Through a lifecycle energy analysis, plastic is the better bag. At current recycling rates two plastic bags use less energy and produce less solid, atmospheric, and waterborne waste than a single paper bag. Moreover future improvements only increase preference in plastic bags. Increasing recycling rates and reducing the 2-to-1 ratio through proper bagging techniques would further the energy preference for plastic bags.
Although, there was a study that this article was based on that *may* have come to a different conclusion (see the first footnote).
This site was kind of nice anyway, if you haven’t seen it before — http://www.ilea.org/index2.html