MOOC: Auditing waste management
3.4. Economic tools
Besides regulatory mechanisms, governments use market-based instruments, which can be used to achieve environmental objectives in waste management. These instruments are usually used to provide producers and consumers with an incentive to change their behaviour towards more efficient use of natural resources and to look for more effective ways of making environmental progress while giving them the flexibility to do so []. Analysing economic instruments helps you to understand the reasons for misbehaviour and make suggestions to amend the system.
Some of the most common economic tools are presented below. Read more about market-based instruments from the INTOSAI WGEA research paper on marked-based instruments for environmental protection and management [].
Charges
Charges are designed to cover (in part or in full) the costs of environmental services and abatement measures, e.g. a charge for waste collection and treatment. Charges are typically payments made in exchange for a service, usually levied in proportion to the volume of the service received. Charges can be differentiated, e.g. mixed solid waste costs more for citizens than sorted waste. There are also administrative charges to cover costs related to licensing, enforcement or control, e.g. a local charge for waste management.
In several countries there is a system of “pay-as-you-throw” (PAYT), where users are charged a rate based on the amount of waste they produce. It usually operates in the form of different types of bags and containers.
AUDIT CASE: CESSATIONS AND HAZARDOUS WASTE
Lithuania – Auditing hazardous waste SAI Lithuania carried out an audit in 2018 to find out whether, upon the termination of the activities related to hazardous waste management, the remaining unprocessed waste would not need to be managed by the state.Auditors compared prices provided by waste operators in their financing plans for cessation of their operations with information provided by the Environmental Protection Department. SAI established that actual waste management prices were 2-3 times higher. Audit also compared prices for the same type of waste provided in the same year by different hazardous waste operators in the financing plans for cessation of their activities and established 10-fold differences. SAI Lithuania concluded that the system wherein prices indicated in the financing plans for cessations were based on proposals from other waste management operators was flawed as it provided a possibility for agreements between operators and did not therefore ensure that waste remaining after cessations would not need to be managed from state resources. |
Taxes
Taxes are like charges, but their main aim is usually to change prices (of products and services) and thus the behaviour of producers and consumers. Taxes are generally considered to be unreciprocated payments to government, with no service received in exchange for the payment, e.g. a landfill/waste disposal tax or incineration tax. The aim of these taxes is to minimise waste being landfilled or incinerated instead of recycled. Taxes can also be imposed on potentially polluting products such as cars, tyres, batteries, motor oil and packaging (e.g. plastic bags).
AUDIT CASE: PROMOTING SEPARATE WASTE COLLECTION
Slovakia – Audit of separate waste collection With the comparatively low recycling rate in mind, SAI Slovakia decided to focus on the stage of separate waste collection in its audit of municipal waste in the period of 2015-2018. Numerous observations were made based on the findings of this audit, including shortcomings in the fulfilment of control function by the state, inefficiency of legislative instruments as well as problems with waste management plans, organization and reporting on of separate collection by the municipalities. Regarding economic incentives which should promote the separate collection of waste, SAI Slovakia observed that the extended producer’s responsibility scheme had not reduced local waste tax for citizens but had merely decreased the financial burden of local governments as the municipalities had earlier financed waste management also from their budgets in addition to waste tax revenue. SAI Slovakia concluded that the concept ‘the more you separate, the less you pay’ did not therefore work in practice. |
Deposit refund systems
A deposit refund system is a surcharge on a product when purchased and a rebate when it is returned. It is used with beverage bottles, consumer electronics, cars, etc. It is usually a very effective way of collecting waste/used products, but the system itself can be expensive to manage.
You may read more about deposit systems for beverage containers here: https://www.cmconsultinginc.com/wp-content/uploads/2017/05/BOOK-Deposit-Global-24May2017-for-Website.pdf
Extended producer responsibility
The extended producer responsibility is a tool used to ensure that all environmental costs associated with a product throughout the product life cycle are added to the market price of the product. Assigning such a responsibility is designed to provide incentives to prevent waste at the source, to promote product design for the environment and to support the achievement of public recycling and materials management goals.
AUDIT CASE: EXTENDED PRODUCER RESPONSIBILITY SCHEME
Lithuania – Application of the extended producer responsibility scheme In 2017, the National Audit Office of Lithuania audited the application of the producer responsibility principle. Three main criteria of the audit were as follows: 1) data on products and packaging supplied to the internal market as well as the resulting waste are reliable; 2) producers and importers organise and fund the processing of all products and packaging waste; 3) control and monitoring system of the application of the producer responsibility scheme are in place. Auditors concluded that the implementation of the producer responsibility principle was not effective due to the opportunity for the producers and importers to fulfil their responsibilities only partially and consequently avoid environmental taxes, causing cost to state and residents for the proper management of unprocessed product and packaging waste. Lack of correct and reliable data and a clear control mechanism over waste management operators were also pointed out as risk areas by SAI Lithuania, contributing to situations whereby waste management documents would be issued for unlawfully processed waste. |
Subsidies
Subsidies are used by governments to achieve environmental objectives in order to encourage more environmentally beneficial behaviour. Governments can subsidise the collection and treatment of waste, but usually these costs are covered by producers and consumers. Nevertheless, there can be tax exemptions or direct grants for preferable behaviour, e.g. funding programmes for enterprises in investing in new recycling technologies or reducing waste generation.
Note: Subsidies may also have environmentally harmful consequences. For example, renewable energy subsidies for municipal waste incineration alter the objective of sorting and recycling this waste.
AUDIT CASE: THE BENEFITS OF WASTE MANAGEMENT SUPPORT
Czechia – Auditing benefits of support In their audit SAI of Czechia evaluated the benefits of financial support provided for waste management by means of the cost-benefit analysis (CBA) – an analytical tool used to evaluate investment decisions with a view to assessing their contribution to the objectives of the intervention, or cohesion policy objectives. The benefits were ascertained from document reviews, e.g. from the Operation Execution Report (a report on the status of the operation being submitted by the recipient managing body or intermediate body).In the audit it was found that the Ministry of the Environment had set up a system for assessing the benefits of support using indicators whose values were influenced by a number of other factors or were partly or completely independent of the support. As a result, SAI Czechia concluded that it was difficult to evaluate the benefits of support from the Operational Programme Environment 2007–2013 of EU Cohesion Funds for the state of waste management in the Czech Republic. |
Tip for auditors
| Possible questions to ask when planning a waste audit:
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