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In today’s race toward a more circular economy, optimization of tariff design is important for minimizing the environmental impact and costs of municipal waste management. This study examines the overlap of an incentive-based tariff method and the unit pricing system. We address whether this overlap impacts the effectiveness and efficiency of waste management in Italian municipalities. Based on a panel data sample for 5,512 municipalities from 2016 to 2022, a generalized method of moments estimation was employed for a linear dynamic panel model. The results suggest that there is room for optimizing their overlap under certain circumstances—specifically, when the availability of waste treatment facilities is adequate and the percentage of separate waste collection is high. The interaction between the percentage of separate collection and the incentive tariff method contributed to cost reduction, confirming the need for consistency and compatibility of a tariff scheme with circular economy objectives. The effective adoption of both tools, as well as other actions such as information campaigns and service delivery improvements, can promote waste sorting and investment in management facilities. The results provide insights for policymakers seeking to design more effective and efficient policy measures aimed at maximizing environmental effectiveness, in accordance with the polluter-pays principle, and minimizing costs.

Abstract: This article constitutes a new contribution to the analysis of overlapping instruments to cover the same emission sources. Using both an analytical and a numerical model, we find that if there is a risk that the carbon price drops to zero and if the political unavailability of a CO2 tax (at least in the European Union) is taken into account, it can be socially beneficial to implement an additional instrument encouraging the reduction of emissions, for instance a renewable energy subsidy. Our analysis has both a practical and a theoretical purpose. It aims at giving economic insight to policymakers in a context of increased uncertainty concerning the future stringency of the European Emission Trading Scheme. It also gives another rationale for the use of several instruments to cover the same emission sources, and shows the importance of accounting for corner solutions in the definition of the optimal policy mix. [Copyright &y& Elsevier]