Environmental Levies in Practice: Plastic Bags, Batteries, Packaging, and More

Environmental levies, commonly referred to as taxes, fees, or charges placed on products or activities that harm the environment, are becoming an increasingly noticeable component of environmental policy worldwide. Unlike carbon taxes that target greenhouse gas (GHG) emissions directly, environmental levies typically apply to specific products or waste streams, aiming to internalize the longer‑term environmental costs associated with their use and disposal.

Thus, these levies can target single‑use products such as plastic bags, toxic waste producers such as batteries, or complex waste streams such as packaging materials. In either case, the practical application of these instruments reveals not only their environmental intent but the compliance, reporting, and strategic challenges facing modern businesses.

An Overview of Different Environmental Levies

As already mentioned, the environmental levies come in many forms, each designed to influence behaviour through economic incentives. A typical framing is the polluter-pays principle (PPP), in which the cost of environmental damage is reflected in the price of goods or services that cause the harm. In other words, those responsible for environmental damage are burdened with paying to cover the costs. 

Some of the most common forms are point‑of‑sale charges, product‑specific taxes, or fees tied to producer responsibility schemes that require manufacturers to fund collection and recycling infrastructure. Regarding product policy, many jurisdictions have adopted Extended Producer Responsibility (EPR) schemes, making producers responsible for the lifecycle management of their products, particularly for end‑of‑life collection and recycling. Notably, the EPR schemes often coexist with other environmental levies.

Nevertheless, while environmental levies may differ in structure and implementation, the primary objective is the same: to reduce consumption or improve end‑of‑life outcomes for environmentally damaging products by making continued use costlier or less attractive.

Plastic Bag Taxes 

Plastic bag taxes are perhaps the most visible and established examples of environmental levies in practice. For years, governments around the world have imposed charges on single-use plastic bags to reduce litter, protect ecosystems, and encourage reuse. Although the aim and principle behind imposing these taxes are the same, countries vary in how they structure them.

For example, in Ireland, a EUR 0.15 plastic bag environmental levy at points of sale was introduced in 2002 and increased over time to the current EUR 0.22 per shopping bag. In the UK, the carrier bag levy is imposed at different rates in the country. Therefore, a GBP 0.10 levy is charged in Scotland and England, a GBP 0.25 levy in Northern Ireland, and a GBP 0.05 levy in Wales for each single-use carrier bag.

In 2018, Chile implemented the Chao Plastic Bags Law, becoming the first Latin American country to completely ban the distribution of single-use plastic shopping bags nationwide by 2020. Other Latin American countries that also introduced levies on plastic bags are Brazil, Mexico, Peru, and Colombia. 

In the US and Canada, environmental levies are typically imposed on state, provincial, and municipal levels. Some notable examples include California and Quebec, which have bans or fees on plastic bags.

Note: Data in the table is from OECD - Scaling Up Biodiversity-Positive Incentives report

Batteries Fees

From an environmental perspective, batteries present a different kind of challenge. Since they contain heavy metals and toxic chemicals that can cause soil and water contamination if not properly collected and recycled, countries typically do not impose a simple per-unit tax. Levies on batteries are frequently structured under EPR frameworks in which producers must fund or organize collection and recycling systems.

Essentially, the battery producers pay fees to Producer Responsibility Organisations (PROs), which provide or coordinate take‑back and recycling services on their behalf. The amount of fees due depends on the battery type and the degree of environmental impact, reflecting the costs of collection, sorting, and recovery. One of the best-known regulatory frameworks in this field is the EU Batteries Regulation, enacted in 2023.

Taxes on Packaging Materials

Packaging represents one of the most complex environmental issues, as it spans multiple industries, materials, and waste streams, from cardboard to plastic. To discourage the overuse of wasteful and single-use packaging, governments around the world have introduced packaging taxes to promote recycling and stimulate material reuse.

For example, Germany has introduced a plastic tax through the Single-Use Plastic Fund Law, effective from January 1, 2024, aligning national legislation with the EU Single-Use Plastics Directive. The Law applies to businesses that place specified single-use plastic products on the German market for the first time and imposes mandatory registration and annual reporting on all entities considered manufacturers, a term with broad application. 

The UK's Plastic Packaging Tax has been in effect since 2022 and is set to increase the use of recycled plastics by taxing only packaging products with less than 30% recycled content. Any item exceeding the threshold falls outside the tax.  Spain and Italy have adopted similar plastic packaging taxes. While Spain implemented its tax on January 1, 2023, Italy approved the national plastic tax in 2019, but postponed implementation several times, with the most recent deadline set for January 1, 2027.

While all these systems share the same objective of reducing waste from single-use plastic packaging and boosting plastic material recycling, they differ in how they handle multi-material packaging. 

In the UK, the tax applies to the weight of the entire item if plastic is the dominant material by weight, meaning a package composed of 3g of paper, 3g of aluminium, and 4g of plastic is taxed on all 10g. In Spain and Italy, on the other hand, a narrower approach is defined, taxing only the plastic component so that the same item would incur tax on only 4g. The rates are set at EUR 450 per ton of taxable plastic in Spain and Italy and GBP 223.69 per ton in the UK.

Environmental Levies on Other Products

In addition to imposing environmental levies on plastic bags, batteries, and packaging, the government also extends these taxes to other products that pose persistent environmental challenges, such as tyres, electronic equipment, and even complex materials, such as petroleum‑based consumer goods.

Another notable example of environmental taxes is container deposit schemes, in which consumers pay a small deposit on beverage containers, which is refunded upon return for recycling. Even though this is viewed more as a deposit scheme than a pure tax, at its core, it is an economic incentive to improve recycling rates and reduce litter.

Conclusion

Globally, there is an apparent trend of continuous expansion of the scope of levies beyond simple point‑of‑sale charges to include broader product categories and lifecycle fees. Enforcement of these rules and regulations relies on administrative sanctions, including fines for late filings, registration failures, or under‑reporting. Additionally, environmental taxes are becoming more sophisticated, with differentiated rates based on recycled content, material type, or end‑of‑life outcomes.

Even though the current regulatory landscape remains primarily national or regional, there is a growing need for and conversation about international harmonization, especially for products involved in cross‑border trade.

Source: Irish Revenue - Plastic bag environmental levy, VATabout - Europe’s Plastic Fiscal Shift: Why Italy’s Plastic Tax Now Starts in 2027, Inter-American Center of Tax Administration, European Commission - Batteries, European Commission - Packaging waste, UK Government - Environmental taxes, reliefs and schemes for businesses, PwC, European Commission - Ensuring that polluters pay, OECD - Scaling Up Biodiversity-Positive Incentives