Avoided Cost

Motivations for Use

Municipal solid waste collection programs have existed in most communities since the early 20th century. Established as a response to public health, aesthetic, and commercial concerns, the collection of waste—or the provision of access to waste disposal locations—is considered a standard and necessary public service even in difficult budgetary times. Waste disposal, due to its necessity and long-term existence as a public service, is often financed by a complex and convoluted structure of fees and taxes.

Recycling and composting programs, which are forms of waste diversion, are newer additions to the waste management practices of most communities and are often viewed as optional services. When initiated, it is common that services for these programs are charged directly to citizens, making program costs easily visible. Presenting the full cost of waste diversion programs in this way can give the appearance that waste diversion methods are more expensive than traditional disposal of waste through landfilling or incineration. Avoided cost is a tool developed to provide a more accurate description and accounting of the comparison of the cost of waste disposal with potential savings through diversion activities.

Calculating Avoided Cost

Avoided cost is the amount of money not spent on disposing of waste because material has been diverted from the disposal stream. When calculating avoided cost, the net cost of waste disposal is compared with the net cost of a form of diversion, such as recycling or composting.

To determine avoided cost, the cost per ton for waste disposal must first be calculated. Several costs are associated with disposal of waste. First, waste must be collected from households, businesses, or other points of creation. Collection requires labor, equipment such as trucks and containers, and associated administrative or overhead costs. The cost of hauling this material to a disposal facility, also termed the hauling fee, may be included in collection costs or broken out as a separate cost. Finally, waste must be “tipped” or dumped into a landfill or incinerator, the cost of which is termed the tipping fee. Tipping fees include the cost for the management of disposal facilities. Disposal of waste in a landfill or through incineration is becoming increasingly expensive because of limited space available for landfilling, public outcry over placement of new landfills, and more stringent technological requirements regarding the operation and location of new landfills and incinerators.

The cost per ton of waste disposal is determined by calculating the cost of disposal (adding together collection and hauling fees, tipping fees, and other administrative overhead for overseeing the process) and dividing by the total number of tons of waste disposed. The equation may be described as: cost per ton = cost of disposal divided by total number of tons.

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