Options for Improving Municipal Solid Waste

BENEFITS VALUATION OF IMPROVED RESIDENTIAL SOLID WASTE MANAGEMENT SERVICES IN MALAYSIA [+]

Jamal Othman, Ph.D[*]

ABSTRACT

In Malaysia, the local government authorities have been responsible for solid waste (SW) management services. However, over the years, various weaknesses have led to inefficiency in the provision of services at various levels. The privatization process was initiated in 1996 with the aim of attaining an efficient management system. However, there are uncertainties in consumer attitude towards a number of waste management issues that may hinder the implementation of effective privatized solid waste management options. A critical issue relates to consumer demand or willingness to pay with the types of services characteristics that the private contractors can offer. This study employs Choice Modelling (CM) and Contingent Valuation (CV) techniques to elicit consumers’ willingness to pay (WTP) for different service options and to estimate the implicit price for each service attribute (collection frequency, mode of transportation, the provision of facilities and containers to facilitate separation of waste at source) and the tradeoffs among the attributes. The study found that households highly value improvements in SW management plan. However, results on kerbside recycling attribute was rather inconclusive. The CM reveals that households derive positive utility from the provisions of recycling facilities and compulsory kerbside recycling. The CV, on the other hand, indicates that respondents were not willing to pay any additional waste charges for non-voluntarily compliance of kerbside recycling, despite the provision of free recycling facilities by service providers.

BENEFITS VALUATION OF IMPROVED RESIDENTIAL SOLID WASTE MANAGEMENT SERVICES IN MALAYSIA

ABSTRACT

KEYWORDS: Residential Solid Waste Management, Choice Modeling, Contingent Valuation, Kerbside Recycling, Value of Solid Waste Management Program

INTRODUCTION

Background and Problem Statement

Managing SW has become a major problem for local governments in Malaysia. In 1998, Malaysia generated about 5.5 million tons of SW of which a quarter was produced in the Klang valley alone, the most affluent area in Malaysia. In 1995, percapita generation rates averaged 0.77 kg/person/day. These rates are expected to increase steadily as the Malaysian economy grows. SW generation for 2000 was estimated at 3.9 million tonnes with 1 kg per capita daily.

In Malaysia, the local government authorities have been responsible for solid waste management services. However, over the years, lack of infrastructure, inefficient institutional setup, weaknesses in financial and technical resources, have led to an inadequate and inefficient level of provision at various levels. These contrast to the increasing waste generation rates and environmental awareness among the general public. To reduce the burden facing local governments, the privatization process was initiated in 1996 with the aim of attaining an integrated and efficient management system to enhance environmental quality through resource re-use and waste minimization. Privatizing MSW management became an integral part of the national privatization program. Under the program, the government directly awards national infrastructural projects to business entities with long-term operating concessions. SWM was expected to be fully privatized in 2001 where 4 major private waste service providers were expected to be given a 20 years concessionaire period for MSW management. The current privatization mode is currently regarded as a transition period pending the approval of the proposed Parliamentary SW Act.

Before the privatization program, the most common waste collection method was through communal bins and the wastes disposed in open dumps, normally without ground cover or control for leaching. It was reported that in 1990 (Mourato, 1998), there were 230 official dumping sites with less than 2 years of operating life. About half of these sites were open dumps. It was also reported that there were 3 times more unofficial dumping sites (Agamamuthu, 2001). Control tipping has become an increasingly popular method of waste disposal. It is regarded as the first (lowest quality) level amongst the class of sanitary landfills.

The Malaysian government has of late increased its campaign to create public awareness on the importance of waste recycling and waste minimization. It is estimated that only 3 percent of total SWs generated nationwide are being recycled. Draft Concession Agreements between the government and the private waste service providers targeted 22 percent recycling, 8 percent composting, 17 percent incineration and 53 percent landfilling by 2020.

Currently, households in the privatized areas are required to place their waste bags in waste bins in front of their houses (kerbsides) and private collectors would collect the wastes twice - thrice a week. Payment for the collection services is currently made indirectly through the annual house assessment.

The local authorities, in consultation with the private service providers set the tariff rate. Therefore, households at this stage do not pay a separate payment for solid waste management fee and they are also not aware about the amount of tariff they are paying for the waste collection service. This, however, might change once the full fledge privatization process comes into being. Contractors may also wish to increase the quality of their services including substituting existing landfills with mostly sanitary landfills or incinerators, conventional open trucks with compactors or covered trucks and thus service charge might also need to be increased. Consumers will also be required to pay the service charge directly to contractors.

There are uncertainties in consumer awareness and attitude towards a number of waste management issues that may hinder the implementation of effective SW management options. A critical issue relates to consumer demand or willingness to pay with the types of services characteristics and disposal options that the private service providers can offer.

Most of the studies on solid waste management in Malaysia are descriptive or technical in nature. Further, the literature on economic valuation or consumer willingness to pay for improved solid waste management in Malaysia is rather sketchy. To date there has been only one study conducted to estimate consumer WTP for improved SW management system for the area of Kuala Lumpur and Petaling Jaya using Contingent Valuation (CV) (Mourato, 1998). The study found a mean WTP value of RM16 per household per month. The study also solicited the factors affecting consumer satisfaction with the level of services provided.

Given the above background, this study focuses to address the following policy issues; What shall be the desirable future waste management programs, in terms of priorities over different service attributes and levels. The major service attributes that will be examined are: collection frequency, mode of transportation, disposal options, and the provision of different type of containers to facilitate recycling or separation of waste at the household level.

Specifically, the objectives of this study are:

1. To elicit consumers’ WTP for different service options – collection frequency, mode of transportation and the provision of facilities and containers to facilitate separation of waste at source (kerbside recycling).

2. To rank the characteristics of service in order of importance to consumers – collection frequency, mode of transportation, recycling facilities, and disposal options

3. To estimate the implicit price for each service attribute and the tradeoffs among the attributes.

Rationale of Study and Policy Relevance

This study provides two important insights for public and private policymakers in terms of incorporation of demand-side information into the design of MSW management services/attributes and fee schedules

This study will be of special interest to Malaysian regulators (Economic Planning Unit) of private concessions of MSW management as well as to the private waste collectors. This study derives estimates of the value of changes in individual attributes as well as changes in the aggregate level of service attributes. Therefore the results from this study can be used to produce estimates of the value of multiple service alternatives or the total value of a SW management package. This information can be used in negotiating an appropriate tariff rate with the current private service providers as well in the designing for future concession agreements and/or consideration of proposals by new private entities for new residential service areas.

An important contribution of this study is to address the problem of mismatch in terms of services that can be supplied by service providers (i.e, sanitary landfills vs open landfills options, less and regular vs more but irregular collection frequencies, conventional open trucks vs compactor, etc) and what the public really wants and is willing to pay for. In short, knowledge obtained from this study will help match the affordability of supply and public demand for waste services. To date, no such study has been conducted in Malaysia.

METHODOLOGY

Two methods were employed in this research - Choice Model (CM) and Contingent Valuation (CV). The aim of CM was to identify marginal values for SWM attributes. This is to allow identification of a desirable SWM plan from the demand side perspective. The CV was to assess the value of a total SWM package. Results from the 2 techniques will be contrasted and policy implications offered.

The CM like the CV is a class of stated preference technique but has the unique flexibility to evaluate both alternative management options and the marginal values of non-market attributes that may be difficult to identify using a typical CV study because of lack of variation. With CM, it is possible to estimate the value of the individual attributes that make up an environmental good, such as increased waste collection frequency. The CM is also able to derive estimates of the value of changes in the aggregate level of non-market goods quality. The CV is employed in this study to contrast with that of CM for some predetermined aggregate levels of solid waste collection and disposal services. The following section provides an overview of the background of CM.

Overview of CM

Many management decisions are concerned with changing attribute levels, rather than the loosing or gaining of the environmental good as a whole, of which the CV has the unique advantage. For the former, the CM has the unique strength. The CM is also able to derive estimates of the value of changes in the aggregate level of environmental quality. Therefore it can be used to produce estimates of the total value of multiple services or resource use alternatives from one single application. The main weakness of CM relative to CV is the added cognitive burden it imposes on respondents apart from its complexity in designing it correctly and its econometric estimation.

In CM questionnaires, respondents are posed with a series of choice sets, where each choice set contains usually three or more service or resource use options. Respondents are asked to choose their preferred option from each choice set. The options in each choice set contain common attributes, which can be at various levels. The combination of attribute levels for each option in each choice sets is designed using experimental design techniques. Similar to a CV study, before the choice sets are presented to respondents, there is a description of the study site, the research issues, the proposed policy changes and its implications on attributes which are being modeled.

The theoretical basis of CM is random utility theory (RUT). Under RUT it is assumed that that the utility function of a good can be broken down into two parts, one deterministic and one stochastic. Assume utility for an option i which depends on environmental attributes (Z) and socio-economic characteristics (S).

Uin = V (Zin , Sn ) + e (Zin , Sn) (1)

The probability that individual n will choose option i over other option j is given by:

Prob (i/C) = Prob {Vin + e in > Vjn + e jn ; j Î C} (2)

where C is the complete choice set. It is assumed that the error terms of the utility function are independently and identically distributed (IID). A consequence of this assumption is the property of independence of irrelevant alternatives (IIA). The IIA states that the probability of choosing one alternative over the other is entirely dependent on the utility of the respective alternatives. This property may be violated by the presence of close substitutes in the choice sets as well as heterogeneity in preferences.

The probability of choosing option i is given by:

(3)

where Vi = V(Zi, S), Vi is the utility function, Zi is a vector of environmental goods, S is a vector of market goods and socio-economic characteristics, and m is a scale parameter, which is usually assumed to be equal to 1 (implying constant error variance). Equation (3) is estimated by means of a multi-nomial logit regression, which assumes that choices are consistent with the IIA property.

The most basic form of Vi is an additive structure, which includes the attributes from the choice sets only, eg:

Vi = C + SbkX (4)

where C is an alternative specific constant (ASC), b is a coefficient and X are attributes from the sets. The effect of attributes in the choice sets are captured by the X variables while C represents the effect of systematic but unobserved factors that explains respondents’ choices. Technically C reflects the differences in the error terms. In a multinomial logit (or nested logit) with j options it is possible to have J-1 ASC.