## wpiea2019283-print-pdf

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### I. INTRODUCTION — key findings
- Waste management expenditures currently accounts for about 0.5 percent of global GDP.
- Global waste generation rates are projected to reach more than 2 billion tons each year by 2025, almost double their level in 2012.
- Ocean plastic pollution has been valued at $13 billion per year.
- Methane from anaerobic decomposition of organic waste accounts for about 5 percent of global greenhouse gas emissions.
- Island nations can face waste management costs (including environmental externalities) that exceed 1 percent of GDP.
- Paper focus: review literature on scope of solid waste externalities and revenue-raising instruments adaptable to developing countries and subnational governments.

### II. THE SCOPE OF THE PROBLEM — Waste generation
- Global MSW generation in 2012: roughly 1.3 billion metric tons; average 1.2 kilos per person per day.
- Projected MSW in 2025: 2.3 billion tons.
- More than half of total solid waste (by volume) produced by developing countries; per capita, higher-income countries generate at least twice as much waste per capita.
- Average waste generation rate among OECD countries in 2014: 1.4 kg/person/day.
- Selected per capita waste generation (Kg/Person/Day) and income group (source: Hoornweg and Bhada-Tata (2012)):
  - Kuwait: 5.72, Income Group: High, Landfill/dumping rate (%): na
  - Antigua and Barbuda: 5.50, Income Group: High, Landfill/dumping rate (%): 99
  - St. Kitts and Nevis: 5.45, Income Group: Upper-middle, Landfill/dumping rate (%): 100
  - Guyana: 5.33, Income Group: Lower-middle, Landfill/dumping rate (%): 96
  - Sri Lanka: 5.10, Income Group: Lower-middle, Landfill/dumping rate (%): na
  - New Zealand: 3.68, Income Group: High, Landfill/dumping rate (%): 85
  - Ireland: 3.58, Income Group: High, Landfill/dumping rate (%): 66
- Composition shifts with income:
  - Lower-income countries: mostly biodegradable organic materials.
  - Middle- and high-income countries: larger shares of inorganic materials (paper and plastic).
- Central challenge for low-income countries: safely processing organic materials (e.g., composting).
- Higher-income countries: address growing inorganic materials flow via recycling; lower-income countries can anticipate rising inorganic wastes as incomes grow.

### II. THE SCOPE OF THE PROBLEM — Waste management and finance
- Collection and disposal outcomes by income:
  - Low- and middle-income countries collect only 40-60 percent of their solid waste and properly dispose of only 5-30 percent (Medina, 2010).
  - Collection rates by income (Hoornweg and Bhada-Tata, 2012):
    - Low and lower-middle income countries: average 43 percent collection rate.
    - Upper-middle income countries: 85 percent collection rate.
    - High-income countries: little significant dumping; majority deposited in sanitary or controlled landfills.
- Informal sector:
  - Scavengers process about 15 percent of MSW in developing countries; scavenging can account for as much as five percent of urban employment.
- Fiscal burdens and expenditures:
  - Waste management expenditures: approximately 0.5 percent of global GDP (UNEP).
  - Local government burden: waste management often the single largest budget item, accounting for 20-50 percent of operational spending (Medina 2010).
  - Annual public expenditure on waste processing in developing countries: about US$46 billion.
  - World-wide comparable figure: roughly $400 billion.
- Income share spent on solid waste management (Cointreau (2006)):
  - Low-income countries: 0.7-2.6 percent of income.
  - Middle-income countries: 0.5-1.3 percent of income.
  - High-income countries: 0.2-0.5 percent of income.
- Selected collection and disposal costs by income level (World Bank (2012)):
  - Low income: USD/ton 85-250, Volume (Ton/Person/Year) 43, Collection Rate (%) 0.22
  - Lower middle: USD/ton 30-75, Volume 68, Collection Rate (%) 0.29
  - Upper middle: USD/ton 40-90, Volume 85, Collection Rate (%) 0.42
  - High: USD/ton 85-250, Volume 98, Collection Rate (%) 0.78
- Revenue mismatch:
  - Waste-specific public revenues are much lower than expenditures; in OECD countries, solid waste-related charges account for only 0.02 percent of GDP on average.
  - Property tax revenues average 0.7 percent of GDP worldwide; among 76 countries tracked by OECD:
    - Developed countries: 1.1 percent of GDP average.
    - Developing countries: 0.4 percent of GDP average.
- Financing from general revenues reduces consumer incentives to reduce trash generation.
- Examples of revenue changes:
  - Italy: spike in 2010 due to partial replacement of property tax with a waste management tax.
  - Mauritius: central/local governments spend around MUR 1.5 billion (US$ 45 million) annually on waste management; waste-related revenues roughly US$8.2 million.

### II. THE SCOPE OF THE PROBLEM — Externalities
- Waste-related externalities across lifecycle stages:
  - Extraction: loss of biodiversity, reduced carbon absorption, watershed pollution and erosion, aesthetic disamenities.
  - Production: energy use adding to carbon emissions; liquid, solid or gaseous wastes.
  - Disposal: dumping or landfill damages; greenhouse gas emissions from decomposition.
- Internalization ideally via stage-specific taxes: virgin material taxes or royalties for extraction damages; carbon tax for production emissions.
- Disposal tax can reduce some extraction/production externalities when stage-specific instruments absent.
- Decomposition emissions:
  - Biogas from dumps/landfills roughly 50-50 mixture of carbon dioxide and methane.
  - Account for about 1.4 percent of total global GHG emissions (disposal decomposition figure).
- Selected studies:
  - Conrad (1999): failure to charge for disposal biases production toward virgin materials.
  - Acuff and Kaffine (2013): disposal taxes and recycling subsidies affect carbon emissions; carbon savings from recycling vary and can be large (especially aluminum).
- Paper assumption for analysis: virgin material royalties and carbon taxes are available to address extraction and production externalities; focus on taxing waste to curb disposal externalities, noting disposal externalities include GHG emissions not generally covered by carbon taxes.

### Externalities and means of disposal — magnitude and pathways
- Disposal mode critical: sanitary landfill versus non-sanitary landfill, official dump, or illegal dump determines externality magnitude.
- Kinnaman (2006) U.S. disposal externality estimate: $5.38 to $8.76 per ton, including greenhouse gas emissions.
- Non-sanitary landfilling and dumping generate localized harms: foul odors; poisoning of wild and domestic animals; vermin spreading disease; leaching of toxins including unprocessed human sewage into ground and surface water; spontaneous fires producing air pollution.
- Illegal dumping and wind/water-escaped trash additionally block drainage systems, contributing to flooding and waterborne diseases.
- Plastic waste concerns: non-biodegradability, impermeability, mobility and toxicity; thin plastic bags highlighted.
- National and international spillovers:
  - Approximately five percent of greenhouse gases derive from methane produced by anaerobic decomposition of organic materials in solid wastes.
  - UN Environmental Program estimate: 8 million tons of plastic end up in the ocean each year, causing an estimated $8-13 billion in annual damages.
  - Jambeck and others (2015): more than 60 percent of ocean pollution originates in six Asian countries (China, Indonesia, the Philippines, Vietnam, Sri Lanka, and Thailand).
- Data constraints and macro relevance:
  - Comprehensive global data on solid waste externalities are not available (Cointreau, 2006).
  - Example: total cost of solid waste in Palau (Hajkowicz et al. (2005)) estimated at approximately 1.6 percent of GDP.
  - U.S. 2006 figures: U.S. GDP $13.86 trillion; U.S. generated 251.3 million tons of trash; roughly 300,000 tons of U.S. plastic waste ends up in the ocean (Jambeck, 2015).

### Policy responses overview — instruments and roles
- Instruments used: regulatory (extended producer responsibility (EPR), sanitary landfilling requirements, recycling quotas) and economic (waste collection charges, advance disposal fees (ADFs), deposit-refund schemes).
- No single policy ideal; regulatory and economic instruments can complement or substitute each other.
- Emphasis on revenue-raising instruments given developing countries’ need for domestic resource mobilization and widespread underpricing of waste.
- Elevating disposal standards (sanitary landfilling, composting) reduces externalities but raises costs and requires additional funding.
- In OECD countries, higher solid waste taxes strongly correlated with reduced waste volumes and increased recycling levels.
- Role of government levels:
  - Waste management typically local; central governments set standards and ensure financing adequacy due to national/international externalities.
  - Some instruments (material charges, hazardous waste excises) more easily imposed at national level.
  - Central governments can promote local own-revenue generation; central transfers can weaken citizen perception of cost.
- Stakeholders and design constraints:
  - Producers, wholesalers/retailers, consumers, local governments, private/non-profit entities all relevant.
  - Developing-country constraints: high poverty and regressivity concerns; relatively high per capita collection costs; limited administrative capacity; significant private recycling activities.

### Disposal-level instruments (tipping fees, host fees, landfill taxes)
- Landfilling private costs compensated by tipping fees charged per ton; rates often vary by waste stream.
- Public landfills may undercharge, acting as implicit subsidies to waste generation.
- Hedonic evidence: U.K. survey — properties within one mile of a landfill worth an estimated 5-10 percent less than comparable properties (DEFRA, 2003).
- U.S. landfills often pay “host fees” per ton to local governments.
- Kinnaman (2006) recommends landfill taxes to internalize residual externalities.
- Tradeoffs: raising landfill environmental standards reduces externalities but raises operating costs, affecting optimal balance of landfill taxes and tipping fees.
- OECD trend: higher landfill charges correlated with lower rates of landfilling; European landfill tax rates rose in the 1990s then generally declined since 2000 as other measures reduced waste volumes.

### Household-level fiscal instruments and salience
- Common local instruments: flat fees per residence; fees scaled to property size/value; utility surcharges (ad valorem markup on electricity or water bill); financing from general revenues.
- Implicit charges and flat fees create zero marginal cost of disposal and no incentive to reduce waste.
- Flat fees: easy to administer but regressive.
- Utility surcharges: relatively easy, proportional to a consumption proxy, improve compliance when utility bills collected together; salient to households.
- Property taxes: progressive but poor proxy for waste generation; finance multiple services so do not clearly signal waste costs.

### Unit-based (PAYT) pricing — design, evidence, tradeoffs
- PAYT variants:
  - Bin-based systems (pay for number/size of regulated bins; charged per period or per set-out bin).
  - Bag-based systems or bag stickers (only trash in official bags/stickers accepted).
  - Weight-based systems (charged by weight collected).
- Appropriate PAYT charge should cover full collection, disposal, environmental externalities, anti-dumping enforcement costs and untaxed vehicular externalities.
- Empirical evidence:
  - Bel and Gradus (2016) meta-analysis: unit-based pricing schemes average arc elasticity of -0.34 on waste volume generated.
  - No significant difference between bin-based and bag-based systems in effectiveness.
  - Weight-based systems perform substantially better with an additional marginal elasticity of -0.4.
  - Systems offering compost collection have additional marginal elasticity of -0.2.
  - Curbside pickup of recycling did not perform significantly better.
- Major disadvantages of PAYT:
  - High administrative and compliance costs.
  - Incentives for illegal dumping, counterfeit bags/stickers, and unpaid dumping in collective bins.
  - Easier to implement in suburban single-family settings; more difficult in urban settings with collective bins and in rural areas.
- In high-dumping-risk settings, Fullerton and Kinnaman (1995) suggest pre-charging for disposal upon purchase (e.g., local sales tax) and providing free garbage collection as an alternative.

### Unit-based pricing regimes and revenue — South Korea example (VBWF)
- South Korea introduced unit-based pricing in 1995 (volume-based waste fee, VBWF).
- Outcomes:
  - Waste generation per person fell from 1.3 kg per person per day in 1994 to 0.95 kg in 2014.
  - Total waste generation fell from 58.1 tons per day to 49.9 tons.
  - Recycling rate rose from 15.4 percent to 59 percent between 1994 and 2014.
  - 2013: an additional composting program for separation of food wastes added.
  - Landfilled food waste fell from 97 percent in 1994 to about 2 percent in 2014.
- Bag pricing (2014):
  - Average cost of a 20 liter household bag: KRW 482 (about US$0.46).
  - Local prices ranged from KRW 299-813 (US$0.28-0.77).
  - Average cost of a 20-liter business bag in 2014: KRW 766 (US$0.73).
- KEI (2016) notes Korea’s growth engine shift and changing shopping behavior shortened expected product lives.

### Retail-level consumption taxes and advance disposal fees (ADFs)
- General consumption taxes (VAT or RST) are blunt for internalizing product-specific environmental costs; better for revenue raising.
- Retail sales tax could prepay for disposal where household-level waste charges infeasible; if varied locally, could be tailored to local disposal costs.
- Jamaica’s Environmental Protection Levy (EPL):
  - Introduced 2007 as a 0.5 percent ad valorem charge on imports (except CARICOM origins) to offset environmental costs of waste materials, particularly plastic packaging.
  - Revenues intended to be earmarked but were swept into general revenues.
  - 2015: base extended to include imports from CARICOM and domestic manufacturing; credit given for EPL paid on inputs; revenue use not reformed.
  - EPL began to resemble an additional 0.5-point surcharge on Jamaica’s General Consumption Tax.
- Goods-specific excises (ADFs) can be levied at retail or production/import stage and pass through to consumer prices, discouraging consumption of goods with costly waste streams.
- ADFs can reflect disposal cost tiers: recycling (lowest), trash disposal, littering (highest).
- Practical guidance:
  - If ADFs internalize only recycling costs, additional charge should be levied for disposal and stronger dumping penalties.
  - Reasonable practice: set ADFs to reflect cost of legal disposal, provide rebates for recycling (deposit-refund schemes).
  - Where improper disposal costs very high, incorporate them into ADFs with rebates for recycling.
  - Administrative challenge: setting appropriate ADF levels on highly pollutive goods may be difficult for many developing countries.

### Retail versus production-stage ADF administration and visibility
- Retail ADFs:
  - More numerous retailers make retail ADFs generally more costly to administer than production-stage ADFs.
  - More visible to consumers, increasing behavioral impact.
  - Can be implicit or explicit; explicit ADFs increase consumer awareness.
- Production/import ADFs:
  - Greater administrative simplicity.
  - Less likely to be itemized and thus less salient.
  - As a source-based tax, may impair export competitiveness; rebates on exports appropriate but increase administrative complexity.
- ADF uptake:
  - Common in Europe on batteries, electronics, appliances, packaging, tires and vehicles.
  - ADFs often introduced at low levels with exemptions for competitiveness/employment concerns.
  - Wide variability in ADF rates across and within countries; some revenues earmarked for environmental/waste programs.

### Plastic bag taxes — effects and international experience
- Environmental costs: carbon and air pollution emissions from production account for about a third of bags’ environmental costs (UNEP, 2014).
- Country consumption examples:
  - Denmark: average charge about EUR 0.37 per bag levied on retailers; consumption 4 single-use plastic bags per person per year (rate including multiple use bags ~90 per year).
  - United States: about 350 per year.
  - Thailand: almost 3,000 per year.
- Bag charge levels: range from US$0.015 in parts of Indonesia to US$1.00 in Brownsville, Texas.
- Policy combinations: charges often combined with bans on bags below a minimum thickness (e.g., 20-50 microns); bans without charges common.
- Enforcement variability: Mexico’s 2010 law largely unenforced; China’s 2008 law mainly enforced in urban areas.
- Empirical impacts:
  - Imposing a very small bag fee (average fee equal to 0.3 percent of national daily per capita consumption) reduced bag use by an average of two thirds in listed countries.
  - Arc elasticities of bag demand range from 24 to 47, with an average value of 34.
  - Initial signaling/shock effect can wear off; maintaining deterrent effects may require increasing charges over time (observed in European countries).

### Deposit-refund (D-R) schemes
- D-Rs are ADF variants offering refunds for goods/packaging returned for recycling.
- Economic effects:
  - D-Rs raise prices only for consumers who do not recycle.
  - D-Rs deter consumption less and encourage recycling more than ADFs; generally lower-cost and more effective.
  - D-Rs do not encourage illegal dumping (unlike unit-based disposal pricing).
  - Optimal D-R rate equals marginal social cost of solid waste disposal (Palmer and Walls (1997)).
- Administrative considerations:
  - High administrative and compliance costs possible.
  - Consumers incur storage and return costs; deposit must compensate.
  - As incomes rise, higher deposit rates may be required to maintain compliance.
  - Retailers, distributors and producers may incur administration costs; they can retain a fraction of deposits.
  - Unclaimed deposits may revert to state, recycling authority, or participating businesses.
  - Deposit rates cited historically: $0.05-0.10 have stagnated in the U.S.
- Potential benefits in developing countries:
  - D-Rs could be highly progressive, establish minimum monetary value for covered goods, boost urban employment, invigorate informal recycling, and provide income streams for scavengers.
  - Unclaimed deposits can fund the D-R system and recycling activities.
  - UNDP supports D-R schemes to combat ocean plastic pollution; funded feasibility studies for Pacific SIDS (Mar Dieye, 2018).
  - Zimbabwe example: a D-R for bottles showing high elasticity of recycling response (Kaseke, 2005).

### ADF rate variability and data sources
- OECD PINE database documents many national and subnational ADFs (base, rates, revenues).
- Figures summarize ADF rates for plastic packaging, batteries, tires, and appliances showing:
  - Tremendous variability in ADF rates across and within countries.
  - Common exemptions include exports and particular uses (e.g., tires for public service vehicles, plastic packaging for medical goods).
- Representative numeric references:
  - Average bag fee in empirical studies: 0.3 (percent of national daily per capita consumption).
  - Arc elasticity average (bag demand): 34; range: 24 to 47.
  - Deposit rates referenced historically: $0.05-0.10.

### Earmarking and political economy
- Earmarking environmental revenues may be necessary to sustain programs through downturns and government changes.
- Brett and Keen (2000): environmental earmarking can insulate environmental programs under green politicians.
- Source-based ADFs attractive for developing countries: small number of collection points, administrative ease at customs/manufacturers.
- To avoid harming trade competitiveness:
  - Charge manufacturers ADFs only for output sold into domestic market.
  - Rebate ADFs charged on imported inputs for exported products.
  - Charge production waste where it is disposed of.

### Producer-level instruments — D-R, EPR, VMT
- Producer-level D-R for administrative simplicity: producers/importers charge retailers an ADF; reclaim from producer when used goods returned. Requires household/retail recycling mechanisms.
- Extended Producer Responsibility (EPR):
  - Imposes legal liability on manufacturers to reclaim goods/packaging after use.
  - Increases producer costs passed to consumers, abating demand.
  - Incentivizes product design to reduce waste and maximize recycling/reuse.
  - If EPR excludes exports, it should not impact competitiveness; applying to importers can avoid favoring imports.
  - Experience: South Africa included EPR in National Waste Management Strategy; 2018 requirements for manufacturers in certain industries to submit waste minimization/management plans including detailed data and public awareness measures.
- Virgin Material Tax (VMT):
  - Excise on virgin (not recycled) raw materials.
  - Lowers relative cost of recycled inputs, stimulating demand for recycled materials (Miedema, 1983; Conrad, 1999).
  - Dinan (1993): D-R or unit-based disposal pricing more efficient than VMT at encouraging recycling because VMT only encourages recycled inputs in goods that also use virgin materials.
  - VMTs/resource royalties appropriate for internalizing extraction environmental costs.

### Conclusions and policy recommendations
- Overarching assessment:
  - Countries seek better means of reducing waste generation and financing processing due to rising environmental costs.
  - Fiscal instruments, with regulations, can generate resources for proper waste management and modify behavior.
  - Analysis focuses on disposal externalities assuming carbon and virgin material taxes exist for other externalities.
- Developing country priorities:
  - Waste management often underfunded; charges obscure consumer costs.
  - Explicit garbage collection fees often do not cover full disposal costs or environmental externalities.
  - Fees unrelated to amount disposed (marginal disposal cost zero) provide no disincentive to generate waste.
  - Consumer awareness of waste costs and externalities tends to be poor.
- Recommended instruments and design choices:
  - Households and businesses should face full cost of waste management (collection, disposal, environmental externalities).
  - Where feasible, unit-based pricing schemes based on actual weight or volume create best incentive to minimize waste.
  - Where administrative capacity limited and/or illegal dumping risk high, charge based on household consumption as second-best (e.g., sales tax prepaid at retail, or ad valorem utility surcharge).
  - If property tax compliance good and other systems politically rejected, property tax financing is third-best; fee should be separately stated to inform households.
  - Impose adequate landfill charges—tipping fees to cover private operation costs and landfill taxes scaled to environmental externalities (population density, topography) and to cover anti-dumping enforcement costs.
  - Fully financing waste management to raise consumer awareness should help build support for higher environmental standards; improved solid waste regulations (sanitary landfilling, separation of organic materials) reduce externalities though raise operating costs.
- Instrument choice guidance:
  - Downstream instruments: more visible to consumers, more likely to alter behavior, do not need border adjustments to avoid harming competitiveness.
  - Production waste disposed in source country should be charged at source, even if product exported.
  - Revenues from waste-related charges should arguably be earmarked for waste management to prevent erosion of environmental standards in fiscal stress.
  - Deposit-refund schemes (disposal tax plus recycling subsidy) can ensure recycling for goods with highest material value and disposal externalities (vehicles, appliances, electronics, tires, batteries, metal cans, PET bottles, paper/cardboard).
    - With curbside recycling, producer-level D-R administratively easier.
    - Without curbside recycling, retail-level deposit reclaim necessary to incentivize consumers and generate revenue for scavengers.
    - If goal is to discourage consumption (e.g., lightweight plastic bags), simple retail-level ADF may be more appropriate.
  - Cover high-value/pollutive goods with D-Rs and ADFs to calibrate disposal fees toward average cost of other waste.

### Areas for further research
- Two salient needs:
  - Responsiveness of consumer behavior to ADFs: many studies (e.g., on plastic bag taxes) lack rigorous estimation of behavioral elasticities needed to design effective bag tax policies.
  - Measuring environmental externalities from waste disposal: to set ADFs and waste charges that internalize external costs, determine magnitude and geographic/demographic variability of those costs.
- Policy-relevant data gaps:
  - Proliferation of ADFs with wide differentials in rates and bases points to need for better studies of their effects and determinants (local disposal costs, political values).

*Source: wpiea2019283-print-pdf (IMF working paper content unit).*

### References .............................................................................................................

### References

### I. INTRODUCTION
- Neoclassical economic models traditionally assume free disposal of goods, but collection and disposal of discarded goods consumes labor, fuel and land.
- Waste management expenditures currently accounts for about 0.5 percent of global GDP, though this understates the full social cost of trash generation.
- Global waste generation rates are projected to reach more than 2 billion tons each year by 2025, almost double their level in 2012.
- Ocean plastic pollution has been valued at $13 billion per year.
- Methane from anaerobic decomposition of organic waste accounts for about 5 percent of global greenhouse gas emissions.
- Island nations can face waste management costs (including environmental externalities) that exceed 1 percent of GDP.
- Paper focus: review literature on scope of solid waste externalities and revenue-raising instruments to address underpricing of waste management services, with emphasis on instruments adaptable to developing countries and subnational governments.

### II. THE SCOPE OF THE PROBLEM
H3: A. Waste Generation
- Global MSW generation amounted to roughly 1.3 billion metric tons in 2012, or an average of 1.2 kilos per person per day.
- Projected MSW in 2025: 2.3 billion tons.
- More than half of total solid waste (by volume) is produced by developing countries; in per capita terms, higher-income countries generate at least twice as much waste per capita.
- Average waste generation rate among OECD countries in 2014: 1.4 kg/person/day.
- Many highest per capita waste generation rates are in developing island nations where tourism is important; scarcity of land exacerbates disposal problems.
- Table excerpt (countries with highest per capita waste generation rates—selected numbers preserved):
  - Kuwait: 5.72 Kg/Person/Day, Income Group: High, Landfill/dumping rate (%): na
  - Antigua and Barbuda: 5.50 Kg/Person/Day, Income Group: High, Landfill/dumping rate (%): 99
  - St. Kitts and Nevis: 5.45 Kg/Person/Day, Income Group: Upper-middle, Landfill/dumping rate (%): 100
  - Guyana: 5.33 Kg/Person/Day, Income Group: Lower-middle, Landfill/dumping rate (%): 96
  - Sri Lanka: 5.10 Kg/Person/Day, Income Group: Lower-middle, Landfill/dumping rate (%): na
  - New Zealand: 3.68 Kg/Person/Day, Income Group: High, Landfill/dumping rate (%): 85
  - Ireland: 3.58 Kg/Person/Day, Income Group: High, Landfill/dumping rate (%): 66
  - (Source: Hoornweg and Bhada-Tata (2012))
- Composition shift with income: lower-income countries—mostly biodegradable organic materials; middle- and high-income countries—larger shares of inorganic materials, notably paper and plastic.
- Central challenge for low-income countries: safely processing organic materials (e.g., composting).
- Higher-income countries need to address growing inorganic materials flow via recycling; lower-income countries can anticipate rising inorganic wastes as incomes grow.

H3: B. Waste Management and Finance
- Collection and disposal outcomes vary by income level; low- and middle-income countries collect only 40-60 percent of their solid waste and properly dispose of only 5-30 percent (Medina, 2010).
- Collection rates by income (Hoornweg and Bhada-Tata, 2012):
  - Low and lower-middle income countries: average 43 percent collection rate.
  - Upper-middle income countries: 85 percent collection rate.
  - High-income countries: little significant dumping; majority deposited in sanitary or controlled landfills.
- Disposal methods and informal sector:
  - Scavengers process about 15 percent of MSW in developing countries; scavenging can account for as much as five percent of urban employment.
- Waste management expenditures: approximately 0.5 percent of global GDP (UNEP).
- Local government burden: waste management often the single largest budget item, accounting for 20-50 percent of operational spending (Medina 2010).
- Annual public expenditure on waste processing in developing countries: about US$46 billion (a little more than one tenth of roughly $400 billion worldwide).
- Cointreau (2006) estimates of income share spent on solid waste management:
  - Low-income countries: 0.7-2.6 percent of income.
  - Middle-income countries: 0.5-1.3 percent of income.
  - High-income countries: 0.2-0.5 percent of income.
- Table excerpt (Collection and Disposal Costs by Income Level—selected values preserved):
  - Low income: USD/ton 85-250, Volume (Ton/Person/Year) 43, Collection Rate (%) 0.22
  - Lower middle: USD/ton 30-75, Volume 68, Collection Rate (%) 0.29
  - Upper middle: USD/ton 40-90, Volume 85, Collection Rate (%) 0.42
  - High: USD/ton 85-250, Volume 98, Collection Rate (%) 0.78
  - (Source: World Bank (2012))
- Waste-specific public revenues are much lower than expenditures; in OECD countries, solid waste-related charges account for only 0.02 percent of GDP on average.
- Property tax revenues (common source for waste finance) average 0.7 percent of GDP worldwide; among 76 countries tracked by OECD:
  - Developed countries: 1.1 percent of GDP average.
  - Developing countries: 0.4 percent of GDP average.
- Financing waste from general revenues creates the impression that disposal is free, removing resident incentives to reduce trash generation.
- Examples of recent expansion of waste-related revenues:
  - Italy spike in 2010 due to partial replacement of property tax with a waste management tax.
  - Mauritius doubled solid waste-related revenues since 2007; central/local governments spend around MUR 1.5 billion (US$ 45 million) annually on waste management, compared to waste-related revenues of roughly US$8.2 million.

H3: C. Externalities
- Waste generation is driven by consumption; extraction, production, and end-of-lifecycle disposal all generate externalities.
- Extraction externalities: loss of biodiversity, reduced carbon absorption, watershed pollution and erosion, aesthetic disamenities.
- Production externalities: energy use adding to carbon emissions; liquid, solid or gaseous wastes.
- Disposal externalities: dumping or landfill damages, greenhouse gas emissions from decomposition.
- Internalization ideally occurs through taxes at the relevant stage: virgin material taxes or royalties for extraction damages; carbon tax for production emissions.
- In absence of stage-specific instruments, a disposal tax may reduce some extraction/production externalities.
- Decomposition emissions: biogas (roughly 50-50 mixture of carbon dioxide and methane) from dumps and landfills account for about 1.4 percent of total global GHG emissions.
- Studies cited:
  - Conrad (1999): failure to charge for disposal biases production toward virgin materials.
  - Acuff and Kaffine (2013): disposal taxes and recycling subsidies affect carbon emissions; carbon savings from recycling vary and can be large (especially aluminum).
- Paper assumption for analysis: virgin material royalties and carbon taxes are available to address extraction and production externalities; focus is on taxing waste to curb disposal externalities, noting disposal externalities include GHG emissions not generally covered by carbon taxes.

*Source: wpiea2019283-print-pdf - References (IMF).*

### 14.      Solid waste externalities depend critically on the means of disposal: that is, whether trash

### wpiea2019283-print-pdf - 14.      Solid waste externalities depend critically on the means of disposal: that is, whether trash

### Externalities and means of disposal
- Disposal in sanitary landfill versus non-sanitary landfill, official dump, or illegal dump critically determines externality magnitude.
- Kinnaman (2006) estimates U.S. disposal externalities at $5.38 to $8.76 per ton, including greenhouse gas emissions, or only about 0.01 percent of GDP.
- Non-sanitary landfilling and dumping generate localized harms: foul odors; poisoning of wild and domestic animals; vermin that spread disease; leaching of toxins including unprocessed human sewage into ground and surface water; spontaneous fires producing air pollution.
- Illegal dumping and wind/water-escaped trash cause the same harms and additionally block drainage systems, contributing to flooding and waterborne diseases.
- Plastic waste, especially thin plastic bags, are of particular concern due to non-biodegradability, impermeability, mobility and toxicity.

### National and international spillovers
- Approximately five percent of greenhouse gases derive from methane produced by anaerobic decomposition of organic materials in solid wastes.
- UN Environmental Program estimates 8 million tons of plastic end up in the ocean each year, causing an estimated $8-13 billion in annual damages, including poisoning marine stocks and littering shorelines that damage fishing and tourism.
- Jambeck and others (2015) find that more than 60 percent of ocean pollution originates in only six Asian countries (China, Indonesia, the Philippines, Vietnam, Sri Lanka, and Thailand), implying targeted policy reform in a few countries could have outsized benefits.

### Data availability and macro relevance
- Comprehensive global data on solid waste externalities are not available (Cointreau, 2006).
- Individual-country studies show costs can be macro-relevant:
  - Hajkowicz et al. (2005) estimate total cost of solid waste in Palau (public collection and disposal plus impairments to human health, fishing, and tourism income) at approximately 1.6 percent of GDP.
- Example U.S. figures (2006): U.S. GDP was $13.86 trillion and the U.S. generated 251.3 million tons of trash; roughly 300,000 tons of U.S. plastic waste ends up in the ocean (Jambeck, 2015).

### Policy responses overview
- Governments use regulatory instruments (extended producer responsibility (EPR), sanitary landfilling requirements, recycling quotas) and economic instruments (waste collection charges, advance disposal fees, deposit-refund schemes).
- No single policy is ideal; regulatory and economic instruments can complement or substitute each other.
- Paper focuses on revenue-raising instruments due to developing countries’ need for domestic resource mobilization and because waste-related charges in developing countries usually do not cover collection, disposal, and externalities.
- Elevating disposal standards (e.g., sanitary landfilling or composting organic materials) reduces externalities but raises costs and requires additional funding.
- Among OECD countries, higher solid waste taxes are strongly correlated with reduced waste volumes and increased recycling levels.

### Role of central and local governments
- Waste management is typically a local responsibility, but central governments set standards and ensure financing adequacy because some externalities (methane/carbon emissions and aquatic pollution) are national/international.
- Some instruments (material charges, hazardous waste excises) are most easily imposed at the national level.
- Central governments can promote local own-revenue generation; local services are often financed from central transfers, weakening citizen perception of cost.

### Stakeholders and design considerations
- Waste stewardship involves producers, wholesalers/retailers, consumers, local governments, and private/non-profit entities; effective product-stewardship programs must account for differing incentives.
- Developing-country constraints to policy design:
  - High poverty rates make regressivity a major concern.
  - Relatively high per capita collection costs (dependent on fuel and capital prices) despite lower labor costs.
  - Very limited administrative capacity, especially locally.
  - Significant private recycling activities.

### Disposal-level instruments: tipping fees, host fees, landfill taxes
- Private costs of landfilling (land rent, capital, operating costs) may be compensated by tipping fees charged per ton; rates often vary by waste stream.
- Tipping fees ultimately burden consumers via higher waste charges.
- Public landfills may undercharge, providing implicit subsidies to waste generation.
- Hedonic studies show proximity to landfills reduces property values:
  - U.K. survey: properties within one mile of a landfill are worth an estimated 5-10 percent less than comparable properties (DEFRA, 2003).
- U.S. landfills often pay “host fees” per ton to local governments; Kinnaman (2006) recommends landfill taxes to internalize residual externalities.
- Tradeoff: raising landfill environmental standards reduces externalities but raises operating costs, shifting the balance between landfill taxes and tipping fees.
- In the OECD, higher landfill charges (taxes and tipping fees) are strongly correlated with lower rates of landfilling; European landfill tax rates rose in the 1990s then generally declined since 2000 as other measures reduced waste volumes.

### Household-level fiscal instruments and salience
- Common local instruments: flat fees per residence, fees scaled to property size/value, utility surcharges (ad valorem markup on electricity or water bill), and financing from general revenues (implicit charges).
- Implicit charges and flat fees create zero marginal cost of disposal and no incentive to reduce waste.
- Flat fees: easy to administer but not proportional to household consumption and thus regressive.
- Utility surcharges: easy to administer, proportional to a consumption proxy, improve compliance when utility bills are collected together; salient.
- Property taxes: progressive but a poor proxy for waste generation; finance multiple services so do not signal waste costs clearly.

### Unit-based (PAYT) pricing: design, evidence, and tradeoffs
- PAYT (pay-as-you-throw) charges residents per unit of trash collected via:
  - Bin-based systems (pay for a number/size of regulated bins; charged per period or per set-out bin).
  - Bag-based systems or bag stickers (only trash in official bags/stickers accepted).
  - Weight-based systems (charged by weight collected).
- The appropriate PAYT charge would cover full collection, disposal, and environmental externalities as well as anti-dumping enforcement costs and untaxed vehicular externalities.
- Empirical evidence:
  - Meta-analysis by Bel and Gradus (2016) finds unit-based pricing schemes have an average arc elasticity of -0.34 on waste volume generated.
  - No significant difference between bin-based and bag-based systems in effectiveness.
  - Weight-based systems perform substantially better with an additional marginal elasticity of -0.4.
  - Systems offering compost collection have an additional marginal elasticity of -0.2; curbside pickup of recycling did not perform significantly better.
- Major disadvantages of PAYT:
  - High administrative and compliance costs.
  - Incentives for illegal dumping, counterfeit bags/stickers, and unpaid dumping in collective bins.
  - Easier to implement in suburban single-family settings; more difficult in urban settings with collective bins and in rural areas where dumping is easier.
- In high-dumping-risk settings, Fullerton and Kinnaman (1995) suggest pre-charging for disposal upon purchase (e.g., local sales tax) and providing free garbage collection as an alternative.

### Unit-based pricing regimes and revenue
- Several advanced countries implement unit-based pricing and can raise significant revenue, often earmarked for disposal costs.
- South Korea example:
  - Unit-based pricing introduced in 1995 to address rising solid waste from higher incomes and changing consumption.
  - Under the volume-based waste fee (VBWF) system, consumers and smaller businesses must buy official bags to dispose of waste.
  - Bag prices vary among municipalities reflecting local disposal costs:
    - 2014 average cost of a 20 liter household bag: KRW 482 (about US$0.46).
    - Local prices ranged from KRW 299-813 (US$0.28-0.77).
    - Average cost of a 20-liter business bag in 2014: KRW 766 (US$0.73).

*Source: https://www.imf.org/-/media/files/publications/wp/2019/wpiea2019283-print-pdf.pdf*

### 34.      Although Korea’s VBWF system generally does not charge consumers for the full cost of

### wpiea2019283-print-pdf - 34.      Although Korea’s VBWF system generally does not charge consumers for the full cost of

### Korea’s volume-based waste fee (VBWF) outcomes
- Waste generation per person fell from 1.3 kg per person per day in 1994 to 0.95 kg in 2014.
- Total waste generation fell from 58.1 tons per day to 49.9 tons.
- Recycling rate rose from 15.4 percent to 59 percent between 1994 and 2014.
- In 2013, an additional composting program for the separation of food wastes was added.
- Landfilled food waste fell from 97 percent in 1994 to only about 2 percent in 2014, reducing landfill externalities (air and water pollution as well as methane emissions).
- KEI (2016) observes that Korea’s growth engine shift and changing shopping behavior shortened expected product lives.

### Retail-level consumption taxes and advance disposal fees (ADFs)
- General consumption taxes (VAT or RST) raise the general cost of consumption but are a blunt instrument for internalizing product-specific environmental costs; better suited to revenue raising.
- Where household-level waste charges are not feasible, a retail sales tax could prepay for disposal; if varied locally, it could be tailored to local disposal costs.
- Jamaica’s Environmental Protection Levy (EPL):
  - Introduced in 2007 as a 0.5 percent ad valorem charge on imports (except CARICOM origins) to offset environmental costs of waste materials, particularly plastic packaging.
  - Revenues were intended to be earmarked for waste management but were swept into general revenues.
  - In 2015 the base was extended to include imports from CARICOM countries and domestic manufacturing, with credit given for EPL paid on inputs; use of revenues was not reformed.
  - EPL began to resemble an additional 0.5-point surcharge on Jamaica’s General Consumption Tax.
- Goods-specific excises (ADFs) can be levied at retail or production/import level and pass through to consumer prices, discouraging consumption of goods with costly waste streams.
- ADFs can reflect disposal cost tiers: recycling (lowest), trash disposal, littering (highest).
- Practical guidance:
  - If ADFs internalize only recycling costs, additional charge should be levied for disposal and stronger penalties for dumping.
  - Reasonable practice: set ADFs to reflect cost of legal disposal, provide rebates for recycling (deposit-refund schemes).
  - Where improper disposal costs are very high, incorporate them into ADFs with rebates for recycling.
  - Administrative challenge: setting appropriate levels for ADFs on highly pollutive goods may be difficult for many developing countries; product- and context-specific norms could help.

### Retail versus production-stage ADF administration and visibility
- Retail ADFs:
  - More numerous retailers (many small) make retail ADFs generally more costly to administer than production-stage ADFs.
  - May be more visible to consumers, increasing behavioral impact.
  - Can be implicit (included in retail price) or explicit (stated as specific charge); both raise prices and reduce waste, but explicit ADFs increase consumer awareness and can further dampen demand and increase recycling.
- Production/import ADFs:
  - Greater administrative simplicity than retail ADFs.
  - Less likely to be itemized and thus less salient to consumers.
  - As a source-based tax, raise relative price at production stage and may impair export competitiveness; rebate of ADFs on exports is appropriate but increases administrative complexity.
- ADF uptake:
  - Common in Europe on batteries, electronics, appliances, packaging, tires and vehicles.
  - ADFs often introduced at low levels with numerous exemptions due to competitiveness and employment concerns.
  - Variability in ADF rates across and within countries is large; some revenues are earmarked for environmental and/or waste management programs.

### Plastic bag taxes, effects, and international experience
- Plastic bags: carbon and air pollution emissions from production account for about a third of bags’ environmental costs (UNEP, 2014). Thin plastic bags escape waste deposits, harming wildlife, clogging drainage, spreading disease, and contributing to ocean plastic pollution (Xanthos and Walker, 2017).
- In the absence of a plastic bag tax, retailers typically include bag costs in overhead and provide them “free”; explicit charges have both price and signaling effects.
- Country-level consumption examples:
  - Denmark: average charge of about EUR 0.37 per bag levied on retailers; consumption of only 4 single-use plastic bags per person per year (the rate including multiple use bags is approximately 90 per year).
  - United States: about 350 per year.
  - Thailand: almost 3,000 per year.
- Bag charge levels and policy design:
  - Per bag charges range from US$0.015 in parts of Indonesia to US$1.00 in Brownsville, Texas.
  - Charges often combined with bans on bags below a minimum thickness (e.g., 20-50 microns); bans without charges are common.
  - Some laws require retailers to charge consumers a minimum amount but not remit revenues to the public treasury (e.g., China).
  - Revenues remitted and earmarked for cleanup funds can lead to governance issues in developing countries.
  - Enforcement varies: Mexico’s 2010 law largely unenforced; China’s 2008 law mainly enforced in urban areas.
- Empirical impacts:
  - Imposing a very small bag fee (average fee equal to 0.3 percent of national daily per capita consumption) reduced bag use by an average of two thirds in listed countries.
  - Arc elasticities of bag demand range from 24 to 47, with an average value of 34.
  - The initial signaling/shock effect of bag charges can wear off over time; maintaining deterrent effects may require increasing charges over time (observed in European countries).
- Examples of countries with plastic bag charges and bans include (selected from Table 5): Argentina (2009), Botswana (2007), Colombia (2016), Denmark (2003), China (2008), Ireland (2002), Mexico (2010), UK (2011-2015), USA (policy varies subnationally).

### Deposit-refund (D-R) schemes
- D-Rs are ADF variants that offer refunds for goods or packaging returned for recycling.
- Economic effects:
  - Unlike ADFs that raise price unequivocally, D-Rs raise prices only for consumers who do not recycle.
  - D-Rs deter consumption less and encourage recycling more than ADFs; generally a lower-cost and more effective strategy.
  - D-Rs do not encourage illegal dumping (unlike unit-based disposal pricing).
  - The optimal D-R rate equals the marginal social cost of solid waste disposal (Palmer and Walls (1997)).
- Administrative and compliance considerations:
  - D-Rs can have high administrative and compliance costs.
  - Consumers incur storage and return costs that must be compensated by the deposit.
  - As incomes rise, higher deposit rates may be required to maintain compliance, particularly where curbside pickup exists.
  - Retailers, distributors and producers may incur program administration costs; they can be offset by retaining a fraction of deposit amounts.
  - Unclaimed deposits may revert to the state, recycling authority, or participating businesses.
  - Deposit rates cited: $0.05-0.10 have stagnated over decades in the U.S., diminishing real incentive.
- Potential benefits in developing countries:
  - D-Rs could be highly progressive, establish minimum monetary value for covered goods, boost urban employment, invigorate informal recycling, and provide income streams for scavengers.
  - Unclaimed deposits can fund the D-R system and recycling activities.
  - UNDP supports D-R schemes to combat ocean plastic pollution and has funded feasibility studies for Pacific SIDS (Mar Dieye, 2018).
  - Zimbabwe is an exception among developing countries with a D-R for bottles showing a high elasticity of recycling response (Kaseke, 2005).

### ADF rate variability and data sources
- OECD PINE database describes many national and subnational ADFs (base, rates, revenues).
- Figures (12–15) summarize ADF rates for plastic packaging, batteries, tires, and appliances and show:
  - Tremendous variability in ADF rates across and within countries (subnational differences and variation across goods).
  - Common exemptions include exports and particular uses (e.g., tires for public service vehicles, plastic packaging for medical goods).
  - Further research into determinants of ADF rates (local disposal costs, political values) would support rate-setting norms and best practices.
- Representative numeric references from the figures and tables in the source:
  - Average bag fee in empirical studies: 0.3 (percent of national daily per capita consumption).
  - Arc elasticity average: 34; range: 24 to 47.
  - Deposit rates referenced historically: $0.05-0.10.

*Source: Extracted from the provided IMF working paper content unit.*

### 53.      Another common feature of ADF regimes highlighted in Figures 8-11 is frequent

### Another common feature of ADF regimes highlighted in Figures 8-11 is frequent earmarking of their revenues for waste management, recycling or other environmental purposes.

### Earmarking and political economy
- Earmarking of environmental revenues may be necessary to sustain environmental protection programs through economic downturns and changes of government.
- Brett and Keen (2000) model environmental earmarking as a means by which green politicians can insulate environmental programs from potential future changes in government.

### Source-based ADFs and administration in developing countries
- Source-based ADFs are attractive for developing countries because the small number of collection points make them relatively easy to administer.
- Countries that import a large share of their consumer goods can collect most ADFs at customs, plus perhaps at a small number of manufacturers.
- The environmental cost of managing the waste stream from imports (particularly high for island countries) could potentially be used as a basis for rationalizing tariff structures.
- To avoid harming trade competitiveness:
  - Manufacturers should be charged ADFs only for output sold into the domestic market.
  - ADFs charged on imported inputs should be rebated for exported products.
  - Production waste should be charged for where it is disposed of (likely in the producing country).

### Deposit-refund (D-R) schemes and producer-level implementation
- Palmer and others (1997) suggest imposing deposit-refund schemes at the producer level for greater administrative simplicity.
- Under producer-level D-R:
  - Producers (or importers) charge retailers an ADF.
  - Part or all of the ADF is reclaimed from the producer by recycling consolidators when used goods and/or packaging are returned.
- Producer-level D-R assumes the existence of household- or retail-level recycling mechanisms (e.g., curbside pickup).
- Where such mechanisms do not exist, D-R schemes are more effective at the retail level to ensure return of used goods or packaging.

### Extended Producer Responsibility (EPR) and comparative advantages
- Producer-level ADFs are often an important component of EPR, which imposes legal liability on manufacturers to reclaim their goods and/or packaging after use.
- Under EPR:
  - Imposition of recycling responsibility on producers/importers increases their costs, which are passed to consumers through higher prices, abating consumer demand.
  - Producers use higher unit income to either recycle goods themselves or compensate intermediaries to fulfill recycling functions.
- Advantages of EPR over ADFs:
  - Government does not need to determine an appropriate excise tax level; EPR is less information-intensive.
  - EPR incentivizes manufacturers to design products to reduce waste and maximize recycling and reuse.
  - If EPR does not apply to exports, it should not impact competitiveness.
  - Applying EPR to importers should ensure it does not favor imports over domestically produced goods.

### EPR experience and requirements
- ERP has the greatest potential in larger developing countries with significant manufacturing for domestic consumption.
- Example: South Africa included a significant ERP component in its National Waste Management Strategy (Republic of South Africa, 2016).
  - In the first phase, manufacturers in the paper and packaging, electrical and electronic, and lighting industries were required to submit comprehensive waste minimization and management plans in 2018.
  - Manufacturers may either subscribe to the government waste management plan or define their own plan, including possible establishment of non-profit organizations to manage industry waste cycles.
  - Plans are required to include detailed data on waste volumes, management costs, environmental impact, and job creation, and to define methods of raising public awareness and involvement of historically disadvantaged individuals and communities.

### Virgin Material Tax (VMT) and alternatives
- A virgin material tax (VMT) is an excise on virgin (but not recycled) raw materials.
- VMTs lower the relative cost of recycled inputs, stimulating producer demand for recycled materials and consumer demand for goods with higher recycled content (Miedema, 1983; Conrad, 1999).
- Increased demand for recycled inputs can make recycling programs more cost-effective.
- Dinan (1993) demonstrates that either deposit-refund schemes (waste charge combined with recycling subsidy) or unit-based disposal pricing are more efficient than a VMT at encouraging recycling, because a VMT only encourages use of recycled inputs in goods that also use virgin materials.
- VMTs (or resource royalties) are appropriate instruments for internalizing the environmental costs of extracting virgin materials (Dinan, 1993; Kinnaman, 2006).

### Conclusions and policy recommendations
- Countries are seeking better means of reducing waste generation and financing its processing due to rising environmental costs of solid waste.
- Fiscal instruments, together with appropriate regulations, can generate resources for proper waste management and modify producer and consumer behavior to reduce waste.
- This analysis focuses on externalities produced by waste disposal, assuming carbon and virgin material taxes are available to address fossil fuel consumption and natural resource extraction externalities.
- Developing country priorities for waste management:
  - Waste management programs are often underfunded and/or charged in ways that obscure costs to consumers.
  - Even explicit garbage collection fees often do not cover full disposal costs or environmental externalities.
  - Fees usually unrelated to the amount of trash disposed (marginal disposal cost zero) give households no disincentive for waste generation.
  - Consumer awareness of waste management costs and externalities tends to be poor.
- Recommended instruments and design choices:
  - Households and businesses should face the full cost of waste management, including collection, disposal, and environmental externalities.
  - Where feasible, unit-based pricing schemes based on actual weight or volume of trash disposed create the best incentive to minimize waste.
  - Where administrative capacity is limited and/or illegal dumping risk is high, charging on the basis of household consumption is a second-best alternative (e.g., a sales tax tailored to local disposal costs prepaid at retail, or an ad valorem surcharge on water or electric utility bills).
  - If property tax compliance is good and other systems are politically rejected, paying for waste management through the property tax is a third-best alternative, but the fee should be separately stated to inform households.
  - Impose adequate landfill charges—both tipping fees to cover private operation costs and landfill taxes scaled to environmental externalities—reflecting local waste externalities (population density, topography) and covering increased anti-dumping enforcement costs.
  - Fully financing waste management in a manner that raises consumer awareness should help build support for higher environmental standards; improved solid waste regulations (sanitary landfilling, separation of organic materials) will reduce externalities though raise operating costs.
- Instrument choice guidance:
  - Downstream instruments have clear advantages: more visible to consumers, more likely to alter behavior, and do not need border adjustment to avoid harming competitiveness.
  - Production waste disposed of in the source country should be charged at source, even if the product is exported.
  - Revenues from waste-related charges should arguably be earmarked for waste management to ensure environmental standards are not compromised in times of fiscal stress.
  - Deposit-refund schemes (disposal tax plus recycling subsidy) can ensure recycling of goods with highest material value and/or disposal externalities (vehicles, appliances, electronics, tires, batteries, metal cans, PET bottles, paper/cardboard).
    - Where curbside recycling programs exist, deposit-refund schemes could be applied at the producer level for administrative ease.
    - In their absence, retail-level deposit reclaim is necessary to incentivize consumers and generate revenue for scavengers.
    - If the goal is to discourage consumption rather than encourage recycling (e.g., lightweight plastic bags), a simple retail-level ADF may be more appropriate.
  - Covering high-value and pollutive goods with deposit-refund schemes and ADFs allows disposal fees to be calibrated toward the average cost of other waste.

### Areas for further research
- Two salient research needs:
  - Responsiveness of consumer behavior to ADFs: Many studies (e.g., on plastic bag taxes) lack rigorous estimation of behavioral elasticities needed to inform effective bag tax policies.
  - Measuring environmental externalities from waste disposal: To set ADFs and waste management charges that internalize external costs, the magnitude and geographic/demographic variability of those costs must be determined.
- Given proliferation of ADFs on various items and wide differentials among their rates and bases, better studies of their effects would be extremely useful.

*Source: Excerpt from IMF working paper chapter (pages 53–66) on ADF regimes, deposit-refund schemes, EPR, VMTs, conclusions, and research needs.*

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_Source: https://www.imf.org/-/media/files/publications/wp/2019/wpiea2019283-print-pdf.pdf_