Chapter 19 Managing Municipal Solid Waste MSW 2007

Chapter 19 Managing Municipal Solid Waste (MSW) © 2007 Thomson Learning/South-Western Thomas and Callan, Environmental Economics

Problem of MSW n MSW is nonhazardous waste posing no direct threat to humans or ecology n Still there are risks n n Excess generation Improper management, which can lead to… p bacterial contamination: unsanitary conditions p toxic contamination: hazardous wastes mixed in p air pollution: incineration or decomposition gases 2

MSW Trends n MSW generation is growing, both total and per capita n Dependence on landfills continues n In 2001, almost 56% of MSW was landfilled in the U. S. n Composition of MSW n largest proportion by product: containers & packaging n largest proportion by materials: paper & paperboard n Major industrialized nations are largest generators n Recycling rates vary across nations n Japan has one of the highest recycling rates, e. g. , 60% of its paper/cardboard; 78% of its glass n U. S. overall recycling rate is 29. 7% 3

Trend Data US Annual MSW Generation Source: U. S. EPA, Office of Solid Waste and Emergency Response (October 2003), pp. 2, 4, table ES-1 and ES-3 4

International Ranking by Per Capita Generation Sources: OECD (2002), as cited in U. S. Census Bureau (2003), Table No. 1329, p. 849; World Bank, as cited in U. S. Census Bureau (2003), Table No. 1333, p. 851. 5

Policy under RCRA (Subtitle D) n Federal responsibilities n To give financial and technical assistance to states, encourage resource conservation, set minimum criteria for land disposal, incineration facilities, etc. n States’ responsibilities n To develop waste management plans p n Many follow EPA’s integrated waste management system, which promotes using a combination of programs aimed at source reduction, recycling, combustion, and land disposal – in that order To use regulatory powers to comply with RCRA p e. g. , recycling laws, grant programs 6

EPA’s Integrated Waste Management System Source Reduction Recycling Combustion Land Disposal 7

MSW Services Markets Using Economics

Modeling the MSW Market n Supply (S), or MPC, represents the production decisions of firms providing MSW services n Demand (D), or MPB, represents the purchasing decisions of MSW generators 9

Two Sources of Resource Misallocation n Flat fee pricing of MSW services does not reflect rising MPC associated with increases in production levels. n Production of MSW services is associated with negative externalities, which means that private market equilibria, where MPB = MPC do not yield an efficient solution 10

Flat Fee Pricing System n Communities typically charge the same fixed fee regardless of amount of MSW generated n Fee typically hidden in property taxes n Demanders pay a zero Marginal Price as if MPC were 0 n Ignores positive and rising MPC of MSW services n Result: n n No incentive to reduce wastes Too many resources allocated to MSW services 11

Flat Fee Pricing System Result is overallocation of resources, since Q 0 > Qc where Qc would be based on a positively sloped MPC $ D = B MP S = MPC (actual rising MPC) S = MPC (implied by flat fee) 0 QC Q 0 Q of MSW Services 12

Negative Externality n Production externality causes resource misallocation even if the fee reflects rising MPC n External costs (MEC) are due to air pollution from incineration, groundwater contamination, etc. n Result: n Overallocation of resources to MSW services 13

Price Negative Externality overallocation, since Qc > QE MSC = MPC + MEC S =MPC PE PC D = MPB = MSB 0 QE QC Q of MSW Services 14

Market-Based Solutions Waste-end Charges Retail Disposal Charges Deposit-Refund Systems

Back-end or Waste-end Charge n Imposed on waste at time of disposal n Efficiency is achieved if the fee, PE, equals to MSC at QE n Known as unit pricing, or pay-as-you-throw (PAYT), programs n Can be implemented as flat rate or variable rate pricing n Real-world usage n Used in over 4, 000 communities in 43 states p n n Some use bag-and-tag systems Empirical evidence $0. 50 per container led to reduction of 3, 650 tons/year for a community of 100, 000 people (Jenkins 1993) 16

Unit Pricing Price Implemented as a Waste-end Charge MSC = MPC + MEC S = MPC Fee = PE D = MPB = MSB 0 QE Q of MSW Services 17

Front-end or Retail Disposal Charge n Imposed on the product at point of sale n Intended to encourage prevention through source reduction n Aimed at a consumption externality n Efficiency is achieved if the front-end charge equals the MEB at QE n Effective price of product (PR) includes fee 18

Retail Disposal Charge A Front-End Charge Price Effective price, including the charge MSC + charge Charge MSC = MPC PR D = MPB MSB 0 QE QC Q of batteries 19

Deposit/Refund System (review in Chapter 5) n Up-front fee imposed on a product at point of sale (like retail disposal charge) n Fee equals MEC of improper disposal, or the negative MEB of consumption n Fee is returned if consumer takes proper action to avoid environmental damages n Real world examples p Australia, Canada, Denmark, Mexico, South Korea, Sweden, and U. S. for beverages p Greece, Norway, and Sweden on car hulks 20

Deposit-Refund Programs in U. S. STATE Arizona Arkansas California PRODUCT Batteries Beverage Connecticut Batteries Beverage Beverage Beverage Batteries Delaware Hawaii Iowa Maine Massachusetts Michigan New York Oregon Vermont Washington AMOUNT OF DEPOSIT $5. 00 $10. 00 $0. 025 for < 24 oz. $0. 05 for > 24 oz. $5. 00 $0. 05 minimum $0. 05 $10. 00 $0. 05 – $0. 15 $0. 05 – $0. 10 $0. 05 $0. 03 – $0. 05 - $0. 15 $5. 00 minimum Sources: U. S. EPA, Office of Policy, Economics, and Innovation (January 2001), pp. 57 -66; Battery Council International (May 23, 2002); State of Hawaii (2002). 21

Deposit-Refund Model Deposit converts % of overall waste disposal, measured by (QIW - Qe), from improper to proper methods $ MSCIW MPCIW + Deposit MPCIW a Deposit=MEC at QE b MPBIW = MSBIW QE 0 100 QIW Improper Waste Disposal (%) Proper Waste Disposal (%) 100 0 22