Garbage Peter Berck 2000 Problem Garbage isnt free

Garbage Peter Berck 2000

Problem • Garbage isn’t free to dispose of properly, but the opportunity to illegally dispose of it, and the public health problems with nonproper disposal, make it difficult to charge for this service. – Garbage charges – Deposit refund systems – Laws

Theory--consumer • r good disposed clean • d is refundable and for refund deposit • c good disposed clean • hr hc hx the time costs of disposing of the • x good disposed dirty good in the various • w wage modes • T time • P is price of good • L leisure

Budget constraint • Tw = Lw + (P+d+w hc) c + (P+w hr) r + (P+d + whx) x • U(L, c+r+x, c+r) – reflects total consumption of good – taste for clear disposal. •

More garbage comments • Tw = Lw + (P+d+w hc) c + (P + whx) x • If we charge for garbage properly disposed of at price d (recall that the underlying good costs P), then dirty is favored over clean. • Two effects: less garbage produced and more illegal disposal

General Comment • Tw = Lw + Px or (T-L)w = Px • an advalorem tax of d on x: (T-L)w = d. Px • gives the same result as (T-L)w/d = Px – income tax is a tax on all goods, here there is only one good, so it is a tax on it. – income taxation already discourages consumption of environmental bads, so pigouvian taxes have less work to do.

Garbage Reduction Thoughts • Value of Garbage reduction – WTP as in Hutla – Shadow price of dumping • Much higher than price because public entities set p=ac • Don’t include cost of making next dump. • However, many small dumps closed and many towns moved to commercial dumps • California 140/ton is way above numbers in Fullerton—may be because of transport costs— new dumps further away

Consumer • Many deposit return situations – Beverage containers (talk about later) • Recycle for bottles (Denmark) • Recycle for cullet (Ca. ) – Car batteries • Laws – No dumping of motor oil – Charge fee to dispose of properly – More stringent for Toxics (CERCLA) with manifests and permitting – NYC really does fine for non-seperation

Upstream • Separate garbage from salvage – Clean and dirty MURFs – Scavengers

End Product is bales

Economics of Reuse • • • Price for cullet at furnace Less cost of transport Less MURF cost Has to be greater than dump fee For glass to be remelted into new bottles

Glass doesn’t pay its way • Four ways to make it go back – Make manufacturer pay (Germany and in theory in Ca. ) Would be first best, polluter pays principle. – Use unredeemed part of deposit fund • Doesn’t discourage use by recyclers sufficiently • Done in CA. – Use tax revenue – Have recycled content laws • • Done in many states Could bring in waste paper from other places Could drive production out of state Will shift demand for cullet/crushed cans out.

Other incentives • Garbage reduction mandate – Cities pay fine if they don’t reduce their landfilling – Cities choose to fund curbside rather than pay fine. • Big target is yard waste to compost • Glass, because mandate is by ton. • Aluminum is valuable and doesn’t end up in this stream • Plastic is problematic

Plastic • • Many resins PET has the biggest share PET bottles weigh very different amounts Light weight bottles best made with pure resin, so • Plastic lumber, fleece are uses • More and more things are packaged in plastic rather than glass • Infant industry. Wait and see.

Plastic v. Glass • Not at all obvious whether a ½ lb glass container causes more environmental damage than a 1/17 lb PET container. Even after recycling. • Definitely a hot Berkeley issue—Ecology center calls the reuse of plastic as lumber, downcycling.

• Deposit-Refund – Equivalence of refund to other taxes – Tax on virgin material encourages recycling but • Offshore processing and manufacturing evade tax and move jobs out

From Fullerton’s Review • (much of this is verbatim)

• Drop off programs – (Jakus) $1. 29/lb (for cost of time) – (Powell) costs from transport • 5 pounds stirling per ton curbside • 23 pounds stirling per ton drop off. • Prob of starting new curbside – Increases in income – Increases in env. Group membership

Curbside • Tawil (1995) – 80 towns in Massachusetts – every $1000 that can be saved by curbside recycling increases the probability of adoption by 11%. • a 1% increase in the percentage of households belonging to an environmental interest group increases the probability of adoption by 4%.

• In a survey of 100 households, Kinnaman (1998) finds that households are on average willing to pay about $86 per year to keep curbside recycling of newspaper, glass, and aluminum. • Jakus et al. (1996) estimate that households are willing to pay $69. 36 per year for curbside collection of newspaper and glass.

• Huhtala (1997)develops a dynamic model of waste accumulation with recycling as a backstop technology. The model is simulated using 1993 data from the. Helsinki region. Results show that the social benefits of recycling paper, cardboard, andmetal exceed the social costs. Glass and plastic do not pass the benefit/cost criterion. • Brisson (1997) finds that the recycling of aluminum produces the greatest social benefits, followed by glass, ferrous metals, paper board, and rigid plastic.

Garbage Charges • Reschovsky and Stone (1994) and Fullerton and Kinnaman (1996) asked • individual households whether they observed any change. In the former study, 51% of • respondents reported an increase in dumping. The most popular method was household • use of commercial dumpsters. For the 20% who admitted to burning trash, the authors • were unable to confirm whether these burners did so in response to the program. Roughly • 40% of the respondents to the Fullerton and Kinnaman (1996) survey indicated that illegal • dumping had increased in response to the unit-pricing program.

• Germany implemented a unique policy in 1991 called the “Law on Waste • Management” that is designed to internalize the external costs of packaging choices by • industry. This law requires the original product manufacturers to pay to recycle the • packaging it produces even after the product is sold to retail firms or directly to consumers. • The law also set an original recycling target of 80%. That is, firms would be required to • recycle 80% of all packaging they produce. Amendments to the original legislation are • expected to ease these targets to 60 -70%.

• • • Over 400 retail and packaging firms have combined with the large wastehauling firms to create the Duales System of Deutschland (DSD). The purpose of this syndicate is to reduce the administrative costs associated with satisfying the minimum recycling standards. Rather than requiring that each bottle be delivered back to its original manufacturer, local waste management firms agree to collect for recycling all bottles of member organizations in exchange for payment from the DSD. Participating manufacturers identify their membership in the DSD by affixing a green dot on their packaging. In essence, the program becomes a national recycling effort operated by the DSD rather than by independent municipal governments, as is common in the United States. 11

• Only Fullerton and Kinnaman (1996) use household data that are not based on • self-reported surveys. The weight and volume of the garbage and recycling of 75 • households were measured by hand over four weeks prior to, and following, the • implementation of a price-per-bag program in Charlottesville, VA. A curbside recycling • program had already been in operation for over one year. Results indicate that the weight • of garbage decreased slightly, but the volume of garbage (number of bags or cans) • decreased by more. Indeed, the density of garbage increased from 15 pounds per bag to • just over 20 pounds per bag.