The Crowding-Out Effects of Garbage Fees and Voluntary Source Separation Programs on Waste Reduction: Evidence from China

This paper examines how and to what degree government policies of garbage fees and voluntary source separation programs, with free indoor containers and garbage bags, can affect the effectiveness of municipal solid waste (MSW) management, in the sense of achieving a desirable reduction of per capita MSW generation. Based on city-level panel data for years 1998-2012 in China, our empirical analysis indicates that per capita MSW generated is increasing with per capita disposable income, average household size, education levels of households, and the lagged per capita MSW. While both garbage fees and source separation programs have separately led to reductions in per capita waste generation, the interaction of the two policies has resulted in an increase in per capita waste generation due to the following crowding-out effects: Firstly, the positive effect of income dominates the negative effect of the garbage fee. Secondly, there are crowding-out effects of mandatory charging system and the subsidized voluntary source separation on per capita MSW generation. Thirdly, small subsidies and tax punishments have reduced the intrinsic motivation for voluntary source separation of MSW. Thus, compatible fee charging system, higher levels of subsidies, and well-designed public information and education campaigns are required to promote household waste source separation and reduction.