Charging for Plastic Bags as an Effective Nudging Policy

Policymakers have little experience regarding designing the right levels of pricing for plastic bags. Prices for bags are generally set low and are largely a symbolic reminder to consumers of the environmental concerns attributed to plastic bag use. The ineffectiveness of charging for bags in the long term, in countries such as South Africa, makes it imperative that we map the demand curve. Getting the price “right” depends on the size of the externality. Charging for plastic bags is therefore an effective nudging policy. Moreover, charging the right price levels could alleviate the adverse effects associated with the use of substitute carrier bags. To address this issue, a survey was developed using the Contingent Behaviour (CB) approach to generate the stated preference (SP) data necessary to estimate the price level that is likely to lead to a reduction in bag use over time. Thus, the aim of this study is to estimate the bag-use demand function for reusable plastic shopping bags in South Africa. The current price of $0.03 was found to be too low, and highly inelastic. Our analysis suggests that the price for plastic bags should be set at $0.13. This price will reduce unnecessary plastic use and is still much lower than the price of alternatives; therefore, there is no danger of consumers shifting to alternatives that may cause more harm.