A Coffee Cup Charge?

The UK’s Environmental Audit Committee recently heard evidence on the scale of waste created by disposable coffee cups. About 2.5bn of the cups, used for take-away coffee, are disposed of annually, with only 1% recycled. The plastic lining on such cups increases the cost of recycling them compared to pure paper. This, and the high supplies of paper for recycling, means that demand from the recycling industry for composite materials is low (Tietenburg & Lewis, 2012). As such, disposable coffee cups currently are essentially deemed as non-recyclable contaminants in the UK. Excessive packaging waste can be seen to be the result of a market failure, as the prices of packaged products, in this case take away beverages, fails to account for the costs of the waste produced. This market failure could be seen to result from a negative externality, as neither the waste disposal costs nor the costs of exceeding the environment’s capacity to receive non-recycled waste are borne by those creating the waste, the retailers and consumers of the coffee cups (Pearce & Turner, 1992). This could explain why current voluntary action has been deemed insufficient and further measures, including a levy or even a ban, have been recommended (Environmental Audit Committee, 2018).

Creagh (in Taylor, 2017), the head of committee, said that “These coffee shops have a big responsibility under the producer responsibility obligations to provide proper recycling facilities and they are in breach of them.” The producer responsibility obligation is an example of a regulatory response to the problem of waste, setting recovery and recycling targets for businesses (DEFRA, 2017). Such, take-back obligations can incentivize producers to improve both their products and the supporting infrastructure in order to increase recycling (DEFRA, 2017, Tietenburg & Lewis, 2012). However, as Creagh’s comment shows, this has not worked in the case of coffee cups. This is probably as it would likely to require businesses to make greater investments into encouraging collection and the specialised recycling facilities needed to deal with current cups. The high risk that other firms could freeride on these investments is likely to make them unattractive. This is especially so given that firms do not currently bear the cost of the waste problem. Therefore, in the face of ineffective enforcement, retailors are unlikely to take these steps to reduce waste caused by disposable coffee cups.

Another regulatory method therefore proposed is “banning the current disposable cups to encourage more easily recyclable alternatives” (Taylor, 2017). An outright ban would force retailors to provide alternatives, such as reusable cups (as some already do) and fully recyclable cups such as Frugalpac, or not to offer takeaway drinks. This would remove this source of waste (assuming recycling always takes place where possible). However, it is likely to be inefficient, particularly if it reduced businesses’ revenues due to difficulties sourcing alternatives. The costs reducing the waste production of from disposable coffee cups to zero are likely to be greater than the benefits produced, and thus a ban is not the socially optimal solution.

Putting a price on disposable cups’ use and thus the waste pollution they cause has also been suggested as a solution. The most obvious and frequently suggested means of doing this would be to charge a product charge on disposable coffee cups at the point of use. Indeed, the Environmental Audit Committee (2018) has since recommended a minimum 25p levy. Product charges have been very successful in reducing plastic bag use, as a means of waste control. Product charges price the externality that can be seen to cause excessive waste production and thus internalises the waste into decision making. This can produce an efficient reduction of waste, as customers choose to either to pay the charge or to use the alternative that best suits them depending on the relative costs and benefits. Therefore, waste reduction only occurs when the costs of doing so do not exceed the benefits. Product charges are not completely efficient, as they do not account for differing impacts resulting from siting or product variations (Tietenburg & Lewis, 2012). However, they are likely to be more efficient than regulatory approaches. They also have additional benefits. Product charges are relatively easy to administer, given that they are applied at an existing point of transaction and thus do not require additional monitoring or intervention. The revenue raised could potentially be invested in infrastructure to increase the recycling rate of disposable cups, as recommended by the Environmental Audit Committee (2018), or other waste reduction initiatives. Therefore, the potential impacts on waste reduction could be increased.

However, the industry dislikes proposals of a product charge, or a ban, being imposed on them, insisting that “they were working towards creating a system that would allow consumers to recycle the existing cups” (Taylor, 2017). However, such industry-led initiatives have yet to have much effect. In addition, attitudes may change after implementation; the initial scepticism of Irish retailors to the plastic bag charge was overcome, with their costs offset by no longer providing free bags and new income streams created by reusable alternatives. As such, it seems a worthwhile risk to implement a product charge on disposable coffee cups.

A product charge is more likely to be an efficient solution to the overproduction of waste resulting from disposable coffee cups than relying on existing regulation, industry initiatives or an outright ban. As with the plastic bag charge, it would internalise the disposal costs of this products by creating a market price. This would enable these costs to be accounted for when deciding whether to use disposable coffee cups. As such, it could rectify the market failure that can be said to have created the problem in the first place. A product charge would be relatively easy to administer and, given the precedent provided by the plastic bag charge, it could be easy to justify to the public. This precedent also suggests that there are counter arguments to current industry opposition, which may decrease after the introduction of a product charge in any case.

References

DEFRA, 2017, The Producer Responsibility Obligations (Packaging Waste) Regulations 2007: post implementation review 2017, available at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/625963/post-implementation-review-producer-responsibility-obligations-july2017.pdf [accessed on 22/10/17].

Environmental Audit Committee, 2018, Disposable Packaging: Coffee Cups, Second Report of Session 2017-19, House of Commons, available at: https://publications.parliament.uk/pa/cm201719/cmselect/cmenvaud/657/657.pdf [accessed on 11/01/2018].

Pearce, D., Turner, R.K., 1992, Packaging waste and the polluter pays principle: a taxation solution, Journal of Environmental Planning and Management, 35(1):5-15. 
Taylor, M., 2017, Coffee shops not doing enough to combat huge increase in waste cups, The Guardian, available at: https://www.theguardian.com/environment/2017/oct/10/coffee-shops-not-doing-enough-to-combat-huge-increase-in-wasted-cups [Accessed on 22/10.17].  

Tietenburg, T., and Lewis, L., 2012, Environmental and natural resource economics, 9^th edition, Pearson, Boston.

About me
Bethanie Helas is a 4th year Sustainable Development student interested in how more sustainable everyday behaviours can be encouraged and facilitated.