Evaluating the effectiveness of the weight-based packaging tax on the reduction at source of product packaging: The case of food manufacturers and retailers

This paper examines the effect of the packaging tax on food manufacturers' and retailers’ decision to produce less packaging at the source. We analyze a longitudinal data set for the packaging quantities generated from 2005 to 2017 in the province of Quebec (Canada). We estimate two fixed effect models, then we triangulate our results with qualitative evidence from in-depth interviews and a focus group with key stakeholders. We show that the reduction effect of the packaging tax is sensitive to the targeted packaging particularities. Manufacturers and retailers are willing to bear high tax fees for food packaging when it has important operational, environmental, and technical benefits. Hence, policymakers should not expect that only increasing taxes will always produce the expected reduction effect for all packaging, because other important decision-making criteria come into play for food packaging. However, varying taxes according to packaging material recyclability is found to be effective. Indeed, since the packaging tax is charged on a weight basis, decision makers are inclined to reduce their costs by substituting high-taxed materials (i.e. environment-damaging and heavy packaging) with low-taxed materials (i.e. eco-friendly and lightweight packaging). The local availability of packaging materials shapes this substitution elasticity, hence applying “material levies” suggested by previous studies might be ineffective to achieve the expected reduction at source. The absence of a regulatory framework combined with high-priced recycled materials, technical and availability issues, lead manufacturers to choose virgin materials while retailers are predisposed to pay a high price to benefit from the recycled content branding.