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Article Excerpt
Abstract
Municipal solid waste is often transferred to landfills in other regions or states. While municipalities frequently resist imports, the interpretations of the Interstate Commerce Clause require that landfills accept waste regardless of its origin. This may require importers to act in ways that are not in their own best interest. The analysis of this paper suggests that importers benefit from trade when their landfill is so large that it is not exhausted at the end of the planning period. However, when landfill capacity is sufficiently scarce, importing waste is not welfare enhancing. Such municipalities have considerable motivation to try to de facto exclude waste from outside the municipality. (JEL L51)
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Introduction
Transfers of municipal solid waste between municipalities garner the occasional headline or grass roots political response. However, such reactions belie the daily occurrence of waste transfers. For example, in 2001, the Chicago Metro Region exported 26 percent of its waste while all other regions in Illinois were net importers. The amount of waste imported as a fraction of the waste generated locally ranged from about 40 percent to over 300 percent. As a whole, transfers accounted for about a third of all waste landfilled in the state. Waste transfers take place not only within a given state but also between states. Ley, Macauley, and Salant [2002, p. 190] report that about 10 percent of municipal solid waste is transferred between states nationwide. They also summarize the most important institutional aspect of waste transfers: a potential exporter can always choose not to export, but an importer faces great difficulty in excluding waste from outside its jurisdiction because of Supreme Court rulings [Ley, Macauley, and Salant, 2002, pp. 190-92]. This fact notwithstanding, in their numerical simulations, trade in waste always improves welfare compared to no-trade or autarky.
Therefore, why do states (and citizen groups) resist and try to limit imports if importing is welfare enhancing? Are states and citizens simply making bad policy decisions? In fact, most states have attempted to restrict or ban waste imports. However, "most of these restrictions have been struck down by the courts as violations of the Interstate Commerce Clause of the United States' Constitution" [Ley, Macauley, and Salant, 2002, p. 191]. The primary result of this paper is that the potential benefits for an importer depend on the size of the importer's landfill relative to its internal demand for landfill space.
To simplify the analysis, suppose there is a waste exporter and a waste importer. (This paper abstracts from the question of whether the importer and exporter are thought of as states, regions, or municipalities. Instead, they are referred to as municipalities.) The exporter has a landfill but its capacity is relatively small and so it also transfers (exports) waste to the importer's landfill. Thus, the importer's landfill accepts waste from its own residents and transfers (imports) waste from the exporting municipality. Waste which is not landfilled is recycled. Recycling is a backstop waste disposal technology, which is more expensive per unit than landfilling. All prices are exogenous except for the tipping fee, which is endogenous. The market structure is such that the exporter is always a price-taker with regard to the tipping fee. The importer is modeled both as a price-taker and a price-setter.
This paper may be best thought of as complementary to Ley, Macauley, and Salant [2002] and the earlier version of that paper [Ley, Macauley, and Salant, 2000]. They do a numerical simulation of the welfare effects of various policy proposals compared to a baseline model. Demand for waste disposal is linear and the measure of welfare is consumer surplus (less costs). While this paper also relies on numerical simulation, it begins with utility functions rather than demand curves, and most importantly, does not find that importing waste is always welfare enhancing. Most of the work of the paper will be to find ranges of parameters where trade is welfare enhancing and ranges where it is not.
Besides Ley, Macauley, and Salant [2000, 2002] and this paper, other papers in the municipal waste management literature that consider a landfill as an exhaustible resource and other methods of waste disposal (recycling or incineration) as backstop waste disposal technologies (but do not focus on transfers) are Huhtala [1997] and Highfill and McAsey [1997, 2001a, 2001b]. Other approaches to waste management include Callan and Thomas [2001], who focus on the cost side of waste disposal; Calcott and Walls [2000], who have a static model of optimal policy designed to reduce consumer waste; and Huhtala [1999], who has a dynamic model of renewable resources and waste accumulation (without an upper bound on landfill capacity). In addition to considering the welfare benefits...
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