In Israel, the government currently implements various measures intended to reduce the amount of household waste sent to landfill. So far, however, these measures have resulted in only limited success. The commonly heard claim that municipalities prefer to continue sending waste to landfill because it is less costly than recycling is incorrect. A recent study shows that on average, recycling is 11% less costly than landfill, and that over 50% of municipalities would enjoy lower waste management costs by recycling, even ignoring the landfill tax which has since gone into effect. However, despite this basic economic consideration, the vast majority of municipalities are hesitant to make the transition to recycling. The main reason for this is the combination of price uncertainty in recycling on the one hand, and high irreversible investment costs required to make the transition to recycling on the other. This combination of uncertainty and irreversible investment costs is recognized in the literature as a significant deterrent to transition between states, even when the transition is economically profitable. This study present a theoretical model analyzing the decision-making process of the municipality, and then empirically tests the results of the model by using data from 79 municipalities in Israel. On the basis of these results, an alternative government policy is proposed – a policy focused on dealing with the uncertainty factor in recycling, constructed in such a way as to help make the transition to alternative treatment solutions for household waste more efficient.

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