December 3, 2007
Series Editor: Ian Parry
Managing Editor: Felicia Day
Assistant Editors: John Anderson and Adrienne Foerster
Welcome to the RFF Weekly Policy Commentary, which is meant to provide an easy way to learn about important policy issues related to environmental, natural resource, energy, urban, and public health problems.
This week, the topic is one that affects us all, namely household trash (or rubbish as we Brits would say). Do we generate too much garbage? Should households be charged for each can or bag of garbage? Or would this have the perverse effect of encouraging illegal dumping? If so, are there other policies to promote conservation of trash that do not encourage illegal dumping? These are the some of the questions discussed in this week's insightful commentary by Don Fullerton (University of Texas, Austin) and Margaret Walls (RFF senior fellow), two economists who have done valuable research on these issues.
Next week, Jan Brueckner and Kurt Van Dender will discuss policies to alleviate flight delays at congested airports.
Don Fullerton and Margaret Walls
An inevitable by-product of our consumer society is the generation of trash. And continued economic development combined with population growth in communities across the United States and around the world are only making matters worse.
In this country, the problem is a big one. Americans generate about 4.5 pounds of trash per person per day, 95 percent more than our neighbors to the north in Canada, 64 percent more than Australians, and 37 percent more than the French. This high per-capita rate, combined with our large population, means that the United States generates far more trash each year than other developed countries. The amount is also much greater than it used to be: in 1970, the average American generated only 3.25 pounds per day.
Recycling and composting do make a dent: in 1970, composting was virtually nonexistent and only 7 percent of solid waste generated was recycled. But by 2005, the numbers had risen to 24 percent, for recycled, and 8.4 percent, for composting. These figures have remained relatively unchanged for the past several years, however. And while some materials have relatively high recycling rates - half of all paper and paperboard is recycled - others pose perennial problems. Plastics are difficult and costly to recycle and as a result, less than 6 percent of them are. Furthermore, products like cell phones and computers are creating new headaches.
What are the key problems that government officials and policymakers need to address with respect to solid waste? And what policy instruments do the best job of tackling those problems?
For local communities, three goals seem paramount: trash needs to be managed properly without the high social costs of litter and other forms of illegal disposal; the amount of legally disposed waste should be reduced to a level that accounts for its own social costs; and particularly hazardous or toxic wastes need to be disposed separately, not thrown in the landfill with other trash.
Policymaking inevitably involves tradeoffs, so furthering one goal may reduce progress toward another. For the most part, developed countries have figured out how to manage solid waste to avoid extensive dumping. Local communities provide trash collection and disposal services - usually through government provision, franchises, or contracts with private companies. Although the number of landfills has fallen in the past 15 years or so, landfill capacity has remained steady. Moreover, landfills are safer than they used to be because of requirements for liners, methane control, and monitoring. What is less clear is how best to reduce the volume of solid waste in the first place. Based on economic analysis, empirical research, and years of real-world experience, our view is that no "one size fits all" solution exists. An array of policies can best make the tradeoffs for different locations and different waste materials.
The economist's typical solution to an externality problem is a Pigouvian tax: charge a tax or fee per pound of trash exactly equal to the social damages imposed by that trash. That would reduce waste in landfills, but it raises two questions. The first is whether the social damages can actually be estimated. Even if policymakers know what to charge, however, the second question is whether any such fee can feasibly be administered and enforced.
Some communities charge for each can or bag of trash, under a system commonly called "Pay as You Throw" (PAYT). Households might be charged one monthly amount for one can a week, or a higher monthly amount for a larger can or two cans a week. But not every can gets filled every week, leaving households with no incentive at the margin to reduce waste. A better system, closer to true marginal cost pricing, requires households to buy a special bag at the grocery store, or a special tag to use on a bag of garbage of a particular size.
EPA estimates that approximately 7,100 communities in the United States use some kind of PAYT, making it available to approximately 25 percent of the country's population. The number of communities has risen over time and, in some areas of the country, is quite high. Some states (Wisconsin, Oregon and Minnesota) even have a law requiring that communities use PAYT.
Senior Fellow, Resources for the Future
Walls' current research focuses on solid waste and recycling, as well as transportation, urban land use, and air quality issues.
Professor of Economics,
University of Texas, Austin
(August '07 to May '08: Visiting Professor, University of Illinois, Urbana)
Fullerton's research includes the distributional effects of social security, household disposal of garbage and recycling, policies for green design, the effects of the Superfund clean-up program, and vehicle emission control policies.
Does it work? Results from the economics literature suggest that demand for garbage collection is relatively unresponsive to prices, but PAYT towns have experienced some reductions. And it is important to keep in mind that even if reductions are small, charging the right price may result in the right
amount of garbage disposal. Fixed monthly charges - the norm in many places - set a zero price for an additional bag or can and thus provide no incentive for households to conserve.
The big question for PAYT communities, though, is what households are doing with the garbage they no longer place at the curb. To avoid paying the fee, households can reduce their waste by recycling, composting, consuming less in the first place, or disposing illegally - burning, finding a commercial dumpster, or throwing it by the side of the road. Recycling does increase with PAYT but not enough to account for all of the reduction in trash. Clearly, municipalities can help themselves by providing free curbside collection of a wide variety of materials for recycling and yard waste collection for central composting. Towns also must choose how much to spend on enforcement, and how to set penalties.
PAYT is most effective in small cities and suburban areas but has not worked so well in densely populated urban areas where apartment dwellers use chutes and dumpsters for their normal disposal (and might easily use vacant lots for everything else). PAYT is also not as well-suited to very rural areas where illicit dump sites are similarly easy to find. In general, it is most feasible where we can measure and monitor individual households' weekly trash and recycling.
Even in towns where a PAYT fee works well to reduce waste amounts without increased dumping, it does nothing special for separate handling of hazardous and other troublesome items like batteries, tires, or used electronic equipment. These products, especially, are candidates for some kind of deposit refund system (DRS). Experience has shown great success with a DRS applied to certain products: beverage containers in "bottle bill" states have recycling rates that range from 60-95 percent, significantly higher than in states without such a program; 96 percent of lead-acid batteries are recycled; and tires in states with a DRS are recycled at a 72 percent rate. But the idea can be generalized, in a "two-part instrument," a general sales tax on everything at the store - all of which eventually becomes waste - along with a subsidy per ton of waste handled at the recycling center. Products like computer monitors could still be specifically targeted with a special fee, but most items could be treated in bulk, without time-consuming transactions to count or weigh individual items.
Thus the "best" policy is not
any single policy. PAYT can successfully be employed in at least some communities, and probably in more than are currently doing so. Other towns, however, need a two-part instrument - a general sales tax on new items at the store, plus a subsidy for recycling. And products that pose special problems may need targeted deposits or refunds. Different circumstances therefore call for different policies, PAYTs, DRSs, or two-part instruments. All of these policies have a key feature in common and one that economists invariably seek in all of their policy prescriptions: they provide the proper incentives to consumers and others to generate a socially desirable outcome.
Views expressed are those of the author. RFF does not take institutional positions on legislative or policy questions.
To receive the Weekly Policy Commentary by email, or to submit comments and feedback,
Calcott, Paul and Margaret Walls. 2000. "Can Downstream Waste Disposal Policies Encourage Upstream 'Design for Environment'?" American Economic Review, vol. 90, no. 2. May. pp 233-237.
Fullerton, Don, and Tom Kinnaman, 1996. "Household Responses to Pricing Garbage By the Bag." American Economic Review 86, September. pp 971-84.
Fullerton, Don and Ann Wolverton. 2000. "Two Generalizations of a Deposit-Refund System." American Economic Review. vol. 90, no. 2. May. pp 238-242.
Jenkins, Robin, Karen Palmer, Michael Podolsky, and Salvador Martinez. 2003. "Determinants of Household Recycling: A Material Specific Analysis of Unit Pricing and Recycling Program Attributes." Journal of Environmental Economics and Management, February.
Kinnaman, Thomas. 2006. "Examining the Justification for Residential Recycling." Journal of Economic Perspectives. vol.20, no.4.
Macauley, Molly and Margaret Walls. 2000. "Solid Waste Policy," in Public Policies for Environmental Protection, 2nd ed., Paul R. Portney and Robert N. Stavins, Editors. RFF Press.
Skumatz, Lisa and David Freeman. 2006. Pay As You Throw (PAYT) in the US: 2006 Update and Analyses, Report to U.S. Environmental Protection Agency, December.
Porter, Richard. 2002. The Economics of Waste, RFF Press.