Introducing and enhancing competition to improve solid waste management in Barcelona [WP]

Abstract

Over the last two decades, Barcelona has implemented a far-reaching reform of the city’s solid waste management. In 2000, the city was divided in four zones, with four separate solid waste collection contracts being awarded to private firms, with none being allowed to obtain more than two zones, a rule that was revised in 2009 to just one contract per firm. This division of the market via exclusive territories sought to enhance competition in the expectation of the convergence of relative costs, efficiency and service quality throughout the city. Based on monthly observations of costs and outputs between 2015 and 2018, this paper analyzes and evaluates the creation of lots as a tool of competition. We find that firms producing in larger zones report higher costs, that increased competition was not sufficient to lead to converging costs, and that none of the firms operate under increasing returns to scale. As such, we recommend creating an additional zone. We further suggest that if one of the zones were to be subject to public production, and adopted a mixed delivery provision strategy, the ability of the regulator to deal with asymmetric information would improve and a more reliable system could be created.