The plastic bag industry and grocers have signed an ambitious recycling pact with the city of San Francisco, averting what could have been the first tax on retail shopping bags in the United States.

The city had been threatening a 17-cent-per-bag tax to reduce consumption and the environmental impact from the bags. Instead, the Nov. 2 deal requires grocers and the bag industry to cut bag use in the city´s food marts by about 20 percent by the end of 2006.

Specifically, the deal calls for grocers to cut bag use by 10 million sacks and institute broader recycling programs in stores, and requires the bag industry to spend $100,000 on a public education campaign.

The city, for its part, agrees not to pursue a bag tax through 2006, while the industry program gets underway, and said it will try to introduce curbside recycling for bags.

"Our city is taking a historic step to reduce the use of disposable items such as grocery store bags," said Mayor Gavin Newsom, in a statement. The city noted in a news release that it has a goal of diverting 75 percent of landfill waste by 2010 and being "zero waste" by 2020.

The bag tax had been controversial among city residents. The bag industry earlier this year launched a $700,000 statewide campaign to oppose taxes and promote alternatives.

City officials say the plastic bags gum up their recycling equipment, contribute to litter and harm marine life and ecosystems.

While Newsom praised the agreement, another public official who was active on the issue suggested the debate is not over and that the city will be watching closely.

"This is a first step whose merit shall be judged in due time," said Supervisor Ross Mirkarimi. The city´s Department of the Environment must give Newsom a formal evaluation by Dec. 31, 2006.

Industry officials praised the agreement, and the head of a coalition of grocery sack manufacturers, the Progressive Bag Alliance, said it will work with grocers to see that plastic bags are not overused.

"To build a business on a long-term basis on the improper use of your product and creating false demand is not a good situation for the industry," said Larry Johnson, chairman of the PBA, and an executive at bag maker Hilex Poly Co. LLC.

For example, he said the typical bagger puts three or four items in a bag, but could double that with better packing techniques.

The grocery industry also sees the agreement as preferable to a tax. Paul Smith, vice president of government relations at the California Grocers Association in Sacramento, said it is too early to say if the plan will work, because grocers can´t control whether consumers ultimately recycle the bags.

"We´re not sure this will work," Smith said. "We would caution other municipalities from adopting it but we do know this is better than a bag tax."

Smith then added that he thought it would work, and wanted the city to implement curbside recycling for bags.

Tim James, GCA local government relations manager, said grocers will make a strong effort to educate consumers, provide more recycling opportunities and train staff.

City officials said they want to expand the agreement to other retail establishments, and include independent and smaller grocers who have not yet signed up.

The agreement will be policed by the city´s Department of the Environment, which will collect figures on bag use from the stores. Smith said the department is well-staffed and "pretty aggressive," and is expected to thoroughly monitor compliance.

Johnson said the bag industry and grocers are close to striking a similar deal with the city of Los Angeles. Like in San Francisco, the industry would put up about $100,000 in cash and in-kind contributions for an education program, and take steps to increase recycling opportunities. L.A. has already started recycling bags in its curbside program.

Johnson said the bag industry needs to make similar recycling opportunities available to retailers across the country.

Toloken is a reporter for Crain´s Plastics News.