Can Economic Incentives Increase Composting Rates and Reduce Food Waste?

Composting food waste produces significantly less methane emissions than landfills, yet most organic waste is landfilled. Economic incentives such as pricing strategies for near-expiry products and the provision of municipal composting services can effectively reduce this waste. 

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Food waste is a significant global issue with profound economic and environmental impacts. According to the UN Environment Programme Food Waste Index Report 2024, approximately one-fifth (19%) of food available to consumers is wasted at the retail, food service, and household level, amounting to about 1.05 billion tonnes, and leading to economic losses estimated at $936 billion annually. The same report indicates that households accounted for 631 million tonnes (60%) of the total food waste in 2022, while the food service sector contributed 290 million tonnes and the retail sector added 131 million tonnes.

Food waste generates 8-10% of global greenhouse gas (GHG) emissions – almost five times the total emissions generated by the aviation sector. This waste is largely sent to landfills, where it undergoes anaerobic decomposition due to the lack of oxygen. This process generates methane, a potent greenhouse gas over 21 times more effective at trapping heat in the atmosphere than carbon dioxide over a 100-year period. Landfills rank as the third-largest source of human-induced methane emissions, following fossil fuels and livestock, accounting for around 10% of all anthropogenic methane emissions globally. Given methane remains in the atmosphere for a much shorter amount of time than carbon dioxide, reductions in methane emissions today have a more immediate impact on reducing global warming. Therefore, reducing food waste in landfills can have a substantial impact on lowering greenhouse gas emissions and mitigating climate change.

Economic incentives can play an important role in reducing food waste and subsequent greenhouse gas emissions by influencing the behaviour of households. By providing convenient composting options through the provision of goods, such as curbside collection, governments can facilitate the diversion of organic waste from landfills to composting facilities, thereby reducing methane emissions and promoting sustainable waste practices. Policies that support dynamic pricing for near-expiry products can help retailers reduce food waste. Clear and accurate food labelling can also help consumers make informed decisions, reducing unnecessary food waste.

More on the topic: 25 Shocking Statistics About Food Waste

The Potential of Composting

Composting is a key solution to reducing the amount of food waste in landfills. Composting organic waste can significantly reduce methane emissions by providing an aerobic alternative to anaerobic decomposition in landfills. When food and garden waste is composted, the presence of oxygen prevents the formation of methane, as methane-producing microbes are not active in such conditions. Instead, composting facilitates the breakdown of organic matter into valuable compost that provides a number of environmental benefits including the enrichment of soil, promoting higher agricultural yields, reducing the need for chemical fertilisers, and aiding in reforestation and habitat restoration. 

Economically, composting is one of the cost-effective methods for mitigating methane emissions from landfills. The process of composting can be relatively low-tech and inexpensive to implement, especially at a municipal level, making it an accessible solution for many communities.

Despite these advantages, most food waste ends up in landfills or is incinerated. For instance, in 2018 the US sent 50% of food and garden waste to landfills, 32% was composted, 12% was incinerated, 6% to other management pathways. To combat this, governments are increasingly investing in municipal composting services. The European Union (EU) saw composted municipal waste rise from 11% in 2004 to 17% in 2018. Similarly, US municipalities with separate food waste collection grew from 24 in 2005 to 510 in 2021, and Australian local governments offering composting services jumped from 10% in 2012 to 25% in 2023.

The Role of Economics

Economic incentives play a pivotal role in reducing food waste by influencing behaviours through monetary and non-monetary means. Monetary incentives offer direct financial benefits to individuals and organisations that adopt waste-reducing practices. 

For example, by offering lower prices on items close to their expiration dates, retailers can encourage consumers to purchase products that might otherwise go to waste. Non-monetary incentives, such as the provision of goods and information, provides consumers with the information and means to take action to reduce their food waste. It provides increased accessibility for consumers to make decisions which provide public benefit. 

1. Government Direct Provision: The Effects of Municipal Composting Services

Municipal composting services are waste management programs provided by local governments that allow residents to dispose of their organic waste, such as food scraps and garden clippings, in a designated compost bin. These programs typically involve curbside collection, where the waste is picked up from households and transported to a central composting facility. At these facilities, the organic waste is processed into compost.

These services reduce the cost and effort for households to compost, making it more convenient to dispose of food waste. Without them, individuals would need to manage their own composting, which can be time-consuming and would require space that not all households have. Moreover, municipal composting services lead to increased composting rates and, consequently, a reduction in emissions from landfills.

A 2024 study demonstrates the effectiveness of municipal composting services in reducing household waste sent to landfills. The research focused on a large-scale quasi-experiment in New South Wales (NSW), Australia, where 24 local governments adopted curbside composting services between 2009 and 2015. By comparing councils that adopted these services with those that had not, the study found that households redirected an average of 4.2 kilograms (9.3 pounds) of waste per week from the landfill stream into the composting stream. This diversion represented approximately one-fourth of the waste that households were previously sending to landfills. The results suggested that curbside composting could reduce emissions from landfills by 6 to 26%.

2. Price Incentives: The Effects of Pricing Strategies on Near-Expiry Products

Pricing strategies for near-expiry products are designed to reduce food waste by discounting products that are close to their expiration dates, making them more attractive to price-sensitive shoppers. By doing so, retailers can sell items that might otherwise go to waste, reducing the overall amount of food discarded. Supermarkets already use pricing strategies to sell food that is close to its expiration date, but these methods are often not applied consistently or to their full potential.

Studies have shown that pricing strategies can effectively reduce food waste in retail environments. A 2022 study highlights that dynamic pricing strategies can reduce food waste at the retail stage of the food supply chain. The study focuses on using real-time Internet of Things (IoT) sensor data to adjust prices at different stages of a product’s lifecycle. By adjusting prices based on freshness scores obtained through IoT sensors, retailers can optimise pricing to balance inventory, sales, and waste reduction. The study found that appropriate pricing interventions could not only reduce food waste but also boost sales and increase profits. Specifically, it highlighted that discounting strategies applied at the right time could help deplete on-hand inventory before the products reach their best-before dates. 

3. Provision of Information: The Effects of Food Labelling 

Food labelling informs consumers about the quality and safety of food products. However traditional date labels, such as “use by” and “best before” dates, often cause confusion among consumers, leading to the premature disposal of food that is still safe and edible. 

Food labelling can act as an economic incentive by reducing the uncertainty about food quality and safety, encouraging consumers to maximise the use of their purchases rather than discarding them prematurely. Clear and accurate labelling increases the amount of information available to consumers, enabling them to make better-informed decisions, thus reducing unnecessary waste and saving money. 

A 2022 study highlights that many consumers misinterpret date labels, resulting in increased food waste. The study explores the effectiveness of alternative labelling strategies, including freshness indicators and simplified date labels, to assess the likelihood of discarding food. The findings revealed that more explicit date labels and freshness indicators, such as colour-coded dots showing the actual freshness of the product, could reduce the likelihood of discarding food. For example, the use of a “best if used by” label with a green freshness indicator significantly decreased the probability of consumers discarding food compared to traditional labels. 

More on the topic: Climate Labels on Food Can Change Eating Habits For the Better: Study

Implications for Policy and Future Action

It is evident that addressing food waste requires more than individual and household efforts; comprehensive government and policy actions are crucial. While some reduction in food waste can be achieved through personal and community initiatives, significant progress hinges on the implementation of economic incentives provided by governments through policy action. These incentives can effectively change consumer behaviour and operational practices across the food supply chain, from production to consumption, making it easier and more financially viable to reduce food waste and subsequent landfill emissions. 

For future progress, it is essential to expand research and development into the effectiveness of various economic incentives and their scalability across different regions and populations. Studies should explore consumer behaviour to fine-tune these strategies and ensure they are effective and practical. Investment in and adoption of technologies like smart packaging and IoT sensors can also provide real-time information on food quality, helping reduce waste. Governments should support these innovations through funding and policy frameworks that encourage their widespread use. Continued efforts and innovations in these areas will not only help mitigate climate change but support a more sustainable and efficient food system.