufacturing, packaging and retail industries. Business and unions raised concerns about jobs, income and equipment loss as well as the need to have a holistic approach to waste management rather than targeting a single product. Education, awareness and strong anti-litter penalties were proposed by industry and labour as appropriate responses to the problem of plastic shopping bags waste rather than regulation. A study commissioned by the National Economic Development and Labour Council examined possible impacts of the proposed regulation on investment, employment (including job losses or creation, shifts in skills profiles), distortions in the market (including supply and demand balances and between different products due to the focus on one part of the packaging industry), and industry (e.g. petrochemicals and plastics). The study warned of a possible close-down of the local plastic-bag manufacturing industry, with consequent job losses. It also showed, using recovery economics, that an effective stimulus to local recycling is dependent on addressing constraining factors such as the need to create additional demand in the local market for recycled polymer.

Debates emerged around the need to promote locally made facilities producing two alternatives, namely a Green Bag and Biodegradable Plastic Bag. The case showed the importance of finding reliable life cycle inventory data to compare the environmental impacts

to unlock and guide alternative technology paths. This needs to be combined with appropriate regulation such as carbon taxes. Governments can also develop national financing mechanisms that would favour providing loans to those small and medium-sized enterprises (SME) that are willing to improve their resource efficiency but have limited access to financing from commercial banks. Such funding mechanisms could be operated using revenue generated through environmental taxes.

Voluntary action, information and capacity building In its analysis of environmental policy mixes, the OECD (2007) has argued that in the case of “multi-aspect” environmental problems, policy-makers should supplement instruments that address total amounts of pollution with instruments