Supplementary memorandum submitted by
the Environment Agency
PLASTIC BAG
LEVY—IRELAND
Ireland's Plastic Bag Environmental Levy is
a charge of
0.15 on plastic shopping bags. This was introduced
throughout Ireland on 4 March 2002. The charge applies at the
point of sale in shops, supermarkets, service stations and all
sales outlets. Retailers must pass on the full amount of the levy
as a charge to customers at the checkout. The charge is itemised
on all invoices, receipts or dockets issued to customers.
It was estimated that some 1.2 billion plastic
shopping bags were provided free of charge to customers in retail
outlets annually, before the introduction of the levy. The charge
was introduced to encourage the use of reusable bags and to change
people's attitudes to litter and pollution in Ireland. According
to the Irish government, use of disposable bags fell by 90% soon
after introduction.
Revenue generated from the Plastic Bag Environmental
Levy goes into the new Environmental Fund. Some
30 million was raised in the first two years of its
operation. This fund is used to support waste management, litter
and other environmental initiatives.
There are several exemptions from the levy:
— Plastic bags used to store goods
— Smaller plastic bags that are used
to store fresh meat, fish and poultry,
— Bags for life costing more than 70
cents
— Bags supplied to intending passengers
in airports and ports and passengers on board commercial aircraft
and ships.
Denmark has tried an alternative approach, with
retailers being charged per kg of plastic bags. According to the
OECD, the scheme reduced consumption by a third between 1994 and
2000.
Possible concerns are raised by the British
Plastics Federation, including:
— Switching to exempt disposable bags—for
example, bin bags or paper bags
— Increased theft of baskets from shops
— More shoplifting facilitated by carrying
reusable bags
These would need to be taken into account in
policy design
Climate Change Levy—impact of revalorisation
The CCL was introduced on 1 April 2001, following
announcement in the March 1999 Budget to give businesses a full
two years to adjust.
The rates of the Levy are:
— 1.17p/kg (equivalent to 0.15p/kWh)
for coal;
— 0.96p/kg (equivalent to 0.07p/kWh)
for liquefied petroleum gas (LPG); and
— 0.43p/kWh for electricity.
The CCL rates have been frozen in nominal terms
at 2001 levels and have therefore declined in real terms. If rates
were revalorised (adjusted to keep pace with inflation), the CCL
would be 26% higher in 2010-11 using the HM Treasury's projected
GDP deflator over this period.
The expected emissions reduction arising from
the climate change levy is 3.5 MtC per year by 2010. 2 As a first
level of approximation, an increase in the levy of 26% would increase
the emissions savings by 26%—or 0.9 MtC per year, or about
0.55% of the 165 MtC carbon dioxide emissions in the baseline
year of 1990.
This is a crude "first order" calculation
and assumes a constant price-elasticity of demand and constant
cross-elasticities for fuels. There has been considerable debate
about the importance of the "announcement effect" of
the CCL—the idea that the gains come from the attention-grabbing
fact of introducing a new instrument rather than its magnitude.
However, it is possible that a decision to re-index the CCL would
also cause an announcement effect, as this could be recognised
as a new signal of long tem policy intent. These assumptions are
likely to mean the estimate above is upper bound.
The Committee expressed interest in the design
of the CCL, which does not reflect carbon emissions. If restated
as a carbon price, the equivalent rates would be as follows, showing
a substantial difference.
| CCL rate
Pence/kWh
| Carbon price
£/tC | Carbon price
€/tCO²
|
Electricity | 0.43
| 39 | 16.0 |
| Gas | 0.15 | 30
| 12.3 |
| Coal | 0.15 | 17
| 7.0 |
| |
| |
Source: Carbon Trust
Within the price for carbon for electricity there are still
greater variations than equivalents shown in the table as this
rate applies equally to coal, gas and nuclear generated electricity.
The price is also given in €/tCO² because this is the currency used in the emissions trading system. Carbon prices in the emissions trading system have been around €25/tCO² so these differences in the CCL rates are significant in comparison to prices in the ETS.
February 2006
2 HM Treasury, Pre-budget Report, 2005—based on modelling
by Cambridge Econometrics.
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