Putting a Price on Trash: Does Charging for Food Waste Reduce Total Waste? The Case of Korea

The purpose of this paper is to estimate the impact of the new unit-based pricing system (UPS) for food waste on the volume of solid waste collected, accounting for the effect of cross price elasticity and environmental activism. Based on causal inference using a natural experiment with a difference-in-differences model for Korea for 2003-2010, this paper shows that adopting UPS for food waste has a significant negative effect on the volume of solid waste. A key contribution relative to the broader literature is that this paper initially examines the impact of adopting a UPS for food waste on the volume of solid waste by using a natural experiment. Furthermore, this research suggests a way to implement UPS that needs to be considered according to the characteristics of each type of waste. For solid waste, the effects of own price elasticity and income elasticity are clear and significant. However, for food waste, the effect of own price elasticity exists but, the effect of income elasticity is insignificant. Increasing the price of bags for food waste may send residents a signal regarding the cost of waste disposal and thereby motivates residents to reduce their total waste.