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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 non-proper disposal, make it difficult to charge for this service. Garbage charges Deposit refund systems Laws


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

Budget constraint: 

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: 

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: 

General Comment Tw = Lw + Px or (T-L)w = Px an advalorem tax of d on x: (T-L)w = dPx 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: 

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: 

End Product is bales

Economics of Reuse: 

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: 

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: 

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: 

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: 

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 theHelsinki 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: 

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 waste-hauling 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.

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