Landfill tax and recycling

Abstract

This paper brings new empirical evidence on the role of landfill taxes on reducing landfill waste and promoting recycling. We focus on the impacts of the 2017 landfill tax law reform in Catalonia, a Spanish region, which increased the tax rate from 18€ to 47€ euros per ton over the extended period of 2017-2020. Using municipality-level data for Catalonia from the 2013-2020 period, we contrast municipalities that differed in the use of door-to-door (DtD) waste collection by the beginning of our study period. As DtD waste collection is advocated as especially efficient in reducing waste, and landfill waste in particular, we hypothesize that municipalities that had not yet adopted this system had greater leeway in responding to the tax changes. Based on a two-way fixed effects design, our findings reveal large differential responses to the tax hike. Compared to municipalities that had implemented DtD waste collection by 2013, we estimate that those that had not responded to the tax hike by reducing landfill waste by an additional 12%, reducing total waste by 4%, increasing the share of recycled waste by 6 percentage points, and increasing the share of waste that is sorted and processed as organic by 2.5 percentage points. We provide suggestive evidence that the adoption of DtD waste collection is the main mechanism driving these responses.