Monday, 24 December 2007

Festive rubbish

On the topic of charges for refuse collection, I posted this at the Adam Smith blog recently, and it seems to fit in well with Xmas theme (all that wrapping and packaging!) so I'll repeat it here.

There are costs associated with disposing of stuff, let's take fridges, for example. Let us assume that it costs £20 to dispose of a fridge properly (siphon off CFC's, separate out steel parts for re-use, if that is economically rational etc). Rather than charging people £20 to dispose of a fridge, they should put a £20 tax on new fridges (most new fridges are replacements for old fridges) rather than try and charge for getting rid of old fridges (which just leads to fly-tipping).

There is no reason why the same shouldn't apply to everything else. If it costs £10 to collect a ton of rubbish and the waste incineration plant is happy to pay £5 for it to use as fuel for generating electricity, then there should be a £5 per ton tax on plastic, paper, polystyrene etc. 

There is then no need for an additional charge on disposal - it's been paid for! 

This doesn't quite work for garden waste of course, but that would be covered by land value tax (bigger garden = more grass cuttings and so on). 

Simple is good, good is simple. 

6 comments:

The Great Simpleton said...

Mark,

I agree, polluter pays should be the founding principle behind all waste.

But how do we cost in the cost of collection? Furthermore, we need to incentivise (horrible word) people to recycle, even if what they are recycling has a pollution tax at soiurce.

Simon Clark said...

Some problems:

Not everything that is bought is thrown away. If people are forced to pay the cost of throwing it away when they buy it, they lose the incentive to keep things, reuse them, hand them down etc. Those who don't throw things away are unduly taxed.

Similarly, there will be increased incentives to buy second hand and decreased incentives to sell second hand as the original purchaser is the one who paid the disposal costs. In other words, there's going to be less second hand stuff around (at higher prices) and thus more stuff being thrown away.

Not everything that is bought stays as-is. If people pay for the cost of disposing what they buy, not what they throw away, they lose the incentive to keep disposal costs low with what they buy e.g. if I buy a piece of metal, disposal costs are low at purchase so I can eradiate it or otherwise make it hazardous or expensive to dispose with no cost to myself. Equally, there is no incentive to reduce disposal costs e.g. why should I fold up my cardboard boxes or clean out my bottles if I already paid for the cost of throwing them out as they are?

The tax might be reduced in the fashion you describe of seeing how much firms will pay for the garbage, but are they going to be honest about what they are willing to pay and is government going to do a good job getting the best deal for us? No one is as careful with someone else's money as he is with his own, and no one is as careful buying things for other people as they are buying things for other people.

How can we create a market for disposal if everyone is forced to pay a flat fee for disposal at purchase? How can there be choice?

If we don't allow choices and have government decide, is government going to make good decisions about the best way to dispose of garbage? It doesn't currently.

Mark Wadsworth said...

GS, the tax, broadly speaking = the costs of collection, the costs of collection are what private bidders are prepared to accept (providing certain minimum standards are met).

SC, as to folding up boxes or cleaning bottles, that is just relying on human decency. If people do this and cut their local council's collection costs, then all things being equal, their local tax bill goes down. But flattening boxes or cleaning bottles is probably a waste of time anyway, that can be done much cheaper by machines.

As to second hand stuff, the difference in price between a second hand a new fridge would fall by £20. So the chap who wants to replace a fridge gets £20 more for his second hand one and pays £20 more for his new one. That doesn't discourage buying a second hand fridge, much the opposite if anything.

So, such a tax does not discourage people from throwing things away (as you point out), but it does marginally discourage people from replacing things, and if you don't throw away the old thing you can't replace it with a new thing.

Mark Wadsworth said...

SC, sorry, the difference in price between a new and a second hand fridge would initially INCREASE by £20 (not fall, obviously).

But that would be more or less competed away, so the two prices would move in line - because the chap who sells his fridge second hand rather than dumping it would of course gain by nearly £20, which would cover the £20 tax he pays on the new one.

Anonymous said...

Two quibbles:
1. We already pay a tax on new stuff (VAT), so disposal is paid for now.

2. Garden waste is valuable - raw material for compost - so we should be paid for proving it

Mark Wadsworth said...

Anon, well spotted, VAT is probably the worst tax, so I'd phase it out first.

Secondly, if garden waste has value, then people will pay for it, ergo it costs the council money to collect it but they recoup some or all of that from purchaser, so maybe they even make a turn on the deal.