Managing Municipal Solid Waste (MSW)

Chapter 19

© 2007 Thomson Learning/South-Western Thomas and Callan, Environmental Economics

2

Problem of MSW

MSW is nonhazardous waste posing no direct threat to humans or ecology

Still there are risks Excess generation Improper management, which can lead to…

bacterial contamination: unsanitary conditions toxic contamination: hazardous wastes mixed in air pollution: incineration or decomposition gases

3

MSW Trends

MSW generation is growing, both total and per capita Dependence on landfills continues

In 2001, almost 56% of MSW was landfilled in the U.S. Composition of MSW

largest proportion by product: containers & packaging largest proportion by materials: paper & paperboard

Major industrialized nations are largest generators Recycling rates vary across nations

Japan has one of the highest recycling rates, e.g., 60% of its paper/cardboard; 78% of its glass

U.S. overall recycling rate is 29.7%

4

Trend DataUS Annual MSW Generation 1970 1980 1990 2000

MSW (millions tons)

121.1 151.6 205.2 232.0

Population (thousands)

203,984 227,255 249,907 281,422

Per capita MSW (pounds/day)

3.25 3.66 4.50 4.52

Source: U.S. EPA, Office of Solid Waste and Emergency Response (October 2003), pp. 2, 4,

table ES-1 and ES-3

5

International Ranking by Per Capita Generation

Country kilograms per capita US 760 Australia 690 Switzerland 650 Germany 540 France 510 Italy 500 Greece 430 Japan 410 Turkey 390 Canada 350 Czech Republic 330 Mexico 320 Poland 290

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.

6

Policy under RCRA (Subtitle D)

Federal responsibilities To give financial and technical assistance to states,

encourage resource conservation, set minimum criteria for land disposal, incineration facilities, etc.

States’ responsibilities To develop waste management plans

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 e.g., recycling laws, grant programs

EPA’s Integrated Waste Management System

Land Disposal

Source Reduction

Recycling

Combustion

MSW Services Markets

Using Economics

9

Modeling the MSW Market

Supply (S), or MPC, represents the production decisions of firms providing MSW services

Demand (D), or MPB, represents the purchasing decisions of MSW generators

10

Two Sources of Resource Misallocation

Flat fee pricing of MSW services does not reflect rising MPC associated with increases in production levels.

Production of MSW services is associated with negative externalities, which means that private market equilibria, where MPB = MPC do not yield an efficient solution

11

Flat Fee Pricing System

Communities typically charge the same fixed fee regardless of amount of MSW generated Fee typically hidden in property taxes

Demanders pay a zero Marginal Price as if MPC were 0 Ignores positive and rising MPC of MSW services

Result: No incentive to reduce wastes Too many resources allocated to MSW services

12

Flat Fee Pricing System

$

Q of MSW Services

S = MPC (implied by flat fee)

Q00

Result is overallocation of resources, since Q0 > Qc where Qc would be based on a positively sloped MPCD

= MPB

S = MPC (actual rising MPC)

QC

13

Negative Externality

Production externality causes resource misallocation even if the fee reflects rising MPC

External costs (MEC) are due to air pollution from incineration, groundwater contamination, etc.

Result: Overallocation of resources to MSW services

Negative ExternalityP

rice

Q of MSW Services

D = MPB = MSB

S =MPC

MSC = MPC + MEC

PC

PE

0QE QC

overallocation, since Qc > QE

Market-Based Solutions

Waste-end Charges

Retail Disposal Charges

Deposit-Refund Systems

16

Back-end or Waste-end Charge

Imposed on waste at time of disposal Efficiency is achieved if the fee, PE, equals to MSC at QE

Known as unit pricing, or pay-as-you-throw (PAYT), programs Can be implemented as flat rate or variable rate pricing

Real-world usage Used in over 4,000 communities in 43 states

Some use bag-and-tag systems Empirical evidence $0.50 per container led toreduction of 3,650 tons/year

for a community of 100,000 people (Jenkins 1993)

Unit PricingImplemented as a Waste-end Charge

Pri

ce

Q of MSW Services

D = MPB = MSB

S = MPC

MSC = MPC + MEC

Fee = PE

0QE

18

Front-end or Retail Disposal Charge

Imposed on the product at point of sale Intended to encourage prevention through

source reduction Aimed at a consumption externality Efficiency is achieved if the front-end charge

equals the MEB at QE

Effective price of product (PR) includes fee

Retail Disposal ChargeA Front-End Charge

Pri

ce

Q of batteries

MSB

MSC = MPC

PR

0QE

D = MPB

QC

MSC + charge

Charge

Effective price, including the charge

20

Deposit/Refund System(review in Chapter 5)

Up-front fee imposed on a product at point of sale (like retail disposal charge) Fee equals MEC of improper disposal, or the

negative MEB of consumption Fee is returned if consumer takes proper action

to avoid environmental damages Real world examples

Australia, Canada, Denmark, Mexico, South Korea, Sweden, and U.S. for beverages

Greece, Norway, and Sweden on car hulks

21

Deposit-Refund Programs in U.S.STATE PRODUCT AMOUNT OF DEPOSITArizona Batteries $5.00Arkansas Batteries $10.00California Beverage $0.025 for < 24 oz.

$0.05 for > 24 oz.Connecticut Batteries $5.00

Beverage $0.05 minimum Delaware Beverage $0.05Hawaii Beverage $0.05Iowa Beverage $0.05Maine Batteries $10.00

Beverage $0.05 – $0.15Massachusetts Beverage $0.05Michigan Beverage $0.05 – $0.10New York Beverage $0.05Oregon Beverage $0.03 – $0.05Vermont Beverage $0.05 - $0.15Washington Batteries $5.00 minimum

Sources: U.S. EPA, Office of Policy, Economics, and Innovation (January 2001), pp. 57-66; BatteryCouncil International (May 23, 2002); State of Hawaii (2002).

Deposit-Refund Model$

Improper Waste Disposal (%)

MPBIW = MSBIW

MPCIW

MSCIW

0

QE QIW

MPCIW + Deposit

b

a

Deposit=MEC at QE

100Proper Waste Disposal (%)

0100

Deposit converts % of overall waste disposal, measured by (QIW - Qe), from improper to proper methods