3.8 Economic instruments

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The Waste Act51 provides for economic instruments, and empowers the Minister, in concurrence with the Minister of Finance, to make regulations for incentives and disincentives to encourage a change in behaviour towards waste generation and management. Economic instruments can change behaviour indirectly by creating a set of incentives and disincentives through pricing. Pricing can offer a more cost-effective and dynamic form of regulation than the traditional command and control approach.

Economic instruments will be applied within the overall fiscal and taxation policy of government.

The selection and use of economic measures, including pricing, taxation, subsidies, incentives and fiscal measures will also be aligned with the principles established by NEMA, including the 'polluter pays' principle. According to the 'polluter pays' principle, all generators of waste (including businesses and households) are responsible for the costs of managing the waste generated. These include not only the direct financial costs of collection, treatment and disposal of waste, but also externalities such as health and environmental impacts.

Before economic instruments can be more widely applied, the pervasive under-pricing of waste services needs to be addressed. The under-pricing of waste services creates the wrong set of incentives, undermines waste minimisation efforts, and ultimately undermines the polluter pays principle. Additional economic instruments will create distortions and be ineffective in this context. DEA and National Treasury will conduct an annual review of pricing, and review the effectiveness of measures to correct pricing of waste services. This will be the focus of activities for the next three years.

During this period additional economic measures will be investigated, and evaluated in terms of their effectiveness, and potential impacts on income distribution and competitiveness. Consultation with industry and stakeholders will take place prior to the application of marketbased instruments.

DEA and National Treasury will undertake further research into implementing or extending the following instruments once under-pricing has been corrected:

  • Deposit Refund Schemes: These schemes are most suitable for products that are easy to identify and handle; feasible to re-use or recycle; require careful disposal; and where co-operation is feasible between producers, retailers and consumers. Currently the private sector implements such a scheme for a specified range of glass bottles, where the consumer pays a deposit per bottle and the consumer receives a refund per bottle upon return to a retailer.
  • Waste Disposal Taxes: These taxes address the external social and environmental costs of waste disposal and provide pricing that influences waste generation and disposal decisions by private actors. Waste disposal taxes require that effective regulation and monitoring of landfill sites are in place.
  • Product Taxes: Product taxes will be directed at products or materials that a policy intends to reduce or remove from production. An example of this instrument is the Plastic Bag Levy52 that consumers who choose to buy plastic bags pay directly.
  • ax interventions for hazardous waste disposal: Tax interventions for hazardous waste disposal will be considered in instances where more effective management of hazardous waste generators is required.
  • Tax rebates and benefits: Industries could receive a tax benefit if they promote or implement recycling infrastructure.

As per the National Budget 2010/11 the following waste related environmental taxes and charges are being investigated:

  • A wastewater discharge levy in terms of the Water Act.
  • Levies on the waste streams of various products.
  • A landfill tax at municipal level.

Further research is required into fiscal instruments for integrated waste management as follows:

  • National Remediation Fund: DEA together with National Treasury will examine a remediation fund for contaminated land as discussed under Section 2.6 Goal 7.
  • Solid Waste Project Development and Finance: DEA and National Treasury will investigate ways to ensure that capital expenditure in the sector increases; create a robust pipeline of municipal projects; and develop an appropriate capital financing mix. Support for capital financing of waste projects is needed from the private banking sector and Development Financial Institutions, and National Treasury and DEA will examine ways to improve the bankability of municipality's waste management projects.

DEA will work closely with National Treasury to monitor the implementation of the above economic mechanisms and to implement the necessary policy and regulatory tools.


  1. Section 69(1)(bb).
  2. The Plastic Bag Levy is a tax which charges R0.04 per plastic bag in the 2010/11 budget.