Innovative market-based policy instruments for waste management: A case study on shredder residues in Belgium.

In an increasingly complex waste market, market-based policy instruments, such as disposal taxes, can give incentives for sustainable progress while leaving flexibility for innovation. However, implementation of disposal taxes is often criticised by domestic waste handlers that fear to be outcompeted by competitors in other countries. The article discusses three innovative market-based instruments that limit the impact on international competitiveness: Tradable recycling credits, refunded disposal taxes and differentiated disposal taxes. All three instruments have already been implemented for distinct environmental policies in Europe. In order to illustrate how these instruments can be used for waste policy, the literature review is complemented with a case study on shredder residues from metal-containing waste streams in Belgium. The analysis shows that a conventional disposal tax remains the most efficient, simple and transparent instrument. However, if international competition is a significant issue or if political support is weak, refunded and differentiated disposal taxes can have an added value as second-best instruments. Tradable recycling credits are not an appropriate instrument for use in small waste markets with market power. In addition, refunded taxes create similar incentives, but induce lower transactions costs.

Towards a coherent European approach for taxation of combustible waste.

Although intra-European trade of combustible waste has grown strongly in the last decade, incineration and landfill taxes remain disparate within Europe. The paper proposes a more coherent taxation approach for Europe that is based on the principle of Pigovian taxation, i.e. the internalization of environmental damage costs. The approach aims to create a level playing field between European regions while reinforcing incentives for sustainable management of combustible waste. Three important policy recommendations emerge. First, integrating waste incineration into the European Emissions Trading System for greenhouse gases (EU ETS) reduces the risk of tax competition between regions. Second, because taxation of every single air pollutant from waste incineration is cumbersome, a differentiated waste incineration tax based on NO(x) emissions can serve as a second-best instrument. Finally, in order to strengthen incentives for ash treatment, a landfill tax should apply for landfilled incineration residues. An example illustrates the coherence of the policy recommendations for incineration technologies with diverse environmental effects.

Extended producer responsibility for consumer waste: the gap between economic theory and implementation.

Although economic theory supports the use of extended producer responsibility (EPR) to stimulate prevention and recycling of waste, EPR systems implemented in Europe are often criticized as a result of weak incentives for prevention and green product design. Using a stylized economic model, this article evaluates the efficiency of European EPR systems. The model reveals that the introduction of static collection targets creates a gap between theory and implementation. Static targets lead to inefficient market outcomes and weak incentives for prevention and green product design. The minimum collection targets should be complemented with a tax on producers for the non-collected waste fraction. Because such a tax internalizes the cost of waste disposal, more efficient price signals will lead to better incentives for waste management in a complex and dynamic market.