Around 7.7 billion single-use plastic water bottles are consumed every year in the UK, amounting to roughly 21 million every day. Despite widespread recycling bins, only a fraction are cleanly recycled; millions end up in landfills or polluting marine environments. The Department for Environment, Food and Rural Affairs (DEFRA) has suggested that a plastic bottle levy could replicate the success of the carrier bag charge. The 10p carrier bag charge led to a 90% drop in plastic bag usage across major supermarkets. It is estimated that introducing an indirect tax of 10p on single-use plastic water bottles could cut demand by up to 4 billion bottles annually.
One environmental campaigner remarked: "We have seen how a small financial disincentive can shift public habits on carrier bags. Extending this to single-use water bottles is a logical next step. Most consumers buy bottled water out of convenience without considering the environmental cost. A direct price signal would encourage a transition to reusable flasks."
However, a retail representative contested this view, arguing that a tax is the wrong approach: "A 10p increase on a £1.20 bottle of water will not deter a thirsty commuter. It risks being highly regressive. A better approach lies in innovation—developing biodegradable plant-based plastics or investing in nationwide public water-fountain infrastructure so refilling is easier."
Manufacturing plastic bottles requires significant resources. It is estimated that the annual production of PET bottles for the UK market consumes around 2.5 million barrels of oil and generates over 350,000 tonnes of CO2 emissions. Furthermore, chemical additives used to make the plastic flexible complicate the recycling process, requiring specialist processing plants that are currently operating at maximum capacity.
Question
Examine the advantages of using an indirect tax as a means of reducing the use of single-use plastic water bottles. Refer to Extract B in your answer.
22 exam-style questions on Edexcel A A Level Economics 1.2.9 Indirect taxes and subsidies. Each one has a worked solution and a mark scheme showing where the marks go.