Effects of the increase in the danish waste tax

4. Analysis of enterprises’ behaviour

4.1. Introduction
4.2. Outline of development in waste generation at selected enterprises
4.3. Interview study
4.4. Financial implications of waste tax
4.5. Analysis of enterprises’ behavioural patterns

4.1. Introduction

Comprehensive analysis

In this chapter, a more comprehensive analysis of the behaviour at the selected enterprises is presented. In section 4.2, the development in waste generation at enterprises from 1996 to 1997 and 1998 is outlined. In section 4.3, the results of a brief interview study are presented. Section 4.4 gives an analysis of costs in connection with waste management compared to key financial figures for the enterprises. Finally, section 4.5 discusses the possible correlation between behaviour, especially regarding the development in taxable waste, and various independent variables.

4.2. Outline of development in waste generation at selected enterprises

Development in waste amounts at enterprises

This section describes in more detail the development in selected enterprises’ waste generation. In table 4.1, an outline is shown of the development in total and taxable waste amounts from 1996 to 1997, and table 4.2 gives the development in waste generation compared to the development in industrial and commercial waste generally, and for manufacturing industry etc. specifically. For 1997, it is possible to compare figures from the study of enterprises with data from the Danish Information System for Waste and Recycling, the ISAG.

1996-1998

For most enterprises data are also available for 1998, and table 4.3 shows an outline of the development in total and taxable waste amounts from 1996 to 1998. As yet, ISAG data for 1998 are not available.

Table 4.1. Increase or decrease in waste generation 1996-1997 (per cent)

Large differences

Table 4.1 shows large differences in the development of selected enterprises’ total and taxable waste generation from 1996 to 1997, including the distribution of taxable waste amounts by treatment option. Enterprises and their production are not directly comparable, and no further attempts have been made to interpret these differences.

Table 4.2. Development in sum of enterprises’ waste amounts, compared to the categories "industrial and commercial waste " and "waste from manufacturing industry etc." in Waste Statistics 1996-1997 (Source: Danish Environmental Protection Agency (1999) and own calculations).

Comparison with ISAG data

On the basis of ISAG data for 1997, a comparison of the sum of selected enterprises’ waste amounts with the development in industrial and commercial waste and waste from manufacturing industries in general shows that it is difficult to determine precisely whether the development in selected enterprises’ waste amounts from 1996 to 1997 was more positive than for enterprises in general.

With and without Aalborg Portland

Total waste amounts at the selected enterprises showed an increase of 5 per cent from 1996 to 1997, whereas industrial and commercial waste and waste from manufacturing industry, according to the ISAG, increased by 9 per cent and 4 per cent respectively. This seems to indicate a fair accordance, but a study of taxable waste amounts shows that the studied enterprises had a considerably more positive development than the average. The reduction in generation of taxable waste at the selected enterprises amounted to 18 per cent which is considerably more than reductions in similar taxable waste for industrial and commercial waste and waste from manufacturing industry in general (which amounted to only 2 and 7 per cent respectively). However, a comparison of waste generation at the selected enterprises shows that Aalborg Portland’s share accounts for 70 to 80 per cent of total amounts. By excluding Aalborg Portland from the statement it is seen that the development in taxable waste amounts at the selected enterprises (excluding Aalborg Portland) is less significant. Here, the reduction in taxable waste amounts only amounts to 3 per cent, whereas reduction in waste from manufacturing industries etc. from 1996 to 1997, according to the ISAG, reached 7 per cent.

1998

For most enterprises, it has also been possible to compile waste data for 1998. When ISAG data for 1998 are available, it will be possible to see whether the enterprises studied do still not stand out significantly from total figures on waste reduction.

Table 4.3. Increase or decrease in waste amounts 1996-1998 (per cent)

Also large differences in 1998

Table 4.3 shows that also in 1998 there were large differences in the development in selected enterprises’ total and taxable waste generation compared to 1996. However, it is remarkable that all enterprises having stated waste generation in 1998 have reduced waste going to landfill. For some enterprises (Glasuld and Carlsberg) decreases in taxable waste amounts from 1996 to 1997 have continued in 1998, giving substantial reductions from 1996 to 1998.

Table 4.4. Development in sum of waste amounts 1996-1998 (per cent).

Further reduction in waste amounts

Table 4.4 shows that the enterprises as a total have reduced their waste amounts further compared to 1997, as taxable waste amounts from the selected enterprises (excluding Aalborg Portland) from 1996 to 1998 decreased by 8 per cent. However, even when excluding Aalborg Portland the statement is sensitive to substantial variations at some enterprises.

4.3. Interview study

Interviews

In order to study enterprises’ internal measures relating to waste management and the underlying motivation, an abbreviated version of the questionnaire for the interview study from Working Report from The Danish Environmental Protection Agency no. 18 1999 was used at the selected enterprises. One enterprise (Odense Stålskibsværft) did not want to participate.

Initiative to reduce waste amounts

Eight of the participating enterprises stated that they had taken initiatives to reduce waste generation or to change the distribution on treatment option for their waste in recent years (cf. table 4.5.). Reductions in waste generation are mainly due to increased recycling and changed raw material consumption (cf. table 4.6.).

Table 4.5. Number of enterprises having taken initiatives to reduce waste generation.

Table 4.6. Measures to reduce waste generation.

Costs have an effect on disposal

Six of eight enterprises replied that costs in connection with waste disposal had had a significant effect on their decision to reduce waste generation (cf. table 4.7.). Disposal costs were evaluated to have had a somewhat more significant effect than requirements in municipal waste regulations and the desire to enhance the environmental profile of the enterprise.

Table 4.7. Motivation for reduction of waste amounts.

Three of the six enterprises replying that costs of disposal of waste had a significant impact, evaluated that the waste tax had had an effect in its own right (cf. table 4.8.).

Table 4.8. Effect attributed to waste tax.

Difficult to compare

Three of ten enterprises evaluated that the waste tax had had an effect in its own right on waste disposal at the enterprise. In comparison, only two of 16 enterprises in the previous evaluation of the waste tax were of this opinion. However, it is difficult to assess whether this difference is due to the increase in the waste tax rate as from 1^st January 1997 or is explained by the mix of selected enterprises.

4.4. Financial implications of waste tax

Large differences in cost burden

The description of enterprises shows that there are large differences in the cost burden from the waste tax at the different enterprises and consequently also from the increase in the waste tax rate as from 1^st January 1997. Of the enterprises for which it is possible to compare the cost burden from the waste tax with net turnover and operating profit/loss, only Aalborg Portland has a substantial cost burden. For the other enterprises, the burden does not exceed 1 per mille of the net turnover and 1 per cent of the operating profit/loss. For Aalborg Portland, the cost burden from the waste tax in 1997-98 amounts to 7 to 8 per mille of the net turnover and 4 to 5 per cent of the operating profit/loss.

The total cost burden for the selected enterprises (excluding Aalborg Portland) increased from DKK 2.9 million in 1996 to DKK 4.3 million in 1997, and in 1998 the cost burden decreased to DKK 4.1 million. If the enterprises had not been able to reduce their taxable waste amounts, however, the cost burden would have increased to DKK 4.6 million, which for 1998 would have meant a further increase in costs as a consequence of the waste tax of almost DKK 0.5 million.

Overestimate of cost burden

Where enterprises have been able, in total or in part, to shift the waste tax onto prices, the calculated cost burden is, however, an overestimate of the financial effects of the waste tax. Erhvervsministeriet m.fl. (1997: 25) describes by various degrees of tax shifting the possibilities in different sectors to shift green taxes³⁸ onto consumers by increasing sales prices.

Possibility of shifting waste tax

Table 4.10 shows that the service sector, due to a more limited number of foreign competitors, is assessed to be able to shift 70 per cent of costs of green taxes, whereas the manufacturing industry is assessed to be able to shift only 35 per cent. If this degree of tax shifting may be transferred directly to the waste tax, the actual cost burden from the waste tax has amounted to around two thirds of the calculated burden.

Limited cost burden

With this limited cost significance it is not surprising that only few enterprises indicate the tax as decisive for their activities. The tax is only one of several cost elements in waste management (fees, transportation, handling etc.), so the calculated shares do not give a definite indication of the extent of waste-related costs.

4.5. Analysis of enterprises’ behavioural patterns

Recycling and export shares

Table 4.11 gives an outline of the results from the enterprises studied with regard to total rate of recycling, development in production, and development in waste generation. Furthermore, where possible, the export share is stated.

Table 4.11. Recycling rate in 1996 for enterprises studied compared to attained waste reduction ('++' indicates reduction in both total and taxable waste amounts; '+' indicates reduction in total amounts). Third column indicates enterprises with a decrease in production and column four the export share.

Considerable variations

It is seen in table 4.11 that there are considerable variations in total recycling rates at the enterprises. Six enterprises have high rates of recycling – 66 per cent or more (three enterprises exceed 85 per cent) – and four enterprises attain relatively moderate rates of recycling, from 33 per cent and downwards. It is remarkable that enterprises with a relatively high environmental profile such as Coloplast and Novo Nordisk fall within the latter group, whereas the first group covers enterprises of the more conventional "chimney-industry" type.

No correlation between rate of recycling and new initiatives

However, there does not seem to be any systematic correlation between high rate of recycling and lack of new initiatives for waste reduction after the increase in the waste tax, or between low rates of recycling and new initiatives to waste reduction. A comparison of information on recycling rates with indications on waste reductions for 1996 to 1997 shows that there is no unambiguous correlation.

No correlation between competition and environmental performance

The export share is not available for all enterprises, but on the basis of available data there seems to be no indication of a correlation between enterprises’ export share and the reaction to the increase in the waste tax rate. Hence, there seems to be no clear correlation between the competitive situation of the enterprises, expressed by their export share, and their environmental performance.

Correlation between production growth and development in waste amounts

By contrast, there seems to be a certain correlation between production growth in enterprises and the development in waste amounts. Table 4.11 shows that among five enterprises not having reduced waste amounts, three enterprises experienced a growth in production.

Table 4.12 shows the correlation between reduction in taxable waste amounts and development in production.

Table 4.12. Comparison of taxable waste amounts and production from 1996 to 1997.

It is seen from table 4.12 that three enterprises with declining production have experienced an increase in taxable waste amounts. Among seven enterprises with a growth in production, five have been able to reduce taxable waste amounts whereas two have had a certain increase. Among these two, Novo Nordisk has experienced a very considerable growth in production that has, despite certain waste-related initiatives, caused an increase in total waste amounts. The other enterprise, Bryggeriet Vestfyen, is a small enterprise, and variations in both production and waste generation are moderate. Only one enterprise (Tarco Vej) has had a decrease both in production and waste generation, but this enterprise is very untypical, as it only generates waste similar to domestic waste.

Attention to environmental issues

It is natural to interpret the correlation between the development in production and waste generation to the effect that enterprises on a production decline do not have resources to optimise their environmental costs and that the decline therefore is not reflected in decreasing waste amounts. Enterprises in a growth situation, however, have both possibilities and resources to optimise production and reduce waste generation, also in absolute figures. For some enterprises, however, production growth may be so important that it leads to higher waste generation.

Difficult to estimate optimum marginal costs of reduction

A more precise comparison of enterprises would require a separate statement of each separate waste fraction. Total recycling rates cover very different waste types. Only by comparing every single waste fraction and assessing specific costs of recycling in enterprises, would it be possible to evaluate whether waste reductions are attained at optimum marginal costs of reduction. As such data by nature cannot be obtained for enterprises having declared a number of waste types as residual waste, with a modest rate of recycling, such an analysis would be extremely resource consuming.

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