ISSN 0798 1015

Vol. 38 (Nº 14) Año 2017. Pág. 1

Economic valuation of urban solid waste: a review

Valoração econômica de resíduos sólidos urbanos: uma revisão

Anny Kariny FEITOSA 1; Júlia Elisabete BARDEN 2; Odorico KONRAD 3

Recibido: 28/09/16 • Aprobado: 20/10/2016

Content

1. Introduction

2. Environmental Economic Valuation

3. Material and methods

4. Results and Discussions

5. Conclusions

References

1. Introduction

Studies on environmental economic valuation provide a significant contribution in the field of economic sciences for an integrated management decision-making process regarding environmental resources, as they favor the processes of guidance, design and application of the strategies and policies applied to the protection and preservation of environmental goods and services (Santoyo et al., 2013).

Concerning urban solid waste management, according to Adam et al. (2015, p. 49), “the concern with solid waste pollution is one of the various dimensions of environmental concerns. This variable is commonly applied in studies on economic valuation of different aspects of solid waste management services”.

In order to obtain knowledge on the prevalent themes addressed in the discussion of economic valuation applied to urban solid waste management, the present article proposes a systematic literature review spanning the last decade, by searching scientific papers at the bases Portal de Periódicos (CAPES), Springer, Science Direct and SciELO, using the descriptors Environmental Economic Valuation; Economic valuation and solid waste; and, Economic valuation and solid waste management. Finally, the selected articles were analyzed and grouped by theme, using construction of analysis categories (Bardin, 2011).

2. Environmental Economic Valuation

According to Motta (1998, p.13), obtaining the total economic value of an environmental asset consists in:

Determine how much better or worse will be the people’s wellbeing due to changes in the quantity of environmental goods and services, either through their use or not. Thus, the methods of environmental valuation will fulfill this goal if they are able to contemplate the different economic value components of the environmental asset.

Thus, the total economic value (TEV) of environmental resources can be understood according to its attributes, considering its use (Use Value – UV) and non-use (Non-Use Value – NUV). The use values are classified into Direct Use Value (DUV) and Indirect Use Value (IUV). The VERA (TEV) expression and its composition are shown below:

TEV = (DUV + IUV + OV) + EV                                                  (1)

Motta (1998) presents the general taxonomy of the Economic Value of Environmental Resources, as follows (Table 1):

Table 1 –  General taxonomy of the Economic Value of Environmental Resource

Source: adapted from Motta (1998).

According to Motta (1998), the valuation methods are Methods of production function and Methods of demand function, subdivided as follows:

• Methods of production function subdivided into marginal productivity and substitute market goods (replacement, defensive expenditures or avoided expenditures and control expenditures); and,
• Methods of demand function that can be complementary market goods (hedonic pricing and travel cost prices) and contingent valuation method.

In turn, Rodrigues and Santana (2012, p. 303) classify the techniques of economic valuation of resources into four groups, as follows:

• Conventional market approaches by market prices or shadow prices as approximation;
• Domestic or household production functions.
• Hedonic pricing methods; and,
• Experimental methods.

Thus, several methods can be used in the valuation of an environmental resource. However, the choice of the most appropriate method depends on the specifications of each study, according to the objectives pursued. Among the methods shown, Contingent Valuation Method (CVM) is considered an effective tool to assess environmental goods and services, as well as public goods not provided by traditional markets. This method also captures individuals’ preferences in hypothetical markets because of its flexibility that allows estimating both use and non-use values of these assets. (Gullo & Gregori, 2011). According to Rabelo Neto et. al. (2014, p. 112), the Contingent Valuation Method:

Attempts to estimate the benefits of public goods and services not traded in traditional markets. In accordance with the economic theory, this method estimates the value  economic agents are willing to pay (WTP) for the availability of public goods, based on hypothetical markets. Simulation of these markets is made by surveys where respondents are directly asked about their contingent valuation of the assets.

Therefore, the method consists in asking the individuals to state their willingness to pay (WTP) on contingent situations, that is, on a specific hypothetical scenario. So, willingness to pay (WTP) or to accept/receive (WTA) is assumed according to the variation in the availability of the specific environmental resource (Motta, 1998).

McFadden (1994) (Rodrigues & Santana, 2012, p. 303) stress three factors in the assessment of contingent valuation studies. The CVM should be:

a) robust, in the sense that the outcomes cannot be substantially altered by changes in the study format, survey design and instructions. The latter which should be applicable to all the  individuals;

b) statistically reliable, so that the distribution of WTP (Willingness to Pay) or WTA (Willingness to Accept) is estimated with a satisfactory accuracy, through the use of samples with appropriate sizes; and,

c) economically sensitive, so that the individuals preferences measured by the CVM are consistent with  rationality requirements (e.g. transitivity) and widely consistent with the sensitive characteristics of economic preferences (e.g. fraction of the individual budget that corresponds to its WTP or WTA, as well as plausible income-elasticity).

Thus, according to the above described factors, the CVM is a suitable method for estimating the benefits of a given environmental good or service, through the assessment of the Willingness to Pay of the population, related to their well-being.

3. Material and methods

A systematic literature review was performed for the construction of a theoretical-scientific reference on economic valuation applied to urban solid waste management. Searches were made to bases Portal de Periódicos (CAPES), Springer, Science Direct and SciELO. Articles available in the internet published from 2006 to 2015 were selected based on the following guiding question and descriptors:

How has environmental economic valuation applied to urban solid waste management been addressed in the literature? Descriptors: Environmental Economic Valuation; Economic valuation and solid waste; and, Economic valuation and solid waste management.

The articles were selected after reading of both title and abstract and further identification of those related to the guiding question (TABLE 2).

Table 2 – Articles selected for the study

 The articles were investigated and Bardin’s content analysis was adopted as theoretical fundamentals in the construction of the analysis categories  (Bardin, 2011).

4. Results and Discussions

Considering the predominant issues of the selected articles, the following categories were constructed: Economic Assessment of Urban Solid Waste Management; Economic Valuation of Solid Waste Collection; and  Solid Waste Management Costs.

Category 1 – Economic Assessment in Urban Solid Waste Management

The articles involving studies on economic valuation applied to urban solid waste management were included in this category. The listed works included willingness to pay of the residents aimed to improve urban solid waste management and the main factors that determined such willingness, using statistical analysis. They also addressed respondents’ preferences regarding waste management and disposal.

Eshet et al. (2006) conducted a literature review in the 90’s on the assessment and analysis of externalities in the urban solid waste sector, through mapping, collection, analysis and comparison of decision making regarding external costs associated to several types of pollution and problems related to deposition of solid waste in landfills and use of incineration.  Shmelev and Powell (2006), in turn, conducted studies on the development of sustainable solutions in urban solid waste management, providing methodological support to regional urban solid waste management modeling, considering spatial and temporal patterns of waste generation and management, as well as the economic and environmental impacts of the development of the urban solid waste management system, with particular emphasis on public health and biodiversity.

The study conducted by Jin et al. (2006b) aimed to shed light on the public preferences regarding urban solid waste management programs in Macau, China. The findings showed that the residents prefer waste sorting and recycling in the source; reduced noise during waste collection and transport, and paying lower rates for waste management-related services.

Subsequently, in a district in Enugu metropolis, in Nigeria, Ichoku et al. (2009) investigated the willingness to pay of citizens applied to urban solid waste management. Among the respondents, 215 reported paying $1.6 Nigerian Naira, which is equivalent to  R$ 0.28 cents of Brazilian real, while 200 were willing to pay $ 1.5 Nigerian Naira, approximately R$ 0.27 cents of Brazilian real, amount actually charged for the waste collection service at local company (ENSEPA). The determining factors of willingness to pay were positively and significantly related to gender, family income and respondent’s perception of environmental quality.

In a study conducted in Kota Bharu, Malaysia, Rahim et al. (2012) assessed community acceptance rates regarding integrated urban solid waste management and their willingness to pay. The results indicated that 66.7% of the respondents find the urban solid waste management system ineffective, which results in environmental problems (70.4%) and health problems (72%). Besides, 55% of the respondents are willing to pay for integrated urban solid waste management.

Ali et al. (2012) investigated willingness to pay to improve urban solid waste management in Bangi, Selangor, Malaysia. According to the results, 85.5% of the respondents were willing to pay for a better urban solid waste management. Statistical analysis showed that income and ability to pay of the residents were significant and positive. However, age was significant and negative.

In the localities of Broga, Semenyih and Cheras, in the State of Selangor Darul Ehsan, in Malaysia, Chen-Khee and Othaman (2012) conducted an economic analysis of household urban solid waste management services, estimating the population’s willingness to pay (WTP) for waste disposal. They found the determining variables for WTP: age, care (concern with the waste disposal site), ownhse (respondents residing in their own houses) and proex (variable that represents the distance from the households to the waste disposal areas). The authors reported that an increase in PROEX value would increase WTP and identified that respondents with lower WTP had lower preference for incineration of disposed waste.

Sumukwo et al. (2012), in turn, analyzed the economic value of a better urban solid waste management in the city of Eldoret, in Kenya. They found that 80% of the respondents were willing to pay for improvements in urban solid waste management and the main determinants for such availability were income, education and age.

Wang et al. (2014) performed an economic analysis in Eryuan, China, and assessed the willingness to pay for improvement in urban solid waste collection and disposal.  They found that the average WTP corresponds to approximately 1% of the family income of the participants. The analysis also revealed that lower income households were more willing to pay, in percentage terms. In absolute values, availability to pay is equivalent in locations where urban solid waste management services are not available. According to the authors, the poorest families are more dependent on public urban solid waste management services, while the rich are more able to use private solutions.

Moreover, Al-Khatib et. al. (2014) investigated the concerns and attitudes of citizens from  Hebron, in Palestine, regarding general aspects of urban solid waste management, as well as the benefits obtained and environmental impacts caused by the installation of urban solid waste management services. The authors advocated the importance of the introduction of educational programs and programs for encouraging active public participation in all stages of the installation of public urban solid waste management services (planning, implementation, operation), to ensure public acceptance, participation and sustainable regional development.

Finally, Massarutto (2015) addressed the contribution of economics to the debate on waste incineration, especially the interaction between recycling and energy reuse, stressing that this will be one of the most promising research fields for economic analysis in the coming years. According to the author, from an economic view, recycling and incineration are complementary: recycling is appropriate for materials that can be more easily sorted, and at lower costs, while incineration is more suitable for the others. Therefore, ex-ante scrutiny based on cost-benefit assessment confers a key role to incineration” (p. 55), especially when there are bottlenecks that prevent the operation of landfills and effective control of pollution.

Category 2 – Economic Valuation of Urban Solid Waste Collection

Concerning the studies on economic valuation of urban solid waste collection, Owusu et al. (2011), using contingent valuation method, determined the willingness of family aggregates to pay for the urban solid waste collection service in the city of Kumasi, in Ghana. The authors reported that the families would be willing to pay for the collection service, and the factors that influenced payment were age, gender, employment, income and education.

Rodrigues and Santana (2012), in a study aimed to identify the Willingness to Pay (WTP) for the use of door-to-door urban solid waste collection service (USW), using conventional and selection household waste collection methods, in Palma, TO, found that WTP was higher among the participants with higher income and higher levels of education. The main outcomes obtained were that the independent variables - monthly income and years of education were statistically significant. Besides, the average WTP for selective household waste collection services was higher than that obtained for conventional household waste collection, demonstrating respondents’ greater willingness to “cooperate with the implementation of a service less threatening to the environment” (p. 311).

Also, regarding economic valuation of selective household urban waste collection, Bernad-Beltrán et al. (2014), analyzed the population’s attitude towards household selective biodegradable waste collection in an urban solid waste management system in a Spanish city. For this purpose, the authors considered the following variables: level of participation in waste collection systems, willingness to participate in selective household biological waste collection, reasons and barriers that impact participation, willingness to pay for the incorporation of selective household biological waste collection and socioeconomic characteristics (age, gender, family size, work, education and income) of the citizens that are willing to pay for selective household urban waste collection services.

The results obtained showed that “approximately 81% of the respondents were willing to participate in selective household biodegradable waste collection”. According to the authors, “household biodegradable waste collection would increase by up to 89%, if the City Council provided collectors for the management of specific types of waste, once the main obstacle to participation in the new selective household waste collection system is the need for trash bags specific for sorting biodegradable waste” (Bernad-Beltrán et al., 2014, p. 2434).

In addition to descriptive analysis, the authors performed an econometric analysis using a logit model to estimate the average willingness to pay. They assessed the socioeconomic characteristics of respondents willing to pay for the implementation of household biological waste collection systems, through Chi-square Tests of Independence and simple linear regression (Bernad-Beltrán et al., 2014).

Based on this analysis, the authors concluded that: regarding age, young individuals are more willing to pay for the implementation of the new waste collection system than older individuals. Regarding gender and work, men are slightly more willing to pay than women, and active workers are more willing to pay than retired individuals. Also, concerning age and education, people who have completed primary education are less willing to pay for the new system than people with higher education (Bernad-Beltrán et al., 2014).

Ferreira and Marques (2015) applied the contingent valuation method to selective household collection of waste from municipal packages in Portugal. The authors conducted 1,186 interviews. The participants were asked about their recycling practices, sociodemographic characteristics and whether they were willing to pay the price proposed for the implementation of a more sustainable selective household waste collection service. An average WTP ranging from EUR 1.35 to 3.16 was obtained, as well as a high number of protests, i.e. participants who were not willing to pay at all and their WTP was zero. The authors also stressed that few studies use the contingent valuation method in waste management in Europe.

Category 3 – Costs of Urban Solid Waste Management

In some articles, the economic analysis concerned the costs involved in urban solid waste management. This type of analysis considers the waste management system as an economic actor and “tends to focus on processes directly related to urban solid waste management” (Cleary, 2009, p. 1262).

Rathi (2006) estimated the cost of municipal urban solid waste management in Mumbai, India, considering the participation of the population and the existence of public and private partnerships. The author found that the cost of waste per ton is lower when the community participates in urban solid waste management (US$ 35 dollars); it is US$ 41 dollars, when a public and private partnership (PPP) is responsible for such management and, US$ 44 dollars when the public sector is entirely responsible for urban solid waste management. Thus, the author claims that the municipalities should involve the community in urban solid waste management to promote environmental, institutional, economic and social sustainability.

Regarding the flow of food waste (scraps) from families in South Africa, Nachman et al. (2012) estimated the economic (monetary) value of the waste of food, by calculating the costs associated to the final disposal of such scraps in a landfill and the costs incurred by the community due to the loss of a potentially valuable food source. The authors estimated these two costs in around US$ 2.7 billion per year, corresponding to 0.82% of South Africa’s annual GDP.

Based on the complete accounting of the costs, which consists in a more comprehensive approach that comprises the economic, social and environmental dimensions (Lim, 2012), Debnath and Bose (2014) conducted a study in India on the status of urban solid waste management services and recognition of the total cost applied in its ability to generate information related to the implementation of sustainable resource management. The authors found that urban solid waste management services in developing countries often face difficulties due to lack of financial and operational autonomy, type of scientific approach and lack of funding. Therefore, the municipalities responsible for household urban solid waste management services, which are facing structural and financial inefficiency, are urged to take measures aimed at supporting an effective use of resources and improve decision- making skills.

5. Conclusions

The present integrative literature review does not intend to exhaust the discussion of economic valuation applied to urban solid waste management.

Nevertheless, it can be said that environmental economic valuation is an effective tool to be considered in the process of urban solid waste management planning, supporting the environmental policies of sustainable development.

The articles examined addressed the contribution of economic analysis in urban solid waste management. They showed that the willingness to pay of the citizens ranged from 55% to 85.5% regarding improvements in the urban solid waste management system. Regarding willingness to participate in selective solid waste collection, the main determining factors were income, education and age. In general, younger ad higher-income individuals with higher level of education would be more willing to pay for selective waste collection. Concerning the costs of urban solid waste management, they tend to be lower when there is community involvement. Therefore, communities should be encouraged to participate in waste management in order to promote environmental, institutional and social sustainability.

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1. Doutoranda no Programa de Pós-graduação em Ambiente e Desenvolvimento – Centro Universitário UNIVATES. Mestre em Economia – Universidade Federal do Ceará – UFC. Professora no Instituto Federal do Ceará – IFCE – Campus Iguatu. Email: akfeitoso@hotmail.com

2. Doutora em Economia – Universidade Federal do Rio Grande do Sul – UFRGS. Professora Adjunta no Centro Universitário UNIVATES

3. Doutor em Engenharia Sanitária e Ambiental – Montanuniversität Leoben (Áustria). Professor Titular no Centro Universitário UNIVATES