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4.4. Cost Savings from New Incentive Systems for Solid and Hazardous Waste Management

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Savings from Economic Incentives

Analysts have offered a number of incentive-based proposals for improving waste management policy. [See, for example, Wirth and Heinz (1991).] Many of the suggestions involve more widespread application of incentives in current use: marginal cost pricing of household solid waste disposal, and container and battery deposits. Other suggestions are more novel: for example, virgin material content taxes, product tax/recycling subsidy systems, and recycling credits combined with recycled content standards.

For solid waste disposal, Repetto et al. project that widespread use of unit pricing incentive mechanisms in earea with high disposal costs could achieve a cost savings of $650 million annually, if not by the year 2000 then shortly thereafter. That full potential is unlikely to be achieved without some form of encouragement at the federal level. Some proposed approaches such as packaging requirements, virgin material taxes, and recycled content standards would require additional federal actions, but could increase the magnitude of savings to as much as 30 percent of the annual solid waste disposal bill for the nation as a whole, producing savings shortly after the year 2000 of as much as $6.7 billion annually.

Greater use of deposit-refund systems is a possibility; however where they would be applied is not clear. Evidence suggests that the net savings from bottle deposit systems are negligible once one considers all transactions costs. Lead-acid batteries are already recycled at a rate approaching 100%. Car hulk deposits to encourage recycling of junked automobiles appear to be a success in Sweden and are being adopted elsewhere.

Hazardous waste regulations include those involving leaking underground storage tanks (LUST), Superfund, and most RCRA activity. These statutes impose substantial liabilities on generators, transporters, and disposers of hazardous wastes, especially in the event of a leak into the environment. The liability provisions act as powerful incentives to engage in due care. It may be possible to fine tune the liability rules to produce incentives that closely match marginal costs and marginal benefits, a feature that some feel is missing in some current rules. At this point it is premature to attempt to estimate any potential cost savings from such charges.

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