Photo: Quynh Anh/Infonet

1.10.2020 / RESOURCES ARTICLES

DAIRY PACKAGING INDUSTRY’S SCANDAL IN

VIETNAM: WHAT SHOULD BE DONE?
Nguyen Thi Lan Anh, Nguyen Minh Long, Nguyen Thi Thu Phuong, Nguyen Hoang

Thuy, and Nguyen Thu Trang

D rinking milk packed in cartons has been a common practice among Vietnamese

people. However, weird as it may sound, this has been a hidden yet significant

contributor to the declining environmental quality in Vietnam, which is addressed in the

article from the Guardian: “The Blight of Tetra Paks Covering Vietnam’s Beaches and

Towns” by Corrinne Redfern published on December 9th, 2018.

Tetra Pak
Tetra Pak is one of three companies in the Tetra Laval
Group – a private group that started in Sweden. Since
the start in 1951, Tetra Pak has taken pride in
providing the best possible processing and packaging
solutions for food.

What Is The Problem?

The major problem pinpointed in this article, economically speaking, is negative externalities

from inefficient waste disposal management. To be precise, in Vietnam, using Tetra Pak’s

cartons to pack milk has caused external costs to the environment and Vietnamese citizens,

which are pollution from tons of single-used milk cartons thrown away without being

processed and recycled appropriately.

Milk cartons are thrown away on landfill – Hoang Thuy/FTU.

What Might Be The Causes?

There are multi-dimensional rationales for this phenomenon. On the one hand, milk suppliers

decide to choose Tetra Pak for milk packaging since Tetra Pak’s cheap milk cartons match

their profit-maximizing incentives. On the other hand, Tetra Pak mass-produces milk cartons

with costly-to-process materials, dampening recycling plants’ incentives to recycle these milk

cartons. It also fails to find an appropriate solution in returning back and recycling its large

number of cartons. From the perspective of recycling plants, the industry is currently

functioning under an ineffective recycling process, failing to keep pace with the rapid growth

of Tetra Pak since extracting and treating separate layers in different ways cost a great deal of

time and money. As a result, according the data from Dong Tien, only just over 5.5% amount

of all cartons sold in Vietnam was recycled at its peak and later, sunk to only 1%.

A step in the process of collection and recycling milk cartons in Vietnam – Vietnam Investment
Review.
However, we cannot shift the entire blame onto the parties involved in dairy and recycling

industries because the outsiders, or specifically, the government and society should take the

responsibility as well. While the government shows its lack of effective garbage sorting and

recycling solutions, the public also adopts a lukewarm attitude towards the negative

externalities of thrown-away milk cartons for the sake of time and money convenience.

Therefore, all sides have to acknowledge their part in the enormous negative externalities

caused by inefficient milk carton processing, which requires implementation of divergent

policies going to be discussed in the following.

What Can We Do?

Command-and-Control Regulation

Firstly, command-and-control regulation sets specific must-follow limits for pollution

emissions (emission standards) and/or specific pollution-control technologies (technology

standards). Command-and-control regulation will have a direct impact on waste reduction

and environmental improvement. However, it seems inappropriate in this case. Firstly,

ambient standards refer to the requirement of specific condition or quality of, for example, air

and water. Since Tetra Pak is not the one directly harming the environment, ambient

standards would not be effective in reducing negative externalities of milk cartons. Secondly,

in terms of emission standards, Tetra Pak only supply cartons to milk companies and no

parties take responsibility for discharging cartons into the environment. Finally, when it

comes to technology standards, since Tetra Pak factories are not in Vietnam, it is difficult to

set technology standards for Tetra Pak. Another point is to make recycling plants such as

Dong Tien company apply a more cost-effective technology for disposal process.

Nevertheless, technology standards offer no incentives to improve the quality of environment

as well as research and develop new sustainable technologies. Thereby, this policy will be

effective in the short term rather than solve the roots of this issue. Furthermore, it might be

costly for recycling plants to adapt new technology from the government and forcing a party

which is not directly involved in the issue to bear the brunt is grossly unfair. In light of these

facts, command-and-control regulation; in other words, ambient, emission and technology

standards should not be applied for lack of long-term success.

Decentralized Policies

In addition to command-and-control regulation, decentralized policies, including liability

rules, private negotiations ("Coasean bargaining") and voluntary actions, are taken into

consideration to reduce environmental pollution. In the first place, liability rules are an

effective way for environmental pollution based on the principle: polluters are required to

compensate for environmental damage they cause (often by accidents). However, in this case,

neither Tetra Pak nor recycling plants are responsible for the fact that the huge quantity of

milk cartons is washed up on Long Hai beach since they do not directly throw those cartons

but consumers. The second policy is private negotiations between two sides with clearly

defining the owner of the property rights. Despite its effectiveness, it is impossible to apply

this measure to Tetra Pak’s cartons because nobody has the right to use the property right of

resources - a fundamental requirement of “Coasean bargaining”. Therefore, both of these

policies are not appropriate to solve the issue discussed.

Witt respect to voluntary actions, they focus on directing people’s attention to environmental

protection through social forces. One of the forces is moral suasion, which is usually

organized as publicity campaigns aimed at consumers and people directly affected by

untreated Tetra Pak’s milk cartons for purpose of avoiding pollution.

Another force is called informal community pressure, which is not based on any laws or

rules. For instance, it is not a difficult task for environmentalists to attract people’s awareness

of problems with Tetra Pak’s milk cartons via multimedia outlets. Both have the same

mechanism that raises people’s consciousness of environmental pollution to change their

behavior of using milk cartons. Under the threat of being boycotted, Tetra Pak feel motivated

to develop advanced and eco-friendly milk cartons, thus minimizing waste discharge into the

environment. On the whole, these two measures can reduce the number of residual milk

cartons and improve the environment. Nevertheless, these ones are not the most effective way

because they require a long-time frame.

An article raising awareness of negative externalities that milk cartons impose on surrounding
environment - Corrinne Redfern/The Guardian.

Incentive–based policies

Other noteworthy ones are policies based on incentives, which are designing a deposit refund

system together with implementing Pigouvian tax.

In the first place, a deposit refund system works as a combination of a tax and a subsidy for

beverage containers. The container deposit schemes require adding a small extra deposit on

top of the price of a carton of milk (tax) - which would be refunded to the consumer when

they return the empty carton for recycling. This can be done using an automated reverse

vending machine in convenient places such as supermarkets, convenience stores, etc.

Return and Earn reverse vending machines, a model of deposit refund system operating in
Orange, California, USA – Mark Rayner/Western Advocate.

Container deposit scheme can succeed in reducing milk carton disposal and increasing

recycling rates due to its financial incentives for consumers. Gradually, it will form a good

consuming habit for citizens in protecting the environment. Furthermore, this system could

improve recycling velocity by increasing the purity of milk containers. By sorting clean

cartons for recycling through reverse vending machines, drink containers are collected

without contamination from other types of waste in a household recycling bin, compared to

informal garbage collection. To make this system applicable, the government, Tetra Pak and
 recycling plant will all have to invest in designing and setting the machines throughout

Vietnam. It might be costly in the short run but developing a container deposit system offer a

sustainable process of reducing, collecting and recycling milk containers.

Applying Pigouvian taxes is another policy to analyze. To be specific, tax will be

implemented on each milk good using the cartons which contain aluminum and plastic

(between 30% - 50%) and paper (cartons Tetra Pak currently use); and the amount of tax

equals a portion of cartons’ recycling process expenditure.

Price Demand for milk Marginal social

$
cost (MSC)
According to the theory, after
tax was implemented:
Marginal
𝒈
𝒑 private cost Quantity equals Q*
(MPC)
Buyers buy at Pg
𝒑 𝟎 Tax
Sellers get Pn
𝒏
𝒑
Tax equals (Pg - Pn)
Tax revenue equals Q* x (Pg - Pn)

Q* Q° Quantity of milk
boxes produced Q

Pigouvian model

Apply to this specific case:

The government should research and decide a level tax to apply which is smaller than the
theoretical one to keep the milk price not extravagant.

Afterwards, to avoid tax, milk suppliers may finance more environmental-friendly packaging

methods or continue collaborating with Tetra Pak on condition that Tetra Pak will cover the

tax expenses or improve its technology. From Tetra Pak’ viewpoint, to maintain their

business relationship with milk manufacturers, they have one choice of temporarily covering
the tax expenditure, but in the long run, they will ideally invest in R&D to produce more

environmental-friendly package.

It is obvious that companies with eco-friendly packaging will benefit from this policy; and on

the other hand, milk suppliers and Tetra Pak have to suffer loss. From society’s perspective,

there are both losses and gains: gains in declining numbers of cartons and improved

environmental quality; but financial loss, as the price of milk rises. However, to reduce

negative financial impact, this tax should cover some portions, not all of recycling expenses

to keep the milk price reasonable. Additionally, tax revenue and government’s subsidies will

be invested in recycling activities to protect the environment. Moreover, acknowledging

benefits in the long run, this policy will motivate related companies to invest in R&D and

utilize environmental-friendly manufacturing technology. All in all, this policy is feasible,

acceptable and worth considering.

To sum up, one hidden yet acute environmental issue in Vietnam from the Guardian article –

negative externalities from inefficient milk carton processing emanate from many parties:

milk manufacturers, Tetra Pak, recycling plants, the government and society. Nonetheless,

this dilemma can be tackled effectively with simultaneous implementation of moral suasion,

informal community pressure, deposit refund system and Pigouvian tax. All sides involved

now have to take a proactive role in milk carton pollution for the sake of a better environment

for all.
Further Reading

Barry C. Field, Martha K. Field. “Environmental economics: An introduction.” 7th Edition.

Mc Graw Hill Education, 2017: 2-261.

Corrinne Redfern. “The Blight of Tetra Paks Covering Vietnam’s Beaches and Towns.” The

Guardian. December 9th, 2018.

<https://www.theguardian.com/environment/2018/dec/09/billions-discarded-tetra-pak-cover-

vietnams-beaches-towns>

NGUYEN THI LAN ANH

Undergraduate, Foreign Trade University, Hanoi

NGUYEN MINH LONG

Undergraduate, Foreign Trade University, Hanoi

NGUYEN THI THU PHUONG

Undergraduate, Foreign Trade University, Hanoi

NGUYEN HOANG THUY

Undergraduate, Foreign Trade University, Hanoi

NGUYEN THU TRANG

Undergraduate, Foreign Trade University, Hanoi