The Environmental Kuznets Curve and the production of waste

284 Pages·2014·4.13 MB·Italian

The Environmental Kuznets Curve and the production
of waste: an explanatory analysis
for the Italian industrial sector

Thesis presented by:

Alessandro Stanchi

to
The Class of Social Sciences

for the degree of
Doctor of Philosophy
in the subject of
Management, competitiveness and development

Tutor: Prof. Marco Frey
Relatore: Prof. Marco Frey

Scuola Superiore Sant’Anna
A.Y. 2013-2014
Nel mezzo del cammin di nostra vita
mi ritrovai per una selva oscura,
ché la diritta via era smarrita.

Ahi quanto a dir qual era è cosa dura
esta selva selvaggia e aspra e forte
che nel pensier rinova la paura!

Tant' è amara che poco è più morte;
ma per trattar del ben ch'i' vi trovai,
dirò de l'altre cose ch'i' v'ho scorte.

Io non so ben ridir com'i' v'intrai,
tant'era pien di sonno a quel punto
che la verace via abbandonai.

Dante Alighieri, Divina Commedia, Canto I, versi 1-12

O Fortuna
Velut luna
Statu variabilis
Sempre crescis
Aut decrescis
Vita detestabilis
Nunc obdurat
Et tunc curat
Ludo mentis aciem
Egestatem
Potestatem
Dissolvit ut glaciem...

O Fortuna, Carmina Burana

"In this phial...is caught the light of Eärendil’s star...
It will shine still brighter when night is about you.
May it be a light to you in dark places, when all other lights go out"

J.R.R.Tolkien, The Lord of the Rings
1
Ringraziamenti

La parte più difficile di un lavoro di scrittura è sempre quella dei ringraziamenti: non si sa mai se la pro-
pria onestà intellettuale ha fatto sì che si sia riusciti a ricordare tutti coloro che hanno contribuito ad aiuta-
re lo scrivente nella sua impresa, così come non si può essere mai certi di aver espresso con parole chiare,
forti e sincere il senso di gratitudine che si prova nei confronti di coloro che vengono ricordati.
Nel mio caso, il compito è davvero molto, ma molto, più facile del solito.
Il debito di gratitudine che ho nei confronti delle persone che mi hanno accolto, accompagnato, guidato,
incoraggiato e supportato nel completare questo percorso umano, prima che accademico e professionale,
può essere descritto mediante un unico termine: immenso.
E, anche così, sbaglio per difetto.
Un primo ringraziamento va al mio relatore e guida, il Prof. Marco Frey, per la fiducia che mi ha sempre
dimostrato, per la sua disponibilità e cortesia sempre estreme, e per i preziosi consigli non solo in merito
alla ricerca, ma anche alla vita e all'ambiente accademico.
Un sentito grazie va al Direttore del corso di Ph.D., il Prof. Andrea Piccaluga, per il suo spirito energico e
motivante, per la sua cortesia nell'indirizzare gli studenti verso i loro obbiettivi, e per aver voluto in ogni
momento dar vita ad un ambiente sereno, produttivo e di collaborazione.
Per gli stessi motivi desidero ringraziare i docenti del Ph.D. che ho incontrato nel corso di questi anni: da
loro ho appreso in prima persona come si possa e si debba comunicare la passione per la ricerca a chi ci a-
scolta.
Un affettuoso ricordo, poi, lo rivolgo a tutti i colleghi Perfezionandi: a loro auguro una carriera piena di
soddisfazioni, e che li porti a mostrare all'esterno la vivacità della Scuola di cui siamo stati allievi.
Un'istituzione viva e pulsante non è la semplice sommatoria delle persone che la popolano, e degli edifici
che la ospitano, ma ha un qualcosa in più che la rende tale, e che la fa vivere di vita propria: ecco perché
desidero esprimere tutta la felicità intellettuale di essere stato accolto all'interno della Scuola Superiore
Sant'Anna di Studi Universitari e di Perfezionamento di Pisa (e, per il corso di Perfezionamento, nel suo
Istituto di Management), e di esserne stato membro in un momento molto burrascoso, travagliato e anche
doloroso della mia vita personale.
Un ringraziamento particolare va, poi, a mia madre e a mio padre, che, poco silenziosamente ma molto
stoicamente, mi supportano e mi sopportano da oramai parecchi anni, e che, da quel che vedo, non hanno
intenzione di perdere questa "brutta" abitudine: spero possano essere più sereni nei tempi che verranno.
In una pagina di ringraziamenti come quella che intenderei continuare a scrivere, i "grazie" sarebbero an-
cora molti, ma non voglio che il senso di gratitudine che avverto come fortissimo in me possa venire scam-
biato dal lettore occasionale per un vuoto esercizio di retorica, come fosse un compito necessario cui si deve
adempiere per "cortesia istituzionale", per così dire. Non è così: non sarò mai abbstanza in grado di espri-
mere appieno quanto io sia debitore nei confronti della Scuola Sant'Anna.
Nel terminare, però, prendo immeritatamente come esempio di stile la struttura narrativa della versione di
Carl Orff dei Carmina Burana (1935-1936), dove l'invocazione alla Fortuna è suonata come primo bra-
no, e poi di nuovo come ultimo brano, perché la Fortuna è una ruota che gira e che torna, prima o poi, al
luogo di partenza: allo stesso modo, desidero tornare a ringraziare il Prof. Marco Frey, verso il quale il mio
debito di gratitudine è senza fine.
2
Table of contents

RINGRAZIAMENTI 2

TABLE OF CONTENTS 3

INTRODUCTION 5

1. ECONOMIC GROWTH, ENVIRONMENT, AND THE ENVIRONMENTAL 10
KUZNETS CURVE FRAMEWORK
1.1. Introduction 10
1.2. Economic growth and environment: a classic dilemma 10
1.3. A deconstruction analysis: the IPAT framework 13
1.4. The Environmental Kuznets Curve (EKC) 16
1.4.1. Origins of the EKC framework 16
1.4.2. The basics of the Environmental Kuznets Curve 17
1.4.3. The main theoretical literature on the Environmental Kuznets Curve 21
1.4.4. A macroeconomic model for the EKC: the Green Solow Model 28
1.4.5. The empirical literature on the Environmental Kuznets Curve 33
1.4.5.1. Distribution of income, wealth and equity 34
1.4.5.2. Structural change in the economy and technological progress 36
1.4.5.3. International trade 37
1.4.5.4. Individual preferences 39
1.4.5.5. Energy demand, energy prices and energy intensity 40
1.4.6. A brief overview of some econometric issues related to the EKC estimation 42
1.5. The Waste Kuznets Curve (WKC) 45
1.6. Conclusions 59

2. THE PRODUCTION OF INDUSTRIAL WASTE IN THE MUD DATABASE, 61
DURING THE PERIOD 1998-2004
2.1. Introduction 61
2.2. Industry and its importance in the Italian economy (1998-2004) 62
2.3. The MUD database (1998-2004) 66
2.3.1. The production of industrial waste according to the MUD data (1998-2004) 66
2.4. Analysis of the coverage of the MUD database as regards the Industry in a Strict 70
Sense sector (1998-2004)
2.4.1. The overall context 70
2.4.2. Coverage in terms of economic activity (1998-2004) 72
2.4.3. Coverage in terms geographic divisions (1998-2004) 77
2.4.4. Methodological insights about the quality and the representativeness of the 80
MUD database (1998-2004)
2.5. The MUD database: quantitative analysis of the production of waste 82
2.5.1. The geographic dimension: a quantitative analysis 82
2.5.1.1. Italy and its macro-regions 82
2.5.1.2. Regions and provinces 94
2.5.2. Quantitative analysis from a sectorial point of view 97
2.5.3. Waste and economic activity 99
2.6. Conclusions 100
APPENDIX A2 102

3
3. ITALIAN WASTE PRODUCTION (1998-2004): A GENERAL FRAMEWORK 124
FOR THE ANALYSIS
3.1. Introduction 124
3.2. A note on the theoretical framework 124
3.3. The drivers of the model 124
3.3.1. Descriptive analysis 125
3.3.1.1. Value-added of Industry in a Strict Sense (1998-2004) 125
3.3.1.2. Energy consumption of Industry in a Strict Sense (1998-2004) 133
3.3.1.3. Sorted (and non sorted) urban waste collection (1998-2004) 138
3.3.1.4. Innovations and patents (1998-2004) 142
3.3.1.5. Exports (1998-2004) 143
3.3.1.6. Population density of the provinces, and density of the local units of In- 145
dustry in a Strict Sense (1998-2004)
3.3.1.7. Share of the value-added of Industry in a Strict Sense and of Service In- 146
dustry on the total 146value-added (1998-2004)
3.3.2. Relationship between industrial waste and socio-economic drivers 147
3.4. Conclusions 150
APPENDIX A3 151

4. MODEL SPECIFICATION AND ECONOMETRIC TESTING 175
4.1. Introduction 175
4.2. The specification of the model 175
4.3. The econometric tests 182
4.4. Main results 198
4.5. Conclusions 201
APPENDIX – A4 202

5. THE PRODUCTION OF WASTE OF INDUSTRY IN A STRICT SENSE: A 219
SIMULATION
5.1. Introduction 219
5.2. The hypothesis of the simulation of a EKC relationship: growth rates of the Italian 219
local economies
5.3. The evolution of the production of waste: the simulation of the model 222
5.3.1. The results of the simulation: the five randomly selected provinces 225
5.4. Simulation’s results: a discussion 227
5.5. Conclusions 236
APPENDIX – A5 237

CONCLUSIONS 253

ACRONIMI – ACRONYMS 259

LIST OF FIGURES 260

LIST OF TABLES 263

REFERENCES 266

4
INTRODUCTION

Solid waste management is strictly linked to urbanization and economic development, and is the one
service that almost every national government provides for its citizens. While service levels, costs and
environmental impacts can dramatically vary among places and nations, solid waste management is
perhaps the most important public service that nevertheless must be set up in all countries, and mu-
nicipal solid waste (MSW) management is the most relevant service a city government provides, to-
gether with the industrial solid waste (ISW) management. In low-income countries, as well as in many
developing countries, MSW is the largest single budget item for cities. The 2012 World Bank’s Urban
Development department’s report (Hoornweg and Bhada-Tata, 2012) estimates that the amount of
municipal solid waste (MSW) has risen in the past, and it will steadily rise in future: in 2002, 2,9 billion
urban residents have generated about 0,64 kg of MSW per person per day, which leads to a 0,68 billion
tonnes per year. In 2012, waste residuals in cities have increased: about 3 billion residents have gener-
ated 1,2 kg per person per day (1,3 billion tonnes per year). The estimates show that, by 2025, 4,3 bil-
lion urban residents will have produced about 1,42 kg per capita per day of municipal solid waste (that
is, 2,2 billion tonnes per year). Much of this increase will take place in rapidly growing cities of develop-
ing countries (Table I.1).

Table I.1 – Waste generation projections for 2025, region by income
(from Hoornweg and Bhada-Tata, 2012)

World Bank estimates of 2005 GNI per capita:
High: $ 10.726 or above; Upper middle: $ 3.466-10.725; Lower middle: $ 876-3.465; and Lower: $ 875 or less.

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Waste is mainly a by-product of the nowadays consumer-based lifestyles that drive much of the world’s
economies. As countries tend to urbanize, their economic wealth increases: their standards of living and
incomes increase, as well as consumption of goods and services, thus resulting in a corresponding in-
crease in the amount of generated waste. There are remarkable differences in waste generation rates
across countries, among cities, and even within cities, but everywhere the global nature of solid waste
contributes to the increase of GHG emissions, and to all the global issues related to products, urban
practices, and the recycling industry. Waste generation have been seen to be much lower in rural areas
since, on average, residents are usually poorer, purchase fewer items (which results in less packaging),
and have higher levels of reuse and recycling. Anyway, in any place in the world, waste production is
strictly related to economic growth and social development, and the current debate is on whether such
an increase is sustainable in environmental and in social terms, being an economic issue in both devel-
oping and developed nations: the annual global cost of solid waste management is estimated to rise
from the current 205 billion dollars to 375 billion dollars in 2025, and such costs will increase most in
low-income countries.

Table I.2 – Italian expenditure for waste management, 1997-2007
(millions of €, current-prices; from CMCC, 2010)

Source: CMCC (2010) and Istat (2008).

The focus of the present research is on the Italian case, where waste is a major source of public con-
cern and costs: according to Istat (2008), the national current-prices expenditure for waste management
in 2007 was about 21.000 millions of Euros, while in 1997 it was almost 11.000 millions of Euros,
6
showing an increase of +91% (Table I.2). In 1997, the waste management expenditure was about 1,1%
of the Italian GDP, but, after ten years, its weight has been increasing up to 1,4%: the most relevant
component of such an expense are the intermediate consumptions of firms, which have a weight bigger
than 55% of the total, while the second weighing voice, the final consumptions of both households and
public sector, amounts to more than 30% of the total. Investments of the waste management sector
(which is 10% of the total expenditure) have been mainly made by the private sector, with an increase
of +100% in the period 1997-2007 (CMCC, 2010), while public sector and other social institutions have
lowered their investments by one third. As regards the employment data, in 1997 there were more than
71.156 units working in the sector, while in 2007 this number has increased to more than 106.000
(CMCC, 2010): the whole sector has doubled its employees in ten years, and all of such an increase has
to be ascribed to the private sector, while the public sector has seen an almost zero increase in that pe-
riod (+0,7%). Therefore, in line with the international experience, Italy too has seen an increase in the
expenditure of waste management costs, a growing privatizing process and a growing outsourcing one.

As waste seems to be the main social challenge that policy makers have to face every day hic et nunc,
abroad as well as in Italy, the general research question of the present work is to try to cast a light on
the relationship between waste (especially those residuals produced by firms), economic activity and the
socio-economic structure, in Italy. The vast majority of the available data and works deals with urban
waste data and its policy indications: the first idea for this research has been investigating the behaviour
of the productive sectors in producing waste, and whether such a behaviour could be defined as sus-
tainable.
The Italian national law on waste and it subsequent modifications, considers two different kinds of
waste, which can be roughly detailed (for legal descriptions, see Italian waste laws) as:
 urban waste (also called municipal waste): all the residuals produced by non-productive activi-
ties;
 special waste (also called industrial waste): all residuals produced by productive activities.
The Legge n. 70/1994 has first introduced the obligation, for those institutions and firms which pro-
duce or manage waste, to yearly send to the Chambers of Commerce the Modello Unico di Dichiarazi-
one (MUD) Ambientale, detailing those amounts of waste produced, collected or managed during the
previous year. The total quantity of waste produced in Italy is not equivalent to the mere summation of
urban and special waste, since there were many entities which were exempted by giving that statement:
such entities, however, had to give their waste to those subjects which could transport, recycle and dis-
pose such residuals. Those last subjects had to declare the type and the quantity of waste that they were
collecting, and all the personal data of their partner. This resulted in a complex system of reports which
has been the first in EU to be so detailed, and it has provided a rich dataset of waste production.
7
The present research work deals with a provincial-level dataset of special waste, for the period 1997-
2004. During those years, the Legge n. 70/1994 was in force, and therefore the categories subjected to
present the MUD were the same for the whole period: as a consequence, the descriptive and simula-
tions’ results can be perfectly compared across those years. The same cannot be said for the subsequent
years: in 2006, the Decreto Legislativo n. 152/2006 was calling for different duties on different sub-
jects, and therefore the data are not more perfectly comparable from that point on.
The first research question of the present work deals with the description of the framework of the
production of special waste in Italy, and tries to describe the context of the production of firms’ residu-
als in Italy, indicating whether it has been experienced an increase, and the trends of the period: the use
of original and disaggregated data gives new insights on an issue which is less known and even less de-
scribed than urban waste.
The second research question investigates the possible relationships between special waste produc-
tion and the several socio-economic aspects of the Italian society, and the signs of such a link: the tar-
get has been studying whether the industrial production of waste is sustainable in economic terms, and
what are the main drivers of that production. The Environmental Kuznets Curve framework of analysis
has been used, selecting those socio-economic drivers which, according to the main literature, could be
responsible for the increase or the decrease of (the measure of) special waste. The model has been
tested using a pooled OLS technique to find out whether an Environmental Kuznets Curve can be
found for special waste production, during the period 1997-2004, and what are the variables that can
lead towards, or away from, such a behaviour.
The third research question tries to simulate the model in the framework of a growing economy,
looking whether waste could decrease in the Italian socio-economic texture: using data coming from
periods of decrease in the economic variables (as the period 2006-2013) may lead to the result that the
feasible decrease in the waste production could be led by the relative decrease in the economic activity.
Therefore, we have been interested in simulating the behaviour of the special waste production in a
growing economy set.
The work is structured as follows. Chapter 1 presents a review of the main findings of the previous
studies concerning the links among economic growth, economic development and environmental deg-
radation, choosing the quoted papers among a vast number of researches dealing with what is one of
the most studied subjects in the economic literature. The chapter introduces the classic dilemma be-
tween economic growth and environment, then it deals with the IPAT framework and its use in the
economic analysis of the environment; then the Environmental Kuznets Curve (EKC) hypothesis, with
its origins and its basic framework, the theory behind the EKC, the macroeconomic aspects of the
Green Solow Model, the main empirical studies on the EKC, and the main econometric issues related
8
to the use of the in EKC have been described. A special section deals with the application of the EKC
analysis to waste data, and the development of the so called Waste Kuznets Curve (WKC).
Chapter 2 gives the basics on the production of waste generated by firms of the sector of Industry in a
Strict Sense, based upon the information provided by the MUD database (excluding the database com-
ing from the waste collectors), for the period which goes from the year 1998 (whose statements have
been given in the year 1999) to the year 2004 (whose statements have been give in the year 2005). A
short description about Industry in a Strict Sense is given, and its importance within the Italian econ-
omy during the period 1998-2004 is highlighted. Then the description of the database which has been
used in the analysis is provided, together with the explanation on why that precise period has been cho-
sen: the importance of Industry in a Strict Sense to the framework of waste production in Italy has
been assessed, and the waste production of firms has been outlined under a geographical and a sectorial
point of view.
Chapter 3 gives an overview of the socio-economic variables which contribute to the waste production
and which have been used in the econometric test of the subsequent chapter. A brief description of
each of the drivers has been provided, in the span of time 1998-2004, at a provincial and at national
level, and how each of them might have influence on waste production is depicted.
Chapter 4 presents the specification of the model that has been tested: it has been tried to explain the
socio-economic causes behind the production of waste in the industrial sector, by the means of the
drivers described in the previous chapter. Some hypotheses about the model have been presented, as
well as its different functional forms and the econometric estimates. The statistical significance of the
variables has been tested, and the EKC behaviour of the dependent variable has been checked: the best
specification to be used in the following simulations’ section has been done by jointly using the infor-
mation provided by the Bayesian/Schwartz Information Criterion (BIC), the Akaike Information Crite-
rion (AIC) and the R-squared criterion (R2).
Chapter 5 presents the simulations of behaviour of the dependent variable of the model (waste) in a
hypothetically growing economy framework, in order to investigate whether the EKC trend can be ob-
served, for the Italian provinces, also for the future as well as for the past. After the economic crisis
that has stricken the world since 2008, the performance of the Italian economy has gone down, with
negative growth rates across the years 2010, 2011 and 2012. Therefore, two different scenarios of fic-
tional economic growth have been created, based on real and hypothetical growth estimates, for the pe-
riod 2006-2010, and based on ad hoc hypothesis, and the model has been simulated.
In the end, the Conclusions session sums up the main results of the work, and it casts a light on new
research hypotheses that might arise within this context.
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