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The in Brief
The cost of residential waste management service is currently buried--along with other services, such as police and ambulance operations--within most municipal property tax bills. While the cost is modest at about $150 to $250 per household per year, it is not visible to consumers and, as result, they lack a cost incentive to reduce the amount of waste they generate.
Partial- and full-unit pricing mechanisms for residential waste management send a message to consumers that a reasonable, but not infinite, amount of service will be provided for a set fee, or on a user-pay basis. Experience shows that when partial- or full-unit pricing mechanisms are introduced, the amount of disposed residential waste declines by 8 percent-to-38 percent, and the amount recycled increases by as much as 6 percent in mature systems to 40 percent in newer recycling programs. In locations where recycling is cheaper than garbage disposal, this change in household behaviour leads to a more efficient, cheaper, waste management system.
Over 200 communities in Canada and 6,000 in the United States now finance their waste management systems through fees charged directly to householders, requiring consumers to pay the full cost of their waste management services and enabling them to see exactly what the service costs. Where residential waste management service is delivered through a separate cost centre or utility, full-cost accounting identifies and recovers the entire expense of the service. This approach is fairer than the current system in place in most Canadian communities, where everyone pays based on their property taxes.
Municipalities throughout Canada should introduce partial- and full-unit pricing for the financing of residential solid waste management services. This will reduce the amount of residential garbage that has to be disposed of, while encouraging the development of more efficient system for doing so. Meanwhile, provincial and territorial governments should consider encouraging user-pay mechanisms by making them a requirement for financial support.
Canadians are very dependent on landfill as a waste management option; we currently landfill 79 percent of the waste we produce, compared to an average of 58 percent for other OECD countries (OECD 2004). Waste disposal is excessive--or a sign of inefficiency in our economy--when households send materials to landfills that could be better used as feedstocks for industrial and other processes. The potential net lifecycle effects of recycling waste materials such as metals and papers, rather than disposing of them, are enormous. But Canadian consumers receive few price signals to indicate that they should manage their wastes in a more resource-efficient manner and, as a result, waste disposal rates are as high. Pricing signals could lead to better choices and improved economic efficiency, while reducing the environmental pressure that landfill creates.
User fees for waste management make the costs of those services transparent to householders. If the fee structure is designed correctly, it encourages consumers to reuse, recycle, compost and decrease their dependence on landfill as a waste management option. Meanwhile, landfills are difficult to establish in Canada and greater reliance on that system may be unwise in future. The waste management system should also be self-financing through a fee structure that makes the costs transparent to the consumer and sends the correct signals to alter consumer behaviour. The financing of waste management services has been buried in the property tax system in the past; governments should change this practice to make the costs transparent to the consumer.
Background and Overview
In Canada, most households receive some level of solid waste-management collection service, such as garbage, recyclables and garden waste pickups, typically delivered by the local municipality. The collection service is provided using either municipal staff or by contract with private-sector waste management companies. The level of service varies by municipality, depending on local circumstances; small and rural communities often provide drop-off collection service, while large urban communities offer curbside collection. Residential waste management services typically cost between $150 and $250 per household a year in Canada. This amount is considerably less than costs for similar service in the U.S., and is modest compared to the average $300 a year for a basic phone service and $600 per year for cable television (currency figures are in Canadian dollars unless otherwise noted).
Property taxes have traditionally financed residential waste management costs in Canada. Financing residential waste management services from property tax revenue leads to inequities and cross subsidization because commercial and industrial property owners typically do not receive waste collection service. Ideally, the financing of residential waste management services should be separated from property taxes; households should pay for the services directly so that consumers see the exact costs. Under the current property tax arrangement, the costs of waste management, which are low, are buried along with the costs of other services, such as police and ambulance services.
About 21 percent of residential waste is recycled in Canada (Table 1). The remaining 79 percent is disposed, mostly through landfill and a small amount through incineration. Recycling and composting are voluntary activities in most Canadian municipalities, and a large amount of material which could be recycled or composted is actually disposed because of poor participation in waste diversion programs and less than optimal capture of recyclable and compostable materials. In the future, increasing recycling and composting are essential to establishing sustainable waste management systems in Canada and to reducing our reliance on expensive and relatively scarce landfills.
Partial- and full-unit pricing mechanisms for residential waste management send a message to consumers that a reasonable, though not infinite, amount of service will be provided for a set fee, or on a user-pay basis. Where participation in recycling is a voluntary activity, experience has shown that economic instruments, such as partial- and full-unit pricing for garbage pick-up, provide additional encouragement to recycle and compost more material. Experience has also shown that when partial- or full-unit pricing mechanisms are introduced into municipalities, the amount of residential waste to be disposed falls by anywhere from 8 percent to 38 percent, and the amount recycled increases by anywhere from 6 percent in mature systems to as much as 40 percent in newer programs. For materials such as paper, metals and certain plastics, recycling is cheaper than garbage disposal in some locations, therefore this change in behaviour by households leads to a more efficient, cheaper waste management system. It also preserves landfill capacity.
Partial- and full-unit pricing mechanisms for residential garbage disposal have proven successful instruments to encourage waste reduction. This is consistent with sustainable development principles; materials are incorporated into manufacturing industries across Canada, reducing the need to extract raw materials from the environment and also lowering reliance on imported recyclables from other countries. Operation of waste management as a separate utility leads to full-cost accounting to identify total costs of waste management, which can then be charged back to the consumer, the residential taxpayer.
Using an approach where costs are charged in proportion to the amount of service used is fairer than the current system, where the cost is not linked to the service used. Households that put out 10 bags of garbage each week pay the same as households that put out one bag of garbage and use the system much less. Where municipalities have moved to a unit-pricing mechanism for residential solid waste management, concerns regarding illegal dumping have been managed through diligent enforcement of anti-dumping by-laws.
Municipalities should consider the introduction of partial- and full-unit pricing mechanisms to pay for residential solid-waste management, along with the creation of a separate utility for managing residential solid waste, to reduce the amount of residential waste disposed and to encourage the development of more efficient residential waste management systems in Canada. Provincial and territorial governments should encourage municipalities to adopt user-pay mechanisms, perhaps through regulation or as a condition for provincial financial support.
Size Matters
In 2002, Canada produced over 30 million metric tonnes of solid non-hazardous waste, which includes that from residential, institutional, commercial and industrial (IC&I) and construction and demolition (C&D) sources. 24 million tonnes of waste were disposed in publicly and privately owned landfills and incinerators in Canada and the U.S. About 9.5 million tonnes were from residential sources, approximately 11.5 million tonnes were from IC&I sources and some 3.8 million tonnes were C&D materials. Each household in Canada produces slightly less than 1 tonne of waste per year; about a fifth is recycled.
Residential of household waste includes waste from single family, multi-family, high-rise and low-rise residences, waste managed through backyard composting and grass-cycling, material that is self-hauled to depots, transfer stations or landfills, and waste that is picked up for recycling or composting, or disposal in landfills or incinerators.
Municipalities employed more than 8,100 people in waste management service activities, and waste management businesses had more than 24,300 people on their payrolls across Canada in 2002, the latest year for which figures are available (Statistics Canada 2002).
Municipalities and other government bodies which provide waste management services spent $1.5 billion on waste management activities in 2002. About $800 million of this represented payments by municipalities or municipal organizations to contracted waste management firms.
Operating revenues of businesses in the waste management industry totalled $4.1 billion...
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