Unit-pricing: minimising Christchurch domestic waste

Abstract

Waste generation and disposal impacts on our local environment and is of growing concern. Managers of waste services face growing pressure to contribute to environmental goals while providing quality service. One economic tool that can aid in the achievement of waste minimisation targets is unit-pricing. This research investigates the potential impact of implementing a unit-pricing policy for domestic waste collection and disposal services in Christchurch.

Christchurch City Council provides the city's major domestic waste collection and disposal service to its residents through the weekly kerbside collection service. This service is currently funded by a flat-rate charged to each rateable property. Under flat-rate funding residents perceive a marginal cost of zero for each additional unit of service provided. This leads to an inefficiently high quantity of service demanded.

This level is economically inefficient as the marginal benefit of the last unit demanded is less than the true marginal cost. Excessive waste is created that places pressure on the environment to absorb it. Residents do not have an economic incentive to reduce the quantity of service demanded as there is no (monetary) benefit for doing so. In contrast, unit-pricing provides residents with an incentive to reduce the amount of service demanded as residents are charged relative to the amount of waste created. In this way, unit-pricing is a policy that may help achieve the Council's waste minimisation goals.

To assist in the formation of such a system information is required on how residents may react to a shift from flat-rate charging to a market based unit-pricing system. In particular the price level that is needed to achieve reductions to aid the Christchurch City Council reach waste minimisation targets. Data for this research was obtained in a self-administered Contingent Valuation survey of 448 Christchurch households. A Poisson Quasi-Maximum Likelihood count model is specified for econometric analysis.

The model indicates that the quantity of bags put out for collection is positively influenced by the size of the household and income levels. Negative determinants in the model are price per bag, the quantity of private service subscribed to, use of recycling, composting, and source reduction behaviour. Charging a price per bag is shown to have considerable potential to reduce waste going to landfill. A price of $1.00 leads to a 17 percent reduction in the waste going to landfill by the council service. The level of household income is shown to effect a household's reaction to the level of unit-price.