The disposal of municipal solid waste entails severe environmental burdens especially in small, densely populated regions and countries. Israel (with one of the world’s highest population density), too, has been grappling with the task of designing an efficient (and politically feasible!) solid-waste policy, taking into consideration the wide-spread externalities associated with alternative disposal options, as well as the pervasive and NIMBY syndrome. During the past two years we have studied alternative options for Israel, including the scope for incorporating economic incentives in solid- waste policy schemes. Presently, neither direct nor indirect incentives for individual households to reduce, reuse or recycle waste are built into the Israeli system. Indeed, the opposite is true, at least for household waste. Households pay a fixed, uniform fee for garbage collection, included in their monthly municipal taxes, and there is absolutely no incentive for them to reduce the total weight (or volume) of garbage or to separate it in order to render recycling a cost-effective option. However, some of the incentives currently employed or under consideration in the US or western-European countries, or variation thereof, might be implemented in Israel as a part of a national, integrated waste management policy.

The study analyzed alternative recycling options, the technological aspects of the recyclable materials, and costs of alternative waste management techniques. We developed a simple computerized model to assemble and analyze data obtained from recycling companies and the municipalities. In addition, economic valuations of environmental impacts of the different municipal solid waste management scenarios were obtained from studies conducted in Israel, and elsewhere (especially the UK). The model enables us to compare costs of the different solid waste management scenarios for a "representative" town, as well as for a specific municipality, given the relevant data for that municipality - collection, transportation and processing costs, landfill tipping fees, and environmental costs. These external costs could increase total disposal costs by 10-20%. When these environmental costs are added, there is a clear advantage to the wet/dry source separation option (the organic wet material is turned into compost), due to the fact that organic kitchen waste comprises about 50% of the municipal solid waste in Israel.

Several incentive schemes at the household are considered. It seems that the most feasible scheme, given the residential patterns of urban settlements (the overwhelming majority of families leave in multi-family, coop-type apartment houses), would involve some form of a "pay-per-bag" system, if the associated "backyard dumping" phenomenon could be somehow checked. In addition, a packaging fee of some sort is also examined, as an incentive for reducing the volume of waste at source, or impose the externality costs on the consumer. A household survey was administered in a couple of medium-size towns, to gauge the acceptability of alternative incentive schemes, including households’ WTP.