Evaluating joint environmental and cost performance in municipal waste management systems through data envelopment analysis: Scale effects and policy implications

The widespread need to reduce public expenditure and meet the targets for separate collection established by current national and European legislation requires regulatory authorities to reorganize their municipal waste management systems to improve both their economic and environmental performance. This process can be helped to a great extent by the availability of empirical measures of comparative efficiency. Adding to the literature that evaluates this through data envelopment analysis (DEA) - usually focused on economic (cost) efficiency alone - this article proposes a joint evaluation of the two aspects through a modified DEA model that includes unsorted waste as an undesired output to be minimized. The article also provides an application using data for 289 municipalities located in an Italian region, Abruzzo, for the period 2011-2013. The main focus of the empirical analysis is on dimensional aspects. In particular, comparing the results obtained through DEA models based on different hypotheses concerning returns to scale, in the first place it is verified whether a particular municipal dimension emerges as an efficient benchmark, and secondly if waste collection is organized above or below its optimal scale in the municipalities taken into consideration. Tobit and probit regression models are then applied to some of the results to isolate the influence of territorial specificities on different kinds of scale inefficiencies. The information obtained allows to shed light on the usefulness of designing multi-municipal optimal territorial areas (OTAs) to improve the joint benefits of environmental and cost efficiency in waste collection, and to understand which variables the regulator should preferably take into account in the process.