Landfill diversion in a decentralized setting: A dynamic assessment of landfill taxes

• Landfill tax played a relevant role in the evolution of Italian waste management.
• Landfill diversion is stronger where the economic cost of land deriving from high population density is higher.
• Investment in alternative technologies, like incineration, promotes landfill diversion.
• The absence of social cohesion affects waste management choices through the lever of environmental policies.

We analyze the process of landfill diversion and its main determinants, by embedding the dynamics in a frame where economic, geographical and policy variables come into play. In addition to structural and economic drivers, we primarily investigate whether the Italian tax has been effective in supporting landfill diversion. Although the Italian landfill tax dates back to 1996, the oldest in the EU, its effectiveness in terms of landfill diversion has not been assessed yet. The complexity primarily derives from the decentralized regional implementation and the absence of a full coherent dataset covering all regions. We merge this new and original data on taxes to an integrated dataset which includes economic, waste and policy variables at regional level over the period 1999–2008. Panel regressions show that the effect of tax is significant, even when taking into account for its possible endogeneity. Regions that have increased such taxes have improved waste disposal performances over time. Landfill taxes are surely not the only instrument policy makers might introduce, but they seem to play a relevant role in the evolution of Italian waste disposal performances.