According to the official statistics data, New Zealanders send around 3.2 million tonnes of waste material to landfill. On 25, September, the Waste Minimisation Act 2008 (the Act) was encouraged to put levy. Since July, 1^st, 2009, the Act is allowed to puts a levy on waste disposed of at landfill in order to help the communities and businesses address New Zealand’s waste issues.  Under the Act, a $10 per tonne levy on ALL waste sent to landfill – charged via disposal facility operators. The main purpose of the levy is “to create funding supports for waste minimisation initiatives and provide an economic incentive to polluters to change their behaviour” ^[1]. More precisely, half of the levy income will go to territorial authorities – city and district councils – to spend on activities promoting or achieving the goal of minimizing waste; while the other half would be set up as a waste minimisation fund to support a set of criteria established waste minimizing projects after subtracting the administration fee.

In my opinion, this landfill tax could be regarded as a Pigou tax, since it increase the cost of negative externality and try to correct the market. Theoretically speaking, the tax could be an effective and efficient policy, for the increasing of marginal private cost cancel off the difference between private and social cost. And if this allocation is achieved successfully, this landfill tax would be neutral tax, since all the tax revenue is used to promote related R&D activities and pay back to residents via future utility increasing.

In ideal situation, the coverage is good because it cover all the waste sent to landfill and no exemption. But in reality, in my opinion, we should worry about the existence of potential ignored part. According to the official document, it is said that they cover all the waste SENT to landfill. We should think about the part that not sent to the landfill. For instance, some householders or business would illegally dump their waste to forestry area or ocean or any place not used as landfill in order to get rid of the $10 per tonne, especially when they are facing huge amount of waste, because the tax payers could transfer the levy fee to householders and business; or some facility operators reduce their waste amount, etc. Though they said “decreasing rate of illegal dumping” ^[2], the reason they supply is not convinced enough because of the sample size, uncompleted questionnaires and unclear respondent group distribution – there may be some sample selection problems. Thus without detail data, I could not agree that the coverage of this tax is great.

According to the 2011 Review report:

*Data source: collected from [3].                 **Not all funding allocated because of not enough application.

Through the briefly inflow-outflow table above, we are not sure whether this policy is revenue neutral or not. Lack of the information about the $8,225,612 spend, all I could conclude now is that the funding remaining in a large amount. And due to the statement in Review report that “there were not enough applications of sufficient quality to qualify for funding” and “not 100% support the project cost”^[3], we are not sure that this large amount of money would be all allocated to increase the taxpayers’ future utility.

The landfill levy rate is $10 (plus GST). According to the official document, they claim that this is a good rate and they would not change the rate. They set this rate because this amount “i) it is less likely to result in behaviour such as illegal dumping, ii) reduces the impact on businesses and households, iii)reduces the risk of inefficient spending of revenue; iv)allows the effects, both positive and negative, resulting from the levy to be assessed”^[2]. In my opinion, this rate would have some problems. It probably helps increase the marginal private cost to the level of marginal social cost. But due to the 2011 Christchurch earthquake, the large destroy happened in the second largest city of New Zealand. I search the data for the same three quarters as 2011 Review – it shows that the inflation rate in New Zealand increased from approximately 1.9 at 2009 to 4.6 at 2011 ^[5]. We don’t know the slope of growth rate of marginal social cost and marginal private cost, thus we are not sure that after the large jump of inflation rate, the $10 would still be high enough to cover the difference. Unfortunately the latest update of official website of this policy is Feb 23, 2011. Thus I would say that they should change the levy rate rather than set it unchanged.

References:

[1] Official website of Ministry for the Environment of New Zealand: here

[2] Waste Disposal Levy FAQs: here

[3] Review of the Effectiveness of the Waste Disposal Levy, 2011: here

[4] 2011 Christchurch Earthquake: here

[5] New Zealand Inflation Rate (Annual change on CPI): here

Catherine Guo

Master of Food and Resource Economics

University of British Columbia