Removing the externality…

Articles — By forcechange on February 3, 2008 1:51 pm

On Friday we had a post alluding to the concept of environmental externalities in explaining why solar energy isn’t yet cost efficient. Interestingly, the country of Ireland has a great example of how to restore balance into the pricing of products that are causing economically unaccounted for damage to the environment. In addressing the waste and environmental damage caused by the use of plastic bags at grocery stores, a few years ago Ireland imposed a 33 cent end-user tax on plastic bags (recently raised to 50 cents). According to the New York Times, the result was a 94% percent decrease in the use of plastic bags! Again, with most things that damage the environment, the true cost of that damage was not being paid for by the consumer (since plastic bags were completely free until the tax). By imposing this fee, the government of Ireland did two things: First, it more accurately priced the cost of plastic bags (by forcing the consumer to pay for the cost of environmental damage resulting from these bags). Second, and probably even more important, it created a collective awareness and social norm that rejects and socially condemns the use of these bags.

Photo credit.