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July 2002

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by Lisa A. Skumatz, Ph.D.

Project Director: Kenneth Green, D.Env.




Reason Public Policy Institute

������ ������ ��������� A division of the Los Angeles-based Reason Foundation, Reason Public Policy Institute is a public-policy think tank promoting choice, com- petition, and a dynamic market economy as the foundation for human dignity and progress. Reason produces rigorous, peer-reviewed research and directly engages the policy process, seeking strategies that emphasize cooperation, flexibility, local knowledge, and results. Through practical and innovative approaches to complex problems, Reason changes the way people think about issues and promotes policies that allow and encourage individuals and voluntary institutions to flourish.

Reason Foundation Reason Foundation is a national research and education organization that explores and promotes the twin values of rationality and freedom as the basic underpinnings of a good society. Since 1978, the Los Angeles-based Foundation has provided practical public-policy research, analysis, and commentary based upon principles of individual liberty and responsibil- ity, limited government, and market competition. REASON, is the nation’s monthly magazine of “free minds and free markets.” It covers politics, cul- ture, and ideas through a provocative mix of news, analysis, commentary, and reviews.

Reason Foundation is a tax-exempt organization as defined under IRS code 501(c)(3). Reason Foundation neither seeks nor accepts government funding, and is supported by individual, foundation, and corporate contributions. Nothing appearing in this document is to be construed as necessarily representing the views of Reason Foundation or its trustees, or as an attempt to aid or hinder the passage of any bill before any legislative body.

Copyright © 2002 Reason Foundation. Photos used in this publication are copyright © 1996 Photodisc, Inc. All rights reserved.

Policy Study No. 295 Variable-rate or “Pay-as-you-throw”

Waste Management:

Answers to Frequently Asked Questions BY LISA A. SKUMATZ, PH.D.

Executive Summary A s landfills fill up and recycling opportunities increase, more communities across the nation are interested in reducing waste disposal and its costs. City managers are considering a variety of strategies to improve incentives to recycling and composting, as well as increasing the variety of materials that can be recycled or composted.

Currently, in most parts of the country, garbage is removed once or twice a week with revenues coming from

one of two places:

–  –  –

A fixed bill amount that does not vary with respect to the amount of garbage taken away.

Neither method provides an incentive to reduce waste. In fact, with the property tax method of payment, customers never even see a bill and generally have no idea how much it costs to remove their garbage regularly. Areas using this method of payment have sometimes implemented mandatory recycling programs to reduce their amount of garbage.

Variable-rate pricing, or “pay as you throw,” is a new strategy with a growing number of advocates. Under a variable-rate system, customers are provided an economic signal to reduce the waste they throw away because garbage bills increase with the volume or weight of waste they dispose. Variable-rate pricing is being adopted in thousands of communities to create incentives for additional recycling in the residential sector.

Variable-rate programs are very flexible and have been implemented by communities in many forms. The most common types of variable-rate programs are can programs, bag programs, tag and sticker programs, and hybrid programs. Other less common programs include weight-based rates. Each program type is briefly summarized below.

Can Programs. Customers select the appropriate number or size of containers (one can, two cans, etc., or 30–35 gallons, 60–65 gallons, etc.) for their standard weekly disposal amount. Residents who use larger cans or numbers of cans are charged more.

Bag Programs. Customers purchase bags imprinted with special logos ahead of time, and waste must be put in the appropriate bag (i.e. yard waste, recyclables, regular “wet” waste, etc.). The price of the bag incorporates the cost of the collection, transport, and disposal of the waste.

Tag and Sticker Programs. These programs are almost identical to bag programs, except instead of using a special bag, customers affix an appropriate sticker or tag that identifies the type of waste they are disposing.

Hybrid Programs. These programs form a hybrid of the current collection system and a new incentivebased system. Instead of receiving unlimited collection for payment of the monthly fee or tax bill, the customer gets a smaller, limited volume of service for the fee. If the customer needs to dispose of additional waste, there is an additional charge such as a fee per bag or additional container.

Weight-based Programs. This system uses a modified scale on trucks to weigh garbage containers and charge customers based on the actual pounds of garbage set out for disposal. On-board computers record weights by household and customers are billed on this basis.

Other Variations. Some communities or haulers offer variable rates as an option along with their standard unlimited system. Waste drop-off programs, that use punch cards or other customer tracking systems, are also in place in some communities.

Some systems are more appropriate than others, depending on local conditions. Larger communities and urban and suburban communities tend to use can programs. Smaller communities and more rural communities are more likely to use bag, tag, or sticker programs. Bag and drop-off programs are most prevalent in the East, can and bag programs are most common in the Midwest and the South, and can programs are the most popular in the western U.S.

Each type of variable-rate system has strengths and weaknesses. Key advantages and concerns are discussed in the following sections of this study. The factors driving the growth in each program are presented. The study also provides information on appropriate program selection, implementation issues and tips, and rate setting.

This study demonstrates that rate incentives in solid waste have strong and measurable effects on waste disposal behavior and waste disposal. Towns implementing variable-rate programs can expect to see reductions of more than 15 percent in tons disposed, with increases in recycling, yard-waste diversion, and measurable impacts on the highest rung on the waste-management hierarchy: source reduction.

Ultimately, variable rates can help reduce the burden on the disposal system and lead to more efficient resource use, reduced environmental burden, and lower long-run solid waste system management costs. The programs enhance community recycling and waste reduction programs. While these programs may not be appropriate in all communities, many communities can benefit from variable rates. This report offers guidance to communities wishing to examine the feasibility of variable rates for their solid waste systems.

Policy Study No. 295 Table of Contents What is variable-rate waste disposal, and what are its benefits?

Why apply market principles to waste management?

What are the different types of variable-rate waste-disposal pricing systems?

Who is implementing variable-rate waste-disposal pricing?

How does state legislation affect adoption of variable-rate waste disposal?

What are the tonnage impacts of implementing variable rates?

How does variable-rate waste-disposal pricing relate to source reduction?

Which types of variable-rate waste-disposal pricing are more effective at increasing recycling?

Does variable-rate waste disposal automatically increase recycling?

Do higher rates or rate bands increase recycling?

How does variable-rate waste-disposal pricing reduce waste volumes at the curb?.............15 Do variable-rate programs increase illegal dumping?

Is variable-rate waste-disposal pricing difficult to administer?

A. Payment Strategies for Large Families and Low-income Customers

B. Revenue Uncertainty

C. Multi-family Buildings

D. Customer Acceptance

What are the concerns and advantages of pricing by weight instead of volume?.................18 What type of system is right for a given community?

What are the implementation and administration costs of variable-rate waste-disposal pricing?

What are the key elements of a variable-rate pricing waste-disposal program?

A. Key Steps and Policy Changes

B. Rate Levels, Steepness, and Program Fees

How can we get variable-rate waste-disposal pricing implemented in our community?.......26 About the Author


Related Reason Studies


What is variable-rate waste disposal, and what are its benefits?

Systems of pricing trash for disposal are known by a variety of names: variable rate, pay by the bag, variable-can rate, volume-based, pay as you throw, among others. However, the basic concept underlying all these terms is the same and is very straightforward: customers that put out more waste for collection pay more than those who put out less.

Variable-rate programs provide a number of advantages for communities and residents:

Equity. Variable rates are fair: customers who use more service pay more.

Economic Signal. Under variable rates, behavior affects a bill, regardless of what disposal choices a household makes. Without variable rates, avid recyclers pay the same as large disposers. Variable rates provide a recurring economic signal to modify behavior, and allow small disposers to save money compared to those who use more service and impose more costs on the system.

Lack of Restrictions. Variable rates do not restrict customer choices. Customers are not prohibited from putting out additional garbage; but those who want to put out more will pay more.

Efficiency. Variable-rate programs are generally inexpensive to implement and, unlike recycling programs, do not require additional pick-up trucks. They also help prevent overuse of solid-waste services. Rather than fixed all-you-can-throw charges, which encourage over-use of the service, volume-based rates encourage customers to use only the amount of service they need.

Waste Reduction. Unlike recycling programs alone, which only encourage recycling, variable rates reward all behaviors—recycling, composting, and source reduction—that reduce the amount of garbage thrown away. Source reduction is the cheapest waste-management strategy and thus of the highest priority—and it is not directly encouraged by recycling and yard waste programs.

Speed of Implementation: Pay-as-you-throw programs can be very quickly put in place—one community installed a variable-rate program in less than three months (although most take longer).

Flexibility. “Pay-as-you-throw” programs can be implemented in a variety of sizes and types of communities, with the broad range of collection arrangements.

Environmental Benefits. Because they encourage increased recycling and waste reduction, variablerate programs are broadly beneficial to the environment.

Ultimately, it is anticipated that using variable rates to reduce the burden on the disposal system will lead to more efficient use of services, improved environmental and resource use, and lower long-run solid waste system management costs.

Why apply market principles to waste management?

Research has demonstrated that rate incentives in solid waste have strong and measurable effects on waste disposal behavior. Adapting pricing principles from energy, water, and other utilities, studies show that paying for more (and more specific) garbage service increases recycling and composting and reduces disposal overall.

2 Reason Public Policy Institute

–  –  –

The advantages and disadvantages of each of these systems are summarized in Table 1a and 1b. Using these systems, communities realize savings through reduced landfill usage, efficiencies in routing, staffing, and equipment, and higher recycling. However, there are some negatives: collection changes can lead to additional costs and new administrative burdens (monitoring and enforcement, billing, etc.), rate-setting and revenues are more complex and uncertain, and significant expenditures for public education outreach are necessary for successful implementation of a variable-rate program.

–  –  –

0.8 0.6 0.4 0.2 0 80 85 90 95 96 70 19 19 19 19

–  –  –

Program Type. Overall, data from the survey indicated that 25 percent of variable-rate communities nationwide use a variable-can program, 20 percent use a bag program, 20 percent use a hybrid program, 15 percent use a drop-off location, 10 percent use a sticker program, 5 percent use a tag program, and 5 percent allow residents to choose from two or more programs (e.g. variable can or sticker). However, when one considers the population covered, variable can represents an even greater percentage.

The distribution of variable-rate programs also varies by region. Drop-off and bag programs are most popular in the eastern United States, variable-can and bag programs are used most often in the Midwest and South, and variable-can programs are by far the most popular variable-rate program in the western United States where towns tend to be larger and have automated collection. The complete breakdown is shown in Figures 4 and 5 below.

Population. Figure 5 shows that variable-can programs cover the largest percent of the population, followed by hybrid programs. When variable-rate systems are available, variable-can programs serve 45 percent of the population, hybrid programs serve 28 percent, bag programs serve 9 percent, sticker programs serve 7 percent, tag programs serve 5 percent, and multiple programs serve 4 percent.

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