Economics of Hazardous Waste Management

Hazardous waste management involves treatment, disposal, or recycling of a wide range of different waste streams from industry, households, and others. The diversity of wastes and management methods means that many choices affect its environmental harms, which result from possible contamination of groundwater, surface water, soil, and air. Efficient public policies that would fully reflect such varied external costs are unlikely to be feasible. In practice, governments principally apply three policy approaches to hazardous waste: taxes on hazardous waste, liability for environmental damages, and standards-based regulation of waste management facilities. Hazardous waste taxes may help internalize environmental costs but do not reflect all the variability in these costs. By contrast, liability for environmental damage can make waste generators and managers confront environmental costs that vary with their particular choices. However, environmental liability is often linked to programs for cleanup of contaminated sites and may not create efficient incentives for active waste management because this liability does not reflect the social costs of the contamination. Regulation usually takes the form of technology and performance standards applied to treatment, storage, and disposal facilities (TSDFs) and affects generation decisions only indirectly. Research finds that public policies that raise costs of hazardous waste management, such as taxes and regulation, encourage less waste generation, but may also provoke detrimental responses. First, facilities may substitute illegal waste dumping for legal management and thus exacerbate environmental damage. Second, generators may ship waste to jurisdictions with weaker environmental protections, especially developing countries, giving rise to a “waste haven” effect. This effect may create offsetting environmental damage, facilitate destructive policy competition among jurisdictions, and worsen inequities in exposure to environmental harm from hazardous waste.