TAXING PEOPLE”S RUBBISH: Evidence from Switzerland that they don”t like it at first but learn to live with it

People might dislike taxes on their rubbish at first – but such taxes do encourage recycling and eventually become popular. That is the main finding of research by Stefano Carattini, Andrea Baranzini and Rafael Lalive, to be presented at the Royal Economic Society''s annual conference in Brighton in March 2016.

People do not like paying taxes. Because of this, they can be used not just to raise money, but also to discourage people from all kinds of activities – smoking, drinking and even polluting (such as throwing away rubbish instead of recycling it).

This study looks at the introduction of a tax on bags of rubbish in a Swiss canton. It finds that adding a tax reduced the amount of unsorted waste by 40%, made people more likely to recycle and even the tax itself became popular after some time. People overwhelmingly went along with the tax, instead of dumping rubbish elsewhere.

Without the tax, people have little reason to recycle unless they happen to want to. With the tax, households now have something to gain (or less to lose) by cutting down on waste and bringing more to a recycling centre. Pollution fell, and when people saw the wider benefits they went from seeing the tax as unfair to supporting making it even higher. The authors comment:

''Our study shows that voters are pessimistic about an environmental tax before they experience it, and become more optimistic once the tax has been implemented.''


This study shows how effective garbage taxes can change people''s recycling behaviour and make them like the tax better

People do not like taxes

This is a recurrent fact in many contexts. Sometimes people do not like taxes even though they work just fine. Environmental taxes represent a good example. In most cases, environmental taxes aim at changing behaviour, not raising fiscal revenues. Yet, they are seen with suspicion by the population, and their effectiveness is often challenged.

But sometimes things can be different. A study by Stefano Carattini, LSE, and co-authors shows that garbage taxes can face important resistance before being implemented, but enjoy much more popularity thereafter. They look at the implementation of pricing garbage by the bag in one Swiss canton, and study at the same time the policy''s effectiveness and acceptability by the population.

They find that pricing garbage by the bag reduces unsorted waste by 40%, increases the frequency of recycling, and does not lead to ''waste tourism'' to a neighbouring canton without pricing garbage by the bag. Before its introduction, the policy is criticised by many, but afterward its popularity substantially increases.

But why tax garbage?

In most countries waste management is funded through fees at the council level, which do not depend on the quantity of garbage produced by households. But this is a bad idea, because in this way households do not have any financial incentive to recycle. If they produce more garbage, the cost of collecting it and incinerating it is shared by the whole community.

Some people still recycle, driven by pro-environmental motives. But the rate of recycling tends to be much lower in jurisdictions counting only on the altruistic behaviour of some generous people.

How to tax garbage then?

There are a few ways to do it. One of them is to introduce a special coloured garbage bag and forbid the use of any other bag, as in this study. The price of the bag is set by the authorities, to match the costs of managing waste.

Pricing garbage by the bag works like this: households can either sort their garbage and dispose it at the closest collection centre for free, or fill the garbage bag. The more they sort, the more they save money by using less priced bags. Households could be tempted to dump garbage in the woods or in public bins, but they tend not to. People comply with garbage taxes, as they do with the cigarette bans or seat belts.

Does the tax work?

It does. The study uses household survey data and administrative data to assess the effect of pricing garbage by the bag on people''s behaviour. Both data show that unsorted waste is reduced by 40%, and many more households are found to sort materials such as organic waste and aluminium.

Measuring garbage in kilos or volume provides the same results, suggesting limited room for stomping waste in fragile garbage bags. Since less garbage incinerated means lower waste management costs, households gain from this reform. Of course, those who recycle the most, gain the most.

There are some costs of administrating the programme, but these are likely to be small according to the study. Plus, less incinerated waste implies also less pollution, for instance from local gases such as NOX and SO2 as well as particulate matters. Carbon emissions also decrease.

Why don''t people like it?

People do not believe that the garbage tax helps them recycle and think it is unfair before it is implemented. People do not perceive pricing garbage by the bag ''as effective, in the sense that it incites the inhabitants of your municipality to recycle more of their garbage and pay more attention to voluminous wrapping'', and as unfair, ''because you already pay enough taxes'' or because pricing garbage by the bag ''makes you pay even if you already sort your garbage''.

Some people are also concerned with the potential distributional effects on low-income households, even though they do not only depend on pricing garbage by the bag but also on the way revenues are redistributed.

After the implementation, people see how pricing garbage works in their direct environment. For many, the feeling of ineffectiveness and unfairness disappear, and households declare to be ready to vote for a much higher price for garbage bags.

Any lessons?

Policy-makers around the world struggle to make environmental taxes of any type acceptable. This study shows that voters are pessimistic about an environmental tax before they experience it, and become more optimistic once the tax has been implemented. If voters hold pessimistic beliefs at the time of democratic decision-making, many environmental taxes will not be implemented.

This study suggests a way out of this stalemate. Policies could be first introduced for a temporary period. Voters could then decide on keeping the new policy or returning to the status quo after testing it. Policies forced onto voters that remain detested could be abandoned after the trial period. Policies that voters embrace after living with them would remain, and contribute to better environmental quality.