This article provides an overview of the economics of solid waste, and related issues. Public attention to solid waste and recycling has increased in India. In response, economists have developed models to help policymakers choose an efficient mix of policy levellers to regulate solid waste management and recycling activities.
For many years, economists engaged in research studies related to municipal solid waste (MSW) were hampered by the general lack of data. Very few municipal governments bothered to keep accurate data on the quantity of waste generated, its composition, information about landfills, and any data on the economics of MSW. Therefore, India has no time series data or panel data in connection with solid waste. Economists found it very difficult to gather solid waste generation data. For example, there was inadequate data regarding cost analysis in most municipal governments. It was difficult to understand the empirical relationship between costs and the benefits of MSW management policies.
Rapid urbanisation and population growth increased solid waste generation in the past decade. Inadequate solid waste management policy and the absence of appropriate guidelines led to serious health and environmental problems all over India. The Municipal Solid Waste Management Handling Rules, 2000 indicated that all the municipal authorities should take the responsibility of waste collection, transportation, disposal, and segregation of solid waste. But most municipality solid waste management practices proved to be highly inefficient.
The “environmental Kuznets curve” suggests that environmental pollution would initially increase with per capita gross domestic product (GDP) and after a point the per capita GDP and emissions become delinked. Although to our knowledge, there is no research or survey to validate the environmental Kuznets curve for solid waste generation in India, a large number of studies had been carried out in developed countries—Mazzanti and Zoboli (2009) in Italy, Johnstone and Labonne (2004) in Organisation for Economic Co-operation and Development (OECD) countries, and Yamamoto and Ichinoe (2009) in Japan. Most studies on India carried out only preliminary analyses in relation to solid waste management. There are a large number of issues such as the difficulties in decision-making and the problem of cost planning in India. For example, data unavailability and the inaccessibility of areas were the most common problems of solid waste management planners in India.
Solid Waste Disposal and Costs
In India, municipal agencies spend about 5%–25% of their budgets on solid waste management. Although, most local governments manage MSW collection and disposal in many parts of Indian states, many states had inefficient construction and operation of MSW landfills and incinerators. A review of recent literature on solid waste management in India point out that institutional and financial issues are the most important ones which had shown improvements in solid waste management.
Very little was known until a few years ago, about external costs. Economies of scale for factors for MSW since Hirsch (1965), DeGeare and Ongerth (1971), Clark et al (1971), Wilson (1981), Moon (1994), Fullerton and Kinnaman (1996), Callan and Thomas (1997), Kinnaman and Fullerton (2000), and Bohm et al (2010), have mainly predicted the collection and recycling costs and the future generation rates of MSW, and provided evidence that the procedure could be used as a simple planning tool. The works cited in MSW economic literature focused on specific regions in the developed world. There seemed to be no efforts made in the cited literature at providing generated cost functions which were applicable to developing countries like India.
In India, the cost function of solid waste management had not been studied properly. In Delhi, the per capita expenditure on solid waste management was found to differ widely. For example, the Federation of Indian Chambers of Commerce and Industry estimates costs at Rs 431 per tonne, The National Institute of Urban Affairs (2005) at Rs 135, and the National Solid Waste Association of India (2010) puts it at Rs 497.
Landfills become increasingly expensive because of rising costs of construction and operations. Yet, the available space for landfills decreased and land prices rose, while the environment had either no price or had non-optimal prices assigned to it, which in turn had led to overuse or over-exploitation of these functions and resulted in misallocation of resource. Therefore, environmental problems such as solid waste management are problems of non-optimal pricing and misallocation, which means overuse of resources, and unforeseen externalities.
In India, urban local bodies spend around Rs 500 to Rs 1,500 per metric tonne of solid waste, out of which 60% to 70% is usually spent on collection alone, and 20% to 30% is on transportation. An improper solid waste management approach resulted in all types of pollution — air, solid and water — and as much as 95% was discarded as MSW. Health and safety issues also arise from improper solid waste management which increases environmental and health costs all over India, and waste workers or scavengers, are worst affected due to constant exposure and frequent injuries.
Solid waste management had traditionally been addressed with command and control (CAC) regulations, which regulated behaviour directly by prescribing specific legislations and standards which should be achieved and by enforcing their compliance through the levy of penalties. Economic Instruments (EIs), such as environmental taxes and subsidies sought to change the behaviour of persons indirectly by changing relative prices (and hence incentives) that individuals and businesses had to bear. In the context of solid waste management, it was ineffective in India. Examples of EIs that could be used for solid waste management include product and input taxes, deposit-refund schemes, and quantity-based waste collection charges.
The use of EIs increased in developed countries and they could be effective in reducing waste generation, diverting waste from disposal to recycling, and by converting waste to energy. Till date there had been few studies on using economic instruments for waste management. Das, Birol and Bhattacharya (2008) had studied solid waste management to improve local environmental quality and public-health choice in West Bengal. They had found that the Indian population demanded improved solid waste management services in the study area municipalities and that they were even willing to pay for it.
In addition, the polluter pays principle (PPP) could also be invoked. In the context of solid waste management, PPP implied that all waste generators, including households and companies were responsible for bearing costs associated with wastes they had generated. The PPP means that both producers and consumers should pay in India. Yedla and Parikh (2001) had found that waste disposal expenses for a tonne of waste by the landfill system with gas recovery in Mumbai, were found to be much less than those of the existing practices of waste disposal in other areas, and a huge saving of about Rs 6.4 billion per annum was calculated. It was found that a properly managed landfill system could even yield some good profits. Paul P Appasamy (2004), in his study had calculated that biomethanation had high benefits and high costs compared to the sanitary landfills approach. The cost of the sanitary landfill was completely dependent on the price of the land that was available. The large negative benefit was due to the fact that the land costs were estimated to be about Rs 25 crore. Both biomethanation and sanitary landfill systems emit greenhouse gases, the main difference being that sanitary landfills emit some methane (even after the provision for gas collection), which is much more detrimental to the environment than carbon dioxide. The benefit to society of Rs 45 crore consisted of not only the net social benefits of biomethanisaiton, but also the costs averted due to the landfill system.
Waste and Poverty Reduction
At present, new forms of disposal had arisen in most societies due to the process of globalisation and other modern developments. Cities have an increasingly important role to play in societies as the pace of urbanisation and globalisation becomes more rapid. Cities have to managed more responsibly for their dwellers (Lazarev 2008). The New York Times (in a letter it published) re-emphasised India’s enormous waste problems, with special reference to scavengers and ragpickers. The inefficient mechanism of waste collection and recycling by municipalities has led to a growing informal economy, based on the collection of reusable wastes by ragpickers, which amounts to more than $280 million annually in economic value (Kapur 2011). With slow, scattered, and inefficient government initiatives to solve India’s solid waste problems, the country might find a solution, or a part of the solution, in the informal networks that currently exist in the country.
India generates more than 100 million tonnes of municipal waste every year. On a per capita basis, this was far lower than most developed countries, but the amount of garbage generated has been growing fast. The OECD estimated that only about 60% of the municipal waste in the country is collected and a far smaller proportion recycled. Martin Medina, an expert in the management of the informal waste sector, had estimated that scavengers or ragpickers collected more than 10,000 tonnes of reusable waste across India every day. The informal waste recycling involves the urban poor and marginalised social groups that engage themselves in waste picking as a source of income, and often, as their only survival strategy. In an unequal society, however, informal waste recycling would continue in the foreseeable future also.
Many thousands of people in developing cities depended on the recycling of materials collected from waste for their livelihood. With the focus of the Millennium Development Goals on poverty reduction and of waste management strategies for improving recycling rates, one of the major challenges in developing countries is about how best to work in this informal sector to improve livelihoods, working conditions, and efficiency of recycling (Wilson, Velis and Cheeseman 2006).
Worldwide, more than 15 million people make a living in the informal collection, recycling, and handling of solid waste. Informal refuse collection could be a profitable activity. The informal refuse collectors of Cairo, popularly known as Zabbaleen, earn about three times the city’s minimum wage. A research study had found that informal refuse collectors operating in the Mexican city of the Nuevo Laredo, on the tax border, had earned five times that of the minimum wage putting them in the top 3% of income earners in that city (Medina 2008). In Brazil, for example, waste picking had been recognised as an organised sector, and workers enter into informal agreements or even formal contracts with business, industry, and with neighbourhood associations to gain access to recyclable materials or to sell materials or manufacturing items. In a survey conducted in six Latin American countries, more than 90% of waste pickers had reported that they liked the job that they did and considered it a decent job (Medina 2008). Recycling by waste pickers saved municipalities much money while reducing the volume of waste that had to be collected, transported, and disposed.
In Mumbai, more than 30,000 waste pickers had recovered reusable items that could be recycled from the stream of waste. Waste pickers had created more than 400 micro enterprises that processed waste materials and made consumer products out of them. The economic impact of these activities had been estimated at $600 million to 1 billion a year (Medina 2007). For example, Madurai has more than 500 waste pickers engaged in waste collection. I spent a month with waste pickers in the village of Vellakkal (solid waste dumping area in the Madurai District). One respondent, Periya Mariyappan, who was about 62 years old has been in collecting garbage in the area for more than three and half decades with his wife Palaniyammal who was about 51 years old. Both of them said they now earned more than Rs 500 a day. Another waste picker name Veerammal, who was about 48 years old, had been working more than two decades in waste collection. She said this work was of huge help to her family and she had been for earning Rs 250 per day, and had saved more than Rs 45,000 for her daughter’s wedding to be celebrated next year. Waste pickers were important in the waste recycling process, but they are not recognised formally and they face several problems every day in the course of their work.
The external costs of waste should be estimated in every municipality in India. As noted earlier, very few economic analyses have been conducted and hence further research around solid waste management has to be carried out. The government aims to consider environmental protection with the market activating both preventive tools to asses and reduce damage to the environment and mechanisms to enhance good market functioning. New solid waste plans acquire management features rather than following the previous logic based on final elimination of goods discarded. The polluter pay principles extends to all actors: producers, consumers and institutions. There is a need to evaluate, in advance, the impact of the targets set by the laws for recycling by taking into consideration region-specific needs, so that proper polices are developed for all actors. Recycling chains could benefit thousands of low-income and vulnerable sections of people at the national level and it will contribute to the fight against climate change.
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