Waste Tax 1987-1996

6. Strategic decisions in waste companies

Questionnaire study

In connection with the present evaluation, a questionnaire study was carried out among local administrations in order to clarify which factors influence the design of collection schemes. Local administrations were asked to state for which waste fractions separate collection schemes or treatment plants were established. They were furthermore asked to state the motivation of their choices. In this context, the influence of treatment costs saved by better separation compared to other motivation was studied. Local administrations were finally asked to state the consequences of the increase in the waste tax rate for the planning of collection schemes, and to comment on the influence of the tax rate differentiation between incineration and landfilling.

The questionnaire was sent to the local environmental administration. As there are considerable differences between administrations, it was requested to have the questionnaire filled in by an "experienced staff member" in the area of waste. In some cases the questionnaire was passed on to an intermunicipal company with practical knowledge of the area who then filled in the questionnaire on behalf of several local administrations. For 36 municipalities questionnaires were filled in by an intermunicipal company. A total of 189 local administrations responded to the questionnaire corresponding to a rate of 68 per cent, which is a satisfactory coverage.

Local administrations and companies want to minimise tax payment

At the study of behaviour in local administrations, the waste tax was expected to have an effect on municipal and intermunicipal waste companies implying that they design collection in a way that costs are minimised. As described, the waste tax may be avoided by opting for recycling as much as possible, and it can be reduced by prioritising incineration at the expense of landfilling. Recycling can be promoted by establishing separate collection schemes for example for paper/cardboard, glass, organic waste, bulky waste, plastic, metal and construction and demolition waste. Furthermore, collection schemes can be designed in various ways: for example collection schemes, decentralised reuse banks, or recycling centres.

Figure 6.1. Waste fractions and proportion of municipalities with separate collection of such fractions.

Figure 6.2. Proportion of municipalities with collection, broken down by year of introduction

Large range of separation options

Figure 6.1 shows how many local administrations have established separate collection schemes for different waste fractions. In the wording of the question no distinction has been made between different collection systems. Thus, a scheme may vary between a collection system, decentralised container schemes, and central recycling centres (bring systems). Collection may either be done by a municipal or an intermunicipal company, but options are immense. For example, paper/cardboard and glass may be collected by a municipal company, while other fractions are collected by an intermunicipal company. The purpose of the study was not to make a survey of the variation in municipal and intermunicipal waste operations, but to get a picture of the number of local administrations that have taken initiatives in relation to different waste fractions.

The Figure shows that 99 per cent of local administrations have established separate collection of paper/cardboard and glass - which was a requirement under the terms of the Danish Statutory Order on Waste. For waste fractions without mandatory separate collection, many local administrations have established separate collection. Ranking third are bulky waste schemes which are established in 87 per cent of municipalities, and ranking fourth is garden waste which is collected in 82 per cent of municipalities. Next comes metal and scrap (80 per cent), construction and demolition waste (71 per cent), organic waste (50 per cent), and plastic (43 per cent). The category "other" (23 per cent) comprises, for example, electronics, tyres, expanded polystyrene packaging, clothes and wood.

6.3 Implementation of schemes

Figure 6.2 shows when the various schemes were introduced, based on replies from the local administrations. Small deviations in relation to Figure 6.1 are explained by the fact that not all respondents have stated year of introduction. The statement shows that 26 per cent of municipalities had separate collection of paper/cardboard and glass before 1987 - the year the waste tax was introduced.

Extension stages

In the years from 1987-89, especially collection of paper/cardboard and glass gained ground. In the period from 1990-92 this collection was further consolidated, but the largest extension was within garden waste, bulky waste, construction and demolition waste, and metal and scrap. In the years from 1993 onwards, especially collection schemes for organic waste from households were established.

6.4 Motivation for introducing schemes

In order to clarify the importance of the waste tax in relation to other factors that may lay behind the introduction of these collection schemes, a motivational analysis was made.

Eight possible motives were given:

1. Legal requirements;
2. Objectives of the Government's Plan of Action for Waste and Recycling;
3. Problems of limited landfill or incineration capacity;
4. Desire to reduce treatment costs, e.g. save waste tax;
5. Pressure from citizens;
6. Requirement/proposal from intermunicipal company;
7. Possibility of subsidies from the Council for Recycling and Cleaner Technology (abolished late 1993);
8. Political desire to increase recycling in the municipality.

Furthermore, it was possible to state other essential motives. Local administrations were asked to indicate the three most essential motives behind the establishment of the scheme. Results of the motivational analysis are shown in figures 6.3 to 6.11.

Political motivation most important

In general, the motivational analysis shows that the political factor, i.e. the desire of the local council to increase recycling, is estimated as the most essential factor for all nine waste fractions. The two second-most important factors are the desire to comply with the objectives of the Government's Plan of Action for Waste and Recycling and the desire to reduce total treatment costs. Furthermore, requirements in the Danish Statutory Order on Waste play an important role in relation to the fractions paper/cardboard and glass. In general, problems of limited treatment capacity have played a more modest role. Pressure from citizens and requirements from intermunicipal companies also have had a very modest role. The subsidy scheme of the Council for Recycling and Cleaner Technology has also been of minor importance, when paper/cardboard and glass are excluded (many subsidies were used for these fractions in the first years). The motivational analysis seems to have included the most essential motives, as only few additional factors were mentioned under "other", including - most frequently - the desire to improve public services.

For the different waste fractions it is seen that the trend for paper/cardboard and glass is almost identical. Legal requirements and local councils' desire to increase recycling are mentioned by around 60 per cent of respondents. Around 30 per cent mention the desire to reduce costs and to comply with the Plan of Action for Waste and Recycling.

Desire to limit costs for heavy fractions

When it comes to garden waste, organic waste and bulky waste, 50-60 per cent mention the political desire to increase recycling. However, for these fractions there are no legal requirements, and therefore it is unclear why this is stated by quite so many local administrations. Second ranked is the desire to reduce costs, stated by a little more than 40 per cent. For bulky waste, however, it is to a larger extent pressure from citizens that plays a role. For construction and demolition waste it is again the political desire to increase recycling, both locally and nationally, as well as the desire to limit treatment costs that are stated as the reason for establishing collection schemes. An identical pattern is found for plastic and metal.

For an analysis of the effects of the waste tax it is especially paper/cardboard, garden and park waste as well as construction and demolition waste that call for a more detailed analysis. This is due to the fact that especially these three waste fractions are subject to increased separation and recycling, cf. the analysis in Chapter 4 of developments in waste amounts.

Figure 6.3. Paper and cardboard: Respondents' motives for establishing separate collection.

Figure 6.4. Glass and cullets: Respondents' motives for establishing separate collection.

Figure 6.5. Organic waste etc.: Respondents' motives for establishing separate collection.

Figure 6.6. Garden and park waste: Respondents' motives for establishing separate collection.

Figure 6.7. Bulky waste: Respondents' motives for establishing separate collection.

Figure 6.8. Construction and demolition waste etc.: Respondents' motives for establishing separate collection.

Figure 6.9. Plastic waste: Respondents' motives for establishing separate collection.

Figure 6.10.Metal and scrap etc.: Respondents' motives for establishing separate collection.

Figure 6.11. Other waste fractions (food waste, electronics, clothes etc.): Respondents' motives for establishing separate collection.

Figure 6.12. Effect of waste tax on financial aspects of collection and/or treatment system.

Figure 6.13. Effect of waste tax on design of collection and/or treatment system.

6.5 The impact of the waste tax on financial aspects of the municipal system

Figure 6.12 shows how local administrations estimate the impact of the waste tax on the financial aspects of the collection system and/or treatment system. It should be noted that the design of systems varies considerably, depending on treatment method, separation and recycling systems as well as collection scheme, and there will therefore be very different calculations of possible financial advantages of improved separation.

Impact of tax

Questions related to evaluation of the impact of the tax were put broadly, as it was not the intention to enter into a detailed study of the financial aspects of waste schemes. The tax may have an impact both on operating costs and initial investments in new plant, and the impact will depend also on local decisions of administration of waste schemes, including the more detailed administration of the non-profit cost-coverage principle (Kirkelund, 1997).

Figure 6.12 shows that 48 per cent of respondents estimate that the tax has a decisive impact on the collection of construction and demolition waste. For garden and park waste and bulky waste 32 per cent estimate that the tax has had a decisive impact, whereas a little more than 24 per cent are of this opinion concerning metal/scrap and organic waste. For conventional collection of paper/cardboard and glass some 19 per cent of respondents estimate that the tax has had a decisive impact.

Plays a role for 60-80%

A large share of respondents attribute "some" impact on the finances of their schemes to the tax. By this is meant that the tax contributes to shifting the financial balance towards recycling, without being totally decisive. For all waste fractions with the exception of plastic, between 60 and 80 per cent of local administrations attribute a decisive or some impact to the waste tax on financial aspects of established recycling schemes. By contrast, only 20-30 per cent of municipalities have schemes for which the tax is not believed to have had any impact. Relatively few respondents "do not know" the impact of the tax on the schemes.

Local administrations were also asked how the waste tax influences the design of collection schemes, i.e. the choice between centralised or decentralised collection. Figure 6.13 gives an outline of results of replies for different waste fractions. In general, no more than 10 per cent of respondents find the tax to have had a decisive impact on the design. For heavier waste fractions, a further 20 per cent of respondents attribute "some" impact to the tax on the design, but all in all the result seems to be that the waste tax does not influence the design of schemes to a significant extent.

Weight-based fees

23 local administrations already have or intend to introduce weight-based fees

Local administrations were asked to inform whether they have introduced or intend to introduce weight-based fees in the collection system. The study shows that this is the case in 23 municipalities, corresponding to 12 per cent.

Local administrations without weight-based fees were asked to state considerations made in this respect. Most respondents find that it will be too expensive and difficult and that there is no reliable technology available. There is a fear of fly-tipping, and the financial incentive for the individual householder is estimated to be limited.[note 13]

Effect of waste tax increase

Under the Tax Reform in 1993 an increase in the waste tax rate was adopted, taking effect from 1.1.1997. At the same time, the increase entailed a further differentiation between incineration and landfilling.

Local administrations were asked to state which measures were planned as a reaction to this increase. 38 local administrations have taken initiatives to improve recycling or plan to do so, including by increasing collection of garden waste and organic waste, and by improving conditions for home composting.

Evaluation of tax rate differentiation

Incineration prioritised

39 respondents state that tax rate differentiation has had no consequences for the choice between incineration and landfilling, but almost 80 respondents state that the tax rate differentiation has led to various forms of prioritisation of incineration.

An obligation was introduced from 1.1.97 to incinerate waste suitable for incineration, and the rate differentiation between landfilling and incineration will therefore no longer have a direct impact. From 1.1.97, further differentiation between incineration with and without power generation has been introduced, but evaluations of this differentiation were not studied.

General evaluation of waste tax

Effects of tax

In a last open question, respondents had the possibility of giving a more general evaluation of the waste tax. Evaluations are very different, and there is no unambiguous pattern. Following statements are taken from the replies and indicate that:

	"Better separation of waste takes place at the recycling station ",
	"Garden waste, which used to be collected with bulky waste and incinerated, is now to a larger extent transported to central composting. This saves money".
	"It has become easier to have industry and commerce separating waste ".
	"Increased recycling - increased incineration ".
	"Taxes push in the direction of increased recycling. Nevertheless, new schemes can only be introduced if they are cost neutral - and this can be difficult despite the saved tax when investments and operating costs are included."
	"Has had the planned effect in relation to promotion of recycling and reduction in amounts landfilled "

Critical comments

Also critical comments were given:

	"The tax is perceived as taxation or punishment, as the local council already works goal-oriented on increased recycling. It has almost been perceived as an obstruction from the Danish Environmental Protection Agency because of ambiguities and lacking guidelines, for example within industrial and commercial waste".
	"Problems of fly-tipping or illegal burning. We catch 1-2 lawbreakers each year. But such processes are very hard to handle due to loopholes in legislation."
	"The waste tax on landfilling of construction and demolition waste is so high that people cheat. Much waste never enters the system, and the liberalisation of recycling makes it hard to compete".
	"Increased taxes no longer have a large impact in municipalities. It is difficult to reduce amounts further".

Proposals

Finally, some more future-oriented comments were made:

	"We need money to establish and operate recycling schemes. Local administrations carry the costs, the State gets the revenues"
	"Some of the tax should be diverted back to the municipality to help the establishment of environmentally sound schemes"
	"DKK 160 for incineration is too low, now that prices for paper are down"
	"The landfill tax should be at least doubled before it becomes profitable to deliver burnable waste to an incineration plant"

It should be noted that the last two comments are based on tax rates in late 1996. As explained, the landfill tax was increased from DKK 195/tonne to DKK 335/tonne and the incineration tax from DKK 160 to DKK 210 and DKK 260 respectively as per 1.1.1997.

6.7 Conclusions

The study of local administrations' behaviour has shown that the political factor - the desire to increase recycling - is the most important factor behind the quite extensive collection schemes that have clearly exceeded the requirements of the Danish Statutory Order on Waste. The two second-most important factors are the desire to comply with the Government's Plan of Action for Waste and Recycling and the desire to limit total treatment costs. Furthermore, legal requirements play an important role in relation to the fractions paper/cardboard and glass.

Tax influences heavy fractions

The desire to limit treatment costs - including the waste tax - for citizens plays a key role, especially for heavier waste fractions such as garden waste, organic waste and construction and demolition waste. 48 per cent of respondents estimate that the tax has had a decisive impact on the collection of construction and demolition waste. For garden and park waste and bulky waste 32 per cent estimate that the tax has had a decisive impact. By contrast, the tax does not significantly influence the detailed design of schemes.

Reactions to the waste tax increase from 1.1.97 have been moderate, but some local administrations plan further measures with a view to improved separation. The tax differentiation between incineration and landfilling is also estimated to have a certain impact.

In general, local administrations seem to pay attention to the waste tax and the intentions behind it. Some respondents are concerned about fly-tipping, and there is a desire to have funds diverted back to the recycling schemes.

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13/ See also Chapter 7 for a detailed discussion