The indirect environmental effects of taxing waste

Abstract

This paper investigates the indirect effects of environmental policies that target waste production, i.e., pay-as-you-throw (PAYT) schemes. Using a newly constructed longitudinal dataset of Italian municipalities and a stacked difference-in-differences design, we find that PAYT adoption generates positive effects on pro-environmental behaviors not directly targeted by the policy (indirect effects), in addition to reducing unsorted waste production (direct effect). Survey evidence shows that PAYT increases the salience of environmental issues among treated residents, which in turn strengthens their pro-environmental attitudes. These findings suggest that narrowly targeted environmental policies can lead to broader behavioral changes by fostering environmental awareness.