Effects of the increase in the danish waste tax

5. Summary and recommendations

The results of the evaluation may be summarised as follows:

	Taxable waste amounts increased by 7 per cent from 1996 to 1998, but this increase may be explained by the extension of the taxation base to comprise also slag and residues from power plants,
	Net delivered waste amounts at municipal waste treatment plants decreased by 0.5 per cent (around 14,000 tonnes) from 1996 to 1998,
	Net delivered waste amounts at inert waste landfills decreased by 23 per cent (around 56,000 tonnes) from 1996 to 1998,
	The net production index for industry and consumption index for households show an increase for the period 1996-98 of 7 per cent, so the stagnation in waste amounts delivered to municipal plants reflects a de-coupling of economic development and waste generation,
	A comprehensive data collection has been carried out on the basis of green accounts for around 30 production units distributed on eleven enterprises in order to study the development in waste amounts and the cost burden from the increase in the waste tax rate,
	The study of the eleven enterprises having included waste data in green accounts has shown that for 1997 there were very large differences both in the general recycling rate, going from 90 per cent at Kongskilde Maskinfabrik to 5 per cent at Coloplast, and in waste types and recycling initiatives at the enterprises,
	A comparison of the development in waste amounts at the selected enterprises and the general development in industrial and commercial waste for 1996-97 as stated by the ISAG, shows that the reduction in net delivered taxable waste amounted to 18 per cent at the studied enterprises compared to a total reduction of 7 per cent for the entire manufacturing industry,
	One enterprise, Aalborg Portland, accounts for 80 per cent of waste amounts among the eleven enterprises. If this untypical enterprise is excluded from the study, the result is a net reduction in taxable waste of only 3 per cent, which is less than the total reduction of 7 per cent for 1996 to 1997, as stated by the ISAG,
	Five of the enterprises have reduced their taxable waste amounts in parallel to a growth in production. Another five enterprises have increased taxable waste amounts, but of these three have experienced a production decline or stagnation, whereas only one has experience a steep production growth. This reflects special conditions at the different enterprises and also the fact that a proactive waste management strategy is incompatible with restructuring or crises at enterprises,
	At the selected enterprises, a more significant diversion has taken place from landfill to incineration than in the manufacturing industry as a whole. Waste going to landfill has decreased by 25 per cent in the studied group, whereas the national figure amounts to 14 per cent,
	Six of eight enterprises having taken initiatives to reduce waste generation, indicate costs of waste disposal as a significant factor, but only three of these believe that the tax in itself has had an effect to some extent or to a high extent,
	The cost burden from the waste tax for the selected enterprises was relatively modest in 1996 and 1997. In general, it did not exceed 1 per mille of the net turnover or 1 per cent of the operating profit/loss. Aalborg Portland stands out from the other enterprises, as the tax here accounted for 6-8 per mille of the net turnover and 4-5 per cent of the operating profit/loss.

Evaluations:

Waste tax contributes to de-couple economic growth and waste generation

It is remarkable that the steep increase in the waste tax rate as from 1^st January 1997 did not lead to a decrease in taxable waste amounts, since the increase as a weighted average amounted to around 60 per cent of the previous waste tax rate. An important reason for the lack of reduction in waste generation seems to be the significant growth in production and consumption of around 7 per cent for the past two years, which is believed to have resulted in increasing waste generation in relation to the base year of 1996. Within private consumption especially the consumption of electronics and durable consumer goods has increased more than the average, and this type of consumption is believed to lead to a relatively larger waste generation (packaging etc.) Against this background, it must be concluded that the waste tax increase has contributed to ensuring that waste amounts did not increase correspondingly, and that waste generation and economic growth have been de-coupled. Another reason for the moderate waste reduction is that the differentiation in the tax means that considerable savings may be obtained by diverting waste from landfill to incineration.

Waste tax not directly reflected in householders’ costs

Despite substantial tax increases in both 1993 and 1997, the stagnation in taxable waste amounts from 1993 to 1998 indicates that the instrument has had certain problems of penetrating to the waste producers. The explanation given in the Working Report from The Danish Environmental Protection Agency no. xx 1997 was that the tax is not reflected in the waste collection fees paid by householders, as fees under collection schemes are typically calculated according to a fixed volume and not by weight. Thereby, there is no financial incentive for householders to increase recycling. The lack of transmission of the price signal of the waste tax in financial transactions in the waste sector, especially regarding households, is assessed to constitute one of the decisive barriers to a decrease in taxable waste amounts. Some local authorities have changed to weight-based fee systems for household waste, but as very few have done so, it does not have a decisive impact on total waste figures.

Low cost burden for most enterprises

Large enterprises are typically not comprised by collection schemes and have therefore the possibility of reacting to the price signal of the waste tax. However, as demonstrated by this study, not all enterprises pay attention to the costs of waste disposal. For most enterprises, the waste tax amounts to less than 1 per mille of the net turnover and will consequently range low in the hierarchy of attention. For a few very waste-intensive enterprises, however, the tax does put a significant stamp on the financial result, and this makes it difficult to implement new tax increases without showing regard to the competitive situation of certain enterprises and production processes.

"Chimney-industries" are most advanced

The analysis of enterprises’ waste management confirms the assumption put forward in Working Report no. Xx 1997 that waste-intensive enterprises typically are significantly further advanced in their waste management than enterprises that are waste-extensive. This may imply that the marginally cheapest waste reductions today are hardly found in traditional "chimney-industries", but rather at enterprises in the pharmaceutical, plastics, electronics and telecommunications industries, or within trade and offices that so far did not pay much attention to waste issues (as reflected in relatively low recycling rates).

Increasing attention

However, it is a positive sign that, according to the ISAG, taxable waste amounts from industry and commerce from 1996 to 1997 showed a decrease of 2 per cent. The study of enterprises indicates that attention to waste management increases in enterprises, and it is the first time for several years that a drop in enterprises’ waste amounts can be seen. Similarly, several enterprises have reacted by diverting their waste from landfill to incineration.

Recommendations:

It is recommended to improve procedures for entry and filing of reports on received waste amounts from the Customs and Tax Regions. Cases on deferred payments should be recorded on a consolidated list. Data on weighed waste amounts should be integrated directly in the ISAG statement.

The statistical basis for estimating the development in industrial and commercial waste amounts should be improved so that waste can be stated both by sub-sectors and waste types. The market concentration in the manufacturing industry is relatively high (the average market share on the domestic market is estimated to be around 55 per cent just for the four largest enterprises in each sector cf. Konkurrencestyrelsen (1999: 26)). As a consequence it will be possible, on the basis of analyses of a limited number of enterprises, to design a database covering the most relevant sectors. This database could be based on, for example, a total of 50 to 80 enterprises and could be used with considerably larger certainty in future analyses in the waste area, and in environmental-economic modelling tools. Such a database could be similar to the LOOP (Landovervågningsoplande) designed by the Danish National Environmental Research Laboratory in the area of nutrients.