Bag "Leakage": The Effect of Disposable Carryout Bag Regulations on Unregulated Bags

Bag "Leakage": The Effect of Disposable Carryout Bag Regulations on Unregulated Bags. By Rebecca Taylor
University of California Working Paper, May 2017, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2964036

Abstract: Governments often regulate the consumption of products with negative externalities (e.g., gasoline, tobacco, sugar). Leakage occurs when partial regulation results in increased consumption of products in unregulated parts of the economy. If unregulated consumption is easily substituted for regulated consumption, basing the success of a regulation solely on reduced consumption in the regulated market overstates the regulation’s welfare gains. This article quantifies leakage from an increasingly popular environmental policy — the regulation of disposable carryout bags (DCB). In California, DCB policies prohibit retail food stores from providing customers with thin plastic carryout bags at checkout and require stores to charge a minimum fee for paper carryout bags. However, all remaining types of disposable bags are unregulated (e.g., garbage bags, food storage bags, paper lunch sacks). Using quasi-random variation in local government DCB policy adoption in California from 2008-2015, I employ an event study design to quantify the effect of bag regulations on the consumption of plastic and paper carryout bags, as well as the consumption of other disposable bags sold. This article brings together two data sources: (i) weekly retail scanner data with product-level price and quantity information from 201 food stores in California, and (ii) observational data collected at checkout in seven Californian supermarkets. The main results show that a 40 million pound reduction of plastic from the elimination of plastic carryout bags is offset by an additional 16 million pounds of plastic from increased purchases of garbage bags (i.e., sales of small, medium, and tall garbage bags increase by 67%, 50%, and 5%, respectively). Additionally, DCB policies lead to a 69 million pound increase in paper carryout bags used annually. Altogether, I show that DCB policies are shifting consumers towards fewer but heavier bags. This bag "leakage" is an unintended consequence of DCB policies that offsets the benefits of reduced plastic carryout bag use. I conclude by discussing the environmental implications of policy-induced changes in the composition of plastic and paper bags, with respect to carbon footprint, landfilling, and marine pollution.