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Policies for Reducing the Costs of Cigarette Smoking
Harry Clarke and Louise Collis
Department of Economics and Finance
Policies for regulating tobacco smoking in Australia are examined. Cigarette
management policies need to account for the addictive nature of nicotine, information failures
and the existence of externalities and internalities. The external costs of smoking are low
relative to internalised private costs. In so far as externalities do arise they can be addressed
by taxes and by direct controls on smoking. If internalised health costs are targeted then taxes
and restrictions can be usefully assessed in terms of implied health outcomes. Substitutions
toward ‘chop chop’ and compensatory behaviour by smokers restrict the usefulness of taxes
while the existence of NRTs and smokeless tobacco products enhance the case for hefty taxes
on smoked tobacco. Adverse effects on low income consumers from high taxes can be offset
by income transfers from high income consumers. Smoking behaviour among high income
consumers can be addressed using non-price deterrence, such as bans. Policy development is
complicated by the existence of distinct groups of users who react differently to incentives.
Most governments intervene to reduce the consumption of tobacco. Australia, along with
nearly 150 other countries, has ratified the World Health Organization Framework
Convention on Tobacco Control
(WHO, 2003), binding it to provide warning labels on
cigarette packages, restrictions on where tobacco can be consumed, advertising bans and
disincentive taxes. With an estimated 19,019 deaths in 1998 attributable to smoking in
Australia (Ridolfo and Stevensen, 2001), there is little argument against the need for some
intervention, but some disagreement as to the level and form.
In Australia, the national policy setting framework is set out as the National Tobacco Strategy
(NTS) (Ministerial Council, 2004). Its central goals are to improve tobacco-related health
outcomes and to reduce the social costs of tobacco use. The aim is not only to reduce the
externalities associated with smoking, such as public health costs and passive smoking
exposure, but also the internalities – the costs that smokers may not take into account when
deciding to consume tobacco. The latter include increased private health costs, reduced paid
and unpaid work potential, disability, and early death. In fact the NTS seeks a reduction in
gross health costs, regardless of
who bears the burden of these costs. The rationale given for
the focus on gross health costs rather than external costs alone is that smokers can be
irrational and suffer from internalities.
This paper also pursues this objective as well as focusing on external cost. This recognises the
fact that reducing smoking is
a key social objective, so that an economic question arises as to
how to meet this objective effectively and at low cost.
One issue when developing policy is that different groups may react differently. In 2004,
there were about 2.8 million Australians who smoke at least once a day and half a million
who smoke less than daily (AIHW, 2005). Those who smoke less than five cigarettes a day,
known as ‘chippers’, are unlikely to be addicted to nicotine (Shiffman et al, 1995). Studies
suggest that, of all smokers, about 7 per cent are chippers, and a further 16 per cent are casual
smokers (Zhu et al, 2003), equating to about 650,000 smokers who may be more responsive
to smoking disincentives. Over half of the Australian population aged 14 and over have never
smoked, while just over a quarter have successfully quit. This group may be considered to be
In most developed countries the incidence of smoking has fallen dramatically since the 1950s
when the connections between smoking tobacco and lung cancer were publicly articulated. In
Australia smoking of tobacco products peaked in the 1950s when about 70 per cent of males
and 30 per cent of females smoked. Among adult males smoking prevalence dropped from 45
per cent in 1974 to around 18.6 per cent in 2004. Among females it fell from 30 per cent to
16.3 per cent (AIHW, 2006). Before these gains can be celebrated, it should be remembered
that globally tobacco use is estimated to kill about 5 million people annually, increasing to 10
Smoking has significant effects on length of life. Doll et al (2004), for example, examine the
smoking behaviour of 34,439 male British doctors over a 50-year period and find that long-
term smokers died 10 years younger than non-smokers. For men born around 1920, Doll et al
found that prolonged smoking from early adult life tripled mortality to 43 per cent among
smokers compared to 15 per cent among non-smokers between ages 35-69. Moreover,
cessation at age 50 halved the mortality hazard and cessation at age 30 avoided most of it,
confirming the huge potential public health gains from quitting.
Smoking is a major risk factor contributing to disease. Mathers et al (2000) evaluate such
factors as obesity, unsafe sex, alcohol consumption and smoking for the effect they have on
disease and injury as measured in disability-adjusted life years. Tobacco is responsible for
nearly 10 per cent of the burden and more than any other identified, avoidable factor.
Part of these health costs is born privately: in Australia in 1998-99 treatment costs borne by
individuals were $145 million. Net health care costs borne by government (costs that net out
the saving that arise because smokers die early) were $880 million in 1998-99 or about $1054
million in 2004-05 dollars (Collins and Lapsley, 2002). Public health sector costs are
therefore much smaller than the tax benefits accruing to the community from cigarette taxes
which in 2005-06 amounted to $5.3 billion (Commonwealth of Australia, 2007). This does
not, however, imply that taxes are inefficiently high for two reasons. First, efficient
externality taxes equate the cost of a good with the social marginal costs. If these social
marginal costs are strongly increasing – so damages associated with smoking increase more
than proportionately with consumption – then tax revenues collected will exceed external
costs. Second, for public financial reasons, taxes on goods such as cigarettes, with relatively
inelastic demands, will be large because this helps to limit the ‘excess burden’ of the total tax
The NTS claim that one of the major market failures associated with smoking is that smoking
is not a free and informed lifestyle choice. First, the health risks of smoking are under-
appreciated by smokers as is the reality of nicotine addiction. Moreover, smokers under
appreciate the connections between smoking and the incidence of specific diseases. Second,
most people start smoking and become dependent on nicotine while young and presumably
immature. Further, decisions relating to addictive goods are not easily reversible.
The remainder of this paper is structured as follows. Section 2 considers the addictive nature
of nicotine. The question of whether smokers make fully informed choices is further explored
in section 3. Sections 4, 5, 6 and 7 look at specific policies, some of which are adopted in
2. Issues affecting policy development
The addictive nature of cigarettes calls for a distinctive public policy approach compared to
non-addictive goods which may nevertheless have the potential for poor information, or yield
negative externalities, such as polluting fuels. The nicotine delivered by cigarettes is
addictive. This distorts thinking processes and leads to uninformed decisions that may persist.
Most people start smoking and become dependent on nicotine while they are young. The
addictive agent is much less harmful to health than other components of smoking, such as
carcinogenic, tobacco-specific nitrosamines. However when cigarettes are smoked these are
inevitably consumed jointly with the nicotine and so cause health damages.
Addicted smokers smoke to satisfy a craving for nicotine. Typically, that craving is met by
raising the level of nicotine in the blood to a certain level. This is achieved by consuming
enough tobacco products to yield this desired level. This means that ‘cutting back’ on
cigarette consumption will typically not be an option for a smoker who wishes to continue to
smoke. Thus, the response of most smokers to low-tar cigarettes is to smoke more cigarettes,
smoke more of each cigarette, to inhale more deeply or generally to change smoking
behaviour to maintain the nicotine levels in the blood. For example, breathing holes in ‘light’
cigarette filters, which mix air with smoke before inhalation, are countered by covering holes
with fingers or lips to increase nicotine intake. Any measure to reduce the intake of tar,
which simultaneously reduces nicotine intake, is therefore likely to fail. An addicted cigarette
for any move to reduce nicotine consumption by changing their
For those smokers who find the addiction insurmountable, alternate methods of delivering
nicotine to the brain exist. Pharmaceutical nicotine in the form of patches, gum or inhalers,
delivers nicotine without the carcinogens and toxins present in tobacco. These can be used to
replace cigarettes completely in the case of those who quit, but they can also be used by
smokers to reduce the amount smoked. Four studies reported in ASH (2007) of smokers who
were interested in cutting down the amount smoked but were not yet ready to quit, found that
one in twelve had quit within a year. These studies also showed that in double-blind placebo
trials, smokers given NRT were more than twice as likely to sustain a reduced tobacco intake.
The nicotine delivered may nevertheless have some adverse consequences. While having far
fewer negative health consequences than smoking, nicotine may be a trigger for cardiac
events, may affect a foetus, may be passed through breast-milk, and may reinforce a nicotine
addiction in adolescents. Nicotine increases pulse-rate and blood pressure, and slows the
release of insulin. The health effects could perhaps be compared to caffeine. Nicotine is not,
however, associated with carcinogens, and may be beneficial in some cases, for example in
the treatment of Parkinson's disease and Alzheimer's disease (Birtwistle and Hall, 1996).
Smokeless tobacco products such as chewing tobacco and oral snuff have been banned in
Australia since June 1991, on the basis that they are ‘known to cause cancer of the mouth’.
Nasal snuff, that is now consumed in negligible quantities, is not covered by this same
legislation, but is controlled federally in a similar fashion to smoked products, and is banned
A 1988 review by the Trade Practices Commission (TPC) found an association between oral
snuff and cancer, but did not support a ban on chewing tobacco or nasal snuff. Despite this,
the ban introduced covered chewing tobacco and oral snuff on the basis that they may be
unsafe (Quit Victoria, 1995). It was acknowledged that this treatment was different from
smoking tobacco and alcohol which were known to be unsafe, but this was not seen to be
relevant to the decision. In addition to the health consequences of nicotine, chewing tobacco
is associated with mouth cancer, due to the presence of nitrosamines in the prepared tobacco.
While smokeless tobacco is not harmless, there is much evidence that it is less harmful than
smoked tobacco of the order of 1/1000 to 1/10 of the risk (RCPL, 2002). Phillips et al (2005)
show that despite evidence that smokeless tobacco is safer than smoked tobacco, information
easily available continues to promote the message that smokeless tobacco is no safer.
A distinction that may be important is between harm minimisation and harm reduction.
Undoubtedly, quitting tobacco products altogether minimises harm, but where this is not an
option, at least in the short term, chewing tobacco may be a reduced harm option.
It could be theorised that promotion of a good that reduces the cost of smoking may increase
the demand for cigarettes. By reducing the cost of quitting, NRTs could induce a moral
hazard whereby the probability of potential smokers to consume smoked tobacco is increased.
Saffer et al (2007) test this thesis on youth smoking, and find that NRT advertising has no
affect on whether a person smokes, but may increase the amount smoked for those who do.
They find that a 10 percent increase in NRT advertising is associated with an increase in
average cigarettes smoked per day from 5.77 to 5.82. Further, a ban on NRT advertising
would have the same effect on amount smoked as a 10 percent increase in prices. This
suggests a caution to any aggressive promotion of substitutes.
Most smokers commence smoking when they are young. The NTS (p. 3) suggest that more
than 90 per cent of those who currently smoke in Australia begin as teenagers. This is
significant because, first, many of those using will become addicted to nicotine and will
continue smoking throughout their adult life. Second, there is strong evidence nicotine has
particular neurotoxicity costs for young people defined as those aged less than 25 years
(Jacobson et al, 2005) even though it is much less toxic for those who are older.
Finally, and more significantly, there is strong evidence of enhanced impulsiveness, and
hence of higher rates of time preference at very young ages (Mischel et al, 1992) and
initiation of smoking during adolescence is related to impulsiveness (Baumeister et al., 1994,
p. 198-199). This suggests use at younger ages is less guided by rational foresight than other
factors and strains the case for ‘informed choice’ arguments. The main policy implication of
the idea that rates of time preference rates fall during adolescence is to focus the direction
rather than level of anti-smoking effort. Strict bans on selling cigarettes to the young, age
limits on the right to smoke and advertising campaigns directed at discouraging initiation of
3. Information and internalities
The claim by the NTS that health risks are underappreciated has been challenged by Viscusi
(2002) and others, who argue that the risks of smoking are widely appreciated by most people
partly because of publicly-funded, anti-smoking campaigns and press coverage of smoking
risks. Indeed, this was the basis for the failure of individual plaintiff lawsuits in the United
States up until 1990 – jurors consistently concluded that the risks of smoking were well
known and voluntarily incurred. Thus non-smokers are not privy to ‘secret information’
regarding the hazards of smoking. Viscusi (2002, Chapter 7) argues that US citizens fully
understand the risks of smoking with respect to lung cancer, total smoking mortality and life
expectancy loss. With respect to lung cancer risks, which Viscusi estimates to be 0.06-0.13,
he found that, in 1998, the overall population forecast this risk at 0.48 while smokers
predicted 0.42. Thus smokers overstated
the risks of contracting lung cancer by a factor of
between 3.2-7 times. Viscusi found this was so both for highly educated and un-educated
people. Moreover, people overestimated the effects of smoking in reducing life span
confirming that they overstate smoking hazards. Viscusi also provides evidence suggesting
that people fully understand the addictive implications of smoking. Most people know that it
is difficult to quit smoking once it is initiated.
However people do not identify all of the specific risks of smoking. For example women
seem to be unaware that they are particularly susceptible to the health costs generated by
smoking. Zang et al (1997) shows that, accounting for differences in body weight, women
have higher lung cancer risks. In addition, smoking reduces female fertility. Van Voorhis et
al, 1996) shows substantial dose-related ovarian disfunction occurs with smoking. Women
are also particularly susceptible to becoming addicted to nicotine. DiFranza et al, (2002)
shows that smoking periods prior to initial addiction of 12-13 year olds were 21 days for girls
and 183 days for boys. It is also true that passive smoking has severe health costs for
children: thus ABS (2006) argue that breathing in of tobacco smoke by non-smokers can lead
to harmful health effects in unborn children, and middle ear infections, bronchitis, pneumonia,
asthma and other chest conditions in children. It is also linked to sudden infant death
syndrome (SIDS). In adults, passive smoking increases the risks of heart disease, lung cancer
To some extent these hazards will be emphasised by fostering perceptions that smoking is a
generally hazardous activity even if specific health problems are not spelt out. But to the
extent that these specific problems are individually significant and under-appreciated the
implication is that smoking warnings should target not only general risks of smoking, which
are already internalised, but instead be specifically targeted to those particular smoking-
related health issues that are
In addition there are specific groups in the community who do not appreciate the risks of
smoking partly because they are isolated from the impact of sustained health warning
messages. A particular group of concern are Australian aboriginals who have high rates of
smoking and widespread under-appreciation of attendant health risks. About 51 per cent of
adult indigenous Australians smoke compared to 17 per cent in the non-indigenous population
(ABS, 2006). Higher rates of smoking are associated with lower socio-economic status,
unemployment and early school leaving which are characteristics of many indigenous
populations. Dispossession and dislocation contribute to the low self-esteem which is also
associated with smoking. Members of the ‘stolen generations’ are also more likely to smoke
than other indigenous Australians. A 1994 survey showed that one third of indigenous
Australians erroneously thought it was safe to smoke up to one pack of cigarettes a day (ABS,
1996). Smoking warnings should be adapted to target aboriginals.
Even if individuals on average
internalise health risks, there can be a case for specific policies
that target specific health problems linked to smoking and to target particular groups who are
In addition, there are
important aspects of smoking about which individuals seem poorly
informed. Cummings et al (2004) argue that smokers may be well-informed about the size of
health risks but still not have good information on reducing
these risks. Knowledgeable
smokers might be prepared to experience a certain level of health risk but still seek ways of
reducing that risk. For example, 58 per cent of smokers believe that smoking is made less
hazardous by switching to low tar or filtered cigarettes despite decades of research showing
More generally Cummings et al surveyed 49,593 households of occupants aged 18+ to
determine generally what is known about reducing smoking risks. They found:
• 94 per cent of respondents believed they were well-informed of the health
consequences of smoking even though their understanding was poor.
• 39 per cent misunderstood or didn’t know the health consequences of smoking, more
than half had misleading information on the content of cigarette smoke, the safety of
• 65 per cent had incorrect information on the safety of low tar and filtered cigarettes
believing they lowered health risks when they do not.
• 56 per cent had incorrect information on the safety implications of nicotine
medications believing they were more harmful than they are.
• Most smokers misunderstood the addiction properties of nicotine medication which is
less likely to cause addiction and heart attacks than smoking cigarettes. This
misunderstanding limits the potential for consumers to reduce their health risks by
switching from harmful cigarettes to safer NRT and smokeless tobacco products.
Cummings et al also provide evidence for optimism biases.
While smokers estimate
community risks adequately they underestimate the risks posed to their own health from
smoking. This misperception is partly due to their mistaken belief that they will be able to
stop smoking before health problems eventuate.
It is therefore incorrect to claim that smokers have accurate information about reducing the
risks of smoking creating a case for public intervention to refine perceptions. A major
misperception is the widespread belief that low tar and filtered cigarettes reduce the risks
from cigarette smoking but that medically supplied nicotine and smokeless tobacco such as
snuff do not. Each of these views is fallacious. Nor is it true that heavy smokers who cut
back their smoking, even by 50 per cent, reduce their health costs. Godtfredsen et al (2002)
show that over a 16 year period, heavy smokers who reduce their smoking by 50 per cent do
not reduce their mortality risk while those who quit to reduce their risk.
Compensatory smoking behaviour explains why there is no reduction in risk associated with
reduced smoking. The policy implication is that quitting cigarette smoking completely should
4. Policies to counter externalities
The World Bank regards tobacco taxes as the single most important step governments can
take to reduce smoking among both young people and adults. The adult demand elasticity is
-0.4 and for children -1.6. Australian evidence supporting this general conclusion is in
Bardsley and Olekalns (1999). They estimate short-run price elasticities of -0.2 to -1.5, and
suggest that the impact of price is greater than that of anti-smoking messages. Policies that
discourage use by increasing the price of tobacco products are therefore fundamental to
reducing smoking and thereby to reducing the costs of smoking. These policies are most
effective as a tool in discouraging young smokers, chippers and those on low incomes since it
is such people who will have most elastic demands.
Surveys which measure preferences for anti-smoking policies show that even smokers
themselves support increases in taxes (Gruber and Mullainathan, 2002). This suggests that
price increases driven by tax increases have low welfare costs. In 2004, over 65 per cent of
Australian ex-smokers supported policies to increase taxes on cigarettes as a measure to
discourage use (AIHW, 2005). Moreover, Nakajima (2007) found that peer effects, whereby
the smoking choices of friends influences a potential smoker’s choices, strengthens the effect
of taxes. If these externalities are taken into account, the effect of taxes may be 50 per cent
However, tax based policies have some adverse equity implications which the NTS recognise.
Not only are the poorest quintile most likely to smoke, they also smoke more cigarettes per
smoker (AIHW, 2005) and cigarette consumption is a large part of their disposable income.
The 2003-04 Household Expenditure Survey found that the while the highest income quintile
spend 0.8 per cent of total income on tobacco, the lowest income quintile spends 1.8 per cent.
To some extent however these regressive effects are offset by the fact that price elasticities
will be higher among those with low incomes. In particular, one response to higher prices
among the poor will be increased quit rates and lower levels of consumption. Thus the
financial burden of the tax will tend to be borne mainly by those on higher incomes.
Currently taxes are applied on a per stick basis. An efficient tax would be set at the amount of
externality imposed, implying that cigarettes with higher levels of harm should be taxed at a
higher level. This would also provide incentives for producers to reduce known harmful
Complications of further tax increases include greater use of illegally supplied tobacco (‘chop
chop’). The existence of illicit supplies is a serious constraint: the 2004 National Drug
Strategy Household Survey reports that 38 per cent of Australians smokers aged 14 and older
are aware of unbranded loose tobacco, and of those, nearly 23 per cent have smoked it. The
recent acceptance of offers to domestic growers to exit the market will make policing of illicit
supplies easier and hence should reduce the supply of unbranded illegal tobacco. In the future
tobacco may only be grown in Australia if binding contracts to export it exist.
Smoking bans are a further way of countering externalities by reducing the opportunity for
passive smoking externalities to be incurred. Many countries impose restrictions on who can
sell and buy tobacco, and where it can be consumed. Smoke-free legislation was introduced
in the Republic of Ireland from 24 March 2004, and by 2007 the remainder of the United
Kingdom, along with most states and territories of Australia and the United States of
America, and provinces of Canada have laws against smoking in workplaces and other public
places. In Australia, smoking restrictions in public places such as pubs are regulated by states
and territories, with Queensland having the strictest laws, and Northern Territory as the only
state/territory with no restrictions in force or due to come in force.
It has been argued that bans on smoking in public places may increase exposure to
environmental smoke by forcing smokers to consume at home (Adda and Cornaglia, 2006).
However, in Ireland, where smoking has been banned in all workplaces including pubs,
surveys show that the introduction of the ban was accompanied by an increase in the number
of smoke-free households. Borland et al (2006) similarly found a strong correlation between
jurisdictions with smoking bans and lower tolerance for smoking in the home.
The NTS, in its discussion of bans, states that the policy intent is to reduce exposure to
passive smoking. While important, this ignores additional positive benefits of bans to
smokers. A US survey found that workplace smoking restrictions reduced the amount
smoked by a given smoker by ten per cent, and reduced the probability of a worker being a
smoker (after controlling for the likelihood that a smoker would choose to join a workplace
with a ban) by five percentage points (Evans et al, 1999). More recently, a study of smokers
in Greece, where smoking rates rose over the 1990s in contrast to most developed countries,
shows that smokers are much more responsive to workplace bans than to price increases
5. Policies to counter information failure
To the extent that there exists an information failure as described in section 3, provision of
accurate information about risks and ways of reducing risks is an effective tool. Advertising
bans and restrictions on smoking scenes in movies are also useful in reducing positive images
of smoking. Labels which misleadingly suggest that cigarettes are safer, such as ‘mild’ and
Smokers should be provided not only with information about the dangers of smoking, but also
with accurate advice on how to reduce risk. Cutting down the number of cigarettes smoked or
switching to low tar cigarettes can do more harm as smoke is taken deeper into the lungs in an
effort to satisfy the nicotine requirement of the addiction.
In Australia, cigarette packs must contain text and graphic health warnings. They may not
contain any descriptors such as ‘light’ or ‘mild’. An equivalent to the comprehensive list of
ingredients or nutritional information which is required on food products is not only not
required, but is not allowed. One difficulty with providing such information is that the
amount of toxins consumed depends heavily on the smoking method. A smoker may change
the way they smoke, meaning that a cigarette that contains less of a toxin may deliver more to
the smoker if other aspects of the cigarette cause it to be smoked differently. Low values of
toxins may suggest a cigarette is less harmful even though the compensatory smoking method
may make it more harmful. The drawback of not providing any information is that tobacco
manufacturers have no incentive to remove or avoid use of toxins.
Federal and state governments support anti-smoking and quit information campaigns, both
directly, and through support of organisations such as QuitSA and Quit Victoria. Information
is provided through mass media advertising, schools, and printed material. Fully subsidised
advice and help can be sought online or by phone. The thrust of advertising is general, but
campaigns are also directed at pregnant women, women in general and youth.
6. Policies to promote substitutes
NRTs, and smokeless tobacco are, as discussed in Section 2, lower risk substitutes to
cigarettes although they are not completely riskless. NRTs are available over-the-counter but
they are not subsidised. It has been shown that NRTs are a cost-effective way to reduce
smoking (Wasley et al, 1997); if social costs are associated with smoking cigarettes, an
argument can be made for a subsidy. However, in Australia, smokeless tobacco is not only
not promoted, but actively discouraged with bans and production and import restrictions. The
NTS, in its discussion of smokeless tobacco, concedes that it may be less harmful than
smoked tobacco, but is concerned that it may hinder quitting, and form a ‘gateway to tobacco
McNeill et al (2001) argue for a complete liberalisation of the market for NRT on the grounds
that the alternative to NRT use is even more destructive tobacco consumption. Criticising the
risks of consuming NRT alone is not sensible and reflects risk-aversion from the viewpoint
that NRT should be subject to pharmaceutical regulation. One suggested approach is to
provide NRT to overcome nicotine withdrawal symptoms and to overcome the behavioural
side of nicotine dependence and then to break the dependence by stopping use of NRT.
According to McNeil et al, minors, pregnant smokers and even smokers with cardiovascular
disease should all be allowed to use NRT if the alternative is to continue cigarette smoking.
Moreover, NRT at moderately high doses should be made available for long-term use and
should generally be made as widely available as cigarettes. Reducing regulatory hurdles that
limit marketing of NRT products would provide incentives for firms to produce and develop
While smokeless tobacco and NRT are a more healthy way for a nicotine addict to access
their nicotine, a difficulty in promoting such products is that they may reduce disincentives to
smoke. Thus if the constraints on initiating a smoking habit are the anticipated long-term
health costs that stem from an anticipated addiction to nicotine that is costly to reverse, any
substance, such as NRT, which reduces the cost of quitting, might increase the incentive to
initiate use, as investigated by Saffer et al (2007) for youth.
Finally, the drug bupropion, marketed in Australia as Zyban, is not a substitute for nicotine,
but aids in smoking cessation. It is available on prescription and is subsidised under the
Pharmaceutical Benefits Scheme, receiving a government subsidy of over 80 per cent.
7. Other policies to reduce harm
Cigarettes contain a number of known carcinogens which occur naturally during the curing
process, and which could be removed. Also, regulating the use of chemicals, pesticides and
fertilizers in the production of cigarettes could reduce known toxins. These moves would not
make cigarettes safe, but safer. As with the promotion of NRTs, any move to reduce the
private costs of smoking may increase use, and this must be taken into account when
Cigarettes are known to cause a number of fires every year. Collins and Lapsley (2002)
estimates that cigarette-induced fires cause $52.1 million of tangible costs and a further
$28.5 million of costs due loss of life. Reduced-ignition propensity (RIP) cigarettes which do
not continue to burn when not drawn have been developed, and there are calls to ban in
Australia cigarettes which do not incorporate these features (Chapman and Balmain, 2004).
Sale of cigarettes is restricted to licensed outlets in some states, while in Victoria and New
South Wales, for example, so licence is needed. There are limits on the size of advertising,
the number of packs that can be displayed and a ban on sale or discounting advertising at
place of sale, although these may vary from state to state. Sale to minors (age under 18) is
prohibited. Cigarettes cannot be sold singly: the minimum pack size is 20 cigarettes. This
discourages non-smokers from experimenting with cigarettes, and in particular makes it more
difficult for children to buy cigarettes as they typically have less disposable income.
There have been calls for sale of tobacco to be limited to pharmacies. The NTS points out
that cigarettes have a higher retail profile than milk or bread, being available in more outlets.
Allowing tobacco to be sold together with everyday items gives the impression that it is a
similar product, unlike codeine, for example, which may only be sold by a pharmacist.
Research is being conducted into vaccines which prevent nicotine from reaching the brain.
Once the nicotine reward mechanism is broken, the addictiveness of cigarettes is removed.
Researchers point out that these vaccines, if effective, may help recent quitters from relapsing,
but are not designed as a long-term preventative (Hall, 2005).
For addicted smokers, the aim may be to deliver the necessary nicotine with the least amount
of tar, carcinogens and carbon monoxide. In theory this could be achieved with artificially
heightened nicotine levels in a low tar cigarette – a mandated minimum level of nicotine. An
important drawback is that the cigarettes would be available to potential smokers or non-
addicted smokers. Given that an addiction is formed when a stock of nicotine is consumed
within a certain time, high nicotine cigarettes would make it easier and quicker for a non-
addict to become addicted. This would suggest a recommendation for a maximum level of
Penalties are not discussed in the NTS, possibly because most penalties are set by states,
although this is also true of bans. Penalties reinforce regulation, and in the absence of
appropriate penalties, regulation is not binding. The penalty for manufacturing, selling or
supplying chewing tobacco or snuff is 100 penalty units ($10,743) in Victoria (Tobacco Act
s.15), and 140 penalty units ($10,500) in Queensland (Tobacco and Other Smoking
Products Act 1998
s.26ZR). This suggests that legislators believe that the harm from chewing
tobacco is high. In the state of Victoria, the penalty for selling to a minor is from 2 penalty
units (~$200), up to a maximum of 50 (~$5,000). Penalties in Queensland are much higher:
$10,500 fine for a 1st offence, and up to $31,500 for a 3rd or subsequent offence, plus
revocation of seller licence for up to three years (Tobacco and Other Smoking Products Act
s.10), but this was increased from a fine of $75 in 2005.
A 2002 survey of under-age smokers in NSW found that 22 per cent bought their last cigarette
from a retail outlet (NSW DoH, 2004). Similarly, a 2005 survey of Victorian youth found
that 23 per cent purchased their last cigarette, and even in the 12-15 age group, 17 per cent of
recent smokers indicated that they had purchased cigarettes from retail outlets (Cancer
Council Victoria, 2006). This suggests that expected penalties are not providing adequate
incentives for licensed retailers to diligently check the age of purchasers.
Developing policy in such a complex environment involves trade-offs. While policies have
been very effective in reducing the overall numbers of people smoking, there are still huge
potential costs and large numbers of new smokers. And while policies are effective for those
who are able to quit, for those who find it difficult, the range of alternatives is limited by bans
Policy makers are wary of any apparent quick-fixes, and with reason. The low tar campaign
which purported to offer a safer cigarette and which was supported by policy makers was
shown in many cases to do more harm than traditional cigarettes. Proponents of high nicotine
cigarettes (which give the nicotine hit with less of the carcinogenic tar) often ignore the fact
that potential smokers are more likely to become addicted if nicotine is more accessible.
Taxes are a simple way to discourage use, but they are regressive, as lower socio-economic
groups smoke in greater numbers. Taxes collected more than make up for externalities
imposed, but information failures and the addictive nature of nicotine mean that the cost of
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