Who will gain and who will lose from the levy on
rubbish disposal?
Background
The government plans to ask the public to pay a rubbish disposal fee as the
landfill sites in Hong Kong will be full in a few years. Neighbouring countries like
Taiwan and South Korea have similar policies. But there are some problems
which need to be solved before the levy is imposed, such as how much should
each rubbish bag be charged and how to avoid illegal waste dumping, etc.
Introduction
For the implementation of the rubbish disposal fee, there are different effects on different parties.
In this news commentary, we will discuss the effects of this policy on society, individuals and the
government.
Analysis
How can the rubbish disposal fee help society to attain economic efficiency?
Before the imposition of the fee, individuals will dispose of as much rubbish as possible until their
private benefit equals their private costs at the margin.
But when an individual dumps his rubbish, external problems are imposed on others, such as the
bad smell from the rubbish, hygienic impacts to the living environment, etc. Therefore, negative
externality occurs and there is a divergence between private and social costs. The public disposes of
too much rubbish and it causes deadweight loss to the society.
When the government imposes the rubbish disposal fee, individuals’ private costs will increase. This
encourages the public to dispose of less rubbish. Then the divergence between private and social
costs will be reduced. Economic efficiency can be attained.
What will be the effects on the general public?
Suppose the high income earners and low income earners dispose of the same
amount of rubbish and they need to pay the same fee for rubbish disposal fee. This
fee is regressive in nature. The impacts on these two groups of people are
different:
► The proportion of income paid as rubbish disposal fee to the high income
earners is less than that of the low income earners.
► The burden to the low income earners is higher.
► The income gap between the rich and the poor will widen after the imposition
of the fee.
What will be the gain or loss of this policy to the government?
Gain
► Disposal fees collected from the public provides an extra source of
revenue to the government.
► After the imposition of the fee, people will dispose of less rubbish, so the
existing landfill sites can be used for a few more years.
Loss
► In order to avoid paying the disposal fee, people tend to dump their
rubbish into the rubbish bins on the streets. It will directly reduce the effectiveness of this policy.
The government needs to spend extra resources to monitor the public.
Conclusion
Originally, the government has planned to impose rubbish disposal fee to reduce the amount of
rubbish. But from an economic point of view, after the imposition of the fee, economic efficiency
can be attained by solving the problem of negative externality. Also, the government can also collect
extra revenue from this policy.
However, it will increase financial burdens of low income earners. The government needs to make
extra efforts to stop people dumping their rubbish onto the streets.
In my opinion, rubbish disposal fees can encourage the public to dump less
rubbish. But the government should make more effort to educate the public to
reduce wastage, and encourage the general public to recycle their wastes.