Is Taxing Waste a Waste of Time? Evidence from a Supreme Court Decision

Abstract

A B S T R A C TEnvironmental taxes are often underexploited. This paper analyses the effectiveness of a garbage tax, assessing its effects on multiple outcomes as well as its acceptability. We study how a Supreme Court decision, mandating the Swiss Canton of Vaud to implement a tax on garbage, affects garbage production and beliefs about the tax. We adopt a difference-in-differences approach exploiting that parts of Vaud already implemented a garbage tax before the mandate. Pricing garbage by the bag (PGB) is highly effective, reducing unsorted garbage by 40%, increasing recycling of aluminium and organic waste, without causing negative spillovers on adjacent regions. The effects of PGB seem very persistent over time. Our assessment of PGB looks very favourable. It may surprise that PGB is not implemented more often. Hence, we look at people's perceptions. We find that people are very concerned with PGB ex ante. Public opposition seems to be the main obstacle to PGB. However, implementing PGB reduces concerns with effectiveness and fairness substantially. After implementing PGB, people accept 70% higher garbage taxes compared to before PGB. We argue that environmental taxes could be much more diffused, if people had the chance to experience their functioning and correct their beliefs.

Wasted in Waste? The Benefits of Switching from Taxes to Pay-as-you-throw fees: The Italian Case

“…More recently, Allers and Hoeben (2010) applied a difference-in-difference approach to control for unobservable local characteristics on a sample of 458 Dutch municipalities and found a significant effect for unit pricing in reducing waste generation and increasing recycling, even after controlling for endogeneity; the price effect depends on the pricing system: weight-based systems reduce waste quantities more than volume-based systems (for compostable waste they estimate an elasticity of -1.77 with respect to weight-based PAYT). Similar evidence was provided more recently by Morlok et al (2017) for Germany and by Carattini et al (2018) for Switzerland.…”

Poorer and less political fragmented Dutch municipalities take tighter waste reduction decisions

“…It is shown that illegal disposal may be an issue in the Netherlands as some early innovators, such as the municipality of Oostzaan, moved back to a flat system due to illegal disposal. By contrast, in the Swiss city of Lausanne, Carattini et al (2018) show that four years after the introduction of a unit-based pricing system, illegal disposal remained a minor issue.…”

Overcoming public resistance to carbon taxes

“…Another survey shows that, once the policy was in place, both commuters and noncommuters were less skeptical about it (D. Andersson & Nässén, 2016). Carattini et al (2018) exploited a regulatory change in a region of Switzerland, which enabled them to analyze people's perceptions and acceptance of pricing domestic refuse by the bag before and after the scheme's implementation, and to compare them with a control group composed of people living in municipalities that had already implemented the tax. Their study suggests that residents were willing to pay 70% more for the price of a refuse bag once the policy was implemented than they had been before.…”