Landfill Diversion in a Decentralized Setting: a Dynamic Assessment of Landfill Taxes

We analyse the process of landfill diversion and separated collection, two pillars of a waste related performance in a country, by embedding the dynamics in a frame where economic, geographical and policy variables enter the arena. We aim at investigating in depth what main drivers may be responsible for such a phenomenon. In addition to structural and economic drivers we primarily investigate the role of landfill taxes. Notwithstanding the Italian landfill tax dates back to 1996, there is a lack of effectiveness assessment, which primarily derives from the absence of a full coherent dataset covering all regions. In fact, the implementation is delegated to each region, a case study of real decentralisation, and the opposite for example of the UK situation, where the tax is set and administered by the Treasury. We first provide a descriptive analysis of the regional trends over the years on the basis of an original landfill tax dataset covering all Italy that we constructed through a scrutiny of regional bills, and web and telephone contacts. We exploit this peculiar and original aggregation of tax related information to test whether the tax has been effective in supporting landfill diversion. We test the hypothesis on the basis of an integrated dataset that merges economic, waste, policy variables together, at regional level and over the period 1999-2008. We check for results sensitivity the effect of the landfill regional tax by using provincial dataset over the same period. Panel regressions show that the effect of tax is significant, complementary to structural factors, population density and related opportunity cost among others. Spatial effects seem instead negligible. This is the first evidence on a large panel dataset that introducing and increasing landfill taxes over time is an effective way to cope with waste disposal. Regions that have increased such taxes over time have achieved better waste disposal performances. Landfill taxes are not the only instrument but they show to a relevant ‘must have’ in the policy package.