Armenia Fails to Ban Plastic Bags. Taxing Them Could Generate $215 Million for the Government

By Diana Ghazaryan

While environmentalists try to fight against producing plastic bags in Armenia, the government – unlike the Republic of Georgia - is far from adopting legislation to curtail their use. Yet taxing plastic bags can generate $215 million in new revenue for the government.

At least 5,000 tons of plastic bags accumulate in Armenia every year, and this raises a growing environmental and economic cost for the tiny republic, according to the Ministry of the Environment. Yet in the last three years since the report was issued no ban has been introduced. Taxing them could generate $215 million, industry experts say.

While Georgia has passed legislation to ban plastic bags, Armenia has embraced plastic.

Each year, Armenia’s biggest landfill, Nubarashen, receives 300,000 tons of garbage. Polyethylene products such as bags, microplastic, and bottles, account for a significant segment of total rubbish, according to Yerevan Municipality. This figure suggests that the amount of plastic bags being discarded may be conservative, and that the Ministry of the Environment’s 2014 report may be outdated.

Plastic bags entered the world in the 1950s. Before their invention people used paper, setkas (or net bags in the Soviet era) and cloth bags. They proliferated because they are cheap and relatively durable with a lifespan of four centuries to 1,000 years. In Armenia, there is also a socio-cultural reason: setkas are associated with the long lines and scarcity of the Soviet era, whereas plastic bags are seen as symbols of prosperity, and capitalist success.

This poverty of thinking has dire economic and environmental consequences. It is estimated that by 2050 there will be more plastic than fish in the world’s oceans. “Plastic pollution is surfing onto Indonesian beaches, settling onto the ocean floor at the North Pole, and rising through the food chain onto our dinner tables,” says the UN.

There is a lack of awareness on the issue in Armenia. Parliament has been slow to act and failed to introduce legislation to stop their use. Why not tax them? The resistance to taxation comes from local firms that make plastic bags. But were there not plastic bag makers in neighboring Georgia where a ban has been enforced? Could Parliament not tax plastic bags and use the income it gets from a sin tax to bolster its budget, or to fund new recycling programs? Saddled with a growing external debt-to-GDP ratio close to 50%, could the government not take the lead? These questions have yet to be tackled directly by the international institutions working in Armenia like the European Union (EU), the World Bank, and the EBRD. They have sat on the philosophical sidelines, with the exception of vague and mechanism-lacking proposals, experts say.

The EU made reference to this environmental challenge in a document that was shared with the government of Armenia. The report recommends that the development partners active in Armenia explore the possibility of banning the usage of plastic in supermarkets, but the language is broad at best, and since its publication in 2016, there has been no action. The EU is now revising a new set of proposals with US AID, the World Bank and the EBRD, but it remains to be seen if they will toughen their language and propose specific recommendations to ban or tax plastic bags with a timeline.

Armenians do not understand that by using so much polyethylene every day they hurt themselves and the environment, says Ruben Khachatryan, director of the Foundation for the Preservation of Wildlife and Cultural Assets. But the environmentalists have also failed to advance credible economic arguments to the government and the EU. An economic argument has to be made so that political actors listen, says Raymond Von Culin, an Environment Impact Assessor with Cadmus in Yerevan.

Economic Benefits of a Sin Tax

There are a number of economic benefits from taxing, recycling and reducing the 5,000 tons of plastic bags discarded in the country each year: Up to 2,000 gallons of gasoline can be saved by recycling just one ton of plastic. And if each household in Armenia was taxed 100 drams for three plastic bags bought each day, it would generate 2,100 drams a week, or 33,600 drams in sin tax a year for the government. The number of households reached more than 1 million in Armenia in 2016, according to the National Statistics Office. Using today’s exchange rate, this translates to $215 in revenue for the government per household, or $215 million a year flowing into its coffers. This number is almost four times the grant aid Armenia receives from the EU each year.

The Elasticity and Inelasticity of Plastic

 Of course, the relationship between taxing and usage is not inelastic, and this is precisely the idea behind a surcharge: if the tax is seen as prohibitive, it will force consumers to find alternatives such as using cloth, net, or paper bags. If consumers, on the other hand, pay the tax, it would provide a boost to government revenue. Part of the $215 million can be used to help local plastic bag producers to transition to more sustainable, greener technologies. In addition to subsidizing their move to new businesses, part of the taxed income could be spent on education.

In July of 2016, several Armenian supermarkets started selling plastic bags for 10 to 20 drams. The first one to do so was Nor Zovq. Two years have passed and customers, especially seniors, still grapple to understand the idea behind the fee, which remains unregulated. Few, mainly the elderly, bring their own cloth or recycled bags to the store, according to the manager of a Nor Zovq branch, who asked to remain anonymous. To make a dent, the government should introduce a surcharge of 100 drams - not 20 - and collect the proceeds, rather than leaving it to the stores in an unregulated market. “There has to be some kind of exchange that happens in order for people to care about something,” says Karine Vann, an environmentalist. “Giving things to people for free makes them assign less value to that item.”

 Meanwhile, Georgia has taken a different approach with an outright ban. In September of 2017, the neighboring republic expanded its progressive credentials by restricting the importation and selling of polyethylene bags of less than 10 microns. Plastic bags are being substituted with paper and textile ones.

 Questions sent by email to the press office of Armenia’s Ministry of Environment were not answered by the time of publication.