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Spring 2024: Plastic

Using Taxes to Control Plastic Pollution

Roberta Frances Mann


  • Plastic packaging accounts for nearly half of all plastic waste globally, and much of it is thrown away within just a few minutes of its first use.
  • A plastic tax could provide revenue for innovation. If significant enough, it might even make petrochemical companies think twice about expanding their reach.
  • Plastic is ubiquitous because it is cheap. The environmental harm that plastic causes is not reflected in its price.
Using Taxes to Control Plastic Pollution
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Although plastic waste is a global issue, the United States is the largest contributor to the problem. In 2016, the United States generated the largest amount of plastic waste of any country in the world, 42 million metric tons. Kara Lavender Law et al., The United States’ Contribution of Plastic Waste to Land and Ocean, 6 Sci. Advances eabd0288, at 1–2 (2020). Plastic is a term that encompasses dozens of chemical compounds. Oil and its close relative, natural gas, are essential feedstocks for the manufacture of most plastic products. Over 99% of plastics are derived from petroleum or other fossil fuels. While plastics vary by chemical composition, two types—polyethylene (32% of plastic production by weight) and polypropylene (23% of plastic production by weight)—are critical in the production of plastic packaging, the largest and fastest-growing category of plastics products and the biggest contributor to plastics pollution. Ctr. for Int’l Env’t L., Fueling Plastics: How Fracked Gas, Cheap Oil, and Unburnable Coal Are Driving the Plastics Boom, at 2 (2017). Major oil companies produce both fossil fuels and plastics, with trends showing that plastic production could become an even larger share of their overall production. For example, BP expects plastics to represent 95% of the net growth in demand for oil over the next 20 years. David Roberts, Big Oil’s Hopes Are Pinned on Plastics. It Won’t End Well., Vox (Oct. 28, 2020). The International Energy Agency (IEA) projects that plastics will be the biggest single source of demand growth for the oil industry. Int’l Energy Agency, The Future of Petrochemicals: Towards More Sustainable Plastics and Fertilisers 11 (2018). According to the IEA, petrochemicals are fast becoming the largest driver of global oil demand and are a growing consumer of natural gas. The industry is already generating more than $580 billion in revenues annually, and that number is expected to grow to more than $1 trillion a year over the next decade.

Plastic production creates negative externalities, including carbon dioxide emissions and air pollution. Carbon dioxide emissions are a major cause of climate change. Climate change, as well as other environmental hazards, disproportionately affects impoverished populations, both globally and in the United States. With respect to plastics production in particular, chemical manufacturing plants producing the building blocks for plastics, petrochemicals such as ethylene and styrene, are disproportionately located in areas with minority populations, such as Louisiana’s Cancer Alley. In addition to its climate impacts, petrochemical production can release airborne toxins that cause cancer and other illnesses.

Environmental Taxation

Many scholars credit A.C. Pigou with developing the concept of environmental taxation. Roberton C. Williams III, Environmental Taxation, at 1, 2 (Res. for the Future Discussion Paper 16-24, 2016). Pigou, an economist, agreed with market theory but understood that the market fails when the cost of products and services does not take into account externalities. Negative externalities are adverse consequences of producing or using a product or service that are imposed on the public without cost to the consumer or producer. Therefore, the cost of a product will be lower than if that price took into account that externality. Looking at the market as a whole, an unregulated free market creates an inefficiently high quantity of a product or service with a negative externality. Imposing a tax on the product or service can correct the externality. Taxing the externality imposes the cost of this adverse consequence on the consumer or producer and therefore allows the market to operate properly. With environmental taxation, the market shows the appropriate price signal.

Benefits of Plastic

Plastic is not all bad. Plastic is cheap, lightweight, and durable. While energy is used to create plastic, plastics can be used to reduce energy consumption. When plastics are used in automobile manufacturing, the cars become more energy efficient. Weight reduction is a priority in automotive design, boosting fuel efficiency, reducing emissions, and lowering costs for drivers. Lightweight Materials for Cars and Trucks, U.S. Dep’t of Energy, Off. of Energy Effic. & Renew. Energy. In modern vehicles, plastics make up 50% of a vehicle’s volume, but only about 10% of its weight. Chemistry in Automotive, Am. Chemistry Council. In the home, plastic-based home insulation can also reduce energy costs. Plastic-based insulation, including polystyrene board, polyurethane board, and polyisocyanurate spray foam, have R-values per inch up to double that of other forms of insulation such as fiberglass batts. Matt Power, Insulation R-Values Chart and Buyer Guide, Green Builder (Aug. 10, 2020).

Plastic preserves food and reduces food waste. Around a third of human-generated greenhouse gas (GHG) emissions comes from the global food system, and lost or wasted food constitutes about half of the GHG emissions from the food system. Deepa Padmanaban, How Wasted Food Turns into Huge Amounts of Greenhouse Gas, Scientific Am. (July 1, 2023). If food waste were a country, it would be the third-largest emitter of GHGs. Craig Hanson et al., What’s Food Loss and Waste Got to Do with Climate Change? A Lot, Actually., World Res. Inst. (Dec. 11, 2015). However, while plastic as a means of food preservation is often seen as a positive with regard to the use of plastic, single-use plastic remains an issue, and there are alternative ways of reducing food waste—single-use plastic is not the only way to solve that problem. Liz Goodwin, The Global Benefits of Reducing Food Waste, and How to Do It, World Res. Inst. (Apr. 20, 2023). While using plastic as a food preservation tool, we must focus on doing so without single-use.

Single-Use Plastic Is the Main Problem

The key to reducing plastic waste is reducing single-use plastics. Plastic packaging accounts for nearly half of all plastic waste globally, and much of it is thrown away within just a few minutes of its first use. Much plastic may be single-use, but that does not mean it is easily disposable. When discarded in landfills or in the environment, plastic can take up to a thousand years to decompose. Erik Solheim, Foreword to UN Env’t Programme, Single-Use Plastics: A Roadmap for Sustainability, at i (rev. ed. 2018).

If plastic were more expensive, it would not be designed as a single-use product. There is a reason why expensive materials, such as gold, are not used as packaging or for preserving food. Rather, expensive materials are used in expensive products designed for somewhat longer use, such as electronics and implantable medical devices. When plastics are used in automobile manufacturing or home insulation, the material is in use for many years. That is not the case for most plastic packaging. In general, manufacturers make profits by either high markups or high sales volume. The single-use plastics profitability model relies on high sales volume. The oil industry makes more than $400 billion per year selling plastic. Laura Sullivan, How Big Oil Misled the Public into Believing Plastic Would Be Recycled, NPR (Sept. 11, 2020).

Environmental taxation could reduce those oil company profit margins and encourage phasing out single-use plastics. The solution promoted by the oil industry is recycling, which shifts the burden of plastic pollution to consumers. Other articles in this issue will discuss recycling—but suffice here to say that recycling is no panacea for plastic pollution. Recycling uses energy and only limited types of plastics can even be successfully recycled. “Wish” cycling happens when consumers want to believe that the products they use are recyclable. “Wish” cycling leads to contamination of the waste stream and reduces the ability to actually recycle products. Economics do not favor recycling: Virgin plastic is cheaper than recycled plastic because the fossil fuels used to produce it are both subsidized and plentiful. In the United States, more than half of households have access to curbside recycling. Of the products recycled curbside, only about 20% by weight are plastic—the bulk of the products recycled are paper, cardboard, and glass. As of 2017, only 9% of the plastic ever produced has been recycled. John Hocevar, Circular Claims Fall Flat: Comprehensive U.S. Survey of Plastics Recyclability, at 6 (Greenpeace 2020).

Carbon pricing refers to economic instruments for climate change mitigation. Carbon pricing would increase the cost of fossil fuels, including petroleum and coal. Carbon pricing could provide an appropriate signal for plastics externalities as fossil fuels such as petroleum or natural gas constitute the primary feedstock for plastic material. It would also have an economy-wide impact, affecting many other industries as well as consumers of many other products. A carbon price, if passed through to consumers, would likely have a regressive effect, affecting lower-income consumers to a greater degree than higher-income consumers. It may not be the best instrument if the goal is to narrowly target plastic issues. Indeed, the European Union, which began implementing a carbon pricing scheme in 2003, adopted a separate directive on plastic waste. A European Strategy for Plastics in a Circular Economy, at 21, COM (2018) 28 final (Jan. 16, 2018). Commentators agree on one aspect of the solution: The main focus should not be on consumers. Maarten Dubois, Extended Producer Responsibility for Consumer Waste: The Gap Between Economic Theory and Implementation, 30 Waste Mgmt. & Res. 36, 37 (2012). Consumers have very little opportunity to avoid plastic products, even if well-educated on the issues and possessing a sincere desire to do so. Local bans on plastic bags and straws at the retail level may make consumers feel better and have some local environmental effects, but not nearly enough to make a dent in the global problem.

Taxing plastic directly could have more of an impact. Plastic bags are almost a poster child for plastic waste. Photos of turtles and sea birds entangled in plastic bags give heartbreaking evidence of their environmental harm. Americans use 100 billion plastic bags per year. Economist Tatiana Homonoff investigated whether a 5-cent bonus for bringing a reusable grocery bag or a 5-cent tax on a disposable plastic bag had a greater impact on consumer behavior. Tatiana A. Homonoff, Can Small Incentives Have Large Effects? The Impact of Taxes versus Bonuses on Disposable Bag Use, 10 Am. Econ. J.: Econ. Pol’y 177 (2018). She found a significant impact for the 5-cent tax and almost no impact for the 5-cent bonus. The tax had more salience for customers: 98% of customers were aware of the tax while only 52% of customers were aware of the bonus. The tax decreased disposable bag use by 42 percentage points and increased reusable bag use by 32.7 percentage points. Eight states have banned single-use plastic bags: California, Connecticut, Delaware, Hawaii, Maine, New York, Oregon, and Vermont. State Plastic Bag Legislation, Nat’l Conf. of State Legislatures (Feb. 8, 2021). Oregon’s legislation allows retail establishments to provide reusable plastic bags if they charge at least 5 cents per bag.

The United Kingdom (UK) has taken the environmental taxation route to reducing plastic pollution. The UK’s plastic packaging tax, which took effect in April 2022, applies to plastic packaging produced in or imported into the UK. Official Statistics: Plastic Packaging Tax (PPT) Statistics Commentary, HM Revenue & Customs (Aug. 17, 2023). Plastic packaging is defined as packaging that is predominantly plastic by weight. The tax rate started at £200 per ton of plastic packaging that does not contain at least 30% recycled plastic. The tax rate has been adjusted for inflation and in April 2023 increased to £210.82 per ton. As reported in August 2023, the UK collected £276 million in plastic packaging tax in the 2022–23 fiscal year. Almost 40% of the total plastic packaging manufactured or imported into the UK was subject to the tax. The tax provides a clear economic incentive for businesses to use recycled material in the production of plastic packaging, which will create greater demand for this material and in turn stimulate increased levels of recycling and collection of plastic waste, diverting it away from landfills or incineration.

Superfund Excise Tax

While the United States does not impose a carbon price or a plastic tax at the federal level, recent legislation has imposed a tax on some chemicals used in plastic production. The Infrastructure Investment and Jobs Act of 2021 reinstated the Superfund excise tax (26 U.S.C. § 4661), which applies to a list of chemicals such as ethylene and propylene that are primarily used in the manufacture of single-use plastics. Pub. L. No. 117-58, § 80201, 135 Stat. 429, 1328 (2021).

Until its reinstatement, the Superfund excise tax had not been collected since 1996. As of the beginning of FY 2022, the balance in the Superfund was $67 million, down from a peak of $4.7 billion in 1997. Funding the Future of Superfund, U.S. PIRG (Dec. 8, 2021). The Superfund excise tax collections began again in July 2022. Ethylene and propylene are taxed at a rate of $9.74 per ton and the tax applies to the sale of the chemical by the manufacturer, producer, or importer. 26 U.S.C. § 4661. The Superfund excise tax goes into the Superfund, which is available to remediate environmental harms to land if no responsible party can be found. The Superfund’s purpose is to clean up uncontrolled or abandoned sites containing hazardous substances when there is a release or threat of release of pollutants and contaminants into the environment. The Superfund excise tax may modestly increase the cost of manufacturing plastic from petrochemicals, but it is not targeted toward reducing single-use plastic.

While the Superfund excise tax may be characterized as an environmental tax, it does not necessarily implement the “polluter pays” principle. The Superfund Law itself—i.e., the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), imposing strict, joint, several, perpetual, and retroactive liability for releases of hazardous substances—has deterred corporate behavior since its enactment regarding potential responsibility for releases of CERCLA-listed hazardous substances, whether before or after enactment. 40 U.S.C. §§ 9601–9607. However, neither Superfund nor the Superfund excise tax itself was drafted contemplating the relatively inert nature of plastic as compared to the specifically listed CERCLA hazardous substances. Thus, while both styrene and vinyl chloride are listed CERCLA hazardous substances, polystyrene and polyvinyl chloride are not. See, e.g., Off. of Land & Emergency Mgmt., EPA, List of Lists, EPA 550-B-22-001 (Dec. 2022). Thus, neither the Superfund tax nor Superfund liability currently deters plastic behavior or promotes alternative behavior regarding plastic. The revenue from the tax cannot be used to innovate or create new solutions to the persistent problems of plastic or related chemical pollution. The Superfund itself can only be spent on remediation of hazardous substances, i.e., to clean up defined messes, not plastic, nor to prevent plastic messes in the first place.

A plastic tax, perhaps including a strong element of liability arising from plastic production and distribution, could provide revenue for innovation, as well as specifically pay for remediation of legacy plastic waste that is not considered listed as Superfund hazardous substances. If significant enough, it might even make petrochemical companies think twice about expanding their reach. The threat of litigation might cause second thoughts, but litigation is expensive. Former New York City mayor Michael Bloomberg has pledged to invest $85 million to block the construction of 120 planned petrochemicals plants in Texas, Louisiana, Pennsylvania, Ohio, and West Virginia. David Gelles, Michael Bloomberg Dials Up a War on Plastics, N.Y. Times (Sept. 30, 2023). However, litigation may be the only option if there is no other policy to prevent plastic pollution from occurring in the first place, like the New York Attorney General’s “first-of-its-kind lawsuit” against PepsiCo filed November 15, 2023, seeking remediation of plastic waste along the Buffalo River. Marie French, New York Attorney General Sues Pepsi in New Plastic Pollution Fight, Politico (Nov. 15, 2023).

State Action and Federal (In)action

Maine and Oregon are the first states to impose plastic taxes in legislation enacted in 2021. Maine’s law creates a new extended producer responsibility (EPR) scheme. Me. Rev. Stat. Ann. tit. 38, § 2146 (West 2021). Under Maine’s law, the Maine Department of Environmental Protection will set the packaging fee schedule on producers, based on the per-ton costs derived from collecting and processing a given producer’s packaging material. The fees will go into a packaging stewardship fund. Oregon’s law is similar, requiring producers to join a producer responsibility organization (PRO) and requiring the Environmental Quality Commission to establish a per-ton fee, called a “processor commodity risk fee,” that the PROs will pay to collectors of mixed waste. Plastic Pollution and Recycling Modernization Act, ch. 681, 2021 Or. Laws 1.

In contrast to the efforts of states and local governments, there is currently no federal incentive in the United States to reduce and reuse plastic, or for producers to use recycled plastics. The White House Council on Environmental Quality published its aspirational “guiding principles” on chemical safety and plastic pollution. The principles recognize that plastic pollution is an environmental justice issue and noted that plastic and product manufacturers should bear responsibility for addressing plastic pollution. The principles prioritize reduction of single-use plastics and acknowledge that the United States cannot recycle its way out of the plastic pollution crisis. The executive branch of the federal government has limited ability to control plastic pollution without legislation, but it is taking some action. For example, Secretary of Interior Deb Haaland ordered the phaseout of single-use plastic products on Department-managed lands by 2032. Secretary’s Order 3407 (U.S. Dep’t of Interior June 8, 2022).

Federal legislation with a greater focus on waste minimization, an increased focus on reuse systems, and a more “circular” approach to recycle unavoidable plastic packaging would have economic and environmental benefits. A promising federal proposal was introduced by Senator Sheldon Whitehouse in September 2023. The REDUCE Act (which stands for Rewarding Efforts to Decrease Unrecycled Contaminants in Ecosystems) is a straightforward excise tax on virgin plastic resins predominantly used for single-use plastics. S. 2844, 118th Cong. (2023). The tax would start at $0.10 per pound in 2024, gradually increasing to $0.20 per pound in 2026. It would be imposed upstream on the producers of the plastic resin, which are presumably integrated oil companies. The proposal also establishes a Plastic Waste Reduction Fund that could support plastic waste reduction and recycling activities, including making improvements to recycling infrastructure. The fund could be used to carry out marine debris reduction, detection, monitoring, and cleanup activities and to address environmental justice and pollution impacts from the production of plastic.

In the waning days of the 117th Congress, Senator Cory Booker introduced the Protecting Communities from Plastics Act. S. 5163, 117th Cong. (2022). Building on the Break Free from Plastics Pollution Act of 2021 (H.R. 2238 & S. 984, 117th Cong. § 12201 (2021)), which included a mix of phaseouts of certain single-use consumer products, an extended producer responsibility for those and other products, and deposit or charge requirements at the consumer retail level, the new legislation has a greater focus on environmental justice. It requires EPA to assess the public health impacts on nearby communities from facilities that manufacture, process, recycle, or otherwise use plastics or plastics-related chemicals.

The Solution Must Consider the Problem’s Origin

While most of the public understands that there is a problem with plastics pollution, there is still much misunderstanding about the origin of both plastic and plastics pollution. Plastic is a fossil fuel product. Fossil fuels, whether burned as fuel or turned into a single-use plastic product, pollute the planet and cause climate change. With the increasing awareness that climate change is real, disastrous, and caused by using fossil fuels, alternative technologies such as renewable energy and electric vehicles are increasingly popular and supported by federal tax incentives through the Inflation Reduction Act.

Plastic is ubiquitous because it is cheap. The environmental harm that plastic causes is not reflected in its price. Although much of the plastic pollution ends up in lesser developed countries, most of the plastic waste originates in wealthy countries. When we send our plastic waste away, we should remember that “away is a place, and people live there.” The best way to reduce plastic waste is to reduce the use of plastic, particularly single-use plastics. Consumers alone cannot solve the plastic pollution problem. Recycling cannot be the sole solution. There are many ways to limit the use of plastic: bans, complicated schemes to enforce producer responsibility, and taxes. As the United States is a major part of the problem, the government must act to put the cost of externalities on those who profit from plastics, before the oceans contain more plastic than fish. Environmental taxation, targeted towards single-use plastics, like the UK provision, can be an effective solution.