International Review of Waste Management Policy - Department of ...

Another feature of levies is that they generate revenue. Many of the countries which
deploy levies do so with the intention of using some or all of the revenue for specific
purposes related to waste management (or other environmental purposes).
The environmental impact of levies and bans, therefore, depends upon both:
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a) the extent to which the structure of levies, or the ban, or both, makes the
activities targeted by the levy and/or the ban less desirable;
b) the way in which other policies affect the desirability of alternative
management routes (i.e., those not subject to levies and bans); and
c) where levies are concerned, the effects of the use of levy revenue in terms of
environmental improvement.
Regarding a) and b), own-price and cross-price effects are important. Other things
being equal, a levy would be expected to have consequences which relate to the size
of the levy. A ban effectively acts like a levy set at infinity for the treatment subject to
the ban. The own- and cross-price effects will be different for different materials and
for different waste streams, the reason being that the range of alternatives, as well as
the costs thereof, vary by material and stream.
The basic premise is that as landfill prices rise, less waste will be disposed to landfill
and more will be minimised (probably very little in the case of municipal waste), reused
and sent to alternative treatments.
The degree to which this occurs relates to the alternatives available and their price
relative to that of landfill. Important here is the cross-price elasticity of demand. This
shows how sensitive recycling or mechanical biological treatments (MBT), for
example, are to changes in landfill tax. Where technologies are widely available and
where they are competitive in cost, the response can be expected to be considerable.
Similarly, where the opposite is true, the shift away from landfill will be more limited.
When the cost of disposal increases above the cost of treatment via an alternative
method, this price, know as the substitution price, will determine the marginal waste
management route, as any rational agent will pursue the most cost effective option
(as long as the risks aren’t to great) unless, for example, they are restricted by lengthy
municipal contracts.
Some studies that have attempted to measure the demand for waste disposal
services in general (rather than specifically demand for landfill), conclude that the
demand for municipal services is inelastic. 953 This implies that a large increase in the
cost of the service would be needed to see any significant change in the quantity of
waste sent for disposal. However, studies also indicate that householder’s attitudes
and the implementation of pay-by-use charging mechanisms strongly affect the
outcome, implying that the cross-price elasticities of demand for waste disposal
services can be relatively elastic. It is not so clear, however, whether changes in
953 H. Bartelings, P. van Beukering, O. Kuik, V. Linderhof, F. Oosterhuis, L. Brander and A. Wagtendonk
(2005) Effectiveness of Landfill Taxation, R-05/05, Report Commissioned by Ministerie von VROM,
November 24, 2005
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