ECONOMIC INCENTIVES TO ENCOURAGE HAZARDOUS WASTE MINIMIZATION AND SAFE DISPOSAL by Richard

This report examines opportunities for the application of economic incentive instruments for the management and reduction of hazardous wastes. The analysis concludes that as long as firms comply with existing regulations and bear potential tort liability, no additional incentives appear to be warranted. There may be significant residual external damages, however, if full compliance cannot be ensured. Neither waste-minimization standards nor simple economic incentives appear promising as regulatory strategies aimed at noncompliant firms. An innovative economic incentive instrument is examined in which the overt identification of noncompliers is not required. This instrument is applied to the case of used lubricating oil. An empirical methodology is developed in which the effects of the incentive are modeled based on exogeneous parameters which include: (1) the relative priceresponsiveness among waste generators, (2) the level of unit transactions costs, and (3) the level of risk associated with existing or projected disposal practices. The analysis shows that the conditions under which the instrument may offer net external benefits do not appear to exist in the case of used oil, but may well be present in more hazardous waste streams. Suggestions for future research and additional case studies are offered.