More Headaches than it’s Worth: Assessing Privatized and Semi-Privatized Waste Collection

Source: David Campanella, Canadian Centre for Policy Alternatives, June 2015

A review of international econometrics studies on the pros and cons of privatization and semi-privatization waste collection suggests full privatization can cause more headaches than it’s worth. The review of decades’ worth of studies concludes there is no empirical evidence to support the claim that privatizing waste collection services is more cost efficient. The academic literature points to two key factors that end up being costly for governments who fully privatize waste collection: lack of competition in the waste collection sector and large, often unaccounted for administrative costs required to deal with private firms.

This study reviews econometrics studies of privatization and semi-privatization of solid waste collection in the U.S., the UK, the Netherlands, Spain, Sweden, Ireland, and in Canada. The conclusion of decades of empirical research is that there is no clear connection between private waste collection and cost reduction. When all the relevant factors are included, it appears that privatization is often more of a headache than it’s worth. What’s the number one reason U.S. city managers cite for reversing a decision to privatize services? Insufficient cost savings. In solid waste collection, studies reveal that any initial cost savings tend to diminish over time, and that cost savings have become increasingly less likely.

There are two main reasons why private waste collection fails to reduce municipal costs:
1. A widespread lack of competition; and
2. Large and often unaccounted for administrative costs from dealing with private firms.