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National Center for Environmental Economics
Environmental Economics Reports
This study analyzes the potential of pricing mechanisms in solid waste management systems. Such pricing mechanisms have been suggested as appropriate means for encouraging greater efficiency of resource use, both within the solid waste management system proper and among sources of solid wastes. The study reviews the limited empirical evidence concerning supply and demand characteristics in markets for solid waste management (primarily collection) services. The analysis of processing and disposal and ancillary solid waste management services is hampered by the diversity of existing systems, and remaining problems in the conceptual clarification of the services provided. The analysis of cost functions in the collection and transportation subsystem suggests that these cost functions are subject to variable returns to scale. For smaller communities, there are economies of scale with respect to the amount of waste handled. For large communities, scale effects vanish. The available literature provides sufficiently strong evidence for the importance of both prices (and pricing policies) and incomes as determinants of the amount of waste collected per household. This evidence is used in an exploratory numerical analysis employing decision-theoretic elements to assess the likely impact of pricing mechanisms. The analysis suggests that total system costs could be reduced through pricing mechanisms, even though there would be a tendency to rely more on self-disposal as prices for collection services increase. The study concludes with a brief suggestion for a feasible method for implementing and effective pricing mechanism in solid waste management systems.
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