Taxation of waste incineration

- does it match the external costs ?

Prof. Mikael Skou Andersen

NERI, University of Aarhus (DK)

External costs

Green Week, Brussels, June 13.th 2007

When a transaction between

A and B has negative (or
positive) implications for third
persons (Pigou, in
Economics of Welfare, 1920)
External costs impact
amenity values
natural capital
absorption capacity of the
environment
life support systems

NERI, University of Aarhus (DK)

Air pollution from waste

incineration may have an
impact on life support systems
for humans as well as for
nature

Getting the prices right

with environmental taxes and charges

Green Week, Brussels, June 13.th 2007

When external costs are internalised in market

transactions:
1) an incentive is created to integrate environmental
concerns in all transactions
2) measures that are more cost-effective will be
implemented
3) new technologies that minimise environmental burdens
are promoted
4) a decoupling reflecting eco-efficiency is enabled

NERI, University of Aarhus (DK)

Denmarks Tax on Solid Waste

NERI, University of Aarhus (DK)

50
40
30
20
10

07
20

02
20

97
19

92

19

Incineration tax

60

87

Green Week, Brussels, June 13.th 2007

Landfill tax

19

Introduced in 1987 with

modest rate (5 /ton)
National weight based
tax different from
user fees for waste
management (volume)
Tax gradually
increased to a level of
45-50 /ton
Levied on landfill waste
as well as on waste for
incineration

per tonne waste

Impact on Waste Delivered

Green Week, Brussels, June 13.th 2007

NERI, University of Aarhus (DK)

Tax is incentive to waste

collectors to sort waste
Recycling has increased, in
particular of heavy factions
(tax penalises weight)

Amount of residual
waste reduced by 26
per cent within a
decade

Weight-based user fees

required to transmit waste tax
incentive to consumers and
producers

How to establish
the appropriate tax rate ?

Justification with reference to standards

(Baumol-Oates tax)

Green Week, Brussels, June 13.th 2007

or

Justification with reference to external costs

(Pigouvian tax)

NERI, University of Aarhus (DK)

Green Week, Brussels, June 13.th 2007

External air pollution costs of

Copenhagen waste incinerator

Incinerator receives
500.000 tons municipal
waste annually

Air pollution control

comprises sulphur
scrubber, de-NOx, dust
filters, dioxine filter

Yet, some emissions of

SO2, NOx, PM2,5, lead
etc. remain

NERI, University of Aarhus (DK)

EVA-model accounts for background

(annual mean)

Modelled NO2 concentration background

Modelled NO2
concentration background

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(6-hr mean)

NERI, University of Aarhus (DK)

Green Week, Brussels, June 13.th 2007

Contribution of emissions to annual

concentration level also regionally

NERI, University of Aarhus (DK)

Green Week, Brussels, June 13.th 2007

Particles and early death:

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All external health effects

Green Week, Brussels, June 13.th 2007

Response

Component

Population

Acute mortality (deaths)

SO2, O3
Respiratory hospital admissions (cases)
SO2, PM2.5, NO3, SO4
Congestive heart failure (cases)
CO, PM2.5, NO3, SO4
Cerebrovascular hospital admission (cases) PM2.5, NO3, SO4
Chronic mortality (years of life lost)
PM2.5, NO3, SO4
Bronchodilator use (cases)
PM2.5, NO3, SO4
Cough (days)
PM2.5, NO3, SO4
Lower respiratory symptoms (days)
PM2.5, NO3, SO4
Chronic bronchitis (cases)
PM2.5, NO3, SO4
Restricted activity days (days)
PM2.5, NO3, SO4
Lung cancer (cases)
PM2.5, NO3, SO4
Infant mortality (cases)
PM2.5, NO3, SO4
Loss of IQ-points (points)
Lead
Loss of IQ-points (points)
Mercury
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All
All
> 65
All
All
Asthma
Asthma
Asthma
> 16
> 16
> 16
Baby
Baby
Foster

Green Week, Brussels, June 13.th 2007

ExternE-method:

NERI, University of Aarhus (DK)

External costs of waste incinerator

- air pollutants excl. dioxine
PM2,5

SO2

NOx

Pb&Hg

10
8

25
20
/ton 15
Waste 10
5
0

2003 2004 2005

Landfill tax

Incineration tax

60

2
0
2003

2004

2005

external costs (million )

per tonne waste

50
40
30
20
10

NERI, University of Aarhus (DK)

20
07

20
02

19
97

19
92

19
87

Green Week, Brussels, June 13.th 2007

Conclusions

Green Week, Brussels, June 13.th 2007

Denmarks national waste incineration tax is 45 /

ton of waste
External costs of air pollutants alone appear to
justify to tax about 20 per ton of waste for a
modern incinerator with filters
Other external costs relating to water pollution,
landfilling of slags and cinders and toxic
micropollutants remain to be monetized
Taxation of actual external effects (emissions) more
efficient and desirable than to tax per ton of waste

NERI, University of Aarhus (DK)

http://www.DMU.dk/COMETR

References

Green Week, Brussels, June 13.th 2007

Andersen, M.S. (2007): An introductory note on the environmental economics of the circular
economy. Sustainability Science 2(1): 133-140.
Andersen, M.S., Frohn, L.M., Nielsen, J.S., Nielsen, M., Jensen, J.B., Jensen, S.S., Christensen,
J. & Brandt, J. (2006), EVA - a non-linear Eulerian approach for assessment of health-cost
externalities of air pollution. http://www.dmu.dk/International/News/EVA.htm
Andersen, M.S. & Dengse, N. (2002): A Baumol-Oates Approach to Solid Waste Taxation. Journal of Material Cycles and Waste Management 4: 23-28.
Andersen, M.S. (1999) The Waste tax 1987-1996 - an ex-post evaluation of incentives and
environmental effects, Working report no. 18, Copenhagen: Environmental Protection
Agency.
Pope et. al. (1995): Particulate air pollution as a predictor of mortality in a prospective study of
US adults Am J Resp Crit Care Med 151, 1995, 669-674
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