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Disposal is not free: fiscal instruments to internalize the environmental costs of solid waste

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Abstract

This paper provides an overview of global solid waste management challenges and waste-specific fiscal instruments that can help address them. Countries struggle to manage an ever-increasing volume of solid waste, which currently exceeds 2 billion tons a year. Though solid waste management is usually relegated to subnational governments, externalities from inadequate management, including greenhouse gas emissions and marine plastic, reach a global scale. Reduction of these externalities through improved waste management requires substantial additional fiscal resources. An effective combination of waste charges levied throughout the product cycle can provide resources to upgrade waste management, reducing environmental impacts, and create incentives for improved stewardship.

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Fig.1
Fig. 2

Source: Kaza et al. (2018)

Fig. 3

Source: Kaza et al. (2018)

Fig. 4
Fig. 5
Fig. 6

Source: OECD PINE database

Fig. 7

Source: OECD PINE database

Fig. 8
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Notes

  1. See, for example, Debreu (1982).

  2. Leonard (2010).

  3. Figures based on data provided in Kaza et al. (2018).

  4. Le Courtois (2012) and UNEP (2011).

  5. The UNEP (2014) estimate of at least $18 billion per year is adjusted in line with global GDP growth.

  6. UNEP (2018).

  7. Kaza et al. (2018).

  8. In 2016, the World Bank classification for low-income countries was those with average annual per capita income of US$1,205 or less, for lower-middle income countries $1,026-$4,035, for upper-middle income countries $4,036-$12,475, and for high-income countries $12,476 or more.

  9. In contrast to open dumping, controlled landfilling entails daily coverage of wastes with soil to reduce air emissions and deter vermin access, as well as perimeter drainage. Modern sanitary landfilling further entails entrapment and treatment of leachate and gas emissions. Figure 5 does not distinguish between controlled and sanitary landfilling.

  10. UNEP (2015) notes that this estimate focuses on methane (CH4) emissions from decomposing organic matter and does not adequately reflect other sectoral emissions, such as black carbon from incineration. It thus estimates that improved waste management including materials recovery could generate as much as a 15–20 percent reduction in global GHGs.

  11. UNEP (2014).

  12. See, for example, supplemental tables to Martinez-Sanchez et al. (2017).

  13. For a review of this literature, see Khadelwal et al. (2019).

  14. See, for example, Paes et al. (2020) on Brazil, and Talang and Sirivithayaparkorn (2021) on Thailand.

  15. See, for example, Martinez-Sanchez et al. (2017) on the U.S., and Ericsson et al. (2005) on Sweden.

  16. Kaza et al. (2018).

  17. https://stats.oecd.org.

  18. See, for example, Barrios et al. (2013).

  19. Among the 76 countries tracked in the OECD revenue database, property tax revenues averaged 1.1 percent of GDP in developed countries but only 0.4 percent in developing countries.

  20. See, for example, Acosta-Ormaechea et al. (2019). However, Dahlby et al. (2021) find a very high MCF for non-residential property taxes in Alberta due to their negative impact on business investment.

  21. See US Environmental Protection Agency (2011). A growing literature on the game theory of sustainability explores these interactions. See, for example, Grimes-Casey and others (2006) and Kaushal and others (2015).

  22. Conrad (1999), for example, presents a general equilibrium model showing that failure to charge for waste disposal biases production in favor of virgin materials, and Dinan (1993) accordingly suggests imposing virgin material taxes to encourage recycling.

  23. For a detailed discussion of ADF structures, see Porter (2002).

  24. Palmer et al. (1997), Acuff and Kaffine (2013)

  25. The rise of curbside recycling in the U.S. has led to pressure to repeal “bottle bills” in some U.S. states, and Delaware scrapped its law in 2011. Deposit rates of $0.05–0.10 have stagnated over decades, diminishing the real incentive for consumers to participate, while the spread of curbside recycling offers a “free” alternative. However, bottles collected through D-R programs are generally cleaner and more likely to be reused or recycled than bottles processed via curbside recycling. D-R programs have historically been unpopular with beverage producers, distributors and retailers, who are sometimes undercompensated for their participation. In recent years, however, increased interest in sustainability has led some producers to support bottle bills to ensure an adequate flow of recyclable inputs.

  26. For more on marine plastic, see Jambeck et al. (2015) and Xanthos and Walker (2017).

  27. An alternative policy is to offer consumers a subsidy for bringing their own reusable bags.

  28. The rate including multiple use bags is approximately 90 per year. Ireland and Luxembourg have the lowest overall plastic bag use rates in the EU of approximately 20 bags per year.

  29. Where dumping risk is high, Fullerton and Kinnaman (1995) posit that the best alternative is pre-charging for goods disposal upon purchase (e.g., through a local sales tax) and collecting garbage for free.

  30. Kaza et al. (2018).

  31. Korea Environment Institute (2016), henceforth cited as KEI, notes that, as Korea’s growth engine shifted from exports to domestic consumption, shopping evolved from a necessity to popular leisure activity, leading producers to shorten their expected product lives.

  32. KEI (2016).

  33. For example, a U.K. survey found that properties located within one mile of a landfill were worth an estimated 5–10 percent less than comparable properties located elsewhere (DEFRA, 2003).

  34. OECD environmental statistics database.

  35. Adam et al. (2020).

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Acknowledgements

The author gratefully acknowledges comments from Ian Parry, Martin Grote, participants in an IMF Fiscal Affairs Department seminar and working paper review, participants in a Washington DC Tax Economists Forum seminar, and an anonymous reviewer.

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    Thornton Matheson

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Matheson, T. Disposal is not free: fiscal instruments to internalize the environmental costs of solid waste. Int Tax Public Finance 29, 1047–1073 (2022). https://doi.org/10.1007/s10797-022-09741-1

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