Pay as you throw

The effect of municipal user pay systems on waste and recycling activity is a topic that has generated significant attention from a multitude of researchers. Early literature on the topic sought to develop a household demand function for waste services, exploring the effects of PAYT on household waste generation. Such studies include seminal pieces by McFarland et al, (1972), Wertz (1976), Jenkins (1991) and Repetto (1992). Subsequent studies by Ebreo et al. posited that households may reduce quantities of waste disposed under a variable fee system, opting to reuse items and/or change purchasing behaviour (i.e. buying durable instead of one time use items etc.) (1999). While changes in consumer purchasing behaviour and waste generation are largely dependent on the magnitude of the PAYT price signal (the penalty for excess garbage must be sufficient to induce behavioural change), there is empirical evidence linking PAYT policy to reduced household generation rates and changes in household consumption. A Belgian study on the effects of PAYT schemes found that household waste generation decreased by 9.1% over a ten year period (Flemish Waste Institute, 2013).  Similar results were observed in a review of PAYT schemes in 27 European Union states – Austria, Germany, Finland and Ireland all reported decreases in household generation and an increase in the proportion of material recycled post implementation of PAYT policy (BIOS, 2012).

Tangent to this line of inquiry, an increasing number of researchers have expanded the household waste demand function to include recycling, attempting to determine the effects of PAYT on overall waste diversion (Fullerton and Kinnaman, 1997, 2000; Hong, 1999; Allers and Hoebin, 2009; Sidique et al., 2009). The general argument in favour of unit based pricing (eg. Dijkgraaf and Gradius, 2008; Callan and Thomas, 2006) is that such schemes promote the efficient use of waste management resources. Households are given an incentive to generate less waste if they are forced to pay for the management of additional material.

As demonstrated by Podolski and Siegel (1998) and Jenkins (1993), these studies find statistical support for the negative relationship between the price paid per bag and the quantity demanded of disposal services. In a study using community level data for 149 New Jersey municipalities, pay as you throw schemes were found to significantly reduce the amount of solid waste disposed by households, while increasing the amount of material recycled (Podolski and Spiegel, 1998). Kinnaman and Fullerton (2000) derive a similar conclusion by analyzing cross-section data of more than 900 U.S. communities. Consumers will also be less likely to dispose of items such as white goods (fridges, microwaves), waste electronics and yard waste in the residential waste stream when PAYT systems are implemented.

Brown and Johnstone (2014) also found that there is public support for garbage bag limits/unit based pricing among residents living in PAYT communities. In an analysis of environmental taxes (expressed as PAYT fees) in communities across four countries, it was found that household support for PAYT schemes was a direct function of exposure to such systems. Opposition and/or resistance to PAYT policy was observed to decrease over time, a finding that was supported by other studies examining similar forms of environmental taxation (see Schuitema et al., 2010; Dunne et al., 2008) . Of note, Brown and Johnstone (2014) found an inverse relationship between support for PAYT schemes and levels of household waste generation (households with higher rates of waste generation expressed lower levels of support for PAYT policy). This result is consistent with our understanding surrounding how PAYT policies affect behaviour – those most affected by garbage bag limits/unit based pricing are most likely to be opposed to its implementation. What is unknown is whether “high generation” households modified consumption and disposal behaviour in response to PAYT policy over time.

Despite the extensive empirical evidence supporting the use of PAYT systems in increasing waste diversion, there remains considerable debate as to whether they benefit the community as a whole. As noted by Kinnaman (2006, 2008) and Allers et al (2009), PAYT systems may give rise to illegal dumping and in fact, may be more costly for municipalities to implement relative to a fixed fee scheme. The administrative challenges of measuring and billing individual households may be sufficient to offset any benefits from diverting material from the residential waste stream. To date, there is little consensus regarding the long term efficacy of PAYT schemes despite an increasing trend to adopt such systems in North American cities (USEPA, 2007).


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