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Flexible Waste Management under Uncertainty

Author

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  • Luca Di Corato

    (Department of Economics, Swedish University of Agricultural Sciences)

  • Natalia Montinari

    (Strategic Interaction Group, Max Planck Institute of Economics, Jena)

Abstract

In this paper, we use stochastic dynamic programming to model the choice of a municipality which has to design an optimal waste management program under uncertainty about the price of recyclables in the secondary market. The municipality can, by undertaking an irreversible investment, adopt a flexible program which integrates the existing landfill strategy with recycling, keeping the option to switch back to landfilling, if profitable. We determine the optimal share of waste to be recycled and the optimal timing for the investment in such a flexible program. We find that adopting a flexible program rather than a non-flexible one, the municipality: i) invests in recycling capacity under circumstances where it would not do so otherwise; ii) invests earlier, and iii) benefits from a higher expected net present value.

Suggested Citation

  • Luca Di Corato & Natalia Montinari, 2012. "Flexible Waste Management under Uncertainty," Jena Economics Research Papers 2012-066, Friedrich-Schiller-University Jena.
    • Handle: RePEc:jrp:jrpwrp:2012-066
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    References listed on IDEAS

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    Cited by:

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    2. Gambella, Claudio & Maggioni, Francesca & Vigo, Daniele, 2019. "A stochastic programming model for a tactical solid waste management problem," European Journal of Operational Research, Elsevier, vol. 273(2), pages 684-694.
    3. Carlo Reggiani & Francesco Silvestri, 2015. "Municipal Waste Collection: Market Competition and the EU Policy," Working Papers 2015.90, Fondazione Eni Enrico Mattei.
    4. Cui, Hailong & Sošić, Greys, 2019. "Recycling common materials: Effectiveness, optimal decisions, and coordination mechanisms," European Journal of Operational Research, Elsevier, vol. 274(3), pages 1055-1068.
    5. Carlo Reggiani & Francesco Silvestri, 2018. "Municipal Solid Waste, Market Competition and the EU Policy," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 71(2), pages 457-474, October.
    6. Lambertini, Luca, 2021. "Regulating the tragedy of commons: Nonlinear feedback solutions of a differential game with a dual interpretation," Energy Economics, Elsevier, vol. 100(C).
    7. Trigeorgis, Lenos & Tsekrekos, Andrianos E., 2018. "Real Options in Operations Research: A Review," European Journal of Operational Research, Elsevier, vol. 270(1), pages 1-24.

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    More about this item

    Keywords

    Real Options; Flexibility; Municipal Waste; Recycling;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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