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The objective of the essay is to illustrate how theory can help to improve the understanding of resource management issues considering the case study in Ireland (Boon et al., 2019). The case study is about banning plastic bags and taxes applied for using plastic bags. As plastic bags are widely used, many countries have banned single-use plastic bags in recent years. Some other jurisdictions have implemented bag taxes for using plastic bags. The main material of plastic bags is the polythene of high-density and low-density along with the mixture of both these polymers (Tennakoon et al., 2020). Polymers do not biodegrade in landfill sites because of their essentially inert nature. Plastic bags cause pollution from manufacturing to disposal. Plastic bags are extremely long-lasting and take a long time to decompose. That is why it creates a negative impact on the environment.

This essay will be an appropriate economic model to develop the policy solutions to the problems regarding the case study that are identified. Models are used for mainly two purposes: simulating and forecasting.

In the year of 2002, Ireland imposed a levy for using plastic bags and it was the first country to take this step. The key objective of the levy is to reduce the amount of plastic bag litter. The word levy is used in the Waste Management Amendment Act, of 2001 (Neves et al., 2020). The good part is that it led to a 90% drop in plastic bag usage.

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Problem identification 

To get the resource management issue is to find out the source of the problem. In the case of Ireland, along the coastline and throughout the country, plastic bags were visible as a significant contributor to litter pollution. The usage of plastic bags is one of the main causes of environmental pollution (Egbetokun et al., 2019). Nobody is going to compensate for the pollution caused by it. Two qualities of Ireland are appropriate in this issue. The first one is that the country has frequent high winds that lead the plastic bags to travel long distances in the surroundings. Many Hedgerows with comparatively small fields are present, leading to the accumulation of unwanted plastic bags. The effect was evident in the winter season in the absence of deciduous vegetation. Some critics who work on tax identified that house owners were reusing plastic bags in huge numbers to gather household rubbish and finally, those were used for landfills.

Since March 2002 in Ireland, the tax has been applied to plastic bags. It was a tax of € 0.15 for a single plastic bag. To change the habit of consumers to reduce plastic bag usage, a tax was imposed in rural areas and increased public awareness of littering (Gidigbi et al., 2020). Especially in rural areas, the tax was implemented to reduce the usage of littering by the people. It also helped to reduce the usage of plastic bags in the environment. Ireland is not the only country to apply taxes on plastic bags. Other countries such as Denmark also apply taxes for using plastic bags on producers and retailers.

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The economic problem and why is it considered an economic problem Economic problem

An economic problem is defined as any economy-related problem, which includes concerns about the production of goods (Pramukh et al., 2020). As well, it refers to the services to fulfill the unlimited demands of the economic subject through the proper utilization of the resources, which are not abundant.

Tax on plastic and economic problem

Now in recent days, many countries banned the ‘use and throw’ of plastic bags or imposed a tax on the same. Usually, plastic bags, which can be used several times, contribute to marking points to the growth of the economy (Seikh et al., 2021). But in recent days, the linear model of recent plastic bag productions and usages, such as ‘take, make, use and dispose of’ added a large contribution to the degradation of natural resources as well as climate change, human health and the overall economy. On the one hand, bans on plastic bags increase the cost of the products for the consumers, affect the profit of producers, contribute to a degression of economic activity, and thus contribute to a reduction in retail employment. On the other hand, implementing a tax on ‘single-use plastic bags increased the use of ‘bags for life, which are made of heavier-gauged plastic and are more harmful (Fetner & Miller, 2021). Thus, a decrease in buying ‘use and throw’ plastics and an increased number of buying ‘single-use’ plastics affect the economy and thus it is an economic problem.

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A brief exposition of the conceptual tools

Economic tools: some economic statements are often difficult to understand. Some use of tools like tables, modes, charts, means, graphs, median, etc. makes the complex statement of the economy easier to understand (Comerio & Strozzi, 2019). In conceptual economics, the tools used are conceptual and intuitive.

For example, many people aim to buy a diamond necklace but they buy a gold necklace as it is more affordable to them. This is an economic concept and the tools used to emphasize the economic fact are conceptual tools. Demand supply analysis, environmental standards model, etc. all are examples of conceptual tools in the economy.

The command-and-control regulation

There are many regulations in environmental economics. Command-and-control regulation is one of them. This is environmental regulation. It determines how the policymakers will regulate the process of making a product and also the amount of the product they make so that the environmental quality remains uninterrupted. During the making process of a product or while considering the number of the product that should be made one has to remember the standard-setting and enforcement, prohibits and permissions according to the command-and-control regulation (Tajdić et al., 2021). ‘The Clean Air Act’ or ‘The Clean Water Act’ are examples of this regulation mentioned above. According to this regulation, firms producing plastic are bound to install anti-pollution equipment. This again increases the cost of the pollutive (like plastic) or non-pollutive product. Thus, the products are sold less in numbers.

The same statement goes true for plastic production.

Implemented taxes on policymakers: There is huge pressure on the government regarding the taxes, whether they should be imposed or not so that the economic condition and the environment both remain on the safe side. Many countries already imposed taxes on single-use plastics (Moshood et al., 2021). This again increased the cost of plastic reducing the sale of the same and searching the other options instead of pollutant plastic. The pollutant flows, that is, the forward continuous motion of plastic from one place to another is thus interrupted or reduced.

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Theory of externalities

Externality refers to the problem when the action, production, or consumption of one economic unit directly influences another economic unit (Nordhaus, 2019). According to economists, an externality is a major issue that makes the market inefficient which eventually leads to market failure. Externalities are mainly of two types

  • Positive externality
  • Negative externality

Most of the externalities are negative, some of them cause pollution, and others are harmful to living and non-living bodies (Xiao et al., 2018). Negative and positive externalities can be further divided into Production and Consumption Externality.

The main reason behind the negative externality may be the poor definitions of property rights which result in overproduction also.

Possible solutions to control the negative externalities are discussed below:

  • A strict declaration of property rights can limit the effect of one activity on unrelated parties (Montolio & Planells-Struse, 2019).
  • Imposing a tax on products or services can be a solution as this tax would discourage the production and supply of that product.
  • Subsidies can be introduced to some substitute products with positive externalities to encourage the consumption of that product.

Revolutionary emergence and growth of the Plastic Industry led to the negative externality due to the following reasons:

  • Inefficient disposal of plastic leads to a lack of biodegradability in landfills.
  • It did not satisfy the 3 R’s: Reduce, Reuse, and Recycle.
  • Contamination of the ocean and other environmental harms are also caused by the littering of plastic bags.

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Performance of Levy

To lessen the extreme usage of disposable plastic bags, Levy was introduced as an anti-litter measure (Penn et al., 2022). This plastic bag waste was a total of 5% of litter in the entire Ireland. It created a high impact on Ireland.

A survey was done by an initiative of the Government which found that consumers are willing to pay a tax of EUR 0.024 per plastic bag (Adeyanju et al., 2021). This research sets the level for defining the actual tax which is nearly six times and even higher than the amount people were willing to pay. A tax of EUR 0.15 on plastic bags was introduced by the Ireland Government in 2002. It was applied to the bags made fully or partially using plastic used at any sales outlet. Though this step resulted in an immediate decrease in plastic bag usage by nearly 90 percent, the consumption started to increase again in 2006. Then as an immediate reaction, the tax was increased from EUR 0.15 to 0.22 per bag in 2007.

The levy was imposed on both biodegradable and other plastic bags (Napper & Thompson, 2019). However, the plastic bags that were used for separating foods to maintain hygiene and for food safety were exempted from the tax. Bags within the range 225mm in width, 345mm in depth, and 450mm in length, used in packaging food items and ice were not subjected to the tax. The plastic bags that are sold on ships, planes, and reusable plastics that cost less than EUR 0.70 each were also excluded from taxable.

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Effect of 6x tax in Ireland

This new tax on plastic bags was an immediate and spectacular success and the usage of plastic bags was reduced by 90% of the consumption when the levy was 15 cents per bag (Mogomotsi et al., 2019). This figure was collected from nearly 3000 retailers. Recycling plastic bags was also proposed as a measure. The positive impact of the reduction of usage was seen in the environment. It also raised national consciousness. This measure immediately reduced 328 bags per capita to nearly 14 bags per capita in 2014 when the levy on it was 22 cents per bag. However, this reduction in the usage of plastic bags had a very limited impact on employment in that industry.

The Department of Environment, Community, and Local Government uses a Pollution Monitoring System that has a constant eye on the impact of plastic bag taxes continuously. The data on the average per capita consumption rate of plastic bags are used to make sure that the application of the levy is appropriate (Sobaya et al., 2018). The collected lavy contributes to the Environmental Fund, created in 2002 which also covers the cost of administering the levy along with the environmental initiatives. This tax also goes into the cost of environmental research works, promotion of awareness campaigns, and other initiatives to protect the environment.

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Tax levy versus ban on plastic

As stated earlier, levying the tax on the plastic bags that are used for a single time, results in reduced plastic bag usage. The application of levies on plastic bags leads to an upsurge in the price of such items resulting in their demand fading away and increasing demand for alternatives (Bruwer et al., 2021). Levying well-designed taxes should make way for more sustainable and durable substitutions to plastics that are either which is more easily recyclable or more durable plastic or consumers can opt for entirely non-plastic materials that are manufactured from jute, wood, or metal. Levying a tax on single-use plastic bags is a market-based instrument that aims at reducing the manufacturing of single-use plastics. Thus, pruning the plastic wastes of years and the adverse effects of those on the environment.

Banning plastic bags has many impacts. Economically speaking, banning single-use plastic bags affects business sales and profits negatively. These bans provide an unjustified advantage to retailers in the geographical area without the ban and have irreversible consequences (Asmuni et al., 2018). It has been reported that theft of store shopping carts is higher in the stores that come under the area of the ban. Instead, customers in these areas tend to use more plastic produce bags which directly undercuts the reason and effect of the ban. Overall, bans on plastic bags that are used for a single time, decrease the profit percentage of the producers, increase prices for consumers, and decrease economic liquidity in the area affected by the ban.

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How well the proposed policy matches the theory 

Both the market instruments like levying taxes and banning single-use plastics are meant to do only good (Delmotte & Cowen, 2022). Still, there are a lot of factors to consider. Both of these two create economic challenges for both business owners and consumers.

  • In the case of the tax levy, though the usage of plastic gets reduced significantly, the threat looms because, for the economically blessed 1 percent of the population, a little tax does not matter nor does a time increase in tax matter. A tax levy on plastic bags at a grocery store also hurts the poor and already food-insecure people.
  • Ban on plastic bags negatively impacts store owners as they end up spending 40 to 200 percent more on alternative carryout bags thus affecting their bottom lines directly (Yoshida, 2022). Banning reduces a customer’s purchasing power ultimately leading to a decrease in demand. It also increases the price of goods and services in the area of the ban. Because of this, in Los Angeles, the retail stores that are in located the area where the bags are banned, lessen their employment rate by almost 11 percent. On the other hand, the stores which are situated outside of the banned area, enhanced their employment by 2.4 per cent. Single-use plastic bag bans not only affect retail employment. The plastic bag manufacturing companies in the USA alone sustain 30,900 American jobs. If the ban on plastic bags becomes widespread the lives of these people will be at stake.

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Whether levying taxes and prohibition the use of plastic bags that are used for a single time, is beneficial or not and what are the impacts of these two on the economy, are highly controversial (Alvarez-Risco et al., 2020). Due to the taxes, the use of plastic bags will decrease paving the way for more durable and sustainable alternatives. The most commonly used alternatives to plastic bags are cloth and paper bags and this affects the environment negatively. The manufacturing of plastic bags requires much less energy than cloth and paper bags and is easily recyclable. A single cloth bag needs to be used 104 times to create an environmental advantage over plastic bags and most of the time the cloth bags are not used for half that amount of time.

The need of the hour is to ban plastic altogether but one has to make sure of the repercussions it can cause to the economy. The countries implementing these laws should first consider the units of manufacturing plants producing plastic and their annual turnover. Before implementing any of these measures, the Government should weigh the impacts of major job losses in the country as a result of the closure of the manufacturing plants thus paving the way for huge unemployment. This would lead to an economic downturn (Inoue et al., 2020). Because of levying taxes on single-use plastics, a major decline will take place in the retail employment sector. Banning single-use plastic bags altogether or levying huge amounts of taxes on them have adverse effects on the environment, jobs, and mostly the economy.

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In conclusion, it can be said that the author has discussed the appropriate economic model for a particular problem which is regarding the single-use of plastic bags. The essay has focused on the single-use plastic bags that are widely used in various countries. Some countries have banned them and some countries have implemented taxes for using them. In this essay, the problem is identified by the author and discussed and described elaborately. Here, it was also explained why the problem was considered an economic problem. The theory of externalities is also analyzed in this essay in detail. The positive and negative externalities have also been discussed. The performance of levy was the topic of discussion in this essay. The author has enlightened the topic of the effect of the 6x tax in Ireland in detail. The essay has focused on the tax levy vs the ban on plastic in different countries. How well the proposed policy matched is also analyzed in this essay. Finally, the author has stated some recommendations that can be implemented.

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