The Impact of Integrating Economic Incentives to Promote Recycling in Waste Management

Abstract

Efficiency of recycling schemes is characterized by high participation rates and high recycling quotas as key performance indicators. One possible approach to promote efficient recycling is the implementation of economic incentive schemes. In this study, existing international incentive schemes were analysed based on an extensive literature review in combination with semi-structured expert interviews, in order to determine their limitations and potentials. Several influencing factors were derived and adopted for considerations concerning the potential implementation in civic landfill sites in Africa. Recommendations for a successful planning and implementation of incentive schemes are given. For highly developed, comprehensive collection schemes, accompanying economic incentive schemes can help to boost popularity and participation rates.

CHAPTER ONE

BACKGROUND TO STUDY

Waste, as defined by the Basel Convention, is “substances or objects which are disposed o f or are intended to be disposed of or are required to be disposed of by the provisions of national law”. More specifically, “waste is generated when a product or material begins to be treated as waste, and managed as such. Thus, waste generation includes material that is generated, collected and then recycled, composted, burned with or without energy recovery, or landfilled” (OECD, 2004). Though no single definition o f sustainable waste management exists, the concept refers to the efficient use of material resources to reduce the amount o f waste produced and, where waste is generated, to managing it in a way that actively contributes to the economic, social and environmental goals o f sustainable development1.

From this perspective, waste generation levels are often excessively high and the allocation o f waste to the various disposal options inefficient. This is due to a lack o f appropriate pricing signals, as the full social costs of landfilling, incineration, and recycling are not adequately reflected in the market. The underpricing of landfills, for example, makes the waste stream larger than it otherwise would be, since recycling and conservation are rejected in favour of artificially cheap landfilling. Furthermore

The issue of waste management is an important one, representing a potentially large source o f misallocation of resources, and the environmental externalities associated with waste disposal are both significant and long-term. In the OECD countries4, over 35% of known public and private sector environmental-related expenditures are directly linked to waste (OECD, 2000). Current expenditure on waste management in the European Union (EU) amounts to approximately 48 billion Euro per year (around 14 per cent o f which is related to packaging), which constitutes 0.6-0.7 per cent of GDP and 40 per cent of total environmental expenditure (Linher, 2005). It is evident that concerted policy action will be required to mitigate and reverse the trends in waste generation, and to dispose of the waste stream in the most efficient way

The amount of extraction of natural resources and waste is continuously increasing along with global development and population growth resulting in increased environmental degradation. In Nigeria, the annual amount of waste has increased by 30% since 1995 (SSB7, 2010) which demonstrates the continuous increase in consumerism. There is a pressing need to increase levels of recycling in both public and private sectors. Recycling implies a cost to the individual, but a benefit for society and the environment. So the individual must make a decision between doing what is in the interest to oneself or the social group; this form of situation is termed a social dilemma (SD). Stern (1978) suggested two ways to attempt to resolve a SD and the first is to make it in the interest of the individual to behave in a prosocial manner. The second is to persuade individuals to accept the pro-social values. In order to do this, appropriate policy instruments must be used. Some of the potential instruments are economic incentives (EIs) (e.g. taxes, subsidies, tradable permits), legislation (e.g. bans, permits, standards) and informational measures (e.g. campaigns, recommendations, labeling). The purposes of these are to change the costs, framework conditions, preferences and habits, respectively. Such incentives are created to motivate people to make certain choices and engage in certain behaviors. Increasingly, several policy makers adopt the first solution suggested by Stern (1978) and introduce EIs with the rationale being that it makes what is socially desirable individually beneficial as well (Peace & Turner, 1992, in Thøgersen, 1996). Their predicted effects are based on neoclassical economic theory, but its use has been criticized on several grounds, some of which will be described. In this research, classical institutional economic theory is argued to be a more reasonable model in predicting choice, as it recognizes that institutions have an influence on people’s preferences and therefore their choices. Meanwhile, neoclassical economic theory views institutions as external to an individual, and that they cannot change an individual’s set preferences.

STATEMENT OF PROBLEM

Even though EIs often guide individuals to make choices that are socially desirable, they should not be assumed to be the most effective nor efficient instrument to take to resolve all SDs. In some cases they are found to not have their predicted effect (Katzev and Pardini, 1987). EIs can also have negative effects if implemented to change behaviors that are based on or steered by norms and/or habits. They may cause the initial motivations to be replaced, or ‘crowded out’, by economic motivations by reframing the behavior from a ‘domain of morality’ to a ‘domain of economy’ (Schwartz, 1970, in Jackson, 2005). The EI could also remove internal rewards gained from the behavior and therefore reduce utility. Moreover, some may reduce their engagement in a behavior because the price or fee may be seen as sufficient for ‘buying’ the service of others (Frey, 1993; in Thøgersen, 1996). On the other hand, if the EI is seen as symbolic in the sense that it tells a person that one is doing the ‘right’ thing, it may encourage the behavior (Frey, 1993; in Thøgersen, 1996). It is suggested that doing ‘the right thing’ is a motivation in itself, even when the behavior does not add to the individual’s utility (Vatn, 2005). Moreover, it has been argued that some behaviors are not necessarily consciously calculated upon but are rather learned habits from young age (Hodgson, 1988). Hence, it is important to understand and highlight what situations EIs are not an appropriate policy instrument. The pro-environmental behavior studied here is recycling and the circumstances are that an EI is present in Nigerian municipalities where recycling norms and habits are to an extent already established.

Objective of the study

The broad objective of the study is to examine the impact of integrating economic incentives to promote recycling in waste management. Specifically the study will examine:

The Scopes for design of incentive schemes the efficiency of Design alternatives of reward schemes influencing factors economic incentives as a tool for promoting recycling in waste management.

Research Questions

The research question for this study are;

1. What is the Scope for design of incentive schemes?

2. Are the Design alternatives of reward schemes efficient?

3. What are the factors influencing economic incentives as a tool for promoting recycling in waste management?

Significance of study

In order to create an effective recycling policy, an understanding of what motivates people to recycle is required. Just as important, one must be aware of how the incentives in place work and what their effects are. The purpose of this study is to contribute to the literature on the effect of EIs on household recycling, as well as whether and how it influences motivations surrounding the behavior.

Scope of study

Scope of this study is streamlined towards an evaluation of the suitability classical institutional economic theory in explaining and predicting motivations and behavior compared to neoclassical economic theory. The expected success of EIs stems from the neoclassical economic theory as its assumptions entail that its implementation cannot have negative outcomes