Incentives and disincentives:

rates and pricing, contract provisions, deposits, fees, and bans

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Creating Rate Incentives and Disincentives:

Structuring collection and disposal rates to encourage waste reduction on the part of residential and commercial generators can be accomplished by implementing a “pay-as-you-throw” system of charging for services. In this type of system, customers pay a monthly fee that increases as the volume, or weight of disposed waste increases, and customers can see a direct relationship between the amount they discard and the cost for collection service.

In many communities, pay-as-you-throw rate structures are implemented at the same time that new recycling services are put in place, in order to demonstrate the relationship between decreased disposal and increased recycling, and to help customers offset any cost for recycling services with cost reductions for disposal services.

Many communities operate transfer facilities that accept both recyclable materials and waste destined for landfill disposal. These facilities can encourage recovery not only through layout and design, but also through a tiered rate structure that pays for some recyclables, accepts some materials at no charge, charges fees for materials with special handling requirements, and charges the highest fees for unseparated disposed waste. Such rate structures reward and encourage material separation and recovery, while at the same time providing funds to cover the cost of recovering unseparated materials, and offering an opportunity for educating system users about the community’s material recovery efforts.

What Can Local Government Do?

Local agencies with rate-setting responsibility for waste collection and disposal can work to revise any existing rate structures that provide disincentives to waste reduction and recycling. The degree to which these rate changes can be easily implemented depends in part on the existing system costs and the existing rate structure.

Although increasingly less common, there are still municipalities that charge for waste collection service as part of the annual tax bill, through a single flat fee paid yearly and then forgotten. However, most communities that contract with a private sector collection service provider, as well as some jurisdictions that operate a municipal waste collection program, charge customers through a monthly, bi-monthly, or quarterly billing system.

The ability of local government to revise collection rate structures when services are provided through a private sector hauler will depend upon the provisions of the hauler contracts, the length of the contracts, and the degree to which competition for such contracts motivates the hauler to be flexible in working with the community.

Steps for implementing a volume or weight-based system are outlined in this section; strategies for gaining cooperation from collection service providers will be discussed in the next section.

Task One: Evaluate Existing Rate Structure.

Evaluate the existing rate structure for disposal and recycling to determine whether the full cost of disposal is reflected in the rate, and whether disposal rates are structured to provide incentives for recycling. Determine whether collection rates reflect the amount of waste disposed. Compare recycling services and costs to programs and rate structures from near-by communities. Establish a baseline for the existing rate structure to facilitate measuring the reduction achieved from rate structure changes.

Task Two: Restructure if needed.

If you determine that existing rates do not accurately reflect the amount of waste disposed, begin working to develop a system that can accomplish your goal. Links to several sources of useful information in making this transition can be found in the “Resources” section at the end of this chapter.

Implementing this type of revision will likely result in reduced costs for small-volume generators, and increased costs for large-volume customers. Offering recycling opportunities at the same time can help offset the financial and political impact of such a change. Providing waste audits for large commercial customers can also help minimize this impact.

Task Three: Circulate for Review and Input.

Once you have established the policy objectives for your rate structure revision, it is important to involve other agencies and service providers in developing the details for the new rate structure. Achieving the acceptance of all involved parties is only the first step in winning public and political acceptance.

Task Four: Revise as needed.

Most changes to the rate structure will require a public hearing process, which may produce additional comment and considerations. In the event of significant public opposition to the proposed changes, be prepared to go back and re-work the proposal.

Task Five: Adopt and Implement.

If you do your homework, and overcome public opposition to proposed rate structure changes, the rate structure revisions will be adopted and incorporated into your solid waste collection and disposal system. Monitor regularly, and compare to baseline disposal quantities in order to determine the reduction achieved through rate structure revisions.

Using Incentives to Reward Reduction:

“Incentive programs are designed to use economic and policy tools to harness the forces of the marketplace to accomplish adopted public policy goals. Many of these economic tools are designed to reward those who decrease the amount of waste they produce, or those who reuse, recycle, or compost it. Conversely, for those who continue to waste, these tools are designed to increase their costs. People can reduce-reuse-recycle, or they can pay for the privilege of wasting.”

From “Incentive Programs for Local Government Recycling and Waste Reduction”, prepared by Gary Liss & Associates under contract to the California Integrated Waste Management Board, Incentives

Negotiating Contracts for Resource Recovery:

Finding ways to encourage waste haulers and collection service providers to work with you in establishing contract provisions for material recovery can be a challenging process. If haulers have exclusive, long term contracts, it may be difficult to find incentives to motivate cooperation in looking for ways to reduce the amount of disposed waste, since payment is often based upon the amount of waste collected.

This may be even truer in small, rural areas, which have fewer customers, greater transportation costs, smaller quantities of waste, and a larger proportion of the population that self-hauls waste for disposal. As a result these communities are often less attractive to many hauling companies, making it more difficult to benefit from the pressures of competition.

Particularly in situations where a competitive bidding process may yield only a single bidder, offering to negotiate an extension to an existing contract in return for willingness on the part of the hauler to provide increased recovery and recycling services can be a win-win situation.

More lucrative collection contracts will offer opportunities to expand recycling services through the competitive bidding process when current contracts expire.

What Can Local Government Do?

In addition to negotiating for services through the contract bidding or extension process, local governments can offer financial incentives and disincentives in these contracts that will provide economic motivation on the part of the hauler to recover and recycle materials. These incentives can include:

- Permit fee rebates - Haulers and material collectors who pay permit fees to operate may receive a rebate of a portion of the fee upon proof of recovery and marketing of materials collected;

- Tiered franchise fees - Businesses may be charged a reduced franchise fee on net revenue collected from recycling and composting collection services;

- Sharing avoided disposal costs - When someone other than the hauler pays the disposal fee, the entity that pays the fee can reduce costs and motivate recovery by sharing the cost saving with the hauler or collection service that is responsible for reducing disposal tonnage;

- Providing bonus payments based upon tonnages recovered - Using local recycling funding to pay for recovered materials can help offset the effect of revenues lost by haulers as tonnage is reduced;

- Sharing the cost and revenue from recycling - Revenue from recycling may be shared through a contractual agreement between the jurisdiction and the hauler or collection service provider. Typically, this will be part of an agreement that outlines shared responsibility for all aspects of the program’s success, including education and promotion, the purchase of equipment and containers, monitoring and reporting on program results, etc. When the hauler is responsible for all aspects of program implementation, recycling revenues may be granted to the hauler to partially offset the program cost.

Task One: Review Existing Contracts.

Determine the expiration date of existing contracts, and review contracts for existing language requiring or encouraging hauler and collection service provider participation in recovery and recycling activities. Review contracts from similar and neighboring communities to look for language and provisions that may be effective in your community as well.

Task Two: Draft a “Wish List”.

Identify programs and provisions in your ideal contract. Develop proposals to present to existing service providers detailing these ideas, and how they could be implemented, either within an existing agreement, or at the time the agreement is extended or re-bid. Conduct an in-house review with other staff and departments, including counsel, to refine your proposals.

Task Three: Meet with Service Providers.

Notify existing and potential haulers and service providers of your interest in working with them to expand recovery and recycling services. Meet with them, either individually or as a group, to present and discuss your proposals. Schedule a second meeting to hear their counterproposals. Individually, determine their “price” - what they will try to get from you in return for meeting your requests. Make sure that you can be clear with them regarding how much flexibility you can offer within the terms of existing agreements. Like any bargaining situation, there will likely be issues on both sides of the table that cannot be easily resolved.

Task Four: Negotiate Contract Revisions.

Where possible, reach agreement and adopt amended agreements implementing programs and expanding recovery and recycling services. Revise your wish list to include items you were not able to negotiate, for future contract bids and extensions.

Task Five: Monitor Performance.

Include specific dates and tasks in amended agreements, to facilitate monitoring implementation. Reduction performance should also be monitored on a regular basis. Establish a mechanism to resolve disputes over performance issues.

Task Six: Acknowledge Success.

Public recognition of cooperation and achievement, even in a business relationship where performance is rewarded economically, can make an immeasurable contribution to creating and maintaining good working relationships with haulers and collection service providers. You will earn a reputation as being tough, but fair, and you will be able to call on your contractors for help when there is something you really need.

A Look at Deposits and Advance Recycling Fees:

Deposit/refund systems and advance recycling fees are two different funding mechanisms to encourage recovery and recycling of products and materials. The consumer pays a deposit or core charges at the time of purchase, and receives a refund when the product or container is returned after use. Suppliers of batteries and other automotive parts collect a core charge at the time of sale, in order to encourage customers to return the old part, which can be repaired or rebuilt, and reused. Rental agencies and landlords use deposits to ensure the return of their property in good condition.

States that have enacted deposit-refund legislation for beverage containers experience significantly higher recycling rates than states without such legislation. “The 82 million people in the ten bottle bill states recycle more bottles and cans than the 200 million people in the forty non-deposit states.” from www.bottlebill.org

Advance recycling fees (ARFs) are similar to deposit-refund systems, but differ in that the money collected at the time of purchase is usually retained by the seller, and/or paid to the manufacturer or distributor, to fund a take-back system for the targeted product. In many cases, these are products that are not accepted for disposal within the local system, such as computers and tires, and often have a significant handling cost for collection and recycling or proper management.

ARFs are currently being adopted by an increasing number of states in order to create a recycling collection system for discarded electronics, such as computers, computer monitors, and televisions.

When such fees are not collected at the time of purchase, it becomes the responsibility of local government or disposal facility operators to collect a fee at the time of disposal or recycling, when it often represents a much large portion of the total cost.

Other potentially recyclable products that would benefit from the existence of ARFs are appliances. Refrigerators, stoves, washers, and dryers are expensive to handle, and expensive to pick up when dumped illegally by residents unwilling to pay the fee at the time of recycling or disposal. A $20.00 fee at the time of purchase may represent 2-5% of the total cost, but might be 200% of the handling or disposal cost.

What Can Local Government Do?

Although local government can adopt resolutions, and join in advocating for the adoption of deposit legislation and advance recycling fees, very few individual communities are large or powerful enough to be able to pass local ordinances establishing such a point-of-purchase fee.

Local governments can work with retailers and local manufacturers to establish a voluntary take-back system, but funding for such a system will require user fees, grants, or public monies to support its creation and operation.

Advance Recycling Fees in Action:

With the support of major television manufacturers, state environment ministers in Australia are considering a plan to impose an $18.75 recycling fee ($US) on the sale of new TVs.

The collected funds would be used to develop and operate a nationwide recycling scheme. Industry members expect the fee level to drop once the recycling system has taken care of the units currently backlogged.

Northwest Product Stewardship Council

Banning Materials from Landfill Disposal:

One strategy a community may consider in looking for ways to maximize recovery, reuse, recycling, and composting is the banning of disposal for specific materials. Statewide bans have typically targeted the disposal of leaves, but other organics and easily recyclable materials may also be considered.

Once a community has established the programs and facilities needed to collect and process recovered materials, and has succeeded in building public participation in these programs and use of the facilities, a landfill ban may be considered.

Reasons for adopting a disposal ban may include:

Ø Conserving space and extending the life span of the landfill;

Ø Protecting the land, water, and air from potentially toxic or hazardous materials;

Ø Reducing the cost for special handling of specific types of materials;

Ø Increasing participation in reduction, recycling, and composting programs; and

Ø Recovering additional materials for local recycling-based businesses.

Communities without local landfills may avoid the transportation costs of exporting materials that could be recovered and recycled locally.

What Can Local Government Do?

If opportunities for recycling exist at the local level, waste reduction staff can initiate discussion of a landfill ban for specific materials. Bans for some materials are enacted at the state and federal level, if those products and materials are determined to be potential contaminants to air, soil, or water at the landfill and the surrounding area. Disposal facilities must implement and operate programs to screen for such materials, and attempt to prevent them from being deposited at disposal facilities. Items such as tires, appliances, batteries, and electronic goods are only a few of these targeted materials. Smaller containers of chemicals are even more difficult to detect.

But these landfill bans are different, because they focus on materials not yet banned by a regulatory agency outside of local control, and they target materials for which recycling opportunities have been established.

The most important material type targeted by such bans is the category of organic materials. Organic materials make up a large percentage of the average waste stream, including leaves and grass, wood and brush, food waste, and other potentially compostable materials such as contaminated paper. Jurisdictions will have difficulty meeting state requirements for reducing disposed waste without implementing programs for recovery of organics.

In rural communities, particularly if disposal costs are high, the amount of yard waste being landfilled is normally less than is the case in suburban areas, or areas with low disposal costs. Many residents are capable of managing leaves, grass, and other yard waste materials on-site, through back yard composting and gardening programs.

Urban areas will likely produce larger quantities of recoverable organic materials that can justify and support the creation and operation of a centralized composting facility.

Steps for implementing a local disposal ban are outlined below

Task One: Initiate Discussion of a Targeted Material Ban.

Identify a product or material, such as yard waste, or traditional recyclables, to target as the subject of a landfill ban. Conduct extensive discussions with system operators, recycling facilities, waste reduction staff, and elected officials to determine the adequacy of recycling opportunities and the impacts of the proposed ban.

Task Two: Draft a Resolution and Ordinance Implementing the Ban.

Create a resolution, which can serve as a tool for public education as to the reasons to support the landfill ban. Identify potential supporters and opponents of the ban, and organize a focus group presentation to assess public response to the proposed ban.

Task Three: Conduct Public Discussions.

Present the proposed ban to a variety of groups and organizations. Include arguments by supporters and opponents in the public discussion process. Be prepared to respond to public concerns, and to points raised by opponents of the proposed ban.

Task Four: Revise as Needed.

As in any kind of public policy process, be sure to allow adequate opportunity for meaningful public input, and be prepared to give serious consideration to that input. That does not necessarily mean backing down or giving up in the face of opposition, but it may mean changing your approach or your strategy for implementation.

Task Five: Adopt and Implement the Ban.

Consider phasing in the implementation of the ban in order to provide an adequate opportunity for public education. Be sure that the obligation to enforce the provisions of the ban does not outweigh the potential benefits. Be prepared to revisit the outcome and provisions of the ban after a reasonable period of time in order to make sure that you are achieving your intended result.

Task Six: Add Additional Materials.

If all goes well, add additional materials to the disposal ban over a period of time.

Landfill Bans at Work:

In the Regional District of Kootenay Boundary we want valuable resources to be used again and again and again. After all it doesn't make much sense to spend huge amounts of money mining for metals or cutting down trees, then processing the raw resources, only to throw it all away after one use.

So we've established recycling programs and composting operations which give these resources renewed life. And in the process we conserve landfill space, reduce greenhouse gas emissions and create a better quality of life.

To show we're serious about eliminating waste and recovering resources, as of September 1, 2001, it will be illegal to put certain things in your garbage. Things like yard and garden debris or any material accepted in our recycling programs. Landfill Ban Information, Grand Forks, British Columbia

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