SSRN Id4284169 PDF

TARGETING PLASTIC POLLUTION WITH TAXES
ROBERTA MANN*
Plastic pollution is a matter of increasing global concern.

Unmanaged plastic waste is a particularly large and growing
problem in the world’s oceans. Assuming a constant level of fish
stocks, the weight of plastic pollution in the ocean in 2050 is
projected to exceed the weight of the fish. The concern reaches all
levels of government from the local to the national. Solutions
include plastic bag bans, taxes or fees on single-use plastics,
incentives for reusable bags, and incentives for recycling. Recycling
has become a particular issue since early 2018, when China
announced it would stop accepting imported plastic waste. Plastics
pollution creates significant environmental externalities, such as
harm to natural systems, greenhouse gas emissions from
production and after-use incineration, and human health impacts
from endocrine disrupters released when plastics degrade.
Environmental taxation should be an efficient solution to the
plastics pollution problem, if properly designed. Research shows
that taxation could be more effective than other measures such as
incentives. This Article will assess the various solutions proposed
and used worldwide.
I. INTRODUCTION ........................................................................ 2
A. History of Plastics ............................................................. 3
B. Growing Awareness of the Pollution Problem ................. 4
1. The U.S. Contribution to Plastic Waste .................... 5
2. The Pandemic and Single-Use Plastics ..................... 5
C. The Petroleum Industry: Power and Influence ................ 6
II. TAXES AND THE ENVIRONMENT .............................................. 9
A. Pigou and Externalities .................................................... 9
B. The Petroleum Industry – Redux ................................... 13
C. Is “Clean Energy” Enough to Address the Harm from
Plastic Production? ......................................................... 22
D. Waste and Taxes ............................................................. 27
1. Recycling or “Wish” Cycling ..................................... 28
2. Upcycling or Downcycling? ....................................... 30
3. Re-Use ....................................................................... 32
* Roberta Mann is the Mr. & Mrs. L.L. Stewart Professor of Business Law at the
University of Oregon School of Law. Thank you to Caleb Crahan (J.D. 2022) for able
research assistance. Thank you also to Jim Repetti, Shu-yi Oei, Steve Shay, Steve Shiffrin,
and the other participants at Boston College School of Law Tax Policy Colloquium. I also
greatly appreciate the comments and support from Bridget Crawford, Greg Bothun, Marta
Villar Ezcurra, and Tracey Roberts.
Electronic copy available at: https://ssrn.com/abstract=4284169

2 JOURNAL OF LAND USE [Vol. 37:2
III. DESIGN ISSUES: ARE STICKS OR CARROTS BETTER?............. 33

A. The Efficiency Problem with Tax Incentives (Carrots).. 33
B. The Big Stick: Carbon Pricing ....................................... 34
C. Targeting Plastics ........................................................... 37
IV. POLICY INSTRUMENTS AND PROPOSALS................................ 37
A. Extended Producer Responsibility ................................. 37
B. Bags, Bans, and Small Incentives ................................. 40
C. Ideas from Africa ............................................................ 41
D. The UK Solution ............................................................. 41
E. United Nations Resolution to End Plastic Pollution..... 42
F. State Legislation ............................................................. 43
1. Recycling Credits ...................................................... 43
2. Plastic taxes .............................................................. 44
G. U.S. Federal Proposals ................................................... 44
V. CONCLUSIONS AND RECOMMENDATIONS .............................. 47
I. INTRODUCTION
Waking up in the morning, you open your eyes. You toss off
your cozy fleece blanket and check your phone. You stumble to the
bathroom and touch the light switch. Opening the cabinet, you
grab your toothbrush and toothpaste. How many plastic items
have you encountered? How many of those items could you easily
replace with something that did not contain plastic? Plastic is
ubiquitous in the modern world. We cannot even imagine a day in
which we did not use hundreds of items containing plastic. Yet,
synthetic plastic as we know it was only invented in 1907, when
Bakelite launched the modern plastics industry.1
Plastic pollution is a matter of increasing global concern. In
2015, a report by McKinsey & Company stated that “the amount of
unmanaged plastic waste entering the ocean…has reached crisis
levels.”2 Assuming a constant level of fish stocks, the weight of
plastic pollution in the ocean in 2050 is projected to exceed the
weight of the fish.3 The concern reaches all levels of government
from the local to the national. Solutions include plastic bag bans,
taxes or fees on single-use plastics, incentives for reusable bags,
and incentives for recycling. Recycling has become a particular
1. History of Plastics, PLASTICS INDUS. ASS’N,

https://www.plasticsindustry.org/history-plastics (last visited Oct. 6, 2021).
2. Stemming the Tide: Land-Based Strategies for a Plastic-Free Ocean, MCKINSEY
CTR. & OCEAN CONSERVANCY 1, 6 (Sept. 1, 2015), https://www.mckinsey.com/business-
functions/sustainability/our-insights/stemming-the-tide-land-based-strategies-for-a-plastic-
free-ocean.
3. The New Plastics Economy: Rethinking the Future of Plastics, WORLD ECON. F.
1,14 (Jan. 19, 2016), https://www.weforum.org/reports/the-new-plastics-economy-rethinking-
the-future-of-plastics.

Spring, 2022 TARGETING PLASTIC POLLUTION 3
issue since early 2018, when China announced it would stop

accepting imported plastic waste.4 Plastic pollution creates
significant environmental externalities, such as harm to natural
systems, greenhouse gas emissions from production and after-use
incineration5, and human health impacts from endocrine
disrupters released when plastics degrade.6 Environmental
taxation should be an efficient solution to the plastics pollution
problem, if properly designed. Part I of this Article will briefly
discuss the history of plastic, its chemical origins, and the growing
concern about plastics pollution. Part II focuses on environmental
taxation as practiced in the United States, including energy tax
incentives. Oil is the feedstock for most plastic products and
energy is required to transform that feedstock into plastic, so an
examination of existing energy tax incentives can inform a
potential path forward for controlling plastic waste. Part III
compares the effect of tax incentives and tax “penalties,”
considering the question of whether carrots or sticks might be most
effective in controlling plastic waste. Part IV assesses the various
solutions to the plastic waste problem, both proposed and in effect
worldwide. Part V will then conclude with recommendations.
A. History of Plastics
Plastic is a term that encompasses dozens of chemical
compounds.7 Its uses range from everyday household items to
highly technical instruments used in medicine, space exploration,
and defense. Most plastics derive from petroleum.8 Some of the
first petroleum plastic products include: polyethlene, invented in
England in 1933; nylon, invented by DuPont in 1939; expanded
polystyrene, created in 1941 by accident in a Dow Chemical lab;
polypropylene, invented in 1954; and high-density PE, commonly
4. See Amy L. Brooks et al., The Chinese Import Ban and Its Impact on Global
Plastic Waste Trade, 4 SCI. ADVANCES 1, 1 (June 20, 2018),
https://www.science.org/doi/pdf/10.1126/sciadv.aat0131.
5. ORG. FOR ECON. CO-OPERATION & DEV. [OECD], POLICY PAPER 12, IMPROVING
PLASTICS MANAGEMENT: TRENDS, POLICY RESPONSES, AND THE ROLE OF INTERNATIONAL
COOPERATION AND TRADE 4 (2018), https://www.oecd.org/environment/waste/policy-
highlights-improving-plastics-management.pdf.
6. Qiqing Chen et al., Leaching of Endocrine Disrupting Chemicals from Marine
Microplastics and Mesoplastics Under Common Life Stress Conditions, ENV’T INT’L, Sept.
2019, at 1, 1-2.
7. John N. Hahladakis et al., An Overview of Chemical Additives Present in Plastics:
Migration, Release, Fate and Environmental Impact During Their Use, Disposal and
Recycling, 344 J. HAZARDOUS MATERIALS 179, 184-86 tbl.1 (2018),
https://www.sciencedirect.com/science/article/pii/S030438941730763X?via%3Dihub.
8. See generally CTR. FOR INT’L ENV’T L., FUELING PLASTICS: FOSSILS, PLASTICS, &
PETROCHEMICAL FEEDSTOCKS, at 1 (Sept. 20, 2017), https://www.ciel.org/wp-
content/uploads/2017/09/Fueling-Plastics-Fossils-Plastics-Petrochemical-Feedstocks.pdf,
(“Plastics are produced from chemicals sourced almost entirely from fossil fuels.”).

used to make plastic milk jugs and hula hoops.9 Traditional plastic
production is highly energy intensive and generates pollutants,
including greenhouse gas emissions.10
The miracle of plastic is that it is lightweight, durable, and
cheap. The tragedy of plastic is that it is lightweight, durable, and
cheap. Because it is cheap, it is often used for disposable products,
such as packaging. Because it is durable, plastic pollution lasts
and lasts.11 Because it is lightweight, it can blow across the land
and float in the ocean.
B. Growing Awareness of the Pollution Problem
There is increasing public awareness of the plastics pollution
problem, although the scientific community and plastics industry
have been aware for decades.12 One report found that up to 12.7
million metric tons of plastic entered in the ocean in 2010 alone.13
Further, although plastics are durable, they do break down into
smaller pieces in the environment, called microplastics. These
microplastics can enter the food chain to be ingested by fish and
ultimately by humans.14 Plastics can leach endocrine-disrupting
chemicals, which can cause cancer and other illnesses.15
World plastics production increased more than 20 times in the
fifty years between 1964 and 2014.16 In 2022, the world produced
more than 367 million metric tons of plastic.17 “After a short first-
use cycle, 95 percent of plastic packaging material value, or $80–
120 billion annually, is lost to the economy.” 18 Only 20 percent of
the 6,300 million tons of plastic produced between 1950 and 2015
9. History of Plastics, supra note 1.

10. See OECD, supra note 5.
11. “Due to its durability, unless incinerated or recycled, all of the plastics that have
ever been produced are still present in the environment, whether in use, as litter, or as
components of landfill.” L.S. Dilkes-Hoffman et al., The Role of Biodegradable Plastics in
Solving Solid Waste Accumulation, PLASTICS TO ENERGY 469, 472 (2019),
https://www.sciencedirect.com/science/article/pii/B9780128131404000194.
12. Fueling Plastics: Plastic Industry Awareness of the Ocean Plastics Problem
[Fueling Plastics], CTR. FOR INT’L ENV’T L. 1, 6 (2017), https://www.ciel.org/wp-
content/uploads/2017/09/Fueling-Plastics-Plastic-Industry-Awareness-of-the-Ocean-Plastics-
Problem.pdf.
13. Jenna R. Jambeck et al., Plastic Waste Inputs from Land into the Ocean, 347 SCI.
768, 770 (2015), https://www.science.org/doi/epdf/10.1126/science.1260352.
14. Richard C. Thompson, Microplastics in the Marine Environment: Sources,
Consequences and Solutions, MARINE ANTHROPOGENIC LITTER 185 (2015),
https://link.springer.com/content/pdf/10.1007%2F978-3-319-16510-3.pdf.
15. See Chen, supra note 6.
16. The New Plastics Economy: Rethinking the Future of Plastics, supra note 3, at 7.
17. Production of Plastics Worldwide from 1950 to 2020, STATISTA
https://www.statista.com/statistics/282732/global-production-of-plastics-since-
1950/#:~:text=In%202019%2C%20the%20global%20production,quarter%20of%20the%20glo
bal%20production (last updated Jan. 12, 2022).

has been recycled.19 The remaining 80 percent ended up in

landfills or in the environment. According to the World Economic
Forum, 32 percent of plastic packaging escapes collection
systems.20
1. The U.S. Contribution to Plastic Waste
Although plastic waste is a global issue, the United States is
the largest contributor to the problem. In 2016, the U.S. generated
the largest amount of plastic waste of any country in the world, 42
million metric tons.21 Until 2018, much of the plastic waste
generated by the United States were shipped overseas for
“recycling.”22 From 2017 to 2019, U.S. exports of scrap plastic
decreased by 60 percent.23 In 2018, China, which had been
accepting the majority of U.S. plastic scrap exports, implemented
its “National Sword” policy.24 This policy imposed strict
contamination standards on plastic scrap and resulted in a 99
percent reduction in plastic scrap imports to China.25
2. The Pandemic and Single-Use Plastics
The amount of plastic waste generated has increased due to the
COVID-19 pandemic in 2020 and 2021.26 Most personal protective
equipment (PPE) used by both medical personnel and ordinary
citizens alike, is made of plastic designed to be single use.27
Quarantining at home has increased online shopping and
19. ORG. FOR ECON. CO-OPERATION & DEV., supra note 10, at 4.
21. Kara Lavender Law et al., The United States’ Contribution of Plastic Waste to
Land and Ocean, 6 SCI. ADvances 1-2 (2020),
https://www.science.org/doi/epdf/10.1126/sciadv.abd0288.
22. See Amy L. Brooks et al., The Chinese Import Ban and Its Impact on Global
Plastic Waste Trade, SCI. ADVANCES, June 20, 2018, at 1, 6,
https://www.science.org/doi/pdf/10.1126/sciadv.aat0131.
23. Colin Staub, Paper and Plastic Export Numbers Take a Historic Dive, RES.
RECYCLING (Feb. 10, 2020), https://resource-recycling.com/recycling/2020/02/06/paper-and-
plastic-export-numbers-take-historic-dive/.
24. Cheryl Katz, Piling Up: How China’s Ban on Importing Waste Has Stalled Global
Recycling, YALE ENV’T 360 (Mar. 7, 2019), https://e360.yale.edu/features/piling-up-how-
chinas-ban-on-importing-waste-has-stalled-global-recycling.
25. Id. However, the United States has continued to export large volumes of waste
plastic to countries willing to accept it. See, e.g., The Recycling Myth: Malaysia and the
Broken Global Recycling System, GREENPEACE 1 (2018),
https://www.greenpeace.org/static/planet4-southeastasia-stateless/2019/04/7c9f822c-
7c9f822c-the-recycling-myth-malaysia-and-the-broken-global-recycling-system.pdf
(“Malaysia specifically showed a 292.5% increase of mixed plastics importation in 2017 as
opposed to 2016 (from 9,600 Mt to 38,000 Mt—quadrupled amount in the space of one
year).” Id. at 14.
26. Shashank Bengali, The COVID-19 Pandemic Is Unleashing a Tidal Wave of
Plastic Waste, L.A. TIMES (June 13, 2020, 5:00 AM), https://www.latimes.com/world-
nation/story/2020-06-13/coronavirus-pandemic-plastic-waste-recycling.
27. See generally id.

packaging.28 Even before the pandemic, one study estimated that

in 2019, Amazon generated 465 million pounds of plastic
packaging, very little of it recycled.29 Restaurants that were
limited to take-out used more plastic packaging.30 Reusable cloth
grocery bags and bulk food containers were discouraged at grocery
stores.31
C. The Petroleum Industry: Power and Influence
Oil and its close relative, natural gas, are essential feedstocks
for the manufacture of most plastic products. Oil has long been
viewed as an essential part of modern society. Ostensibly to protect
the economy and the public from shortages, the oil industry has
enjoyed significant government support.32 As will be detailed in the
next section, the oil industry has benefited from government tax
incentives since the early 20th century.33
Despite increasing awareness of the health and environmental
dangers of fossil fuels,34 a particularly significant moment in fossil
fuel industry influence occurred in the early 2000s. Vice President
Cheney headed the National Energy Task Force, whose
membership was secret until the Washington Post uncovered the
names of dozens of oil and coal industry executives.35
Environmental groups were conspicuously absent.36 The National
28. Jasmin Malik Chua, Online Shopping Has Boomed in the Pandemic. But What
About All the Packaging?, VOX (Jan. 8, 2021, 9:10 AM), https://www.vox.com/the-
goods/22214017/online-shopping-pandemic-packaging-ecommerce-waste-plastic.
29. Amazon’s Plastic Problem Revealed, OCEANA 1, 4-5 (2020), https://oceana.org/wp-
content/uploads/sites/18/amazons_plastic_problem_report_12.17.2020_doi.pdf. The report
notes that most of Amazon’s packaging is “plastic film” and only four percent of post-
consumer plastic film was recycled in 2019. Id. at 5.
30. Jose Isagani B. Janairo, Unsustainable Plastic Consumption Associated with
Online Food Delivery Services in the New Normal, 2 CLEANER & RESPONSIBLE
CONSUMPTION 100014, 100014-15 (2021).
31. Tom Szaky, Reusable Packaging in the Time of COVID-19, GREENBIZ (May 18,
2020), https://www.greenbiz.com/article/reusable-packaging-time-covid-19.
32. From 1918 to 2009, oil and gas businesses received almost $447 billion in
government subsidies, measured in 2010 dollars. Nancy Pfund & Ben Healey, What Would
Jefferson Do? The Historical Role of Subsidies in Shaping America’s Energy Future, at 29
(Sept. 2011), https://www.dbl.vc/wp-content/uploads/2012/09/What-Would-Jefferson-Do-
2.4.pdf.
33. Id.
34. Savannah Bertrand, Fact Sheet: Climate, Environmental, and Health Impact of
Fossil Fuels, ENV’T & ENERGY STUD. INST. (Dec. 17, 2021),
https://www.eesi.org/papers/view/fact-sheet-climate-environmental-and-health-impacts-of-
fossil-fuels-2021 (“Air pollution from burning fossil fuels can cause multiple health issues,
including asthma, cancer, heart disease, and premature death.”)
35. Dana Milbank & Justin Blum, Document Says Oil Chiefs Met With Cheney Task
Force, WASH. POST (Nov. 16, 2005), https://www.washingtonpost.com/wp-
dyn/content/article/2005/11/15/AR2005111501842.html.
36. Id.

Energy Task Force’s work culminated in the 2005 Energy Policy

Act, which exempted fracking from the Safe Water Drinking Act.37
Another significant moment occurred in 2010, when the
Supreme Court decided Citizens United, the case that ended limits
on campaign finance contributions.38 Since that decision, oil
industry lobby contributions to legislators more than doubled.39
Legislation designed to eliminate oil industry subsidies failed.40
More recently, oil companies received disproportionate benefits in
the CARES Act.41
For many years, scientists predicted that oil production would
peak and then decline.42 This has not happened. Enhanced
fracking technology has extended the life of oil production.43
Recently, it has been suggested that the new “peak oil” will be
related to demand, not production.44 Demand for motor fuels is
likely to continue to fall.45 The Biden administration announced
37. Michael Grunwald & Juliet Eilperin, Energy Bill Raises Fears about Pollution,
Fraud, WASH. POST (July 30, 2005),
https://www.washingtonpost.com/archive/politics/2005/07/30/energy-bill-raises-fears-about-
pollution-fraud/ea8ddb6f-d75e-4c6c-80a1-8aefe6d64b55/.
38. Citizens United v. Fed. Election Comm’n, 558 U.S. 310, 372 (2010) (striking down
the Bipartisan Campaign Reform Act of 2002’s restrictions on independent corporate
expenditures).
39. Oil and gas companies contributed more than $84 million to candidates running
for the U.S. Congress in 2018, more than a twofold increase since the Citizens United
decision in 2010, when oil and gas companies contributed approximately $35 million to
candidates. Matthew H. Goldberg et al., Oil and Gas Companies Invest in Legislators that
Vote Against the Environment, 117 PROC. NAT’L ACAD. SCI. U.S. AM. 5111, 5111 (2020).
40. On March 1, 2011, the House voted 249-176 to defeat a “Motion to Recommit
[that] would repeal oil and tax production tax breaks for major integrated oil companies.”
On May 17 the Senate voted 52-48 on a motion to proceed to the Close Big Oil Tax
Loopholes Act, S. 940. Weiss et al., Big Oil’s Banner Year: Higher Prices, Record Profits,
Less Oil, CTR. FOR A M. PROGRESS (Feb. 7, 2012, 9:00 AM),
https://www.americanprogress.org/issues/green/news/2012/02/07/11145/big-oils-banner-
year/.
41. Bill McKibben, Are We Past the Peak of Big Oil’s Power?, NEW YORKER (May 28,
2020) (noting that Occidental Petroleum expects to receive a $200 million tax refund thanks
to the CARES Act), https://www.newyorker.com/news/annals-of-a-warming-planet/are-we-
past-the-peak-of-big-oils-power; see also Lukas Ross, Cashing in on COVID: Tax Breaks,
Royalties and Stimulus Loans, FRIENDS OF EARTH, https://1bps6437gg8c169i0y1drtgz-
wpengine.netdna-ssl.com/wp-content/uploads/2020/05/CashingInOnCOVID-4.pdf (last
visited Mar. 17, 2022).
42. Edoardo Campanella, After Decades of Wrong Predictions, Oil May Finally Be
Peaking, FOREIGN POL’Y (July 13, 2020, 10:36 AM),
https://foreignpolicy.com/2020/07/13/peak-oil-pandemic-predictions/.
43. Manual Frondel, Marco Horvath, & Colin Vance, The U.S. Fracking Boom:
Impacts on Global Oil Prices and OPEC, INT’L ASSOC. ENER. ECON. ENERGY FORUM, 2 Qtr.
2018, https://www.iaee.org/en/publications/newsletterdl.aspx?id=466, (“After a steady
decline spanning several decades, U.S. crude oil production rebounded in 2008 owing to the
increased adoption of hydraulic fracturing, a technology otherwise knowns as fracking.”)
44. Bryan Walsh, The New “Peak Oil” Could be Demand, Not Production, AXIOS (Apr.
22, 2020), https://www.axios.com/peak-oil-demand-production-05842e6c-0714-41ce-bb9b-
746b122ef066.html.
45. See infra notes 46-47.

new proposed rules ending Trump era rollback of fuel economy

standards.46 Major car manufacturers have announced conversions
of their fleets to electric vehicles.47 Reduced fuel tax revenues have
stimulated states to consider other sources of road funding, like
vehicle miles traveled taxes.48
Despite falling demand for motor fuels, the oil industry has
another act planned: plastics. Over 99 percent of plastics are
derived from petroleum or other fossil fuels.49 While plastics vary
by chemical composition, there are five predominant types of
plastics, which currently constitute over 90 percent (by weight) of
all plastics produced: polyethylene (34.4%); polypropylene (24.2%);
polyvinyl chloride (16.5%); polyethylene terephthalate (7.7%); and
polystyrene (7.3%).50 In particular, “[e]thylene and propylene are []
critical in the production of plastic packaging, the largest and
fastest growing category of plastics products and the biggest,
though by no means only, contributor to the accelerating crisis of
plastics pollution.”51 Major oil companies produce both fossil fuels
and plastics, with trends showing that plastic production could
become an even larger share of their overall production.52 For
example, BP expects plastics to represent 95 percent of the net
growth in demand for oil over the next 20 years.53 The
International Energy Agency (IEA) projects that plastics will be
biggest single source of demand growth for the oil industry.54
The oil industry is no stranger to environmental controversy. It
countered growing concern about climate change by sowing doubt
46. Fact Sheet: President Biden Announces Steps to Drive American Leadership
Forward on Clean Cars and Trucks, WHITE HOUSE (Aug. 5, 2021) (targeting 50% new
electric vehicles share by 2030), https://www.whitehouse.gov/briefing-room/statements-
releases/2021/08/05/fact-sheet-president-biden-announces-steps-to-drive-american-
leadership-forward-on-clean-cars-and-trucks/.
47. See generally Annie White, Here Are All the Promises Automakers Have Made
About Electric Cars, CAR & DRIVER (June 26, 2021),
https://www.caranddriver.com/news/g35562831/ev-plans-automakers-timeline/.
48. Ian Duncan, Two States Tax Some Drivers by the Mile. Many More Want to Give It
a Try, WASH. POST (Mar. 12, 2021),
https://www.washingtonpost.com/transportation/interactive/2021/electric-mileage-tax/.
49. See supra note 12, at 1-2.
50. See supra note 8, at 2.
51. Fueling Plastics, supra note 12, at 2.
52. David Roberts, Big Oil’s Hopes Are Pinned on Plastics. It Won’t End Well., VOX
(Oct. 28, 2020, 4:04 PM), https://www.vox.com/energy-and-environment/21419505/oil-gas-
price-plastics-peak-climate-change.
53. Id.
54. The Future of Petrochemicals: Towards More Sustainable Plastics and Fertilisers,
INT’L ENERGY AGENCY 1, 11 (2018), https://www.iea.org/reports/the-future-of-
petrochemicals.

about the science.55 As public awareness of plastics pollution

increased, the oil industry took a new strategy–encouraging
recycling. Plastics recycling eased concerns about plastic pollution
and allowed consumers to feel virtuous about their consumption.
As will be discussed later, plastics recycling is not an unalloyed
environmental blessing.56 In considering solutions to plastics
pollution, it would be naïve to count out the power and influence of
the oil and fossil fuel industry.57
The next section will discuss how taxes can be used to solve
environmental problems. The history of energy tax incentives will
be reviewed, including both “dirty” and “clean” energy. Finally, the
next section will discuss potential tax impacts on waste and
recycling.
II. TAXES AND THE ENVIRONMENT
A. Pigou and Externalities
Many scholars credit A.C. Pigou with developing the concept of
environmental taxation.58 Pigou, an economist, agreed with
market theory, but understood that the market fails when the cost
of products and services does not take into account externalities.59
Externalities can be positive or negative. Positive externalities
exist when private costs generate excess public benefit.60 For
example, a student may bear the cost of an advanced education
that enables the student to benefit society by finding a cure for a
disease. Negative externalities are adverse consequences of
producing or using a product or service that are imposed on the
public without cost to the consumer or producer.61 Therefore, the
55. See John Cook et al., America Misled: How the Fossil Fuel Industry Deliberately
Misled Americans About Climate Change, GEO. MASON U. CTR. FOR CLIMATE CHANGE
COMMUC’N 1, 3-5 (2019), https://www.climatechangecommunication.org/wp-
content/uploads/2019/10/America_Misled.pdf (“Over the past few decades, the fossil fuel
industry has subjected the American public to a well-funded, well-orchestrated
disinformation campaign about the reality and severity of human-caused climate change.”).
56. See GREENPEACE, supra note 25, at 26-31 (describing the environmental harm
caused by plastic exports to Malaysia).
57. As of this writing, Senator Joe Manchin is supporting the fossil fuel industry and
resisting removing fossil fuel subsidies in the 2021 reconciliation bill. Alleen Brown, Sen.
Joe Manchin Has Been Fighting to Keep Billions in Subsidies for Fossil Fuel Industry,
INTERCEPT (Oct. 22, 2021, 7:00 AM), https://theintercept.com/2021/10/22/manchin-climate-
fossil-fuel-subsidies-reconciliation/.
58. Roberton C. Williams III, Discussion Paper, Environmental Taxation, 2016 RES.
FOR THE FUTURE 1, 16-24.
59. See generally SHI-LING HSU, CAPITALISM AND THE ENVIRONMENT 108-9
(Cambridge Univ. Press 2021).
60. Pamela J. Jackson, Higher Education Tax Credits: An Economic Analysis 2, Cong.
Res. Serv. Rep. RL32507 (Apr. 18, 2005) (“Economists believe that education causes positive
externalities since it generates both private benefits for individuals and social benefits for
the public at large.”)
61. Hsu, supra note 59, at 109.

cost of a product will be lower than if that price took into account
this externality. Looking at the market as a whole, an unregulated
free market creates an inefficiently high quantity of a product or
service with a negative externality. Imposing a tax on the product
or service can correct the externality. Taxing the externality
imposes the cost of this adverse consequence on the consumer or
producer and therefore allows the market to operate properly.
With environmental taxation, the market shows the appropriate
price signal.62 This “polluter-pays” concept has been a feature of
tax policy discussions for many years.63 In the nineteenth century,
for example, political economist Henry George urged policy makers
to tax bads, not goods.64
Flexibility is an important advantage of environmental
taxation. In contrast to command-and-control regulations,
environmental taxes do not forbid or prescribe behavior.65 Rather,
consumers and businesses can decide how best to reduce their
environmental footprint.66 Government does not need to “pick
winners.”67 Rather, by responding to the correct price signal, the
market is free to innovate and develop the lowest-cost solution to
the problem.68
Tax incentives can have the same effect of market signaling. A
tax incentive operates to lower the cost of desirable products.69 Tax
incentives may be in the form of tax credits, tax deductions, or a
62. Id.
63. ORG. FOR ECON. CO-OPERATION & DEV, THE POLLUTER-PAYS PRINCIPLE: OECD
ANALYSES AND RECOMMENDATIONS (1992),
https://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=OCDE/GD(92)81&d
ocLanguage=En (discussing the OECD’s adoption of the polluter pays principle in 1972).
“Pollution prevention and control measures may achieve a desired improvement of the
quality of the environment to least social costs when they are based on the levying of
charges. When charges are applied they should be put in the framework of a comprehensive
policy. Such a policy will make explicit the function of charges in relation to environmental
policy objectives and to other instruments. When a charge is levied, it induces polluters to
treat their effluents as long as the treatment costs remain lower than the amount of the
charge they would otherwise be compelled to pay in the absence of pollution abatement. A
charging policy may thus achieve an objective at least social cost to society as it would
induce each of these polluters to abate pollution to the point where they each incur the same
additional costs for the same reduction of pollution emission.” Id. at 24.
64. See Annika Neklason, The 140-Year-Old Dream of ‘Government Without Taxation’,
ATLANTIC (Apr. 15, 2019) (referring to Henry George’s 1879 book Progress and Poverty),
https://www.theatlantic.com/national/archive/2019/04/henry-georges-single-tax-could-
combat-inequality/587197/.
66. Id.
67. See Tracey M. Roberts, Picking Winners and Losers: A Structural Analysis of Tax
Subsidies to the Energy Industry, 41 COLUM. J. ENV. L. 64, 74 (2019).
68. See Environmental Taxation: A Guide for Policy Makers, ORG. FOR ECON. CO-
OPERATION & DEV 1, 1 (Sept. 2011), https://www.oecd.org/env/tools-evaluation/48164926.pdf.
69. Roberta F. Mann & Mona L. Hymel, Getting into the Act: Enticing the Consumer to
Become “Green” Through Tax Incentives, 36 ENV. L. REP. 10419, 10421 (2006).

lower rate of tax on a given activity.70 In effect, the government

granting the incentive is bearing a portion of the cost of the
product. This increment of the cost will likely be borne by
taxpayers, not users.71 Whether an incentive or a tax is more
appropriate may depend on the salience of the instrument.72
Further, the incentive may be temporary, serving as a bridge to
encourage commercial adoption of the product or may be a
permanent feature of the tax system.73 Oil and gas incentives, such
as percentage depletion, have been a permanent feature of U.S. tax
law since the early 1900s.74 In contrast, renewable energy tax
incentives have generally been structured as temporary, although
frequently being extended.75 Tax incentives will be further
explored in Part III of this Article.
Plastic production creates negative externalities, including
carbon dioxide emissions and air pollution.76 Carbon dioxide
emissions are a major cause of climate change.77 Climate change,
70. See generally Roberta F. Mann, Another Day Older and Deeper in Debt: How Tax
Incentives Encourage Burning Coal and the Consequences for Global Warming, 20 PAC.
MCGEORGE GLOB. BUS. & DEV. J. 111, 127 (2007) (describing four types of tax incentives.)
71. Tax expenditures represent a loss in government revenue, and as such, may be
considered to be borne by all taxpayers. Section 3(3) of the Budget Act of 1974
defines tax expenditures as “those revenue losses attributable to provisions of
the Federal tax laws which allow a special exclusion, exemption, or deduction
from gross income or which provide a special credit, a preferential rate of tax,
or a deferral of tax liability.” See MICHAEL B. ENZI, STAFF OF S. COMM. ON THE BUDGET,
115TH CONG., TAX EXPENDITURES: COMPENDIUM OF BACKGROUND MATERIAL ON INDIVIDUAL
PROVISIONS, S. Prt. 115-28, at III (2018).
72. See generally Brian Galle, Carrots, Sticks and Salience, 67 TAX L. REV. 53 (2013).
73. See generally Roberta F. Mann, Lightning in a Bottle: Using Tax Policy to Solve
Renewable Energy’s Storage Challenges, 20 J. ENV’T & SUST. L. 71, 90 (2013)
(“Governmental action can help bridge the gap between nascent technology and market
competitiveness.”).
74. See Timeline of Natural Gas and Oil Tax Provisions, INDEP. PETROL. ASS’N OF
AM., (2016), http://www.ipaa.org/wp-content/uploads/2016/12/2009-04-
TimelineHistoryofNaturalGasandOilTaxProvisions.pdf (discussing the precursor to
percentage depletion, called “discovery value depletion,” was enacted in 1918, and
percentage depletion entered the tax law in 1926). The current provision is found in I.R.C.
§ 613.
75. MOLLY F. SHERLOCK, CONG. RES. SERV., R43453, THE RENEWABLE ELECTRICITY
PRODUCTION TAX CREDIT: IN BRIEF 3 (2020). (discussing the wind energy production tax
credit that has expired twelve times since 1999).
76. Plastic & Climate: The Hidden Costs of a Plastic Planet, CTR. FOR INT’L ENV’T L.,
https://www.ciel.org/project-update/plastic-climate-the-hidden-costs-of-a-plastic-planet/ (last
visited Nov. 6, 2021).
77. Climate Change 2014, Synthesis Report: A Report of the Intergovernmental Panel
on Climate Change, INTERGOVERNMENTAL PANEL ON CLIMATE CHANGE 1, 4 (2014),
https://www.ipcc.ch/site/assets/uploads/2018/05/SYR_AR5_FINAL_full_wcover.pdf. The
Intergovernmental Panel on Climate Change was created in 1988 by the World
Meteorological Organization (WMO) and the United Nations Environment Programme.
About the IPCC, INTERGOVERNMENTAL PANEL ON CLIMATE CHANGE,
https://www.ipcc.ch/about/ (last visited Feb. 20, 2022). (discussing the objective of the IPCC
is to provide governments at all levels with scientific information that they can use to

as well as other environmental hazards, disproportionately affects

impoverished populations, both globally and in the United
States.78 The climate justice movement grew out of the
environmental justice movement, which “combined notions of
environmental sustainability and everyday environments with
demands for social justice.”79 Human vulnerabilities to climate
change include hunger, water shortage, coastal flooding, and
increased risk of disease.80 In a prescient 2004 report, the
Congressional Black Caucus identified the likely impacts of
climate change on the U.S. African-American population: a
disproportionate burden from the health effects of climate change,
including deaths during heat waves and from increased air
pollution; disproportionate impact from extreme weather events
and spread of infectious diseases, such as dengue fever and
malaria; and increased unemployment and economic hardship due
to the economic instability caused by climate change.81 Populations
forced to live in disaster-prone areas as a result of poverty and
discrimination are more vulnerable to more intense and more
frequent storms caused by climate change.82 With respect to
plastics production in particular, plants producing the building
blocks for plastics, petrochemicals, are disproportionately located
in areas with minority populations, such as Louisiana’s Cancer
Alley.83 A post on the Yale Environment 360 site expands on this
point: “[i]n addition to its climate impacts, petrochemical
production can release airborne toxins such as 1,3-Butadiene,
benzene, and toluene, causing cancer and other illnesses. Many
develop climate policies. Id. The IPCC is an organization of governments that are members
of the United Nations or WMO. Id. The IPCC currently has 195 members (including the
United States). Id. The IPCC is currently in its Sixth Assessment cycle, during which the
IPCC will produce the Assessment reports of its three Working Groups, three Special
Reports, a refinement to the methodology report, and the Synthesis Report). The Sixth
Synthesis Report is due for release in 2022. AR6 Synthesis Report: Climate Change 2022,
INTERGOVERNMENTAL PANEL ON CLIMATE CHANGE, https://www.ipcc.ch/report/sixth-
assessment-report-cycle/ (last visited Feb. 20, 2022).
78. Beverly Wright & Earthea Nance, Toward Equity: Prioritizing Vulnerable
Communities in Climate Change, 4 DUKE F. FOR L. & SOC. CHANGE 1, 2 (2012).
79. David Schlosberg & Lisette B. Collins, From Environmental to Climate Justice:
Climate Change and the Discourse of Environmental Justice, 5 WIRES CLIMATE CHANGE
359, 361 (2014).
80. See Wright & Nance, supra note 56, at 7.
81. Matthew Elliot et al., African Americans and Climate Change: An Unequal
Burden, CONG. BLACK CAUCUS FOUND. 1, 10-12 (July 21, 2004),
http://www.sustainlex.org/BlackCaucusfullCBCF_REPORT_F.pdf.
82. See Wright & Nance, supra note 56, at 7.
83. Environmental Racism in Louisiana’s ‘Cancer Alley’, Must End, say UN Human
Rights Experts, U.N. NEWS (Mar. 2, 2021), https://news.un.org/en/story/2021/03/1086172.

plants are in poor areas, often in communities of color...”84

Moreover, the creation of plastic waste creates negative externality
costs of collection and sorting for recycling and ocean clean-up of
improperly discarded plastic waste.85 A report by Carbon Tracker
estimates the average externality cost of plastic production to be
$1,000 per tonne, including the costs of carbon dioxide emissions,
air pollution, collection and sorting, and ocean clean up.86 These
costs fall disproportionately on the poor countries which accept the
plastic waste of the developed world.87
B. The Petroleum Industry – Redux
Ideas about what products are desirable may change over time.
In the infancy of the oil industry, government viewed its robust
development as essential to creating economic growth.88 To
nurture this nascent industry, Congress provided tax incentives
and other subsidies.89 This section outlines some of those
incentives. The oil and fossil fuel industries are inextricably linked
with the plastic industry because plastics are made from chemicals
sourced almost entirely from fossil fuels. Moreover, most plastics
are made by companies that also produce fossil fuels.90 A report by
the Center for International Environmental Law makes this point:
While not all fossil fuels are used to make plastic, all (or
virtually all) plastic is made from fossil fuels. Moreover, the
largest players in each industry—DowDuPont, ExxonMobil,
Shell, Chevron, BP, and Sinopec—are all integrated companies
that produce both fossil fuels and plastics. Understanding
these linkages and their role in driving plastics production and
plastic investment, is key to addressing the growing crisis of
84. Beth Gardiner, The Plastics Pipeline: A Surge of New Production is on the Way,
YALE ENV’T 360 (Dec. 19, 2019), https://e360.yale.edu/features/the-plastics-pipeline-a-surge-
of-new-production-is-on-the-way.
85. See WORLD WILDLIFE FUND, PLASTICS: THE COSTS TO SOCIETY, THE ENVIRONMENT
AND THE ECONOMY 13 (Sept. 2021), https://media.wwf.no/assets/attachments/Plastics-the-
cost-to-society-the-environment-and-the-economy-WWF-report.pdf.
86. Roberts, supra note 52.
87. Erin McCormick et al., Where Does Your Plastic Waste Go? Global Investigation
Reveals America’s Dirty Secret, GUARDIAN (June 17, 2019), https://www.theguardian.com/us-
news/2019/jun/17/recycled-plastic-america-global-crisis (discussing that 2018, “the
equivalent of 68,000 shipping containers of American plastic recycling were exported from
the US to developing countries that mismanage more than 70% of their own plastic waste.”).
88. Clayton Coleman & Emma Dietz, Fossil Fuel Subsidies: A Closer Look at Tax
Breaks and Societal Costs, ENV’T & ENERGY STUD. INST. (July 2019),
https://www.eesi.org/files/FactSheet_Fossil_Fuel_Subsidies_0719.pdf (noting that subsidies
are designed to produce cheap and abundant fossil energy and over the past 100 years the
U.S. has enjoyed unparalleled economic growth due to cheap energy).
89. Mona L. Hymel, Discussion Paper, Environmental Tax Policy in the United States:
A “Bit” of History, 3 ARIZ. J. ENVT’L. L. & POL’Y 157, 162 (2013).
90. Fueling Plastics: Fossils, Plastics, and Petrochemical Feedstocks, supra note 12, at
4.

global plastics pollution and identifying the role corporate

actors play in that crisis.91
Examining incentives for oil and gas can inform design choices
for tackling the plastics problem. Like oil and gas, plastics are
ubiquitous. Oil and gas are still essential to today’s economy, but
the oil and gas industry is facing an existential crisis: climate
change. Use of fossil fuels, including oil and gas, results in carbon
dioxide emissions, which have been clearly shown to lead to
climate change.92
The oil industry is fully entrenched in politics and powerfully
resists any reform efforts. The support for the oil and gas industry
generally falls along political party lines.93 The huge tax cut bill
known as the Tax Cuts and Jobs Act (TCJA) provided outsized
benefits to the oil and gas industry.94 Of course, the corporate rate
cut from 35 percent to 21 percent benefited the industry, as it did
all corporations.95 Most importantly, the oil and gas industry did
not lose any of its traditional and exclusive benefits in the TCJA.96
Although in a Congressional hearing in March 2021, an oil
industry executive asserted that the industry did not receive any
benefits other than those received by all businesses, which is
incorrect, as Congresswoman Katie Porter noted.97
Tax incentives enjoyed by the oil and gas industry include
percentage depletion,98 deduction of intangible drilling costs,99 and
enhanced oil recovery credits.100 Percentage depletion originated in
1918,101 and today it still provides a deduction for a percentage of
91. Id.
92. See, e.g., INTERGOVERNMENTAL PANEL ON CLIMATE CHANGE, supra note 55.
93. Lisa Friedman & Coral Davenport, Amid Extreme Weather, a Shift Among
Republicans on Climate Change, THE N.Y. TIMES (Oct. 10, 2021),
https://www.nytimes.com/2021/08/13/climate/republicans-climate-change.html (Discussing
“[b]ehind the scenes in Washington, oil and gas interests continue to lobby hard against
policies that would reduce emissions, particularly tighter vehicle mileage rules that would
prevent the burning of hundreds of billions of gallons of gasoline. Those companies are
donating overwhelmingly to Republicans.”).
94. Carrie Brandon Elliot, News Analysis: The TCJA’s Effect on Oil and Gas
Investments, TAXNOTES (July 20, 2018), https://www.taxnotes.com/featured-analysis/news-
analysis-tcjas-effects-oil-and-gas-investments/2018/07/20/28854.
95. See I.R.C. § 11.
96. Elliot, supra note 94.
97. Lexi Lonas, Katie Porter Scolds Oil Executive: “Please Don’t Patronize Me,” HILL
(Mar. 10, 2021, 1:42 PM), https://thehill.com/homenews/house/542563-katie-porter-scolds-
oil-executive-please-dont-patronize-me.
98. I.R.C. § 613 (2018).
99. I.R.C. § 263 (2018).
100. I.R.C. § 43 (2005).
101. See George K. Yin, The Curious Origins of the Major U.S. Tax Incentives for Oil
and Gas Producers, in TAX L.AW AND THE ENVIRONMENT: A MULTIDISCIPLINARY AND
WORLDWIDE PERSPECTIVE 19, 20 (Roberta F. Mann & Tracey M. Roberts eds., 2018) (For a
fascinating account of the history of percentage depletion).

income from certain oil and gas properties.102 The concept of a

depletion allowance is analogous to depreciation, which allows the
cost of a business asset to be recovered via deductions over the
useful life of the asset.103 Depletion is a term that applies to
natural resources, like oil and gas.104 There are two types of
depletion: cost depletion and percentage depletion.105 Cost
depletion, like depreciation, allows deduction of the investment in
the resource over time.106 The total amount deducted is limited to
the cost of the property.107 Percentage depletion, in contrast, is a
deduction of a percentage of the income derived from the natural
resource each year.108 Because percentage depletion is not limited
to the cost of the resource, it may exceed the investment made by
the taxpayer. The Joint Committee on Taxation (JCT) estimated
that the cost of percentage depletion over cost depletion at about
$600,000,000 per year.109
The deduction for intangible drilling costs (IDC) allows oil
producers to deduct many drilling and field development costs that
would otherwise be required to be capitalized and deducted over
time.110 In a study of the impact of federal subsidies for oil and gas,
the IDC deduction had the most significant effect on project
internal rates of return (IRR), nearly doubling the IRR in one oil-
producing region.111 JCT estimated the revenue lost from the
intangible drilling cost deduction at $400,000,000 per year.112
Some federal oil production tax incentives are triggered when a
reference price of crude oil drops below a statutory oil price
level.113 Historically, oil and gas prices have been volatile.114 To
protect supply and the viability of oil producers, an enhanced oil
recovery (EOR) credit may be claimed for up to 15 percent of the
102. I.R.C. § 613 (2018).

103. I.R.C. § 167 (2007).
104. See I.R.C. §§ 611-613.
105. I.R.C. § 612 defines cost depletion, which limits production cost recovery to the
basis of the property. Percentage depletion, as defined in I.R.C. § 613, is based on a fixed
percentage of gross receipts and is not limited to the basis of the property.
106. I.R.C. § 612 (2020).
107. Id.
108. I.R.C. § 613 (2018).
109. JOINT COMM. ON TAX’N, ESTIMATES OF FEDERAL TAX EXPENDITURES FOR FISCAL
YEARS 2019-2023, JCX-55-19, at 22 (2019).
110. I.R.C. § 263(c) (2018).
111. Peter Erickson et al., Effect of Subsidies to Fossil Fuel Companies on United
States Crude Oil Production, 2 NATURE ENERGY 891, 894 (2017).
112. JOINT COMM. ON TAX’N, supra note 109, at 66.
113. MOLLY F. SHERLOCK & PHILLIP BROWN, CONG. RSCH. SERV., IN11381, LOW OIL
PRICES MAY TRIGGER CERTAIN TAX BENEFITS, BUT NOT OTHER 1 (2020).
114. Kimberly Amadeo, Oil Price History: Highs and Lows Since 1970, THE BALANCE,
Mar. 7, 2022, https://www.thebalance.com/oil-price-history-3306200 (“Since the 1970s, oil
prices have become more volatile.”).

taxpayer’s qualified enhanced oil recovery costs attributable to a

qualified domestic project for increasing the production of crude oil
or for production of Alaskan natural gas.115 The credit is reduced
by a phaseout amount based on the reference price per barrel of
domestic crude oil.116 If oil prices are high enough, the credit is
phased out, as it was for 2020.117 In April 2020, hammered by
falling demand due to the coronavirus pandemic, the price of oil
went negative for the first time in history.118 The price recovered
by May and averaged $42 per barrel over 2020.119 Oil prices in
2020 did result in a reference price for oil that allowed taxpayers
to claim the EOR credit on 2021 tax returns.120 The credit is
claimed as part of the general business credit and is subject to its
tax liability limitation and carryover rules.
In addition, the oil and gas industry benefits from tax-
advantaged investment in publicly traded partnerships, also called
Master Limited Partnerships (MLPs).121 While generally publicly
traded partnerships are taxed at the entity level like C
corporations, MLPs are taxed as partnerships and enjoy a single
level of tax.122 Corporations are subject to two layers of taxation–at
the corporate level123 and again at the investor level if dividends
are paid.124 To be an MLP at least 90% of a business’s gross income
must be considered “qualifying income,” which includes natural
resource income.125 Natural resource income includes income
related to the exploration, development, mining or production,
processing, refining, transportation, storage, and marketing of any
mineral or natural resource.126 Investments in renewable energy
do not qualify for this tax benefit because the definition of
qualifying income does not include income from renewable energy
115. I.R.C. § 43 (2005).

116. Treas. Reg. § 1.43-1(c)(1).
117. INTERNAL REV. SERV. (IRS), BULLETIN NO. 2020-19, Notice 2020-31.
118. Vikas Bajaj, What Negative Oil Prices Mean and How the Impact Could Last, NY
TIMES (Apr. 20, 2020), https://www.nytimes.com/article/negative-oil-prices-facts-
history.html.
119. EIA’s AEO2021 Reference Case Shows Crude Oil Production Plateauing After
2030, U.S. ENERGY INFO. ADMIN. (Feb. 4, 2021),
https://www.eia.gov/todayinenergy/detail.php?id=46656#:~:text=In%20the%20Reference%20
case%2C%20EIA,or%20lower%20crude%20oil%20prices.
120. INTERNAL REV. SERV. (IRS), BULLETIN NO. 2021-32, Notice 2021-47.
121. MOLLY F. SHERLOCK & MARK P. KEIGHTLEY, CONG. RSCH. SERV., R41893, MASTER
LIMITED PARTNERSHIPS: A POLICY OPTION FOR THE RENEWABLE ENERGY INDUSTRY 1-4
(2011).
122. I.R.C. § 7704(c) (2008).
123. I.R.C. § 11 (2017).
124. I.R.C. §§ 61(a)(7) (2017).
125. I.R.C. § 7704(c)(2) (2008); I.R.C. § 7704(d)(1)(E) (2008).
126. I.R.C. § 7704(d) (2008).

investments.127 The ability to access equity markets in a manner

similar to corporations allows MLPs to obtain greater amounts of
capital.128 Access to a greater pool of capital, when combined with
the favorable partnership tax treatment, may allow MLPs to
secure capital at a lower cost than similar businesses operating
under a different organizational structure.129 The JCT estimated
that the tax benefits of MLPs for energy cost U.S. taxpayers
$300,000,000 per year.130
Subsidizing oil and gas while attempting to control climate
change is, at best, counterproductive. An analysis published in
2017 found that at $50 per barrel, the effect of subsidies would be
to increase potential U.S. production by 20 billion barrels, which
once burned would emit about 8 billion tonnes (Gt) CO2.131 The
study found that subsidies increase field development most
strongly at lower prices. At $40 per barrel, almost all new U.S. oil
investment depends on subsidies.132 Regardless of the oil price, the
majority of taxpayer resources provided to the industry end up as
company profits.133
Congressional bills have frequently proposed ending subsidies
for oil and gas.134 So far, all have failed. In 2010, the Waxman-
Markey bill that would have created a nationwide carbon cap-and-
trade system designed to limit carbon emissions failed.135 In fact,
recent legislation has encouraged oil exploration. In 2017, the
TCJA contained a provision requiring sale of oil and gas leases in
the pristine Arctic National Wildlife Refuge (ANWR).136 However,
one of the first executive orders from the Biden Administration in
2021 temporarily halted drilling in ANWR.137 Although so far in
127. Although legislative proposals to include renewable energy as an eligible

investment have been made, none have been enacted. See Felix Mormann et al., Clean
Energy Scores a Success with the Master Limited Partnership Parity Act, BROOKINGS (Dec.
19, 2013), https://www.brookings.edu/opinions/clean-energy-scores-a-success-with-the-
master-limited-partnership-parity-act/.
128. Id.
129. Id.
130. JOINT COMM. ON TAXATION, supra note 109.
131. Peter Erickson et al., Stockholm Environmental Institute, Effect of Government
Subsidies for Upstream Oil Infrastructure on U.S. Oil Production and Global CO2
Emissions 18 (Stockholm Env’t Inst., working paper No. 2017-02, 2017).
132. Id. at 16.
133. Erickson, supra note 131.
134. See, e.g., H.R. 2184, 117th Cong. (2021); H.R. 3671, 115th Cong. (2018).
135. See Ryan Lizza, As the World Burns: How the Senate and the White House Missed
Their Best Chance to Deal with Climate Change, THE NEW YORKER (Oct. 3, 2010),
https://www.newyorker.com/magazine/2010/10/11/as-the-world-burns (explaining the
history of the bill and analyzing its failure).
136. Tax Cuts and Jobs Act, Pub. L. No. 115-97, § 20001(b).
137. Press Release, U.S. Dep’t of the Interior, Interior Department Suspends Oil and
Gas Leases in the Arctic National Wildlife Refuge (June 1, 2021),

the U.S. the industry has successfully fended off carbon pricing,
those days may be coming to a close.138
Oil industry resistance to carbon pricing and the potential loss
of subsidies has several dimensions.139 The entire point of carbon
pricing is to reduce demand for fossil fuels. From the shareholder
perspective, carbon pricing will reduce profits. However, some
investors are beginning to demand that companies pay attention to
the risks of climate change.140 From a societal perspective, a
paradox exists: high oil prices reduce demand and may improve
the environment, but low oil prices reduce resistance to carbon
pricing. In other words, “the paradox of oil [is that] the cheaper it
is (economically), the more it costs (environmentally).”141 A
potential solution to that problem would be to impose a tax to
stabilize oil prices.142 For example, policymakers could decide that
an oil price of $60 per barrel was optimal for reducing demand. If
the market price is $40 per barrel, a $20 per barrel tax could be
imposed. The integrated oil companies have invested significant
amounts in oil and gas properties, incentivized by subsidies to
create supply. Carbon pricing will erode the value of those
“stranded” assets.143 Professor Tracey Roberts has a creative
https://www.doi.gov/pressreleases/interior-department-suspends-oil-and-gas-leases-arctic-
national-wildlife-refuge; The lease sale, which occurred a few weeks before the Biden
Administration took office, raised far less than expected and many of the leases were
purchased by the State of Alaska. Rebecca Beitsch, Trump’s Sale of Arctic Refuge Drilling
Rights Earns Just a Fraction of GOP Prediction, THE HILL (Jan. 6, 2020,4:43 PM),
https://thehill.com/policy/energy-environment/532983-trumps-sale-of-arctic-refuge-drilling-
rights-earns-just-a-fraction.
138. See Jonathan Weisman & Coral Davenport, Democrats Consider Adding Carbon
Tax to Budget Bill, N.Y. TIMES (Oct. 20, 2021),
https://www.nytimes.com/2021/09/24/us/politics/carbon-tax-democrats.html.
139. The American Petroleum Institute, the leading oil and gas lobbying group, has
stated its support for carbon pricing. Steven Mufson & Joshua Partlow, Oil, Gas Industry
Says It Will Support Carbon Pricing, WASH. POST (Mar. 25, 2021, 6:03 PM),
https://www.washingtonpost.com/climate-environment/2021/03/25/carbon-tax-biden/.
However, this assertion is less than credible after an oil industry lobbyist was recorded
explaining that ExxonMobil supports a carbon tax because of their belief that it will never
happen. See Chris McGreal, ExxonMobil Lobbyist Filmed Saying Oil Giant’s Support for
Carbon Tax a PR Ploy, GUARDIAN (June 30, 2021, 3:00 PM),
https://www.theguardian.com/us-news/2021/jun/30/exxonmobil-lobbyists-oil-giant-carbon-
tax-pr-ploy.
140. See, e.g., Larry Fink, Larry Fink’s 2021 Letter to CEOs, BLACKROCK,
https://www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter (last visited
Feb. 5, 2022).
141. Samuel Alexander, The Paradox of Oil: The Cheaper it is, the More it Costs,
RESILIENCE (March 5, 2015), resilience.org/stories/2015-03-05/the-paradox-of-oil-the-
cheaper-it-is-the-more-it-costs/ (“Oil acts as industrial civilisation’s own form of heroin, and
whether it is cheap or expensive, addicts today are in as much trouble as ever.”).
142. Thomas W. Merrill & David M. Schizer, Energy Policy for an Economic Downturn:
A Proposed Petroleum Fuel Price Stabilization Plan, 27 YALE J. ON REGUL. 1, 1 (2010).
143. See, e.g., SMITH SCH. OF ENTER. & THE ENV’T, UNIV. OXFORD, STRANDED ASSETS:
THE TRANSITION TO A LOW CARBON ECONOMY, OVERVIEW FOR THE INSURANCE INDUSTRY 12

solution to the problem of stranded assets held by regulated public

utilities. She notes that “investor and consumer concerns about
stranded costs have delayed the adoption of carbon pricing
schemes [and] spurred the rejection of greenhouse gas regulation
altogether . . . .”144 Although her solution is not perfectly adapted
to the oil and gas industry, an analogy may be drawn. She
proposes using benefits of accelerated depreciation accrued during
higher corporate tax rates to fund an insurance pool to compensate
utilities for the loss in value of stranded assets.145 Similarly, oil
companies have benefited from tax incentives that reduced their
taxes while corporate tax rates were higher than today’s. Under an
analogy to Roberts’s formulation, the oil companies would be
considered to have had advance recovery of these investments in
the form of tax savings.146
The oil and gas industry has embraced one climate mitigation
strategy: credits for carbon capture and sequestration.147 Section
45Q allows a credit for qualified CO2 captured at a qualified
facility and disposed of in secure geological storage.148 It also
allows a credit for qualified CO2 that is captured at a qualified
facility and used as a tertiary injectant in a qualified enhanced oil
or natural gas recovery project.149 Oil companies have long used
injections of CO2 to enhanced oil recovery from spent wells.150
Moreover, “among CO2 uses by industry, enhanced oil recovery
leads the field. It accounts for around 90 percent of all CO2 usage
today (mostly in the United States).”151 Even further, “in 2014,
(Lloyd’s of London ed., 2017), https://www.lloyds.com/-/media/files/news-and- insight/risk-

insight/2017/stranded-assets.pdf [perma.cc/C8HR-DK86] (estimating that $20 trillion in
fossil fuel assets will be stranded if greenhouse gas emissions are regulated).
144. See Tracey M. Roberts, Stranded Assets and Efficient Pricing for Regulated
Utilities: A Federal Tax Solution, 11 COLUM. J. TAX. L. 1, 1 (2019).
145. Id. at 49.
146. See Frederick van der Ploeg & Armon Rezai, Stranded Assets in the Transition to
a Carbon-Free Economy, 12 ANN. REV. OF RES. ECON. 281 (2020).
147. See, e.g., 26 U.S.C. § 45Q; see also, Ken Silverstein, Tax Credit May Rev Up
Carbon Capture and Sequestration Technology, FORBES, (Feb. 15, 2018, 8:30 AM),
https://www.forbes.com/sites/kensilverstein/2018/02/15/tax-credit-may-rev-up-carbon-
capture-and-sequestration-technology/?sh=46c699084a06.
148. I.R.C. § 45Q (2020).
149. Id.
150. David B. Blair et al., A Primer on the Tax Credit for Carbon Oxide Sequestration,
TAX NOTES FED: TAX NOTES 629, 630 (2020) (“Historically, CO2 has been injected into
underground oil formations to produce more oil than could normally be extracted as part of
the enhanced oil recovery (EOR) process. EOR technologies using CO2 injection have been
in use in the United States for several decades.”).
151. Krysta Biniek et al., Driving CO2 Emissions to Zero (and Beyond) with Carbon
Capture, Use, and Storage, MCKINSEY QUARTERLY (June 30, 2020),
https://www.mckinsey.com/business-functions/sustainability/our-insights/driving-co2-
emissions-to-zero-and-beyond-with-carbon-capture-use-and-storage.

through the process of carefully injecting compressed CO2 into

existing oil fields to recover oil and natural gas, known as EOR,
produced approximately 300,000 barrels of oil per day—more than
2% of U.S. oil production.”152 From an environmental standpoint,
this represents one step forward and two steps back. The National
Academies of Sciences, in a recent publication entitled
“Accelerating Decarbonization of the U.S. Energy System,”
recommends extending the § 45Q tax credit for carbon capture,
use, and sequestration for projects that begin substantial
construction prior to 2030 and make tax credit fully refundable for
projects that commence construction prior to December 31, 2022.
The recommendation estimates that setting the 45Q subsidy rate
for use in oil recovery equal to $35/tCO2 minus whatever explicit
carbon price is established and the subsidy rate for permanent
carbon sequestration to be equal to $70/tCO2 minus whatever
explicit carbon price is established would cost $2 billion in lost
revenue.153
In 2016, Doug Koplow at Earth Track reached back to James
Bond for an analogy to Q–an analogy that today might be more
controversial.154 He notes that there are many options to achieve
lower carbon emissions and the main effect of tax breaks such as
45Q is subsidizing carbon-intensive fuels and industries: “[b]y
harming the competitiveness of much lower carbon strategies and
technologies, the subsidies actually prolong the service life of the
carbon-wasting production systems.”155 In contrast, governments
could adopt a “polluter pays” method of lowering carbon emissions.
This “polluter pays principle (PPP)...entered the economics
literature in the 1920s. It was adopted by the Organisation for
Economic Cooperation and Development...in the early 1970s.”156 If
governments follow the PPP, “[they] ought not subsidize emissions
or emissions controls. Rather, they should constrain emissions
robustly and consistently, forcing the cost of controlling that
152. NAT’L PETROLEUM COUNCIL, U.S. DEP’T OF ENERGY, 1 MEETING THE DUAL
CHALLENGE: A ROADMAP FOR AT-SCALE DEPLOYMENT OF CARBON CAPTURE, USE, AND
STORAGE 16 (2019).
153. NAT’L ACADS. OF SCIS., ENG’G, & MED., ACCELERATING DECARBONIZATION OF THE
U.S. ENERGY SYSTEM 178 (2021).
154. Doug Koplow, The Trouble with Q: Why the U.S. Should Not Be Subsidizing
Carbon Capture and Sequestration, EARTH TRACK (Aug. 5, 2016),
https://www.earthtrack.net/blog/trouble-q-why-us-should-not-be-subsidizing-carbon-capture-
and-sequestration. The “controversial” comment refers to the QAnon conspiracy theory
(often shortened to Q), explained in this article: Kevin Roose, What Is QAnon, the Viral Pro-
Trump Conspiracy Theory, NY TIMES (Sept. 3, 2021), https://www.nytimes.com/article/what-
is-qanon.html.
155. Id. at 7.
156. Id. at 6.

pollution into the price of the related goods and services.”157 But
“[w]hat is surprising is how often politicians want to replace the
PPP with a policy of PCGS (‘Powerful Constituents Get
Subsidies’).”158
Evaluating these subsidies, Richard Westin observed:
What this means is that coal, oil, and natural gas
companies that capture or reuse their CO2 releases can get
potentially unlimited income tax credits of up to $50 per ton
for CO2 that they buried and $35 per ton for CO2 that they
reuse. The credits run for a decade. Using the technology
instead of taxing CO2 or using regulatory measures is
questionable here because the credit arguably encourages
CO2 emissions...Not producing CO2 in the first place is
preferable.159
The Consolidated Appropriations Act of 2021 extended the
section 45Q credit for carbon capture and sequestration
facilities.160 Previously the credit was available for qualified
facilities the construction of which begins before January 1,
2024.161 The Act extends this deadline by two years, such that
projects that begin construction by the end of 2026 are eligible for
the credit.162
Oil is a terrific product. Its energy potential has transformed
society. The incentives provided by the U.S. government
encouraged development of supply, which was necessary when oil
exploration was in its infancy. Now that the oil and gas industry
are mature, incentives serve to support oil company profits. No
incentives are necessary to encourage consumers to use oil
products. To the contrary, incentives are now used to move
consumers away from fossil fuels, as will be described in the next
section.163 But continuing to incentivize fossil fuel production while
incentivizing consumers to use alternative methods of energy is a
dance involving two steps—one back and one forward. As noted at
the beginning of this part, the oil and fossil fuel industries are
157. Id.
158. Id.
159. Richard A. Westin, The Torturing of Green Tax Incentives, TAX NOTES FED.: TAX
NOTES 251, 263 (2020).
160. Consolidated Appropriations Act of 2021, Pub. L. NO. 116-260, § 121, 134 Stat
1182 (2020).
161. I.R.C. § 45Q (2020).
162. Consolidated Appropriations Act, H.R. 133, 116th Cong. (2020) (enacted) (the
Taxpayer Certainty and Disaster Relief Act of 2020 is found in Division EE). See ANGELA M.
JONES & MOLLY F. SHERLOCK, CONG. RSCH. SERV., IFII455, THE TAX CREDIT FOR CARBON
SEQUESTRATION (SECTION 45Q) ( 2021).
163. See infra section II.C.

inextricably linked with the plastic industry because plastics are

made from chemicals sourced almost entirely from fossil fuels. In
addition, the process of plastic production uses fossil energy.164
C. Is “Clean Energy” Enough to Address the Harm from Plastic
Production?
The previous section focused on tax incentives for the oil and
gas industry and the linkage between oil and gas and plastic.
Plastic production creates pollution and greenhouse gas emissions.
Plastic waste, of course, also creates environmental issues, which
will be the topic of a subsequent section.
Despite its obvious downsides, which are the focus of this
article, plastic is a terrific product, in many ways like oil.
Consumers need no encouragement to continue to use plastic. As
noted, plastic is cheap, lightweight, and durable. While energy is
used to create plastic, plastics can be used to reduce energy
consumption. When plastics are used in automobile
manufacturing, the cars become more energy efficient.165 Weight
reduction is a priority in automotive design, boosting fuel
efficiency, reducing emissions, and lowering costs for drivers.166 In
modern vehicles, “plastics make up 50 percent of a vehicle’s
volume, but only about 10 percent of its weight.”167
In the home, plastic-based home insulation can also reduce
energy costs. In general, insulating a structure reduces energy
costs by limiting the heat loss from the structure. In warmer
climates, insulation also allows the structure to retain the cool
temperature created by air conditioning. Engineers rate insulation
by thermal resistance, called “R-value.”168 The R-value “indicates
the resistance to heat flow…the higher the R-value, the greater the
insulating effectiveness.”169 Plastic-based insulation, including
polystyrene board, polyurethane board and polyisocyanurate spray
164. Daniel Posen et al., Greenhouse Gas Mitigation for U.S. Plastics Production:
Energy First, Feedstocks Later, 12 ENV’T RSCH. LETTERS, Mar. 16, 2017, at 2 (“All plastics
require process related electricity and heat (on-site fuels) at various stages throughout their
life-cycles.”).
165. Automotive: Chemistry in Automotive, A M. CHEMISTRY COUNCIL,
https://www.americanchemistry.com/chemistry-in-america/chemistry-in-everyday-
products/automotive (last visited Feb. 5, 2022).
166. Lightweight Materials for Cars & Trucks, OFF. OF ENERGY EFFIC. & RENEW.
ENERGY, https://www.energy.gov/eere/vehicles/lightweight-materials-cars-and-trucks (last
visited May 14, 2022).
167. Automotive: Chemistry in Automotive, A M. CHEMISTRY COUNCIL,
https://www.americanchemistry.com/chemistry-in-america/chemistry-in-everyday-
products/automotive (last visited Feb. 5, 2022).
168. Insulation Fact Sheet, DEP’T OF ENERGY 1, 3 (2008),
https://www.energystar.gov/sites/default/files/asset/document/Insulation%20Fact%20Sheet.
pdf.
169. Id.

foam, have R-values per inch up to double that of other forms of

insulation such as fiberglass batts.170
Plastic preserves food and reduces food waste. The World
Resources Institute (WRI) found that if food waste were a country,
it would be the third-largest emitter of greenhouse gases behind
China and the U.S.171 The American Chemical Society (ACS)
argues that protecting food in plastic packaging helps protect the
environment.172 Ten times more resources are used to make and
distribute food than are used to make the packaging to protect
it.173 The ACS even argues that plastics are generally an energy
efficient way to provide packaging.174
Given its benefits and assuming that plastic use continues,
there are two ways to reduce the harm: (1) reducing the emissions
from plastic production and (2) reducing the externalities from
plastic waste. Reducing the harm from plastic waste could involve
using biological feedstocks instead of petroleum. Bio-based plastics
could break down more quickly and safely in the environment.175
Although most plastic today is made from petroleum-based
feedstock, plastic can be made from biofeedstock, such as corn.176
To date, biodegradable plastics hold only a small market share in
overall plastics production. In 2019, biodegradable plastics
represented 0.3% of global plastics production capacity.177
170. Insulation R Value Chart, GREAT DAY HOME IMPROVEMENTS, LLC (Feb. 6, 2013),
https://www.greatdayimprovements.com/insulation-r-value-chart.aspx.
171. Craig Hanson et al., What’s Food Loss and Waste Got to Do with Climate Change?
A Lot, Actually, WORLD RES. INST. (Dec. 11, 2015), https://www.wri.org/blog/2015/12/whats-
food-loss-and-waste-got-do-climate-change-lot-actually.
172. Steve Russell, There’s a Reason We Use Plastics to Package Food, AM.
CHEMISTRY COUNCIL (Feb. 27, 2018), https://www.americanchemistry.com/chemistry-in-
america/news-trends/blog-post/2018/there-s-a-reason-we-use-plastics-to-package-
food#:~:text=When%20food%20decomposes%2C%20it%20produces,help%20cut%20our%20c
arbon%20emissions.
173. Id.
174. Steve Russell, Using Plastics Means Less Waste in the First Place, AM. CHEMISTRY
COUNCIL (Feb. 21, 2018), https://www.americanchemistry.com/chemistry-in-america/news-
trends/blog-post/2018/using-plastics-means-less-waste-in-the-first-place.
175. Michael T. Zumstein et al., Dos and Do Nots When Assessing the Biodegradation of
Plastics, 53 ENV’T SCI. TECH. 9967, 9968 (2019).
176. The Environmental Impact of Corn-Based Plastics, SCIENTIFIC AMERICAN (July 1,
2008), https://www.scientificamerican.com/article/environmental-impact-of-corn-based-
plastics/.
177. SCI. ADVICE FOR POL’Y BY EUR. ACAD., BIODEGRADABILITY OF PLASTICS IN THE
OPEN ENVIRONMENT 10 (Sci. Advice for Pol’y by Eur. Acad. ed., 2020),
https://www.sapea.info/wp-content/uploads/bop-report.pdf. The report also notes “[W]e do
not consider replacing conventional plastics by biodegradable plastics as a viable strategy by
which to address plastic pollution, and emphasise that biodegradable plastics should neither
be considered as a universal alternative to improved waste management practices, nor as an
answer to inappropriate disposal, in particular littering.” Id. at 15.

Researchers found that using renewable or low-carbon energy

to produce plastic reduces emissions at a lower cost than using bio-
based feedstocks.178 They found that the cost of switching from
fossil-fuel based feedstocks to presently available bio-based
feedstocks ranged from ranges from several hundred to several
thousand dollars per tonne, depending on the plastic, while the
cost of converting the energy used to produce plastic to low-carbon
energy ranged from $10–$200 per tonne of plastic.179 They
concluded that “adopting low-carbon energy is more economically
favorable than switching to bio-based polymers, reinforcing the
GHG emission results that favor energy substitution for near-term
GHG mitigation.”180
Use of fossil fuels as a feedstock for plastic creates significant
carbon emissions, largely due to extraction and transport of the
fuels.181 Using fossil fuels to manufacture plastic emits even more
GHGs.182 Therefore, using renewable energy to manufacture
plastic would reduce the climate impact of plastics, if not the waste
problem. One study found that “even if fossil fuel feedstock is used
as the sole source for plastics production, a 100% -renewable -
energy scenario will reduce the average life-cycle GHG emissions
by half from the baseline emissions.”183 Fortunately, the U.S. tax
system has been encouraging the development of renewable energy
through tax incentives. This section will briefly describe those
incentives at the federal level. Many states also provide incentives
for use and development of renewable energy.
The main renewable energy tax incentives are the production
tax credit, mostly used for wind generated electricity, and the
investment tax credit, mostly used for solar electricity
178. Daniel Posen et al., Greenhouse Gas Mitigation for U.S. Plastics Production:
Energy First, Feedstocks Later, 12 ENV’T RSC. LETTERS 1, 8 (2017).
179. Id.
180. Id.
181. “In the [U]nited States alone in 2015, emissions from fossil fuel (largely fracked
gas) extraction and transport attributed to plastic production were at least 9.5–10.5 million
metric tons of CO2 equivalents (CO2e) per year.” Plastic & Climate: The Hidden Costs of a
Plastic Planet, CTR. FOR INT’L ENV’T L., https://www.ciel.org/project-update/plastic-climate-
the-hidden-costs-of-a-plastic-planet/ (last visited Nov. 6, 2021).
182. “Plastic refining is among the most greenhouse- gas-intensive industries in the
manufacturing sector—and the fastest growing. The manufacture of plastic is both energy
intense and emissions intensive in its own right, producing significant emissions through
the cracking of alkanes into olefins, the polymerization and plasticization of olefins into
plastic resins, and other chemical refining processes. [I]n 2015, 24 ethylene facilities in the
[U]S produced 17.5 million metric tons of CO2e, emitting as much CO2 as 3.8 million
passenger vehicles. [G]lobally in 2015, emissions from cracking to produce ethylene were
184.3–213.0 million metric tons of CO2e, as much as 45 million passenger vehicles driven
for one year.” Id.
183. Jiajia Zheng & Sangwon Suh, Strategies to Reduce the Global Carbon Footprint of
Plastics, 9 NATURE CLIMATE CHANGE 374, 376 (2019).

installations.184 These credits have significantly spurred renewable

energy development.185 U.S. renewable energy doubled between
2008 and 2019.186 In 2017, former President Obama wrote that
renewable energy had reached a tipping point.187 However, unlike
tax incentives for the oil and gas industry, renewable energy
incentives have been structured as temporary incentives.
Although the incentives have been regularly extended by
Congress, the on-and-off nature of the incentives has inhibited
some development.188
The complexity faced by taxpayers seeking to benefit from the
renewable energy tax incentives also inhibits their use. The
production tax credit applies per unit of energy created by the
installation.189 The investment tax credit is determined by the cost
of the project.190 In both cases, the credits are non-refundable. That
is, the value of the credit depends on the tax liability of the
investor. Because federal tax credits may not be “sold,” using the
credits requires complex transactions.191 To benefit from the tax
credits, the taxpayer must be an “owner” of the energy
development project.192 This is accomplished in a number of
different ways, depending on the credit.193 Production tax credits
are generally shared in a partnership structure.194 Investment tax
credits may be shared in a partnership or through a sale-leaseback
transaction.195
184. MOLLY F. SHERLOCK, CONG. RSCH. SERV., R44852, THE VALUE OF ENERGY TAX
INCENTIVES FOR DIFFERENT TYPES OF ENERGY RESOURCES 11 (2019).
185. “[F]ederal tax incentives have been the primary policy driver for the growth of
wind, solar, and other renewables during the past decade.” Bidisha Bhattacharyya,
Renewable Energy Tax Credits: The Case for Refundability, CTR. FOR AM. PROGRESS (May
28, 2020),
https://www.americanprogress.org/issues/green/reports/2020/05/28/485411/renewable-
energy-tax-credits-case-refundability/.
186. Cara Marcy, U.S. Renewable Electricity Generation Has Doubled Since 2008, U.S.
ENERGY INFO. ADMIN. (Mar. 19, 2019),
https://www.eia.gov/todayinenergy/detail.php?id=38752.
187. Barack Obama, The Irreversible Momentum of Clean Energy, 355 SCI. 126, 126-28
(2017).
188. Eric Lantz et al., Implications of a PTC Extension on U.S. Wind Deployment,
NAT’L RENEWABLE ENERGY LAB. 1, 3 (June 4, 2015),
https://www.nrel.gov/docs/fy14osti/61663.pdf. “[T]he on-again, off-again historical policy
environment has created substantial uncertainty and deployment volatility. Past PTC
expirations have resulted in reductions in year-on-year installations between 73% and 93%.”
Id.
189. I.R.C. § 45 (2020).
190. I.R.C. § 48 (2021).
191. Roberta F. Mann & E. Margaret Rowe, Taxation, in THE LAW OF CLEAN ENERGY
145, 146 (Michael B. Gerrard, ed. 2011).
192. Id.
193. Id.
194. Rev. Proc. 2007-65, 2007-45 I.R.B. 967.
195. Rev. Proc. 2001-28, 2001-19 I.R.B. 1156-60.

Economic events have caused the value of credits to fluctuate.

During the Great Recession of 2009, the market for tax credits
dried up because tax equity investors had little tax liability and
therefore little appetite for credits.196 With the significant
reduction in tax rates in the 2017 Tax Cuts and Jobs Act (TCJA),
the tax credits also lost value.197 The COVID-19 pandemic has also
affected tax equity markets. A report from Bloomberg estimates
that up to $23 billion in capital for U.S. clean energy projects could
be lost due to the economic fallout from the coronavirus pandemic.
198 That capital represents as much as 31 gigawatts of solar and
wind projects that may be seeking tax-equity financing through

the first half of 2021.199
These difficulties have increased calls for refundability.200 The
Consolidated Appropriations Act of 2020 included a one-year
extension of the production tax credit (PTC) for wind energy
facilities.201 Under prior law, a taxpayer had to begin construction
on a facility by December 31, 2020, to qualify for the PTC.202 Under
the Act, taxpayers that begin construction on a wind facility in
2021 continue to be eligible for the PTC.203 The PTC rate for such
facilities is 60% of the otherwise available statutory rate (currently
2.5 cents per kilowatt hour and adjusted annually for inflation).204
A taxpayer may elect to take the investment tax credit (ITC) in
lieu of the PTC.205 However, the credits are still non-refundable,
and Congress declined to create grants in lieu of the tax credits, as
they had done previously in the American Recovery and
Reinvestment Act (ARRA) in 2009.206 The Solar Energy Industry
196. MARK P. KEIGHTLEY ET AL., CONG. RSCH. SERV., R45693, TAX EQUITY FINANCING:
AN INTRODUCTION AND POLICY CONSIDERATIOns 12 (2019).
197. Id. at 4.
198. Brian Eckhouse, Covid Created a U.S. Clean Energy Shortfall of Up to $23 Billion,
BLOOMBERG (Jul. 15, 2020), https://www.bloomberg.com/news/articles/2020-07-15/covid-
likely-created-23-billion-shortfall-for-u-s-clean-
energy#:~:text=Workers%20take%20a%20break%20in,generating%20facility%20in%20Milli
gan%2C%20Tennessee.
199. Id.
200. Bhattacharyya, supra note 185.
201. U.S. Wind Production Tax Credit Extended Through 2021, U.S. ENERGY
INFORMATION ADMINISTRATION (Jan. 28, 2021),
https://www.eia.gov/todayinenergy/detail.php?id=46576; Consolidated Appropriations Act of
2021, Pub. L. NO. 116-260, § 131(c), 134 Stat 1182 (2020).
202. I.R.C. § 45(b)(5)(D) (2019).
203. Consolidated Appropriations Act of 2021, Pub. L. NO. 116-260, § 131(c), 134 Stat
1182 (2020).
204. I.R.C. § 45(b)(5)(D) (2020).
205. I.R.C. § 48(a)(5) (2021).
206. See Keightley et al., supra note 196.

Association (SEIA) estimated that the market for tax credits would
decline by up 50 percent due to the pandemic.207
Renewable energy tax credits have spurred the development of
renewable energy projects. Renewable portfolio standards in some
states have also increased access to renewable energy.208 However,
they do not directly impact the choice of consumers to use
renewable energy. Rather, they encourage such use indirectly by
reducing the cost. Both U.S. and worldwide data shows the cost of
electricity generation from renewable sources falling below that of
fossil energy.209 However, there is little to no evidence that plastics
manufacturing is turning to renewable energy. Rather, the
petrochemical industry in the United States is ramping up
production facilities using petroleum by-products.210 The next
section will turn from issues of reducing the harm from plastic
production to reducing the harm from plastic waste.
D. Waste and Taxes
Single-use plastics constitute the majority of plastic waste
found in the ocean.211 Whether at sea or on land, the key to
reducing plastic waste is reducing single-use plastics. As a United
Nations’ report noted: “plastic packaging accounts for nearly half
of all plastic waste globally, and much of it is thrown away within
just a few minutes of its first use. Much plastic may be single-use,
but that does not mean it is easily disposable. When discarded in
landfills or in the environment, plastic can take up to a thousand
years to decompose.”212
A study by researchers at the University of California, Santa
Barbara, estimated the scope of the plastics pollution problem.
They estimated that:
207. COVID-19 Impacts on Tax Equity Markets: Implications for U.S. Solar
Deployment, SOLAR ENERGY INDUS. ASS’N (Nov. 2020),
https://www.seia.org/sites/default/files/2020-11/Nov2020-SEIA-Tax-Equity-Brief.pdf; see also
Hasan Eroglu, Effects of Covid-19 Outbreak on Environment and Renewable Energy Sector,
23 ENV’T, DEV. & SUSTAINABILITY 4782 (2021).
208. State Renewable Portfolio Standards and Goals, NAT’L CONF. ST. LEGISLATURES
(Aug. 13, 2021), https://www.ncsl.org/research/energy/renewable-portfolio-standards.aspx.
209. See INT’L RENEWABLE ENERGY AGENCY, RENEWABLE POWER GENERATION COSTS IN
2019 37-38 (2020), https://www.irena.org/-
/media/Files/IRENA/Agency/Publication/2020/Jun/IRENA_Power_Generation_Costs_2019.p
df; U.S. Dep’t of Energy, Nat’l Renewable Energy Lab’y, ATB Electricity Data Overview
(2020), https://atb-archive.nrel.gov/electricity/2020/.
210. Gardiner, supra note 62.
211. See generally U.N. Env’t Programme, Synthesis Rep., From Pollution to Solution:
A global assessment of marine litter and plastic pollution 16 (2021),
https://wedocs.unep.org/bitstream/handle/20.500.11822/36965/POLSOLSum.pdf.
212. Erik Solheim, Foreword to CLAUDIA GIACOVELLI, UNITED NATIONS ENV’T
PROGRAMME, SINGLE-USE PLASTICS: A ROADMAP FOR SUSTAINABILITY i (2018).

8300 million metric tons (Mt) as [sic] of virgin plastics have

been produced to date. As of 2015, approximately 6300 Mt of
plastic waste had been generated, around 9% of which had
been recycled, 12% was incinerated, and 79% was accumulated
in landfills or the natural environment. If current production
and waste management trends continue, roughly 12,000 Mt of
plastic waste will be in landfills or in the natural environment
by 2050.213
[P]lastics’ largest market is packaging, an application whose
growth was accelerated by a global shift from reusable to
single-use containers. As a result, the share of plastics in
municipal solid waste (by mass) increased from less than 1% in
1960 to more than 10% by 2005 in middle- and high-income
countries.214
If plastic were more expensive, it would not be designed as a
single-use product. There is a reason why expensive materials,
such as gold, are not used as packaging or for preserving food.
Rather, expensive materials are used in expensive products
designed for somewhat longer use, such as electronics and
implantable medical devices.215 In general, manufacturers either
make profits by high markups or by high sales volume.216 The
single-use plastics profitability model relies on high sales volume.
According to a report by National Public Radio, the oil industry
makes more than $400 billion per year selling plastic.217
1. Recycling or “Wish” Cycling
Recycling is one way to deal with consumer guilt about using
plastics.218 But recycling plastics is no panacea for the ills of plastic
waste. Recycling uses energy and only limited types of plastics can
213. Roland Geyer et al., Production, Use, and Fate of All Plastics Ever Made, 3 SCI.
ADVANCES 1, 1 (2017).
214. Id. (citations omitted).
215. See, e.g., Hobart M. King, The Many Uses of Gold, GEOLOGY.COM,
https://geology.com/minerals/gold/uses-of-gold.shtml (last visited Nov. 11, 2021).
216. See, e.g., Michael V. Marn & Robert L. Rosiello, Managing Price, Gaining Profit,
HARV. BUS. REV. 84, 84-85 (1992) (explaining the interaction between pricing and volume).
217. Laura Sullivan, How Big Oil Misled the Public Into Believing Plastic Would be
Recycled, NPR (Sept. 11, 2020, 5:00 AM), https://www.npr.org/2020/09/11/897692090/how-
big-oil-misled-the-public-into-believing-plastic-would-be-recycled (providing transcript and
recording). The most recent data available from the plastics industry is consistent, reporting
$395 billion in shipments. 2021 Size and Impact Executive Summary, PLASTICS INDUS.
ASSOC. 1, 3 (2021), https://www.plasticsindustry.org/sites/default/files/2021-
Size%20%26%20Impact%20Report-Executive%20Summary.pdf.
218. E.A. Crunden, How Useful Is Recycling, Really?, ATLANTIC (Jan. 28, 2021),
https://www.theatlantic.com/science/archive/2021/01/recycling-wont-solve-climate-
change/617851/.

even be successfully recycled.219 “Wish” cycling happens when

consumers want to believe that the products they use are
recyclable.220 “Wish” cycling leads to contamination of the waste
stream and reduces the ability to actually recycle products.221
Economics do not favor recycling: virgin plastic is cheaper than
recycled plastic because the fossil fuels used to produce it are both
subsidized and plentiful.222 In the United States, more than half of
households have access to curbside recycling.223 Of the products
recycled curbside, only about 20 percent by weight are plastic–the
bulk of the products recycled are paper, cardboard, and glass.224 As
of 2017, only 9% of the plastic ever produced has been recycled.225
Nonetheless, since the 1980s, “companies have marketed consumer
products as having an environmental benefit, such as being
recyclable.”226 National Public Radio reported that internal records
dating from the 1970s showed that “industry officials long knew
that recycling plastic on a large scale was unlikely to ever be
economically viable.”227 Why did the plastics industry encourage
recycling? One top industry official said: “if the public thinks the
219. JOHN HOCEVAR, GREENPEACE, CIRCULAR CLAIMS FALL FLAT: COMPREHENSIVE U.S.
SURVEY OF PLASTICS RECYCLABILITY 4 (Ivy Schlegel & Perry Wheeler eds., 2020),
https://www.greenpeace.org/usa/wp-content/uploads/2020/02/Greenpeace-Report-Circular-
Claims-Fall-Flat.pdf (“Only some PET #1 and HDPE #2 plastic bottles and jugs can be
legitimately labeled as recyclable in the U.S. today.”). See Sullivan, supra note 217, quoting
Larry Thomas, former president of the Society of the Plastics Industry: “If the public thinks
that recycling is working, then they are not going to be as concerned about the
environment."
220. See Michael Kimmelman, Recycling in America Is a Mess. A New Bill Could Clean
It Up, N.Y. TIMES (Sept. 9, 2021),
https://www.nytimes.com/2021/01/27/arts/design/recycling-packaging-new-york.html.
221. See Alexia Elejalde-Ruiz, Plastic Bags a Headache for Recyclers, CHI. TRIB. (July
30, 2015), https://www.chicagotribune.com/opinion/commentary/ct-plastic-bag-ban-recycling-
0731-biz-20150730-story.html, (“Plastic bags...are among the greatest headaches for
recyclers grappling with growing contamination of their recycling streams, which slows
their systems, drives up their costs and hurts the quality of the materials they sell to be
reborn into new products.”).
222. See Ivy Schlegel, DECEPTION BY THE NUMBERS: AMERICAN CHEMISTRY COUNCIL
CLAIMS ABOUT CHEMICAL RECYCLING INVESTMENTS FAIL TO HOLD UP TO SCRUTINY 4 (Perry
Wheeler ed., 2020), https://www.greenpeace.org/usa/wp-
content/uploads/2020/09/GP_Deception-by-the-Numbers-3.pdf; see also JOHN COOK ET AL.,
supra note 55 and accompanying text.
223. See SCOTT MOUW, 2020 STATE OF CURBSIDE RECYCLING REPORT 9 fig.7 (2020),
https://recyclingpartnership.org/wp-content/uploads/dlm_uploads/2020/02/2020-State-of-
Curbside-Recycling.pdf.
224. Id.
225. Geyer et al., supra note 213, at 2-3.
226. HOCEVAR, supra note 219, at 6.
227. Laura Sullivan, Plastic Wars: Industry Spent Millions Selling Recycling – to Sell
More Plastic, NPR (Mar. 31, 2020, 8:00 AM),
https://www.npr.org/2020/03/31/822597631/plastic-wars-three-takeaways-from-the-fight-
over-the-future-of-plastics.

recycling is working, then they’re not going to be as concerned

about the environment.”228
2. Upcycling or Downcycling?
To actually reduce waste via “plastics recycling,” the project
must process plastic waste into plastic resin that can be used as
feedstock for making a new plastic product.229 Most plastic
recycling falls into the category of mechanical recycling: the plastic
is washed, chopped, and melted into plastic pellets, which are used
to make new plastic products.230 While mechanical recycling can be
cost-effective, its ability to reduce plastic waste is limited.231 For
example, only about fifty percent of the content of manufactured
bottles can be made of recycled plastic.232 Therefore, most
mechanically recycled plastic waste is “downcycled,” that is turned
into material of lesser value.233 For example, plastic bottles can be
used to make long-lasting wearable fleece. Unfortunately, washing
such materials puts microfibers into the water table. These
microfibers have been found even in the most pristine areas.234
Sporting goods company Patagonia, which has been making fleece
clothing out of recycled plastic since 1993, has acknowledged the
problem of microfibers pollution and is working on solutions.235
Waste-to-energy processes “should not be considered recycling,
since those materials are ultimately combusted.”236 While the
waste-to-energy industry presents itself as an environmentally
friendly alternative to landfilling, waste-to-energy may not
represent a win-win situation.237 Energy is required to produce,
collect, and transport the waste, and pollution is produced by
228. Id.
229. Geyer et al., supra note 213, at 2 (“[Recycling] reduces future plastic waste
generation only if it displaces primary plastic production; however, because of its
counterfactual nature, this displacement is extremely difficult to establish.”) (citation
omitted).
230. See Joel Makower, Inside Eastman’s Moonshot Goal for Endlessly Circular
Plastics, GREENBIZ (May 11, 2020), https://www.greenbiz.com/article/inside-eastmans-
moonshot-goal-endlessly-circular-plastics.
231. Andrew N. Rollinson & Jumoke Oladejo, GLOB. ALL. FOR INCINERATOR ALTS.,
CHEMICAL RECYCLING: STATUS, SUSTAINABILITY, AND ENVIRONMENTAL IMPACTS 13 (2020),
https://www.no-burn.org/wp-content/uploads/CR-Technical-Assessment_June-2020.pdf.
232. See Makower, supra note 230.
233. SCHLEGEL, supra note 222, at 7
234. Guiseppe Suaria et al., Microfibers in Oceanic Surface Waters: A Global
Characterization, 6 SCI. ADVANCES 1, 5, (2020).
235. What We’re Doing About Our Plastic Problem, PATAGONIA,
https://www.patagonia.com/stories/what-were-doing-about-our-plastic-problem/story-
72799.html (last visited Oct. 12, 2021).
236. SCHLEGEL, supra note 222, at 7.
237. Alexander H. Tullo, Should Plastics Be a Source of Energy?, CHEM. & ENG’G NEWS
(Sept. 28, 2018), https://cen.acs.org/environment/sustainability/Should-plastics-source-
energy/96/i38.

burning the waste. However, the industry, Covanta in particular,

asserts that waste-to-energy facilities reduce CO2 emissions by
about a ton for every ton of waste that’s not landfilled.238
Ultimately, “[t]his is because fossil fuels aren’t being burned for
energy, methane isn’t being generated in a landfill, and metals are
being collected for recycling.”239
Existing waste-to-energy plants have limited capacity based on
design constraints.240 It may not be possible for those existing
plants to start burning all available plastic waste.241 Plastics have
a higher energy content than most trash.242 If a waste-to-energy
facility processes more plastics, it necessarily has to limit the other
types of waste it takes. Waste-to-energy plants primarily exist to
dispose of waste, with recycling and energy only secondary
benefits.243
To incinerate more plastics, the U.S. would need to build more
waste-to-energy plants so they could process more trash overall.
But it has yet to embrace the technology as some countries do.
Only about 13% of U.S. garbage is burned for energy.244 The
European Union incinerates about twice as much of their garbage:
“Germany incinerates about a third of its waste for power; Norway
and Sweden, more than half.”245 The biggest impediment for waste-
to-energy is cheap landfilling.246 But even if waste-to-energy is
economically possible, it basically converts waste from solid
garbage into air pollution.247 In addition, waste-to-energy
technology is expensive. For example, Detroit spent $1.2 billion on
its incinerator and Harrisburg, PA., “spent more than $360 million
upgrading its plant.”248 After making that level of investment in
waste to energy, communities may be reluctant to invest
additional amounts in other types of waste reduction such as
composting and recycling.
238. Id.
239. Id.
240. Id.
241. Id.
242. Id.
energy/96/i38.
244. Id.
245. Id.
246. Id.
247. Id.
energy/96/i38.

Pyrolysis extracts energy from plastic waste by heating mixed

plastic waste at 350 to 800 °C in a low-oxygen environment,
breaking down the plastic into shorter-chain hydrocarbons such as
gas or oil.249 While it is theoretically possible to recycle these
components back into plastic, the process is inefficient and
ultimately non-economic.250 Turning plastic into fuel “delivers little
environmental benefit.”251 Moreover, the fuel created by pyrolysis
of mixed plastics is lower quality than virgin oil, requires
additional processing, and contains many toxic substances.252 In
short, “chemical recycling is not the answer to society's problem of
plastic waste.”253
3. Re-Use
Reusing existing plastic products can reduce plastic waste by
keeping those products out of the waste stream. It also cuts down
on packaging waste. Plastic bottles can be used repeatedly to hold
bulk products such as shampoos and lotions.254 Yogurt containers
can be repurposed to store homemade broth in the freezer.255 Even
plastic bags and plastic film can be washed and reused.256
Reuse can be encouraged by making virgin products more
expensive but also by regulating reuse. The State of Oregon
pioneered this approach with its landmark bottle deposit bill in
1971.257 The original intent of the bottle bill was to reduce Oregon’s
growing litter problem and to conserve resources.258 The bottle
legislation evolved to accommodate changes in the beverage
industry, moving from glass to plastic bottles and adding certain
alcoholic beverages to the covered bottles.259 Ten states (including
Oregon) and Guam have a deposit-refund system for beverage
containers.260 The higher the deposit, the more effective the law.
249. Id.
250. ROLLINSON & OLADEJO, supra note 231, at 11.
251. Id. at 5.
252. Id. at 27. Cleaning these toxicants from chemical recycling products can be
extremely difficult, expensive, and will create additional toxic waste streams. Id.
253. Id. at 34.
254. Lori Starling, Buy These 10 Items in Bulk and Help Keep Tons of Plastic Trash
Out of the Oceans, ONE GREEN PLANET https://www.onegreenplanet.org/lifestyle/items-to-
buy-in-bulk-instead-of-packaging/ (last visited Nov. 11, 2021).
255. This statement comes from personal experience.
256. Erica Young, Can You Reuse Plastic Wrap?, TASTE OF HOME,
https://www.tasteofhome.com/article/can-you-reuse-plastic-wrap/ (last visited Nov. 11,
2021); Lisa McManus, Testing Bag Drying Racks, COOKS ILLUSTRATED (July 23, 2020),
https://www.cooksillustrated.com/articles/2524-testing-bag-drying-racks.
257. Oregon’s Evolving Bottle Bill, OREGON.GOV,
https://www.oregon.gov/deq/recycling/Pages/Bottle-Bill.aspx (last visited Nov. 11, 2021).
258. Id.
259. OR. REV. STAT. §§ 459A.702 (2021).
260. State Beverage Container Deposit Laws, NAT’L CONF. OF STATE LEGISLATURES
(Mar. 13, 2020), https://www.ncsl.org/research/environment-and-natural-resources/state-

Oregon’s original bottle bill provided for a five-cent deposit per

can.261 Oregon Bottle Bill: A history notes that:
[i]f deposits had kept up with inflation, the deposit on a six-
pack would be about $1.66 today rather than 30 cents. There is
strong evidence that the size of deposits does affect the return
rate of containers. Michigan, which has a minimum 10-cent
deposit, has the highest return rate of all the states with bottle
bills.262
A 2018 study by Australian researchers found significantly
lower proportion of beverage containers found in coastal debris
surveys in states with a container deposit law than in those
without such a law.263
III. DESIGN ISSUES: ARE STICKS OR CARROTS BETTER?
Both carrots and sticks can be used to dealing with
externalities. Externalities occur when markets fail to take into
account the cost of some harm caused by a product.264 In other
words, the product’s cost does not reflect the incidental harm that
it causes. Externalities are a classic example of a market failure.
When an externality occurs, the government can implement
policies to force internalizing the cost. This can be accomplished by
regulating the behavior or by taxing the behavior. However, there
is a third way: the government can provide incentives to encourage
mitigation of the consequences of the behavior. In the case of
plastic pollution, the government could provide incentives at
various levels: manufacture of the plastic, manufacture of products
using plastic, plastic packaging, or at the consumer level. These
incentives could be used by various levels of government: federal,
state, or local.
A. The Efficiency Problem with Tax Incentives (Carrots)
Tax incentives have been the primary way that the U.S. federal
government addresses environmental externalities.265 The federal
tax incentives for environmentally friendly behavior available
either currently or in the past include tax credits for purchasing an
beverage-container-laws.aspx#:~:text=States%20with%20Container%20Deposit%20Laws,-
California&text=Ten%20states%20and%20Guam%20have,refund%20system%20for%20bev
erage%20containers.
261. Oregon’s Evolving Bottle Bill, supra note 257.
262. Id.
263. Qamar Schuyler et al., Economic Incentives Reduce Plastic Inputs to the Ocean, 96
MARINE POL’Y 250, 254 (2018).
265. Roberta F. Mann, Federal, State, and Local Tax Policies for Climate Change:
Coordination or Cross-Purpose?, 15 LEWIS & CLARK L. REV. 369, 379 (2011).

electric car,266 credits for insulating your home,267 extra deductions

for green office buildings,268 credits for carbon sequestration,269 as
well as the renewable energy credits described in the previous
section.270 Tax credits, like tax cuts, tend to be popular with
taxpayers. Tax increases, not so much.271
A 2011 Congressional Research Service report on energy tax
expenditures noted that:
While taxing activities associated with negative externalities
may enhance economic efficiency, subsidizing the alternative
activity is not necessarily economically efficient. Subsidizing
renewable energy, in this context, reduces the average price of
energy, which increases demand and ultimately consumption.
Subsidies for renewable energy, by decreasing the average
price of energy, work against initiatives for energy efficiency.
Further, the government must raise revenue to finance these
subsidies. Such revenues may be raised using distortionary
taxes.272
Inefficiency also results when the behavior would have
occurred in absence of the incentive. In that case, the government
is expending revenue unnecessarily.
B. The Big Stick: Carbon Pricing
Carbon pricing refers to economic instruments for climate
change mitigation. Most economists favor carbon taxes over cap-
and-trade proposals.273 Carbon taxes limit the cost of climate
change mitigation, while cap-and-trade proposals focus on the
quantity of carbon emissions.274 Either instrument can achieve the
266. Roberta F. Mann, Back to the Future, Recommendations and Predictions for
Greener Tax Policy, 88 OR. L. REV. 355, 369, 392-93 (2010).
267. Id. at 392.
268. Id. at 393.
269. Roberta F. Mann, Tax Policies for Green Manufacturing: Implementing the Green
New Deal, 17 PITT. TAX REV. 1, 35 (2019).
270. See supra Part II.C.
271. See, e.g., Syon Bhanot & Reed Orchinik, Why We Hate Taxes, and Why Some
People Want Us To, BEHAV. SCIENTIST (Aug. 5, 2019), https://behavioralscientist.org/why-
we-hate-taxes-and-why-some-people-want-us-to/.
272. MOLLY F. SHERLOCK, CONG. RSCH. SERV., R41227, ENERGY TAX POLICY:
HISTORICAL PERSPECTIVES ON AND CURRENT STATUS OF ENERGY TAX EXPENDITURES 10-11
(2011).
273. Heather Long, ‘This is not Controversial’: Bipartisan Group of Economists Call for
a Carbon Tax, WASH. POST (Jan. 16, 2019),
https://www.washingtonpost.com/business/2019/01/17/this-is-not-controversial-bipartisan-
group-economists-calls-carbon-tax/.
274. See Roberta F. Mann, The Case for the Carbon Tax: How to Overcome Politics and
Find Our Green Destiny, 39 ENV’T L. REP. NEWS & ANALYSIS 10118, 10119-23 (2009)
(comparing carbon taxes to cap-and-trade); see also SHI-LING HSU, THE CASE FOR A CARBON
TAX: GETTING PAST OUR HANG-UPS TO EFFECTIVE CLIMATE POLICY 21 (Island Press 2011).

same level of emissions reductions, depending on the design.275

Carbon pricing is economically efficient for several reasons. First,
rather than the government picking winners via incentives, it
allows the market to determine the lowest cost emission
reductions. Second, this market effect would spur innovation in
low carbon-intensive technologies (e.g., renewable energy) and
encourage other behavior that may decrease emissions, such as
efficiency improvements.276 Third, it avoids spending government
funds on activities that would occur in any event, such as, for
example, shifting to electric vehicles.
Carbon pricing would increase the cost of fossil fuels, including
petroleum and coal.277 Carbon pricing could provide an appropriate
signal for plastics externalities as fossil fuels such as petroleum or
natural gas constitute the primary feedstock for plastic material.278
It would also have an economy-wide impact, affecting many other
industries as well as consumers of many other products.279 A
carbon price, if passed through to consumers, would likely have a
regressive effect, affecting lower income consumers to a greater
degree than higher income consumers.280 Low-income consumers
tend to spend a larger portion of their income on high emission
products such as energy for heating and transportation.281 This
distributional issue has been considered by most of the recently
proposed carbon pricing legislation in the U.S.282 The regressivity
275. Gilbert E. Metcalf & David Weisbach, The Design of a Carbon Tax, 33 HARV.
ENV’T L. REV. 499, 502-03 (2009).
276. JONATHAN L. RAMSEUR & JANE A. LEGGETT, CONG. RSCH. SERV., R45625,
ATTACHING A PRICE TO GREENHOUSE GAS EMISSIONS WITH A CARBON TAX OR EMISSIONS FEE:
CONSIDERATIONS AND POTENTIAL IMPACTS 12 (2019).
277. See Ian Parry, Putting a Price on Pollution, 56 IMF F&D MAG. 16 (2019),
https://www.imf.org/external/pubs/ft/fandd/2019/12/pdf/the-case-for-carbon-taxation-and-
putting-a-price-on-pollution-parry.pdf.
278. See Williams, supra note 58 and accompanying text.
279. See MARC HAFSTEAD, RESOURCES FOR THE FUTURE, FEDERAL CLIMATE POLICY 102:
ECONOMY-WIDE POLICY, (Mar. 9, 2021), https://www.rff.org/publications/explainers/federal-
climate-policy-102-economy-wide-
policies/#:~:text=Economy%2Dwide%20carbon%20pricing%20also,with%20all%20else%20ke
pt%20equal.
280. JOSEPH ROSENBERG ET AL., URBAN-BROOKINGS TAX POL’Y CTR., DISTRIBUTIONAL
IMPLICATIONS OF A CARBON TAX 6 (Noah Kaufman ed., 2018),
https://www.taxpolicycenter.org/sites/default/files/publication/156300/how_to_design_carbon
_dividends.pdf.
281. Id.
282. What You Need to Know About a Federal Carbon Tax in the United States,
COLUMBIA SIPA: CTR. ON GLOB. ENERGY POL’Y,
https://www.energypolicy.columbia.edu/what-you-need-know-about-federal-carbon-tax-
united-states (last visited Nov. 12, 2021). Various representatives and senators in the U.S.
Congress have proposed legislation authorizing a federal carbon tax in recent years. Id. The
following proposals have all provided at least one of the ways to redress the regressive
impact of the carbon price (i.e., low-income assistance, carbon dividends, or payroll tax
reductions): the America’s Clean Future Fund Act, S. 4484, 116th Cong. (2020) (proposed by

of carbon pricing could be mitigated by redistributing revenue from

the carbon price in a variety of ways, including a so-called “carbon
dividend” that would be distributed to householders. There are
many issues with the design of a carbon “dividend,” including who
would be eligible to receive one, the frequency of the payments,
and whether carbon dividends would be included in taxable
income.283 The carbon revenues could be used to reduce regressive
taxes, such as the payroll tax.
In addition to the distributional issue, implementing a carbon
price in the U.S. faces other challenges, not the least of which is
political opposition.284 There are myriad design issues, including
where to impose the tax and what to tax—the rate of taxation, and
whether and/or how to address imported carbon-intensive
materials. Should the tax be imposed upstream, midstream, or
downstream? If the tax were imposed midstream, for example at
the oil refinery, that business would need “(1) make tax payments
based on emissions or emission inputs, such as fossil fuels, (2)
monitor emissions or emission inputs, and (3) maintain records of
relevant activities and transactions.”285 There are fewer oil
refineries than oil wells, so that might be a better choice.286 Should
the rate of tax be based on target GHG emissions or the social cost
of carbon? The answer to that question is a policy choice. Carbon
emissions are a global problem, so how should imported products
be treated? This question goes to the concept of carbon leakage–if a
carbon tax is imposed in one jurisdiction, it may give a pricing
advantage on goods produced in another jurisdiction without a
Senator Dick Durbin in August of 2020 ("Durbin Bill")); the American Opportunity Carbon
Fee Act of 2019, S. 1128, 116th Cong. (2019) (proposed by Senator Sheldon Whitehouse in
April 2019 (“Whitehouse Bill”)); the Energy Innovation and Carbon Dividend Act of 2019,
H.R. 763, 116th Cong. (2019) (proposed by Congressman Ted Deutch in January of 2019
(“Deutch Bill”)); the Stemming Warming and Augmenting Pay Act, H.R. 4058, 116th Cong.
(2019) (proposed by Congressman Francis Rooney in July of 2019 (“Rooney Bill”)); the
Climate Action Rebate Act, S. 2284, 116th Cong. (2019) (proposed by Senator Chris Coons in
July of 2019 (“Coons Bill”)); the Raise Wages, Cut Carbon Act of 2019, H.R. 3966, 116th
Cong. (2019) (proposed by Congressman Dan Lipinksi in July of 2019 (“Lipinski Bill”)); the
America Wins Act, H.R. 4142, 116th Cong. (2019) (proposed by Congressman John Larson
in August of 2019 (“Larson Bill”)); the Carbon Reduction and Tax Credit Act, H.R. 5457,
116th Cong. (2019) (proposed by Congressman Sean Patrick Maloney in December 2019
(“Maloney Bill”)).
283. JOSEPH ROSENBERG ET AL., URBAN-BROOKINGS TAX POL’Y CTR., DISTRIBUTIONAL
IMPLICATIONS OF A CARBON TAX 6 (Noah Kaufman ed., 2018),
https://www.taxpolicycenter.org/sites/default/files/publication/156300/how_to_design_carbon
_dividends.pdf.
284. Ramseur & Leggett, supra note 276, at 3. “Many Members [of Congress] have
expressed their opposition to a carbon tax.” Id.
285. Ramseur & Leggett, supra note 276, at 4.
286. Id. at 5.

carbon tax.287 But if a jurisdiction puts a tariff on imported goods

to reduce the carbon leakage, that could violate free trade rules.288
C. Targeting Plastics
Carbon pricing, as noted above, has many benefits and many
challenges. It may not be the best instrument if the goal is to
narrowly target plastic issues. Indeed, the European Union, which
began implementing a carbon pricing scheme in 2003,289 has
recently adopted a directive on plastic waste.290 Commentators
agree on one aspect of the solution: the main focus should not be on
consumers.291 Consumers have very little opportunity to avoid
plastic products, even if well-educated on the issues and possessing
a sincere desire to do so. Local bans on plastic bags and straws at
the retail level may make consumers feel better and have some
local environmental effects, but not nearly enough to make a dent
in the global problem.292 The next section will evaluate some of the
proposals made world-wide, some of which have actually been
implemented.
IV. POLICY INSTRUMENTS AND PROPOSALS
This section provides an overview of policy instruments and
proposals to address the problem of plastic waste. It explores both
design choices and proposals from around the world, ranging from
Europe, to Africa, and back to the United States.
A. Extended Producer Responsibility
Extended Producer Responsibility (EPR) is an environmental
policy approach under which the responsibility of producers for
their products is extended to include the social costs of waste
287. Id. at 10.

288. Jennifer Hillman, Changing Climate for Carbon Taxes: Who’s Afraid of the WTO?,
CLIMATE & ENERGY POL’Y PAPER SERIES 1, 5-10 (2013). For a discussion targeted towards
plastics specifically, see Rodolfo Salassa Boix, Plastic Free But Not Free Trade?, in CRITICAL
ISSUES IN ENVIRONMENTAL TAXATION (forthcoming 2022).
289. Directive 2003/87/EC, of the European Parliament and of the Council of 13
October 2003 on Establishing a Scheme for Greenhouse Gas Emission Allowance Trading
Within the Community and Amending Council Directive 96/61/EC, 2003 O.J. (L 275) 32, 34.
The EU ETS, implemented in 2005, has successfully brought down emissions from power
generation and energy-intensive industries by 42.8%. European Commission Press Release
IP/21/3541, European Green Deal: Commission proposes transformation of EU economy and
society to meet climate ambitions (July 14, 2021).
290. See A European Strategy for Plastics in a Circular Economy, COM (2018) 21 final
(Jan. 1, 2018).
291. See Maarten Dubois, Extended Producer Responsibility for Consumer Waste: The
Gap Between Economic Theory and Implementation, 30 WASTE MGMT. & RSCH. 36, 37 (2012)
(“[E]conomists consider EPR as an important tool to remediate the market failure of cheap,
subsidized household waste collection.”).
292. Rob Jordan, Do Plastic Straws Really Make a Difference?, STAN. EARTH MATT.
MAG. (Sept. 18, 2018), https://earth.stanford.edu/news/do-plastic-straws-really-make-
difference#gs.wfas11 (Statement of Jim Leape, co-director of the Stanford Center for Ocean
Solutions) (“Plastic straws are only a tiny fraction of the problem–less than 1 percent.”).

management, including the environmental impact of waste

disposal.293 EPR has been used in Europe since the early 1990s.294
Products subject to EPR are not limited to plastics or packaging—
they include “paint, batteries, electronics, cell phones, tires, used
crankcase oil, appliances and end of life vehicles.”295 EPR shifts
financial responsibility for waste management from municipalities
and individuals to the producer, thereby internalizing the costs of
disposal.296 An OECD analysis notes that “EPR is designed to
confront the producer with the costs of end-of-life disposal of their
products, and thereby to provide incentives for the producer to take
account of these costs in designing and marketing their
products.”297 When products can be freely discarded by consumers
and waste management costs are borne by municipalities,
producers can design and market products which have high end-of-
life waste management costs without facing any penalty, either in
terms of profits or consumer demand.298
EPR is well-suited to reducing plastic waste. As noted earlier,
resource extraction and processing activities are subsidized.299
Therefore, virgin materials are underpriced, as seen in the case of
petroleum feedstocks for plastics. If virgin resources were properly
priced—to reflect the full costs, including external costs, of
extraction and processing300—producers might be encouraged to
design products to reduce material input requirements and to
make greater use of recycled materials. Thus, EPR could
encourage producers to reduce their use of virgin resources, and to
make greater use of recycled materials.
The World Wildlife Fund has adopted EPR as a critical policy
tool, focusing their EPR efforts on eliminating plastic pollution in
Southeast Asia and China.301 Many European countries have
293. Stephen Smith, Analytical Framework for Evaluating the Costs and Benefits of
Extended Producer Responsibility Programmes, WORKING GRP. ON WASTE PREVENTION &
RECYCLING: ORG. FOR ECON. CO-OPERATION & DEV. 1, 4 (2005) https://www.oecd-
ilibrary.org/economics/analytical-framework-for-evaluating-the-costs-and-benefits-of-
extended-producer-responsibility-programmes_oecd_papers-v5-art13-en.
294. Id. at 6.
295. Id.
296. Id. at 12.
297. Id. at 8.
298. Id.
299. See Pfund & Healey, supra note 32 (detailing government subsidies to the
petroleum industry).
300. See Bertrand, supra note 34 (explaining the negative externalities caused by fossil
fuel production and use).
301. Legal Framework Study of Extended Producer Responsibility, WORLD WILDLIFE
FUND 1 (2019),
https://d2ouvy59p0dg6k.cloudfront.net/downloads/2019___wwf___epr_legal_framework_anal
ysis_vf.pdf.

implemented EPRs via legislation.302 As noted, the European

Union (EU) adopted a plastics directive in 2018.303 The directive
emphasizes the use of economic instruments to prioritize waste
prevention and recycling at national level by EU member states.304
The directive applies the polluter pays principle, noting that the
economics of plastic recycling would be improved by internalizing
the environmental costs of landfilling and incineration through
high or gradually rising fees or taxes.305
Most EPR systems use a producer responsibility organization
(PRO) model.306 A PRO can be a for-profit, not-for-profit, or
governmental organization.307 Its role is to coordinate EPR by
registering and monitoring producers and collecting fees. Effective
EPR policy instruments include advance disposal fees (ADF),
which would be added to the price of the product to reflect the end-
of-life waste management costs associated with the product.308
Consumers would be encouraged to substitute products without an
ADF, which would encourage producers to change their products.
In some cases, ADFs may be combined with recycling incentives
for additional economic efficiency.309 France and Italy modify their
ADFs based on the packaging’s degree of recyclability. Thus,
France doubles the fee for non-recyclable plastic packaging, while
in Italy, non-recyclable packaging results in different surcharges
that can amount to a quarter of the original fee.310 However,
neither France nor Italy attempts to collect most mixed plastic
waste.311
Another effective tool is mandatory deposit-and-refund.312
Consumers return eligible items, such as beverage containers, and
receive a reward.313 The reward incentivizes the consumer (or
someone else who collects the container) to return the item rather
302. Austria, Belgium, Bosnia, Bulgaria, Czech Republic, Cyprus, Estonia, Finland,
France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Macedonia,
Malta, Netherlands, Norway, Poland, Portugal, Romania, Serbia, Slovak Republic, Slovenia,
Spain, and Sweden have all set up PROs. Id. at 9-10.
303. See A European Strategy for Plastics in a Circular Economy, supra note 290.
304. Id. at 19.
305. Id. at 16.
306. Dubois, supra note 291, at 36.
307. WORLD WILDLIFE FUND, supra note 301, at 10.
308. Thornton Matheson, Disposal is Not Free: Fiscal Instruments to Internalize the
Environmental Costs of Solid Waste 21 (Int’l Monetary Fund, Working Paper No. 283, 2019).
309. Margaret Walls, discussion paper, EPR Policies and Product Design: Economic
Theory and Selected Case Studies, WORKING GRP. ON WASTE PREVENTION & RECYCLING:
ORG. FOR ECON. CO-OPERATION & DEV. 1, 5 (2005).
311. See Id. at 20.
312. See supra notes 257-263.
313. Matheson, supra note 308, at 24.

than throw it away.314 Deposit-refund systems use consumer

participation to reduce waste.315 As noted by the World Wildlife
report, “deposit-refund systems are only effective for specific,
easily identifiable items like beverage bottles” and are not effective
in covering a broad range of packaging waste.316 Moreover, the
deposit must be high enough to encourage returns.
B. Bags, Bans, and Small Incentive
Plastic bags are almost a poster child for plastic waste. Photos
of turtles and sea birds entangled in plastic bags give
heartbreaking evidence of their environmental harm.317 Americans
use 100 billion plastic bags per year.318 Economist Tatiana
Homonoff investigated whether a 5 cent bonus for bringing a
reusable grocery bag or a 5 cent tax on a disposable plastic bag had
a greater impact on consumer behavior.319 She found a significant
impact for the 5 cent tax and almost no impact for the 5 cent
bonus.320 The tax had more salience for customers: 98 percent of
customers were aware of the tax while only 52 percent of
customers were aware of the bonus.321 According to the study, ”the
tax decreased disposable bag use by 42.0 percentage points and
increased reusable bag use by 32.7 percentage points, and further
found that “the percent of customers who used no bags at all
increased by 11.1 percentage points.”322 Eight states have banned
single-use plastic bags: California, Connecticut, Delaware, Hawaii,
Maine, New York, Oregon, and Vermont.323 Oregon’s legislation,
although considered a “ban” by the National Conference of State
Legislatures,324 does allow retail establishments to provide
reusable plastic bags if they charge at least 5 cents per bag.325
Good news for businesses may be bad news for marine animals:
eighteen states have preemption statutes that do not allow

315. Id.
316. Id.
317. 10 Facts About Single-Use Plastic Bags: The Problem with Plastic Bags, CTR. FOR
BIOLOGICAL DIVERSITY,
https://www.biologicaldiversity.org/programs/population_and_sustainability/sustainability/p
lastic_bag_facts.html (last visited Oct. 12, 2021).
318. Id.
319. Tatiana A. Homonoff, Can Small Incentives Have Large Effects? The Impact of
Taxes Versus Bonuses on Disposable Bag Use, 10 AM. ECON. J.: ECON. POL’Y 177 (2018).
320. Id. at 204.
321. Id. at 179.
322. Id. at 190.
323. State Plastic Bag Legislation, NAT’L CONF. OF STATE LEGIS. (Feb. 8, 2021),
https://www.ncsl.org/research/environment-and-natural-resources/plastic-bag-
legislation.aspx.
324. Id.
325. HB 2509, 80th Or. Leg. Sess (2019), section 2(1)(b).

localities to impose bans, fees, or taxes on single-use plastic or

paper bags.326 The American Legislative Exchange Council (ALEC)
provided a model preemption statute designed to protect
businesses from plastic bag bans.327
C. Ideas from Africa
According to the National Geographic, the African continent
now leads the world in bag regulations, with 34 countries
adopting taxes or bans.328 Extreme measures against plastic
pollution appear to be effective. In Rwanda, it is illegal to import,
produce, use, or sell plastic bags and plastic packaging except
within specific industries like hospitals and pharmaceuticals.329
Traffickers caught carrying illegal plastic are liable to be fined,
jailed, or forced to make public confessions.330 Plastic‐bag
vigilantes are everywhere, from airports to villages, and these
informants tip off the authorities about suspected sales or use of
plastic.331 The nation’s zero-tolerance policy toward plastic bags
appears to be paying off: Streets in the capital, Kigali, and
elsewhere across this hilly, densely populated country are virtually
spotless.332 In Kenya, manufacturers and importers of plastic bags
now face fines of $19,000 to $38,000 or four‐year jail terms.333 The
heavy penalties associated with the plastic bag ban are a strong
incentive for people to comply with the law. Since taking effect in
2017, positive results from the ban have been documented. For
example, obstruction of waterways has decreased, and fishermen
have fewer bags caught in their nets.334
D. The UK Solution
326. NCSL, supra note 323.

327. Regulating Containers to Protect Business and Consumer Choice, AM. LEGIS.
EXCH. COUNCIL (Sept. 4, 2015),
https://www.alec.org/model-policy/regulating-containers-to-protect-business-and-
consumer-choice/.
328. Laura Parker, Plastic Bag Bans are spreading. But are they truly effective?, NAT’L
GEOGRAPHIC (Apr. 17, 2019),
https://www.nationalgeographic.com/environment/article/plastic-bag-bans-kenya-to-us-
reduce-pollution.
329. Kimiko de Freytas‐Tamura, Public Shaming and Even Prison for Plastic Bag Use
in Rwanda, THE N.Y. TIMES (Oct. 28, 2017),
https://www.nytimes.com/2017/10/28/world/africa/rwanda-plastic-bags-banned.html.
330. Id.
331. Id.
332. Id.
333. The Editorial Board., Follow Kenya’s Lead on Plastic Bags, THE N.Y. TIMES (Sept.
14, 2017), https://www.nytimes.com/2017/09/14/opinion/kenya-plastic-bag-laws.html.
334. Caroline Kane, Kenya’s Plastic Bag Ban: An Imperfect but Effective Policy,
FORDHAM ENV’T L. REV. (Jan. 29, 2020),
https://news.law.fordham.edu/elr/2020/01/29/kenyas-plastic-bag-ban-an-imperfect-but-
effective-policy/.

The United Kingdom’s (UK) new plastic packaging tax,

combined with its Packaging Producer Responsibility Regulations,
should have a significant effect in reducing virgin plastic
packaging used in the UK. The UK’s plastic packaging tax will
take effect in April 2022.335 The tax applies to plastic packaging
produced in or imported into the UK.336 Plastic packaging is
defined as packaging that is predominantly plastic by weight.337
The tax rate will be £200 per tonne of plastic packaging which does
not contain at least 30% recycled plastic.338 The tax will provide a
clear economic incentive for businesses to use recycled material in
the production of plastic packaging, which will create greater
demand for this material and in turn stimulate increased levels of
recycling and collection of plastic waste, diverting it away from
landfill or incineration.339 The tax will complement the reformed
Packaging Producer Responsibility Regulations.340 These reforms
will encourage businesses to design and use plastic packaging that
is easier to recycle and discourage the creation of plastic packaging
which is difficult to recycle. They will also make businesses
responsible for the cost of managing the packaging they place on
the market when it becomes waste. These measures, together with
the UK government’s proposals to increase consistency in
household recycling collections across local authorities and
businesses, will increase the supply of easier-to-recycle plastic.341
E. United Nations Resolution to End Plastic Pollution
On March 2, 2022, representatives of 175 nations endorsed a
resolution to end plastic pollution.342 The resolution establishes an
Intergovernmental Negotiating Committee (INC) that will attempt
to draft a “legally binding instrument . . . [reflecting] diverse
335. Policy Paper: Introduction of Plastic Packaging Tax From April 2022, GOV.UK:
HM REVENUE & CUSTOMS (July 20, 2021),
https://www.gov.uk/government/publications/introduction-of-plastic-packaging-tax-from-
april-2022/introduction-of-plastic-packaging-tax-2021.
336. Id.
337. Id.
338. GOV.UK: HM REVENUE & CUSTOMS, PLASTIC PACKAGING TAX: SUMMARY OF
RESPONSES TO THE POLICY DESIGN CONSULTATION 1, 3 (2020)
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_da
ta/file/934566/Plastic_packaging_tax_-
_summary_of_responses_to_the_consultation_on_policy_design.pdf.
339. See id.
340. The Producer Responsibility Obligations (Packaging Waste) Regulations 2007,
LEGISLATION.GOV.UK, https://www.legislation.gov.uk/uksi/2007/871/regulation/2 (last
visited Nov. 12, 2021); HM REVENUE & CUSTOMS, supra note 226, at 3.
341. Id.
342. Press Release, U.N. Env’t Programme, Historic Day in the Campaign to Beat
Plastic Pollution: Nations Commit to Develop a Legally Binding Agreement (Mar. 2, 2022),
https://www.unep.org/news-and-stories/press-release/historic-day-campaign-beat-plastic-
pollution-nations-commit-develop.

alternatives to address the full lifecycle of plastics, the design of

reusable and recyclable products and materials, and the need for
enhanced international collaboration to facilitate access to
technology, capacity building and scientific and technical
cooperation.”343 Some environmental scholars expressed skepticism
about this new development, citing “treaty congestion” and doubt
about how binding such an instrument would be.344 International
agreements can only exist by consent of the nation states who
choose to join or withdraw from an agreement.345 Nonetheless, the
degree to which an agreement is binding depends on the “form of
the agreement and the costs to the state of noncompliance.”346
F. State Legislation
1. Recycling Credits
Some states provide tax credits to encourage plastic recycling.
Colorado has a plastic recycling investment tax credit equal to 20%
of the first $10,000 of net expenditures to third parties for rent,
wages, supplies, consumable tools, equipment, test inventory, and
utilities made for new plastic recycling technology in Colorado.347
Louisiana has corporate recycling tax credit equal to a 14.4 percent
of the cost of purchasing new recycling manufacturing or process
equipment.348 The Louisiana credit is limited to a total amount of
$3.6 million and is not limited to plastics recycling.349 Kentucky
has a recycling or composting equipment tax credit equal to fifty
percent of the installed cost of the recycling or composting
equipment.350 The Kentucky tax credit may be used for recycling
any post-consumer waste.351 In Montana, individual taxpayers and
businesses can claim a credit for an investment in depreciable
equipment purchased to collect or process reclaimed material or to
343. Id.
344. Email from Harro vanAsselt, Professor of Climate Law & Policy at the University
of Eastern Finland, to various professors of environmental law (Mar. 3, 2022, 12:41 PST) (on
file with author).
345. Robert Stavins et al., International Cooperation: Agreements & Instruments, IN
INTERGOVERNMENTAL PANEL ON CLIMATE CHANGE, AR5 CLIMATE CHANGE
2014: MITIGATION OF CLIMATE CHANGE 1001, 1014 (Ottmar Edenhofer ed., 2014),
https://www.ipcc.ch/site/assets/uploads/2018/02/ipcc_wg3_ar5_chapter13.pdf.
346. Id.
347. COLO. REV. STAT. § 39-22-114.5.
348. Recycling, L A. DEP’T ENV’T QUALITY,
https://www.deq.louisiana.gov/page/recycling#:~:text=Corporate%20Recycling%20Tax%20Cr
edits%20PDF,income%20and%20corporation%20franchise%20taxes (last visited Oct. 12,
2021).
349. Id.
350. Recycling or Composting Equipment Tax Credit, KY. DEP’T REVENUE,
https://revenue.ky.gov/Business/Pages/Recycling-Composting-Tax-Credit.aspx (last visited
Oct. 12, 2021).
351. Id.

manufacture products from any reclaimed material.352 Virginia has

an individual and corporate income tax credit called the Recyclable
Materials Processing Equipment Tax Credit, for “machinery and
equipment used on the premises of a manufacturing facility or
plant unit which manufactures, processes, compounds, or produces
items of tangible personal property from recyclable materials
within Virginia for sale.”353
2. Plastic taxes
Maine and Oregon are the first states to impose plastic taxes in
legislation enacted in 2021.354 Maine’s law creates a new EPR
scheme.355 Under Maine’s new law, the Maine Department of
Environmental Protection will set the packaging fee schedule on
producers, based on the per-ton costs derived from collecting and
processing a given producer’s packaging material.356 The fees will
go into a packaging stewardship fund.357 Oregon’s new law358 is
similar, requiring producers to join a producer responsibility
organization (PRO)359 and requiring the Environmental Quality
Commission to establish a per ton fee, called a “processor
commodity risk fee” that the PROs will pay to collectors of mixed
waste.360 The legislation also establishes the Oregon Recycling
System Advisory Council.361
G. U.S. Federal Proposals
There is currently no federal incentive in the U.S. to reduce
and reuse plastic, or for producers to use recycled plastics. A
greater focus on waste minimization, an increased focus on reuse
systems, and a more “circular” approach to recycle unavoidable
plastic packaging would have economic and environmental
benefits. The “Break Free from Plastics Pollution Act” of 2021,
352. Recycling Credit, MONT. (Aug. 31, 2021), https://mtrevenue.gov/taxes/tax-

incentives/recycling-credit/; MONT. CODE. ANN. § 15-32-603 (West 2001); MONT. CODE ANN. §
15-32-601(4)(a) provides that "Reclaimable material" means material that has useful
physical or chemical properties after serving a specific purpose and that would normally be
disposed of as solid waste, as defined in § 75-10-203, by a consumer, processor, or
manufacturer.
353. Recyclable Materials Processing Equipment Tax Credit Guidelines, VA. DEP’T OF
TAX’N, (Apr. 3, 2017), https://www.tax.virginia.gov/sites/default/files/inline-files/recyclable-
material-tax-credit-guidelines.pdf.
354. Patrick Gleason, National Plastic Tax Proposal Follows the Enactment of New
State Level Plastic Fees, FORBES (Sept. 24, 2021, 7:43 AM),
https://www.forbes.com/sites/patrickgleason/2021/09/24/national-plastic-tax-proposal-
follows-the-enactment-of-new-state-level-plastics-fees/.
355. Id.
356. Id.
357. ME. REV. STAT. ANN. Tit. 38, § 2146 (West 2021).
358. Plastic Pollution and Recycling Modernization Act, ch. 681, Or. Laws (2021).
359. Id. at § 4.
360. Id. at § 25.
361. Id. at § 17.

introduced by Representative Alan Lowenthal and Senator Jeff

Merkley, includes a mix of phase-outs of certain single-use
consumer products,362 an extended producer responsibility for
those and other products,363 and deposit or charge requirements at
the consumer retail level.364 The legislation creates a federal trust
fund to receive proceeds from carry-out bag fees, unused Container
Deposits, and other revenues.365 The trust fund could be used for
making grants for reusable carryout bags and “recycling, reuse,
and composting infrastructure and litter cleanup.”366 The bill
contains an “anti-ALEC” provision that denies funding to States
that prohibit local governments from implementing more
aggressive measures to reduce plastic products (such as fees at
retail levels).367
One environmental group, while lauding the effort, critiques
last year’s bill’s EPR provision, claiming it will stifle local
government efforts to spur recycling by delivering too much power
to producers, noting:
It means that massive companies like Coca-Cola, Pepsi, and
Nestle would have the authority to establish policies that
would have the force of law. These corporate policies would
replace state and local regulations and serve to undermine our
democratic systems. Participatory democracy is the very engine
propelling the development of a vibrant recycling industry that
is now larger than the US auto industry, and this action would
be, in effect, a hostile takeover of the recycling industry. EPR
for all products, paper and packages (PPP) would
disenfranchise local decision makers and therefore, threaten
our democratic system that has been the basis for decision
making in our country. It would impose corporate rule over
citizen rule. 368
The group preferred an alternative funding mechanism also
contained in the bill, called Product Stewardship.369 Similar to the
Oregon provision, “producer corporations would pay into funds
based on the amount and impact their products and packages have
362. Break Free from Plastic Pollution Act, H.R. 2238 & S. 984, 117th Cong. § 12201
(2021).
363. Id. at § 12101.
364. Id. at § 12104.
365. Id. § 9512.
366. Id. at § 9512(c).
367. Id. at §12401.
368. Neil Seldman, New Federal Legislation Presents the Opportunity to Break Free
from Plastic Pollution, INST. FOR LOC. SELF-RELIANCE (Dec. 8, 2020), https://ilsr.org/new-
federal-legislation-presents-the-opportunity-to-break-free-from-plastic-pollution/.
369. Id.

on municipal waste and recycling programs and . . . the fund

would then reimburse cities and counties for handling the
materials generated by the companies.”370 The environmental
group noted that “this approach to EPR would retain all the
authority, capacity and responsibility of local government to
control discarded materials, which has been practiced in the US
since before the country was formed.”371
Another promising federal proposal was introduced by Senator
Sheldon Whitehouse in August 2021. The REDUCE Act (which
stands for Rewarding Efforts to Decrease Unrecycled
Contaminants in Ecosystems) is a straightforward excise tax on
virgin plastic resins predominantly used for single-use plastics.372
The tax would start at $0.10 per pound in 2022, gradually
increasing to $0.20 per pound in 2024.373 It would be imposed
upstream on the producers of the plastic resin, which are
presumably integrated oil companies.374 Senator Whitehouse’s
press release noted that “[t]he top 100 virgin plastic producers
accounted for 90 percent of the global single-use plastic waste.”375
The proposal also establishes a Plastic Waste Reduction Fund that
could support plastic waste reduction and recycling activities,
including making improvements to recycling infrastructure.376 The
fund could be used to carry out marine debris reduction, detection,
monitoring, and cleanup activities and to address environmental
justice and pollution impacts from the production of plastic.377
The virgin plastic tax was considered as a revenue raiser for
the Build Back Better reconciliation bill.378 Sources close to the
White House reported concern about the tax increasing consumer
costs.379 Unfortunately, the Build Back Better bill appears to be off
370. Id.
371. Id.
372. REDUCE Act of 2021, S. 2645, 117th Cong. (2021).
373. Id.
374. Id. at § 4691(a)(1), §4691(c)(1) (imposing the tax on “applicable entities” and
defining applicable entity as “any manufacturer, producer, or importer of taxable virgin
plastic resin.”); see also Fueling Plastics, supra note 12.
375. Whitehouse Unveils Reduce Act to Tackle Plastic Pollution, SHELDON
WHITEHOUSE: U.S. SENATOR FOR R.I. (Aug. 6, 2021),
https://www.whitehouse.senate.gov/news/release/whitehouse-unveils-reduce-act-to-tackle-
plastic-pollution.
376. S. 2645, supra note 372.
377. Id.
378. VALERIE VOLCOVICI & JARRETT RENSHAW, REUTERS, Democrats Weigh First
Nationwide Fee on Plastic in U.S. Budget Negotiations, U.S. NEWS (Sept. 29, 2021, 5:33PM),
https://www.usnews.com/news/top-news/articles/2021-09-29/democrats-weigh-first-
nationwide-fee-on-plastic-in-us-budget-negotiations.

the table for now.380 However, if this proposal is reconsidered, the

same solutions to address the regressivity of carbon taxes could
apply to a plastics tax. Specifically, the revenue could be used to
pay dividends to taxpayers or to help create alternatives
V. CONCLUSIONS AND RECOMMENDATIONS
While most of the public understands that there is a problem
with plastics pollution, there is still much misunderstanding about
the origin of both plastic and plastics pollution. Plastic is a fossil
fuel product. Fossil fuels, whether burned as fuel or turned into a
single-use plastic product, pollute the planet and cause climate
change. With the increasing awareness that climate change is real,
is disastrous, and is caused by using fossil fuels, alternative
technologies such as renewable energy and electric vehicles are
increasingly popular.
Plastic is ubiquitous because it is cheap. The environmental
harm that plastic causes is not reflected in its price. Although
much of the plastic pollution ends up in lesser developed countries,
most of the plastic waste originates in wealthy countries. When we
send our plastic waste away, we should remember that “away is a
place, and people live there.” The best way to reduce plastic waste
is to reduce the use of plastic, particularly single-use plastics.
Consumers alone cannot solve the plastic pollution problem.
Recycling cannot be the sole solution. There are many ways to
limit the use of plastic: bans, complicated schemes to enforce
producer responsibility, and taxes. Governments must act to put
the cost of externalities on those who profit from plastics.

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TARGETING PLASTIC POLLUTION WITH TAXES

Plastic pollution is a matter of increasing global concern.

Electronic copy available at: https://ssrn.com/abstract=4284169

III. DESIGN ISSUES: ARE STICKS OR CARROTS BETTER?............. 33

1. History of Plastics, PLASTICS INDUS. ASS’N,

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issue since early 2018, when China announced it would stop

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9. History of Plastics, supra note 1.

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has been recycled.19 The remaining 80 percent ended up in

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packaging.28 Even before the pandemic, one study estimated that

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Energy Task Force’s work culminated in the 2005 Energy Policy

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new proposed rules ending Trump era rollback of fuel economy

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about the science.55 As public awareness of plastics pollution

Electronic copy available at: https://ssrn.com/abstract=4284169

Electronic copy available at: https://ssrn.com/abstract=4284169

lower rate of tax on a given activity.70 In effect, the government

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as well as other environmental hazards, disproportionately affects

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plants are in poor areas, often in communities of color...”84

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global plastics pollution and identifying the role corporate

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income from certain oil and gas properties.102 The concept of a

102. I.R.C. § 613 (2018).

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taxpayer’s qualified enhanced oil recovery costs attributable to a

115. I.R.C. § 43 (2005).

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investments.127 The ability to access equity markets in a manner

127. Although legislative proposals to include renewable energy as an eligible

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Electronic copy available at: https://ssrn.com/abstract=4284169

solution to the problem of stranded assets held by regulated public

(Lloyd’s of London ed., 2017), https://www.lloyds.com/-/media/files/news-and- insight/risk-

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through the process of carefully injecting compressed CO2 into

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inextricably linked with the plastic industry because plastics are

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foam, have R-values per inch up to double that of other forms of

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Researchers found that using renewable or low-carbon energy

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installations.184 These credits have significantly spurred renewable

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Economic events have caused the value of credits to fluctuate.

wind projects that may be seeking tax-equity financing through

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8300 million metric tons (Mt) as [sic] of virgin plastics have

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even be successfully recycled.219 “Wish” cycling happens when

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recycling is working, then they’re not going to be as concerned