Waste taxation: is it working? How could we improve it?

Following-up the research on the effects of environmental taxation reforms, we have concluded another interesting piece of research along with Veronica Martínez and Ignasi Puig, both from ENT Environment and Management, my return host. Starting with a version of the dynamic macroeconomic model I developed at Harvard in the context of the Metres project, we have assessed the impact of current and other hypothetical set-ups of waste taxation in Spain.

One of the strengths of the energy-environment-economy model developed  is the high industry/commodity detail it contains in relation to other models. There are 101 industries, including 19 different sectors regarding waste treatment. So we included different waste treatment technologies: (1) incineration: food waste, paper waste, plastic waste, inert/metal waste, textiles waste, wood waste, oil/hazardous waste; (2) biogasification and land application: food waste, paper waste, sewage sludge, composting and land application, food waste; (3) waste water treatment: food waste, other waste; (4) landfill: food waste, paper, plastic waste, inert/metal/hazardous waste, textile waste, wood waste.


This way we can, not only simulate the effect of current taxation on these industries, but also to introduce other scenarios that could potentially improve economic and environmental indicators. Theory suggests that these scenarios should be to increase taxation on incineration and landfill technologies, and at the same time, reward recycling technologies (and activities), if we want to improve environmental conditions.

This is exactly what we have done by setting different scenarios that test this environmental economics principle.

Besides, in this research we have gone further in the analysis and developed different environmental impact categories as an extension of the base model. These categories are global warming potential, marine eutrophication potential, photochemical ozone formation potential, particulate matter, human toxicity (cancer and noncancer), ecotoxicity, and depletion of fossil resources. This way we can track the effects of policies on them, providing an interesting source of information for policymakers.

We found that current taxation has some positive environmental impact but would be deeply improved with a different policy design that includes what we intuited. That is, penalize landfill and incineration and bonify recycling is better for environmental conditions and, depending on other design conditions, can be better for the economy.

An extensive article with all the details has been sent to an academic journal for review.