Efficiency of the Current Municipal Waste Expenditure – Methodology Approach and Its Application

STRUK, M., SOUKOPOVÁ, J.: Effi ciency of the current municipal waste expenditure – methodology approach and its application. Acta univ. agric. et silvic. Mendel. Brun., 2011, LIX, No. 7, pp. 379–386 The paper introduces methodology designed in order to evaluate and compare effi ciency of chosen municipal waste expenditure via calculating effi ciency ratings. First part of the paper briefl y describes current situation around environmental protection expenditure in Czech Republic and explains reason why the area of current municipal waste expenditure has been chosen for the effi ciency evaluation. Second part is dedicated to the idea of the effi ciency evaluation methodology which is based on Cost-eff ectiveness Analysis (CEA). CEA is working with two aspects of effi ciency. First aspect is effi ciency of expenditure per capita and second is effi ciency of expenditure per municipal waste ton. Data necessary for the analysis together with the sources where these data can be acquired are also introduced. The description of exact process of calculating effi ciency ratings for each municipality then follows. Whole methodology is demonstrated on selected sample of municipalities together with the results of effi ciency evaluation and their graphical depiction. Last part of the paper discusses problems that might arise while performing this effi ciency evaluation together with possible expansions of the evaluation. effi ciency, current municipal waste expenditure, Cost-eff ectiveness analysis This article introduces a methodology for evaluating effi ciency of current municipal environmental protection expenditure (EPE). The evaluation is done via comparison of the effi ciency ratios of examined municipalities. As municipal EPE cover vast area of actions, we have chosen to analyze only the area of municipal waste management. Furthermore we analyze only the current expenditure, not the capital expenditure. Current expenditure usually consists of regular day-to-day tasks that occur generally in every single municipality1. On the other hand, capital expenditure is typically spent on various onetime projects (not regular) that are usually unique and have various lifetime, which makes it hard to make any trustworthy comparisons between municipalities and their individual projects2. Moreover, current municipal expenditure makes, based on our calculations, on average 60–70 % of total municipal budgets in Czech Republic. And if we take specifi cally EPE, current EPE represents, according to MŽP data, on average 51 % of total EPE in the period of 2005–2010. These facts, led us to the choice of analyzing current expenditure instead of the capital ones. 1 The fact that these tasks have short lifetime makes it relatively easy to make year-to-year comparison, as they occur many times throughout the year. 2 Analyzing capital expenditure requires diff erent techniques of economic analysis, for example taking into account the time factor (project lifespan). Most known evaluation method used to deal with this type of expenditures is Costbenefi t Analysis (CBA). 380 M. Struk, J. Soukopová METHODS AND MATERIALS First of all, let us explain why we focus on the municipal waste treatment. According to CEPA 2000 classifi cation3 (Eurostat 2007) which is used also in the Czech municipal budget structure, EPE is divided into 9 categories. However, some of them are much more important in terms of total sum of money than the other. Based on the data provided by the ARIS and ÚFIS4 we have created table I. There we can see current EPE in the Czech Republic in the period of 2005–2010 divided into four parts. First and largest part is Waste management, second is Protection of biodiversity and landscape, third is Wastewater management and then the remaining 6 CEPA 2000 classifi cation categories. As we can see from table I., current waste expenditure accounts for roughly one half (49.8 – 52.5 %) of the total current EPE in Czech Republic during the period of 2005–2010. This makes waste expenditure clearly the most important current EPE in terms of money. Due to this fact we have decided to examine effi ciency of municipalities specifi cally in this area of EPE. But as we have mentioned in the introduction, we are analyzing municipal waste expenditure, while the CEPA 2000 category Waste management contains all kinds of waste related expenditures, not just municipal. Category Waste management is, according to the Czech Classifi cation of sector budget structure5, further divided into 10 categories which are internally marked as: 1) § 3721 – Collection and transport of hazardous waste, 2) § 3722 – Collection and transport of municipal waste, 3) § 3723 – Collection and transport of other waste, 4) § 3724 – Use and disposal of hazardous waste, 5) § 3725 – Use and disposal of municipal waste, 6) § 3726 – Use and disposal of other waste, 7) § 3727 – Waste prevention, 8) § 3728 – Monitoring of waste treatment, 9) § 3729 – Other waste treatment, 10) § 2122 – Collecting and processing of secondary raw materials6. Of these 10 categories, only two represent municipal waste expenditure, § 3722 and § 3725. However, they cover majority of total current expenditure on waste management. Figure 1 shows the average shares of current municipal waste expenditures and the rest of the categories that fall under Waste management subsection of the Czech budget structure in years 2005–2010. From Fig. 1 we can see that current municipal waste expenditure covers 86.1 % of total current expenditure on Waste management. If we put this together with information from Tab. I (average share of Waste expenditure category is 51.2 %) we can calculate that current municipal waste expenditure represents on average 44.1 % of total current EPE in the Czech Republic in years 2005–2010. Due to the fact that current municipal waste expenditure represents such notable part of total current Czech EPE, we have decided to examine the effi ciency of this specifi c expenditure. In following part we explain the steps of our analysis and the sources where the data necessary for the analysis are available. In this paper we have chosen to analyze two aspects of effi ciency. First aspect is effi ciency of expenditure per capita and second is effi ciency of expenditure per municipal waste ton. When considering the effi ciency criterion, the most effi cient unit is one that produces highest output per cost unit, or alternatively has lowest costs per I: Shares of current EPE categories on total current EPE in Czech Republic Year Waste management Protection of biodiversity and landscape Wastewater management Remaining 6 CEPA 2000 categories 2005 52.5 % 36.8 % 8.8 % 1.9 % 2006 49.8 % 36.9 % 11.4 % 1.9 % 2007 52.1 % 36.6 % 9.4 % 1.9 % 2008 51.7 % 36.9 % 9.7 % 1.7 % 2009 51.3 % 38.7 % 8.3 % 1.6 % 2010 49.5 % 39.8 % 9.0 % 1.7 % Source: ARIS, ÚFIS, adjusted by authors 3 CEPA 2000 “is a generic, multipurpose and functional classifi cation for environmental protection. It is used for classifying not only activities for environmental protection, but also products. The activities are generally classifi ed by the environmental domain which is protected (air, waste, nature protection, etc.) and then by type of measure (prevention, reduction, etc.)” (Eurostat, 2007). 4 ARIS publicly provides information about muicipial incomes and expenditures in the Czech Republic from period 2001 – 2009. Data from year 2010 are provided by successor of ARIS – ÚFIS (ARIS, 2011, ÚFIS 2011). 5 Czech Attachment to Ordinance no. 323/2002 Coll, Part C 6 Although §2122 belongs to the diff erent section in the budget structure, according to CEPA 2000 it falls under the waste management category with the rest of the listed paragraphs. Effi ciency of the current municipal waste expenditure – methodology approach and its application 381 output unit (Ochrana 2006). In this paper we use the second option. We need following data about each municipality for analyzing effi ciency of municipal waste expenditures: • population, • municipal waste expenditure, • amount of municipal waste. Data on population of each municipality can be acquired from Czech Regional Information Service – RIS7. Data on municipal waste expenditure are available from public database ARIS. And data on municipal waste amount come from database ISOH8 (until 2009) and ISPOP9 (from 2010 further on). However, these last databases provide publicly only aggregated data, and in order to get data about municipalities one has to request them directly from the database operators. So as we can see, all data necessary in order to examine the fi rst aspect of effi ciency are publicly available, while acquiring data for the second aspect of effi ciency requires some interaction with the responsible authorities. As an appropriate method for effi ciency analysis we have chosen Cost-eff ectiveness Analysis (CEA). This method is in general accepted10 as a way to measure effi ciency in cases when we have data about costs expressed in monetary units, but the utility is defi ned in natural units and is diffi cult to be expressed in monetary form. This suits our case. The basic idea of CEA is to create ratio of costs (C) and outputs expressed in natural units, usually called eff ect (E), for which: C CEA =   min. (1) E When calculating these values for each examined unit, we get dataset of C/E ratios (CEAj where j = 1, ...,n). As we analyze two aspects of effi ciency – expenditure per capita with E1 standing for population, and expenditure per municipal waste ton with E2 standing for municipal waste ton – we calculated two values (ratios C/E1 and C/E2) for each analyzed municipality. In order to make clearer interpretation of the calculated results, we have decided to distribute the examined municipalities into several effi ciency categories. We have chosen to create these categories based on their position to the weighted average C/E ratio of the whole examined sample of municipalities. C/E ratio of the whole sample is calculated as a division of the sum of sample’s costs and the sum of sample’s eff ects. In order to calculate the C/E ratio for the whole sample, let us assume that