1. Managing Municipal Solid Waste (MSW)
Chapter 19
Managing Municipal Solid Waste (MSW)
© 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 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

5. 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.

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

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

8. 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
Result is overallocation of resources, since Q0 > Qc where Qc would be based on a positively sloped MPC $
D = MPB
S = MPC (actual rising MPC) QC
S = MPC (implied by flat fee) Q0
Q of MSW Services

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

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

15. 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 to reduction of 3,650 tons/year for a community of 100,000 people (Jenkins 1993)

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

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

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

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 DEPOSIT
Arizona Batteries $5.00
Arkansas Batteries $10.00
California Beverage $0.025 for < 24 oz.
$0.05 for > 24 oz.
Connecticut Batteries $5.00
Beverage $0.05 minimum
Delaware Beverage $0.05
Hawaii Beverage $0.05
Iowa Beverage $0.05
Maine Batteries $10.00
Beverage $0.05 – $0.15
Massachusetts Beverage $0.05
Michigan Beverage $0.05 – $0.10
New York Beverage $0.05
Oregon Beverage $0.03 – $0.05
Vermont Beverage $ $0.15
Washington Batteries $5.00 minimum
Sources: U.S. EPA, Office of Policy, Economics, and Innovation (January 2001), pp ; Battery Council International (May 23, 2002); State of Hawaii (2002).

22. Deposit-Refund Model $ MSCIW MPCIW + Deposit MPCIW MPBIW = MSBIW a b
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
QIW
Improper Waste Disposal (%)
100
Proper Waste Disposal (%)
100