USER FEES FOR WASTE MANAGEMENT:
NOTES PREPARED BY DAVID MCROBERT
In the United States and Canada, most industrial, commercial and institutional (IC&I) waste generators are charged for waste services on the basis of the quantities of waste that they produce. In contrast, the vast majority of householders are not charged user fees. Instead, residential waste management services are financed through property taxes, provincial grants and subsidies, and revenues generated from the sale of secondary materials. Therefore the user of the service often does not directly pay for the service.
B. The Trend Towards User Fees
In the past five years, many Ontario municipalities have considered charging users for waste management services. Between late 1988 and early 1993 approximately 10 different municipalities asked the provincial government for clarification of these powers in the Municipal Act.1 Most municipalities that have examined or implemented user fees are small and ethnically uniform; larger municipalities that have considered user fees include Peterborough and Ottawa.
In 1993 the Ontario government passed Bill 7 amending several parts of the Municipal Act to give municipalities the authority to implement user pay systems for financing waste management if they choose to do so. It is likely that in the coming years Ontarians will see introduced an increasing number of municipal user pay systems.
1. The Supposed Benefits of User Fees
According to proponents, the main advantage of user fees is that generators are provided with a direct financial incentive to reduce their waste. In other words, the less garbage a household or IC&I user generates, the less it would pay for disposal. Another advantage is that householders become keenly aware of the major sources of residential waste, and adjust their purchasing habits accordingly.
There also can be significant cost savings to municipalities. In many communities with a generator pay system in place, it has been found that residents pay less for the collection and disposal of solid waste after the systems are implemented.
2. Experience in Ontario and U.S.
In the United States, a variety of user fee systems for household waste disposal services have been established in many jurisdictions. In most systems, the charges are administered on a per can or a per bag basis. However, in some cases, the generator can pre-arrange a certain specified level of service on a weekly or monthly basis.
In June 1990, Carlisle Borough, Pennsylvannia (estimated 1990 population of 20,000) simultaneously implemented a per-bag waste collection fee and a borough-wide recycling program. Householders purchase 30-gallon garbage bags costing $2.10 each. Borough officials estimated that they recovered more than 30% of previously disposed recyclables during the first 40 weeks of the user-fee program's operation, saving the Borough $83,504 in avoided disposal costs.2
The Borough of Perkasie in Pennsylvania implemented a volume-based bag program in January 1988 for its 6,000 residents. Residents buy bags capable of holding 40 pounds for $1.75 and smaller, 20 pound capacity bags for $1.00. The program has assisted the Borough in achieving a significant diversion rate; between 1988 and 1992, the quantity of waste being recycled increased by 49% (by weight). Similarly, the quantity of waste being disposed at landfill declined by 51% (by weight).
In 1991, Gananoque, Ontario faced an increase in disposal costs of approximately $160,000 per year. In response, the Town started a mandatory tag system in July 1991 for an estimated 2,200 households. Tags cost $1.00, and only tagged bags are collected.
The Town had established a backyard composting program in 1990 and a recycling depot in March 1991. The depot takes in steel, glass, paper, aluminum, PET and ONP. A free tag is given out for every two bushels of recyclables delivered to the recycling depot.
Householder participation in recycling and source-reduction activities increased after implementation of the user fee system in July 1991. By March 1992, the Town had distributed 15,000 free bag tags through the recycling depot and recycling tonnages increased 175% compared with July 1991 (ie. from 8 to 22 tonnes of recyclables/month). By April 1992, approximately 900 composting units had been distributed to 40% of the Town's households. The user-fee program also resulted in a decrease of 45% in the amount of solid waste requiring disposal, and an estimated cost savings to the municipality of $216,000 in 1992.3
Experience in Canada and the United States suggests that the more 3Rs options householders have to reduce their disposal costs, the more effective user fee systems will be in reducing waste.
From an administrative viewpoint, funds raised by generator pay charges could be retained by municipalities or regions and then could be used to support development of local infrastructure.
The charge can be administered on a per can or a per bag basis, or the generator can pre-arrange/pre-select a certain specified level of service on a weekly or monthly basis. Obviously, the more options householders have to reduce their costs, the more effective the system will be in reducing waste. Householders will need access to composting and recycling, and they should also have the opportunity to choose a reduced level of service.
Some supporters of user pay for garbage argue that eventually it would be logical to require generators to pay nominal charges for recycling and centralized composting services to ensure that source reduction is maximized.
User fees for garbage usually are supported for the following reasons:
1) user pay seems to be consistent with the argument that polluters (including companies and consumers) should be made responsible for externalities when possible;
2) user pay does not seem to conflict with any of the policies and major programs of the MOEE such as support for the Blue Box program. Moreover, it was seen as supportive of the home composting program;
3) in theory, user pay would encourage shifts towards the 3Rs by individuals and corporate entities;
4) user pay systems would be simple and cost-effective to administrate, and ideally could be integrated with existing federal, provincial and municipal financial, regulatory and institutional structures;
5) revenues generated could be retained by municipal governments to support the overall waste management system;
6) user pay does not raise all of the messy inter-jurisdictional, trade, political power, etc. issues related to most other (and in my opinion) better economic instruments (such as removal of subsidies to virgin material extraction); and
7) user pay seems to be consistent with the goal of disentanglement of municipal/provincial financing and responsibilities and off-loading of provincial programs onto municipalities.
Here are some of the other major policy issues that should be considered in discussing user pay options.
1. Equity Issues
The most frequently raised issue with respect to generator pay charges is equity. For example, it is argued that large families may be less able to cope with the additional cost of a generator pay system. Undoubtedly there is some truth to this argument; however, the proponents argue that inequities that would arise could be addressed through appropriate rebates to large or low-income families.
The permissive powers in the amendments to the Municipal Act contained in Bill 7 will allow municipalities to exempt or reduce the fees charged to these types of households. In other words, at the MOEE we knew this was going to be a big political issues and we designed the law to accommodate municipalities.
2. Potential for Littering and Illegal Dumping
Municipalities often raise the concern that user pay schemes will result in illegal dumping. Proponents argue the issue that arises is a traditional deterrence argument: should the fact that a few individuals will break the law stop us from putting good laws into place?
In some municipalities, user fees have increased illegal dumping of waste in commercial dumpsters and littering, particularly in the first year after introduction of user fees. Usually, these problems are addressed through public education, by imposing stiff fines against those caught dumping and by the locking of unattended dumpsters. However enforcement is difficult.
Successful public education campaigns against illegal dumping and littering have been launched in many jurisdictions in both the U.S. and Canada. To discourage illegal dumping in Perkasie, Pennsylvania, officials there publish the names of illegal dumpers in the local newspaper.
Advocates of user pay systems argue that public education could help control illegal dumping. However, in some jurisdictions with pay-by-the-bag systems, illegally dumping problems have not been entirely resolved. For example, in Nanaimo, BC user pay has increased the incidence of illegal dumping in the ocean and in wooded areas near the town.
3. Dealing with Apartment Buildings
Another problem with implementing user pay is dealing with residents in apartment buildings. At present, garbage collection services for most apartment buildings are part of the cost of doing business for landlords and the cost is passed on to tenants. Thus, most apartment dwellers are, in effect, serviced by private hauling companies and these companies would be very happy to charge a user fee.
Conceivably, apartment dwellers could be required to participate. However, there is the technical problem of how and when a fee would collected (ie. each time they put waste down the garbage chute in their building?).
In large cities where single family dwellings and apartment buildings are scattered in residential districts one could imagine that administering user pay might create a nightmare for officials. There might be an enormous temptation for landlords to try to arrange user pay to gouge tenants and off-load the cost of garbage disposal onto tenants. In addition, there would be an equally great temptation for apartment dwellers to try to avoid the charges altogether. And this might lead to illegal dumping.
4. Occupational Health and Safety Issues
Pay-by-the-bag user charges are opposed by the Canadian Union of Public Employees (CUPE), which represents between 1,500-2,000 municipal waste management workers in Ontario, because the charges tend to encourage people to increase the density of their garbage by compacting it (ie. to fit more into a bag or can). This could lead to an increase in occupational injuries (i.e. back problems) for CUPE workers. It is unclear if CUPE would support user charges if they are based on weight.
5. User Pay Focuses on Consumers Instead of Companies
Another argument that is made against user pay systems is that there is no direct pressure on the manufacturers of certain products to change their packaging. Many individuals feel trapped by a lack of choice with respect to packaging; they want to purchase a certain good or service but they cannot buy the product inn a reusable container at supermarkets.
In theory, user pay could result in the indirect pressure of consumers on manufacturers and distributors, which can be a powerful force. Market adjustments would certainly occur because supermarkets would begin to provide more bulk foods and reusable packages (smaller health food stores would pick up the slack if they did not) as cost conscious consumers began to demand them to reduce their generator pay charges. User pay also could encourage greater use of some difficult-and-expensive-to-recycle materials like plastics. This trend should be monitored to ensure that taxpayers don't get saddled with the burden.
Moreover, the main benefactors of this shift will be better educated middle class consumers with time on their hands.
Based on current evidence, I would argue that user pay systems will have, at best, a marginal impact on encouraging product stewardship by manufacturers.
In sum, I think user pay systems have good potential to: 1) improve material recovery rates of recycling programs; and 2) increase diversion of waste from disposal in landfills or incinerators.
If user pay is adopted, then I agree with those who say that it should be extended so that charges are imposed for every pick up of blue boxes and and containers brought to centralized composting facilities.
My concern is that, in the absence of other policies to encourage product stewardship, user pay will not necessarily encourage a shift in waste management from recycling to waste reduction.
My guess is that large municipalities in Ontario will continue to avoid implementing user pay because of the difficulties associated with educating an ethnically diverse population and the great potential for increased littering and illegal disposal.
If user pay is worth supporting, I would suggest that the following configuration of measures would be optimal:
The following list of documents is incomplete but lists some of the key sources on user pay that could be consulted.
Association of Municipalities of Ontario (AMO)
AMO's Response to RCO's "Who Should Pay for Recycling?". Toronto: AMO, January 1991.
AMO's Policy Position on Reduction and Re-use. Toronto: AMO, June 1991.
AMO's Response to Municipal Waste Management Powers in Ontario. Toronto: AMO, July 1992.
British Columbia Ministry of the Environment Guide to Establishing User Fee Systems for Solid Waste Management. October 1992. Victoria: BC MOE.
Canadian Institute for Environmental Law and Policy (CIELAP)
A Regulatory Agenda for Solid Waste Reduction, Report prepared for SWEAP by S. Shrybman. Toronto: Solid Waste Environmental Assessment Plan, Metropolitan Toronto Works Department, July 1989.
Looking Back and Looking Ahead: Municipal Solid Waste Management in Ontario From the 1983 Blueprint to 50% Diversion in 2000 -- Conference Background Paper and Conference Report. Edited by M. Winfield. Toronto: CIELAP, March 1993.
Environmentally Sound Packaging Coalition
The Consumer Interest in Economic Instruments, July 1993. Vancouver: ESP Coalition.
Honourable Ruth Grier, Former Ontario Minister of the Environment
"Ontario's Waste Reduction Action Plan", Speech to a conference of Eastern Ontario Mayors, Wardens and Reeves, 21 February 1991, Toronto: MOE.
The Road to a Conserver Society, Speech to the Ontario Waste Management Conference, 17 June 1991. Toronto: MOE.
Grocery Products Manufacturers of Canada (GPMC)
GPMC Packaging Stewardship Model: A Discussion Document. Toronto: GPMC, December 1992.
Ontario Ministry of the Environment (MOE)
Blueprint for Waste Management. Toronto: Queen's Printer, 1983.
The Physical and Economic Dimensions of Municipal Solid Waste Management in Ontario. Report prepared by CH2M Hill Consultants for the Fiscal Planning and Economic Analysis Branch, MOE, November 1991. Toronto: MOE, 1992.
Ontario Ministry of the Environment and the Office of the Greater Toronto Area (OGTA) The Waste Crisis in the Greater Toronto Area: A Provincial Strategy for Action, released by the Minister of the Environment, 27 June 1991. Toronto: MOE and OGTA.
Ontario Ministry of Municipal Affairs
Ontario Waste Management Association (OWMA)
Position Papers on the 3Rs, Flow Control, Incineration of Municipal Solid Waste and the Regulation of Rates Charged. Submitted to the Ministry of the Environment Toronto: OWMA, January 1993.
Recycling Council of Ontario (RCO)
Who Should Pay for Recycling? Toronto: RCO, August 1990.
Achieving a Balance: Public and Private Sector Roles in the Development of a 3Rs Infrastructure. Toronto: RCO, January 1992.
Waste Reduction Advisory Committee (WRAC), Ontario Government
The Shared Model: A Stewardship Approach to Waste Management in Ontario (For Dry Recyclables and the IC&I Stream). Toronto: WRAC, February 1992.
Resource Stewardship in Ontario: A Shared Responsibility. Toronto: WRAC, November 1992.
Generator Pay Charges: A Discussion Paper. Toronto: RAC, December 1989.
1 Most municipalities that expressed interest in implementing user charges for residents in their jurisdiction did not do so because they wish to avoid controversy and possible legal challenges.
2 See Biocycle, April 1992.
3 RCO, Presentation on User Pay Systems to CIELAP Conference, January 23, 1993 in Winfield et al. (1993)